Playboy To Pay Record-Setting Sum In Whistleblower Suit

An historic ruling against the House that Hef Built.

A federal jury in Los Angeles says Playboy Enterprises must pay the company's former controller $6 million as part of a wrongful termination lawsuit.

The suit, filed in U.S. District Court in California, ruled in favor of Catherine Zulfer – who refused to prepare $1 million in unapproved bonuses for top Playboy executives and who then reported “actual and suspected frauds and improprieties” to company management.

According to TheWrap.com, an entertainment industry website, Zulfer, a senior vice-president and corporate controller who had worked 24 years at Playboy, questioned an order by Playboy CFO Christoph Pachler to prepare the bonuses. Zulfer said she went to the company's general counsel to report on what she saw as questionable accounting practices – but was allegedly “frozen out” of management and ultimately laid off in 2012.

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Reuters reports the jury found Zulfer's termination was in retaliation for her reporting the alleged fraud, which is in violation of whistleblower protections covered by the federal, 2002 Sarbanes-Oxley Act. Zulfer was 56 when she was fired, and the jury also determined she was discriminated against on the basis of age.

"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. We will assess the pursuit of all available options, including an appeal and overturning the verdict."

The $6 million damages awarded to Zulfer is reportedly one of the largest, if not the largest, award every given out under Sarbanes-Oxley.

According to TheWrap.com, the jury also ruled that Playboy acted with “malice, fraud or oppression” when it terminated Zulfer – so she may end up being paid more, once punitive damages are decided.