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UNITED STATES DEPARTMENT OF LABOR

OFFICE OF ADMINISTRATIVE LAW JUDGES


Case No.: 2011 SOX 13
VANESSA GIFALDI,
Complainant,
v.
OCTAGON, INC., &
INTERPUBLIC GROUP OF COMPANIES, INC.,
Respondents.
__________________________ ~ I
VANESSA GIFALDI'S CLOSING ARGUMENT
Introduction
Vanessa Gifaldi was terminated on October 26, 2009 by Octagon's President, Phil de
Picciotto, and its director of human resources, Julie Kennedy, for reasons never explained to her
and that have since changed during the litigation. She was terminated within moments of Jenny
Klitch's termination. Gifaldi - Octagon's former General Counsel and later Chief Legal Officer
- was Klitch's right hand woman and, as Julie Kennedy (the human resources director) admitted,
Gifaldi would have to be terminated if Klitch was terminated. The Respondents terminated both
Gifaldi and Klitch without providing them with their contractual four week notice, even though
Mr. de Picciotto acknowledged that he was aware that he had to provide them without four week
notice. Mr. de Picciotto's conduct was retaliation for raising complaints about SOX compliance
issues both internally, and more importantly, externally to Octagon's publicly traded parent
company, IPG. The Respondents officers admit that they were upset that the complaint was
made to IPG rather than be handled internally. They both had to be fired immediately.
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I. SOX Retaliation
To prevail on a SOX claim, a complainant must prove by a preponderance of the
evidence that (i) she engaged in activity or conduct that SOX protects, (ii) the respondent took
unfavorable personnel action against her, and (iii) the protected activity was a contributing factor
in the adverse personnel action. See Sylvester v. ParexeIInt'l, Inc., ARB Case No. 07-123
(2011) (citing 18 U.S.c. 1514A). There is overwhelming evidence supporting these elements.
(i) Protected activity
There are three independent theories of protected activity. Each will be addressed in tum.
Importantly, a protected activity only requires "a reasonable belief' that a relevant law was
violated. Sylvester, p. 14. There is no requirement to identify any specific law or to "definitively
and specifically" identify how Octagon's malfeasance relates to SOx. Id. at pp. 17-19. Both
Ms. Gifaldi and Ms. Klitch actually believed that Octagon's improper financial control processes
would result in clients leaving the company or initiate legal proceedings against the company for
breach of fiduciary duty, both of which would adversely affect lPG's stock price. See Id. at p. 20
(noting that complaints do not have to relate to shareholder fraud). Ms. Klitch - the Chief Legal
Officer who was hired in large part to handle SOX compliance - testified that she believed that
Octagon was violating SOX and she specifically identified SOX non-compliance in her August
25, 2009 email. This is more than just a reasonable, good-faith belief.
First, Ms. Gifaldi complained to Ms. Klitch, her supervisor about lax invoicing
procedures and mishandling (if not outright misappropriating) client escrowed funds. She was
vocal and active in her concerns about the procedures used to safeguard client money and she
was concerned that the mishandling of client money would cause clients to leave Octagon or to
initiate legal action against Octagon.
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Second, Ms. Gifaldi participated in an investigation conducted by Octagon's publicly
traded parent company, lPG, and an outside consultant, Deloitte, into allegations that Octagon
was not complying with SOX and that it had other legal and accounting compliance issues.
l
The
formal complaint was initiated in an August 25, 2009 email by Jenny Klitch, Octagon's Chief
Legal Officer to Octagon's parent-company, lPG. The email expressly identified legal,
accounting and SOX compliance issues as the basis for the complaint, and the email expressly
identified Vanessa Gifaldi.
Third, Ms. Klitch's August 25,2009 email to lPG constituted protected activity. Octagon
retaliated against Ms. Klitch by firing her, and, because of the close relationship between Ms.
Klitch and Ms. Gifaldi, terminated Ms. Gifaldi as well. Ms. Klitch also indicated in her email
that she was concerned that she would be terminated for sending the email. Even though the
email complaint did not come from Ms. Gifaldi, she was clearly within the zone of interest that
SOX seeks to protect. See Thompson v. North Am. Stainless, L.P., 131 S. Ct. 863, 867-68
(2011)2 There is overwhelming evidence that Ms. Gifaldi had to be fired with Ms. Klitch, and
that the two were treated as a package deal.
(ii) Adverse Employment Action
Ms. Gifaldi was terminated, thus satisfying the second element.
1
Ms. Gifaldi was an employee of Octagon, Inc., a wholly owned subsidiary of holding-
company Advantage International Holdings, which itself is a wholly owned subsidiary of
publicly traded Interpublic Group of Companies, Inc. (pp. 274-274). The Respondents
conceded that both Octagon and lPG are covered by the anti-retaliation provision of SOx.
2 In Thompson v. North American Stainless, L.P., 131 S. Ct. 863, 867-68 (2011), the Court
concluded that an employee who engaged in no protected activity, i.e., he did nothing, could
nevertheless sue for retaliation because the employer fired the employee to retaliate against a
different employee. The two employees in Thompson were engaged, but the plaintiffs fiancee,
not the plaintiff himself, engaged in protected activity. Jd. at 868. His inaction did not preclude
him from seeking relief under Title VII's anti-retaliation provision because he fell within the
"zone of interests" Title VII seeks to protect. Jd. at 870.
