U.S. Department of Labor

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Administrative Review Board

200 Constitution Ave. NW

Washington, DC 20210-0001

IN THE MATTER OF:

GENE SCHAEFER &

LUIS BERMEO,

ARB CASE NO. 2022-0050

COMPLAINANTS,

ALJ CASE NOS. 2018-SOX-00048

2018-SOX-00051

ALJ TIMOTHY J. MCGRATH

DATE: June 22, 2023

NEW YORK COMMUNITY

BANCORP, INC.,

RESPONDENT.

Appearances:

For the Complainants:

Gayle Pollack, Esq. and David B. Saxe, Esq.; Morrison Cohen LLP;

New York, New York

For the Respondent:

Ashley Burkett, Esq.; Arnold & Porter Kaye Scholer LLP; Washington,

District of Columbia

Before PUST, WARREN, and MILTENBERG, Administrative Appeals

Judges

DECISION AND ORDER

PUST, Administrative Appeals Judge:

This case arises under the whistleblower protections of Section 806 of the

Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the

Sarbanes-Oxley Act (SOX), as amended, and its implementing regulations.1 On

June 29, 2022, a U.S. Department of Labor (Department) Administrative Law

Judge (ALJ) issued a Decision and Order Denying Complaints (D. & O.). The ALJ

determined that Gene Schaefer (Schaefer) and Luis Bermeo (Bermeo) (collectively,

18 U.S.C. § 1514A; 29 C.F.R. Part 1980 (2022).

Complainants2) failed to establish by a preponderance of the evidence that they had

engaged in activity protected under SOX, so their whistleblower claims failed.3

Specifically, the ALJ found that the Complainants’ reports of an alleged scheme

related to copper salvaging and cash kickbacks involving employees of New York

Community Bancorp, Inc. (Respondent or NYCB) did not constitute SOX-protected

activity because Complainants failed to demonstrate that they held reasonable

beliefs that the scheme they alleged constituted bank fraud under 18 U.S.C. § 1344,

one of SOX’s predicate statutes.4 Complainants timely petitioned the

Administrative Review Board (ARB or Board) for review. We affirm the ALJ’s

D. & O.

BACKGROUND

The ALJ determined the following facts which, with one exception,5

Complainants do not challenge on appeal.6

This litigation originally involved one additional complainant, Fred Fernandez

(Fernandez), who was employed by NYCB as a Lead Project Manager from December 2014

until December 2017, when NYCB eliminated his position. D. & O. at 5. Fernandez’s claim

was dismissed as part of the ALJ’s June 30, 2020 Order Granting, In Part, and Denying, In

Part, Respondent’s Motion for Summary Decision. Fernandez did not appeal that ruling

and is no longer a party in this case.

D. & O. at 34.

D. & O. at 28-29; see 18 U.S.C. § 1514A(a)(1) (which states that no covered company

may discriminate against an employee for engaging in “conduct which the employee

reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or

regulation of the Securities and Exchange Commission, or any provision of Federal law

relating to fraud against shareholders.”).

Complainants note that the ALJ made one “significant factual error” in relying on

statements made by counsel rather than witness testimony when describing an internal

NYCB investigation related to a different NYCB property in 2013. Complainants’ (Comp.)

Opening Brief (Br.) at 24; see D. & O. at 6. NYCB labels this error a “red herring” because

the ALJ did not rely on this other investigation as a basis for concluding that Complainants

did not reasonably believe they were reporting bank fraud. Respondent’s (Resp.) Br. at 45

n.11. We conclude such error is harmless because the ALJ articulated several other

sufficient reasons why Complainants failed to establish that they reasonably believed that

they engaged in protected activity under SOX. See Wong v. Sumitomo Mitsui Banking

Corp., ARB No. 2018-0073, ALJ No. 2016-SOX-00005, slip op. at 6 (ARB Oct. 26, 2020);

Bechtel v. Admin. Rev. Bd., U.S. Dep’t of Lab., 710 F.3d 443, 449 (2d Cir. 2013).

Comp. Reply Br. at 7.

1. Relationship Between the Parties

New York Community Bancorp, Inc. is a publicly traded financial institution

headquartered in New York with hundreds of branch banks located in five states.7

Robert Wann (Wann) is NYCB’s Chief Operating Officer.8

NYCB operates an internal Corporate Real Estate Services unit (CRES)

responsible for managing and maintaining its physical properties.9 From early 2016

until his termination in 2017, William Curran (Curran) served as the Chief CRES

Officer for NYCB.10 During the relevant timeframe, Fernandez and Richard Grosso

(Grosso) served as CRES project managers11 and Fred Whittaker (Whittaker) was

the Director of Facilities for CRES.12

Complainant Schaefer worked for NYCB in various roles over two decades; in

2016 he was the CRES Budget Coordination Manager and reported to Curran.13

Complainant Bermeo became the Director of Construction and Project Management

for CRES East after also having worked for NYCB for nearly twenty years.14 Like

Shaefer, Bermeo reported to Curran.15

2. Renovation of 100 Duffy

In 2016, NYCB purchased a building at 100 Duffy Avenue in Hicksville, New

York (100 Duffy),16 located adjacent to a building that NYCB already owned at 102

Duffy Avenue (102 Duffy). NYCB hired The Martin Group (TMG) as a general

contractor to complete a renovation of 100 Duffy.17

D. & O. at 4.

Id. at 3.

Id. at 2.

Id. at 2-3.

Id. at 5-6.

Id. at 6.

Id. at 2.

Id. CRES includes two subunits, one of which is CRES East. Trial Exhibit (Ex.) J

(Memorandum re: Audit of Corporate Real Estate Services) at 1.

D. & O. at 2.

Id. at 6.

Id.

Inside the basement of 100 Duffy is a room formerly used to house

telecommunications equipment (LAN room).18 The LAN room contained a dropped

ceiling made of metal gridwork filled with two-by-four ceiling tiles.19 Wires and

cables ran both above and below the ceiling tiles, and some also ran under the floor

in the LAN room.20 As part of the remodeling project, NYCB’s information

technology (IT) department requested the removal of several cabinets and racks

containing obsolete computer-related cables and wires from the LAN room.21

After having inspected the site with Grosso, in September of 2016 Apptel, a

telecommunications repair and installation company, submitted a proposal to

remove all unused or obsolete equipment and cabling from the LAN room.22 Grosso

generated a purchase order based on Apptel’s proposal.23 Apptel’s proposal required

NYCB to remove any material it wanted to keep and to take down the ceiling tiles

in the LAN room before Apptel began any work.24 The purchase order totaled

$9,400.00, and described the project as follows:

Remove Any & All Unused Or Obsolete Equipment &

Cabling From The Level B Telco Room.

