Friday, June 24, 2016

Protection from the State (Part 3)

Protection from the State (Part 3)
(Links to Part 1 and Part 2)

Recently the State has taken up the whistleblower complaint I filed a year and a half ago, and I have had three telephone conversations with Stacey (not her real name), the Deputy Labor Commissioner assigned to the investigation.  My initial complaint, my response to the HomeFirst rebuttal, and my additional supporting documents added to just over 200 pages of information.  She felt, though, that it would be best for me to describe the disclosures and retaliations extemporaneously, rather than ask me questions about the material I provided.

After confirming some basic information – hire date at HomeFirst, title, responsibilities, salary, termination date, and so on – Stacey asked me to describe, on the fly, each of the issues, beginning with the County overbilling.  When I said I had been concerned that the Program Officer, directed by the CEO, might not be accurate in her communications with EHAP concerning its loan, she asked why that was any of my business.  When I referred to HomeFirst’s violations, she corrected me: “alleged violations.” 

She minimized my concern about the California licensing issue because I was only a finance guy.  She challenged: how did I know that the CEO and Board did nothing about the licensing issue until after the State’s monitoring visit?  From a comment by the Vice Chair and from the CEO’s emails, I said.  She seemed unfamiliar with my access to the emails despite the evidence I had provided and my message to her on the topic of “unclean hands.”  Tell me you knew about the emails, I urged her, three times.  Finally she said, yes, she knew about them.  Maybe so, I thought.

Stacey had scheduled an hour for the first conversation, but after an hour and a half we still had many important things to discuss, she said.  At the start of our next conversation the following week, she proposed a different tack: I would cite the laws HomeFirst violated, the date of each disclosure with the name of the person informed and the method used in the disclosure, and the associated retaliatory action.  I would provide this information without preparation although I could send additional information later if I liked.

We began again with the alleged violations.  She thought the bid collusion was among HomeFirst, Downtown Streets, and the City of San Jose (the last being uninvolved), and she was interested whether bid collusion was actually proven (which is irrelevant to whistleblower complaints in California).  She needed a few attempts to get “food handler cards” down right in the notes she typed into her computer.  Eventually we worked through the eight HomeFirst issues I had disclosed.

She asked if there was anything else, and I volunteered the HUD liability issue.  I suspected that HUD may have informed HomeFirst about that complaint, which dealt directly with HUD’s failure to collect any of the $1.2 million had overbilled in 2003-2006.  Stacey played the devil’s advocate role: it appears, she said, that I was trying to bankrupt HomeFirst by complaining about the issue.  I was, she suggested, violating my “duty of loyalty” to HomeFirst by “undermining” the company.  What interest did I have in whether HUD ever collected the money, she asked.  When I offered that I was a taxpayer and a citizen, she was unmoved.  But I had not told HomeFirst about the complaint, so we could forget that one, she concluded.

In closing, she asked for a list of witnesses – not character witnesses but people who were aware of my responsibility to raise compliance issues to the attention of management and to report them externally if management failed to act.  How should I respond: whistleblowing is not a strict responsibility per HomeFirst policy or California regulation.  Anyway, everyone with that awareness was on the other side of my case.  I mentioned one current Board member with whom I had worked extensively for five years and who had once vouched for me.  Well, that could be a problem, Stacey explained, because HomeFirst might not let the director talk without an attorney present.

A few days later I sent her a list of the laws and regulations that I thought HomeFirst violated, the disclosure dates and methods, and the associated retaliations.  I also referred to the State website and court decisions that related “duty of loyalty” to an employee’s benefitting at the employer’s expense, but not to the employee being fired for reporting suspected corporate wrongdoing.  She seemed to have ignored my anti-unclean hands legal argument, and she might do the same with this “duty of loyalty” argument.

Stacey has a difficult job.  She has to handle 100 cases like mine, she told me.  She is an expert in 42 areas of labor law, she said, but cannot know all of the laws and regulations covered in the complaints that cross her desk.  She must make decisions based on what a plaintiff and defendant claim and the little research she has time for. 

The roughly $65,000 a year the State pays Deputy Labor Commissioners can restrict the candidate pool.  Stacey passed the California Bar in 2002, worked for a few years in small law offices and then got off that track.   From 2012 through 2015 she earned $15,000 a year as a part-time athletic director in the city where she lives, coached runners, and did some law work on the side.  During the past year she began handling complaint cases from people like me who have more time than expertise in legal matters.  Imagine 100 plaintiffs each dumping 200 pages of words on her desk to make sense of.  It must be a relief when company attorneys give you the information you need in an easy-to-read format. 

