Small Potatoes

http://smalltimewhistleblower.blogspot.com/2016/03/8th-issue-food-handler-cards-failure-of.html

Small Potatoes

Major whistleblower successes dominate the stage: domestic and international communications surveillance systems, Vietnam War deceptions, frauds committed by major corporations such as Enron, WorldCom, and more recently Wells Fargo, and large-scale public safety dangers created by corporations like GlaxoSmithKline and several other pharmaceutical companies.  Many of the misdeeds disclosed by small-time whistleblowers are substantial and deserve broad interest, but more often they are of vanishing public interest, the stakes involved are quite small, and their villainy is far from terrible.

Misdeeds identified by small-time whistleblowers can suffer from two sorts of deficits. The wrongs might be fairly perceived as trivial by most outsiders.  Calling insignificant a disclosure that led to the whistleblower’s suffering retaliation, even causing him to lose his job, is no rejection of the whistleblower, but only of any heroism that might be otherwise attributed to him.

Among whistleblower cases picked up by news media recently, several of the misdeeds several lacked clear social significance even if the lawsuits over the resulting retaliation deserved attention.

-          James Cleavenger disclosed that University of Oregon police officers made up vulgarly named lists of people they disliked – from Hilary Clinton to campus bicyclists. 

-          James DeNofrio complained that the director of the VA Medical Center where he worked seemed to be suffering from dementia.

-          Addison Entmeier reported that the city’s police department was abusing its overtime system.

-          Michael Hames complained that he was told to sandbag his boss’ house before a storm rolled in.

-          William Plouffe blew the whistle on his university’s hiring of an unqualified teacher who was the friend of a department chair.

These are all legitimate complaints but they do not reach the heights of heroism exhibited by Edward Snowden or Daniel Ellsberg.  In many cases, valid whistleblower complaints do not involve great harm to many persons; they may simply involve some stupid management screwing around. 

In many cases, an outsider might have trouble being sure that the perceived misdeed was not just a misunderstanding.  Was it an age bias or really dementia?  Were the legitimate qualifications missed?

In its latest semi-annual report on whistleblower activity, the County of Santa Clara listed 58 complaints.  They included worries over favoritism, bad hiring practices, an unpopular training program, poor responsiveness in a department, an employee’s impersonating a former employee, staff colluding to make County contracting difficult, and so on.  The County decided that it received so many inconsequential calls on its whistleblower hotline that it will spend $600,000 to rework the process and make it more responsive.

A few of my complaints were demonstrably insignificant.  Take the food handler card issue, for example.  To get a food handler card, you suffer a brief on-line course, pay $10 to take a short test on food safety factors, and get the card.  Maybe you prepare food a bit more safely in the kitchen or carry trays more cautiously to clients; or maybe not so much.  There is little point arguing that blowing that particular whistle was an act of great moral courage.

Some of my complaints could have been the result of misunderstanding the facts (although I don’t think so).  The bid collusion that I complained about, triggering Board members’ decision to fire me, might really have been innocent, as the CEO contended.  The payroll issues – the allegedly unpaid minimum wages and payroll taxes – might not have been problems at all if the clients involved did not qualify as employees.  We don’t really know since the U.S. Department of Labor, the State, and the City of San Jose all ignored my complaints.

I filed official complaints on ten different issues that appeared to me to be violations of laws, regulations, and contracts.  For two and a half years after I was fired, those complaints have resulted in no real changes in behavior by or retribution for HomeFirst.  And arguably no discernible harm to society from the alleged wrongdoing.

Edward Snowden admitted that his greatest fear was that nothing would happen as a result of his disclosures.  But that is the fate of most small-time whistleblowers[1]: they disclose, they suffer retaliation, and the world continues to rotate just as it did before.

That probable futility offers good reason for people like Tom Devine of the Government Accountability Project to try first to talk potential whistleblowers out of it.  Encouraging potential whistleblowers to reconsider makes good sense because, as Alford observed[2], they often feel compelled by the sense of a “choiceless choice.”  They believe, almost religiously, that must come out as whistleblowers[3].  

We whistleblowers would do better to shift away from our “moral narcissism” (Alford) and understand our actions from a reasoned distance, evaluating our tactics in ways that recognize the power of our adversaries and our own limited capabilities.  I think we should still act, but carefully, and accept that no one promised us justice.

