Transformations through the Four Phases of Whistleblowing (Part 1)

Transformations through the Four Phases of Whistleblowing (Part 1)

The individual is transformed in four phases by the events that lead up to her whistleblowing and that follow that defining moment. 

1. Divorce

In the first phase, the individual comes to understand that her goals and the organization’s are not aligned.  If she once felt loyalty to her company, that feeling dissolves.  She may now be prepared to harm the company, or her readiness may come in the second phase.

Daniel Ellsberg described a long lead-up to his release of the Pentagon Papers.   Revelatory conversations with generals in Vietnam during 1967 began his transformation.  He moved closer to his split when attending anti-war rallies in 1969, and he finally released the Papers to the New York Times in 1971.  Edward Snowden recounted a years-long approach to his 2012 decision to release secret documents describing government surveillance to a reporter at The Guardian.  Both Ellsberg and Snowden moved gradually from supporters of the government’s strategies to severe critics who were prepared to act as whistleblowers.

I was no whistleblower in 1992 when I signed a loan agreement that violated a key MAI Systems bank agreement.  Instead, I believed that the agreement was critical to MAI’s survival and my own success.  I was no whistleblower in 2005 when I hoped to delay exposure of fraudulent meal counts at the Gilroy nutrition site of Catholic Charities.  Instead, I wanted time to sweep away the problem before it harmed me and the company.  I was no whistleblower in 2006 when I signed a borrowing agreement that I knew HomeFirst would soon violate or when an attorney advised that HomeFirst was at risk of violating licensing requirements at its largest shelter.  Instead, I saw my own future bound up with a successful turnaround of the company which needed my complicity.

I was not prepared to blow a whistle at HomeFirst until after Jenny Niklaus joined the company as CEO in 2009, after the company’s program director cried at the news of Niklaus' selection, after its development director quit in frustration and Niklaus fired in succession the two replacements she had hired, after the company reported four successive years of losses, and after Niklaus insisted on wildly optimistic assumptions in order to balance the company’s 2013-14 budget.

The events that transform anyone from a reasonably loyal, if not especially respectful, employee to a whistleblower are not always pretty.  Others may find them inconsequential; the events do not always plainly justify becoming a whistleblower.  The events that preceded Chelsea Manning’s disclosure of documents that revealed misconduct in the Iraq war are painful to read, but they do not logically support an ethical decision to reveal classified materials.  After her unique personal journey, each whistleblower arrives at the point where she is prepared, in a way she was not previously, to violate loyalties and to initiate a doomed project that will result in her punishment.

2. Witness

In the second phase, the potential whistleblower witnesses a questionable activity.  No longer fully aligned with the company, she does not assume that the activity will benefit her and the company.  She suspects that something is amiss.  After investigating, she decides that the activity is wrong or a mistake and mentions it to her boss or another responsible person.  Depending on her approach and the value of the activity to the company, her observation may be ignored or dismissed or she may catch some blow-back.

When the company does not deal with the problem promptly, she begins to doubt those in charge, and she watches closely what happens next[1].  As she investigates further, she finds not only that the initial problem remains uncorrected but that other problems exist as well[2].

Organizations that misbehave in multiple instances are sometimes portrayed as “bad barrels” that turn previously good people into bad apples who commit wrongs[3].  Cynics judge that the nature of organizations is to misbehave in furtherance of their objectives[4].  From the whistleblower’s perspective, the question is not why the misbehavior occurs but whether it will be disclosed.

I first suspected the County overbilling at the end of preparing the 2013-14 budget.  As we had done privately and in earlier meetings with the Finance Committee, Niklaus and I exchanged barbs in front of the Board over that budget, which I considered perilously unrealistic.  In a different mood I would have ignored the possibility that we had billed the County of Santa Clara improperly.  I had done so in the past, and the County would not find the problem on its own.  This time, however, I probed further.

Niklaus, who was unhappy that I found the violation just prior to our annual audit, said she and the Program Officer would work it out with the County staff.  In a different mood I might have dropped the matter after she had relieved me of the responsibility to fix it, but this time I tracked their progress.  No resolution emerged, and I became more annoyed.

On August 26, 2013, Niklaus, the Program Officer. the Development Officer, and I met as we did on most Mondays.  As the meeting closed following a discussion of the County overbilling, I asked whether HomeFirst’s largest shelter violated the State of California licensing requirement.  There was no external pressure to evaluate this issue, which would not be discovered by the State or anyone else on their own.  We had all ignored the risk for years.  Niklaus went crazy, which I found interesting.

