Whistleblowing & Villains

Whistleblowing & Villains

Two key parties play in the whistleblowing myth.  The first is the hero, who does what is right despite the cowardly behavior of those around him.  The second player is the villain, greedy and duplicitous, who commits a shameful deed.

The reality of most whistleblowers stands in the way of seeing them as heroes.  Their selfish streaks may manifest differently from those they denounce and they may do better at staying within the lines of lawful activity, but they are so sufficiently flawed that some observers may find the retaliations they experience understandable.

In the stories of actual whistleblowers, people accused of violations seldom come across as heinous, at least with respect to the deeds that we disclose.  For example:

Fred Czerwonka was hired as superintendent of the St. Joseph (Missouri) School District in July 2013, the month after Beau Musser started as district CFO.  Czerwonka’s background included a PhD from St. Louis University, several years as principal, assistant superintendent, and superintendent in the smaller West Plains (Missouri) School District, and 11 State awards for education performance.  A few months into his job, Musser discovered that Czerwonka, without Board approval, had used an unexpected insurance refund to pay special $5,000 stipends to 54 of the district’s administrators, principals, and assistant principals.  A year and a half after he was hired, Czerwonka was fired due in part to his whistleblower retaliation against Musser.   In 2015, the Missouri State Auditor found numerous control problems going back years (including payments of millions of dollars in stipends), some of which continue according to a recent Board member statement.

From the published reports, a plausible, human story emerges:

(a) Czerwonka and Musser found that the district was a bigger mess than they had anticipated when they accepted their positions;

(b) Czerwonka wanted to be a nice guy using the stipend technique employed by his predecessors, including one who later got jail time for it;

(c) Czerwonka screwed up when he suggested that Musser resign in exchange for dropping the sexual harassment charges that surfaced after he blew a whistle on the stipends – that misdeed plus Musser’s suspension and termination cost the district a $450,000 lawsuit settlement;

(d) Czerwonka’s relatively successful years before St. Joseph and his apparently happy time at the much smaller Caruthersville School District after St. Joseph is not that of a villain, even if he wronged Musser.

Viewed now from a distance, the life of Jenny Niklaus, HomeFirst’s CEO who fired me after I disclosed suspected legal violations to her, the Board, and external authorities, seems to me that of a generally likable person, not a demon.  Except for undergraduate years in Davis, California, Niklaus has lived and worked her entire life in Santa Clara County, California.  Her mother assisted her move into each new living arrangement.   Her Friday girls’ night out get together included friends drawn from local nonprofits and government agencies.  A few days before she went to Acapulco to celebrate her 45^th birthday with a group of girl friends from college, she celebrated in San Jose with a larger group of mostly women, including those from her class at the American Leadership Forum - Silicon Valley.

A licensed clinical social worker, Niklaus had spent her entire career trying to help people.  She would sometimes cry when she spoke of the homeless served by HomeFirst.  She told of her brother who was occasionally homeless as a consequence of a mental disability.  She insisted that homelessness was a community problem that could be solved through the coordinated efforts of nonprofits, government, foundations, and businesses.

Seven months after firing me, Niklaus left HomeFirst to become a vice president at tiny ALF-SV, which arranges networking among community leaders.  Although she traded her work with the poor and vulnerable for associations with the locally powerful, she continued to pursue the community building to which she had devoted much of her time at HomeFirst.

Far from being villains, perpetrators can find ample reasons to excuse their actions – the action was not really so bad, the victim was partly to blame, bygones should be bygones[1].  For the broader society, social scientists have identified numerous explanations for why basically good people do bad things[2].  Research discovered causes in personal and institutional biases, insufficient information, impulsive decision-making, the “want” self vs. “should” self, slippery slopes toward wrongdoing, faulty incentive systems, environmental uncertainty, resource limitations, inflated self-perceptions, focus on outcomes rather than the methods used to achieve them, motivated blindness, failure to see through indirect relations, ethical “fading” – a complete list would go on and on.

