Webber v. Wight & Co., 1-04-1622.

• Decision Date: 09 November 2006
• Docket Number: No. 1-04-1622.,1-04-1622.
• Citation: 858 N.E.2d 579,306 Ill.Dec. 782
• Court: United States Appellate Court of Illinois
• Parties: Michael A. WEBBER, Plaintiff-Appellant and Cross-Appellee, v. WIGHT & COMPANY, Defendant-Appellee and Cross-Appellant.

858 N.E.2d 579

306 Ill.Dec. 782

Michael A. WEBBER, Plaintiff-Appellant and Cross-Appellee, v. WIGHT & COMPANY, Defendant-Appellee and Cross-Appellant.

No. 1-04-1622.

Appellate Court of Illinois, First District, Sixth Division.

November 9, 2006.

Rehearing Denied December 6, 2006.

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Arnold and Kadjan, L. Steven Platt, Chicago, for Appellant.

Morgan, Lewis & Bockius L.L.P., Charles C. Jackson, Sari M. Alamuddin and Ross H. Friedman, Chicago, for Appellees.

Presiding Justice FITZGERALDSMITH delivered the opinion of the court:

Plaintiff-appellant and cross-appellee Michael A. Webber was employed by defendant-appellee and cross-appellant Wight & Company (Wight & Co.) as its chief financial officer (CFO) from 1991 to 1999. Following his termination, Webber filed a retaliatory discharge claim, alleging that he was fired because he objected to Wight & Co.'s accounting practices, which he believed were illegal and/or improper. The cause proceeded to a jury trial, and the jury returned a verdict for Wight & Co. Wight & Co. then moved for sanctions against Webber pursuant to Supreme Court Rule 137 (155 Ill.2d R. 137), claiming that Webber filed his complaint knowing his allegations were false. The trial court denied this motion. Webber appeals the jury's verdict, asserting that the trial court erred by refusing to grant his proposed jury instructions, by refusing to let him testify that the accounting practices in question were illegal, and by allowing certain documents into evidence. He asks that we reverse the verdict below and remand the cause for a new trial. Wight & Co., meanwhile, has filed a cross-appeal from the denial of its posttrial motion, asserting that the trial court erred in not imposing sanctions upon Webber for his violation of Rule 137. Wight & Co. asks that we reverse the denial of its motion and that Webber be ordered to pay attorney fees as a sanction. For the following reasons, we affirm both the jury's verdict and the trial court's denial of the motion for sanctions.

BACKGROUND

Wight & Co. is a privately owned architectural and engineering firm with one shareholder: Mark Wight. Webber, who is a financial consultant, had known Wight for some time and began doing consulting work for him in November 1991. Soon thereafter, Wight, as owner of Wight & Co., hired Webber in a permanent position as CFO and, eventually, as a vice president, to assist in the company's financial situation. Webber was in charge of the accounting department and was also a member of the company's executive committee until he was terminated by Wight. A multitude of witnesses testified at trial regarding what occurred during Webber's employment.

Webber himself testified that his main concern at Wight & Co. was to review company finances. When he first began working there, he updated the company's health insurance packages, urged the issuance of timely performance reviews of employees, and put company finances in order. In 1995, there were several changes in tax laws which affected Wight & Co. Webber testified that he approached Wight about them and that Wight told Webber he did not want to, and would not, pay taxes. In an effort to ease the company's tax burden, Webber helped Wight & Co. form new companies, including Tera-Byte, Wight Development Corporation, and Wight Partners Limited. These were meant to take advantage of new tax structures, with Wight Partners Limited to concentrate mainly on Wight's own personal investments. Webber testified that Wight was upset at the recommendations he made to keep the company in line with tax laws. He stated that Wight wanted him to reclassify Wight & Co. expenses; that is, to make nondeductible expenses either partially or fully deductible, and to move personal expenditures made by Wight Partners Ltd. to the financial books of Wight & Co. Webber believed "it was absolutely incorrect" and improper to do this and told Wight that he refused to reclassify any expenses. Webber testified that Wight had others in the accounting department reclassify the expenses upon his refusal to do so.