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(iii) Contributing Factor
There is ovelWhelming evidence that the protected activity identified above was at least a
contributing factor to Ms. Gifaldi's termination on October 26, 2009. "A contributing factor is
any factor, which alone or in combination with other factors, tends to affect in any way the
outcome of the decision." Ameristar Airways, Inc. v. ARB, 650 F.3d 562, 567 (5th Cir. 2011)
(affirming ARB decision for complainant). As detailed below, there is no evidence that the
termination decision was made prior to the August 25, 2009 complaint or that the termination
decision was wholly unrelated to the protected activity. Ms. Gifaldi had excellent performance
reviews and was never told of any performance issues. Ms. Gifaldi was never given any advance
notice prior to October 26, 2009 that her job was in jeopardy. The testimony of Octagon's
witnesses, particularly its president, Phil de Picciotto, was highly incredible, inconsistent and
unsuppOlted by written documentation despite the Respondents concession that there should
have been written documentation to support its defense. An employer's shifting explanation for
the termination is itself evidence of pretext. Id at 569. The issue is: Is it more likely than not
that Ms. Gifaldi's complaints, her participation in the investigation, or Ms. Klitch's complaint,
contributed in any way to Ms. Gifaldi's termination on the date in question? The greater weight
of the evidence says yes.
II. Respondents Cannot Meet Their Burden of Producing Clear and Convincing
Evidence that They Would Have Terminated Ms. Gifaldi Absent Protected Activity
Because Ms. Gifaldi has ovelWhelming evidence supporting her prima facie case under
SOX, the burden of proof shifts to the Respondents to prove by clear and convincing evidence
that it would have fired Ms. Gifaldi on October 26, 2009 even in the complete absence of any
protected activity. See 42 U.S.C. 42121(b)(2)(B)(iv). Although "clear and convincing
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evidence" is not easily defined, the Eleventh Circuit model civil jUly instructions define it as
"evidence that leaves you with a firm conviction that the claim is true.,,3
Importantly, this statutory affirmative defense considers "only the evidence that was
available to the employer at the time of its decision," and is not affected by any after-acquired
evidence. Ameristar Airways, 650 F.3d at 570, n. 23. If, theoretically, the protected activity
hastened an othelwise pre-planned or inevitable termination, the Complainant still prevails on
liability. See McCafferty v. Centerior Energy, ARB Case No. 96-144, p. 21. Among the factors
to be considered is evidence of pretext. Ameristar Airways, 650 F.3d at 570. Evidence that the
employer's explanation or testimony is inconsistent or unsupported - as is the case here - is
evidence that weighs against a finding that the employer would have taken the same action
absent the protected activity, especially when the standard is clear and convincing evidence. Id.
Mr. de Picciotto admits that he has no written documentation supporting his testimony, even
though, according to him, Octagon should have documented Ms. Gifaldi and Ms. Klitch's
performance issues and termination process. He also admits that Ms. Gifaldi was a "key hire"
and that the decision to terminate Ms. Klitch - in light of her role as Chief Legal Officer - was a
significant employment decision. The absence of documentation when one would likely expect
to see documentation weighs heavily against an employer's argument that a termination decision
had already been made. See Mickelson v. New York Life IllS. Co., 460 F.3d 1304, 1312 (10th Cir.
2006) (reversing summary judgment on affirmative defense because of the absence of
contemporaneous documents showing that the termination decision was already made).
Octagon has zero documentation supp0l1ing two significant termination decisions and, at
best, there is some testimony that Octagon was discussing a possible termination of Ms. Gifaldi.
3
Eleventh Circuit Court of Appeals, Model Civil Jury Instructions, p. 510, available at
http://www.ca11.uscourts.gov/documents/pdfs/civjury . pdf
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This is not sufficient for the Court to find a "firm conviction" that Respondents would have
terminated Ms. Gifaldi on October 26, 2009 even in the complete absence of any protected
activity.
III. The After-Acquired Evidence Doctrine Does Not Apply to SOX Retaliation Claims,
and Would Not Matter Here Anyway
During the Respondents' opening statement they mentioned, for the very time during the
litigation, that Gifaldi's claim is barred or limited by the "after-acquired evidence doctrine." As
a preliminary matter, there is nothing to indicate that the affirmative defense applies to SOX or
AIR-2l cases. The fact that AIR-21 has its own statutory affirmative defense weighs against
application of a similar common law affirmative defense.
This affirmative defense requires the Respondents to prove that the wrongdoing that was
identified after termination "was of such severity that the employee in fact would have been
terminated on those grounds alone if the employer had known of it at the time of the discharge."
McKennon v. Nashville Banner Pub. Co., 513 U.S. 352, 362 (1995). It is a limitation on
damages, not liability. !d. It is a disfavored affirmative defense because of "the concern that
employers might as a routine matter undertake extensive discovery into an employee's
background or performance on the job ... " fd. An employer can always find something to
potentially justify a telmination, and thus it becomes a "get out of jail free card." But employees
are not required to be perfect to prevail in anti-retaliation and anti-discrimination lawsuits.