These apologia leave the villain in the whistleblower myth empty.  No person remains to blame for the crime.  Whistleblower Eric Ben-Artzi’s frustration that the SEC did not punish executives at Deutche Bank wins our sympathy.  Basically nice as he may be, the fact that the St. Joseph School District (or its insurance company) paid $450,000 and wrongdoing Czerwonka skated away unharmed undermines our concept of personal responsibility.  That Niklaus escaped so easily from any penalty for HomeFirst’s (alleged) wrongs and her retaliation against me likewise offends.

The whistleblowing project is endlessly ambiguous: whistleblowers are tainted by complicated motivations, and they can be said to bring their troubles on themselves; the alleged wrongdoers are not clearly villainous, and they are seldom punished

Roy Baumeister observed[3] that victims view the time frame of a crime differently than do perpetrators, who feel that the incidents are isolated affairs.  Victims see the long lead up to the event more clearly and feel the painful effects for far longer.  The torturously slow regulatory and legal proceedings involved in whistleblower cases encourages us to consider the situation longer, in contrast to corporate perpetrators who can deal the transaction off to attorneys for handling.  But many whistleblowers just take a long time to get the meaning of all the bastards did to us.

---

[1] Baumeister, Roy F., Arlene Stillwell and Sara Wotman. “Victim and Perpetrator Accounts of Interpersonal Conflict: Autobiographical Narratives about Anger.”  Journal of Personality and Social Psychology.  59.5 (1990): 994-1005.  Baumeister, Roy F.  Evil: Inside Human Cruelty and Violence. New York: W.H. Freeman.  1997

[3] Baumeister, 1990

What Do We Hope To Achieve? (Part 2)

What Do We Hope To Achieve? (Part 2)

Whether our preferred story is that of the whistleblower who hopes to do good or of one who wants only to hurt the employer to whom she owes her loyalty, the conclusion is most often not what the whistleblower sought.

When Eric Ben-Artzi was a risk officer at Deutsche Bank, he observed overstatements of the bank’s credit derivative portfolio.  After reporting the violations to an internal hotline and the bank’s top compliance attorney, he was fired.  As a result of information he and two others provided to the SEC, the bank was fined $55 million, of which Ben-Artzi was awarded $8.2 million.  He refused the award because he wanted the government to punish the responsible executives, not the bank and its shareholders.

JPMorgan urged its brokers to pitch its proprietary products to all customers.  Johnny Burris objected that the high-commission investments were inappropriate for many of his elderly clients.  After he was fired, JPMorgan was fined $307 million (about .5% of its total noninterest expense) for similar sales tactics, and Burris won $164,462 in back pay and damages.  That was not punishment enough, though, to satisfy Burris, who claimed JPMorgan had no right to fire him.

David Shepard and Bill Marvel filed a False Claims Act suit alleging that Grand Junction Airport had misused FAA funds by falsely claiming the construction of a perimeter fence.  The suit triggered an FBI investigation into numerous other possible illegal actions by airport executives.  

Although the CEO was terminated and the airport agreed to surrender $500,000 in future FAA grants and pay a fine of $16,500, Shepard and Marvel opposed the settlement.  They contended that the airport and its contractors should be liable for $5 million, of which they might claim 15% to cover their legal costs.

Rodney Lipscomb was fired after he objected to the way ITT Technical Institute lured students to enroll.  The law firm of Martin & Seibert fired Christine Blanda after she alleged it had overbilled clients.  Both ITT Technical Institute and Martin & Seibert were shut down in the midst of investigations and lawsuits.  The corporate failures make uncertain the prospects for lawsuits by Lipscomb, who thought ITT’s failure offered some sense of justice, and Blanda.

The effectiveness of our revenge can be limited when large companies are involved.  After Diana Duenas-Brown and others complained about fraudulent, Illegal, and deceptive practices by Wells Fargo and were fired, they sued the bank.  Wells Fargo was eventually fined $185M for its misdeeds, and it agreed to review and modify its sales practices.  But Senator Elizabeth Warren and others have questioned the bank’s commitment to making meaningful changes.  Even multi-million dollar settlements, which rarely include admissions of guilt[1], amount to minor costs of doing business for companies like Wells Fargo, JP Morgan, and pharmaceutical companies who sign settlement agreements with the government.

