Playboy Must Pay $6 Million to Whistleblower Who Refused to Embezzle Staff Bonuses

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Composite by Mack Gelber from AP and FacebookFormer Playboy accounting executive Catherine Zulfer
Playboy Magazine tends to bring to mind glossy centerfolds, the iconic Playboy Mansion, and the image of Hugh Hefner wearing a bathrobe. But after Wednesday, when a federal jury in California ordered Playboy Enterprises to pay a former accounting executive $6 million, it may become known for something else entirely.

Catherine Zulfer, a former controller at Playboy, was terminated in 2012 after bringing "actual and suspected frauds and improprieties" to the attention of company management, TheWrap reported. The alleged crimes included raising $1 million in bonuses for company executives without board approval, following a period in which the company didn't do well financially. Zulfer filed a suit in the U.S. District Court in California, where the jury found the firing wrongful and retaliatory for reporting the alleged fraud. The company was also found to be in violation of the 2002 Sarbanes-Oxley Act, which provides federal protection to whistleblowers.

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"She was extremely concerned that [Playboy CFO Christof] Pachler and/or CEO [Scott] Flanders were attempting to effectively embezzle, steal or convert Playboy assets," Zulfer stated in her lawsuit.

The jury also determined that Zulfer, who was 56 at the time of her termination, was the victim of age discrimination. According to the lawsuit, Pachler implemented a plan to cut costs by firing employees who had been with he company for more than ten years. Zulfer, who had been at Playboy Enterprises for more than 30 years, said that she was "shunned, humiliated and treated like an outcast."

According to TheWrap, Pachler also allegedly kept Zulfer out of meetings, eliminated 15 corporate accounting positions to set her up to fail, and tried to cheat her out of her severance. He was not named in Zulfer's suit.

The $6 million verdict is thought to be the largest ever awarded under the Sarbanes-Oxley Act. "We strongly disagree with the jury's decision," a Playboy spokesperson said in a statement to Reuters. "Playboy stands behind the conduct of its management team and our corporate governance practices." In the statement, they said that the company would be seeking an appeal of the verdict.

Zulfer's case will enter a punitive damages phase on Friday, where the company may face further penalties.

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