Monday, February 29, 2016

2nd Issue: State of California Licensing Requirement (Part 2)

2nd Issue:  State of California Licensing Requirement (Part 2)

In October 2013, I wrote confidentially to the Chair of the Audit Committee that comments by CEO Jenny and the Board Chair violated the company’s whistleblower policy and that the company was not moving fast enough on the licensing issue.  He and the Board Chair replied that the Board was acting appropriately to resolve the licensing question.

In November, the Executive Committee of the Board decided that Jenny and three Board members would seek an informal consult with an attorney on the issue.  Cutting me out of the process and making the meeting informal seemed to me tactics to delay action further.  I mailed my complaint letter to CCL that night.  My first external whistleblowing increased the stakes by disclosing information to a potentially powerful third party about whom I knew little.  The complaint might be disregarded, or CCL might bang on the BRC doors the next day. 

Two months passed without a response.  The CCL website said not to bother following up on complaints.  Then the letter was returned, rejected by addressee for insufficient postage.  I mailed it again, this time with more postage.  Two weeks passed, and I called to confirm receipt.  The guy who answered found no record of the letter, and I emailed it to him, nearly six months after I first raised the issue. 

Still, the Board had done little to obtain its informal consult.  The Vice-Chair of the Board, who decided that my list of attorneys was not adequate and agreed to locate a suitable attorney, had made no progress in her search.  During the week following CCL’s visit to BRC in February, Jenny finally arranged pro bono legal assistance from a large San Francisco law firm.

When I blew the whistle to CCL, I presumed to benefit the public interest[1].   Here, the public members to be protected were the clients who resided at the site.  By some ethical standards, I needed to be confident of the accuracy of my claim, but that is not always easily done.  The licensing requirement was determined by “care and supervision,” which called for expert understanding that I and the Program Officer may have lacked.

As an employee and company officer, I had legal and ethical obligations to my colleagues.  I could minimize my breach of company loyalty by first exploring internal avenues for change.  But figuring whether anyone’s use of internal channels is adequate can be difficult because the company’s response to a whistleblower might be disingenuous.  The fact that six months after I raised the issue no attorney had been identified for the consultation seemed to confirm the Board’s tepid commitment to resolving the question, but perhaps other issues legitimately competed for attention.  Perhaps I should have objected internally about the delay, too, but the prospect of endless rounds of internal study and response made external disclosure seem to me right despite the potential consequences.

Those obligations and loyalty to company and co-workers may be trumped by higher loyalties, such as to professional standards[2].  And the whole company loyalty thing may be rejected on its face[3].  Loyalty may be just attractive management technique[4] in an age of at-will employment.

Another ethical test for my whistleblowing might be whether harm to the public from the wrong is serious and exceeds the company’s injury from the disclosure[5].  By this standard, few acts, and certainly not this potential licensing violation, deserve being called out by a whistleblower.  Key to this test, however, is an assumption that the whistleblowing would harm the employer to whom he should be loyal.  Jenny claimed that my whistleblowing would cause terrible damage, but that was unproven at the time and was eventually disproven.

To overcome possible biases, the whistleblower might owe everyone involved exposure of the facts to an objective party prior to disclosure.  But obtaining an objective opinion prior to disclosure can be difficult and expensive to obtain.  Prior to mailing my complaint, I described the circumstances to three out-of-the-area attorneys.  None of them replied.  In the end, I was left to make the decision on my own.

The day after the CCL visit, Jenny called me on a speaker phone – she never called me on a speaker phone – and asked whether I had anything to say about the visit.  Nope.  At the next Board meeting, she discussed the visit and said that whoever contacted CCL – a quick, sharp look at me – did not understand what he was doing.  At the end of March I admitted to having contacted CCL.  Jenny forwarded my email to the Board Chair, who replied, “no surprise.”  My complaint was anonymous, but they knew.

After their monitoring visit, the CCL staff determined that the BRC had provided “care and supervision” in violation of regulations.  They decided, however, that HomeFirst’s vital services to the community satisfied CCL’s “urgent need” definition.  As a result, BRC could stay in operation on a temporary basis while we proposed program changes to avoid future violation of the regulations.  Meanwhile, the CCL staff in San Jose discussed the matter with their superiors and political staff in Sacramento because of the decision’s potential statewide impact.  In June 2014, CCL advised HomeFirst that the complaint was “unfounded” following its program changes.  Everything was fine, except that by then I had lost my job.

The BRC licensing violation offers some additional lessons to the whistleblower:

11.       It can be difficult to determine whether an act is truly illegal or unethical and worthy of disclosure.
22.       Distinguishing legitimate justifications from illegitimate rationalizations for allegedly wrongful actions can be difficult.
33.       No less difficult is it to decide when inaction, caused by lengthy study, slides over into evasion of corrective action.
44.       The whistleblower must wrestle with questions concerning to whom and under what circumstances he or she will be loyal.
55.       Political perceptions of the significance of the violation and the consequences of disciplining a misbehaver may ultimately overwhelm the question whether an act is wrong.




[1] Bok, Sisella. “Whistleblowing and Professional Responsibility.” New York University Education Quarterly 11.4 (1980): 2-10
[2] Vandekerkhove, Wim and M.S. Ronald Commers.  Whistleblowing and Organizational Social Responsibility. Aldershot, Hampshire, England: Ashgate Publishing Company. 2006
[3] Duska, Ronald. “Whistleblowing and Employee Loyalty.” In Contemporary Issues in Business Ethics. DesJardins, Joseph R. and John J. McCall (eds.) Belmont, California: Wadsworth Publishing Company. 1985
[5] De George, Richard T.  Business Ethics.  7th edition.  Upper Saddle River, NJ: Pearson Education.  2009

Sunday, February 28, 2016

2nd Issue: State of California Licensing Requirement (Part 1)

2nd Issue:  State of California Licensing Requirement (Part 1)

Some wrongs witnessed by whistleblowers are clear, like a theft from the company or from customers or vendors.  Others are ambiguous because they involve an interpretation of technical rules that may be debated.  Clear-cut wrongs may be resolvable directly with the injured party, but technical rules often demand arbitration by an external authority empowered to position the line between right and wrong and decide how resolution will be accomplished.