Although payouts are touted, few actually benefit from federal whistleblower reward programs.  For example, the Dodd-Frank Commission, which covers financial whistleblower tips about publicly owned companies, received 4,218 tips in FY16 and made 13 awards during the year.

None of my ten complaints against HomeFirst resulted in any harm to the company.  Most of them were ignored by authorities; a couple were rejected by the agencies I approached; and two resulted in minor adjustments by the company.  The Board Chair, who had directed me not to make any more external disclosures and who argued for mytermination, remains Chair Emeritus.  She became CEO of American Leadership Foundation – Silicon Valley, a $1.5 million nonprofit that arranges for meetings among local executives.  The HomeFirst CEO, who fired me, left to become Chief Impact Officer, whatever that could mean, of ALF – SV.  HomeFirst has managed to survive without me.

Although rewards have increased the number of whistleblower tips in programs that provide them, like the SEC, IRS, and FCA, some still prefer to think that whistleblowers are not doing it for money[2] or glory.  Although it is accepted that wrongdoers are in it for financial benefit, extrinsic rewards are said to attract the wrong types of whistleblowers and encourage frivolous, unsubstantiated complaints.

C. Frederick Alford[3] wrote, based on his interviews, that the whistleblower is launched into battle by her ego ideal: the best, most nearly perfect part of herself.  What she wants, he concluded, is to achieve that moral perfection.  But the whistleblower morality story emerges at the end of her battle, not the beginning. 

The whistleblower’s fight is typically long.  Crowley’s whistleblower fight lasted 7 years; Ben-Artzi’s lasted 6 years.  Burris’ went on for 4 years, as did that of Shepard and Marvel.  The cases of Lipscomb and Blanda were apparently cut short at two years when their employers went out of business.  Robert Purcell’s case ended at the door of the U.S. Supreme Court after 17 years.

The years of conflict enable both the whistleblower and her opponent to pass off what actually happened and to confabulate flattering renditions of what happened and why [4].

In HomeFirst’s telling of my story, I did not really believe that the compliance issues I raised were violations of regulations.  Some were not even confirmed violations, they noted.  If I had been honest in making my complaints, I would not have just pointed out problem after problem; I would have worked diligently with staff to correct them; I would not have reported them so abruptly to outsiders.  According to their account, I was on my way to being fired anyway and I played the whistleblower card only to get a more lucrative severance package. They did what they had the right and business obligation to do.

In my own narration, I became fed up with mismanagement and disclosed externally what I thought were violations.  After sensing that they suspected my turn of heart, I admitted having blown the whistle.  Then they formed their plan to fire me.  I did what I had a perfect right, and even an ethical duty, to do.

The two perceived realities are seldom squared.  The truth of what we want seems inaccessible.

Where whistleblowing exemplifies ethical courage[5] and young people are trained to view standing up to illegal behavior as the product of a moral struggle[6] the crass reality of whistleblowing is underappreciated.  Even when we are in the business of disclosing wrongs, at least in part, for selfish reasons, we still serve the public good, our complaints still deserve impartial investigation, and we deserve meaningful protection under the law.

---

[1] The January 2017 Deutche Bank settlement was remarkable in its amount and in the bank’s admission of misconduct.  More typical was the nuanced “without admitting or denying the findings of facts and conclusions of law” language of Wells Fargo’s September 2016 consent agreement with the Consumer Financial Protection Bureau.

[2] For example, Ebersole, Dave.  “Blowing the Whistle on Dodd-Frank Whistleblower Reform.” Ohio State Entrepreneurial Business Law Journal. 6.1 (2011): 123-174.  Soloman, Steven Davidoff.  “Whistle-Blower Awards Lure Wrongdoers Looking to Score.”  New York Times.  December 30, 2014.