Requires Removal of Any Materials The Client

Wishes To Keep, Along With The Removal Of All Ceiling

Tiles Before The Project Can Commence.

A Space For The Roll Of (sic) Dumpster Is Required

Directly Near The Freight Location. 25

The purchase order was approved on September 27, 2016, by Schaefer, Bermeo,

Grosso, and Curran.26

When Apptel started work in the fall of 2016, the ceiling’s gridwork and tiles

had already been removed, as provided for in the purchase order.27 The Apptel crew

removed computer-related cables and wires from the LAN room, all of which fit into

Id. at 7.

Id.

Id. at 7-8.

one dumpster and generated only $1,179.60 in value as scrap metal.28

3. Change Order No. 16

Sometime before March 15, 2017, Grosso approved TMG’s request to submit a

contract change order (CO) for additional work at 100 Duffy, eventually

memorialized as Change Order 16 (CO16).29 CO16 called for the repair of the

existing ceiling grid and installation of new ceiling tiles in the LAN room of 100

Duffy, with payment for the work totaling $40,300.05.30

On March 30, 2017, Grosso sent CO16 to the project architect for review.31 A

few hours later, and after the architect informed Grosso that the cost of the work

was too high,32 Grosso sent an email to Bermeo, with a copy to Schaefer and others

(Grosso email chain), informing all that CO16 was being rejected.33

4. April 3rd Bermeo/Curran Conversation: Bermeo’s Alleged Protected

Activity34

At approximately 9:00 a.m. on Monday April 3, 2017, Bermeo received and

signed CO16, then had it sent to Schaefer for signature.35 When Schaefer reviewed

CO16, he noticed that it called for repairing damage to the LAN room ceiling

although no construction had been authorized in the LAN room. He also noted that

CO16 totaled over $40,000, making it one of the largest change orders on the

project.36 Schaefer did not sign CO16; instead, he met with Bermeo to discuss the

Id. at 8.

Id. Change Order 16 was identified as “CO 16” by the ALJ. Id.

Id.

Id. at 9.

Although Bermeo did not author and was not copied on or named in Schaefer’s April

6th email to Wann, he alleges that this email also constituted part of his protected activity.

For the reasons set forth in the D. & O. at 24, we concur in the ALJ’s finding that the April

6th email sent by Schaefer to Wann, who did not supervise Bermeo, does not constitute

Bermeo’s “aiding in an investigation . . . conducted by . . . a person with supervisory

authority over the employee (or such other person working for the employer who has the

authority to investigate, discover, or terminate misconduct).” See 18 U.S.C. 1514A(a)(1)(C).

See further relevant discussion infra at 16-17.

D. & O. at 9.

Id.

matter.37

At 9:15 a.m. on April 3rd, Schaefer replied to the March 30th Grosso email

chain and asked who had removed the ceiling tiles and authorized the

deconstruction of the LAN room.38 Within ten minutes and without receiving any

response from Grosso or ever having seen the LAN room,39 Schaefer sent the

following email to Wann:

You need to be made aware of the situation below. It

involves a room in 100 Duffy where someone allowed a

vendor access to this room to salvage copper wiring from

the room for cash. I was informed that there was an

exchange of cash envelopes between vendors and our

employees resulting from this activity. It was something

that had transpired at 102 Duffy40 and it seems to have

occurred again.

***

This aggressive salvage operation will cost the company

$40,000 in repairs, and may have netted at least that much

in copper to whoever removed the wiring.41

Also on April 3, 2017, Bermeo replied to Schaefer’s email in the Grosso email

chain, explaining that NYCB maintenance staff had removed the ceiling tiles and

Id.

Id. at 6.

The email’s reference to 102 Duffy relates to an April 2016 conversation between

Fernandez, Schaefer and Bermeo regarding a bid opening meeting that had become

contentious between Fernandez and Grosso. At the suggestion of Schaefer and the

instruction of Curran, Fernandez had obtained a sealed bid on a project that grossly

undercut the bid Grosso had obtained, such that Grosso’s preferred vendor lost the bid. Id.

at 5-6. Explaining why he and Grosso had argued at the meeting, Fernandez told Schaefer

and Bermeo that when he worked for a construction company on the 102 Duffy project in

2013 before he joined NYCB, Grosso “ran a scheme” that involved the removal and sale of

copper wiring, copper piping and stored oil from the property. Id. at 6.

Id. at 9-10. See also RX 203 (April 3rd email). Although Schaefer originally relied

upon this April 3rd email as part of his claimed protected activity, once the record

established that he sent this email prior to being told about a cash envelope exchange

during his viewing of the LAN room later that same day, Schaefer conceded that he was no

longer claiming this communication was part of his claimed protected activity. See D. & O.

at 21 n.12.

Apptel had removed the wiring.42 Schaefer then asked Bermeo, Grosso, and Gerry

Newman (Newman), NYCB’s property manager at 100 Duffy, for documentation

identifying who authorized Apptel to cause $40,000 worth of damage in the LAN

room.43 In response, Bermeo sent Schaefer a copy of the NYCB’s IT department

work order, which specified what work NYCB was requesting.44

That same day, Schaefer, Bermeo, Newman, Fernandez, and NYCB project

manager Edgar Hernandez (Hernandez) visited the LAN room.45 Although their

subsequent descriptions of the damage varied considerably,46 the record indicates

that the entire ceiling grid had been removed or damaged such that it was unusable

and all wiring was gone except for some hanging light fixtures.47 When Bermeo

asked who caused the damage, Newman told him that they should speak with

Grosso who had coordinated the work, which was performed by NYCB personnel

during a three-day weekend after hours.48 Newman then said in a joking manner,

“If you give me an hour, I could have a guy here and we’ll give you a million

dollars.”49

Upon returning to NYCB’s headquarters, Bermeo met with Curran. During

their conversation (April 3rd Bermeo/Curran conversation), Bermeo reported to

Curran that the LAN room was damaged and that Newman told them that Grosso

coordinated the work, all of which was done by NYCB employees after hours during

a three-day weekend. Bermeo also told Curran that Newman “made a joke”

about a “million-dollar payment.”50 Bermeo did not mention copper wiring removal

and did not raise any concerns related to project scope or bid-rigging.51 During the

April 3 Bermeo/Curran conversation, Curran showed Bermeo an envelope of cash

that he said he had received from Whittaker.52 Curran told Bermeo that he was

waiting to speak with Grosso before doing anything with the cash and directed

D. & O. at 10.

Id.

Id. at 10 n.7.

Id. at 10.

Id. at 11.

Id.

Id. at 23.

Id. at 11.

