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Legal     1 - Duke Energy Employee Advocate
Legal - Page Three

“The important people don't wear suits. They wear uniforms or hard hats.” - Tommy Tomlinson

Employee’s Right to Have a Witness

Associated Press - By Adam Geller – November 25, 2001

Arnis Borgs knew he was in deep trouble with his bosses.

So when an angry supervisor at his downtown Cleveland office called him in to a meeting, Borgs asked that a sympathetic colleague be included in the session. The manager refused.

That was five years ago and Borgs and his co-worker were long ago fired. But a closely watched ruling centered on the case sets a new mandate for U.S. employers--expanding to all workers the right to bring an ally to a disciplinary hearing, a privilege long prized by unionized employees.

That right was affirmed earlier this month by a federal appeals court in Washington. The court backed the National Labor Relations Board, which set a precedent last year when it decided Borgs' employer had violated his rights.

The case raises questions for employers and employees in non-union workplaces, because it could change the rules for their coexistence.

"If it becomes widely used, it's going to be a mess,said Dan Yager, general counsel for the Labor Policy Association, an industry group for personnel executives. Yager's group, which argued on behalf of employers in the case, is worried the ruling could interfere with managers' ability to discreetly handle situations including sexual harassment cases, or misconduct by a group of employees.

But labor unions say the ruling could give workers the protection they need to counter managers bent on retaliating against employees who haven't toed the line.

"Having someone there for the morale(sic) courage it supplies is helpful and I think it would also be helpful if an employer is trying to cook something up, to have someone else there, too," said James Coppess, a lawyer for the AFL-CIO, which also presented its arguments to the court.

All in all, the case may not have much impact in the real world, said Michael LeRoy, a professor of labor and industrial relations at the University of Illinois.

"Even though people are fired every day--and therefore the issue could come up--rarely is it the case that employees ask for a friend or colleague to come to an investigatory meeting," LeRoy said. "The case is long on symbolism and short on practical implications."

The questions raised by the decision have long been settled in union workplaces, where employees regularly bring union stewards or other representatives with them into disciplinary meetings.

Borgs said he doubts many workers will take advantage of the right, but still sees it as a victory as employees seek a fairer footing with employers.

"I don't think anybody could rightfully say that they're being mentally tormented if you have somebody of moral support sitting next to you," he said.

Workers Can Have Witness

When a Workplace Dispute Goes Very Public

The New York Times – by Susan E. Reed – November 25, 2001

On a warm, clear morning last Sunday, on the Pebble Beach golf course in Carmel, Calif., 40 professional and 40 amateur golfers were in the final round of the Callaway Golf Invitational when a small plane began circling the long, narrow course beside the Pacific. It towed a banner that read "Merrill Lynch Discriminates Against Women."

The plane created an hourlong distraction for the event, sponsored by Merrill Lynch, the latest in a series of protests by a vocal group of women, former and current brokers, who were part of a class-action lawsuit the firm settled three years ago. They have sought to publicize their unresolved complaints while the company is entertaining clients at high-profile events.

Selena Morris, a Merrill Lynch spokeswoman, declined to characterize the company's reaction to the airborne intrusion on its party.

Since May, eleven planes carrying banners critical of Merrill Lynch have flown over golf tournaments, auto races and vintage-car shows sponsored by the firm. The protest-banner flight last week was the group's first since airspace was reopened to some types of small aircraft by the federal government, which had suspended them after the Sept. 11 attacks.

The women who organize these protests say they are not satisfied with the way Merrill Lynch has acted since the settlement of the lawsuit. Some are still waiting for their cases to be resolved under the settlement, while others have rejected the company's monetary offers and are awaiting hearings on their complaints.

"The women are angry that Merrill Lynch isn't taking them or their claims seriously," said Nancy Thomas, who has helped to organize the airplane protests. She is one of eight women whose claims — that the firm systematically underpaid and failed to promote brokers who are women — formed the basis for the lawsuit, which was filed in federal court for the Northern District of Illinois in 1997.

At the heart of the suit was the allegation that office managers favored male brokers by assigning them larger and more active accounts from customers who approached the firm for financial advice, or from customers whose brokers were leaving the firm, or from investors participating in initial public offerings. If the women complained to management, they said in the suit, they risked criticism and retaliation.

