PwC wins ruling against auditor whistleblower who sued over termination

A federal judge in San Francisco ruled in favor of PricewaterhouseCoopers in a case involving a former employee who sued PwC for firing him after he complained about conflicts of interest among audit clients.

Mauro Botta was a PwC auditor for 18 years when, in November 2016, he filed a confidential complaint with the Securities and Exchange Commission accusing the firm of “prioritizing profits and client satisfaction over compliance with auditor independence standards,” according to Monday’s ruling by U.S. Magistrate Judge Alex Tse. Botta claimed that during his work as a senior manager on two audit engagements for semiconductor company Cavium Inc., from 2012 to 2015, and for video products company Harmonic Inc., from 2015 to 2016, he identified accounting errors and internal-control deficiencies that his supervisors willingly overlooked to retain both clients’ business. The SEC investigated Botta’s allegations, according to the judge, but ultimately chose not to take action against PwC.

“It never proved — nor even claimed — that PwC violated auditor independence rules,” the judge noted. “The SEC’s decision isn’t on review here. At issue instead is whether PwC unlawfully retaliated against Botta. It is undisputed that PwC fired Botta on Aug. 17, 2017, while the SEC’s investigation was ongoing. And Botta insists that his whistleblower complaint contributed to PwC’s action.”

PwC building on Park Avenue in New York

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Botta alleged that during the two and a half years before he was fired, PwC retaliated against him on six other occasions — removing him from three audit engagements (for Cavium, Harmonic and Gigamon), underutilizing him, choosing not to staff him on business he helped bring to the firm, and threatening to fire him for making complaints, the judge noted. Botta also asserted that PwC breached his employment agreement by terminating him without notice.

Botta also went to Sen. Dianne Feinstein, D-California, to corroborate his complaint, according to the National Whistleblower Center. The SEC opened an investigation, but Botta claimed his identity was poorly hidden and, as a result, PwC fired him. He then filed a lawsuit for wrongful termination. He claimed that both the House Oversight Committee and PCAOB investigated the retaliation of the exposure of his anonymity.

However, the judge found reasons why the firm might have terminated the auditor besides his complaints. An attorney, Walter Brown, testified that PwC retained him as outside counsel in response to the SEC’s investigation and that he interviewed PwC employees, including Botta, who had worked on the 2013 and 2014 Cavium audits.

“Brown testified that in two separate interviews, Botta admitted that during the 2014 Cavium audit, he had documented as existing an internal control that he had created and that Cavium didn’t actually have in place,” the judge noted. “This admission was conveyed to Mark Simon, the managing partner of PwC’s U.S. audit practice; and Simon testified that, as he saw it, Botta had either fabricated an internal control or lied about doing so, both grounds for immediate termination. Simon promptly fired Botta in response.”

During the trial, Botta argued that PwC’s stated reason for firing him was spurious, saying he didn’t fabricate an internal control or tell Brown he had. But the judge found PwC’s evidence more persuasive.

“Walter Brown had a firm recollection of what Botta said during the interviews in question,” the judge wrote. “Botta’s statements stuck with him, he explained, because he was shocked by the admission and held a second interview to confirm it. Botta testified about the interviews, but his recollection was poorer. He testified that he didn’t tell Brown that he had ‘fabricated’ an internal control, but he couldn’t remember exactly what he said instead.”

The judge also pointed out that even after removing Botta from the Cavium and Harmonic audits, it reassigned him to other audits as well as the staff of its internal Center of Excellence.

“Botta, in the end, simply didn’t put forward enough evidence to prove that his SEC complaint contributed to PwC’s decision to fire him,” wrote the judge. “The temporal proximity between his complaint and his termination generated suspicion, but at trial that suspicion wasn’t confirmed.”

Botta’s attorney did not respond to a request for comment. PwC released a statement Tuesday praising the ruling. “We appreciate the court’s thoughtful ruling, which comprehensively rejected the plaintiff’s false allegations,” said the PwC statement from spokesperson Ellen Burr. “As the trial evidence demonstrated, the plaintiff was a disgruntled employee who — despite claiming to be a whistleblower — committed serious misconduct requiring his termination. Far from retaliation, PwC demonstrated the utmost integrity throughout this matter. That integrity is at the heart of who we are and how we operate.”

Harmonic dismissed PwC as its auditor in 2018, and Marvell Technology acquired Cavium in 2018.