Bermeo to “stay out of it.”53

On April 4, 2017, Schaefer and Bermeo visited 100 Duffy again, this time

with Hernandez and Apptel’s owner, Michael Chludzinski (Chludzinski).54

Chludzinski told the group that he was not responsible for any of the damage to the

LAN room and that the removal was done by NYCB employees.55 During the same

visit, a TMG employee told Schaefer and Bermeo that he had received an envelope

of cash from an NYCB employee for the sale of “cold water piping taken from the

third floor of 100 Duffy.”56 According to Bermeo, the TMG employee identified

Curran as the NYCB employee who gave him the cash envelope; according to

Schaefer, the TMG employee did not know the name of the NYCB employee who

gave him the envelope.57

Later that morning, Schaefer responded to Grosso and Whittaker’s email

from the previous night, advising that no one should move forward with ceiling

repairs in the LAN room until they understood who caused the damage.58 On the

same day, Schaefer, Bermeo, Grosso (by phone), and Whittaker met to discuss the

situation.59 On April 5, 2017, at Curran’s instruction Bermeo emailed the project

architect advising that NYCB was not proceeding with CO16 as Schaefer and

Curran had both denied authorization for the work.60

5. April 6th Schaefer/Wann Email: Schaefer’s Alleged Protected Activity

On Thursday, April 6, 2017, at 10:44 a.m., Schaefer sent a second email to

Wann (April 6th Schaefer/Wann email), which read in pertinent part as follows:

As I inquired further about the damage to the [LAN room],

I received information regarding an envelope from a vendor

directly. The vendor was given an envelope from an

employee and told he was “returning it to the company that

should have received it.” Unfortunately, for that employee,

the vendor didn’t even know about the envelope or the job

that generated the envelope.

Id.

Id. at 12.

Id.

Id. at 13.

Id.

The employee was William Curran. He returned the

envelope to The Martin Group on the day after I asked if

he was “aware of an incident at 100 Duffy where employees

were receiving envelopes for salvage work?” His response

to me at that moment was “Yea, I heard that.” To which I

replied that “I told the vendor that if our management is

aware of this, I am sure an investigation is under way to

identify what happened, and when it happened, and will

connect all the dots. This is the first I heard about this, and

I don’t know who is involved. Either as a recipient of an

envelope or in the taking of copper.” This was on last

Monday. On Tuesday he gave the envelope to The Martin

Group who didn’t know what to do with it. According to

what he told me The Martin Group, he apparently received

the envelope for “the removal of an abandoned solid copper

cold water pipe on the 3rd floor of 100 Duffy. Which Was

done at night without the Martin Group knowing.”

Mike the owner of App-Tel, our communications vendor,

and I had a conversation. He told me he didn’t know

anything about the removal of other wiring in the room,

but did acknowledge the room had been worked on at night

by someone other than his company. He said they were

aggressive and left only what was still connected to the

equipment he was directed to remove. The rest of the room

was cleared of the 15-20 years of copper wiring that had

been abandoned by Manufacturers Hanover and Chase

Bank.61 In a conversation with Gerry Newman, he told me

“there was ton’s upon ton’s of wire removed from this [LAN]

room. I assume it was done by AppTel.” He said “There was

so much wire here that you couldn’t fit a single wire on the

ceiling anymore. On the ceiling, under the floor, there was

so much here.”

***

If you want to confirm this and verify who was directly

involved, you might wish to review the building security

In his sworn testimony at hearing, Chludzinski denied telling Schaefer that NYCB

employees removed any amount of copper wiring from the LAN room. Contrary to the ALJ’s

findings related to Schaefer, the ALJ found Chludzinski to be a “very credible” witness. Id.

at 31-32.

videos of all afterhours work at 100 Duffy between 9/27/16

through 11/01/16.62

Wann called Schaefer and told him to “do no more.”63 At 3:49 p.m., Wann

replied to Schaefer’s email, advising Schaefer he was not tasked or trained as an

investigator and directing him to “please stand down.”64 Schaefer replied to Wann’s

email at 4:31 p.m., stating he “stood down” and had only been looking to find out

who damaged the LAN room and why, and “could not ethically ignore what [he] had

been told.”65

6. NYCB’s Audit of CRES and the Termination of Complainants’

Employment

On March 1, 2017, NYCB’s internal audit department announced that it was

auditing CRES as part of its regularly scheduled three-year audit cycle.66

Throughout the month, NYCB’s auditors met with members of CRES, including the

Complainants, and requested various documentation.67 On April 6, 2017, NYCB’s

Chief Audit Executive met with Wann to discuss her growing concerns about the

functioning of CRES.68 On May 1, 2017, a draft audit report was circulated to Wann

and Curran, outlining five “High Risk” deficiencies and identifying the employees

responsible for the identified functions, including Complainants, Whittaker, and

Curran.69

The auditors identified the Complainants as not fulfilling their respective job

duties in various respects.70 Specifically, the draft audit report noted that Schaefer

“could not provide documentation to support the . . . responsibilities in relation to

budgetary controls, the monitoring of the budget versus actual spend[ing], vendor

non-performance, reporting of operational and financial analyses, contract

performance and periodic management reporting.”71 The auditors also identified

areas in which Bermeo’s performance was problematic related to improper project

Id. at 13-14 (deletion from original noted with ellipses).

Id. at 14.

Id.

Id. at 14-15.

Id. at 15.

Id.

Id. at 14 (quoting Joint Ex. 57).

scoping and allowing job estimates to be prepared without sufficient independence

from the project team, inadequate leveling procedures, and insufficient change

order procedures.72

After Wann reviewed the draft audit report, he decided to terminate NYCB’s

employment of Complainants and Curran.73 On May 3, 2017, NYCB terminated

Complainants’ and Curran’s employment74

On May 5, 2017, Bermeo emailed Wann denying any involvement in

Schaefer’s investigation into 100 Duffy and stating that he had no knowledge

regarding Schaefer’s accusations.75 Also on May 5th, Schaefer emailed NYCB’s

Chief Executive Officer stating his belief that Complainants were terminated

because of their attempts to “blow the whistle” on a “fraudulent scheme” involving

the stripping and sale of scrap metal “in massive quantities” resulting in “tax free

cash sale of bank property for individual personal gain.”76

7. Procedural History and ALJ Decision

On June 29, 2017, and July 14, 2017, Schaefer and Bermeo, respectively,

timely filed SOX whistleblower complaints with the Department’s Occupational

Safety and Health Administration (OSHA). OSHA dismissed their complaints for

lack of any protected activity related to bank fraud.77 On September 6, 2018,

Schaefer filed objections to OSHA’s dismissal and requested a formal hearing before

the Department’s Office of Administrative Law Judges (OALJ). On September 24,

2018, Bermeo filed objections and a request for a hearing.