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

[4] French, Lauren, Maryanne Garry and Elizabeth Loftus.  “False Memories: A Kind of Confabulation in Non-clinical Subjects.” In Confabulation: Views from Neuroscience, Psychiatry, Psychology and Philosophy by William Hirstein (ed.) New York: Oxford Press. 2009. Pp 33-66

[5] Mullane, Susan P.  “Ethics and Leadership.” The Johnson A. Edosomwan Leadership Institute University of Miami.  White Paper Series.  2009

[6] Comer, Debra R. and Gina Vega.  “Using the PET Assessment Instrument to Help Students Identify Factors that Could Impede Moral Behavior.” Journal of Business Ethics 77 (2008): 129-145

What Do We Hope To Achieve? (Part 1)

What Do We Hope To Achieve? (Part 1)

Whistleblowers and their supporters hold that whistleblowing is a prosocial activity[1] undertaken to benefit nearly all of us by identifying wrongs so they can be corrected, making the world a better place.  Those who justify retaliation against whistleblowers argue that those do-good contentions are a ruse and the real reason for disclosures is to harm the organization and benefit themselves.  For them, whistleblowers are loose cannons from whom the organization must protect itself[2].

When I launched what would become my whistleblowing venture, my interest was technical rather than either prosocial or harmful to the company.  I had identified a billing mistake that simply needed to be fixed.  Like many who become whistleblowers[3], I was just doing my job.

HomeFirst’s CEO and Board Chair responded to the overbilling problem, which could have led to a $140,000 repayment, by trying to limit future disclosures in order to protect the financially vulnerable company.  Early on – some ten months before she would fire me – an adversarial relationship formed between the company and its whistleblower.  On neither side was morality or ethics a determining factor.

Four weeks after identifying the billing violation, I raised the question of licensure at a large HomeFirst location.  Again, the issue was a peculiar one that the CEO saw as a threat to HomeFirst.  This time, however, I was aware that I was stepping into a dark territory, and she blew up, as might be expected under the circumstances.

Nearly all of the misdeeds identified by whistleblowers are violations of law, regulation, or contract.  As such, they lead us to a technical question: does an activity violate some rule or another?  As for any white collar criminal[4], HomeFirst’s intention to violate rules was ambiguous and could only be teased from its past actions.  Whether or not legal guilt was proven by its intent, the organization would be harmed in some fashion if forced into compliance.   

While it fends off harm from the whistleblower, the organization denies that any rule was broken.  The issue is a mere technicality; it belongs to a world of banalities[5], not ethics.  Managers begin an investigation that could last indefinitely, and they likely retaliate against the whistleblower.  Their decisions feel tactical, not ethical.  When HomeFirst’s attorney Bob Shuman advised Board members to fire me, no moral analysis was involved.  His was a business decision to rid the company of someone who could sabotage the company by revealing more violations.

When I poked at the CEO with the licensing problem, I followed a pattern of jabs I had made earlier concerning what I considered unrealistic budget assumptions; digs about the company’s failure to disclose disappointing client results from its social service programs; and cuts about the continuing financial losses.  I was evidently no ethical soldier doing my duty; baser motives were at stake.

Once we set aside the notion that the whistleblower is a moral hero who speaks truth to power and exposes corruption, we are left to wonder what whistleblowers hope to achieve. 

Beginning in frustration, we whistleblowers may hope to wreck a sort of vengeance on the organization or its leaders, and we may succeed to a great or lesser extent.  During the past five years, the Securities and Exchange Commission awarded whistleblowers more than $100 million out of more than $500 million in sanctions against companies.  Since 2007, the IRS has collected $3.4 billion as a result of whistleblower tips and paid out $465 million in awards to tipsters.  In 2016 alone, the U.S. Department of Justice collected $4.7 billion from companies as a result of False Claims Act suits by whistleblowers; $31.3 billion has been collected from offenders since 2009.

Those global successes sum the happy results of many individuals.

