The PCAOB emphatically denied the allegations made by its former chief administration officer Sue Lee who claimed in a wrongful termination lawsuit that she was the victim of a “xenophobic and racist campaign” against her by Chairman William Duhnke because of her Asian ethnicity. How emphatically did the PCAOB deny Lee’s discrimination accusations? The U.S.’s audit cops used the word “deny” about 100 times in its rebuttal and counterclaim filed in a Washington, DC court on April 30.
So … that means the PCAOB denied the following accusations:
- That once the COVID-19 outbreak hit the U.S. last spring, Duhnke “began exhibiting increasingly discriminatory behavior” toward Lee due to her Chinese ethnicity and national origin.
- Duhnke called the coronavirus the “kung flu” and the “Chinese flu” in front of Lee.
- Duhnke mocked Lee for wearing a mask in the office.
- Duhnke told some staffers that “some Chinese national snuck Chinese propaganda into the office” after seeing some Chinese-language journals outside Lee’s office in DC.
- Duhnke unfairly targeted Lee after he discovered that she was a Democrat and supported the Black Lives Matter movement.
- Duhnke wanted to replace liberal PCAOB employees with people who support the Republican Party.
- Duhnke called the PCAOB “a frivolous organization” that should be combined with the SEC.
And while an internal investigation was conducted by the PCAOB on Lee’s “unnecessary” and “unapproved” travel to Boston, where the PCAOB had an office, during her tenure as CAO, a tipster with knowledge of what’s going on at the PCAOB told us an internal investigation was never initiated against Duhnke to determine if he actually said the things Lee is accusing him of saying:
The internal investigative group IOPA [Internal Oversight and Performance Assurance] reports directly to the chairman. The chairman has not directly addressed this with the organization. For over a year, weekly emails have been sent from him, and he’s been quiet since the lawsuit came to light. Should audit committee chairs or the firm ask anyone about the lawsuit, employees were instructed to read to a bland response which states that no comment can be made on pending litigation and that the allegations are baseless. Internal commentary from the board and HR has been lacking at best.
Lee, an accomplished corporate attorney who was hired by the PCAOB in February 2019 as its first-ever chief risk officer, was promoted to acting chief administration officer in July of that year and reported directly to Duhnke.
As part of her duties as acting CAO, Lee oversaw the daily operations of the PCAOB at its DC headquarters and its regional and satellite offices, which necessitated her having to travel to these sites, including Boston, where she recommended the PCAOB move its office there to a more affordable suburb in the Boston area, according to her lawsuit.
In February 2020, after Lee was promoted to full-time CAO, the PCAOB decided to close five satellite office, including the recently opened Boston-area office, and transitioned all affected employees to full-time work from home. The lawsuit states that Lee had to “regularly travel to the Boston area to oversee the closure” of that office space. She says all travel to Boston was approved by the PCAOB and was reported to Duhnke.
In its counterclaim, the PCAOB admitted that Lee was “at times” required to visit other PCAOB offices as CAO. However, the PCAOB denied that the CAO position necessitated frequent travel and said many of Lee’s trips “were undertaken in violation of PCAOB’s mandatory telework period and were also unapproved, improper, and/or excessive.”
The counterclaim also states that the PCAOB “uncovered evidence that proved that much of Ms. Lee’s purported ‘business travel’ was not only unnecessary to PCAOB, but also was, in reality, personal in nature”:
Defendants admit that Plaintiff was expected to compile accurate data from her travel to other offices and to update Mr. Duhnke with complete information, but Defendants deny that Plaintiff did so. Specifically, Defendants deny that Plaintiff accurately reported the nature, purpose, and extent of her travel, particularly to the Boston area, where she maintained a residence, or provided any data that would justify the extent of that travel. …
[O]n several occasions, she charged PCAOB for trips to the Boston area during which she visited her home but did not visit the area PCAOB office or, if she did, stayed for only a few minutes.