Merrill Lynch has denied that there was systemic discrimination at the firm but has acknowledged some incidences of inappropriate behavior, which it says it has fixed. The company has resolved nearly 600 of more than 900 claims, instituted procedures intended to make account distribution a more open process based on merit and said that it had fully complied with the 1998 settlement agreement. "We've implemented a variety of programs and procedures to ensure that everyone is treated fairly and has an equal opportunity to succeed and grow their business," Ms. Morris said.

Some of the activists, who have not yet settled their claims with the firm, say conditions for women at Merrill have not improved. They contend that the most lucrative customer accounts are still being steered to men.

"I thought things would definitely change, that there would be a better working environment," said a broker who works in one of Merrill's Northeastern retail offices and spoke on the condition that neither she nor the branch would be identified. But, she said, "nothing has changed."

For that reason, she said, she has helped finance the plane flights, instead of confronting her supervisor with her continued dissatisfaction over the distribution of accounts.

When Merrill brokers leave the company, their accounts are often redistributed to remaining brokers. After settling the suit, the brokerage firm began posting the redistributions internally via computer so everyone would know who got which accounts.

But the broker in the Northeast retail branch said that the policy was not always being followed in her office and that women were being shortchanged.

Ms. Morris, the Merrill spokeswoman, said: "If someone believes they're not being treated fairly, we want to hear about it and evaluate the situation. We have no tolerance for inappropriate behavior of any kind."

Mary Allyn, the head of human resources for Merrill's domestic brokerage business, said that it had investigated distributions questioned by brokers and remedied any that it considered inconsistent with company policy.

In offices where the issues raised by the suit still resonate, brokers report what they perceive as discriminatory practices to their class-action lawyer, Linda Friedman of the Chicago law firm Stowell & Friedman. Last year, claimants in Merrill Lynch's office in Lawrenceville, N.J., called Ms. Friedman to say that a young broker, Deena Kobrin, was not being allowed to manage by herself a huge customer account she had solicited. A partnership of male brokers was assigned to share its management with her. Ms. Friedman said she had approached Merrill and said, "It's happening all over again to a new generation of women." She requested an independent audit of the office. The results of that audit were shared with women in the office who, Ms. Friedman said, believed that it supported their claims that they had not been given their fair share of account distributions for many years.

According to Ms. Friedman, Ms. Kobrin felt that she had been subjected to retaliation after the audit and left the firm last spring. Merrill denied that any retaliation had occurred and said Ms. Kobrin had resigned to take a position with a competing firm. Ms. Kobrin did not respond to a request for an interview.

The audit results were confidential. But Ms. Friedman said she had been given a description of the findings by a lawyer with Rubin & Associates, a Paoli, Pa.-based employment law firm retained by Merrill that was helping resolve disputes in the Lawrenceville office. From that description, she said, the new account-redistribution reporting system sounded as if it was not fulfilling its goal of keeping people fully informed about account redistributions. Ms. Friedman said in one reporting period, $50 million in assets from a departing broker were unaccounted for in the corresponding redistribution report. Ms. Friedman said a sales manager had placed the assets in what is known as house account, identified by a branch number instead of a broker number, and transferred them later.

The account redistribution policy does not require managers to record transfers to house accounts. "We were extremely frustrated, because it seemed no matter how we wrote the policy and no matter how clear the intent was," Ms. Friedman said, "if you didn't account for every single permutation of what could be done at distribution, they would find the exception and take the exception." She has threatened to take the firm back to court, contending that it has not complied with the spirit of the policy.

Merrill and Rubin declined to comment on the details of the Lawrenceville audit. Merrill said it had reviewed the situation and addressed it. But Ms. Allyn, the human resources executive, said in an interview this month that the company would begin auditing offices with large redistributions and would probably consider "auditing, on a rolling basis, everyone who does distributions."

Some members of what Ms. Thomas calls "the underground" welcomed Ms. Allyn's disclosure of the new auditing policy. "I would love to think our pressure has had something to do with it," said Sandi Arnold, a former Merrill broker who has helped to organize and finance the airplane banner protests. Ms. Arnold said she had worked in the company's Abilene, Tex., office for 12 years before being forced out. Her claim against the company has not been resolved.

