The Bank of Floyd's board of directors amounts to a Who's Who of local farmers.

Many days, not a single share of its stock changes hands. There are no corridors of power — bank president Leon Moore's office is just down from the tellers' windows, with a view stretching only across the street, to where the words "homestyle cooking" are stenciled on the plate glass of the Blue Ridge Restaurant.

But a fight between the no-profile bank and former employee David Welch, fired after he raised doubts about accounting practices, is the unlikely first test of an effort by Congress to protect corporate insiders who blow the whistle on financial trickery.

"It covers the big guys and the little guys," said John M. Vittone, chief administrative law judge at the U.S. Department of Labor, charged with sifting through such cases. "And I'm sure there are a lot of little guys out there who didn't think about it."

Welch, a prayerful certified public accountant fired from his $60,000-a-year job as the bank's chief financial officer, is the first corporate whistleblower to be granted protection under the Sarbanes-Oxley Act, thanks to a little-noticed decision issued by a Department of Labor judge two weeks ago.

"I'm just a person who wanted to stand up and be counted, to stand up for what's right," Welch said recently, spreading binders stuffed with documents from the case across the dining table of his self-renovated home in Meadows of Dan, Va. "And when I stood up, I got shot."

Suspicions arise

Welch was working as an accountant in 1999, when his boss of five months asked if he might be interested in an opportunity at one of the small banks the firm audited. Two weeks later, Welch started at the Bank of Floyd, taking the four-day-a-week job.

At 49, the job as chief financial officer offered a big step up, Welch says. And with little training for such a role, it was "more or a less a swim or drown kind of thing," he would later tell a judge.

The Bank of Floyd has more to it than first meets the eye. Until the early 1990s, the bank — whose home office is three stories high, but only if you count the basement — did business only in Floyd. Then its leaders began pursuing a grander vision, opening four more branches in the area. They made the bank the sole subsidiary of a new holding company, Cardinal Bankshares, named for Virginia's state bird.

Despite the bank's growth, its annual profits still average not much more than $2 million — about as much in a year as Citigroup has made in an hour.

It's hard to know precisely when things starting going wrong between Welch and the men who run Cardinal. Bank president Leon Moore would not be interviewed for this article, referring questions to an attorney for the bank.

"This is not about him," the lawyer, Laura Effel, said.

But it's clear the relationship between Moore and his CFO took a sharp dive after a verbal scuffle in the fall of 2001, according to court papers and interviews with Welch, Effel and the bank's accountant, Michael Larrowe.

Cardinal Bankshares' stock trades on the "bulletin board," a listing run by Nasdaq that is a haven for mostly small and unknown companies seeking a market for their shares. Three local families control a large portion of the stock and most of the rest is held by people living in and around Floyd.

In October of 2001, one such shareholder, Virginia Lane, walked in to the bank and asked to speak to someone about selling her shares. She needed money to pay her electric bill.

Welch came downstairs from his second-floor office to talk with her, then spoke with Moore about what to do. The men agreed that Welch could send an e-mail to bank employees asking if they were interested in buying some of the shares. It wasn't long before a bank vice president responded and Welch approved the sale of 26 shares.

The arrangement angered Moore, who criticized Welch for allowing a transaction with a top executive so close to the end of the bank's financial quarter, fearing the appearance of insider trading.

That needled Welch, who suspected Moore of having done worse. Welch says he had noticed what he thought was a pattern of stock purchases by Moore and a handful of his friends, that appeared to be timed shortly before key announcements sent the bank's stock up.

"I asked Leon about this and I didn't get an answer," Welch says.

Company defends self

Effel, the bank's lawyer, says Welch was wrong about the timing of the stock purchases and denies Moore was engaged in insider trading. She points out that Welch notified the Securities and Exchange Commission of his suspicions two years ago, and that the regulator has taken no action.

Welch's doubts, though, went well beyond Moore's stock purchases. He also informed Moore about what he thought were problems in the way the bank kept its books.

While tensions in the tiny bank began to boil, Congress was crafting a new law in the wake of Enron, WorldCom and other accounting scandals. The principal measure, signed by President Bush in July of 2002, requires top executives of publicly traded companies to personally vouch for the soundness of their financial reports.

But the law, known as Sarbanes-Oxley for the two members of Congress who sponsored it, also offers new protection for whistleblowers, to encourage workers to shine a light on accounting problems without fear of losing their jobs.

When the new federal law went into effect, Welch made clear to Moore and other bank officials that he would refuse to sign off on financial documents he believed to be deliberately misleading.

Moore, who Effel says by this point believed Welch was incompetent and imagining the problems, was equally steadfast.

"You must understand," the bank president wrote in a September 2002 memo to Welch, "that these reports will be certified."

On Sept. 17, the bank board's audit committee — three farmers, a dentist and a local school official — met to hear about the Welch matter. They instructed Larrowe, the bank's external accountant, and a lawyer for the bank to sit down with Welch and hash out his allegations.

The sit-down was timed for a week later, a Wednesday, at 11:30 a.m. in the bank president's blue damask office on the first floor.

But Welch told the audit committee's emissaries he would not meet without his attorney present, a request that was refused.

Larrowe and the bank's lawyer compiled a report with their findings and took it back to the audit committee. Shortly afterward, the board of directors agreed that Welch was guilty of insubordination for refusing to meet without his attorney present.

Four months after the passage of Sarbanes-Oxley, David Welch was out of a job.

Welch filed a complaint with a Labor Department that has years of experience with whistleblowers, but has never seen anything quite like the 30 or so Sarbanes-Oxley cases on its docket.

Most of the whistleblower cases before the department's administrative law judges usually involve workers in industries like airlines or mining, who allege they were fired for bringing safety concerns to light.

The Welch case was first assigned to an investigator for the Occupational Safety & Health Administration. He ruled that while Welch's concerns may have been legitimate, his firing was justified because he was insubordinate.

But Purcell, the DOL administrative law judge who heard the case on appeal, saw it differently.

The case hinged not on whether Welch's allegations were correct — but on whether the accountant "reasonably believed" unethical behavior was taking place, and whether the bank had punished him for voicing those concerns.

Purcell has ordered that Welch be awarded back pay, and that he be reinstated in his job at the 50-employee bank, a notion both sides in the case have difficulty envisioning.

The bank has promised to appeal, calling the decision misguided and the law heavy-handed. Depending on what a Department of Labor review board decides, the battle could soon move to federal court.

Welch smiles when asked about the idea of going back to work at the bank. Maybe, he says, this whole trial has been a test from God.