On December 26, 2018, the assigned ALJ issued an Order Consolidating the

Complainants’ Cases.78 On June 30, 2020, the ALJ issued two orders: (1) Order

Denying Complainants’ Motion for Summary Decision; and (2) Order Granting, In

Part, and Denying, In Part, Respondent’s Motion for Summary Decision. The ALJ

held a virtual hearing in this matter between December 7, 2020, and January 15,

Id.

Id. at 16.

Id.

Id. Fifty-one days after his termination, Bermeo again emailed NYCB’s CEO asking

to be rehired. The email failed to mention the destruction of the LAN room and contained

no reference to the sale of copper wire or any alleged scheme. Id.

Id.

See Trial Ex. I (Schaefer’s Objection to Denial of Claim filed Aug. 30, 2018) at 1.

The ALJ consolidated the claims of Bermeo, Schaefer, and Fernandez.

2021, and the parties gave closing arguments on January 28, 2021.79

On June 29, 2022, the ALJ issued a D. & O. in which the ALJ found that the

Complainants failed to establish by a preponderance of the evidence that they had

engaged in any activity protected under SOX.80 As grounds for his determination,

the ALJ found that neither Bermeo nor Schaefer held reasonable beliefs that the

April 3rd Bermeo/Curran conversation or the April 6th Schaefer/Wann email

constituted reports of bank fraud cognizable under 18 U.S.C. § 1344 or protected

under SOX.81

On July 8, 2022, the Complainants appealed the ALJ’s decision to the Board.

Both parties filed timely briefs.

JURISDICTION AND STANDARD OF REVIEW

The Secretary of Labor has delegated authority to the Administrative Review

Board to review ALJ decisions under SOX.82 The ARB reviews questions of law de

novo but is bound by the ALJ’s factual determinations if they are supported by

substantial evidence.83 “Substantial evidence” is “such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.”84 Because an

ALJ observes all witnesses throughout a hearing, the Board will defer to an ALJ’s

credibility determinations unless they are “inherently incredible or patently

unreasonable.”85

D. & O. at 1.

Id. at 34.

Id. at 22, 25, and 29.

Secretary’s Order No. 01-2020 (Delegation of Authority and Assignment of

Responsibility to the Administrative Review Board (Secretary’s discretionary review of ARB

decisions)), 85 Fed. Reg. 13,186 (Mar. 6, 2020).

Cerny v. Triumph Aerostructures-Vought Aircraft Div., ARB No. 2019-0025, ALJ No.

2016-AIR-00003, slip op. at 5 (ARB Oct. 31, 2019) (citing 29 C.F.R. § 1979.110(b) (2022));

see Leviege v. Vodafone US, Inc., ARB No. 2019-0058, ALJ No. 2016-SOX-00001, slip op. at

3 (ARB Mar. 19, 2021) (citations omitted).

Cerny, ARB No. 2019-0025, slip op. at 5 (quoting Biestek v. Berryhill, 139 S.Ct. 1148,

1154 (2019) (quotation marks and additional citations omitted).

Mizusawa v. United Parcel Serv., ARB No. 2011-0009, ALJ No. 2010-AIR-00011, slip

op. at 3 (ARB June 15, 2012), aff’d No. 12-9563 (10th Cir. Apr. 26, 2013) (quoting Jeter v.

Avior Tech. Ops., Inc., ARB No. 2006-0035, ALJ No. 2004-AIR-00030, slip op. at 13 (ARB

Feb. 29, 2008)); see also Negron v. Vieques Air Link, Inc., ARB No. 2004-0021, ALJ No.

2003-AIR-00010, slip op. at 5 (ARB Dec. 30, 2004), aff’d No. 05-1278 (1st Cir. Mar. 7, 2006).

DISCUSSION

SOX prohibits covered employers from discriminating against an employee

who provides information or otherwise assists in an investigation regarding conduct

“which the employee reasonably believes constitutes a violation of section 1341,

1343, 1344, or 1348, any rule or regulation of the Securities and Exchange

Commission, or any provision of Federal law relating to fraud against

shareholders . . . .”86 A SOX claim is governed by the burdens of proof set out in the

Wendell H. Ford Aviation Investment and Reform Act for the 21st Century

(AIR 21).87

To prevail, a SOX complainant must establish by a preponderance of the

evidence that: (1) the complainant engaged in protected activity under SOX; (2) the

respondent took an unfavorable personnel action against the complainant; and

(3) the complainant’s protected activity was a contributing factor in the unfavorable

personnel action.88 SOX-protected conduct is limited to the six specified categories

of fraud or securities violations set out in the SOX statute.89 Although “[a]

complainant need not cite a specific code provision she believes was violated to

engage in protected activity, [a complainant] nonetheless has to complain or provide

information about conduct that she reasonably believes concerns one of the six

specifically enumerated categories in the statute.”90

Proof that a complainant has reported conduct that he or she reasonably

believed constitutes a SOX violation includes both a subjective and objective

component. That is, to establish their claim Complainants have the burden of

showing both that: “(1) [they] subjectively believed that the conduct complained of

constituted a violation of one of the laws listed in Section 806, and (2) a reasonable

person of similar experience, training, and factual knowledge would objectively

18 U.S.C. § 1514A(b)(2)(A) (citing 49 U.S.C. § 42121(b)).

49 U.S.C. § 42121(b).

29 C.F.R. § 1980.109(a); see also 18 U.S.C. § 1514A(b)(2)(A); 49 U.S.C. § 42121

(b)(2)(B)(iii). If a complainant meets this burden of proof, the employer may avoid liability

only if it proves its affirmative defense, which requires demonstrating by clear and

convincing evidence that it would have taken the same adverse action against the

complainant in the absence of any protected activity. 29 C.F.R. § 1980.109(b).

Harvey v. Home Depot U.S.A., ARB Nos. 2004-0114, -0115, ALJ Nos. 2004-SOX00020, -00036, slip op. at 14-15 (ARB June 2, 2006) (“To bring himself under the protection

of the act, an employee’s complaint must be directly related to the listed categories of fraud

or securities violations.”)

