Repeat Whistleblowing

Repeat Whistleblowing

The Department of Justice (enforcing the False Claims Act), the IRS, and the SEC all pay rewards to whistleblowers whose tips lead to the collection of fines, penalties, or past taxes.  The prospect of large rewards can lead some to file multiple suits.  William LaCorte – derided as a “serial whistleblower” by the Wall Street Journal – won awards of nearly $100 million as a result of filing at least a dozen lawsuits, mostly against pharmaceutical companies. 

For pros like LaCorte, suing pharmaceuticals is almost like shooting fish in a barrel: from 1991 through 2015, 373 fraud suits were settled by these companies for a total of $35.7 billion.  The profusion of Medicare fraud cases enabled the Department of Justice to recover $19.3 billion in wrongful claims from healthcare companies in 2016, including the $785 million result from a LaCorte suit.  Last year the whistleblowing industry earned $516 million in rewards from the DoJ.

Repeat whistleblowers occasionally emerge in companies without the FCA’s financial incentives.  Linda Colon received $125,000 in settlement of a suit against the Housing Authority of the City of Passaic (New Jersey) in October 2012.  The agency continued to harass Colon following the settlement, so last month she sued again, charging that the agency created a hostile work environment.  In her second lawsuit, she included an allegation that the agency violated HUD rules governing rent increases.

While some workers exit dishonest employers, others remain, finding more and more problems until they are fired.  Charles Matthew Erhart was an internal auditor at BofI Holding in 2013 when he discovered that the company violated state law by not informing some customers when it recorded their calls.  Senior BofI executives ordered him not to refer to legal violations in his audit reports, but that did not sit well. 

Erhart proceeded to identify other problems: potentially altered financial reports, late contributions to employee 401k accounts, board failure to approve the company business plan, excessive deposit concentration risk, untruthful responses to an SEC subpoena, customer accounts without taxpayer identification numbers, loans to criminals and politically exposed persons, miscalculated loan and lease losses, and improprieties in the CEO’s personal accounts.  Finally BofI fired him.

Internal auditors, like Erhart, are well positioned to identify multiple instances of wrongdoing.  Carol Bondy, the audit bureau chief at the Montana Department of Public Health and Human Services, reported multiple misdeeds before the department cutback its audit operations and terminated her.  My role as Chief Financial Officer and Compliance Officer enabled me to discover numerous violations and potential violations at HomeFirst Services before the CEO and Treasurer fired me in June 2014.

Returning a whistleblower to her job following a legal settlement is risky for both sides, as it proved for Colon and the Passaic Housing Authority.  Ricky Hansen, for instance, who disclosed Wells Fargo’s unauthorized customer accounts, was rehired following his settlement, but continuing harassment eventually forced him to quit. 

Robert MacLean complained that a 2003 order by the Department of Homeland Security endangered air transportation.  That led to harassment and his eventual termination.  After a ten-year legal battle, the DHS was ordered to reinstate him.  He spent his first day back testifying to Congress about his fight with DHS, and he has continued to file complaints about other suspected air safety issues.

Companies can avoid the risks associated with returning problem employees by banning them from the premises.  Pennsylvania narcotics agent Charles Horvath called out a supervisor’s attempt to conceal evidence and was harassed, then fired.  In his settlement contract, he agreed not to seek future employment with the state attorney general’s office.  The settlement that HomeFirst proposed to me required that I waive any right to reinstatement with HomeFirst and agree that I would not apply to work there again.

Stephen Cass took a different tack by changing companies.  From 2007 to 2010, he was athletic director at a small private high school in Florida.  After he objected that the school’s admission standards and distribution of financial aid violated Title IX requirements, his contract was not renewed.  He filed a lawsuit, but he also moved north.  In 2013 he became athletic director at a high school in Massachusetts, where he made similar complaints.  Again he was fired, and he sued the school in 2016.

