Digital whistleblower finally wins

After a protracted fight, the former executive says he’ll get his judgment worth millions from Digital Lightwave.
St. Petersburg Times, May 10, 2003
http://www.sptimes.com/2003/05/10/Business/Digital_whistleblower.shtml
By JEFF HARRINGTON, Times Staff Writer

For four years, as he waited to collect millions of dollars he said he was owed by former employer Digital Lightwave, whistleblower Seth Joseph refused to talk publicly about his case.

He preferred to let court documents speak for themselves: hundreds of pages of testimony, e-mails and internal memos that detailed how the Clearwater company maneuvered through an accounting scandal in 1998. The documents also helped show how the tech company’s fortunes and misfortunes were closely tied to influential members of the Church of Scientology.

On Friday, after Digital said it would not appeal a $5.2-million judgment in Joseph’s favor, the former Digital senior executive vice president broke his silence.

“Whenever an individual has to stand up to a big company with lots of resources, it’s not an even fight,” Joseph, who now works for a Miami law firm, said in an interview with the St. Petersburg Times. “Digital used every delaying tactic, every procedure they could to wear me down and make it almost impossible just to survive through the process, but here we are.”

Digital, once a high-flying company on Wall Street, is now the one fighting for survival.

Hit hard by the telecom bust, the company that makes testing equipment for fiber-optic lines is being sued by creditors. It has told regulators it cannot meet its short-term debts. It’s tapping an emergency multimillion-dollar line of credit from its wealthy founder and chairman, Bryan Zwan, to stay afloat.

Joseph filed an arbitration suit in 1999 alleging that he was unfairly dismissed by Zwan. In testimony, Joseph said he was punished because he urged Zwan to terminate another executive, Denise Licciardi, who was linked to an accounting scandal in the company. Joseph said that Zwan, a large donor to Scientology, did not want to dismiss Licciardi because she is the twin sister of Scientology’s worldwide leader, David Miscavige.

Zwan has denied Joseph’s account, saying his firing was part of a companywide restructuring.

Joseph won his arbitration complaint and, most recently, an appellate court affirmed the judgment in Joseph’s favor.

In a Securities and Exchange filing late Thursday, Digital said it would not appeal the latest ruling and Joseph would be paid his $5.2-million Friday. A Digital spokesman declined comment.

As of Friday afternoon, Joseph said he had not seen a check or had any recent contact with Digital. But for the first time, he said, he was confident he would receive the money because Digital had earlier posted a $4.8-million bond to cover the judgment and placed $1-million in escrow to cover legal fees and interest.

The wait was worth it, Joseph said.

“My lawyer told me it was going to take six months,” he said with a laugh. “Someone once told me that the wheels of justice grind slowly, but they grind fine. And I feel like that happened in this case.”

Joseph’s lawyer, Holly Skolnick, said the fight took longer than expected because “I’ve never had such tenacious adversaries. . . . Seth really went through hell.”

Joseph declined to talk about Zwan personally but predicted that more problems lie ahead for his old company. As a maker of testing equipment, Digital will lag behind any recovery in the telecom market since any initial burst of spending will probably go to telecom switches and operating equipment instead of testing, Joseph said.

“The only thing that makes it possible that the company will survive is the fact that Zwan was able to cash out to the tune of $400-million to $450-million during the (tech) bubble,” he said.

Forecasting Digital’s future is difficult, Joseph said, because the telecom industry has changed so dramatically since its heyday in the late 1990s and early 2000.

“They’re in a real tough spot,” he said. “When Zwan came back on board (for a second stint as chief executive in early 2002), he promised a brand-new, world-class product by the end of last year, and people are still waiting to see anything that is brand-new or world-class out of the company.”

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