After Whistleblowing

After Whistleblowing

To my mind, whistleblowing comes in three phases. 

The core phase is what we usually consider the whistleblowing project.  That includes observing what seems to be a legal or ethical violation.  Evidence is gathered, and the problem is described to management.  They may fix the problem.  Whether the problem is corrected or not, the discloser can suffer retaliations, beginning with ostracism and accelerating from there.  In response to the retaliations or to the organization’s failure to correct the wrong, the whistleblower discloses violations to external authorities.  If things go south, a lawsuit or other complaint follows.  Finally – perhaps as soon as a year, more often after 3-5 years, sometimes after 10 years or more – the issues are resolved.

Before the whistleblowing project can begin, though, preparations must be made.  The soil must be prepared.  The individual must gain the technical knowledge necessary to identify a violation.  She needs the ethical and legal awareness to believe that a violation should be corrected.  And, importantly, she must become sufficiently dissatisfied with the organization that she is willing to deal with the likely consequences of her actions.

Then after the project is resolved, there will be consequences.  Some will be financial.  The whistleblower may lose her job or miss out on raises or promotions because she has proven untrustworthy.  Her disloyalty will infect her relations at work.  Colleagues will know she could betray them again.  She may test some personal relations outside of work.  Marriages sometimes die from the experience.

Critically, I think, our understanding of the world changes as a result of our whistleblowing project.

C. Fred Alford[1] wrote that many of our tightly held beliefs must be abandoned as a result of our whistleblowing.  Among them:

-          The individual matters

-          Law and justice can be relied on

-          Ours is a government of laws, not men

-          Individual will not be sacrificed for the group

-          Loyalty isn’t equivalent to herd instinct

-          One’s friends will remain loyal if colleagues do not

-          The organization is not fundamentally immoral

-          It makes sense to stand up and do the right thing

-          Someone, somewhere, who is charge, knows, cares, will do the right thing

-          The truth matters, and someone will want to know it

-          If one is right and persistent, things will turn out all right in the end

-          Even if they do not turn out all right, other people will know, understand

-          The family is a haven in a heartless world

-          The individual can know the truth of all this and not become merely cynical

Discarding these ideas based on for-profit experiences seems easy to me.  I can quickly accept that greedy Enron management were douche bags.  Likewise, it is obvious that pond scum managers at Wells Fargo pressured employees to open unauthorized accounts and fired them if they complained.  And that managers at Uber were jerks, as Susan Fowler revealed.

Do-good nonprofits should be different.  But you don’t read as much about nonprofits and their whistleblowers.  They need a special hook to get people’s attention, like a former President.   

Sue Veres Royal was Executive Director at tiny Happy Hearts Fund, which rebuilds schools destroyed by natural disasters.  Her boss wanted to get Bill Clinton to its 2014 gala.  Clinton said okay to a lifetime achievement award as long as it came with a $500,000 honorarium paid to his foundation.  Royal objected to that and a litany of self-dealings by her boss. 

A couple of weeks after the gala, she was dismissed with a modest settlement.  She continued to scuffle with Happy Hearts attorneys.  A year after she left the charity, she wrote skeptically about charity fundraising, but she is back in the business, it seems. 

I developed my own cynicism about nonprofits following my HomeFirst experience.  Asked for money to help fire or flood victims, I want to know exactly what will be done with it.  I want accountability that HomeFirst did not provide.  And that few nonprofits offer.

I voted against a Santa Clara County bond for affordable housing because I don’t trust the County anymore after it mishandled HomeFirst’s $140,000 overbilling.  If I had the chance, I would vote against the Department of Housing and Urban Development because of the way it is dealing with HomeFirst’s $1.2 million overbilling.  I am skeptical of whatever the City of San Jose and the State of California might advocate.  I doubt the effectiveness of minimum wage guarantees from the State and local jurisdictions. 

I volunteer in a few organizations, but I don’t trust them as I once did.  I think it would be difficult to work in the nonprofit world again.

I look differently on friends who were not sufficiently sympathetic when I was deep into my struggles with HomeFirst.  Even though, three years later, I am amazed by my own egoism in those days.  Even though my whistleblowing tragedy no longer seems quite as meaning-filled as I once thought it was.  But as I downplay the significance of my act, I am still sickened by those who did nothing.

Whistleblowing can trigger many of life’s most stressful events – being fired at work, a drastically changed financial condition, a divorce, disruption of our usual habits.  If we get through those possibilities without too much damage, I think the biggest life-changing effect comes from our new understanding of the world.  Whether we like it or not.