Use of the after-acquired evidence doctrine is normally reserved for clear cases of
misconduct by the employee that would have self-evidently resulted in termination. For
example, in McCafferty v. Centerior Energy, ARB Case No. 96-144, the AJL limited back pay
and precluded reinstatement to the complainant because the employer discovered during the
litigation that he lied on a self-disclosure questionnaire about having been removed from a
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previous job because of a positive drug test. Id. at p. l3. Had the complainant been honest on
his application, he never would have received the security clearance to work at a nuclear power
plant. Id This is wholly distinguishable from Octagon's argument here. The Respondents claim
that they found some invoicing errors after terminating Ms. Gifaldi. At the time of her
termination, Ms. Gifaldi was tasked with cleaning up the very same invoicing system. I.e., she
was fired for doing her job. This is not after-acquired evidence of wrongdoing.
IV. Key Testimony Supports Ms. Gifaldi's Case
1) Vanessa Gifaldi
Ms. Gifaldi started with Octagon in October 2008. (p. 42). She was hired to "clean up"
the entire invoicing process. (p. 42). Mr. de Picciotto testified that she was a "key hire." (p.
408). She was hired and supervised by Jenny Klitch, General Counsel. (p. 48). During her
interviewing and hiring, no one she met with - including Nancy Morton, Julie Kennedy and Jan
Plewes - questioned her experience or her qualifications, or otherwise provided any negative
feedback. (pp. 48-50). There is nothing in writing expressing any reselvation about hiring her.
(p. 344). She had excellent performance reviews and no one at Octagon ever complained to her
about her perfonnance. (p. 96).
In or around June 2009, Ms. Gifaldi was tasked with cleaning up the client escrow
process on top of her original job of cleaning up the invoicing process. (p. 58). Ms. Gifaldi
believed that Octagon had a fiduciary duty to its clients with respect to client invoicing and client
escrow accounting, (pp. 67-68), and that Octagon breached that duty. (p. 68). Among the
discrepancies noted by Ms. Gifaldi was that Octagon's agent fees were paid out of the client
escrow account when the fees should have been paid out of the operating account. (p. 85). She
also noticed that Octagon was taking money out of the client escrow account to payoff
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promissory notes when Octagon was not contractually authorized to do so. (p. 88). Under the
terms ofthe notes, repayment was supposed to be made via the client's salary, not endorsements.
(p. 88). When brought to the attention of Octagon's president, he simply responded that he did
not care where the money came from, as long as the notes were paid back. (p. 90). Ms. Gifaldi
was concerned of the legal implications of taking money from a source not contractually
authorized. (p. 92).
Another concern was the Octagon was billing clients without having any documentation
supporting the billing; Mr. de Picciotto conceded that he was more concerned with getting paid
then making sure Octagon was getting paid correctly. (pp. 349-350). He even wrote an email
(admitted as C-69) stating that "the most impOltant thing for us will always be to get the money
in." (p. 350). He wrote another email (admitted as C-IOl) to Octagon's counsel stating that
Octagon "will be led by business needs rather than process needs." (p. 390). Ms. Klitch wrote a
detailed email to Mr. de Picciotto on March 23, 2009 (admitted as R-16) advising him that
"verbal deals" are "higher risk" than written contracts. (p. 356). Mr. de Picciotto agreed that
verbal deals were more risky than written deals. (pp. 356-357).
Many of Ms. Gifaldi's concerns about Octagon's processes were fixed by taking those
responsibilities away from Octagon. (pp. 404-405). Mr. de Picciotto admitted that it was Ms.
Klitch and Ms. Gifaldi "who put th[e] good [invoicing and control] system into place." (p.414).
In other words, the concerns raised by Ms. Gifaldi and Ms. Klitch were valid - despite Octagon's
insistence to the contraty - and the parent company, lPG, had to step in and take certain
functions away from Mr. de Picciotto and Octagon.
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Ms. Gifaldi was told by Ms. Klitch that Ms. Klitch had made a complaint to Octagon's
parent,IPG. (p. 105). Ms. Gifaldi had no knowledge of being terminated (not even hints) until
the day she was terminated on October 26,2009. (pp. 100-101).
2) Jenny Klitch, Esq., General Counsel and Chief Legal Officer
4
Ms. Klitch was hired in 2007 by Phil de Picciotto to serve as Octagon's General Counsel.
(p. 13). Mr. de Picciotto was extremely enthusiastic about hiring Ms. Klitch in large part
because of her background in SOX compliance. (p. 319). She was a very demanding boss
5
Her
only performance review at Octagon was glowing. (p. 86).
Ms. Klitch was promoted to Chief Legal Officer and Senior Vice President of Operations
on or about May of 2009
6
Her new role was, inter alia, to create "'a legal and regulatory
appropriate framework" for the client invoicing. (p. 33). Other Octagon employees "objected []
strenuously" to some of the changes she implemented. (p. 63). Ms. Klitch hired Ms. Gifaldi to
assist her with establishing the proper legal and regulatory framework for the invoicing
processes. (pp. 87-88). Ms. Klitch was Ms. Gifaldi's supervisor at Octagon and she had no
performance issues with her. (p. 88).