The State of California requires that a residential facility should be licensed by the State if it performs any of several “care and supervision” activities, including assistance with personal hygiene, medications, health care, supervision of schedules, and maintenance of house rules[1].  The regulations seek to protect adults who require or want assistance with care and supervision due to disabilities or age.  The California Community Care Licensing Division (CCL) oversees the management of licensed residential facilities in the state, but it does not provide an unambiguous definition of care and supervision, leaving determination in the hands of its staff in local offices and Sacramento.

During a meeting of the Executive Leadership Team – the CEO, CFO, Chief Program Officer, and Chief Development Officer – in late August 2013, I raised the question whether HomeFirst’s Boccardo Reception Center (BRC) facility required licensing as an adult residential facility.  By some measures, BRC appeared to be covered by the regulation.  More than half of the clients were classified as disabled, nearly a quarter were over 60 years old, and many used prescription medications.  Some clients, especially those who were recently discharged from hospitals, received medical care at the site, and all clients were subject to house and program rules.

The Program Officer and I had discussed the issue briefly with an attorney five years earlier without coming to a decision.  Jenny, the CEO, offered a number of counter-arguments: we could not afford to convert BRC to a licensed facility; we did not have staff to work on a licensure application for the site; no other shelters were licensed; if CCL forced licensure on BRC and other shelters, thousands of homeless would be forced on to the streets again; and the financial impact on HomeFirst could be catastrophic.  She argued that BRC had operated in the same way for years and, if we had avoided the question in the past, there was no reason to address it now.  She did not think that any other shelter in the area was licensed.  In addition, if the CCL decided we were operating in violation of the law, they might decide against us in a separate license application for a different location.

It seemed that she protested too much.  Her arguments eluded debate about the protection of clients and the possible illegality of the operation.  While not entirely certain, it seemed to me likely that BRC provided “care and supervision,” and the Program Officer generally agreed.  I recommended that we consult CCL or an attorney to get a definitive reading of the case.

The ambiguity of this case was compounded in two ways.  First, HomeFirst’s activities at BRC had changed over time so that although licensing seemed not to be required earlier it might be necessary now.  Jenny contended that the problem was with CCL, which had not changed its regulations to avoid trapping new homeless services, like those provided by HomeFirst at BRC, in the licensed category.  Second, separating in Jenny arguments those that were legitimate justifications from those that were rationalizations for wrongdoing was difficult.  Even when honestly motivated, we are often deceived by unconscious biases, limits on the information available to us, and emotions and situational factors that can sway our decision-making[2].  Despite the ambiguity, Jenny, I, and the others involved still faced the need to act in some fashion. 

Jenny laid out a plan for dealing with the licensing question.  I would canvass the 20+ homeless shelter providers in the region to learn whether anyone else had considered their need to be licensed on their own or when prodded by funders or auditors.  I would then describe the process for becoming licensed and the risks and opportunities involved in being licensed in the short and long term.  The task was made more difficult by the fact that the Program Officer, not I, had the contacts at other shelter providers and the personal experience with making a license application.  I was also in the midst of the annual audit.  It was a time-consuming project that Jenny felt necessary, even if it meant waiting months before we took action.

After email parries over the next few days, I suggested that I might need to disclose the situation to our auditors.  After the Executive Committee of the Board decided that it was all right for me to discuss it with them, the auditors were indifferent to the issue I described.  Preliminary research indicated that other providers did not care about the problem, either.  Evidence seemed to confirm Jenny’s contention that nothing was very wrong here and no great ethical violation was in progress. 

Despite this seeming validation of inaction, I thought that the core issue – were we required to be licensed at the site? – remained unaddressed.





[2] Bazerman, Max H. and Ann E. Tenbrunsel. Blind Spots: Why We Fail to Do What’s Rightand What to Do about It. Princeton, N.J.: Princeton University Press. 2011

Saturday, February 27, 2016

1st Issue: County Overbilling & Government Indifference (Part 2)

1st Issue: County Overbilling & Government Indifference (Part 2)

Going into my whistleblowing adventures I assumed that right and wrong were fairly clear matters.  I found, though, that more typically some authority is empowered to decide on which side of the line separating right from wrong an act fell[1].  Behavior becomes wrong because someone in power says it is wrong, or it is acceptable because the power says so.  Over time governmental agencies, responding to their competing constituencies, can shift that line, making wrong what was right in the past or making acceptable what was once wrong.  Nudging the ethical line and shading the vigorousness of enforcement can advance the interests of different players in society.  Taxpayers are among the players, but so are government employees, health workers, clients of nonprofits, donors to charities, the charities themselves, and many others.

When an industry or a company causes a regulatory body, which acts with such authority, to favor the regulated party over the public interest, it is called regulatory capture.  In the 2000s, The Minerals Management Service (subsequently renamed Bureau of Ocean Energy Management), an agency of the Interior Department, was captured by the oil and gas industry in two ways: using the time-honored tools of sex, drugs, and graft[2], and using contemporary tools of social networks and revolving employment doors[3].  The result was the 2010 Deepwater Horizon oil rig fire and subsequent spill of 4.9 million barrels of oil into the Gulf of Mexico[4].   