---

[1] Alford, C. Fred. Whistleblowers: Broken Lives and Organizational Power. Ithaca, NY: Cornell University. 2001. P. 49.  

Meaning in Whistleblowing

Meaning in Whistleblowing

People have long found the motivations of whistleblowers intriguing[1].  They seem to be champions of doing the right thing despite the risks.  But what happens to their noble aspirations when the possibility of success is stripped away? 

Dan Ariely’s research into dishonesty helps explain reasons why people misbehave so often and the explanations we offer to justify our ethical failures[2].  He describes the terrain we whistleblowers cross on our projects.  In his recent book, Payoff, he discusses how a sense of meaning and purpose – more than money and status – leads us to be more productive in our jobs.  Presumably including our job as whistleblower.

In a 2008 study, individuals in two groups were told to build Lego models and they were paid for the number completed.  In the “Meaningful” group each model was set on a table until the participant said she was done making them.  In the “Sisyphus” group, the models were disassembled as soon as they were completed.  The Meaningful group produced significantly more models than the Sisyphus group.  Ariely and his co-authors concluded that was because Sisyphus modelers were slapped in the face by the pointless of their work when it was immediately discarded.  Meaningful members and their witnesses could appreciate the results of their effort for at least a time.  They felt motivated to continue their work.

For us, the question is how we can be productive and satisfied in our lives as whistleblowers when everything indicates that our efforts will probably be futile.  Where can we find purpose in our act and sacrifice?

Michael Winston joined Countrywide Financial Corporation in 2005 as an executive vice president.  He soon realized Countrywide was creating mortgages that stood no chance of being repaid and then selling them to unsuspecting investors.  He pointed out the problem to his bosses.  They were unhappy with him.  When asked to falsely certify the mortgages for Moody’s, he refused.  The retaliations increased.  When Bank of America acquired Countrywide in 2008, he was fired. 

He has spent $1 million suing the bank for the retaliation.  That looked prescient in 2011 when a jury awarded him $3.8 million.  It looked less wise when an appeals court reversed the judgment in 2013 and ordered Winston to pay nearly $100,000 of the bank’s legal fees.

In 2014 Bank of America was ordered to pay $1.27 billion for Countrywide’s fraud, which Winston had warned about.  It looked like the whistleblower might fare poorly, but justice would win out against the wrongdoer.  Sadly no.  In 2016 that decision was thrown out.  The bank’s intent to defraud had not been proven, the appeals court ruled.  Winston had lost both of his fights against the bank.

This happens a lot: we complain about wrongdoing and absolutely nothing comes of it except we get fired.  I complained that HomeFirst had kept $138,000 the City of San Jose had advanced to it years earlier.  So the City decided HomeFirst could keep the money and threw in another $25,000. I complained that HomeFirst had overbilled Santa Clara County by $140,000.  The County let that slide and gave the company another $300,000 to make payroll.  I complained that HomeFirst had not begun to repay the $1.2 million it overbilled HUD in 2003-2006.  To finally address the matter, HUD is now working with HomeFirst to apply the amount to other expenses so the company won’t have to repay anything.  What’s the point in blowing a whistle?

Some, like Dan Bethards, decide there is no point.  Bethards, a 14-year undercover drug agent with the Wisconsin Department of Justice, reported that his boss sold weapons without a license.  One customer was the state Attorney General.  His boss admitted making the sales, but an investigation ended without charges against him.  Bethards was fired.  He lost his house in foreclosure.  He lost his whistleblower lawsuit because he didn’t make his disclosure the right way.  After the experience he concluded, “the chances of getting heard are minimal and the chances of winning are miniscule.”  He would not do it again, he said.

I suspect that most whistleblowers, though, get something positive from their whistleblowing.  For some it is a financial award that might even fairly compensate them.   A personal favorite: Michele Gutierrez.  Gutierrez was CFO at Fine Arts Museums of San Francisco when she disclosed that Dede Wilsey, the board chair and CEO, had ordered a $450,773 payment to a former employee without board approval.  Gutierrez was fired.  At the end of it all, Dede is President of FAMSF, she arranged to cover the $450,773, and the City of San Francisco decided she broke no law.  Dede warned “you can’t beat me,” but Gutierrez got $2 million in settlement from FAMSF[3].