On August 25, 2009, Ms. Klitch, Octagon's chief legal officer, "formally complain[ ed)"
via email to Julie Kennedy, Octagon's head of human resources, and Thomas Dowling, chief risk
officer for Octagon's parent, IPG. (p.44). The August 25 email was admitted into evidence as
4
Ms.Klitch's deposition was submitted as Exhibit C-l. Page references are to her
deposition.
S All of the witnesses have testified that Ms. Klitch was a demanding boss, including
Octagon's head of human resources, Julie Kennedy. (p. 425). She worked a lot of hours, was
very tough on her staff, and had her subordinates work a lot of hours as well. (pp. 425-426).
6 As General Counsel, Ms. Klitch oversaw the entire legal department and reported to Mr.
de Picciotto. (p. 428). Upon her promotion to Chief Legal Officer, Ho Shin oversaw the legal
department as General Counsel, but Mr. Shin still reported to Ms. Klitch, who then reported to
Mr. de Picciotto. Id At all material times, she was the senior most attorney for Octagon.
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Exhibit C-41. In it, Ms. Klitch questioned Octagon's legal, accounting and SOX compliance.
She also indicated that she feared for her job. (p.75).
Prior to the August 25 email.Ms. Klitch had raised similar concerns to Mr. de Picciotto
directly, but he was unresponsive. (p. 47). Mr. de Picciotto directed Ms. Klitch to not reveal
certain information - specifically the nature of the escrow account - to Octagon's parent, IPG.
(pp. 53-54). Mr. de Picciotto indicated, somewhat arrogantly, that IPG would not "understand"
the Octagon way of doing business. (p. 54). Ms. Klitch had "an ongoing conversation" with
CFO Morton about Mr. de Picciotto's non-responsiveness and his attitude of keeping IPG in the
dark about Octagon's accounting procedures. (pp. 54-57). At some point Ms. Morton actually
told Ms. Klitch that "I wish you had not asked me that question," or words to the effect. (p. 90).
The August 25 email was sent only after Ms. Klitch had "exhausted efforts" to resolve her
concerns internally. (p. 77).
Ms. Klitch was terminated on October 26,2009 by Mr. de Picciotto. (p. 83-85). She was
told that her position was being eliminated, but when asked what they meant by that, Octagon
refused to give any further explanation. Jd Ms. Klitch was provided no prior indication that her
position was going to be eliminated or that she was going to be fired. Jd
Ms. Klitch's testimony is highly credible. She has been an attorney since 1994. (p. 8).
She graduated from the University of Michigan law school (p. 8) and has worked at two
prestigious national law firms - Jones Day and Squire Sanders. (pp. 8-9). Prior to Octagon she
was assistant general counsel at Ocwen loan servicing. (p. 11). Since being terminated from
Octagon, she has been a pmtner at Gunster Yoakley, one of Florida's oldest and most respected
law firms. (p. 86). She has never had any negative performance reviews at any employer. (pp.
10, 11,85,86,88).
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3) Julie Kennedy, Octagon's Head of Human Resources?
Ms. Kennedy, the head of human resources, testified unequivocally that Ms. Klitch was
promoted to Chief Legal Officer in May 2009. (pp. 426-427). It was doclimented as a
promotion on Octagon's "employee change form." (p.427).
Ms. Kennedy testified that when she received the August 25 email fromMs.Klitch. she
telephoned Mr. de Picciotto and informed him of the complaint, but she never actually told him
what was in the complaint. (p. 430). According to Ms. Kennedy, Mr. de Picciotto never asked
what was in the complaint and never asked to see the actual complaint. (pp. 430-431, 488). Mr.
de Picciotto was not happy when he learned of the complaint. (p. 433). Within a few days of
receiving the complaint, one ofIPG's in-house attorneys, Marge Hoey, requested a copy of Ms.
Klitch's employment agreement from Ms. Kennedy. (pp.431-432).
Ms. Kennedy acknowledged that there was nothing in writing prior to the August 25
email indicating that Mr. de Picciotto was going to terminate Ms. Klitch. (p. 435). She claims
that in light of the August 25 email, Octagon was going to hold off on terminating only Ms.
Klitch. (p.436). ImpOitantiy, there was no discussion of holding off on terminating Ms. Gifaldi.
Id. She further acknowledges that as of August 25, there was no decision on terminating Ms.
Gifaldi. Id. 8 Ms. Kennedy learned of Mr. de Picciotto's purported decision to terminate Ms.
Gifaldi for the first time on September 22, 2009.
?
As a preliminary matter, Ms. Kennedy testified extensively about what other Octagon
employees told her about Ms. Klitch and Ms. Gifaldi. The Respondents' defense relies heavily
on these complaints from other employees, i.e., the purported complaints from other employees
are being offered for the tmth of the matter. Complaint respectfully renews her hearsay
objection to Ms. Kennedy's testimony about what other Octagon employees told her about Ms.
Klitch and Ms. Gifaldi.