My exchanges with Niklaus over the budget had widened my separation from her and the Board.  I was prepared to view potential misdeeds differently than I had in the past, to investigate them, and to look for other misdeeds that might confirm my assessment of the organization.

Psychologically separated from the company and with a suspected misdeed in hand, I was prepared to become a whistleblower.

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[1] For example, Carol Bondy Theresa Ely, Angelo Jacques, Deborah Muller, Helen Pace, Mark Stewart, Joni Westawski, SandRidge Whistleblower
2] For example, Linda Hobson, Rebecca Ricciuti, Amy Ward

[3] 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

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

Whistleblower’s Standing v. Omnicare (Part 2)

Whistleblower’s Standing v. Omnicare (Part 2)

Third among the whistleblower issues raised by the Marc Silver v. Omnicare et al case: Was Silver justified in making his complaint?  Did he have the legal standing to complain? 

Silver witnessed wrongdoing spread across the pharmacy/nursing home industry, and the culprits stole money from U.S. taxpayers.  Certainly, expressing his concern was a socially valuable project.

Every whistleblower discloses what he or she believes is an affront to social or legal mores and something the accused refuses to correct.  Each of my complaints against HomeFirst alleged a continuing company misdeed that involved harming homeless individuals or using taxpayer money inappropriately.  Like Silver, we all can find social justification.

Problematic for Silver’s lawsuit against Omnicare et al were two facts: his suit was very similar to David Gale’s earlier suit, and he might not have presented sufficient direct, inside knowledge of the misdeeds, particularly those committed by Pharmerica.  As a consequence, Omnicare’s settlement agreement provided nothing for Silver although he may eventually receive portions of settlements under the 27 related state suits. 

Silver’s suit against Pharmerica, which was carved out of the Omnicare settlement agreement, was dismissed in 2016 based on the court’s conclusion that he lacked standing under the U.S. False Claims Act.  The court decided that although Pharmerica probably engaged in the alleged illegal activities Silver had no commercial relationship with the company and he had relied on publicly available information in filing his suit. 

As a whistleblower, Silver achieved the ethical objectives of outing the wrongdoers and causing Omnicare to pay a penalty that may encourage it to act better in the future. But, as is true for many other whistleblowers, the issue of legal standing limited his effectiveness.

When I complained about HomeFirst’s not repaying an advance given to it by the City of San Jose, my compliant got little traction.  In part, the City’s indifference arose from its close business alignment with HomeFirst, but also I had no legal standing: I was not a San Jose resident, and I was not harmed by HomeFirst’s inaction.  HomeFirst’s failure to repay the $140,000 it overcharged the County of Santa Clara did not harm me either, even though I was a County resident, because funding for the grant came from state taxes paid by those who earn more than $1 million in a year.  Since I was never a homeless person served by HomeFirst, I was not harmed by the alleged minimum wage, payroll tax, and food handler card violations either. 

I was just a good guy, with no strong legal basis for a lawsuit that might force HomeFirst to act properly or to suffer a penalty.  Many whistleblowers are good guys with little real basis to sue their employers (other than for the retaliation they suffered), and our small-time complaints involve too little money to qualify for suit under false claims acts.  As a result, unless we can interest media in the cases – a risky tactic that exposes us to expensive suits from the companies – we have little power to effect the changes we envision when we begin our projects.

Fourth, the scope of wrongdoing involved in Silver’s case is remarkable.  Ruscher, Gale, and Litwiller were the tip of Omnicare’s iceberg of insider-witnesses that included their colleagues, supervisors, managers, sales and legal staff, and executives who were aware of the company’s tactics.  Many other companies in the institutional pharmacy industry participated in the scheme and employed hundreds to make it work for them.  Then there were all the nursing homes[1] that knew they were getting a deal too good to be legal.

Silver’s case was not unique in the way knowledge of the misbehavior was wide-spread.  Hundreds, and maybe thousands, were aware of Wells Fargo’s bank account fraud.  Thousands were aware of the mortgage frauds allegedly committed by Bank of America, Morgan Stanley, Deutsche Bank, and others during the great recession.  Dozens inside and outside HomeFirst were aware of the misdeeds I alleged. 

In each case of an alleged wrongdoing, many witness but fewer disclose the wrong, and seldom is the accused penalized.