Leviege, ARB No. 2019-0058, slip op. at 4 (citing Nielsen v. AECOM Tech. Corp., 762

F.3d 214, 221 n.6 (2d Cir. 2014) (other citations omitted)).

believe that a violation had occurred.”91 To demonstrate a reasonable belief that

they engaged in protected activity, Complainants need not prove an actual violation

of law,92 but they “must do more than speculate, argue theoretical scenarios, or

share mere beliefs that some corporate activity is wrong and may theoretically

affect the corporation’s financial statements and its shareholders.”93

At the hearing before the ALJ, Complainants asserted that they engaged in

activities protected by SOX when they reported that NYCB employees salvaged

copper wire from 100 Duffy and distributed envelopes stuffed with cash.94 After the

record closed and during post-hearing briefing, Complainants first argued that the

alleged “illegal salvage operation” was shrouded by the submission of “fictitious

scope[s] of work,” submissions designed to ensure that “this money-for-copperscheme [remained] in secrecy.”95 On appeal, Complainants argue that the ALJ erred

in considering their allegations too narrowly. Complainants now assert that both

the April 3rd Bermeo/Curran conversation and the April 6th Schaefer/Wann email

Id. (citation omitted).

“[A]n employee’s communication is protected where based on a reasonable, but

mistaken, belief that the employer’s conduct constitutes a violation of one of the six

enumerated categories of law.” Sylvester v. Parexel Int’l, LLC, ARB No. 2007-0123, ALJ

Nos. 2007-SOX-00039, -00042, slip op. at 16 (ARB May 25, 2011); see also Ronnie v. Office

Depot, Inc., ARB No. 2019-0020, ALJ No. 2018-SOX-00006, slip op. at 5 (ARB Sept. 29,

2020) (“A complainant need not cite the code but nonetheless has to complain about conduct

that he or she believes would reasonably fall under one of the enumerated categories.”).

Leviege, ARB No. 2019-0058, slip op. at 4 (citing Livingston v. Wyeth, Inc., 520 F.3d

344, 355 (4th Cir. 2008)) (other citation omitted).

D. & O. at 21. More specifically, the ALJ had earlier described Complainants’

allegations, in the June 30, 2020 Order Granting, In Part, and Denying, In Part,

Respondent’s Motion for Summary Decision at 7, as follows:

Complainants’ allegation of protected activity proceeds in three

stages. First, Complainants opine that the copper wiring

removed from 100 Duffy constitutes “other property” under

section 1344. Second, the copper wiring was removed from 100

Duffy “by means of false or fraudulent . . . representations”

because it was not specifically authorized and it caused

significant damage. Finally, unidentified bank employees and/or

vendors profited from this unauthorized removal as evidenced

by the surreptitious exchange of cash envelopes. As a result,

Respondent was deprived of the funds generated from the sale

of the scrap copper wire and Respondent incurred the additional

cost of repairing the damage when the scrap copper was

removed. According to Complainants, this amounts to a violation

of the bank fraud statute.

Id. at 26.

constituted SOX-protected activity because both the conversation and the email

incorporated reports of a systematic scheme to defraud NYCB. Specifically,

Complainants contend that some NYCB employees were working with preferred

vendors to rig bids on contracts in order for those vendors to salvage copper from

NYCB’s properties in exchange for cash kickbacks, all of which they assert

constitutes bank fraud, contrary to the findings of the ALJ.96

After considering the parties’ arguments and having reviewed the evidentiary

record, we conclude that the ALJ’s decision is supported by substantial evidence in

the record and is legally sound. Complainants failed to meet their burden of

demonstrating they had subjective beliefs or reasonable objective beliefs that their

reports involved bank fraud and so constituted SOX-protected activity.

1. Complainants Lacked Good Faith Subjective Beliefs Related to Bank

Fraud

Before the ALJ, Complainants bore the burden of establishing that they

subjectively believed their reports related to conduct which constituted bank fraud,

a violation of one of the laws listed in SOX,97 and that they held their actual

subjective beliefs in good faith.98 Reporting conduct which one believes violates

Comp. Opening Br. at 1-2. Specifically, Complainants now argue:

Working in the unit responsible for real property renovations,

Schaefer and Bermeo uncovered what appeared to be a

coordinated scheme to strip copper, fuel, and anything else not

tied down from building refurbishments. This scheme not only

allowed vendors to steal bank materials for kickbacks to bank

employees, but also fundamentally impacted the bid process by

allowing vendors to bid projects at significantly above-market

pricing. This double whammy cost NYCB twice over in increased

payments to contractors and misappropriated assets, a portion

of which were kicked back to NYCB employees. Further,

Schaefer and Bermeo learned about and reported this scheme

against the backdrop of Schaefer and Bermeo learning that the

bid and contracting scheme was fundamentally flawed in

allowing contractors to significantly overbid pricing both for

construction and long-term maintenance contracts.

Leviege, ARB No. 2019-0058, slip op. at 4 (citations omitted).

Johnson v. The Wellpoint Cos. Inc., ARB No. 2011-0035, ALJ No. 2010-SOX-00038,

slip op. at 9-10 (ARB Feb. 25, 2013) (Decision and Order of Remand), aff’d after subsequent

orders, No. 18-10038 (11th Cir. May 18, 2020); see Bailey v. Koch Foods, ARB No. 20100001, ALJ No. 2008-STA-00061, slip op. at 10 (ARB Sept. 30, 2011) (noting that a survey of

cases shows “whether or not the term ‘good faith’ has been used, the whistleblower has been

required to have actually held a belief that there were pertinent statutory violations at the

internal business policies or evidences mismanagement, poor decision-making, or

miscellaneous actions not in the best interests of an organization is insufficient to

establish a SOX claim for bank fraud or any other fraudulent conduct.99

The record contains substantial evidence to support the ALJ’s conclusion that

Complainants failed to establish they subjectively believed that they were reporting

bank fraud or any other fraudulent conduct when Bermeo had his April 3rd

conversation with Curran or when Schaefer sent the April 6th email to Wann. As

such, their engagement in these communications did not constitute protected

activity under SOX.

The record lacks any persuasive evidence that Bermeo had a subjective belief

that his April 3rd conversation with Curran constituted protected conduct under

SOX. Bermeo reported to Curran only that: (1) the LAN room ceiling was damaged;

(2) Grosso had coordinated the work on the ceiling; and (3) Newman told a joke

about a hypothetical million dollar payment.100 Although Bermeo’s report to Curran

suggested that the work in the LAN room might have been mismanaged or perhaps

that some sort of wrongdoing occurred regarding the LAN room’s deconstruction,

Bermeo’s statements to Curran lacked any allegation of fraudulent conduct. Bermeo

did not mention any copper salvaging, a project scoping issue or bid rigging; he

simply noted that the LAN room ceiling was significantly damaged and that Grosso

time he or she engaged in the activity subject to whistleblower protection.”) (internal

citations omitted).

Samaroo v. Bank of New York Mellon, No. 21-CV-02441, 2021 WL 5910603, at *4

(S.D.N.Y. Oct. 5, 2021), report and recommendation adopted, No. 21 CIV. 2441, 2021 WL

5910408 (S.D.N.Y. Dec. 13, 2021), and report and recommendation adopted, No. 21 CIV.