8 This admission by Octagon's head of human resources is fatal to the Respondents'
argument that it made the decision to terminate Ms. Gifaldi prior to the August 25 email from
Ms. Klitch.
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On September 22, 2009, Ms. Kennedy was informed that Mr. de Picciotto decided to
terminate both Ms. Klitch and Ms. Gifaldi for "economic and performances reasons and work
location reasons." (p. 427). It would appear that the actual decision to terminate was made, at
the earliest, on September 22, 2009. Even giving Mr. de Picciotto the benefit of the doubt, he
had some minor discussions about Ms. Klitch and Ms. Gifaldi's employment prior to the August
25, 2009 email, but they were merely discussions, not decisions. According to the head of
human resources, the decision was made on September 22, 2009.
9
The three reasons given to Ms. Kennedy by Mr. de Picciotto - economic, performance
and location - are not just unsupported by the evidence but are actually contraindicated. There
was no evidence presented that Octagon had financial difficulties at the relevant time (and in fact
Octagon hired people during this time period), (p. 418 & p. 309), Ms. Gifaldi had no
performance issues according to her supervisor Ms. Klitch,1O and, according to Ms. Kennedy,
Mr. de Picciotto actually "encouraged' Ms. Klitch to work remotely from her home in West
Palm Beach. (p. 428 and p. 401).
Ms. Kennedy acknowledged that it would be "best practice" to have written
documentation showing disciplinary concerns and to let employees know their job was in
jeopardy. (pp. 443-444). Despite this, at no point prior to their actual termination on October
26, 2009 did Octagon provide any notice to either Ms. Klitch or Ms. Gifaldi that their respective
9
More precisely, Ms. Kennedy testified that Octagon was "planning to terminate Jenny
[Klitch] and we had talked about terminating Vanessa [Gifaldi]." (p. 438) (emphasis added).
Mr. de Picciotto also acknowledged that in August 2009 he was merely "considering
terminating" Ms. Gifaldi. (p. 291).
10 Ms. Kennedy acknowledged that neither Ms. Klitch nor Ms. Gifaldi had any negative
performance reviews (pp. 453-454).
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job was in jeopardy or that they were going to be terminated. (p. 445)Y Ms. Kennedy fmther
acknowledged that there are personnel action forms that have to be completed when terminating
an employee. (p.446). Despite this, as of August 25,2009, the date of the email complaint.Ms.
Kennedy was not given any written directive from Mr. de Picciotto to start the termination
process of either Ms. Klitch or Ms. Gifaldi. (p. 446). Mr. de Picciotto also conceded that there
were no steps taken to terminate either Ms. Klitch or Ms. Gifaldi before October 26, 2009. (p.
359).
Ms. Kennedy believed that if Ms. Klitch was terminated, Ms. Gifaldi would have to be
terminated as well because they "basically worked hand-in-hand together." (p. 447). She further
testified that Ms. Gifaldi's termination was based in large part (if not exclusively) on her
"loyalty" to Ms. Klitch. (pp. 489 & 494). Finally, Ms. Kennedy acknowledged that neither Ms.
Klitch nor Ms. Gifaldi were "part of the family" and did not fit in at Octagon. (pp.497-498).12
Ms. Kennedy acknowledged that, in light of the complaint to lPG, she had to "dot her Is
and cross her Ts" with respect to the termination of Ms. Klitch and Ms. Gifaldi. (pp. 451-452).
No other Octagon employee had ever complained to IPG (p. 452) and no one else in the legal
department had raised any kind of internal complaint such as the one raised by Ms. Klitch. Id
In seventeen years working in human resources, Ms. Kennedy has never known a general
11
According to Ms. Kennedy, both Ms. Klitch and Ms. Gifaldi were "surprised" when they
were terminated. (p. 448). Ms. Gifaldi was not given any performance improvement plan (p.
489) and Ms. Kennedy acknowledged that no one ever spoke to Ms. Gifaldi about her supposed
performance issues. (p. 490). When the Comt asked her "how's an employee such as Ms.
Gifaldi going to understand that she's got performance issues if nobody talks to her about it,"
Ms. Kennedy responded "I think that's a valid point." (p. 492).
12 The August 25 email complaint went emailed to her and it specifically identified Ms.
Gifaldi. Perhaps not coincidentally, Ms. Kennedy was the one pushing for the termination of
Ms. Gifaldi in addition to Ms. Klitch.
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counselor senior legal officer to file a complaint with the company about a compliance issue.
(p.452).
Despite the seriousness of the situation
13
and the importance of written documentation,
there is not a single document from anyone at Octagon or IPG indicating that the termination of
Ms. Klitch should be postponed. (p. 459). Despite Ms. Kennedy's belief that Ms. Klitch's
complaint was meritiess, she believed it would "look bad" if Octagon terminated Ms. Klitch so
soon after her complaint and the resulting investigation. (pp. 460-463).