Finally, did Silver’s whistleblowing do any good?  Along with Gale, Silver caused Omnicare to agree to pay $120 million to the U.S. government.  That sounds like a lot, but during the 10 years to 2014 Omnicare paid an average of $80 million every year in settlement and litigation costs, making the 2014 penalty barely a wrist slap – it was more a normal cost of doing business – for the company which refused to admit doing any wrong.  And Pharmerica, whose litigation costs also run more than 1% of revenues a year, was not penalized at all despite evidence that it had participated in the illegal kickback schemes.

It is an article of faith that whistleblowing meets a social need by helping to correct wrongs in a complex society[2].  Stories about whistleblowers, however, focus most often on the retaliations they suffer and the complaints they file against their attackers for those retaliations.  Too little attention is paid to whether the world is made better by our disclosures and the wrongdoers are punished for the acts that we disclose.  HomeFirst has not been penalized for any of the violations that I alleged; it has not been seriously investigated concerning the allegations; it has not repaid the money it admitted misusing.

If corporations too often go unpunished for the wrongs we disclose and we are not effectively protected from their retaliations, why should we bother to become whistleblowers? 

With little effort, we can construct ethical justifications[3] for blowing the whistle, but that comes well after the fact. 

In my case, identifying issues came naturally as a part of my job as HomeFirst’s CFO.  Avoiding misbehavior was not just a professional responsibility, after fifteen years as CFO of different companies it seemed to me a potential legal responsibility.  The failure of the company’s CEO and its Board to act on my complaints echoed their failure to respond to the company’s faltering financial position.  They drove me crazy.

When whistleblowers act, we respond to ethical and professional concerns but also to personal issues, sometimes including greed or a desire for revenge.  That fact – even combined with the high probability that we will achieve little – does not diminish our whistleblowing.  If anything, it makes our projects more important, I think.  Our jumble of motivations does not mean that we should not act, but when we act we should do so intelligently and warily. 

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[1] Disclosure: my wife’s ex-husband was executive director of a nursing home involved in Silver’s suit.

[2] Miethe, Terance D.  Whistleblowing at Work.  Boulder, CO: Westview Press.  1999

[3] For example, in Hosmer, Larue Tone. “Trust: Connecting Link between Organizational Theory and Philosophical Ethics.” The Academy of Management Review  20.2 (April 1995): 379-403

Whistleblower's Standing & Silver v. Omnicare (Part 1)

Whistleblower's Standing & Silver v. Omnicare (Part 1)

In 1998, Medicare began paying nursing homes a fixed amount for their Medicare Part A patients, rather than reimbursing the homes for their prescription costs[1].  The change created a new financial risk for the nursing homes – the possibility that a Medicare Part A patient’s actual costs exceed what Medicare agreed to pay. 

Institutional pharmacies, like Omnicare, offered a solution: a package deal that provided, via kickbacks, below market pricing for Part A patients and above market prices for patients covered by Medicaid, Medicare Part D (beginning in 2006), and private insurance, whose prescription costs were paid as billed.  Because Part A patients were a small minority of all patients, this arrangement benefited the institutional pharmacies as well as the nursing homes, but Medicare and Medicaid lost out.  It was against the law, of course.

Marc Silver saw all this because he owned and operated a nursing home from 1986 through 2007 and an institutional pharmacy from 2001 through 2007.  He received proposals for this sort of kickback scheme from several institutional pharmacies, including Omnicare.  After accepting one of them, Silver’s nursing home saw its costs decrease by nearly 40% in 1999, and its profits increased.  Silver spoke with scores of nursing home owners in the years up to 2011 and found that they had enjoyed similar experiences. 

In 2010[2], David Gale filed a lawsuit, which the federal government joined, against Omnicare for its participation in these kickback schemes, based on evidence he had obtained as an employee of the company until he resigned in 2010.  In 2011, Silver filed his suit against Omnicare, Pharmerica, and three companies that they had acquired.  Silver’s suit was eventually joined by the federal government and 27 state governments under their various false claims acts.

The Gale and Silver cases proceeded[3] through the courts, based on slightly different, but mutually supporting, evidence.  In 2014, Omnicare settled the suits by agreeing to pay the federal government $124 million, of which Gale received $17 million.  Silver received nothing from Omnicare in the settlement although he could share in future state-level settlement agreements.

The 2014 agreement specifically excluded Pharmerica with whom Silver’s litigation continued.  Finally in 2016, the court agreed with Pharmerica that because Silver had had no commercial relationship with the company (he had relied on evidence provided by another and on public information, the court concluded) he was not entitled to file suit against it under the False Claims Act.