Repeat whistleblowers can muck up the system with their complaints.  The SEC, which pays awards for tips that yield more than $1 million in sanctions, has praised its reward program but admits to the challenge of addressing claims from “serial submitters.”  Perhaps another example: HUD took seven months, not the 20 business days specified by regulation, to reply to my fourth FOIA request concerning HomeFirst’s overbillings.

Critics of whistleblowing cite organizational loyalty as hurdle to clear before the act is ethical[1].  Regardless of ethics, a sense of loyalty to company and colleagues has long been considered an obstacle to potential whistleblowers[2].   But once we have formed our disclosure and, especially, once we have blown the whistle, our concerns over loyalty dissipate.  We are wary of the consequences of future actions but also numb to their supposed ethical obligations.

After HomeFirst fired me, I continued pressing the complaints I had made.  I also reported a potential legal violation by Downtown Streets and a mismanagement issue at a local St. Vincent de Paul operation, two places where I volunteered post-HomeFirst.  Now experienced in the art, I see no reason not to reject what seems wrong or to disclose it to others.

Apply my experience – plus that of LaCourte and the others – to the more than 1 million who blow whistles in the U.S. each year[3], and you discover a growing army of budding repeat whistleblowers.  Unfettered by the bonds of loyalty, these discontents have the potential to act as revolutionaries who stand for good or as tested soldiers willing to destroy what offends them. 

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[1] For example, Bok, Sisella. “Whistleblowing and Professional Responsibility.” New York University Education Quarterly 11.4 (1980): 2-10

[2] Peters, Charles, and Taylor Branch.  Blowing the Whistle: Dissent in the Public Interest.  New York: Praeger Publishers.  1972

[3] Based on Navex Global 2016 rate of 1.3 reports per 100 employees and 153 million employed in the U.S. workforce.

The Enticements of Whistleblowing

The Enticements of Whistleblowing

On June 1, 2017, two Bloomberg articles described contrasting approaches to the discovery of organizational misdeeds.  In the first, U.K. regulators explained their refusal to pay financial industry whistleblowers for what they ought to do anyway.  They cited the costs, complexity, and moral hazard involved in such payment schemes.  The second told of a former Caterpillar Inc. accountant who may be eligible for a $600 million reward for having revealed the company’s evasion of $2 billion in U.S. income taxes. 

Another contrast: while articles on whistleblowing often discuss the penalties suffered by those – Veteran Administration employees, for instance – who disclose organizational wrongdoing, others extol the expansion of protections for whistleblowers, most recently for staff of the VA.  Until the Civil Service Reform Act of 1978, the country’s only whistleblower protection was provided to federal employees who brought information to members of Congress under the Lloyd-La Follette Act of 1912.  Now every state has at least one whistleblower protection law, and 22 federal laws protect informants, but still they regularly experience retaliation.

A final contrast: organizations commonly disparage whistleblowers as disgruntled employees, but our defenders know that we are principled.  Big-time actors like Edward Snowden and Chelsea Manning are described by some sources as traitors and by others as heroes.

These two poles exist: one warns us to run for cover and the other attracts.  Which way we should lean seems less clear than years ago.  When Ralph Nader gathered stories of informants in 1972[1], the stakes were high: the public was deceived about the costly war in Vietnam, the largest car manufacturer in the world knowingly sold unsafe vehicles, leading companies conspired to conceal the dangers of smoking, private contractors grossly overbilled the U.S. military, and our government misled the public about nuclear safety.  With so much at risk, Nader recommended that every employee have the right to object to the activities and policies of his employer and to go public if his complaints were not answered.

If we hear more stories of exposed wrongdoing today than were available 45 years ago, we can thank the multiplying government-private interdependencies that can trip up either side, the proliferation of instruments for presenting complaints, and (as Nader observed 45 years ago) the social dominance of organizations that fuels individual discontent.  There are more but smaller violations, more ways to document and expose misdeeds, and more people upset enough to make disclosures, but there are also more enticements to become a whistleblower, including the U.S. pay-for-tips strategy.

