Mary Schroeder worked for the Greater New Orleans Federal Credit Union (GNOFCU) as manager of the collections, lending and call center departments. On June 19, 2008, after two years with GNOFCU, Schroeder made a fateful call to the National Credit Union Administration (NCUA) to report that GNOFCU had made fraudulent loans. She also called the FBI. She reported her concerns to GNOFCU’s Supervisory Committee. An internal audit partially confirmed that some loans were made in violation of policy. Meanwhile, the boss’ assistant invited Schroeder’s assistant over for dinner and learned that Schroeder had called the NCUA. Within days, the boss (CEO Janet Sanders) was talking to the HR director about how to confront Schroeder and “avoid the appearance of any retaliation.” They began by demoting Schroeder for making “negative comments that might stimulate discord” and that show “poor judgment on your part.” Then they peppered Schroeder’s file with employee complaints about her “attitude” and “management style.” Schroeder retained an attorney who helped her make more complaints to the NCUA and FBI.  An NCUA audit eventually found that some GNOFCU loans were fraudulent, but the audit blamed the borrowers and not GNOFCU employees or managers.  On October 8, 2008, GNOFCU fired Schroeder.

This morning, a panel of the U.S. Court of Appeals for the Fifth Circuit ruled in favor of Mary Schroeder. It reversed a summary judgment and held that a jury could decide that Sanders acted against Schroeder “as retaliation for her complaints to the NCUA[.]” It also held, at page 16, that a jury could decide if GNOFCU violated a Louisiana whistleblower protection law known as La Rev. Stat. Ann. § 23:967(A). The state law “seems to offer broader protections tha[n] it federal counterpart[.]”

The National Whistleblowers Center submitted an amicus brief in support of Mary Schroeder. Our brief argued that Schroeder’s report to the GNOFCU Supervisory Committee should also be protected by the Federal Credit Union Act (FCUA). The Fifth Circuit declined our invitation saying, on page 12, “we enforce plain and unambiguous statutory language so long as it does not yield absurd results[.]” Accordingly, “Schoeder’s internal complaints are not relevant to this [12 U.S.C.] § 1790b appeal.” Perhaps some future court will find it necessary to determine whether internal disclosures are protected under the banking statutes and will find the legislative and case history in our amicus brief useful. The Dodd-Frank Act and the Seventh Circuit’s holding in DeGuelle (see my blog post from earlier today), provide banking whistleblowers other options that may be better in their individual cases. The Fifth Circuit did imply that calls to the FBI should also be protected since the FBI is under the Attorney General (see p. 12, footnote 6). However, it did not have to decide this issue since it found that Schoeder’s calls to the NCUA are sufficient for her case to proceed.

The Fifth Circuit noted that Schroeder did not have any negative comments in her record before she complained about fraudulent loans. GNOFCU followed no policy in demoting her. The failure to follow a policy “cuts in Schroeder’s favor — particularly when considering that part of her poor reputation at work came from her persistence in repeatedly seeking help at all management levels with what she perceived to be fraud.” Finally, “[t]he timing between Schroeder’s termination and her October e-mail and letter also supports a finding of causation.” Which inference to draw about causation and “questions on knowledge, are for the jury to decide.”  Page 15.

The outcome is a complete victory for Mary Schoeder who can now challenge all her adverse actions before a jury, and can even seek punitive damages (see page 2, footnote 1).

Congratulations go to Schroeder’s attorney, Glenn McGovern of Metairie, Louisiana. McGovern thanked NWC today for our amicus brief saying it, “was invaluable and set the tone for a favorable decision.” He adds, “I told the Appeals Judges that financial whistleblower are heroes in the public’s eyes and we have to protect them in every way we can. They agreed apparently.”