Silver’s case involves a few important questions about the nature of whistleblowing. 

First, who deserves to be called a whistleblower at all?  Silver was never an employee[4] of Omnicare or the other defendants in his suit; he never had to wrestle with the loyalty issues that confound other whistleblowers[5]; and he ducked the retaliations that employee-whistleblowers usually suffer[6].   Still, like any whistleblower, Silver served the public welfare by calling out a wrongdoing that he had witnessed. 

Omnicare dismissed Silver by calling his a parasitic suit that only built on Gale’s suit.  But companies accused of wrongdoing commonly disparage their accusers: their complaints are said to be, among other things, baseless and based in poor information, personal vendettas, and the product of character deficiencies.  For its part, HomeFirst claimed that my complaints were not always substantiated and that my responsibility as CFO was to fix problems, not report them externally.

Individuals well known as whistleblowers have been privy to critical information about wrongdoers who were not their employers.  Among the most famous whistleblowers is Daniel Ellsberg, who was a RAND Corporation analyst when he released the Pentagon Papers that revealed government deceptions about the war in Vietnam.  Edward Snowden was employed by Booz Allen Hamilton when he released secret government documents that described domestic and international surveillance programs.

Restricting the term whistleblower to current or former employees of the wrongdoer is an academic exercise that serves no useful social purpose and needlessly discourages evaluation of the disclosures.  While employee-as-whistleblower discussions can highlight the importance of combatting retaliation against whistleblowers, they divert attention from the more important wrongdoer-as-criminal conversation.

Second, were Silver’s motivations sufficiently pure?  When Sissela Bok wrote that whistleblowers should have a moral basis for their complaints, financial rewards for disclosures were rare.  Over the past 36 years, federal and state false claims acts have come to provide compensation for successful whistleblowers, as does the IRS among several federal agencies.  While support for whistleblower rewards is not universal, they have demonstrably increased the number of people (and their attorneys) willing to step forward despite probable retaliations, and in 2014 U.S. Attorney General Eric Holder acknowledged the need for financial rewards to properly compensate whistleblowers.

Whistleblowers’ motivations have always been a mix of ethical and base.  Those who make disclosures are often described as disgruntled and uncooperative, as well they might be around wrongdoers who ostracize and retaliate against them.  After I disclosed suspected misdeeds, HomeFirst was quick to accuse me of impeding the company’s doing business when I wasn’t sabotaging it.

Expecting that whistleblowers should be pure-hearted is delusional at best.  At worst, it subjugates potential whistleblowers to entrenched political and economic powers who are happy to infringe on others’ rights when it suits them.  If Silver’s motivation was, at least in part, financial there is no wrong in that, if only because Omnicare’s misbehavior was financially motivated.

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[1] Information drawn from US et al ex rel. Marc Silver v. Omnicare et al Case 1:11-cv-01326-NLH-JS Document 65 Filed 09/19/13, Third Amended Complaint.  http://freepdfhosting.com/90b8ac4627.pdf

[2] Susan Ruscher, a former Omnicare employee, filed a similar suit in 2008, but courts decided that she failed to produce compelling evidence.  Ruscher’s most recent appeal was denied in 2016.  Alan Litwiller, another former Omnicare employee, also filed a suit over the kick-back scheme in 2011; it was dismissed in 2014.

[3] A hint as to how that process worked: Omnicare inundated Gale’s attorneys with almost half a million pages of evidence in response to their document request.

[4] Near, Janet P., Michael T. Rehg, James R. Van Scotter and Marcia P. Miceli.  “Does Type of Wrongdoing Affect the Whistle-Blowing Process?” Business Ethics Quarterly 14.2 (April 2004): 219-242

[5] Bok, Sissela.  “Whistleblowing and Professional Responsibilities.” In Ethics Teaching in Higher Education. Daniel Callahan and Sissela Bok (eds.).  New York and London: Plenum Press. 1980. 277-295

[6] Alford, C. Fred. Whistleblowers: Broken Lives and Organizational Power. Ithaca, NY: Cornell University. 2001; and Navex Global.  “2016 Ethics & Compliance Benchmark.” 