4) Nancy Morton, Octagon's Chief Financial Officer
Nancy Morton is the Chief Financial Officer for Octagon (the actual Respondent) and for
several other Octagon branded companies. (p.209). She is the person at Octagon most
responsible for SOX compliance and has been since SOX was enacted. (p.212). She was aware
that Ms. Klitch had concerns about the invoicing process vis-it-vis SOX compliance, and she
shared some of Ms. Klitch's concerns. (pp. 214-215). Despite having these SOX compliance
concerns, she did not take her or Ms. Klitch's concerns to her boss, Mr. de Picciotto, and
essentially punted on accepting or taking any responsibility for the concerns about invoicing,
controls or the lack of written contracts. (pp.216-217). She also knew that Ms. Klitch was not
getting the support she needed regarding documentation from Phil de Picciotto. (p. 219).
Despite being the Chief Financial Officer of Octagon and other Octagon branded
companies, she testified repeatedly that she had no knowledge that either Ms. Gifaldi or Ms.
Klitch (the Chief Legal Officer) was going to be terminated or was terminated until after the
terminations occurred. (p.211).
13
Mr. de Picciotto also acknowledged that the decision to terminate Ms. Klitch was "a
significant employment decision." (p. 358).
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Ms. Morton was "shocked" when she received a copy of Ms. Klitch's August 25 email,
(p. 220 & p. 249), especially at how "detailed" it was. (p. 243). Despite this, she never spoke to
Ms. Klitch about it. (p. 223). She did, however, consult with Mr. de Picciotto about the email.
(p.223).
Ms. Morton was upset because she believed that Ms. Klitch's "issues could have been
handled within her own office just having general conversations with people in our office who
had knowledge." (p. 243). This testimony is beyond incredible because she later acknowledged
that Ms. Klitch was not getting her concerns resolved (p. 248) and that neither she -- the Chief
Financial Officer -- nor Mr. de Picciotto - the President -- could answer her questions. (pp. 248,
250-251). When the Court pointed out this incredible testimony ("So, she wrote [the August 25]
email aboutherself? .. ).Ms. Morton answered "basically." (p. 250).
She is biased in favor of Octagon and to her boss, Mr. de Picciotto because she has
continuously worked for it and him since 1983 (p. 210) and because she owns stock and stock
options in lPG. (p.230)14 She is very loyal to Mr. de Picciotto. (p.231).
Octagon uses the U.S. mail and wire service to transfer money into and out of its
operating and escrow accounts. (p.212). She acknowledged significant "push back" to Klitch's
new policies and procedures from long-time employees. (p. 226). She acknowledged that the
preparation of invoices should have been centralized and that Klitch's job was to do exactly that.
(p. 229). She also acknowledged that Ms. Gifaldi was Ms. Klitch's "right hand person." (p.
229).
5) Michael Marra, Esq., lPG's Associate General Counsel
ls
14
She acknowledged (over the Respondents' objection) that Octagon's profit and losses
flow up to the IPG parent company (of which she is a pmtial owner) and that a loss at Octagon
could negatively impact the share price oflPG stock. (pp. 257-259).
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According to Mr. Marra, Mr. de Picciotto informed lPG's deputy general counsel on the
telephone of his desire to terminate Ms. Klitch. (p. 12). (The deputy general counsel was not
called by the Respondents to confirm this). It was not memorialized in writing anywhere. (p.
13). Importantly, Mr. de Picciotto did not discuss his desire to terminate Ms. Gifaldi or anyone
else, just Ms. Klitch. (pp. 13-14). IPG supposedly told Octagon to hold off on the termination of
Ms. Klitch, but only of Ms. Klitch. (p. 32). IPG did not learn of Ms. Gifaldi's termination until
after it happened. (pp. 13-14). (More precisely, Ms. Gifaldi was not even "a blip on the radar"
at IPG. Id at 58.).
6) James Lombardo, Deloitte & Touche, LLp
16
Contrary to Octagon's assertion, it was never cleared of wrongdoing. (pp. 11-12).
Deloitte was not tasked with conducting any audit, did not conduct an audit, was not tasked with
looking for wrongdoing, did not look for wrongdoing and did not reach any conclusions as pali
of its investigation. (pp. 9-12). The entire "investigation" consisted only of "getting an
understanding of how the escrow accounts were managed." (p. 9).
V. Phil de Picciotto's Testimony was Highly Incredible
17
Mr. de Picciotto was a founder of Octagon and he was bought out by IPG for several
million dollars. (p. 306). He owns over $IM in IPG stock equity. (p. 307). He was, at all
material times, its president. He alone made the decision to terminate Ms. Gifaldi and Ms.
Klitch.
15
Mr. Marra was lPG's Rule 30(b)(6) designee and his depositions were entered as Exhibit
C-127 and C-128. Page references are to his second deposition taken on July 6, 20 II.
16 Mr. Lombardo's deposition was entered as Exhibit C-129. Page references are to his
deposition.
17 The Court indicated its own frustration with Mr. de Picciotto' s evasive answers. (p. 381).
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He testified that Ms. Klitch had severe perfonnance issues beginning in 2008 that
included being combative and aggressive and that included staff complaints "from virtually
every one of our division heads and also most, if not all of the people in the legal department."
(pp. 275-276). Despite this, Ms. Klitch was not terminated until late 2009. He also gave Klitch
two spot bonuses in March and May 2009. (p. 336).
