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Two vice presidents at Fairfield, Conn.-based Competitive Technologies Inc., fired while performing business-ethics duties, are battling in an apparent first-in-the-nation standoff under the 2002 Sarbanes-Oxley Act to get their jobs back. The U.S. Department of Labor has ordered their reinstatement, but the company’s fighting it, contending the men were fired for poor performance. On May 13, U.S. District Judge Alfred V. Covello agreed that Competitive Technologies should rehire both executives and reimburse all back pay to Feb. 2, when a labor department administrator first found they were entitled to keep their jobs, under the corporate fraud-fighting act, nicknamed SOX. Last week, the parties began a new hearing before an administrative law judge in New Haven. “It appears to be a case of first impression,” said Hartford labor lawyer Thomas W. Meiklejohn, who’s representing one of the fired workers, Avon resident Willie Jacques Jr., the company’s former vice president of marketing. “We couldn’t find any cases where it was necessary to go into court to enforce one of these orders of reinstatements, but I think the reason is because nobody thought they could get away with ignoring one before,” said Meiklejohn, of Livingston, Adler, Pulda, Meiklejohn & Kelly. The U.S. Secretary of Labor has intervened on behalf of Jacques and John Scott Bechtel, former VP of technology commercialization, who works from Indiana. In 2002, the two men were appointed to Competitive Technologies’ quarterly disclosure committee to assist in deciding the contents of its SEC 10-Q reports to the Securities and Exchange Commission. Both voiced concerns that certain oral agreements CEO John Nano entered into with consultants were material and should be disclosed to the SEC and to company shareholders. But they were told the “oral agreements were not material,” according to the findings of Marthe B. Kent, the regional administrator for the Occupational Safety & Health Administration’s Region 1 in Boston. STANDING UP FOR ETHICS Because the company’s March 2003 quarterly report did not include the oral agreements about the compensation arrangements, Bechtel and Jacques refused to sign off on them. But Nano, Kent found, assured the two their concerns would be addressed, and they signed. Nano’s attitude changed, however. “He criticized and attempted to embarrass them at staff meetings and in front of co-workers,” Kent wrote. Nano fired the two on June 30, 2004. Although the company listed “performance issues and restructuring” on the two men’s unemployment forms, Kent found that the timing of their complaints and new information on SEC disclosures showed they were fired for their ethics stand. Competitive Technologies is engaged in “technology transfer” and licenses inventions commercially in life sciences, nanotechnology and other high-tech fields. Kent’s letter ruling was mailed to the company’s Connecticut counsel, David B. Zabel of Cohen and Wolf in Bridgeport. In it, Kent awarded Bechtel back wages of $192,000, stock option compensation of $94,500, legal fees of $12,036 and various job loss expenses of $69,877. Jacques got $166,857 in wages, $193,978 for loss of stock options, $6,186 in legal fees and $30,203 in job loss expenses. Both men also received punitive damages of $30,000 plus an order eliminating negative comments about their firing from personnel records and from job references. Competitive Technologies has battled to keep from complying, retaining Mary E. Pivec of the Washington, D.C., firm of Sheppard, Mullin, Richter & Hampton to fight the matter. From the New Haven U.S. Attorney’s Office, Christine L. Sciarrino is representing the U.S. Department of Labor. So far, the company has appealed for a stay of the original OSHA order, which was denied March 29 by Department of Labor Administrative Law Judge Janice K. Bullard, in Cherry Hill, N.J. On its Web site, the company says it is “considering its options” for seeking a stay of Covello’s May 13 order, which found that Bechtel and Jacques are entitled to the injunctive relief of job reinstatement, and enforcement of Kent’s order, on the basis of Sarbanes-Oxley’s provisions. On May 17, Competitive Technologies battled back on three fronts. It began its first administrative hearing, de novo, digging into the reasons for the firings, before an administrative judge in New Haven. It also filed a motion for reconsideration of Covello’s ruling and appealed to the 2nd U.S. Circuit Court of Appeals, bolstering its requests with voluminous 2004 correspondence from Zabel to the OSHA administrators investigating the SOX complaint. Zabel, in a July 2, 2004, letter to OSHA, contended that the two VPs earned less than $250,000 for the company over eight years, while the consultants hired to replace them earned $460,000 in one year. The company contends the men do not qualify as whistleblowers and should not be able to take advantage of the protections of Sarbanes-Oxley.

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