A Whistleblower’s Take on the Oakland “Ghost Ship” Fire

A Whistleblower’s Take on the Oakland “Ghost Ship” Fire

On the night of Friday December 2, 2016, an Oakland, California warehouse and artist collective, known as the Ghost Ship, was engulfed in flames, killing 36 persons.  As City officials and others continue to investigate the incident, a story has emerged:

-          The Ghost Ship building had a history of health and safety complaints although it had not been inspected in three decades

-          The building, which was owned by Chor Nar SiuNg, was leased to Derick Ion Almena and Micah Allison who subleased spaces to individuals.  Almena and Allison lived in the building with their three children.

-          Ng has a history of violations in other buildings that she owns

-          Almena resisted calls to improve the safety of the building

-          Illegal housing conversions, such as those at the Ghost Ship warehouse, occur throughout the City of Oakland, where nearly 6,000 habitability complaints and investigations occurred over the past three years and many warehouses have been used for housing and artist spaces.

-          Oakland’s financial difficulties, which have contributed to its long history of high crime, have forced all city services, including building inspections, to compete for resources with an understaffed police force.

-          Oakland’s higher crime rate helps keep apartment rental rates affordable for lower income tenants, such as artists, who welcome cheap, if unsafe, housing in places like the Ghost Ship

-          While the average rent for a one-bedroom apartment was $2,366 in Oakland and $3,336 in San Francisco, Ghost Ship residential spaces rented for about $700 a month although sometimes without heat or electricity

-          Ghost Ship, where artists concentrated on electronic music, operated like many other Oakland warehouses cum artist communities by providing a space that encouraged artistic creativity and growth

-          The substandard housing provided in artist-warehouses is consistent with a special Oakland culture that deserves sympathy and even protection. 

-          To sustain that culture, public and private money is needed to help arts groups stay in Oakland.

This story arcs from the societal tragedy of high housing prices spurred by income inequality to the human tragedy in the deaths of creative young people, and it sprinkles guilt – legal or not – among those youth, the building owner and manager, and civic leaders.  Then in glides to a vision of a civic and artistic communities comingtogether.

The story, though, need never have been told if more people had become whistleblowers who spoke out forcefully. 

-          More residents should have complained to the Oakland’s Planning and Building Department, which, however feckless, was responsible for code enforcement

-          Performing groups should have complained to police and fire safety officers

-          Department employees should have become small-time whistleblowers by complaining to authorities when officials failed to act on complaints and inspections

-          Department managers should have complained to authorities and media when budget constraints created potential safety risks

-          Entertainment journalists who reported on events at the site should have alerted their companies and the police about unsafe conditions

-          Local residents and local businesses and their employees should have complained more to police, fire safety officers, and media

-          Police and fire safety officers who traveled the main thoroughfare just half a block away should have investigated the property on seeing residents and partygoers entering and leaving the building and on receiving complaints from those in the neighborhood

-          Police and fire staff should have blown the whistle on the failure of officers and management to take action against the property and its owner

Early on the morning of March 13, 1964, Kitty Genovese, a 28-year old woman, was brutally murdered in New York City by 29-year old Winston Moseley.  For years afterward, the narrative ran that 38 people in her neighborhood had witnessed Moseley stabbing her repeatedly and had heard her cries for more than half an hour, but no one had called the police under after she was dead.  The incident led to research into the “bystander effect,” which proposed that we are less likely to offer assistance the more other bystanders are present.

Researchers eventually determined that the narrative was wrong: only a handful of people witnessed Moseley’s initial attack, one called out immediately and scared him away, and two others called the police; only one person witnessed a second attack that ended Genovese’s life.  Although the Genovese facts were wrong, social research has provided support for the bystander effect.

Dozens, or even hundreds, were aware of the Ghost Ship problem and failed to act.  One theory shifts blame from individuals to society – valiant if dreamy artists stand against the base economic forces behind high housing costs.  If code requirements were strictly enforced, Ghost Ship and similar buildings could be shut down, the Oakland art community would be decimated, and Oakland itself would lose its vibrant character.  Oakland Mayor Libby Schaaf has assured residents there will be no witch hunts following the Ghost Ship fire even as other cities crack down on illegal sites like Ghost Ship.

Like Ghost Ship and many other whistleblowing cases, at HomeFirst many people – employees and Board directors – were aware of the problems that I disclosed.  HomeFirst’s managers, like Ghost Ship’s apologists, claimed that its alleged violations should not be seen as black-and-white questions but that the broad societal impact of ceasing the violations should be considered.  As was true with Ghost Ship, HomeFirst’s government investigators often were feckless and had little time for the reported problems.

