Whining and Why the Whistleblower Should Have Been Fired Anyway (Part 2)

Whining and Why the Whistleblower Should Have Been Fired Anyway (Part 2)

In early December 2013, HomeFirst’s CEO Jenny, the Board Treasurer, and I sat around a small round table jammed against the wall at Peet’s Coffee on The Alameda in San Jose.  In November, a funder announced that it would delay payments on one of our grants.  If the Very Large Donor also delayed his contribution, I said, we might be unable to make payroll in October 2014.  No time was left to make operating adjustments that would change the result; perhaps a merger would be possible if the $1.2 million HUD liability (5^th Issue) did not get in the way.  The Treasurer nodded, and the conversation petered out.

At the January Board meeting the Treasurer asked me to describe a new cash forecast I was working on.  The uncertainties and the lack of input from the Program Officer and Development Officer might make the forecast a waste of time, I said, but I would complete it soon.  A few days later Jenny reprimanded me for my comment; I had upset the Treasurer.  At the next month’s meeting, I forecast October 2014 operating cash in a range from negative $300,000 to positive $700,000, meaning that we could be bankrupt or just fine, and the discussion ended. 

May’s rollup of the preliminary 2015 budget showed an operating loss of about $600,000 and a cash outflow of more than $1,000,000: we would go bankrupt during the year unless major adjustments were made in contributions or expenses.  Jenny emailed a potential replacement CFO, “It looks like we will be looking for some support beginning in July.  I hope you will be available then.”

I pressed Jenny again to consider a Plan B if the worst scenario occurred.  With so little time left, expense reductions would not help, no time was left to arrange a merger, and Plan B could be little more than a plan to wind down the business in an orderly fashion with as little harm to employees and clients as possible.  Jenny appreciated the recommendation, but said, “I am not sure that it makes sense to consider a shutdown plan instead of just growing the agency,” she said.  “I will let you know.”

At my last Finance Committee meeting a week-and-a-half later, I offered that there was an 18% probability that HomeFirst would not make payroll in October.   One of the three Committee members asked Jenny for her take on the analysis.  She tossed the summary page aside.  She didn’t know what to make of it, she said, but she would continue raising money for the company. 

Later the Treasurer asked Jenny for a meeting with us to discuss the forecast because it was his responsibility to ensure there was adequate corporate liquidity.  I was “Mr. Bleak,” he said, but “No matter what we think of him, he is still CFO and we need to rely on him for financials and financial plans.”  At my last Board meeting on May 28, he mentioned the possibility of not making payroll in October.  The Audit Chair asked if the forecast included any assumptions that might offer a possible relief if they did not come to pass.  There were none, and the forecast assumed no repayments to the City of San Jose (7^th issue), the County (1^st issue), and HUD (5^th issue).  “Sobering,” he said, and the Board moved on to a less bleak discussion of Development activities.

An 18% chance of bankruptcy in six months seemed to me like Russian roulette that a sane person would avoid, but not necessarily so for the Board.  Unlike for-profits, HomeFirst had no shareholders who would lose their investments in bankruptcy.  All of our assets were pledged against government loans, so bankruptcy would result only in their transfer to government agencies and then to other nonprofits.  Our activities were funded primarily by government contracts that could be transferred to other nonprofits.  HomeFirst might die, but its ashes could be spread among other surviving nonprofits with limited disruption to clients and most employees.  Allowing the company to fail might bring no more shame than abandoning the dream of being a leading voice in the community.

A few days later, Jenny wrote me up for an unannounced compliance visit and for not being prepared for the May Finance Committee meeting.  I lost it a little and called her a liar for saying she was concerned about compliance; I called her a piece of work.  A technical term.  The company’s brief would call that the last straw.

The increasing financial pressure on HomeFirst made their responses to compliance issues natural and unsurprising.  Of course, they could not repay the County, HUD, or the City of San Jose with money they did not have.  Of course, they could not willingly give up revenues to heed dubious master leasing requirements or the terms of an old loan agreement.  Of course, they would sidestep paying compensation to a bunch of homeless clients who were happy to have a place to sleep.  What was unreasonable was my bringing up matters that had already been discussed, like the losses, low cash, and compliance problems, without workable solutions.  I was not cooperating.

The whistleblower’s personal qualities – independence, courage, moral compass, or whatever else they might be – that enable him or her to identify and disclose suspected wrongdoing also give management the basis for retaliation: the “clear and convincing evidence that the alleged action [e.g., termination] would have occurred for legitimate, independent reasons even if the employee had not engaged in activities protected by [the law].” 

As a result, protection generally does not go well for the whistleblower.  California does not report statistics on whistleblowing complaints, but some federal agencies do.  From 2005 to 2015, just 25% of all whistleblower cases reported to the Department of Labor – relating to OSHA, Sarbanes-Oxley, and other federal regulations – were resolved in favor of the complainants.

Jenny would have fired me for being unprofessional for raising financial issues without acceptable solutions and for not cooperating in developing solutions to compliance problems that were consistent with our competitors’ practices and our own limited resources.  If I had cooperated and let Jenny and the Board work the issues, then all would have been fine.  Instead, I seemed intent on bringing the organization down with my complaints.  My whistleblowing only reminded them to do what they would have done at some point anyway.  Of course.