Capture can be subtle, too.  In the 2000s, financial regulators were captured by the banking industry in part because both groups shared similar social backgrounds and networks, the regulators envied the bankers’ higher financial and social status, and the regulators needed the knowledgeable cooperation of the banks in order to do their jobs[5].  The result was lax financial market controls that facilitated the financial crash following 2007. 

Capture can generate neat benefits for the regulated firms, including lax supervision, protection from competition, bailouts, and unmerited contracts.  The reward to regulators may be material in the form of lucrative post-government employment, political contributions, and favors to family and friends. Or the benefits may be intangible, like the esteem of others, pride, and validation.  The problem of regulatory capture extends beyond heavily regulated industries.  As nonprofits interact with their government funders, exchanging employees, helping to guide social policies, and cooperating with resource starved government monitors, regulatory oversight risks being co-opted.

The authority in the case of HomeFirst’s County overbilling was a complex of governmental offices: the County Mental Health Department, the County Attorney, the County Chief Executive, the County Board of Supervisors, the Accountability Commission, the State Attorney General, and ultimately the Governor.  State officials yielded to the judgment of the County, and County officials yielded to those further down in the hierarchy so that inaction by the Mental Health Department effectively shifted the line between right and wrong.  The interests of the County and HomeFirst were not cleanly separated because former HomeFirst employees’ managed HomeFirst’s contracts with the County, and the County regularly renewed HomeFirst’s annual contracts without the benefit of regular monitoring.

When I embarked on my whistleblowing, I envisioned only my confrontation with HomeFirst, and I expected that would be supported by the governmental powers that HomeFirst had betrayed.  Instead I found myself in opposition to both the company and its affiliated governmental partners. 

In addition to disclosing issues to the authorities, some whistleblowers take the more aggressive step of blowing the whistle to the media.  That did not work for me.  The reporter I emailed at the Center for Investigative Reporting, a nonprofit that aspires to pursue and reveal injustices that might otherwise remain hidden, replied that she and another reporter who might have interest were both slammed and could not take the project on.  She recommended a San Jose Mercury News investigative reporter who never replied to my email.  When I tried again eight months later, a different reporter at the Center for Investigative Reporting promised to return my contact but never did.  A columnist at the San Francisco Chronicle did not reply either.

By March 2015, HomeFirst had not come up with a plan to repay the overbilled amount, which had been revised to $140,000, and the County considered it very nearly insolvent.  Because the company provided valuable services, the County did not want to force it into bankruptcy by demanding any repayments.  It would just wait until the organization stabilized, but if HomeFirst failed, it figured it would recover its money by withholding amounts it owed to HomeFirst at that time.  County Supervisor Simitian declined to comment on the County’s new wait-and-see strategy. 

The County then decided to provide a $300,000 bailout to HomeFirst, spread in declining amounts from April 2015 through June 2016 according to a contract that was prepared and would be monitored by now-ex-Program Officer Hilary.  Asked about the still unpaid overbilling, Simitian was concerned by this turn of events and forwarded my letter to the County attorney for comment.  My new complaint to the Accountability Commission was forwarded to the County for action.  The County did not act on either referral, and both offices ignored my follow-up messages as did Simitian.

I included the issue in two communications to Governor Brown’s office, but neither was acknowledged.

In January 2016, I made another FOIA request to see if the County had attempted to collect any of its money.  The request was misplaced until I followed up.  Maybe I will learn something if I wait longer.

The County overbilling experience generated some lessons for me and other whistleblowers:

11.   Even a relatively straightforward compliance violation can involve technical complications that make understanding difficult.
22.       Layers of oversight and monitoring confound how complaints are handled and extend to frustrating lengths the time required to resolve a complaint.
33.       One arm of government may be ill-equipped or disinclined to question closely another arm.
44.       Claims for confidentiality and simple unresponsiveness make it difficult or impossible to determine the status of any complaint.
55.       Government agencies may change the standards for compliance without communicating their reasoning.
66.       Political interest may vanish when the amount at stake in the complaint is small compared to other matters considered by the governmental agency.
77.       Public support may be inaccessible because media do not find the violation of significant general interest.
88.       The responses by authorities can fade to nothing as repeated complaints and follow-ups are presented.
99.       The whistleblower confronts not just the corporate wrongdoer but a political structure that resists correction.





[1] Greve, Henrich R., Donald Palmer and Jo-Ellen Pozner. “Organizations Gone Wild: The Causes, Processes and Consequences of Organizational Misconduct.” The Academy of Management Annals.  4.1 (2010): 53–107
[2] Savage, Charles.  “Sex, Drug Use and Graft Cited in Interior Department.”  New York Times.  September 11, 2008.
[4] Carrigan, Christopher.  “Captured by Disaster? Reinterpreting Regulatory Behavior in the Shadow of the Gulf Oil Spill.”  In Preventing Regulatory Capture: Special Interest Influence and How to Limit It. Daniel Carpenter and David A. Moss (eds.) New York: Cambridge University Press. 2014. Pp. 239-291.
[5] Kwak, James. “Cultural Capture and the Financial Crisis.” In Preventing Regulatory Capture: Special Interest Influence and How to Limit It. Daniel Carpenter and David A. Moss (eds.) New York: Cambridge University Press. 2014. Pp. 71-98.

Friday, February 26, 2016

1st Issue: County Overbilling & Government Indifference (Part 1)

1st Issue:  County Overbilling & Government Indifference (Part 1)

Whistleblowing can arise out of seemingly innocent events.  In July 2013 as I began to prepare for the year-end audit, I discovered that I had overbilled Santa Clara County by more than $130,000 during the prior two years because of the misunderstanding that we – I, the CEO Jenny, and the Program Officer Hilary – shared about how to bill two contracts.  One section of the contracts seemed to permit billing based on the number of nights clients stayed in the facility rather than on the more usual standard of reimbursable costs, which was implied in a different section.