The process could understandably prime an investigator to favor a defendant, like HomeFirst, who presents its argument succinctly: we fired the guy because he was an incompetent jerk, his complaint is nonsense, and we never did anything wrong.  Six pages is all it takes.  If I were in Stacey’s chair facing 100 messy cases, I can imagine wanting to move on.  But maybe I read into her questions and comments a leaning that was not there.  She will get back to me although it will take at least a month.


Friday, June 17, 2016

Whistleblower Opponents: Proof (Part 2)

Whistleblower Opponents:         Proof (Part 2)

After the whistleblower makes her disclosure, the wrongdoing company typically retaliates in various ways.  Ostracism is a common technique, but there are many other tactics, these taken from accounts over the past few months[1]:

-          Lack of deserved promotions and raises (Plummer)
-          Demotions (Gutierrez-Canepa)
-          Cutbacks in hours (Grimes)
-          Forced leaves (Montgomery-Ford)
-          Unwanted relocations (Rhoades)
-          Increased scrutiny (Hames)
-          Physical threats (Bettencourt)
-          A dead rat on the whistleblower’s dashboard (Crystal)

-          And finally the whistleblower is terminated.

Termination may spark legal action if other acts of retaliation did not.  The whistleblower alleges a that her disclosures led to retaliation.  The company asserts that her termination had nothing to do with any protected disclosures.  Shrugging off any connection between the termination and her disclosures, the company attacks the whistleblower with a range of personal criticisms.  
Examples from recent whistleblower stories:

-          Poor performance (Barlyn, Blackburn, Jackson, Klym, Rookaird, Scotten)
-          Insubordination (Barlyn, Grimes, Hames, King, Plummer, Smith)
-          Discourtesy & disrespect (Pedowitz, Plummer, Scotten, Smith)
-          Failure to be a team player (Gordon)
-          Conduct unbecoming position (Grimaldi, Klym)
-          Unfit for position (Staub)
-          Mental health problems (Honl)
-          Disgruntled employee making a frivolous claim (Blackburn, Callender, Vande Hey, Honl)
-          Disclosure of confidential information (King, Ladd, Owens)
-          Misconduct (Glisson, Patton)

In some cases, the allegations are backed up with threats of lawsuits (Blackburn, Honl, Owens).

Even if these criticisms are acknowledged as legal tactics and part of the game, they are painful to the whistleblowers.  When I began my whistleblowing project, I considered myself a pretty good guy and a loyal employee.  I had been touted as having turned around HomeFirst (formerly named EHC LifeBuilders) from disaster five years earlier; I had voluntarily taken an 18% pay cut in that turnaround; I had donated more than $1,000 a year to the company over the preceding five years; and my work had been praised by Board members.  HomeFirst was to be a capstone on my 36-year career in finance that included 16 years as the top finance person in one publicly owned company and four nonprofits.

After I disclosed HomeFirst’s suspected violations, like other whistleblowers, I was accused of poor performance, insubordination, refusal to act in a professional and courteous manner, and failure to act as a CFO should when confronting the problems I identified at HomeFirst.  When I continued to press my complaints after I was fired, HomeFirst accused me of being obsessive, bizarre, and defamatory.  It alleged that I possessed confidential information to which I had no right and I had illegally accessed the company’s computer systems after my termination.  If I did not stop complaining, they said, they would sue me.

The company’s strategy of declining to address what the whistleblower seeks to prove – a connection between whistleblowing and retaliation – tempts the whistleblower to try to disprove the company’s contentions.  That task is difficult, though, because no whistleblower is an angel.

As corporate wrongs emerge from the cultures that encourage them, the whistleblower may naturally become disgruntled.  Where superiors and peers persist in doing wrong, the whistleblower may be properly insubordinate, disrespectful, and unfit for her position.  The longer the employee witnesses wrongdoing before making her disclosures, the more likely she is to resent her company, her superiors, and her colleagues.

Staying with the organization to help it correct its wrongs exposes the whistleblower to more risks and to weaken her ability to prove her case.


Saturday, June 11, 2016

Whistleblower Opponents: Proof (Part 1)

Whistleblower Opponents:         Proof (Part 1)

Whistleblowers deal with two levels of proof: one relating to the wrongdoing that we allege and the other to the retaliation we experience after we disclose wrong.  We seldom doubt the quality of the proof that we provide, but the alleged wrongdoers will challenge us and the justice system may be biased against us[1].