2441, 2022 WL 4093171 (S.D.N.Y. Sept. 7, 2022), aff’d, No. 22-2041-CV, 2023 WL 3487061

(2d Cir. May 17, 2023) (“[Reporting] that various managers were poor managers and

mismanaged projects . . . cannot form the basis for a SOX complaint.”); Andaya v. Atlas Air,

Inc., No. 10 CV 7878, 2012 WL 1871511, at *5 (S.D.N.Y. Apr. 30, 2012) (“Complaints largely

related to internal corporate policies concerning corporate waste, personnel matters, and

relationships with vendors . . . are not the subjects courts have found covered by SOX.”);

Harvey, ARB Nos. 2004-0114, -0115, slip op. at 14 (“Providing information to management

about questionable personnel actions, racially discriminatory practices, executive decisions

or corporate expenditures with which the employee disagrees, or even possible violations of

other federal laws such as the Fair Labor Standards Act or Family Medical Leave Act,

standing alone, is not protected conduct under the SOX.”).

“Bermeo relayed to Curran the damage he observed to the ceiling, that the work

done in the LAN room was coordinated by Grosso, and a joke Newman told. Contrary to

Bermeo’s claims, his conversation with Curran is bereft of any mention of bank fraud, fraud

generally, or anything remotely within the realm of SOX. This conversation, as described by

Bermeo, appears to merely be a discussion about potential wrongdoing or mismanagement

by other NYCB employees.” D. & O. at 23 (internal citations omitted).

100

appeared to be responsible for that result.101 We agree with the ALJ that “[i]f

Bermeo [had] actually believed fraud had occurred, it follow[ed] that he would have

at least mentioned the missing copper wire which is the foundation of his allegation

of bank fraud.”102 Bermeo failed to do so, and so failed to establish that he held an

actual, good faith belief that the conduct he reported to Curran constituted bank

fraud or any other SOX-protected conduct.

A review of the April 6th Schaefer/Wann email supports the same conclusion

regarding Schaefer. Nothing in the April 6th email evidences that Schaefer

subjectively believed NYCB employees were orchestrating bids with preferred

vendors or otherwise submitting inflated project scope estimates in order to allow

NYCB employees to salvage copper or receive cash kickbacks from vendors.103 The

April 6th email only includes Schaefer’s report that: (1) Curran allegedly received

an envelope of cash related to NYCB employees salvaging “abandoned copper cold

water pipe” from the third-floor of the building at 100 Duffy and provided that cash

to TMG; and (2) copper wire had allegedly been removed from the LAN room by

unidentified individuals, not the contractor.104 In the email, Schaefer never notes

that he believes Curran or other NYCB employees are defrauding the bank or

violating any law identified in SOX; he merely insinuates that they are salvaging

copper for cash. Lacking any identified link to fraud of any sort, at most this

evidence may establish that Schaefer subjectively believed the 100 Duffy renovation

project was being mismanaged by Curran and/or Grosso and bank property was

being wasted, none of which is sufficient to support his claim of SOX-protected

activity.105

Interestingly, the argument Schaefer presented at hearing, which the ALJ

correctly determined to be lacking in proof that Schaefer actually believed he was

reporting bank fraud, is inconsistent with his current theory that some NYCB

employees were conspiring with preferred vendors to rig contract bids in order to

strip copper from NYCB’s properties in exchange for cash kickbacks. Schaefer

specifically states in the April 6th email that he only learned about the copper

removal and cash payments “this past Monday” (April 3rd), which does not support

101

Id.

102

Id.

“The email fails to mention the potential for false scopes of work being submitted to

cover-up an unauthorized removal and sale of copper wiring. Given the thoroughness of the

April 6th email, it is curious that Schaefer neglected to mention SOX or bank fraud.” Id. at

21. The ALJ concluded “the April 6 email does not contain any information that a

reasonable person would interpret as a whistleblower report.” Id. at 22 n.13.

103

104

Id. at 14.

See Samaroo, No. 21-CV-02441, 2021 WL 5910603, at *4; Harvey, ARB Nos. 20040114, -0115, slip op. at 14-15.

105

his current argument that his April 6th report somehow communicated a link to bid

rigging, which Schaefer allegedly was told about by Fernandez over a year earlier in

April 2016.106 If Schaefer legitimately held a subjective belief that the 2016 bid

rigging rumor and the 2017 copper removal and cash payments were related and

constituted a scheme to defraud NYCB, it is reasonable to expect that he would

have made that clear in his April 6th email to Wann. Instead, the April 6th email

makes no mention of a bid-rigging-for-copper-or-cash scheme, nor does it contain

any reference or linkage to whistleblowing, SOX, or bank fraud. It was not until one

month later, and two days after his termination, that Schaefer first alleged that he

had reported “a fraudulent scheme.”107 Schaefer’s raising an allegation of fraud

post-termination is insufficient to establish that he held, and reported, an actual,

good faith subjective belief regarding fraud a month earlier and prior to his

termination. All told, substantial evidence in the record supports the ALJ’s

conclusion that Schaefer failed to establish that he held a good faith belief that he

had reported bank fraud to Wann when he sent the April 6th email.

Considered altogether, Complainants’ reports to NYCB officials failed to

mention or reference bank fraud or to suggest how an alleged bid-rigging and

copper-salvaging-for-cash kickback arrangement involving Curran and unnamed

NYCB employees constituted bank fraud. Rather than reporting their alleged

scheme, or reporting any other type of SOX violation, Complainants merely

reported questionable wrongdoing and potential mismanagement of the project at

100 Duffy, all unrelated to the bank fraud statute or any of SOX’s other predicate

offenses.108 Such “[g]eneral assertions of wrongdoing untethered from [the SOX]

enumerated categories” do not constitute protected activity.109 Thus, the record

sufficiently supports the ALJ’s conclusion that, at the time of their reports on April

3rd and April 6th, Complainants did not subjectively believe they were reporting a

violation of any of the enumerated provisions in Section 1514A.

106

Id. at 6.

107

Id. at 22.

See Harvey, ARB Nos. 2004-0114, -0115, slip op. at 14 (“Providing information to

management about questionable personnel actions, racially discriminatory practices,

executive decisions or corporate expenditures with which the employee disagrees, or even

possible violations of other federal laws such as the Fair Labor Standards Act or Family

Medical Leave Act, standing alone, is not protected conduct under the SOX.”).