Barbie O'Connor, another claimant, said auditing "is not going to make up for the years of game-playing that's gone on behind closed doors." Ms. O'Connor, based in the company's San Antonio office for 16 years, said she had been passed over for a promotion and pressured to quit, which she did. She has vowed to continue protesting.

She and her husband, Toby, paid $1,500 to hire three planes to fly over as many as 500,000 car-racing fans at the Daytona International Speedway, the Indianapolis Motor Speedway and the Road America at Elkhart Lake in Wisconsin. Ms. O'Connor said she hoped that the banners would help pressure the company to hire and promote more women, as it agreed to do as part of the settlement.

According to Merrill, the percentage of women in the broker ranks has risen slightly, to 15 percent today, from 14 percent in 1997, and now totals 2,200. But the firm has more women in high-ranking positions than ever: Rosemary T. Berkery was recently promoted to general counsel and executive vice president, becoming the first woman at the firm to hold either position.

The airborne protests are some of the most extreme aimed at corporations by their own employees, said Debra E. Meyerson, whose book "Tempered Radicals," published in September by Harvard Business School Press, describes a far subtler range of rebellion by employees in today's workplace. But Ms. Meyerson, a visiting professor at Stanford University's Graduate School of Business, said such activism could be counterproductive. "By taking a polarized approach and creating an enemy," she said, "you are going to make it very difficult to work with institutions and the people in power to make change."

The Merrill Lynch protesters decided to take that course because their legal efforts appeared to them to have stalled. Early last year, Linda Conti, a former broker in Merrill's Indianapolis office, whose claim had not been resolved, requested 900 tickets to the company's shareholder meeting. As the event neared, the firm settled with Ms. Conti and a few other original plaintiffs.

Merrill would not comment on whether Ms. Conti's actions hastened the settlement of her claim. But as the women saw what they considered to be a reaction by the firm to negative publicity, their protests grew. Donna Sabb, a broker who said she had been forced out of the Lawrenceville office, picketed with her husband, Tim Adams, and her mother and father, outside a company executive's home on Mother's Day last year with placards that read "Merrill Lynch Unfair to Women." Last year, too, Ms. Sabb and Mr. Adams inaugurated the protest flights, and Ms. Sabb has since settled her claim.

Ms. Morris declined to say whether the firm had responded to such protests. "Our focus is on the resolution of the claims," she said.

The protesters have reached out for support beyond their own ranks. This year, they persuaded one of Merrill's clients and promoters to join their cause: Coline Jenkins- Sahlin, the great-great-granddaughter of the famous suffragist Elizabeth Cady Stanton. Ms. Jenkins-Sahlin had made a commercial for the firm to attract women investors by reminding them to have purses of their own.

She said that she supported the brokers' efforts to gain equal treatment at the firm but that she hoped the two sides "settle their battles and move ahead."

"This fighting," she said, "is terribly unproductive."

Employees Sue Enron Over Stock Loss

Plan Sponsor – by Nevin Adams – November 22, 2001

November 21, 2001 ( – In what appears to be an emerging trend, employees of embattled energy trading giant Enron sued their employer for endangering their retirement funds – causing some to lose hundreds of thousands of dollars overnight, according to the suit.

The suit also claims that, following a surprising third quarter loss announcement, Enron illegally locked down employee retirement plans - making it impossible for employees to shield their already damaged retirement funds from a 70% drop in Enron's stock price.

According to the suit, Enron executives engaged in extensive insider trading prior to the October 16 earnings announcement, gaining millions of dollars in personal proceeds. Enron later revealed that a portion of the charge against third quarter earnings was related to the unwinding of investments with certain limited partnerships controlled by Enron's CFO, and the company would be eliminating more than $1 billion in shareholder equity as a result of the unwinding of investments.

Retirement Plan Investments Threatened

The suit comes in the wake of one brought by Lucent employee-participant shareholders. Industry experts have cautioned that slumping 401(k) balances, benefit cut-backs and waves of layoffs could put workers in a litigious frame of mind.

Just last July Federal Mogul announced that it was discontinuing its company stock program due to its concerns over its falling stock price and asbestos litigation that could further impact the stock. In addition, economic woes have resulted in retirement plan concerns at firms such as Polaroid and Bethlehem Steel.