I called my contact at the County to clarify which method was correct: the less profitable reimbursable cost method.  When I informed Jenny, she became upset, not because the mistake had occurred but because I had talked to the County about it.  She was sure she could have fixed it by calling the County Mental Health Department director herself.  She and Hilary would get with the director.  Leave the amount in revenue, she said.

At a joint meeting of the Finance and Executive Committees in August, members discussed the overbilling violation and my handling of the problem.  The Board Chair said that the coming year would be challenging and she didn’t want to see any “red flags” – possible compliance problems raised to the attention of authorities.  The others accepted her advice silently, but I pressed for clarification.  Did she mean that I should not go to a funder if I identified a compliance problem as I had done with the County billing?  She danced around an answer; I pressed, “Answer the question.”  Her eyes opened wide, rustling sounds came from other Board members, and she replied that any matters like that should be handled by Jenny, not me.  Jenny chimed in, “That’s what I told him!”  The incident would make its way into HomeFirst's brief against me.

Jenny and Hilary may have had meetings with the County; plans might have been considered to remedy the overbilling; new billings proceeded on the correct basis as though no problem had occurred; and the overbilling remained outstanding.  By February 2014, I had reported other issues to external authorities, and I decided to complain about the County’s failure to demand the return of its money.  Unlike most government agencies, the County reports actions taken on whistleblowing reports to its website.  From January 2011 through March 2014, 4% of the 237 complaints were sustained and 80% were described as pending.  My complaint stuck in the pending category. 
Because State funds were used for the grants, in April I complained to the State Attorney General’s office that the County failed to protect State funds that it employed in the contracts.  The office replied that it had no interest in the case because the funds involved were primarily local and the County could handle it well enough.

After receiving only an automated response from the County to my complaint, in May I filed a second complaint, this time pointing to HomeFirst’s financial vulnerability which could endanger the County’s claim.  I noted that three of the key County staff who oversaw agreements with HomeFirst were former HomeFirst employees.  That complaint received no reply, either.  In response to my Freedom of Information Act (FOIA) request for records relating to the violation, the County attorney said that all documents were protected.  My complaint to the County Executive, who managed the operations of County, received no response. 

The State money involved came from California’s Mental Health Services Act (MHSA), which provided for a 1% tax on incomes over $1 million to fund county mental health programs with spending subject to annual review by a new Mental Health Services Oversight and Accountability Commission.  The 2013 California State Auditor audit report, however, concluded that the California Department of Mental Health and the Accountability Commission provided little oversight of County implementation of MHSA programs and their effectiveness.  They found no evidence that any on-site reviews tested whether County assertions about their compliance with MHSA requirements and use of funds were accurate and proper.  Two years later, an independent State oversight group concurred, writing that effective control of the funds, which amounted to $13 billion by January 2015, was delegated to the Counties and State monitoring agencies had no significant ability to force changes even in the event of abuse.

In early August 2014, acting on my complaint letter, the Accountability Commission learned from the County that HomeFirst had solvency issues but was working on a plan to repay the money.  In September, County Board of Supervisors, Supervisor Joe Simitian assured me that the overbilling problem was known and the money would be collected by June 2015.


Although several governmental offices were charged with ensuring that nonprofit companies used taxpayer money appropriately, they all moved at a leisurely pace getting HomeFirst to return the improperly obtained funds.

Thursday, February 25, 2016

Protection from the State of California (Part 1)

Protection from the State of California (Part 1)

Jaffe’s final email advised me to engage an attorney as soon as possible because I had just one year from my termination to assert my rights.  According to the Labor Commissioner’s web site, though, I had only six months to come to them about a violation of the State’s whistleblower protection law.  It took a week to assemble, but I sent my letter to the Labor Commissioner’s office on December 1, 2014, two days before the deadline.

My 20-page complaint, including fifteen pages of details, identified seven violations and provided a timeline that connected HomeFirst’s retaliations to my internal and external reports of problems.  My case.  A letter auto-signed by a senior deputy labor commissioner in the State’s investigation unit said she had been assigned to my case and she would be contacting me for an interview.  Two weeks later, after hearing nothing from her, I emailed asking when she would like to talk.  After another silent week, now in mid-January 2015, I called the State office and spoke with a woman, who said that, actually, no one had been assigned to my case yet.  Someone should be assigned to the case in six to eight months.  In the meantime, HomeFirst would be sent a portion of the form I had submitted and would be asked to reply.  I could then comment on their reply, she said.

After six months of silence, I called again.  A man, Juan, to whom I would speak regularly, said that a deputy had not been assigned to the case yet, and the backlog was about eight months.  HomeFirst had been asked to respond to my complaint, and Layton identified herself as HomeFirst’s attorney.  She did not, however, answer the State’s request.  I called again every month or so after that.  Nine months after I filed my complaint, Juan apologized.  They were short-staffed because of retirements, he said, but someone should be assigned in four to six weeks.  Not to worry, though: HomeFirst’s delay in responding would not slow their consideration of my case.  Six weeks later he said a deputy should be assigned in a month or two.  On the anniversary of my filing the complaint, Juan explained that OSHA complaints are researched first and the files of one officer, who had retired recently, were being distributed to other officers.  Some of the files were two years old, he admitted.

Finally in January 2016, although an investigator had still not been assigned, the State sent me a letter with HomeFirst’s rebuttal to my complaint.  The letter was auto-signed by the same senior deputy labor commission who had written me a year earlier.  I would have a month to reply, or my complaint would closed.  Juan informed me that assignment of an officer is usually made after the office receives the company’s rebuttal and it asks the complainant to reply.  That was not what he said earlier, but, anyway, we seemed to be moving forward at last.

