Playboy Whistleblower Awarded $6 Million in Compensatory Damages, Punitive Damages Being Decided

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A former accounting executive with Playboy Enterprises will be receiving $6 million in a whistleblower case. The amount is considered the largest amount to be paid out in a whistleblower case, to date.
The accounting executive alleged wrongful termination and a federal jury in California this week set the award, according to The Chicago Tribune. Punitive damages will be decided today.

The lawsuit was filed in the U.S. District Court in California by Catherine Zulfer, a former controller at Playboy, Zulfer reported to Playboy Enterprises management “actual and suspected frauds and improprieties” after she refused to prepare $1 million in bonuses for top executives that had not received appropriate approvals, according to The Chicago Tribune.

The jury found that Zulfer was unlawfully fired as retaliation for her having reported the alleged fraud within Playboy Enterprises, which is a violation of federal whistleblower protections that are provided by the 2002 Sarbanes-Oxley Act, The Chicago Tribune reported. The jury also found that Playboy Enterprises discriminated against Zulfer due to her age, as part of the firm’s cost reduction plan that involved firing older staff. In 2012, when Zulfer was terminated, she was 56 years of age.

According to The Chicago Tribune, the $6 million compensatory damage award is believed to be the largest award under the Sarbanes-Oxley law. The U.S. District Court jury decided that Playboy acted with “malice, fraud, or oppression,” which means that additional penalties may be imposed on the company. In a different case involving a large award in 2013, two whistleblowers were awarded $4.6 million. That lawsuit involved the gambling software company International Game Technology. International Game Technology is appealing the ruling.

In this lawsuit, Zulfer alleged that Playboy CFO, Christof Pachler, stopped talking to her; ostracized her; kept her out of meetings and conversations in which she would normally have been a part; withheld critical information that she required to carry out her duties; and put her in a position to fail by removing 15 corporate accounting positions in Chicago, which left her to handle those responsibilities in Los Angeles with minimal or no help, according to The Chicago Tribune.

According to the lawsuit, Pachler announced a plan that would eliminate older, long-term employees, those who had been with the firm for more than 10 years, in particular. “That pattern continued until plaintiff was laid off. Plaintiff only learned about her upcoming termination through her replacement,” the complaint indicated. The complaint also indicated that Pachler treated Zulfer with “utter disrespect” and attempted to “cheat her out of the severance” due her under Playboy’s policy. Zulfer also alleges that she was “shunned, humiliated, and treated like an outcast.”

In 2013, Courthouse News Service reported that Zulfer had accused Pachler of pressuring her to accrue the $1 million bonuses in a year in which Playboy was experiencing “significant losses,” her complaint notes. Most of the bonus would have been paid to Pachler, according to USA Today. Zulfer, was a 30-year Playboy employee.