Mr. de Picciotto denied that he "encouraged" Ms. Klitch to use her new title of Chief
Legal Officer instead testifying merely that he "approved use" of the new title. (p.338). Despite
this denial, his April 13, 2009 email (admitted as C-51) expressly told Ms. Klitch to not hesistate
to use her new title even though it was Ms. Klitch who was shy about using it. (pp.339-341).
Mr. de Picciotto testified unequivocally that Ms. Klitch's May 2009 transition from
General Counsel to Chief Legal Officer was a "demotion." (p. 342). This is perhaps the most
stunning example of Mr. de Picciotto's incredibility and it taints his entire testimony. She
remained the senior most legal officer and the new general counsel answered to her. She did not
have a pay deduction. She did not consider it a demotion. Most importantly, Julie Kennedy, the
head of human resources, treated it as a promotion and - despite the lack of documentation in
this case and by Octagon generally - it was documented by Octagon as a promotion.
He testified at trial that Ms. Gifaldi was terminated for "perfonnance issues." (p. 303).
This is inconsistent with what he told Julie Kennedy on September 22, 2009, where he stated that
Ms. Gifaldi's "position [was] being eliminated due to economic and strategic reasons." (p.427).
There is nothing in the September 22 notation indicating any performance issues with Ms.
Gifaldi. Id. Moreover, he emailed Julie Kennedy on the date of termination - October 26, 2009
- and grouped Ms. Klitch and Ms. Gifaldi together on multiple occasions even though he was
primarily discussing Ms. Klitch's purported performance issues. (Exhibit R-48).
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As recently as September 12, 2009 - well after he supposedly made the decision to
terminate Ms. Gifaldi - Mr. de Picciotto wrote a laudatOlY email (admitted as R-42) thanking her
for her making changes to a report. (p. 420). Nothing in the email indicated that he had made
the decision to terminate her. (p. 420).
Mr. de Picciotto could not credibly explain why he did not terminate or take steps to
terminate Ms. Klitch or Ms. Gifaldi after the decisions were purportedly made in early and mid-
August 2009, respectfully, but before he was allegedly told not to terminate them following the
August 25,2009 complaint by Ms. Klitch. (pp. 360-363).
Mr. de Picciotto testified that never saw the August 25 email complaint until October
2009. Incredibly, he testified that Ms. Kennedy called him to let him know of the email and that
the entire conversation was: "She said 'Ms. Klitch has sent an email to IPG and I'm calling to let
you know' and then she hangs up." (p. 366). This is so incredible that it is laughable.
Mr. de Picciotto admits he was "annoyed" that Ms. Klitch sent the email to IPG. (p.
392). ImpOltantly, it was not just the complaint that was the problem, it was the fact that the
complaint was sent to Octagon's parent company, IPG. (pp. 392-393). He admits it "didn't
make Octagon look pmticularly good in front of its parent company." (p. 393).
Mr. de Picciotto testified that he was not involved in the Deloitte investigation except to
be interviewed, but this testimony is utterly contradicted by a September 16, 2009 email
(admitted as C-40) from lPG's director of compliance, Tom Dowling, to Octagon's HR director,
Julie Kennedy, stating that "Phil [de Picciotto] was going to update you today on the plan for
next week." (p. 373). He testified that other than the interview, his only interaction with the
investigators at Deloitte was a phone call. (p. 396). But he was quickly impeached when he was
shown an email exchange (admitted as C-125) with the Deloitte investigator. (p.397).Mr.de
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Picciotto obviously knew and knows more than he has shared during his testimony about the
email complaint and subsequent superficial investigation. See Ameristar Airways, 650 F.3d at
569-570 ("If the trier offact does not believe the employer to have given a truthful account of its
decision, it is reasonable to infer that the most likely explanation is the one the employer cannot
admit - that it acted for retaliatory or discriminatory reasons.").
Mr. de Picciotto did not believe it was important to document the terminations yet did
send an email on the day of the terminations expressly (and oddly) indicating that the
terminations were unrelated to Ms. Klitch's complaint. (p. 310). He admitted that other than his
trial testimony, he has no evidence or proof of any kind supporting his assertion that he had
decided to terminate Ms. Klitch and Ms. Gifaldi in August 2009. (pp. 357-358). (This
concession is critical because Octagon has the burden of clear and convincing proof that it would
have terminated Ms. Gifaldi even in the absence of protected activity).
Mr. de Picciotto was highly enthusiastic about Ms. Klitch - in part because of her SOX
compliance experience - at the time that he hired her, despite his testimony that she was merely
qualified. (p. 319). She actually replaced not one but two terminated lawyers. (p. 330). Mr. de
Picciotto further testified that he had no knowledge if Ms. Klitch's replacement had any SOX
compliance background. (p. 346).
Mr. de Picciotto testified that after concluding that the invoicing process was a mess, he
"let it go" and took "several" trips afterwards. (p. 409). He then testified that he likes to give
employees "second chances," but Ms. Gifaldi was never told she had a performance issue and
was never told she was being given a second chance. (pp. 409-410). Employees are supposed to
be notified that they are having performance issues and that the performance issues are supposed
to be documented, (p. 411), but none of this happened with respect to Ms. Gifaldi or Ms. Klitch.