Anonymous whistleblowers provided information that led to the conviction of Dr. Robert Windsor for filing medical claims for services he did not provide.  In addition to taking a jail sentence, Windsor agreed to pay the U.S. Department of Justice $20 million in settlement of whistleblowers’ suits under the False Claims Act case.  A portion of the amount will be paid to the whistleblowers as a reward for their information.

James Crowley, an attorney and manager at Chicago State University, was fired after he identified misdeeds by the university president and responded to an FOIA request concerning the actions.  The president retired in the hubbub.  Although not involving a government reward, after seven years Crowley's suit resulted in a $2 million win, which was later increased by $1 million after the university failed to pay as ordered.  The university is suing its attorneys for their performance in the case.

The less satisfying results of other actions test our hopes for retribution.  [To continue.]

---

[1] For example, Dozier, Janielle Brinker and Marcia P. Miceli.  “Potential Predictors of Whistle-Blowing: A Prosocial Behavior Perspective.”  Academy of Management Review 10.4 (1985): 823-836.  Miceli, Marcia P., Janet P. Near, and Terry Morehead Dworkin. Whistle-blowing in Organizations. New York: Rutledge. 2008

[2] For example, Sanford Wadler and comments by HomeFirst’s CEO to its Board and the advice of its attorney.

[3] For example, Sandra Black, Richard Bowen, Cynthia Cooper, Mona Hanna-Attisha, Jesselyn Radack, Curtis Rookaird

[4] Friedrichs, David O. Trusted Criminals: White Collar Crime in Contemporary Society. 3^rd ed. Belmont, Cal.: Thomson Higher Education. 2007

[5] Arendt, Hannah. Eichmann in Jerusalem: A Report on the Banality of Evil. Revised and enlarged edition. New York: Penguin Books. 1994

“How America Lost Its Secrets” – Snowden, Spies, & Whistleblowers

“How America Lost Its Secrets” – Snowden, Spies, & Whistleblowers

Edward Snowden is for many a hero who revealed the unconstitutional surveillance activities of the federal government[1].  Others consider him an enemy of, even a traitor to, his country[2] or a mix of hero and traitor[3].  In How America Lost Its Secrets: Edward Snowden, the Man, and the Theft, Edward Jay Epstein describes Snowden as both a whistleblower and, effectively, a spy.

Epstein makes a point that is important for understanding whistleblowers.  Snowden was not a whistleblower or a spy or even a mix of the two.  Instead, his nature evolved over time, and the camp to which he truly belongs will always be uncertain.  Like Snowden, many begin ingenuous and turn whistleblowers before they aim to harm their organizations.

At the start, Edward Snowden’s story is like that of an ordinary whistleblower.  His background has its messy spots: dropping out of high school, nerdy or excessively introverted computer interests that swell into real skills, spotty early job history.  According to Epstein, Snowden’s well-placed grandfather may have helped him jumpstart his career with a computer job at the CIA.  His libertarian ways and high sense of his own value (to judge by some profanity-sprinkled social media posts) may have made him a challenge for bosses.  Apparently Snowden poked around where he should not have and lost the CIA job.  Although annoyed, he recovered with a system analyst job at Dell SecureWorks, which did contract work for the National Security Administration.

The Dell position gave him access to secret NSA files.  Those documents, combined with what he obtained by hacking classified systems, enabled Snowden to picture a surveillance network that was both unethical and illegal.  His special knowledge revealed that statements of intelligence officials to Congress were lies.  The complex he confronted was rotten; that was clear to him. 

The web of wrongdoing that Snowden discovered has counterparts in other organizations with whistleblowers.  It was small surprise, for example, that news of Wells Fargo’s fraudulent sale of insurance products to its customers followed discovery of its creation of phony customer accounts.  After I found one then two compliance violations at HomeFirst, it was to be expected that I would keep finding more violations until I was finally fired.

He had raised security concerns to his management, Snowden claimed.  Later, Dell management would deny those reports, but that sort of denial is a common experience for whistleblowers.  HomeFirst dismissed my internal complaints of wrongs, and several of my external complaints were lost or ignored.