HomeFirst’s statement was little more than a copy-and-paste from its November 2014 brief.  The facts were as Layton called them earlier: I was the one who misbehaved, and then I cried whistleblower after HomeFirst responded within its rights.

I decided that this might be my last opportunity to state my case.  My 155-page reply included a paragraph-by-paragraph critique of HomeFirst’s rebuttal and a detailed narrative supported by 122 pages of emails and other documents backing my contention that I was fired in retaliation for my whistleblowing.  In mid-February, Juan said that a deputy was now assigned and she had just been sent the material.  She would contact me to discuss the case.  Two weeks later, I have not received written notification of her assignment, and she has not contacted me.  I will check again with Juan in a few weeks.

Almost two years after I was fired, the State process seems excruciatingly long.  While I wait for the next steps, let me describe what all the whistleblowing was about and what resulted from my reports.



Wednesday, February 24, 2016

Firing My Attorney & California Bar Dealings

Firing My Attorney

Shortly after Bifoss assured me that his utterly disastrous negotiation was just fine, I ended my agreement with Jaffe.  He then reminded Layton that he continued to have a claim on any recovery I might obtain from HomeFirst.  That lien would make it impractical to get another attorney to represent me on a contingency basis.  I saw no reason to trust another attorney either.  Nothing would come from legal action. 

As I headed into my whistleblowing adventures, I thought I had power and was rightly exercising it.  Even after CEO Jenny and the Board members decided to terminate me, I thought that I would be vindicated.  I fantasized how Board members would share a wink and nod with me to say it would all work out fine in the end.  That was how it went six years earlier when a different floundering CEO wanted to fire me, but not this time.  When I assumed that I would be fairly compensated for what happened, I could treat as silent partners those who had witnessed the same events without speaking up.  Now that I would get nothing and HomeFirst would suffer not at all, those who failed to help became guilty by their association with Jenny and the acts of retaliation.

When I have described to friends my experience with Jaffe, they have been sympathetic.  One suggested early on that I complain to the California State Bar, but I supposed him biased because he had recently been disbarred as a result of his involvement in an unfortunate incident.  Six months after I parted from Jaffe, another friend, who was a practicing bankruptcy attorney, also said I should consider complaining to the Bar. 

The California State Bar advises that complaints must be limited to violations of its Rules of Professional Conduct.  The Bar is not interested in hearing the gripes of a dissatisfied client who feels that his attorney should have negotiated a richer settlement with fewer restrictions on his freedom of speech.  I found a few Bar rules that I could contend Jaffe violated, and I sent off my complaint a year after I was fired.  They replied that Jaffe might have been negligent, but the Bar does not discipline attorneys for errors in judgment or mistakes.  They suggested that I might try mandatory fee arbitration.  Another mediator with more fees; I passed.  Case closed.

The next step was a complaint to the State of California that HomeFirst had violated the California Whistleblower Protection Act.

Settlement Agreement Failure

Settlement Agreement Failure

Jaffe anticipated that the session with the mediator would be a waste of expensive time because little new would be presented.  Emotions would rise; as the only one with skin in the game, I was a risk, especially because I thought that the unclean hands critique of the emails was nonsense.  From Jaffe’s standpoint, it would be safer to negotiate separately with Layton.

On Wednesday morning after the briefs were submitted, Jaffe offered $75,000, and Layton countered with $24,000, which was $1,000 less than the low end of the bracket Jaffe had proposed.  I gave him permission to counter with $55,000.  While he was working with Layton, I researched the “unclean hands” defense.  I wrote Bifoss that she had misread the law and my situation; she replied, “It is illegal for you to access someone else’s computer files without their knowledge,” referring to the federal Computer Fraud and Abuse Act and the California Computer Crimes Act.  That afternoon, Jaffe informed me that he had settled for $45,000, and two hours later he received a draft settlement agreement from Layton.  Although he had agreed for less than I authorized, I thought maybe it could still work out if the other terms of the settlement agreement were reasonable.  If they simply read, “here is the money, now go away,” maybe I could live with that. 

On Thursday with more internet research under my belt, I told Jaffe and Bifoss that their understanding of the “unclean hands” was incorrect because my roles of CFO and Compliance Officer legally justified my viewing company emails based on my suspicion of wrongdoing.  Given the clear proof of retaliation that the emails provided, we should demand $65,000.  Jaffe said that he stood by Bifoss’ understanding of the law and, anyway, the $45,000 constituted an “enforceable bilateral agreement,” meaning I had to shut up and accept the deal whether I liked it or not.  That evening, Jaffe sent me a copy of the agreement he had negotiated with Layton. 

The document provided that HomeFirst would pay me $45,000 in settlement of all claims I might have against them, and I would not disclose at any time after my employment anything of a secret, confidential, or private nature connected with the business of HomeFirst, make any disparaging comments about HomeFirst, its officers, directors or employees[1], encourage anyone else to make disparaging comments, or disclose the nature or existence of the settlement agreement.

Since I would receive $27,000 after Jaffe’s fees and I had to pay $3,000 to the mediator even though no meeting had occurred, the agreement meant that I would net about two months’ compensation.  That was far from the $100,000 that I had fantasized in March, and the gag order was a nightmare.

I had begrudgingly accepted that a settlement would require that I not disclose the terms of the agreement, but I had not considered that I would never to be able to talk about any of my experience at HomeFirst ever, to anyone.  For two years I had been told to shut up.  I successfully resisted that pressure.  I could not stomach agreeing now to be silent forever. 