For some others, the benefit is a new career they had not planned.  Michael Winston runs a consulting business focused on strategy, organization and leadership.  Many have gone on to advise individuals and organizations on whistleblowing issues: famously Daniel Ellsberg (Pentagon Papers), Sherron Watkins (Enron), plus Richard Bowen (Citigroup – mortgages), Harry Markopolos (Bernie Madoff), and more.

For still others, benefit from the work is non-material, as Ariely reported.  Some seek and find vindication[4].  Some believe they are serving a higher good.

Or maybe whistleblowers are just slow on the uptake, as C. Frederick Alford said.  Everyone else gets it.  Power wins, and blowing a whistle is probably not going to work out well.  That’s the lesson Bethards learned.  But whistleblowers go ahead anyway. 

Meaning or no meaning, I would do it again.  I admit I didn’t pay the high costs that Bethards, Winston, and lots of others did.  I was right and, anyway, HomeFirst irked me in many ways.  I didn’t see another option.  Like Sisyphus, I think would have pushed my case even if I saw it would come back on me eventually.

---

[1] See, for example, Melnick, Meredith.  “What Motivates a Whistleblower?” HuffPost.  October 10, 2014; Montagne, Renee, Host.  “Why Do Whistle-Blowers Become Whistle-Blowers?”  NPR Hidden Brain.  May 28, 2013; and Dungan, James, Adam Waytz, and Liane Young.  “The Psychology of Whistleblowing.”  Current Opinion in Psychology 6 (December 2015): 129-133.

[2] Ariely, Dan. The (Honest) Truth about Dishonesty: How We Lie to Everyone – Especially Ourselves. New York: Harper. 2012; Gino, Francesca, Shahr Ayal and Dan Ariely. “Self-Serving Altruism? The Lure of Unethical Actions that Benefit Others.” Journal of Economic Behavior and Organization 93 (2013): 285-292

[3] Gutierrez used Joseph Cotchette to negotiate with FAMSF.  I used Stephen Jaffe far less effectively.  Cotchette’s firm wasn’t available to me because a former HomeFirst board chair is partner there.

[4] James Holzrichter was vindicated in his fight against Northrup.  While the cost might have been high, he did share with Rex Richardson’s family a $12 million from the settlement.  And he does a little consulting.

A Matter of Intention

A Matter of Intention

The whistleblower’s case turns on intention.  Did the company intend to violate the law?  Did it mean to punish its whistleblower for disclosing the possible wrong?

Jesse Eisinger’s The Chickenshit Club describes the federal government’s retreat from prosecuting big-time wrongdoers in favor of settlement agreements.  From recent news: Wells Fargo didn’t have to admit any allegations in its settlement with the Consumer Financial Protection Bureau.  That was despite hundreds of whistleblower complaints about the bank’s creation of more than 3 million fraudulent accounts[1].

Settlement agreements are an easy way out for prosecutors when their limited budgets leave them out-lawyered by the offending companies.  A core problem is the difficulty in proving intent – mens rea – in a criminal case.  Many-layered management and dispersed decision-making provide senior managers with plausible deniability.  Sometimes violations even occur accidentally on the way to meeting objectives.

HomeFirst’s CEO Jenny Niklaus and its board members did not plan to commit the ten legal violations that I alleged.  Even middle managers knew about only two[2] when they first occurred.  But Board members pushed back when I said the missteps fit a pattern.  I described a layperson’s idea of intentionality: where there is so much smoke there is probably a good fire underway.  The flame of misbehavior may begin in the organization’s culture[3], but by itself that sort of intention doesn’t prove guilt.

While responsibility for the original misdeed can be dispersed, the plan to retaliate against the whistleblower starts with just a few individuals.  Even then, organizations hope to conceal their scheme to get back at disloyal employees.

Defense attorneys declare their clients had no motive to retaliate because no wrong was done in the first place.  When it settled with the City of Los Angeles over the false accounts, Wells Fargo denied any guilt.  In its turn, HomeFirst claimed I might not have been right in all my complaints.  But standing up to the organization is usually reason enough to get rid of an employee. 

Companies say they have no desire to retaliate because they are committed to ethical behavior.  That is what HomeFirst’s board treasurer Gary Campanella said before he fired me and what its attorney wrote after.  Wells Fargo’s then-CEO John Stumpf averred the bank was victim, too.  Its prized values were violated by employees who opened the unauthorized accounts. 

The justice system supports such posturing.  A commitment to ethical behavior reduces penalties on those rare occasions when companies are convicted of wrongdoing.  Having compliance programs like those HomeFirst and Wells Fargo had counts.