That Snowden did not force his internal complaints made historical sense: whistleblowers who pursued the approved channels at NSA did not fare well.  Thomas Drake, John Crane, and Bill Binney were among earlier NSA employees who had identified problems and were punished for their efforts.  While he was gathering evidence at Dell to support his disclosures, he decided to take a route used by other whistleblowers, famously including Daniel Ellsberg, and turned to journalists.

Snowden’s plan to disclose NSA documents would violate his oath to protect national secrets, yet that offense is analogous to the violations of company loyalty and (sometimes) confidentiality that all whistleblowers commit.  As many of us do[4], Snowden pointed to a higher obligation in justifying his action.

Epstein contends that Snowden moved outside the ranks of whistleblowers with his decision to quit Dell and work for Booz Allen Hamilton in order to get access to a more highly classified group of documents not available at Dell.  While his security access was limited during his probationary period at Booz Allen, he obtained entry into highly classified caches of documents through, Epstein speculates, the cooperation of unidentified others in the firm – not a traditional whistleblower procedure.  Then he copied onto thumb drives roughly a million secret documents from domestic and international sources – a mammoth undertaking, even with Snowden’s skills, that smells of something other than merely gathering evidence to support a theory of wrongdoing.

Rather than remain in the U.S. after his disclosure (understandably) or exit to a neutral country that lacked an extradition treaty with the U.S., such as Brazil, (not so understandably) he left for China on his way to Russia, both adversary countries to the U.S.  Epstein goes on to question Snowden’s unexplained first 10 days in Hong Kong, the ease with which he left for Russia without valid travel documents, and the cordial support he has received from Russian intelligence for the past three years.  He wonders too about the disposition of the 1.2 million classified documents that Snowden copied but did not provide to the journalists he met in Hong Kong.  All of that is far from typical whistleblower behavior and disturbingly close to the expected behavior of a traitor, Epstein concludes.

Epstein and others describe an arc to the Snowden story: from loyalist to disgruntled whistleblower to possible sympathizer with, or even supporter (intentionally or not) of, enemies of the U.S.  That path was traversed by American traitors in the past, Epstein writes: William Martin, Bernon Mitchell, and Victor Norris Hamilton were all former NSA employees who defected to communist Russia.  Critically, in Snowden’s case we are unlikely ever to know his motivations, and we cannot rely on his own explanations, which are as self-serving as those any of us give for our actions.

Each whistleblower gathers a personal momentum, becoming first disaffected, then bothered by misdeeds that may have been present all along, then angered enough by organizational responses to disclose confidential material.  Suspicion that a web of wrongdoing exists leads to more investigations and more whistleblowing.  The fatigue and costs of defeated revelations may discourage the whistleblower from continuing.  But success, such as Snowden achieved, or the luxury of forced retirement, such as mine, may inspire further action.

In its 2016 audit report, HomeFirst restated its 2015 presentation of administrative costs, which had significantly understated those costs and gave the impression of great efficiency.  My April 2016 complaint on the 2015 misstatement had gone unnoticed by the AICPA.  Now, though, with the new 2015 information, I may be able to find evidence that HomeFirst improperly billed government contracts again[5] in 2016.

---

[1] For example, ACLU, Amnesty International, Glenn Greenwald et al, Ewen MasAskill, New York Times Editorial Board, Wired

[2] For example, Fox News,  Malcom Gladwell, Walter Pincus, U.S. House of Representatives Select Committee on Intelligence

[3] For example, Al-Jazeera, Ronald Goldfarb

[4] For example, Johnson, Roberta Ann. Whistleblowing: When It Works and Why. Boulder: Lynne Rienner Publishers. 2003.  Miceli, Marcia P., Janet P. Near, and Terry Morehead Dworkin. Whistle-blowing in Organizations. New York: Rutledge. 2008

[5] Following the 2003-6 overbilling of HUD by $1.2 million and the 2010-13 overbilling of Santa Clara County by $140,000.