When I identified HomeFirst’s overbilling of the County of Santa Clara in July 2013, I did not immediately think to expose any wrongdoing.  That possibility emerged as HomeFirst’s CEO resisted addressing the problem, after the board Chair directed me not to inform outsiders of future violations, and after the Audit Committee chair assured me that, as a former bank president, he was sensitive to the need to address the concerns of whistleblowers.  These events played out during news accounts of Edward Snowden's release of purloined NSA files and his escape first to Hong Kong and then to Russia.

Global queries into whistleblowing surged during this period, and my own interest in the subject took shape.  A desire to do good had attracted me to work with nonprofits and at HomeFirst, specifically, and correcting wrongs seemed consistent with that.  Moreover, fixing the misdeeds seemed a reasonable part of my job as CFO and Compliance Officer.  Although I was unaware that financial rewards might be paid to informants, others’ admiration of my noble actions seemed likely.  I had always felt a kinship with rebels despite a career spent in corporate environments.  HomeFirst’s policy and State law promised whistleblower protection, as did, I thought, my position as a valued executive.  Although I had no real plan, these incentives eased my way along the small-time whistleblowing path.

Twenty-five year-old Reality Leigh Winner entered the news because she sent a top secret NSA document to The Intercept.  Following a four-year tour in the Air Force, Winner had been working at Pluribus International, which performs contract work at NSA, for less than three months when she saw a report that detailed Russian interference in U.S. elections.  It revealed facts that went well beyond the public story.  In the days before the appointment of Robert Mueller as special counsel to investigate the matter, she might have thought the information would be concealed by the administration.  Like me and unlike Edward Snowden, Winner had no real plan.  She was caught by the FBI hours after The Intercept published the material.

While her disclosure provided new grist for the journalism mill, it exposed no government wrong and opened her to the possibility of years in prison.  Winner’s youth, apparent rashness, and prompt arrest led some to find her motivations disappointing, and she has been judged not a whistleblower at all but merely a leaker.  In that assessment her critics echo Malcolm Gladwell’s dismissal of Snowden as a mere hacker, and they insist on the overblown concept of the whistleblower as moral hero.

The radical version of organizational free speech offered up by Ralph Nader in 1972 and by Julian Assange today suggests that recommending changes, complaining, leaking, whistleblowing, and other expressions of voice[2] are variants on a single theme: opposition to the intrusion of organizations into human lives.  All are techniques inspired by obscure, conflicted impulses, and none is morally exalted above the others.

A corollary of the expectation that we accept only virtuous inducements to blow the whistle is permission for our employers to justify retaliation against us by their own lofty values of loyalty, respect, and teamwork.  But if Winner, Manning, Snowden and others deserve to be jailed for violating the law with their disclosures, then so should organizations and managers be punished for their unlawful retaliations.  Making the individual whole – a standard too seldom reached – is inadequate to provide either real vindication[3] or justice regardless of what enticed the whistleblower to act.

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[1] Nader, Ralph, Peter Petkas, and Kate Blackwell (eds.).  Whistleblowing: The Report of the Conference on Professional Responsibility. New York: Grossman Publishers.  1972.  Measuring how times have changed, Nader cited two causes of complaints that seem common today: corporate contributions to political campaigns and government spying on citizens.

[2] Cf. Hirschman, Albert O. Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations and States. Cambridge, Mass.: Harvard University Press. 1970

[3] For example, Bradley Birkenf1eld, Brandon Coleman, Chris DiIorio,  Theresa Ely, Maeve Kennedy Grimes, Ian Minto, Eric Payne, and Patricia Williams

How to Justify Whistleblowing

How to Justify Whistleblowing

Whistleblowing emerged from a tradition of dissent and the muckraking of books like The Jungle (1905), Unsafe at Any Speed (1965), and Silent Spring (1972).  While the authors of those books were outsiders, whistleblowers stand within the organization and disclose its private information.  Some whistleblowers, like Frank Serpico (1970), exposed illegality and corruption, but others, like Vietnam War opponents John Paul Vann (1963) and Daniel Ellsberg (1971), condemned behavior that violated reasonable and moral expectations.

