The ex-finance chief of the Honeywell-led Nevada site operations contractor Mission Support and Test Services is pressing on with a lawsuit in which he claims that his exposure of alleged financial impropriety at the privately held contractor was protected by the Sarbanes Oxley anti-corruption act.
“Privately held companies such as MSTS [Mission Support and Test Services], given its relationship to the publicly traded corporations who own it and its raison d’etre as a vehicle by which the three publicly traded companies who own MSTS perform contractual work for the United States Government, are subject to the provisions of” Sarbanes Oxley, Stephen Musin, MSTS’ former chief financial officer wrote in an amended complaint filed just before Christmas with the U.S. District Court in Nevada.
Just before the holiday, District Court Judge Jennifer Dorsey threw out parts of Musin’s lawsuit, writing that the ex-finance chief needed to demonstrate that MSTS was in fact an affiliate of a publicly traded company. MSTS is a team led by Honeywell with HII Nuclear and Jacobs Engineering Group. Of these, only Honeywell is a party to the lawsuit, so far.
In his lawsuit, Musin says he was fired from MSTS in 2019 after being demoted from his CFO role in 2018 because he would not cover up alleged financial impropriety by MSTS CEO Mark Martinez. Musin alleged Martinez wanted to collect compensation for himself and John Benner, an MSTS vice president, before either was eligible to do so, and that Martinez wanted to conceal some of MSTS’ financial results from the company’s board.
To support his claim that MSTS is covered by Sarbanes Oxley, the landmark anti-corruption act Congress passed after the Enron accounting scandal of 2001, Musin cited MSTS’ corporate governance, pointing out that Honewell, Jacobs and HII executives all sit on the contractor’s board of directors, “creating an affiliated company relationship between MSTS and its Publicly Traded owner’s organizations.”
Musin also said, in his amended complaint, that MSTS’ contract with the National Nuclear Security Administration explicitly describes the parent companies as “corporate affiliates of MSTS,” and that MSTS revenue does indeed show up on the companies’ consolidated financial statements — one of the thresholds for determining whether Sarbanes Oxley protections apply.
According to Musin’s complaint, Honewell owns 40% of MSTS, while Jacobs and HII respectively own stakes of 37% and 23%. “Any ownership interest greater than 10% is considered to be an ‘affiliate,’” the complaint says, citing federal law.
MSTS and Martinez had not filed a response to the amended complaint at deadline Tuesday for Weapons Complex Morning Briefing. They had previously argued that MSTS was not subject to Sarbanes Oxley protections because, among other things, the privately held company is a contractor to the government, and not to a publicly traded company.