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[1] Alford, Charles Frederick.  “What Makes Whistleblowers So Threatening? Comment on ‘Cultures of Silence and Cultures of Voice: The Role of Whistleblowing in Healthcare Organisations.”  International Journal of Health Policy and Management.  5.1 (2016): 71-73

[2] Alford, C. Fred. Whistleblowers: Broken Lives and Organizational Power. Ithaca, NY: Cornell University. 2001

[3] For example, Brandon Coleman (who was advised by Devine at GAP) Glenda Martin, Valerie Riviello, Jeremy Romero, Tammie Taylor, Trish Williams, and Martin Woods

Flocks of Misdeeds

Flocks of Misdeeds

Whistleblowing is better seen as a long process than as a discrete event, and the wrongdoing that the whistleblower discloses usually arises from a multitude of wrongs, not a single act.

Large companies have shown how corporate misdeeds can multiply in an accommodating environment.  Recent examples include Wells Fargo’s creation of fake accounts, Bank of America’s mortgage foreclosure practices, JPMorgan’s marketing of proprietary investment products to unsophisticated investors, and faulty benefits processing by the Veterans Administration (Oakland office).  But companies do not limit themselves to one sort of wrong implemented broadly through the organization; whistleblowers can find varieties of wrongdoing within individual organizations[1].

Where one instance of corruption is found – for example, taking gifts from companies that are subject to regulation – others are likely to follow – such as ignoring legal violations from those companies.  Misusing organizational funds in one area is linked to reckless waste in others.  Nepotism begets cronyism.  Misreporting in one department walks along with deception in other departments.

Of all whistleblower stories, I read those from CFOs with the most interest.  In one, Gregg Becker, CFO at Rockwood Clinics, a nonprofit subsidiary of publicly traded Community Health Systems, Inc., refused to change his forecast – which proved accurate – of Rockwood’s 2012 loss from $12.8 million to the $4 million that senior financial management at CHSI wanted to present.  Becker was badgered repeatedly over his resistance and eventually placed on a performance improvement plan before he felt obliged to resign.  Never mind that the $8.8 million difference was immaterial to CHSI, which reported $1.2 billion in income from operations in 2012, or that Becker’s forecast was not to public investors but to finance management in Rockwood’s parent company.  Because he sincerely, if naively, believed that the lower forecast loss could be used to deceive investors, a Department of Labor judge ruled in his favor. 

It is easy to imagine Becker’s frustration in dealing with the differences between Rockwood’s actual performance and the much better results CHSI expected when it acquired Rockwood two years earlier.  It is easy to imagine pressures from all who were involved in that acquisition to cover their rear ends.  Becker was probably frustrated by Rockwood’s deficient accounting systems in the midst of those operational challenges.  Then came three months and hundreds of emails, including emails that questioned his reading skills, work ethic, and analytical abilities, from CHSI’s finance people.  It is, then, no surprise that Becker blew a whistle internally on the repeated demands to provide an inaccurate forecast.

A second story is that of Michael Hawkey, CFO of Mental Health Systems for 14 years.  MHS revenue had declined from $97 million in 2009 to $75 million in 2015, and Hawkey’s warnings of serious future cash problems were ignored.  In his February 10, 2016 letter to a major government funder, Hawkey revealed that CHS had been requesting reimbursement for unpaid expenditures, it had made suspicious payments to a consulting firm on whose board the CEO’s husband sat, and the CEO’s husband was also a highly paid senior vice president in MHS.  The County of San Diego’s special review report confirmed fully or partially Hawkey’s allegations and determined that the company had used government funds to help finance its for-profit subsidiary.

Before I formally disclosed HomeFirst’s violation of site licensing requirements in November 2013, I had internally identified violations of four other federal contracts or regulations.  By the time I was fired in June 2014, I had described 17 areas of contract violations, in some cases involving multiple contracts, as well as the anti-trust violation and the failures to return funds to HUD and the City of San Jose.

Multitudinous violations at HomeFirst and other companies can affect the behavior of both whistleblowers and wrongdoers.  First, it leads the whistleblower to believe that the wrong won’t be corrected and that wrongdoing will continue.  She revolts against a situation that must not continue and that triggers disgust even before a reasoned ethical critique.