The non-disclosure provisions that are increasingly common in employment and separation agreements, aim to squelch whistleblowing with language like, “Employee shall not disclose, and represents that Employee has not disclosed, any confidential company information to any third party”[2].  Some agreements require employees to report violations internally first as the Chair had ordered me, to forego monetary rewards like those from qui tam suits, and to maintain silence on the terms of severance agreements. 

My employment by HomeFirst had not bound me in a confidentiality agreement, but now they wanted even broader protection that extended to any information of a private nature, whatever that was, and to comments that they might consider disparaging.  They treated it as a simple business transaction, and they offered an insultingly small payment, but I wanted them to feel a penalty for having done wrong. 

Although I was principled, I still had doubts.  Since Jaffe’s $5,000 and the mediator’s $3,000 were sunk costs, I was thinking about walking away from $32,000, and for what?  Was I so naïve as to expect not to be restricted in what I could say?  Really, who was I going to talk to about HomeFirst anyway?  And if I did tell anyone, how would they find out?  Would they require annual depositions to see if I had talked?  Take the money and do what you want, some suggested or, at least, wondered. 

On Friday, I told Jaffe and Layton that I would not sign the agreement as written.  They may have been negotiating but not on terms acceptable to me.  Copying Layton earned me a wrist slap from Bifoss and a warning that I had risked a waiver of attorney-client privilege by doing so.  I was so done.

On Sunday evening, I sent Jaffe an amended settlement agreement without the onerous restrictions on my future communications.  Jaffe replied, HomeFirst would not agree to changes in the nondisclosure language.  Batting emails back and forth, I said that I had told him months earlier about having the CEO’s emails without getting a rise from him and I had set $90,000 as a minimum goal in negotiations.  I posed a hypothetical case to clarify the email question: a CFO gathers email proof that his CEO is stealing and provides it to the police; he is fired; are you telling me that his retention of the emails was illegal?  Jaffe never replied.  He was so done, too.

I called Bifoss on Monday.  When I complained about the “unclean hands” issue, she assured me that they were my attorneys and understood such things; not very good attorneys, I said, if they make a mistake like that.  She assured me that the $45,000 was a good result and I would not do better in court.  The restrictions on communications were entirely normal, she said, and not the result of Jaffe’s letting Layton write the settlement agreement.  The same terms were included in every settlement agreement Jaffe negotiated, she promised.  I lamented that I had not learned much earlier, say on June 4, that they would consider two months compensation plus a gag order to be a good result.

My ace negotiator had let me down.





[1] To avoid the legal challenge of determining damages from disparagement, the agreement called for the return of the settlement amount in the event of disparagement.  To ensure the enforceability of the clause, which it described as “material,” it called for me to acknowledge that it was “reasonable”.
[2] Moberly, Richard, Jordan A. Thomas and Jason Zuckerman.  “De Facto Gag Clauses: The Legality of Employment Agreements That Undermine Dodd-Frank’s Whistleblower Provisions.”  ABA Journal of Labor & Employment Law 30 (2014) 87-120

Legal Mediation - The Briefs

Legal Mediation – The Briefs

The goal of mediation was to find some middle ground on which I, HomeFirst, and the insurance company that would pay all of its costs could meet in agreement.  Successful mediation could avoid trial expenses that I would have to pay for.  In the mediation, each side’s brief would place a stake in the ground describing its case, and then we would arrive at the settlement agreement.

The mediation session allows little opportunity for the presentation of evidence or witnesses that challenge statements in the opposing brief.  If the stakes are set too far apart, no meeting may be possible.  If one stake is placed near the center and the other, far afield – even if its logic might be found faulty in a longer evaluation – then the indicated median will favor the most outrageous party.  In such a situation, I still had my negotiator to rely upon.

My Brief

Jaffe’s assistant Bifoss sent me the draft brief at 10 pm on the night before it was due to the mediator.  Although she and Jaffe had had months to prepare the document, it was imperfect at best.  Bifoss based my lost wages on the wrong compensation and a period of loss that was too short.  I corrected the amount, corrected a misspelling of my name, and added reference to California’s protection of whistleblowers who report “reasonably suspected,” rather than actual, violations. 

The brief described in a bloodless, professional tone HomeFirst’s failure to act to correct the violations I had identified, and it listed some of the government agencies to whom I had reported them.  These constituted protected conduct under California’s whistleblower protection act, California Labor Code 1102.5.  Except in what it failed to do, nothing was surprising here.

Because my communications with Bifoss and Jaffe had been so spotty and Bifoss had sent the draft to me so late, I did not make a big deal of the three HomeFirst violations she left out.  I went easy on the brief’s impotent description of how CEO Jenny Niklaus had pushed for my retirement and had trimmed my responsibilities.  I did not point out how the brief understated the concern I expressed to Board members that the scope and intentionality of the violations were unprecedented at the company.  It stated that I had contacted the California Department of Industrial Relations for more information but ignored the complaint I filed.  It said that I had complained to the U.S. Department of Labor instead of the California Economic Employment Development Department.  There were simply too many problems to make sure that all of the possible corrections would be implemented properly.

The brief was slapdash, but it was done.  Jaffe had discounted the importance of everything save his ability to negotiate successfully with the other side, so it might still go all right.

HomeFirst Brief

In the narrative proposed by HomeFirst’s attorney Layton, the problem was the way I interacted with the company’s internal and external stakeholders.  I had been inappropriate when I challenged the Chair’s August 2013 order not to report violations externally; my warning the Board in January 2014 that a forecast would likely prove a waste of time was unprofessional.  I raised compliance problems, one after another, she said, without providing solutions as I was expected to do.

