Sue Lee, formerly a senior officer at the PCAOB, filed a lawsuit against the audit regulatory board and its Chairman William Duhnke, alleging unlawful termination in October 2020 on the basis of her race and affiliation with the Democratic Party.
Lee, who was hired in February 2019 as the PCAOB’s first chief risk officer, is of Chinese national origin. The suit claims that the PCAOB violated the D.C. Human Rights Act.
At the audit regulatory board, Lee reported directly to Duhnke—who the complaint notes is a white male—who determined the terms of her employment, including salary and benefits without oversight or input by others.
“Despite Ms. Lee’s exceptional performance as a senior officer of the organization, PCAOB’s Chairman, Mr. Duhnke, perpetrated a xenophobic and racist campaign against Ms. Lee on account of her membership in these protected classes, ultimately culminating in Ms. Lee’s termination from PCAOB and the intentional tarnishing of her professional reputation through the assertion of pretextual and baseless allegations of misconduct,” according to the suit filed on March 5, 2021, in the Superior Court for the District of Columbia’s Civil Actions Branch.
Her complaint comes amid a nationwide effort to promote diversity and address systemic racism.
Despite prior praise of her performance and promotion, beginning in the spring of 2020, Duhnke allegedly regularly referred to the COVID-19 pandemic as “kung flu” and the “Chinese flu” in her presence. The suit also alleges that during that time period, Duhnke began making frequent remarks to Lee and other employees about her Chinese ancestry and birth overseas.
“The abrupt change in Mr. Duhnke’s treatment of Ms. Lee coincided with the initial outbreak of the coronavirus in the United States—an event which Mr. Duhnke appeared to blame upon the Chinese population and foreign nationals at large,” the complaint alleges. “Mr. Duhnke mocked Ms. Lee for wearing a mask in the office and drew similarities to Chinese Communist Party leaders wearing masks after causing the coronavirus.”
Further, in September 2020, the complaint alleges that upon seeing some Chinese-language journals outside Lee’s office in Washington, Duhnke asked several of Lee’s direct reports, as well as the board’s security team, whether “some Chinese national snuck Chinese propaganda into the office.”
In addition, during this time, the complaint alleged that Duhnke increasingly targeted Lee after he learned of her affiliation with the Democratic Party when she posted a picture of her with Sen. Elizabeth Warren as well as other items suggesting her support for the Black Lives Matter movement.
Duhnke, a former Republican Senate staffer, regularly made their political differences a central topic of their conversations, Lee alleged.
“Mr. Duhnke further touted multiple politically-motivated agendas regarding PCAOB’s future that he intended to effectuate as Chairman and that did not align with Ms. Lee’s own political beliefs, including replacing politically liberal PCAOB personnel with personnel who are politically conservative and shutting down PCAOB, which Mr. Duhnke expressly viewed as a frivolous organization that should be combined” with the SEC, the plaintiff alleged.
The complaint says that despite this, she continued to effectively perform her duties as chief administrative officer (CAO). But on October 19, she suddenly lost access to her PCAOB work email and cell phone without any advance notice or explanation provided by the board, the suit alleges. When she reached Duhnke, the suit claims that he asserted that she was being suspended immediately because of changes of misconduct that had been leveled against her. He allegedly told her that the PCAOB was putting together a report detailing the charges and that she would have the opportunity to review and respond.
However, the suit alleges that she got no further contact from PCAOB and did not get a copy of the report. On October 23, Duhnke called her that her employment was terminated, citing her frequent travels to Boston before the pandemic. But the travels were necessitated as part of her duty, the suit claims, and approved by the board beforehand and reported to Duhnke.
Lee is seeking to recover monetary compensation for lost wages, reputational harm, and emotional distress. She is also seeking reimbursement for legal fees and costs, and an award of punitive damages to punish the defendants and to prevent them from repeating the alleged misconduct in the future. The plaintiff wants jury trial.
PCAOB Spokesperson Jackie Cottrell said Lee’s claims are baseless.
“Following an investigation by our Office of Internal Oversight and Performance Assurance and consultation with the full five-member Board, Ms. Lee’s employment was terminated on October 23, 2020,” Cottrell said in an emailed statement on April 14. “We look forward to responding fully to the allegations in court and expect to file one or more counterclaims against Ms. Lee.”
The SEC, which oversees the PCAOB, did not immediately respond to a request for comment.
Lee at first headed up the new Office of Enterprise Risk Management to oversee the PCAOB’s risk management, compliance, ethics, and security programs in 2019. She was previously senior vice president, general counsel, and corporate secretary of Entegris, Inc., a chemicals and materials company.
Before the alleged change in Duhnke’s views of Lee, the complaint says that the PCAOB’s governing board in July 2019 promoted Lee to serve as acting CAO in recognition of her strong performance to date.
In this role, she oversaw the daily operations of the PCAOB, including those of its headquarters in Washington and the board’s regional and satellite offices.
In December 2019, Duhnke praised her performance as acting CAO and provided her with an exemplary performance review, the complaint says. She also got a discretionary bonus and at the end of 2019, was promoted to serve as permanent CAO. And she continued to report directly to Duhnke.
“Upon information and belief, there is no record of misconduct or complaints about Ms. Lee’s performance in her PCAOB employee files,” the complaint says.
The PCAOB bylaws say that she can not be removed from her position without prior consultation with and approval by the board.
The suit alleges that Duhnke failed to review her termination in advance with employment counsel and did not obtain the written approval of the chief human resources officer before her termination.
This article originally appeared in the April 15, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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