Webber further testified that he approached Irwin Steinberg, an outside certified public accountant (CPA) who had done some work for Wight & Co., to clarify the deductibility of certain expenses made by the company. When Wight found out Webber had done this, he told Webber not to go outside the company ever again. Between 1996 and 1997, Wight & Co. entered into a project with the Illinois Department of Transportation (IDOT). As a prerequisite, IDOT, led by its auditor Mark Rangel, conducted an audit of Wight & Co.'s financial books; that is, an independent verification that Wight & Co.'s financial records were fairly presented to other companies (like IDOT) seeking to do business with them. Webber and Rich Carlson, the director of Wight & Co.'s architecture department, assisted Rangel in the audit and met to discuss Rangel's findings. Webber testified that following their meeting, Carlson met with Wight, whereupon Wight reprimanded Webber about imparting confidential information about Wight & Co.'s finances to both Carlson and Rangel. Webber also testified that in early to mid-1998, as his relationship with his employer soured, he voiced his concern about disagreements he was having with Wight regarding improper codings, expenses and reporting in the financial records of Wight & Co. to Al Diebert and John Pruitt, outside consultants who sometimes worked with Wight & Co. Webber also stated that he never received a bad performance review while employed there.

On cross-examination, Webber testified that Wight never told him to do things "his [Wight's] way" or he would be "fired." He admitted that he was upset because he believed Wight & Co. should have distributed more profits to him and other members of the executive committee than those they were receiving; Webber testified that Wight had once mentioned a phantom stock or bonus plan which would have given the executive committee members a chance to obtain company stock, but never implemented it. Though Webber stated he did not want more money but, rather, more partners in the company so there would be more scrutiny of the financial records, he did state that he "had been looking forward" to the plan and found the whole situation "frustrating" when Wight failed to implement it. He further admitted that he was "resentful" of Wight as Wight began to tell others that he and Webber were having "communication problems." Regarding the IDOT audit, Webber admitted that he did impart Wight & Co. confidential financial information to Carlson and Rangel that he should not have been talking about, but that he did so in an effort "to save" Wight & Co. from tax problems. Webber testified that he never told any independent auditors that what was happening at Wight & Co. was improper, and admitted that he signed several management representation letters in his capacity as CFO of Wight & Co., pursuant to his responsibility to fairly present the company's financial situation to outside auditors. Four of these letters, which were provided to Wolf & Company (Wolf), a CPA firm working with Wight & Co. and which had also been signed by Wight, were admitted into evidence over Webber's objection. The letters stated the following: that Wight & Co. was "in conformity with generally accepted accounting principles," that all material transactions were "properly reflected" in the company's financial statements, and that there were "no violations or potential violations" of tax laws and regulations by Wight & Co. Though Webber stated that he may not have read these form letters before signing them, he knew at the time they would be used by auditors from several companies looking to do business with Wight & Co. as a reflection of its financial condition.

Rangel testified that, while doing the audit of Wight & Co. for IDOT, he found some unallowable costs the company sought reimbursement for from the federal government, such as personal expenses, gifts and large salaries, so he disallowed them. He then had meetings with Webber, as well as Carlson, during which Webber "lobbied" for these disallowed expenses on behalf of Wight & Co. Rangel further testified that every expense made by Wight & Co. was accounted for in the records kept by Webber and his department.

John DeLand, a partner at Wolf, testified that he was in charge of an audit Wolf performed of Wight & Co., and also helped prepare Wight & Co.'s tax returns and reviewed its financial statements from time to time; he worked with Webber on these tasks. He explained that a management representation letter is written at the end of an audit and is the company's representation to an auditor that its financial statements are fairly presented and that the company's management has authenticated its responsibility for the information contained in the financial statements. He further explained that an auditor cannot sign off on an audit without this letter. He testified that the four management representation letters in evidence in this case, dated from 1996 through 1998 and reviewing company financial records from 1995 through 1997, were provided to him as the auditor by Webber as Wight & Co.'s CFO. Webber's signature confirmed that there has been no fraudulent financial reporting, no noncompliance with financial requirements, and no improper recordings by Wight & Co. during these years. DeLand further testified that Webber never disclosed anything to him regarding Wight & Co.'s financial practices contrary to these representations.

Several other witnesses testified on Webber's behalf, including Steinberg and Gail Duffy, who worked with Webber in Wight & Co.'s accounting department. Their testimony indicated that Webber had made good changes in Wight & Co.'s accounting practices when he arrived at the company.

Mark Wight admitted that Webber implemented programs, developed new...