Its steady flow of wrongdoing also leads the organization to assume a certain stance against the whistleblower.  Because the wrongful acts seem essential to its operations, timely retaliation against the whistleblower becomes important.  After I admitted in March 2013 that I had made external disclosures, HomeFirst’s attorney advised the Board to fire me immediately before I could do any more damage.  Despite the risk of a successful lawsuit, that was the best option, he suggested.  Two weeks later, the company’s CEO prepared a recommendation to the Board that I be fired before I could disclose any more problems. 

Still, the CEO and Board delayed my dismissal, planning to gather documentation to terminate me for cause in July.  As a result of that delay, I could gather more information and I disclosed the payroll-related violations in May and the food handler card violation in June.  In contrast, Hawkey and another CFO, Michele Gutierrez at Fine Arts Museums of San Francisco, were removed from their jobs days after their disclosures then fired a couple of months later.

A third factor: the greater the number of wrongs, the more widely known are the wrongs within the organization.  At Wells Fargo, fraudulent accounts were opened at offices around the country and may have been known to tens of thousands of bank employees, perhaps 2% of the organization.  Reports suggest that about a dozen people – say, 1% of CHSI’s 1,000 employees – may have been aware of Becker’s forecast problem.  At HomeFirst, a broad group, including board members, senior management, program managers and other employees, that totaled more than 15% of the company’s staff and Board members were aware of at least some of the alleged violations.

The more numerous the violations, the more culpability is shared in the organization.  Even the whistleblower can be tarred.  Hawkey, as CFO, was probably at least indirectly responsible for payments to the subsidiary and for billing the County for unpaid expenditures.  Gutierrez surely shared responsibility with the Board Chair she accused of an improper $450,000 payment.  And I owned some responsibility for several of the violations that I disclosed – such as the County overbilling, the site licensing, the master lease billings, and the payroll violations.

Whistleblowing is a messy arrangement, spread over time, and involving many characters and ambiguous ethical issues.  But at the same time, it is a straightforward issue: someone observes something that appears wrong and calls it out, and the organization responds.  Straightforward and necessary.

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[1] Examples from recent news reports: Allard & Graham, Baez, Bailets, Baker, Barcia, Berylavsky, Bondy, Carroll, Crabtree, Davis and Dobbs.  The list could continue.

Ups, Downs, and Lulls

Ups, Downs, and Lulls

From the outside, whistleblowing looks like an event that results from one difficult decision, which might be viewed as heroic or selfish, justified or wrong-headed.  But in reality whistleblowing extends in time and involves emotional highs and lows scattered among long periods of inaction.

I identified HomeFirst’s first violation – overbilling the County of Santa Clara – in July 2013.  My discovery began with a suspicion that we had been billing the County on the wrong basis (per diem rather than actual cost) on two contracts.  That started a month of energy and anxiety.  I emailed Martha Paine, a finance director at the County, who confirmed that we had done it wrong.  I let my boss, CEO Jenny Niklaus, and Chief Program Officer Hilary Barroga know.  Niklaus was understandably upset and said I had created a big problem by talking with Paine.  She and Barroga would work it out.  I spent days nailing down the overbilled amount and coming up with an explanation for the Board.  The Board Chair told me not to let outsiders know if I found any more compliance problems.

Then months passed without anything happening.  Paine met a couple of times with Niklaus and Barroga, but she did nothing.  Niklaus told me she pitched a quasi-repayment idea to a County manager, but he was not interested.

Finally in February 2014 I made a formal complaint to the County.  Nervous energy, then again nothing.  Two months later after research into the issue, I came up with a complaint to the State Attorney General about HomeFirst’s fraudulent billing.  He said he didn’t care.

In June 2014 after more research into the funding source for the contracts, I came up with a new strategy: a complaint to California’s Mental Health Services Oversight and Accountability Commission.  No response; follow-up; no response.  Finally after another month I had a telephone conversation with someone who worked for the Commission.  I was excited and optimistic that I had found an entry point.  Then nothing happened – my contact could inquire, she said, but had no leverage – until April 2015 when she sent me a copy of a letter from the County saying it couldn’t get the money back from HomeFirst just then.  It would wait and see.  I sent follow-ups and another complaint to the Commission but was ignored.