Each whistleblower is asked to justify behavior that violated her presumed loyalty to her employer.  In Pickering v. Board of Education (1968), Marvin Pickering, a teacher in the Township High School District (Will County, Illinois), argued that he had exercised his First Amendment rights in objecting to a proposed school bond.  The U.S. Supreme Court agreed that his concern was a matter of public interest and the Township had wrongly fired him for his letter to a local newspaper.

Governmental employees found whistleblower protection earlier and, in general, more effectively than their private employer counterparts due in part to their assumed service for the public good.  Current and former federal employees are protected when disclosing not just violations of law, rule, or regulation, but also gross mismanagement, gross waste of funds, abuse of authority, and substantial and specific dangers to public health or safety.  While states vary in their whistleblower protection laws, Oregon provides similar protections to its public employees (and, beginning on January 1, 2017, to nonprofit employees). 

James Cleavenger became a part-time University of Oregon safety officer in 2010.  A year later, when assigned full-time to the graveyard shift, he observed fellow officers’ regular discussions of the “Bowl of Dicks” list – individuals whom the officers disliked.  He later objected to this wasteful departmental practice and was subjected to a wide range of retaliations, ending with his termination in 2012.  His lawsuit claimed the university had violated right to his free speech as well as Oregon’s whistleblower law.  The university finally agreed in 2016 to pay Cleavenger $1 million in settlement of his claims.

Complaints about mismanagement and wasteful operations abound in government whistleblower cases: 

-          Steven Fallon described how the Hayward, California school district squandered money transporting special education students and was harassed as payback. 

-          Ron Klym is one of many Veteran Administration employees who have been punished for describing VA inefficiencies and poor service.

-          Major Joseph Lovelace exposed poor maintenance of National Guard facilities and received performance reviews that effectively forced him out of the service. 

-          The Texas Attorney General issued a cease-and-desist letter to John Owens, who had publicly complained that political considerations deterred the State from acting aggressively enough on fraud charges against Trump University.

-          After he retired, psychologist John Schwade called out the millions of mental health dollars wasted by the State of North Carolina in its prison systems. 

-          Wardens David Trujillo and Ted Peperas denounced jail safety conditions and were fired.

-          Simon Wade complained of mismanagement in his Arizona bomb squad and was fired for insubordination.

Defense of whistleblowing sometimes points to the individual’s right of free speech[1] and, particularly where explicit whistleblower protection laws are lacking, to common law protection of the public interest.  Charges of mismanagement in private companies are not, however, protected activities as they are, at least on paper, in governmental organizations. 

Perceived mismanagement creates the internal discontent that fuels whistleblowing.  When I criticized the goofy budget assumptions of HomeFirst’s CEO, my only protection was the Board’s concern that I might be right.  After the CEO persisted in business practices that I considered irresponsible, I turned in a different direction and began to find legal violations to disclose.  Of course, one person might perceive mismanagement where her boss sees the consequence of a difficult decision.

Most whistleblower complaints involve judgment calls, not undeniable abuses.  The California State Auditor’s March 2017 report on Investigations of Improper Activities by State Agencies and Employees listed 10 cases during the preceding six months that cost the State of less than $20,000 in total.  The State Auditor had, for example, received accusations of the misuse of time by Department of Transportation employees.  Investigation identified one employee whose lunch and smoke breaks were found to be too long by about an hour and a half a day during an 8-month period.  The report was silent on whether the employee offered an excuse or blamed an underlying problem.

The Santa Clara County Counsel’s November 2017 semi-annual report on its whistleblower program referred to 44 hotline contacts.  They included allegations of employees not working a full day, poor department operations, as well as charges of possibly illegal harassment and fraudulent billings (including my own complaint).  Nearly two-thirds of the accusations were unrelated to significant legal matters.

It may be tempting to consider these many small complaints as griping that falls short of real whistleblowing.  Many academics and some courts[2] have restricted whistleblowing to non-trivial matters that have broad public significance.  That inflated conception of whistleblowing aligns with the mistaken concept of whistleblower as courageous and supremely ethical.

