A former principal of Minneapolis-based RSP Architects has filed a whistleblower lawsuit in state court against the firm, alleging he was dismissed after complaining about financial mismanagement discovered while he was competing to become its new CEO.
Todd Novak filed the suit in state court in Minneapolis, accusing his former employer of dismissing him in retaliation after he voiced concerns about accounting and alleged missing millions of dollars.
Novak has since taken a position as commercial studio leader at LHB, a Duluth, Minn.-based AE firm. But the lawsuit is just getting started, with a plan for trial discovery the latest step.
About one month after Novak filed suit, RSP announced a new CEO, Andrew W. Burnett, who succeeds former longtime chief Dave Norback.
The new leadership and charges of retaliation come at a time of apparent prosperity at the 330-person practice. Its budgeted revenue for 2024 is $88.5 million.
Hired at the end of 2019 to be a senior associate on RSP retail and multi-use projects, Novak was promoted two years later to principal and national market sector leader, with part of his compensation based on a bonus pool. His annual salary, the company stated in a reply to the lawsuit, was $160,000.
But after RSP had two years of turnover in its financial controller position, Novak claimed, he became concerned.
About one year ago, when Norback announced he was stepping down, Novak applied for the job along with several other internal and external candidates and began reviewing company finances more closely. Financial line items such as overhead, indirect salary and employee benefits did not "line up," Novak claimed, "to the tune of millions." He further alleged that the funds could then be spent by a handful of firm principals, although he did not allege any personal use of the money.
Last December, just before beginning the interview process for the CEO job, Novak raised his financial concerns to other principals who promised to look into matters but said little else, his court complaint alleges. After raising the issue several times, Novak was notified by RSP that he no longer was in the running for CEO, the suit claims.
In March, Novak says Norback notified him that the board decided to lay him off because of softening economic and market conditions, according to the suit.
In its reply to the claim, RSP denied its general allegation that Novak was fired as retaliation and also refuted other details of his court complaint. But it also attacked his account of his work and career at the firm, saying he worked on projects but did not win the commissions for RSP as he claimed in the lawsuit.
RSP said all bonuses and ESOP contributions were made according to the company plans and were done properly based on its profitability and an employee's individual performance. RSP also said some documents referred to by Novak were not financial reports.
In its broadest lawsuit response to Novak, RSP stated that company financial statements are routinely reviewed by a third party, that it never made material changes to them and "has never maintained any hidden account for the sole discretionary use of RSP executives," as Novak charged.
All company actions, RSP claimed, "were undertaken for legitimate and non-retaliatory business purposes."