108

Leviege, ARB No. 2019-0058, slip op. at 4 (citing Welch v. Chao, 536 F.3d 269, 277

(4th Cir. 2008), cert. denied, 556 U.S. 1181 (2009); Day v. Staples, Inc., 555 F.3d 42, 55

(1st Cir. 2009); Reilly v. GlaxoSmithKline, LLC, No. 19-2897, 2020 WL 4013118, at *3-4

(3d Cir. 2020)).

109

2. Complainants Lacked Objectively Reasonable Beliefs Related to Bank

Fraud

Even if Complainants had established that they each held a good faith

subjective belief that they had reported bank fraud or even a SOX violation more

generally, their claims would still fail because neither Complainant satisfied their

burden of establishing that their beliefs were objectively reasonable.

Notwithstanding Complainant’s insistence, testified to by Bermeo, that “[t]heft is

fraud . . . [s]tealing is fraud . . . ,”110 substantial evidence in the record supports the

ALJ’s conclusion that Complainants’ reports to Curran and Wann were not based on

objectively reasonable beliefs regarding bank fraud or any other conduct protected

under SOX.111

In concluding that neither Bermeo’s April 3rd conversation with Curran nor

Schaefer’s April 6th email to Wann constituted an objectively reasonable report of

bank fraud within SOX’s scope, the ALJ correctly differentiated between a report of

“theft”112 from a bank and a report of bank fraud. The bank fraud statute, 18 U.S.C.

§ 1344, does not prohibit theft from a bank113 but instead prohibits “fraud” being

perpetrated against a bank. Section 1344 specifically defines bank fraud as:

[K]nowingly execut[ing], or attempt[ing] to execute, a

scheme or artifice—

(1) to defraud a financial institution; or

(2) to obtain any of the moneys, funds, credits, assets,

securities, or other property owned by, or under the custody

or control of, a financial institution, by means of false or

fraudulent

pretenses,

representations,

110

D. & O. at 24 (citation omitted).

Although the April 3rd Bermeo/Curran conversation and the April 6th

Schaefer/Wann email do not constitute protected activity because these reports are not

consistent with any of the enumerated statutory and regulatory provisions in Section

1514A, the Board does not reach or consider the issue of whether their reports may have

evidenced violations of other federal or state statutes such as theft, misappropriation or

embezzlement.

111

Theft is “[t]he wrongful taking and removing of another’s personal property with the

intent of depriving the true owner of it; larceny[.]” Theft, Black’s Law Dictionary (11th ed.

2019). Under the common law, “fraud” is not “theft” but is instead “a knowing

misrepresentation . . . of a material fact made to induce another to act to his or her

detriment.” Fraud, Black’s Law Dictionary (11th ed. 2019).

112

See 18 U.S.C. § 2113 (a) (defining the crime of “bank robbery and incidental related

crimes” in reference to the taking of bank property “by force and violence, or by

intimidation . . . [or] by extortion . . . .”).

113

promises[.]”114

For conduct to be considered “bank fraud” under § 1344:

[I]t is not enough that a fraudster scheme to obtain money

from a bank and that he make a false statement. The

provision as well includes a relational component: The

criminal must acquire (or attempt to acquire) bank

property ‘by means of’ the misrepresentation.[’] That

phrase typically indicates that the given result (the ‘end’)

is achieved, at least in part, through the specified action,

instrument, or method (the ‘means’), such that the

connection between the two is something more than

oblique, indirect, and incidental.115

“[T]he conduct that § 1344(2) seeks to regulate, and its focus, is a scheme to obtain

property owned or controlled by a bank under false or fraudulent pretenses.”116 As

such, to constitute bank fraud under 18 U.S.C. § 1344, it is not enough to simply

report the removal of something of value from a bank’s property—the report must

involve the removal of property “by means of false or fraudulent pretenses,

representations or promises.”117 “Put another way, larceny is not the same as

fraud.”118

On appeal, Complainants assert that they met the requirements to establish

bank fraud because their reports revealed a scheme by NYCB employees to secure

preferred vendors on construction-related contracts in order to receive cash

kickbacks from those vendors, all to the detriment of NYCB and its shareholders.119

In essence, Complainants allege that: (1) the bank’s construction contracts resulted

from bid-rigging or project scope inflation; (2) the vendors or NYCB employees

stripped copper out of NYCB’s properties without permission, thereby removing

value without compensation to the bank; and (3) the cash payments back to

employees were provided as consideration for the employees’ involvement in, and

presumably their silence about, the bid-rigging. These allegations not only lack

sufficient factual support in the record, they are legally insufficient to establish that

114

18 U.S.C. § 1344 (emphasis added).

115

Loughrin v. United States, 573 U.S. 351, 362-63 (2014) (citations omitted).

116

Bascuñán v. Elsaca, 927 F.3d 108, 124 (2d Cir. 2019).

117

18 U.S.C. § 1344.

Dietz v. Cypress Semiconductor Corp., ARB No. 2015-0017, ALJ No. 2014-SOX00002, slip op. at 10 (ARB Mar. 30, 2016), vacated, 711 Fed. Appx. 478 (10th Cir. 2017).

118

119

Comp. Opening Br. at 19.

it was objectively reasonable for persons with Complainants’ knowledge, skills,

education, and experience to believe that such acts were not merely unlawful in

some unspecified or general way but rose to a specific violation of 18 U.S.C. § 1344.

As such, the ALJ correctly concluded that the Complainants failed to meet their

burden of proof under SOX, for the reasons set forth below.

First, the scheme Complainants allege they sought to reveal, at most, would

have been an arrangement between NYCB employees and vendors whereby vendors

grossly inflated their bids on contract proposals, had their bids accepted by and

executed contracts with the bank, did the work and were paid what the contracts

required, and then surreptitiously and unlawfully kicked back some part of the

payments they had received to bank employees in cash. No credible evidence

establishes such an arrangement took place in this instance. To the contrary, the

facts in the record establish only that a vendor, Apptel, bid a certain amount on a

contract proposal, was awarded the contract at that amount, and then did the work

and was paid for it. The ALJ specifically found that Apptel’s owner, Chludzinski,

was a credible witness.120 Chludzinski denied having any involvement in the

removal of copper from 100 Duffy other than what fit in one dumpster and was

valued at $1,179.60, all as allowed by the relevant contract. The record showed that

if any other copper was salvaged from 100 Duffy it was recovered by NYCB

employees, not by employees of Apptel or any other vendor. What the record does

not show is any link between the Apptel contract and the unsupported allegations of

bid-rigging or cash kickbacks. Even examining the record beyond the Apptel

contract, the ALJ correctly concluded that Complainants failed to establish it was

objectively reasonable to believe that there was a scheme involving bid-rigging by

vendors or employees which led to copper salvaging and cash kickbacks associated

with the LAN room or 100 Duffy more broadly, which was the sole context for

Complainants’ alleged protected activity in this matter. Therefore, Complainants’

reports of damage to the LAN room ceiling and rumors about copper salvaging on

the third floor of 100 Duffy did not constitute reports of bank fraud and do not

satisfy the requirements for SOX protection.121

Second, the Complainants provided no evidence that Apptel’s bid, or the bid

of any other vendor associated with 100 Duffy, was based on a “false or fraudulent

representation or promise” intended to and resulting in a loss of property to the

120

D. & O. at 19.

See e.g., Leckner v. Gen. Dynamics Info. Tech., Inc., ARB No. 2020-0028, ALJ No.