The wrongs that I claimed HomeFirst committed were varied and provide examples of proofs that many whistleblowers use attempting to prove their cases:

Proof was confirmed in some instances:

1.       The County Overbilling – HomeFirst’s invoices were based on a per-day rate, but audits of expenses, first by internal staff (me) and then by Santa Clara County staff, found that the billings exceeded actual costs in violation of the contract.  Proof of the overbilling was undisputed by the parties.  HomeFirst claimed that the overbilling was not intentional but did not repay the amount.

2.       State of California Licensing Requirement – My written descriptions of HomeFirst’s services and clients at the location made me confident that proof of wrongdoing was adequate.  State inspectors, who were empowered to determine whether the services required the site to be licensed, determined that HomeFirst had violated the regulation.  They gave the company time to modify its procedures to avoid the need for licensing and then accepted HomeFirst’s publicly undisclosed descriptions of its value in the community and of its planned changes.

3.       Master Leasing Requirement – Client files included copies of rental agreements that did not conform to the master leasing requirement.  I described to the San Francisco office of the U.S. Department of Housing and Urban Development the number of clients and the amount of lease expenses that did not involve master leases.  HUD ignored whether the proof was adequate or could have been made adequate, and it continued to pay amounts unrelated to master lease arrangements.  After I was fired, HomeFirst changed its procedures to comply with the regulation but did not repay any amounts.

4.       HUD Liability – HomeFirst’s $1.2 million HUD overbilling was proven by comparing invoices to actual eligible expenses for the periods and contracts under consideration.  I provided an Excel-based analysis of roughly 300 invoices and documented expenses to HUD in July 2008.  HUD did not attempt to test the proof, which it believed might understate the overbilling.  It has not demanded any repayment what was overbilled. 

5.       City of San Jose Advance – This violation occurred simply with the passage of time: HomeFirst held the money legitimately during the contract term, but at the end of the contract it continued to hold the money, illegitimately.  The violation was acknowledged by all parties.  The City eventually forgave the debt (by allowing the amount to be applied retrospectively to pay for different expenses), making the violation moot.

Proof has been unconfirmed in others:

6.       Bid Collusion – Emails between the HomeFirst CEO and the President of Downtown Streets described their arrangement: HomeFirst would not bid on a City of San Jose contract and in exchange Downtown Streets would include payments to HomeFirst in their bid application.  My description of HomeFirst CEO’s plans to collaborate with another competitor on a different grant application in order to improve our competitive position was evidence of a second violation.  The U.S. Department of Justice found the proofs unconvincing, and the State Attorney General did not evaluate the proof.

7.       EHAP Loan – The HomeFirst actions that violated sections of its loan 2009 agreement were summarized in the waiver request letter I sent to EHAP (the State of California’s Emergency Housing Assistance Program).  But proof required investigation and, as far as I know, EHAP never attempted to verify the information.

8.       Food Handler Cards – My call to Santa Clara County Department of Environmental Health stated that several HomeFirst food staff did not have the required cards.  Proof could be found by comparing a list of HomeFirst’s food workers with a list of card holders or with copies of their cards.  During a Department inspection, HomeFirst provided copies of some cards but the inspectors did not ask how many cards should have been on hand.  The inspectors sought assurance that HomeFirst was on top of the issue, not proof of any past wrongdoing.

9.       Payroll Taxes and Minimum Wages – Evidence that wage and taxes payments were not made could be found in HomeFirst’s payroll records, but the central question was whether the New Start clients should have been paid at the minimum wage rate.  To prove that point, I described to the State Department Industrial Relations, the U.S. Department of Labor, and the City of San Jose the reasons why I believed those individuals qualified as employees.  Only the City requested payroll records from HomeFirst to begin the proof, but the company has refused to comply with the request (as of May 19, 2016).

HomeFirst’s alleged wrongs included improper use of government funds and violations of laws concerning wages, food safety, residential care facilities, and antitrust activities.  Whistleblower complaints reported in media over the past few months cover a wide range of wrongs:

-          Sexual harassment[2]
-          Improper accounting[3]
-          Misappropriation or misuse of funds[4]
-          Violations of laws (assault, biased hiring, animal protection, & racial profiling in security operations)[5]
-          Conflict of interest[6]
-          Wrongful business practices[7]
-          Workplace safety[8]
-          Illegal direction by supervisor[9]
-          Client fraud[10]
-          Fraudulent trading[11]

In some cases these complaints were confirmed in court or other agency decisions, but in every case the alleged wrongdoer claimed innocence.  We whistleblowers must admit that other observers, even if sympathetic, cannot always be certain that our allegations are correct.  Evaluation of evidence takes time and resources that some choose not to apply.  After a complaint is validated, it may be overturned (as in the case of Bank of America), ignored (as with HomeFirst’s County overbilling and the HUD overbilling), or forgiven (as with HomeFirst’s City of San Jose advance) by authorities.