Stripped of ethical baggage, the need for whistleblowing to pass a materiality test may serve a practical purpose in determining where to allocate scarce legal resources.  The IRS provides rewards to whistleblowers only when recovery exceeds $2 million, for instance.  My own attorney, operating on a contingency fee basis, calculated differently: when he concluded that case was unlikely to net him more than the $18,000 that he negotiated in settlement with HomeFirst, he discouraged further action.

For group members, whistleblowing emerges out of a base of discontent that reflects ethical and non-ethical concerns, matters of public and private significance, and contraventions of law, policy, good sense, or courtesy.    As a result, the whistleblower, however strong her motivations, may not obtain the protection and sympathy that she deserves.  Her efforts may well come to nothing beyond allowing her to act on a felt need, to which she may retroactively ascribe moral or existential significance.

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[1] Lindblom, Lars.  “Dissolving the Moral Dilemma of Whistleblowing.” Journal of Business Ethics 76 (2007).  Also Vandekerkhove, Wim and M.S. Ronald Commers.  Whistleblowing and Organizational Social Responsibility. Aldershot, Hampshire, England: Ashgate Publishing Company. 2006

[2] For example, Johnson, Roberta Ann. Whistleblowing: When It Works and Why. Boulder: Lynne Rienner Publishers. 2003;  Lindblom, Lars.  “Dissolving the Moral Dilemma of Whistleblowing.” Journal of Business Ethics 76 (2007): 413-426; Vandekerkhove, Wim and M.S. Ronald Commers.  Whistleblowing and Organizational Social Responsibility. Aldershot, Hampshire, England: Ashgate Publishing Company. 2006;  Drake v. Agency for International Development (2008); and the case of Dale Klein

On Not Giving Up

On Not Giving Up

Occasionally whistleblowers speak of feeling vindicated at the end of their ordeals[1].  Their years-long battles testify to whistleblowers’ hope for vindication and their reluctance to give up.  Even where vindication is lacking, there is ample evidence of their determination.

On March 28, 2014, Evan Howington, an oil services contractor employee, boarded an oil rig 100 miles south of New Orleans in the Gulf of Mexico.  He happened to see fluid leaking from the rig into the Gulf water and informed the rig supervisor, who told him not to worry because it was just hydraulic fluid.  A few days later he witnessed three supervisors of the companies that operated the rig intentionally discharge hydraulic fluid and then laugh about doing so.  He not only witnessed the men, he recorded them on his phone.

Fearful that he could be charged with complicity if the company failed to report the discharge, he took his evidence to the Environmental Protection Agency and later spoke with staff at other federal agencies.  An investigation ensued, and a year and a half later Walter Oil & Gas agreed to pay a $400,000 fine for failing to report the discharge.  But this was not enough for Howington.

In May 2017, Howington sued the United States of America for the negligence of the Department of Justice attorney who was in charge of the case against Walters and who negotiated the settlement, which Howington considered an inadequate penalty for its intentional misdeed.  He figured that, according to federal regulations, the fine should be closer to $18 million.

Sometimes suing the federal government pays off although that can take a while.  Robert MacLean was an air marshal when he spoke out against what he believed were unsafe measures taken by the Department of Homeland Security.  He was fired in 2006.  Suits, judgments, and appeals took him to the U.S. Supreme Court, which ruled in his favor in January 2015.  A year later he was back at work, complaining again of retaliations.

Suits against private and non-federal government employers can also drag on through years of appeals by both sides.  North Carolina state trooper Reginald Newberne was fired in 2001 after he spoke out against the misconduct of a fellow trooper, and it wasn’t until 2016 that a jury finally decided in his favor.  Steven Babyak, who disclosed illegal kickbacks paid to doctors by his employer, won only after 8½ years of legal fighting.  Paul Bishop and Robert Kraus had to battle against Wells Fargo and two acquired banks for 10 years before the U.S. Supreme Court decided that their False Claims Act suit could move forward, a suit that may have years more to play out.