Enron Action

The Enron suit was filed by attorney Steve Berman of the Seattle-based law firm Hagens Berman on behalf of a proposed class of as many as 21,000 participants in the Enron Stock Plan. Named plaintiff Roy Rinard, a long-time employee, had more than $470,000 of his retirement savings invested in Enron stock – before it plunged $400,000 in a little more than a month, according to the suit.

The class-action suit seeks to represent employees who invested in the Enron Stock Plan between January 20, 1998, and November 20, 2001.

A Scramble for Cover in Indian Case

Legal Times - Jonathan Groner – November 21, 2001

Cabinet officers get paid to advise the president and make policy. Government lawyers want to spend their time trying cases. They don't appreciate being forced to defend themselves before an irate federal judge.

But on Nov. 30, more than three dozen lawyers and officials from the departments of Interior, Justice, and Treasury will have to do just that. And it may get ugly.

These 39 people -- most of them accompanied by their own taxpayer-funded private counsel -- will trudge into the courtroom of U.S. District Judge Royce Lamberth in a long-running lawsuit over a massive Indian trust fund. They have been summoned by an angry Lamberth, who has a reputation for putting the bureaucracy through its paces.

The class action was filed in 1996 in an effort to reform management of the century-old trust fund and to provide some 300,000 Native Americans with money the federal government owes them for timber, natural gas and other valuables extracted from Indian lands.

The plaintiffs say they are entitled to as much as $40 billion because of long-standing accounting failures and deliberate misuse of the money. Decades ago, millions of dollars were spent to bail out New York City and the Chrysler Corp. rather than paid out to Indians who were the rightful recipients. Other millions are simply unaccounted for.

From the very start, Cobell v. Norton exposed these and other instances of mismanagement at the Interior Department, where federal Indian policy is made and where new Secretary Gale Norton now vows to clean up the agency's act.

More than once, Lamberth has signaled his displeasure both with the way the fund has been managed and with the government's litigation tactics.

But never in more than five years of motions and countermotions have so many people, from Norton and former Secretary Bruce Babbitt on down, faced such an immediate threat of a contempt citation, including the outside possibility of six months in prison.


The current charges have little or nothing to do with the mishandling of the Native Americans' money. They concern what the plaintiffs say is a long history of obfuscation, delay, and outright lying by the government in the litigation itself.

"Nobody has been held personally accountable," said plaintiffs' lawyer Dennis Gingold at an Oct. 30 hearing before Lamberth. "It is not their money. They get their paychecks. It is not their pension that is being lost."

If Gingold and other lawyers who represent lead plaintiff Elouise Cobell, a member of Montana's Blackfeet tribe, could have picked any trial judge from the nation's 94 districts to hear those words, they couldn't have found anyone more receptive than Royce Lamberth.

In 14 years on the bench, Lamberth has repeatedly castigated government lawyers for discovery lapses and other failures in cases involving diverse matters such as campaign finance, prison conditions and the Privacy Act.

Lamberth's supporters and detractors agree that the judge knows every litigation tactic, legitimate or not, that the government is capable of venturing. Before former President Ronald Reagan appointed him in 1987, the 58-year-old Texan spent 13 years representing the government as an Assistant U.S. Attorney in Washington, D.C., the last nine of them as head of the office's civil division.

"He was a master bureaucrat in the U.S. Attorney's Office," says a D.C. lawyer who knows him well. "And as a judge, he hasn't forgotten anything. He doesn't just know where the bodies are buried, he knows how to bury the bodies."

At the Oct. 30 hearing, Lamberth set forth his approach candidly in a dialogue with Mark Nagle, a supervisor in the U.S. Attorney's Office whom Lamberth himself hired for the office in the 1980s.

Nagle said, "It is our recognition that this court has and will continue to hold government officials and their attorneys accountable."

"Is that some sudden revelation that I do that?" Lamberth shot back. "Haven't I done that always, in all of my cases?"

The topic that day centered on a blistering motion filed Oct. 19 by the Cobell plaintiffs for contempt, including up to 180 days' imprisonment, and for the appointment of a court-appointed receiver to manage the trust.

Nagle, saying he had just been assigned to the case, asked for an extension until Dec. 15 to reply. An exasperated Lamberth gave him only until Nov. 15 and set Nov. 30 for the contempt hearing.