We are reassured when the accused wrongdoer is officially found guilty, but we cannot depend on that confirmation.  Snowden’s case was strengthened when legislation was passed to limit somewhat domestic collection of phone data, but debate continues whether he acted properly.  Ellsberg, who acted after years of anti-war protests by others, was justified morally by the uproar around the Pentagon Papers and legally by the dismissal of his court case, but the war in Vietnam continued for two more years.  Even the greatest whistleblowers’ victories are seldom clear-cut.

If the whistleblower is vindicated, the wrongdoer may still deny guilt.  When vindication does not come promptly, those who retaliate against them are quick to publicize their innocence, as when HomeFirst stated that I “just raised problems (not all of which were even real)”.

We cannot expect our every complaint to be validated, but when others retaliate against us we should hope for support and vindication.


Saturday, June 4, 2016

Whistleblower Opponent: Heroism

Whistleblower Opponent:           Heroism

Whistleblowers, including Snowden, Manning, Ellsberg, and Wigand, have been praised as heroes or damned as traitors.  Even when a whistleblower denies any intent to be a hero, her story can still be filled with high ethical values, tenacity, and courage that lead others to call her a hero

Joseph Campbell’s description of the hero’s journey (The Hero with a Thousand Faces) is far different from the whistleblower’s journey:

A hero ventures forth from the world of common day into a region of supernatural wonder: fabulous forces are there encountered and a decisive victory is won: the hero comes back from this mysterious adventure with the power to bestow boons on his fellow man.

In contrast, the whistleblower’s journey is typically mundane and covers her usual job territory.  Her opponents are petty bureaucrats who hope to maintain power in their small worlds through the conventional corporate techniques.  The wrong is usually, but not always, trivial, not endangering the lives of many.

Far from unique, the whistleblower is one of millions, and the retaliations that she suffers are simply variations on what others in similar situations have suffered.  That commonness and the lack of intrinsic interest in the wrong helps explain the indifference of others to her problems.  The whistleblower’s story extends for years, beyond the attention of others.  She may abandon the project, but if she does not, it will be forgotten by those who might initially have been concerned.  Unlike Campbell’s hero, the whistleblower seldom succeeds.

Heroic status also endangers the whistleblower: she is inflated and separated from others.  As a hero, she need not closely inspect her contentions, evaluate and question her motivations.  The presumed nobility of her act diverts attention from her less attractive motivations, and she becomes less than fully human as a result.

The sense of one’s honor and heroism encourages some whistleblowers to persist in the project when perhaps they should not – because their case is not so strong or the expected retaliation against them and their families will be too painful.  They may stay too long in the company or identify themselves too soon; they may put too much faith in their invincibility or in official promises of protection by the company and the state.  Particularly when high stakes are involved, such as in qui tam cases, they may be played by investigators seeking more evidence necessary to achieve victory over evil.

Expecting whistleblowers to be heroes sets the bar entirely too high for those considering whether to disclose a wrong.  It puts them on a level near those who saved Jews from murder by Nazis.  But the wrongs they disclose and their personal risks are never that great.  By raising the standard so high, a witness to quotidian wrongs is able to excuse his silence by confessing that he is no hero.  Whistleblowing feels unnecessary to his life; his failure to speak out can be forgotten, he believes.

For wrongdoers, the expectation of heroism opens a defense.  They point out that the whistleblower is not great or noble and does not meet the definition of heroic.  They can that the wrong was never serious enough to warrant heroic action.  They divert attention away from the pedestrian issue at hand: that a wrong was done, it was concealed, and the whistleblower was punished for having revealed it.  By their artifices, the whistleblowing is diminished.

Outsiders expect the heroic whistleblower to be strong and not to yield; she should only succeed if she deserves respect.  She is a hero or traitor rather than an ordinary person making a routine choice in her life.  Those sympathetic to her goals may avoid considering the negative impulses involved – her psychological issues and imperfect performances.   Those who are unsympathetic discount her positive impulses. 

Academics demand that the whistleblower be sure that her facts are right and her motives pure.  Her approach must be so honorable that the wrongdoer is told of the violation before she discloses it externally.  On the other hand, because wrongdoers are not expected to be heroic, a variety of explanations defend the innocence of their misdeeds.


“Whistleblower as hero” enables all sides to close their eyes to the reality of the situation.  Whistleblowing, like other forms of dissent, becomes exceptional rather than essential to daily life.