In Layton’s telling, when I admitted in March 2014 that I had reported two violations externally, I raised for the first time a disturbingly long list of compliance violations.  One of the complaints was unfounded, she said, and what I called bid collusion was just healthy nonprofit collaboration.  My insinuations were offensive, and my attitude was loathsome: I insisted that I alone was right. 
I intended, Layton said, only to find obstacles and cast aspersions on Jenny.  I had unfairly and disingenuously filed one complaint on the same day that she asked reasonable questions about the matter.  My email to the Audit Chair about Jenny’s violation of HomeFirst’s whistleblowing policy was just self-serving.  My May 28, 2014 meeting with Jenny was the last straw.  I twice called her a liar and said she was a piece of work.  Jenny would no longer meet alone with me.  I had to be fired.

Evidence was clear and convincing that my termination would have happened regardless of any whistleblowing.  And, anyway, she said, I could not prove that my termination was connected to my whistleblowing.  I was fired, she said, because I misbehaved, and then I cried whistleblower.  My executive position made my whistleblower claim less authentic than another employee’s because I was expected to work with Jenny and the Board to resolve the violations.

The brief was impassioned and infuriating.  The facts she claimed were incomplete or flat out wrong; and important facts were not included.  I had begun reporting violations to management in October 2013, not March 2014, and I always recommended corrections.  Layton claimed that I was personally responsible for fixing the problems even though Jenny had isolated me from correcting operations.  She held me up as obviously reprehensible for saying what was true: I had challenged Suzanne because her order was illegal; Jenny had lied; the forecast was a waste of time; HomeFirst had violated agreements and laws.

Layton’s brief assembled a long litany of my offenses with dates and references to different people who, it implied, could be called to testify if necessary.  To undermine the case she built would require discovery and depositions that Jaffe wanted to avoid through mediation; to refute her lies seemed impossible in a one-day mediation setting.  We would be stuck in endless he-said-she-said bickering.  Resolution during mediation would depend on the persons involved: a nonprofit nobly serving the homeless versus this irresponsible and impolite jerk.

Personal attacks against the whistleblower are common[1], and HomeFirst’s brief continued them.  Layton’s brief went after my character, and it relied on the assumption of shared beliefs: of course, one should not challenge one’s superior; of course, one should not undermine one’s employer’s position. 

Challenging the truthfulness of legal opponents is helpful, but it can be easier just to destroy them personally through shaming[2].  The witnesses may then destroy themselves.  The unrelenting brief made me doubt myself.  Maybe I was wrong in my analyses of the situations, in my disclosures, in my refusal to accept what Jenny and the Board said they would do, and in my general jerkiness.  Maybe they were right to fire me for my attitude. 

Still, the briefs were just posturing and positioning.  Jaffe decided not to use the emails that connected my termination to my whistleblowing, so neither side wrote anything that the other did not already know.  Neither attorney could expect to deliver a knockout punch in its brief even though Layton seemed to land a stronger barrage of blows. 

Everything would come down to negotiation, which Jaffe had done for more than 40 years.




[1] Devine, Tom and Tarek F. Maassarani. The Corporate Whistleblower’s Survival Guide. San Francisco: Berrett-Koehler Publishers, Inc. 2011
[2] Ronson, Jon.  So You’ve Been Publicly Shamed.  New York: Riverhead Books.  2015

Pig in a Poke – My Whistleblower Attorney, Part 2

Pig in a Poke – My Whistleblower Attorney

Few wrongful termination cases like mine are decided in court, but one San Francisco plaintiff attorney warned that 75% of wrongful termination cases that do not settle outside of court are decided in favor of the company.  Success was far from certain even though I was confident of proving my complaint.  I figured that HomeFirst’s nonprofit status might argue for a low settlement amount.  A New Jersey plaintiff attorney listed 60 settlements he had achieved with an average settlement amount of $300,000.  Another site contended that the average settlement is $150,000 rather than the sometimes reported $1 million figure and encouraged plaintiffs to be reasonable and not to expect a windfall.

In reply to Jaffe’s email I suggested $200,000 for a demand figure.  The figure less Jaffe’s fees would roughly equal the amount that HomeFirst directors had kicked around in March and also roughly equal to one year’s compensation.  The amount equaled about five months’ compensation from June through November plus 2.8 times compensation for my guess of “non-economic losses.”  It made good sense to me based on solid internet research.

I set a target, and now Jaffe’s task was to get there through negotiation.  I heard nothing until a week later when I sent a follow-up email asking what the next step was.  “Send a demand letter,” Bailey Bifoss, Jaffe’s associate and a graduate of Golden Gate University where Layton taught, replied.  I asked, when might that be; probably today, she replied.  Her short email to Layton suggested $200,000 and asked for Layton’s response as soon as possible.  After I followed-up with Jaffe a week later, Layton apologized and promised to reply by the end of the week.

Bifoss warned me that litigation is expensive and involves discoveries, depositions, interrogatories, and responses, all of which are time-consuming and stressful.  In addition, cutbacks in State funding meant that a court date might be 15 months or more after the preliminaries are completed, pushing resolution out beyond two years.  Jaffe preferred pre-litigation mediation, she said, because it costs only about $6,000 for the day and can be scheduled within a couple of months.  The mediation, which is chaired by a professional mediator in private practice or with an organization like JAMS, a dispute resolution organization, requires each side to put all of their cards on the table with the intent to come to an agreement.  To ensure that the day is not wasted, the parties might first bracket their agreeable settlement ranges, she said.  How well mediation works depends on the willingness of the sides to negotiate, and so far Layton had not presented a very conciliatory face.