In July 2014 I decided on another tack: I would approach County management.  They would have an interest.  My letter to the County Executive failed to get a reply.  Sigh.  In September I came up with a letter to the County Supervisors – I sent it to all of them just in case.  When Supervisor Simitian, who represented my district, wrote back, I replied pointing out the errors in his letter.  That reply was ignored.  In April 2015 I pitched him the letter I had received from the Commission, but he didn’t answer.

In June 2015 I wrote Simitian again and mentioned that the County’s behavioral health department had given HomeFirst $300,000 in a grant that was written and would be monitored by Barroga, who had left HomeFirst and joined the County.  The department had told the Board of Supervisors that the grant was to help HomeFirst make payroll, but it ignored the overbilling.  Simitian sent my letter to the County Attorney saying he was concerned.  I got a little excited but didn’t need to because nothing happened after that.

Every month or so I sent out follow-up messages to the Commission and Simitian, but no one answered.  With each new letter and each follow-up my hopes rose briefly as I thought that maybe this time the result would be different. 

In April 2016 I wrote to Simitian summarizing my various communications over nearly three years and pointing out that the County had not even tried to recover the money despite Simitian’s assurance that it would be collected by June 2015.  This time he forwarded the letter to Paine who wrote me saying that she was working with HomeFirst on a repayment plan.  I was excited by the apparent progress.

Then nothing.  In August I followed-up with Paine, who did not reply.  I requested public documents which revealed evidence of Paine asking and HomeFirst demurring.  No payment plan.

In October 2016 I requested copies of the County-HomeFirst communications again.  The County misplaced my request.  After I followed-up again, I found that communications with HomeFirst had stopped for no apparent reason in August.  So I wrote to Simitian again.  We’ll see if he responds.

When people describe the courage of whistleblowers, I’m not sure where exactly they see that courage.  Whistleblowing can go on for so long that there are multiple opportunities for courageous decisions.

In this case, I made decisions to investigate, to reveal the problem to my boss, to push back on the Board Chair when she said not to make reports externally (earning me a reprimand from Niklaus and setting the stage for my termination nine months later), to file the first complaint with the County, to reject HomeFirst’s settlement offer that would have barred future complaining, and to keep plugging away with more follow-ups and complaints to different parties.

The whistleblowing project can go on for years before the initial wrong is resolved and the retaliation is corrected.  Litigation can be cut short with a settlement like the one my attorney proposed to me, but then you have to live with its consequences including non-disclosure and non-disparagement requirements.  And you still could have trouble finding a replacement job.

Lawsuits that are not stopped with settlement agreements can go on for three, five, ten, or more years.  They are finally concluded when one side – usually the whistleblower – runs out of money to fund the scores of motions or after the last appeal of the penultimate judgment.  Proof of the whistleblower’s courage is muddled, at best.

The many ups, downs, and lulls spread over years make clear why the whistleblower’s supporters lose interest.  Most of them knew the mission would probably fail anyway.

For the whistleblower, the investigating, disclosing, and persistence do not form a discrete undertaking that can be shucked painlessly.  The entire process – what led to the first inklings of a problem through the eventual resolution or abandonment – forms an essential element of life.  Just one more thing that didn’t end quite as might have been hoped.

Incremental Steps to Better Whistleblowing

Incremental Steps to Better Whistleblowing

News about whistleblowing often settles on big-time cases, like Edward Snowden’s, or the few public employee cases that attract attention, and the myriad of small-time whistleblowers are mostly ignored.  In the legislative arena, significant federal strokes to encourage whistleblowing, such as Sarbanes-Oxley, the False Claims Act and actions by the IRS, are praised, but it’s the many, varied state laws that create the working environment of most whistleblowers.

Stephen Dubner recently offered a Freakonomics podcast In Praise of Incrementalism which described the slow and steady American progress toward strengthening LGBT civil rights – from failed lawsuits in the 1950s, the formation of gay rights groups in the 1960s, changes in psychological classification of homosexuality in the 1970s, then changes in state laws and eventually in popular thought and the Supreme Court.  The world of whistleblowing has likewise evolved with many small steps although we are still just part way to a balanced treatment of those who disclose suspected wrongs and the accused organizations.

Interest in whistleblowing and protection of the whistleblower took off in the 1970s following Daniel Ellsberg’s 1971 disclosures of the Pentagon Papers.  The Government Accountability Project formed in 1977, and in the following year the Civil Service Reform Act addressed whistleblower rights and protections.  The federal Whistleblower Protection Act of 1989 strengthened those rights, still, however, focused on federal employees.  In 2002, the Sarbanes-Oxley Corporate Reform Act, responding to the scandals at Enron and WorldCom, extended protections to employees of publicly traded corporations.