The Justice Department, while it continued to represent the Interior and Treasury departments and its own lawyers, decided that because of a potential conflict of interest, everyone subject to a possible contempt citation could hire a private lawyer at taxpayers' expense. The fee set by law is $125 an hour, a small fraction of normal billing rates.

The result was a reunion of the elite of the city's white-collar defense bar -- many of the same litigators who turn up whenever a major scandal is brewing. Previously, the case had pitted an alliance of solo practitioners, funded by Elouise Cobell's MacArthur Foundation "genius award" and several million dollars in foundation grants, against an often-changing team of government lawyers.

"It's the usual suspects," says Stanley Brand of Brand & Frulla, who represents Peter Coppelman, a former deputy assistant attorney general.

Among those in the case now are litigator Plato Cacheris; name partner Roger Zuckerman of Zuckerman, Spaeder, Goldstein, Taylor & Kolker; and Michael Bromwich of Fried, Frank, Harris, Shriver & Jacobson.

"This is a lovely group of lawyers to work with," says Robert Luskin of Patton Boggs, who represents Babbitt and two other former high Interior officials. "I'm just sorry that we have to meet under these circumstances. The circles of hell just keep getting wider and wider."

Luskin says his clients are getting a bad rap from Lamberth and from the plaintiffs' lawyers for a problem they inherited and didn't create.

"The Clinton administration set a priority to fix a very difficult problem," Luskin says. "The whole thing is a real tragedy because there are grave and serious issues on the merits, yet those people who did their best to solve the problem, but failed, now find themselves under scrutiny with allegations of fraud."

Adds another litigator: "There are elements here of an incredible government screw-up, and elements of plaintiffs' overreaching. The plaintiffs are asking for criminal contempt against 39 people because they just want the government to give up and write a very large check."


Babbitt and others in Interior were earlier targets of Lamberth's wrath. In August 1999, the judge found Babbitt and then-Treasury Secretary Robert Rubin in contempt and fined them $625,000 for failing to produce documents and destroying files. The government paid the fine.

Also that year, the judge ordered a top-to-bottom cleanup of the Indian trust system and an accounting of all the money. More than a year later, the U.S. Court of Appeals for the D.C. Circuit upheld Lamberth unanimously.

After Lamberth's ruling, Babbitt undertook only a statistical sampling of the fund, an effort that Norton continued earlier this year. But at the Oct. 30 hearing, Lamberth called the sampling procedure an "absolute violation of my order."

The accounting, which according to several people involved in the case is not likely to be completed any time soon, is necessary if the case is ever going to be resolved. Once it's known where the money went, the government may be able to craft a solution for payment.

Norton, who was appointed Interior secretary by President George W. Bush after Babbitt served for the entire eight Clinton years, has pledged to fix the problems in the trust and to resolve the case. On Oct. 15, she announced a reorganization that would put a new assistant secretary in charge of managing the trust.

But before Norton can forge what she hopes will be a global solution, she too has to show up on Nov. 30 and deal with a possible contempt citation.

Like others, Norton has turned to private counsel. Last week she hired Herbert Fenster of D.C.'s McKenna & Cuneo, a longtime government contracts litigator.

Fenster is based in the firm's Denver office, and Norton is a former Colorado attorney general.

"The charge is a terrible distraction to an Interior secretary who now has so many additional burdens resulting from the terrorist attacks," Fenster says. "She has the responsibility to protect the national parks against terrorism, for example. The charges are also a distraction from the work of overhauling a broken [Indian trust] system."

John Wright, an Interior Department spokesman, says the reorganization had been in the works since April and was not a direct response to the contempt motion.

Mark Kester Brown, a D.C. solo practitioner who is a lawyer for the Indian plaintiffs, says he's not impressed with Norton's announcement.

"They have a long history of taking cosmetic steps, a long history of reorganizations for their own benefit and not for the benefit of their beneficiaries," Brown says.

"We are very pleased with Judge Lamberth," Brown says. "He's the salvation of the Indian cause."

But several lawyers for the 39 government officials on the other side are privately grumbling.

"Royce is a conspiratorialist," says one attorney in the case. "After all, he's known forever that in many instances, the cost of litigation for the government is less than the cost of repair. So if he has to turn over every stone to find out who's been lying to him, he will."

Discipline Possible in Indian Trust Case

Legal - Page Two