After another week of silence, I followed up with Bifoss.  Layton responded to Bifoss’ call by proposing an “early mediation.”  Bifoss recommended that we propose a settlement range of $25,000 to $195,000 to make sure that Layton was serious about the mediation.   I said that $25,000 was too low and that $50,000 would be better and would be in line with a goal minimum of $90,000.  Jaffe weighed in, stressing the importance of using $25,000 in order to get the negotiations moving, based on his extensive experience.  He would insist that all decision makers be present: CEO Jenny Niklaus, the insurance company representative, and Layton.  Layton came back saying that she was not a bracket person and the insurance company representative could not be physically present.  My team had frittered away its negotiating position, but that was no matter because we had a case.

Jaffe scheduled a mediator from the list that Layton provided: a retired judge Santa Clara County judge who seemed to be qualified enough.  The mediation meeting would be just before Thanksgiving, two months away.  My additional investment in the project would be half of the $6,000 mediator’s fee.

Two weeks prior to the scheduled meeting, after hearing nothing from Jaffe in the interim, I emailed Bifoss asking whether we needed to discuss preparation for the mediation meeting.  She said that she would send me a draft brief on the following Monday, November 17, the day before it was due to the mediator.  Then I answered, no, I had not had a conversation with Jaffe about “dollar amount expectations.”  Bifoss also wanted to chat about information I had obtained from Jenny’s emails.  I explained again that I had access to the emails because of my rights as CFO and duties as Compliance Officer to investigate potential wrongdoing. 

On Monday, Jaffe and Bifoss called to discuss the emails.  Jaffe said that they should not be mentioned during the mediation because they could create a big problem for us due to the “unclean hands” and “after-acquired evidence” defenses.  If HomeFirst could show that I committed some termination-worthy misconduct in obtaining the emails, they could have complete or partial defense against my claim.  I had my doubts.  I figured: regardless of the legal merits of my claim that I had obtained the emails legitimately, contest by Layton would mean additional costs and risks for Jaffe that he had to weigh against his 40% of any possible additional settlement result.  In conclusion, Jaffe said that he hoped to be able to get between $50,000 and $65,000 without spending the day in mediation.  That would save us all a lot of inconvenience.

I had my pig, and I was riding into battle.



Pig in a Poke -- My Whistleblower Attorney, Part 1

Pig in a Poke – My Whistleblower Attorney


Jenny’s emails beginning in March 2014 made clear that I would be fired, and I began considering the need for an attorney.  Although I had worked with company attorneys for many years, I had never hired one for myself.  I googled whistleblower attorneys and found some candidates on superlawyer.com and other sites. 

One firm boasted of winning $500,000 for a client, which seemed a small amount to brag about.  I settled on one, Stephen Jaffe, who asked potential clients to complete an “intake form” laying out facts.  That struck me as an appealingly efficient way to proceed, and his downtown San Francisco office was outside the circle that I expected might be influenced by HomeFirst’s reputation for doing good work.   Jaffe’s office shared the floor with two other attorney’s offices and the floor required security approval to reach.  That struck me as positive: to avoid hit men sent by defeated defense attorneys (rather than disappointed plaintiffs). 

When I met with him on June 4, the day after I was fired, Jaffe was accompanied by two interns from Golden Gate University, which I took as evidence of his reputation in the community.  He had apparently read at least some of the intake form and asked reasonable questions about my situation.  All in all he seemed as plausible as any I might meet via the internet.  I signed what he described as his standard contingency fee agreement with its 40% contingency. 

I handed Jaffe a flash drive with 575 files, including about 350 emails, which, I explained, I had collected while fulfilling my responsibilities as CFO and Compliance Officer.  I felt good, and Jaffe said I had “a case.”  Of course.  My limited research on attorneys was balanced by my optimism: the emails provided clear evidence of the connection between my whistleblowing and my termination.  I needed a water carrier more than a genius litigator.

Two weeks after our meeting, I had heard nothing more from Jaffe.  In response to my email he said he would re-contact their attorney, whose name I had provided.  The absence of movement and his use of the peculiar term “re-contact” made me uncomfortable.  Four more weeks passed with no progress.  I suggested that HomeFirst would kick the case to their insurance carrier, which would use an attorney, Rona Layton, with whom I had worked on the case of another difficult HomeFirst employee.  My doubts rose, but I was locked into a $5,000 retainer.

In mid-July Jaffe sent a letter to the insurance company attorney offering to negotiate in good faith as long as they contacted him by July 24 and threatening to file a lawsuit otherwise.  After I followed up two weeks later, Jaffe emailed Layton, “unless we are engaged in good faith negotiations towards a settlement, I plan to file a civil complaint the week of August 11th.”

On August 8, Layton replied that I was fired because of my “inability or refusal to act in a professional, courteous manner” and that I “decided that a whistleblower claim would be more lucrative than just retiring.”  She wrote that my “plan to make the Board and the CEO look bad, and to cast [my]self as the one person who was doing the right thing, is transparent and disingenuous.”  She closed saying, “Nevertheless, protracted litigation is generally not in anyone’s best interest, and so if Mr. Veuve would like to make a reasonable settlement proposal, I would encourage my client to consider it.”

Jaffe sent Layton’s letter to me without comment.  When I asked what the next steps were, Jaffe replied, “We have to formulate a demand figure.  Please think about a number for which you would settle.  Remember, a settlement is – by definition – a compromise; not a 100% recovery of all your losses.  When you tell me that number, I will recommend where we should start with a demand.”

I worried that Jaffe was pointing toward a relatively low, easy to negotiate figure even though our contingency fee agreement seemed to recommend a large settlement in which he would share.  The email suggested that his calculus was more complicated than I had imagined and that more was involved than the quality of my case and the money HomeFirst would be willing to pay.