Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 3

Jeff Hemphill was an internal audit manager at Celanese, a publicly traded chemicals company. In 2007, he began work on an internal audit of a Celanese construction project in Ocotlan, Mexico. The team of auditors he managed identified several potential violations of law and company policy at the Ocotlan project, which were described in an audit report. Hemphill also reported these issues to his superiors, including Donna Wegner, and requested that a forensic auditor be hired to determine if any fraud had been committed in connection with these accounting problems. Hemphill additionally raised the issues with Gary Rowan, a Celanese compliance officer.
Hemphill participated in the further investigation of the accounting problems at the Ocotlan project. The Celanese auditors eventually determined that several Celanese employees had violated company policy, but not any laws, and one employee was removed from the project.
In June 2007, after the Ocotlan audit, Wegner told Hemphill that in order to create a better working environment he should "not develop issues." Around this time, Hemphill also worked on another project reviewing the travel and entertainment records for several Celanese employees. Hemphill and his staff discovered certain violations of the company's policies. Hemphill later testified that, in his view, these violations created the risk of a "books and records violation" of Securities and Exchange Commission (SEC) rules. Hemphill advised Wegner of the violations and asked to raise the issues with Celanese's audit committee. Wegner rebuffed this request.
In August 2007, while Hemphill's secretary was arranging to rent a boat for a corporate outing, Hemphill began yelling at her in an abusive manner about her handling of the matter. Two Celanese employees witnessed the incident. Hemphill's behavior was reported to the director of human resources, and an investigation was conducted by an investigator who had no prior knowledge of Hemphill. The head of human resources advised Wegner of the investigation. The secretary and employee witnesses said that Hemphill had acted in an aggressive and unprofessional manner and that he was "outrageously rude and completely unprofessional"; his behavior was "atrocious," and it was "a one-sided rant by Mr. Hemphill... she was spoken to like a dog." Hemphill denied yelling or otherwise engaging in unprofessional behavior.
After concluding the investigation, the investigator recommended that Hemphill be terminated due to his "lying during a formal investigation, harassment of an employee, and creating a negative work environment for the team and those around him." The head of human resources concurred, and Wegner fired Hemphill.
Hemphill filed suit, claiming violations of the whistleblower protection provisions of the Sarbanes-Oxley Act. He alleged that he was terminated in retaliation for the reports he filed regarding the Ocotlan audit and the travel and expenses audit. The district court granted Celanese's motion for summary judgment, after concluding that Hemphill had failed to establish the last prima facie element of his claim: that his protected activity was a "contributing factor" to his termination. The district court also determined that, even assuming Hemphill had established his prima facie claim, Celanese had rebutted the claim with clear and convincing evidence that Celanese would have terminated Hemphill regardless of his protected activity. How should the appeals court rule? Should it matter whether the director of HR was aware of the audit discrepancies? What public policies are at stake here? What firm values? [Hemphill v. Celanese Corp., 430 Fed. App'x 341 (5th Cir. 2011).]