When ATA Holdings Corp.’s chief financial officer “left the company” last June, as management ambiguously put it, many suspected the insider saw bankruptcy looming and wanted to bail out before the crash.
David M. Wing, 53, may have seen something else that troubled him, suggests ATA’s most recent financial report filed with the Securities and Exchange Commission.
“Wing contends that he was terminated in retaliation for exercising his rights and obligations under the Sarbanes-Oxley Act,” states a settlement agreement Wing and ATA reached on Oct. 18.
The settlement, which resulted in Wing’s reinstatement, called for Wing to withdraw a complaint he filed last summer with the U.S. Department of Labor.
Under Sarbanes-Oxley, the department accepts complaints from employees who allege they faced retaliation for reporting concerns they have about a company’s compliance with securities laws. The 2002 law came in the wake of corporate scandals involving Enron Corp., Arthur Andersen and WorldCom.
Exactly what Wing saw at ATA wasn’t disclosed in the agreement. Calls to Wing, who left ATA after being reinstated last fall, were not returned. Terms of the settlement forbid either side from revealing details.
The Oct. 18 settlement states, “Mikelsons and [then-ATA Director Gil] Viets dispute Wing’s contentions in the DOL proceeding and contend that Wing voluntarily resigned from his employment.”
The settlement also states that neither ATA executives nor Wing admit violation of any laws.
Generally, what might concern a CFO in the post-Enron era of tougher criminal penalties for executives?
“It could be a myriad of things,” said Jeffrey B. Bailey, a partner at Bose McKinney & Evans and former branch chief with the SEC in Washington, D.C., adding that he has no knowledge of the ATA settlement.
“It could be anything from internal control deficiencies to bad accounting problems to inaccurate reporting. It could be something as simple as not quite closing the books on the date you’re supposed to.”
Brian T. Hunt, general counsel for ATA Holdings and ATA Airlines, said any suggestion that Wing was alleging fraud is “baseless.”
“I am not aware of any evidence of any financial or other fraud by either company, and no evidence of any fraud by either company has been brought to my attention by Mr. Wing or in connection with his complaint or otherwise,” Hunt added
When Wing left ATA last summer, the nation’s 10th-largest airline was in the fight of its life, trying desperately to stave off loan default.
ATA lost $64.3 million in the first quarter and $25.6 million in the second. That was despite pulling off, with Wing’s help, a debt restructuring earlier in the year that gave ATA an extra four years to pay off $300 million in bond debt due in 2004. ATA also restructured aircraft leases, a move intended to cut its 2004 cash outlay another $99 million.
What had been a cautiously optimistic outlook for 2004 soured in the first quarter. The SEC shot down ATA’s request to expense over time the costs of bond restructuring. Instead, ATA was forced to do so in the first quarter, resulting in a one-time, $27 million charge.
When the second-quarter conference call rolled around, Wing was no longer at embattled ATA founder George Mikelsons’ side.
Observers note that ATA executives may have had issues with Wing. It’s not unheard of for an employee who is booted from a company to threaten to report improprieties-real or not-in return for severance benefits, said Mark Maddox, a Carmel attorney and former Indiana securities commissioner.
While a company might make a settlement with an employee, “for someone to get reinstated after [allegedly] getting fired, that is highly unusual,” Maddox said. “That would be a very chilly work environment.”
ATA’s settlement agreement with Wing is at least consistent with the remedies available to an employee who prevails under the whistleblower statute. Those remedies include reinstatement with the same seniority status and “compensation for any special damages sustained as a result of the discrimination.”
Wing was reinstated Oct. 19 at an annual salary of $315,000. He earned more in 2003-$319,846-but was reinstated at the lower pay because he elected not to return as a board member.
Wing also received a “sign-up” bonus of $157,500.
Before being promoted, CFO Wing was ATA’s vice president and controller from 1994 to 2003. Before that, he worked at American Airlines in a number of accounting and financial posts.
“We are extremely pleased that Dave has decided to rejoin us,” Mikelsons said Oct. 25. “Dave’s extensive experience, skills and knowledge of the company and the airline industry will be extremely valuable during this difficult period in our history.”
The next day, ATA filed for Chapter 11 bankruptcy.
Wing didn’t stick around long at ATA-leaving to become controller of United Airlines parent UAL Corp. less than two months later.
“I would say the fact Wing is employed suggests that he has a fairly clean record,” said George Farra, a principal of Woodley Farra Manion Portfolio Management, in Indianapolis.
Whether Wing had a legitimate concern over dealings at ATA is another question. Certainly under Sarbanes-Oxley, the CFO and CEO “have enormous liability” because they must sign forms attesting to the accuracy of financial statements, Farra said. They face not only stiffer penalties that can bring steep fines and jail time, but also lawsuits from increasingly cynical shareholders.
In that context, an especially conscientious and cautious CFO might have an objection over something relatively innocuous and refuse to sign off on financial statements.
“It could have been a very simple and honest disagreement in which he felt pressure to do something he didn’t want to do and [other top executives] felt he was being ridiculous,” Bailey said.
Viets took over as CFO after Wing left ATA in June. Viets also was an ATA director and head of the board’s audit committee. It is to that committee one might expect a CFO to report concerns, especially if the officer had a disagreement with the CEO of the company.