The PCAOB claims Lee took at least 36 trips to the Boston area between Oct. 10, 2019 and Oct. 10, 2020, and “more than 10 of those trips occurred during PCAOB’s mandatory teleworking period, which was initiated due to the COVID-19 pandemic, when such travel was prohibited and when virtually all of the employees were working remotely and very few, if any, would have been present in the office during her visits.”
The counterclaim includes several examples of what the PCAOB says is Lee’s unnecessary and unapproved travel to Boston, including:
On August 12, 2019, Ms. Lee booked an evening flight from Washington, D.C., to Boston, where she spent the night. The following morning, she flew from Boston to Chicago, where she spent approximately one hour in PCAOB’s Chicago office. She returned to Boston that afternoon and went directly to her home without visiting the PCAOB Boston office. After spending the night in her home, she returned to Washington, D.C. early the following morning. In other words, instead of flying directly from Washington, D.C. to Chicago, Ms. Lee routed herself through Boston on both legs of the trip, apparently to attend to personal matters in Boston.
Between November 12 and November 15, 2019, Ms. Lee took three separate trips to and from Boston. On November 12, she took an afternoon flight from Washington, D.C., to Boston, spent the night at her home, and the following morning took an Uber directly from her home to the Boston airport and flew back to Washington on a flight that departed at 7:00 a.m. Later that same day, she flew back to Boston, departing at about 9:00 p.m. and arriving at about 10:30 p.m. The next morning, she arrived at PCAOB’s office at 9:58 a.m., left for the airport a mere seven minutes later, and flew back to Washington. The pattern repeated itself that evening, when Ms. Lee again took an evening flight to Boston, went directly to her personal residence, visited the PCAOB office for a total of fifteen minutes the following morning, and then returned to the Boston airport to fly back to Washington. Over the course of four days, PCAOB paid for Ms. Lee to fly to and from Boston three times so that she could spend a total of 21 minutes in the PCAOB office.
The PCAOB adds that during the same time period Lee took 36 or so trips to Boston, she only took eight trips to all other PCAOB offices combined. The majority of these trips were scheduled and taken by Lee “on her own initiative, without advance notice to or approval of Duhnke,” the counterclaim states:
Following its investigation, IOPA concluded, among other things: “We were unable to find any reasonable explanation for the extent of Ms. Lee’s travel to the Boston area, in context of the travel policy requirement of ‘good stewardship of PCAOB resources.’”
The PCAOB also claims it received several complaints from employees about Lee’s conduct during the implementation of a new payroll, timekeeping, and HR platform:
For example, employees complained that Ms. Lee moved timelines, deflated team morale, engaged in conflicts with others in leadership roles, limited communication, and similar things.
Some of these concerns were relayed confidentially by employees to PCAOB’s Chief of Staff in early September 2020. Ms. Lee was apprised of these complaints on or about October 9, 2020.
Almost immediately after learning of the complaints and of the Chief of Staff’s anticipated involvement going forward, Ms. Lee scheduled a meeting with the full team which took place on October 13, 2020. Members of the team reported that during that meeting, Ms. Lee was visibly angry, reported that someone on the team had complained about her, made it known that she would learn the identity of those who complained, and threatened that such “actions have consequences” – a phrase she repeated over and over again to her team members. She also canceled meetings and threatened to dissolve the team completely, and she threatened to “throw every decision” at others in leadership roles, hoping to overwhelm them until they “give up.”
PCAOB employees that had been forced to endure Ms. Lee’s tirade felt they had been attacked for expressing concerns about her conduct. Some stated they were “terrified” of Ms. Lee because of her conduct, and others said her actions and criticism were unfair.
Lee was fired by the PCAOB on Oct. 23, 2020. She is seeking back pay and damages as part of her wrongful termination lawsuit against the PCAOB and Duhnke.
Here is the counterclaim the PCAOB filed last week: