A federal magistrate in Philadelphia has granted a former Vanguard Group tax lawyer's request to change his employment retaliation complaint so he can argue that he wasn't fired until after he had reported what he called illegal income tax practices to the Securities and Exchange Commission.

The investment company, which has more than doubled to over $5 trillion in assets since he left its employ in 2013, has argued that lawyer David Danon's allegations in the retaliation case — that he was fired for refusing to sign off on underreported income and tax statements — are "without merit." Vanguard "will move to dismiss" the amended complaint, added spokeswoman Carolyn Wegemann on Tuesday.

The company, which employs more than 10,000 at its Malvern headquarters and other area offices, has also said it pays "fair and appropriate" taxes, which as a private, for-profit company it doesn't disclose.

Tax lawyers, including an expert paid by Danon, have said Vanguard could owe years of unpaid taxes if the IRS accepted Danon's claim the company minimized payments to its management affiliate in order to reduce its tax liabilities, in violation of federal transfer tax rules; and that the company built up a cash reserve that was neither taxed nor split with shareholders. The IRS doesn't confirm or comment on investigations. Danon also contended Vanguard should have told the SEC, as its regulator, about the tax dispute. Danon hopes to collect a percentage of any late payments or fines, under whistleblower laws.

A New York state court ruled in 2015 that Danon could not expect to be paid as a whistleblower there because he was a former Vanguard lawyer using protected information. But Danon collected an informer's fee from Texas tax authorities after reporting Vanguard practices there.

In 2016, federal Judge C. Darnell Jones II dismissed Danon's federal wrongful-firing claim. But last year a federal appeals court ruled Danon could still make a retaliation claim under provisions of the Dodd-Frank financial reform law of 2010. Vanguard had argued that Dodd-Frank didn't apply to Danon because he hadn't complained to the SEC before he was fired. But in March, Danon filed an amended complaint, "asserting that he has discovered documents that disclose that his termination date was after he reported to the SEC in May 2013," so Danon has a basis for his complaint and it can proceed, magistrate judge Lynne Sitarski ruled Monday in granting Danon's request.

Federal judges have not ruled on the merits of Danon's tax and SEC allegations. Vanguard, which pioneered low-fee stock-index mutual funds, has beefed up its legal, compliance and accounting staff as it grew in recent years, and has continued to reduce some investment fees, as rival companies also cut rates.