All states now provide explicit whistleblower protection in at least some instances, and disclosures that are not specifically protected may find common law protection when the public interest benefits.  State protections vary widely in their usefulness – many are limited to public employees, some protect disclosures only of certain legal violations, they have varying deadlines and reporting requirements, and some require the whistleblower to give management a chance to fix things before a report is made.  California introduced its Whistleblower Protection Act in 2005 covering public employees and extended it to all employees with amendments in 2013, making the state among the most attractive for whistleblowers.

Legislation and general public interest have encouraged the development of corporate policies to encourage and protect whistleblowing.  The U.S. Sentencing Commission provided in 1991 that an effective compliance program be considered as a mitigating factor in determining sentences for convicted corporate wrongdoers.  The Commission increased the rigor of its standards in 2004 following scandals at Enron, which had an ethics policy, and WorldCom, whose CEO shunned such policies.  The 2008 revision of the IRS Form 990, which is used by nonprofits to report their income, requires organizations to state whether they have a whistleblower policy in place. 

But protective laws and policies have failed to eliminate unethical actions and retaliation against whistleblowers.  Despite its admirable ethics policy that forbade retaliation against whistleblowers, Wells Fargo employees still complained of punishment for their disclosures, and HomeFirst felt free to retaliate against me.  Hoping to encourage whistleblowing in the face of likely retaliation, the federal government created several major award programs, administered by the Department of Justice, the IRS, and the Securities and Exchange Commission, which together paid $739 million to whistleblowers in 2015 with respect only to violations of federal laws.

The international compliance monitoring and consulting company Navex Global in 2015 collected 867,551 compliance incidents from 2,311 client companies that had a total of 34 million employees.  The median number of incidents per company was 1.3 per 100 employees, compared to 0.9 per 100 in 2008.  Based on Navex reports, whistleblowers number more than 1 million each year in the U.S., many times more than the couple of thousand rewarded through federal programs.

Problems persist despite laws, policies, schemes to improve reporting, and awards for whistleblowers.  What can be done next?  One strategy: a recent academic study found that companies may discourage whistleblowing by giving employees financial incentives, such as stock options, to keep quiet about financial reporting violations, apparently outweighing the available federal awards.

I suggest four areas of incremental change instead.

1.       Expand protections by broadening state laws along the lines of the amended California Whistleblower Protection Act. 

A few steps: (a) cover all (not just public) employees with (b) reasonable suspicions of wrongdoing (rather than actual and serious violations of laws), (c) eliminate the need to first report wrongs internally but (d) protect against retaliation for internal reporting (rather than only when reported to responsible authorities), and (e) extend reporting deadlines.

2.       Increase government staffing to investigate the reported wrongs and claims of retaliation on a timely basis.

Effective enforcement can be a cost-effective alternative to throwing more money at a few whistleblowers who may want to see justice more than hefty rewards.

3.       Increase significantly the transparency of the reporting process at all levels.

A few steps here: (a) make frequent and easily available public reporting of the (i) status and (ii) investigatory results of (iii) all open and recently closed complaints including the names of (iv) the accused, (v) the alleged wrongdoing, and (vi) (unless anonymity is requested) the accused, (b) require reporting of whistleblowing activities in annual SEC filings and Form 990s, and (c) severely restrict nondisclosure clauses in agreements relating to employment, job terminations, and wrongful termination settlements.

4.       End leniency for corporate wrongdoers that is based on the dubious, but politically convenient, contention that the company does good work that must be protected.

Increase penalties on companies and their management – even including jailing managers and dissolving the companies – when they refuse to cooperate with investigations of reported wrongdoing or their actions are found to be egregious.

Individuals become whistleblowers when their patience fails.  If we were all big-time whistleblowers, then perhaps we could demand quick changes, but nearly all of the million or more who make disclosures each year are small-time players.  As a result, incremental changes to correct the problems faced by whistleblowers will take decades to effect.  Other groups who are even more deserving have waited decades – and many are still waiting – for the rights they have been promised.  We will need to wait for justice, but we must continue to fight when we find an opportunity.