2019-SOX-00028, slip op. at 7 (ARB Oct. 22, 2020), aff’d, No. 21-70284, 2021 WL 4843881

(9th Cir. Oct. 18, 2021), cert. denied, 142 S.Ct. 2872 (2022), reh’g denied, 143 S.Ct. 63 (2022)

(explaining that the ALJ properly dismissed the claim because there was no evidence that

complainant had an objectively reasonable belief that “Respondent violated any SEC rule or

regulation or otherwise engaged in securities fraud when he communicated his concerns

about computer software.”).

121

bank. The record does contain a reference to an event that allegedly occurred nearly

one year prior involving a submitted bid on a different contract that was alleged to

be grossly greater than that of the vendor eventually awarded the contract, all of

which related to a different property. The fact that different vendors bid different

amounts in an independent instance is completely unrelated to the Complainants’

involvement in the April 3rd Bermeo/Curran conversation or the April 6th

Schaefer/Wann email related to the LAN room, which is the only conduct in which

they engaged for which they claim SOX protection.

Last, Complainants argue that their reports of “envelopes full of cash” was

sufficient to establish the objective reasonableness of their beliefs that bank fraud

had occurred. The only evidentiary support in the record for this assertion is

Complainants’ testimony that they were told about NYCB employees receiving cash

envelopes, and their newly articulated suspicions that the cash was payback for

employees’ support of bid-rigging, none of which provides a link to “some form of

trickery, of deception, [or of] a ‘knowing misrepresentation or concealment of a

material fact.’”122 Given the ALJ’s findings regarding Complainants’ doubtful

credibility, the record wholly lacks persuasive evidence in support of these alleged

suspicions.123 In addition, Complainants’ blanket statement that the reported

conduct has the potential for exposing the company to financial risk is insufficient

to support a shareholder fraud claim under 18 U.S.C. § 1514A.124

Nor could Complainants’ allegations, even if they had been credibly

established, constitute evidence that NYCB had been defrauded “by means of false

or fraudulent pretenses, representations, or promises[.]”125 Complainants failed to

establish sufficient facts to support their allegation that NYCB’s employees or

vendors made false representations to NYCB to induce it to part with valuable

copper. Specifically, they failed to establish any “means” (the scheme) by which the

NYCB employees and/or vendors achieved the alleged “end” (the award of contracts

and/or the payment of cash kickbacks). The only false representations alleged were

those of unidentified vendors, accused of grossly overbidding unspecified contract

proposals. Complainants are seasoned managers familiar with construction bidding

practices and fiscal controls specific to a regulated bank like NYCB, and held

122

Dietz, ARB No. 2015-0017, slip op. at 9.

The ALJ found that Schaefer was not a credible witness; he found Bermeo’s

testimony “less than enlightening” and afforded it little weight. D. & O. at 17-19.

123

“Other cases where § 1514A claims predicated on shareholder fraud have survived

dismissal have included stronger claims regarding either the importance of the challenged

conduct to the defendant employer’s business or the complicity of the employer in unlawful

conduct.” Nielsen, 762 F.3d at 223 (the court found that the complainant’s conclusory

statement that another employee’s failure to properly review fire safety designs constituted

shareholder fraud was “simply too tenuous” to be considered fraud against shareholders).

124

125

18 U.S.C. § 1344 (emphasis added).

defined authority within the NYCB contract approval process for years.126 Despite

their protestations to the contrary, the record does not support a conclusion that a

reasonable person in their same factual circumstances and with their same training

and experience would have objectively believed that a SOX-protected violation had

occurred.

Faced with their lack of evidentiary support to establish a violation of any of

the six SOX-protected categories, Complainants argue that their reports exposed a

scheme which violated NYCB’s internal policy defining “theft of and individual

profiting from Bank property as fraud.”127 Whether the reported activity did or did

not violate NYCB policy is not the determinative inquiry,128 nor are the

Complainants’ beliefs that theft is inherently fraudulent determinative of whether

their beliefs were objectively reasonable.129 Complainants’ reports of an alleged

scheme to steal copper wire does not rise to a SOX violation because theft of

physical property from a bank does not constitute bank fraud or other protected

conduct under SOX and, at the time of their reports, neither Complainant

reasonably believed that it did.

The ALJ determined that the Complainants did not establish that their April

3 and April 6 reports were within the purview of SOX’s whistleblower protections.

We conclude that this determination is supported by substantial evidence in the

record, well-reasoned, and legally correct. Therefore, we affirm the ALJ’s finding

that the Complainants did not establish by a preponderance of the evidence that

they engaged in protected activity under SOX.

126

D. & O. at 5.

127

D. & O. at 22 n.13.

See La Belle v. Barclays Cap. Inc., No. 19-CV-3800, 2023 WL 2631968, at *13

(S.D.N.Y. Mar. 24, 2023) (differentiating internal policies from legal requirements imposed

externally and noting “[w]here plaintiffs complain of violations of internal policies — even

where the alleged behavior would be clearly wrongful — courts typically decline to find

protection under Section 806.”); Miller v. Stifel, Nicolaus & Co., 812 F. Supp. 2d 975, 988

(D. Minn. 2011) (noting “complaints about alleged violations of internal company policies

are not protected activities under SOX.”) (citing Wiest v. Lynch, No. 10-3288, 2011 WL

2923860, at *9 (E.D. Pa. July 21, 2011) (quoting Marshall v. Northrup Gruman Synoptics,

ALJ No. 2005-SOX-0008, 2005 WL 4889013, at *3-4 (ALJ June 22, 2005)).

128

129

D. & O. at 24 (citation omitted).

CONCLUSION

Accordingly, we AFFIRM the ALJ’s Decision and Order Denying

Complaints.130

SO ORDERED.

____________________________________

TAMMY L. PUST

Administrative Appeals Judge

__________________________________________

IVEY S. WARREN

Administrative Appeals Judge

__________________________________________

NED I. MILTENBERG

Administrative Appeals Judge

In any appeal of this Decision and Order, the appropriately named party is the

Secretary, Department of Labor, not the Administrative Review Board.

130

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