When a wrongdoer delays firing its whistleblower, it further obscures the connection between her disclosure and the retaliation.  Judges are more sympathetic to the whistleblower when retaliation promptly follows her disclosure.  Their suspicions arise when her own misdeeds precede the termination[4].

How a company decides to retaliate is seldom as clear as it was in HomeFirst’s case.  At 9:16am on March 25, 2014, I told CEO Niklaus I had reported HomeFirst’s possible violations of California licensing laws and antitrust regulations.  Three minutes later Board Chair Suzanne St. John Crane replied to Niklaus, “not surprising.”  (For months I had complained internally about compliance violations.)  At 4:58pm Linda Chin, who was on the Board’s Executive Committee, announced to other Board members, my going outside “sounds like insubordination to me.”  Niklaus agreed.

The next morning, Niklaus began contacting potential interim CFOS.  St. John Crane told Bob “Shu” Shuman, an employment law attorney, “no one wants to work with him.”  Shu suggested they fire me immediately.  He would then prepare a settlement agreement.  But some Board members, including Mike Pope, a past Board Chair, suggested going more slowly. 

Early on the 27^th, Niklaus announced, “we all agree he needs to go.”  I sent her a copy of the insurance policy.  She worked out a possible settlement figure.  By the end of the day, they had decided on a plan, which Niklaus formalized in a transition plan she sent out on April 7.  Niklaus would build up a file to fire me in July for poor job performance, not insubordination.  If I sued, any cost would be covered by insurance.  I was not fired until June 3, but they decided in March after talks with their attorney and insurance broker.

Their intention to fire me because I disclosed violations to authorities seems clear to me.  Every fired whistleblower is sure she suffered retaliation, I guess. 

Maybe it’s not so clear.  The State of California has labored on my complaint for nearly three years.  As employers always do, HomeFirst came up with its business reasons.  I was rude and offensive, it said.  I cast aspersions instead of coming up with solutions.  I didn’t do my job and cried whistleblower to protect myself.  Examples were given.

The only way I could prove the connection between my whistleblowing and retaliation was with copies of emails I could access because of my position.  Without those emails, it would have been my whining against their righteous preening.  Their investment in compliance was as obvious as the good works they did in the community, they said.  They had not retaliated but paid close attention to my allegations.  They tried to fix any problems promptly.  They worked with me until I made it impossible.

Most whistleblowers do not have legitimate access to internal management communications.  My own attorney refused to consider the emails, which he advised would taint my case.  Unable to see the workings of the organization’s mind, judges are left with management's honeyed words and the awkward efforts of the whistleblower.  Usually the organization wins, and we lose. 

Dave Eggers’ novel, and the subsequent film, The Circle, describes a do-evil mega-company that may be brought down by transparency through technology.  Edward Snowden, Chelsea Manning, and others have used technology to document suspected wrongdoing.  Technology may also enable future whistleblowers to expose the intentions of the organizations that retaliate.

---

[1] As of the September 8, 2016 CFPB agreement, just 1,534,280 unauthorized accounts had been identified.

[2] Chief Program Officer Hilary Barroga and Senior Manager Shelly Barbiera were aware of the master leasing violations, and Senior Manager Linda Jones was aware of the food handler card violations.  Still each woman would claim that she expected the violation to be waived eventually.

[3] Cf. Banerjee, Neela, David Barboza and Audrey Warren.  “ENRON'S MANY STRANDS: CORPORATE CULTURE; At Enron, Lavish Excess Often Came before Success.” New York Times.  February 25, 2002; Kish-Gephart, Jennifer J., David A. Harrison, and Linda Klebe Trevino. “Bad Apples, Bad Cases, and Bad Barrels: Meta-Analytic Evidence About Sources of Unethical Decisions at Work.” Journal of Applied Psychology. 95.1 (2010): 1-31; Campbell, Jamie-Lee and Anja S. Goritz. “Culture Corrupts! A Qualitative Study of Organizational Culture in Corrupt Organizations.” Journal of Business Ethics 120 (2014): 291–311;  Colvin, Geoff.  “Wells Fargo’s Plan to Fix Its Culture Post-Scandal.” Fortune. June 11, 2017.

[4] Examples from the State of California’s 2014 judgments on whistleblower complaints: Benitez v. Gazelle Transportation, Rand v. Terra Manor, Tatum v. Associated Residential Services, and Turner v. Yaron & Associates,.