The silent witnesses to wrongdoing may be hundreds, dozens, or, in the case of Kitty Genovese, one frightened man behind his apartment door.  Political and economic forces can shift the legally drawn line between right and wrong, and whistleblowers face battles that are less about ethics than about values and power. 

The Lawsuit & Williams v. Wyndham

The Lawsuit & Williams v. Wyndham

On November 17, 2016, Patricia Williams was awarded $20 million by a jury that heard her case against Wyndham Vacation Ownership, which had fired her six years earlier following her disclosures of allegedly fraudulent sales practices at Wyndham’s San Francisco office.  She didn’t get there with my ace attorney who negotiated a $45,000 deal with HomeFirst after I was fired.

Like many other whistleblowers, Williams identified a number of bad actions by her employer Wyndham.  In her lawsuit she listed various illegal and fraudulent sales techniques used by Wyndham sales people plus acts of credit card fraud.  Williams alleged that Wyndham’s tactics specially targeted seniors, and her allegations were echoed in a 2013 class action suit against Wyndham.

In identifying and disclosing these suspicious activities, Williams was no naïf. She had worked for fifteen years in the timeshare industry, where complaints of fraudulent activities were common.  In addition, she had worked in a Wyndham sales office in Virginia for three years before transferring to the San Francisco office in 2010.

Neither was Williams alone in her awareness of potential problems in the San Francisco office.  Before she was fired, Williams met with some other local sales staff, who also refused to engage in illegal activities, about trying to stop the fraudulent conduct.  Her suit identified co-workers who participated in the practices.  She reported her suspicions internally to the company’s compliance hotline, the HR department, and numerous managers, including one vice president.

After she was fired, two years passed before she filed her lawsuit.  If my own case against HomeFirst can be taken as a guide, during that period her attorneys attempted unsuccessfully to negotiate an acceptable settlement with Wyndham.  By the time of her suit, Williams had four co-plaintiffs, so the negotiations may have been complicated and the potential cost to Wyndham could have been high.

Wyndham’s arguments in its defense are familiar to other whistleblowers, and they give insight into how those negotiations might have proceeded.  They gave no ground: she had not proven her case, they claimed.  Wyndham’s actions were entirely justified by valid business reasons.  The company had made good faith efforts to avoid misdeeds and never intended to act illegally.  Williams had unclean hands and based her complaint about her termination on after-acquired evidence – a defense that my former attorney feared HomeFirst would use.

It is easy to imagine that Wyndham would have been no less difficult to negotiate with than HomeFirst was with me.  It was well-practiced in pushing back on complaints about its business conduct, as was HomeFirst’s attorney.  Williams could have settled, as her co-plaintiffs eventually chose to do, but she pressed on for a jury trial.  Along the challenging four-year path to her $20 million award, she plowed through four attorneys.

Williams won financially in a way that most whistleblowers can only dream of even if Wyndham seems likely to appeal the award.  But she certainly suffered first from her whistleblowing.  Unable to find another sales job, she was forced to take much lower paying jobs; she had troubles with alcohol; and she returned to Virginia.

For its part, Wyndham makes few apologies.  It claims to have fine-tuned its compliance operations and to have modified its sales practices.  The actions that Williams alleged occurred six years ago do not represent the company and its values today, it believes.  But it does not admit guilt now any more than it has in the past.

Wyndham’s statements and tactics since it fired Williams make clear that she could not have achieved her outcome through negotiations alone.  It took a lawsuit to get the job done, but the long course of that lawsuit shows why my former attorney was so quick to settle for a piddling amount accompanied by such onerous restrictions.  My attorney was probably correct in saying that any company with a capable defender would never voluntarily agree to a fair compensation for the whistleblower.

We see this one remarkable outcome because it is large and it struck at such a conspicuous target.  The egregious nature of Wyndham’s acts may have contributed to the success of Williams’ suit, but other companies that are called out by unsuccessful whistleblowers are also guilty of egregious behavior.  Williams’ suit pointed to appealing victims in vulnerable seniors, but most companies mistreat vulnerable people.  I alleged that HomeFirst’s actions wronged homeless disabled people, but my complaint has so far yielded no great victory for me.

The many lawsuits that produce little or nothing for their plaintiffs remain in the dark.  The thousands of negotiated settlements that fail miserably to compensate whistleblowers for their losses, even after years of effort, are secret from all.  Save for a lucky few, whistleblowers must content themselves with small reward and less fame.

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.