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Mr. de Picciotto never told Ms. Klitch that he was going to fire her primary direct report. (p.
413).
Mr. de Picciotto knew that both Ms. Klitch and Ms. Gifaldi had employment contracts
providing them with four weeks advance notice of a termination, but he wanted to get rid of them
so badly that he knowingly disregarded the notice requirement. (pp. 383-386). Since he
purportedly decided to terminate both in August 2009, he had ample time - even before the
August 25 email from Klitch - to at least initiate termination proceedings and to comply with
Octagon's contractual notice requirement. But this was about quick retaliation, not honoring
contractual commitments.
In sum, the Court should conclude that Mr. de Picciotto's testimony was highly
incredible and it should completely discount his self-serving, unsuPPOlted, after-the-fact
explanation for what occurred.
IV. The Court Should Award Ms. Gifaldi $85,824.62 in Economic Damages and $50,000
in Non-Economic Damages
At the time of her termination on October 26, 2009, Ms. Gifaldi was earning $95,000
with a $10,000 bonus. (p. 115). Pursuant to her employment contract, her salary would have
been raised to $99,000 on January 1, 20lO. (p. 115). Octagon paid her one month salary
foHowing her termination in lieu of complying with its contractual 30 day pre-termination notice.
(p. 116). She started at a new position on May 17,2010 at an annual salary of $81,000 with a
possible 15% percent bonus. Accordingly, she is owed $ 9,134.62 in back pay for November 26,
2009 through December 31, 2009 at her $95,000 salary. She is also entitled to her $10,000
bonus for 2009. She is owed $ 34,269.23 in back pay for January 1,2010 through May 16,2010
(her new job start date) at her contracted $99,000 salary. She is also entitled to $15,230.77 in
diminished wages from May 17,2010 through December 31,2010 because of the difference in
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her salary from Octagon ($99,000) to her new employer ($81,000). (p. 117). Ms. Gifaldi paid
approximately $1,190.00 in out of pocket COBRA expenses. (p. 118). She borrowed $10,000
from family and friends to live. (p. 118). She removed approximately $6,000 from her 40lK
retirement account. (p. 118). She is not seeking economic damages as ofJanuary 1,2011.
Ms. Gifaldi's total back pay award should be $ 68,634.62. Her total economic damage
award should be $85,824.62, inclusive of COBRA and repayment of borrowed funds.
Ms. Gifaldi is also seeking non-economic compensatory damages. She suffered the
humiliation of being fired for the first and only time; she experienced extreme stress, had trouble
sleeping, and suffered weight gain (pp. 119-123). She is concerned about the six month gap in
her employment. Id. She had to relocate to Dallas from South Florida because she needed the
job. Id. She had planned on staying in South Florida at the time because her fliends and family
are there. Id. She had no friends or family in Dallas. Id. Accordingly, Ms. Gifaldi is seeking a
very reasonable $50,000 in compensation for non-economic damages. See Vieques Air Link, Inc.
v. u.s. Dep '( of Labor, 437 F.3d 102, 110 (1st Cir. 2006) (affirming $50,000 non-economic
damage award in AIR-21 whistleblower proceeding based upon "suffering and pain," depletion
of savings and mental anguish during a six-month unemployment period).
Conclusion
Respondents, no doubt, want this COUlt to miss the forest for the trees. After exhausting
her internal options, Ms. Klitch wrote a detailed and unprecedented complaint to Octagon's
publicly traded parent company that embarrassed Octagon, and more specifically, Mr. de
Picciotto. The email specifically referenced legal, accounting and SOX compliance issues and
even indicated that Ms. Klitch feared that she would lose her job because of the issues she was
raising. Octagon and IPG conducted a superficial investigati on into her complaint. When the
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investigation was over, Ms. Klitch and Ms. Gifaldi, the right-hand-woman, were summarily and
unexpectedly terminated for reasons that are obviously pretextual and unsupported. Their very
presence was so toxic that they had to be terminated without Octagon honoring its contractual
obligation to provide both with 30 days notice of a termination. Octagon concedes that Ms.
Klitch and Ms. Gifaldi were a package deal - Ms. Gifaldi was acceptable collateral damage.
This is precisely the type of activity that the anti-retaliation provision of SOX is designed to
protect.
For the reasons stated above, this Court should enter a judgment in favor of Ms. Gifaldi
and against the Respondents and award her $85,824.62 in economic damages and $50,000 in
non-economic compensatory damages. The Court should also enter an order entitling her to
prejudgment interest, attorneys' fees and litigation costs in an amount to be set by separate order.
Respectfully submi1tteq
Sarelson, Esq.
Fla. Bar No. 888281
SARELSON LAW FIRM, P.A.
1200 Brickell Avenue, Suite 1440
Miami, Florida 33131
305-379-0305
800-421-9954 (fax)
msarelson@sarelson.com
CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on the day of October, 2011, a true and accurate copy
of this document was served via U.S. Mail on counsel for Respondents, Robert R. Niccolini,
Esq., Ogletree Deakins, 1909 K St. NW, Ste. 1000, Washington, D.
Matthew Seth Sarelson, Esq.
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