Then there are others who engage in extended disputes only to quit in defeat.  Robert Purcell struggled for 18 years before having to give up when the U.S. Supreme Court refused to hear his appeal.  Laura King was fired in 2009 by the St. Tammany Parish (Louisiana) Coroner after she refused to buy him a laptop with grant funds; she finally quit her self-funded appeals in 2016.

Sometimes, even if the whistleblower appears to win, it is not enough.  Howington is one example.  Another is Eric Ben-Artzi, who refused his $8.25 million reward for information against Deutsche Bank’s illegal activities because he thought the wrong people were paying the fine.  Whether the result of his disclosure is successful is, I suppose, a personal judgment that every whistleblower makes – from big-time players like Snowden to the many of us small-time whistleblowers.

When I complained about HomeFirst’s violations of licensing regulations and food handler card requirements, I was vindicated by authorities who judged that the company had operated improperly.  The company was permitted to modify its procedures without penalty, and my complaints led to my termination.  Some my other complaints – the master lease violation, the HUD overbilling, and the County overbilling – I continue to play with even though it is pretty clear after three and more years that no one but me cares.

Throughout our lives we face decisions whether to call out perceived misdeeds.  We sense how far we can push before bad things will happen to us, then we decide what to do.  Usually we stop before we pass the point where the likely blowback is dangerous.  Once we become whistleblowers, though, we are on an unfamiliar path where it is harder to tell when we should stop.  Dropping our unsuccessful complaints negates the value of what we have put into our projects.  Stopping means giving up the pretense of our heroic valor and accepting that we may have had it wrong.  It means getting on with life as lived by others.

An attorney might prod us to continue if he sees the prospect of sufficient contingency fees or thinks we still have funds for the contest.  On our own, as I am now, the thing may eventually yield its disappointing result or starve to death in our arms. Without apology[2], we press on, to ultimate success or failure.

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[1] For example, Theresa Ely, Maeve Kennedy Grimes, Ian Minto, Eric Payne, and Patricia Williams

[2] Cf. Alessandri, Mariana.  “In Praise of Lost Causes.” New York Times.  May 29, 2017.

Figuring Who Is Right in Whistleblower Cases

Figuring Who Is Right in Whistleblower Cases

Suzanne E. Esserman had worked for 23 years at the Indiana Department of Environmental Management (IDEM) when she was made a Senior Environmental Manager in December 2011.  In her new role, she reviewed planned reimbursements to residents for costs associated with the cleanup of underground contamination.  Esserman got a new boss in July 2012, and he put her on a performance improvement plan three months later.  The problem, as he saw it, was she wasn’t working fast enough to complete her assignments.

During early 2013, Esserman was out on medical leave for surgery.  When she returned to work in June, she was assigned a monthly review quota.  She went out on leave again in September and October.  In December, the month before she was fired, she exchanged snarky emails with her boss: he told her to speed it up; she replied that the taxpayers would pay too much for the cleanups – she pointed to one nearly $1,000 adjustment – if she didn’t continue her thorough reviews, but thanks for your feedback. 

IDEM wrote that she was terminated in January 2014 for failing to meet work expectations, and it opposed her request for unemployment benefits.  The Indiana Department of Workforce Development rejected Esserman’s application, noting that she had failed to meet her quotas because her investigations went beyond what her employer asked her to perform.  Esserman argued that she always gave her best effort on the job and she could have been held personally responsible for submitting false claims if she believed that the planned payments were not properly reviewed before they reached her desk.

The Indiana Court of Appeals wrote that, like all employers, IDEM needed to decide on an appropriate balance of efficiency and thoroughness in areas like Esserman’s.  But estimation of that balance is often controversial.  In light of Esserman’s 25 years of service, the Court decided that IDEM had failed to meet its burden of proof that Esserman should have understood that her conduct violated her duty to her employer.  It warned the parties, however, that a claim for unemployment benefits should not be confused with a wrongful termination lawsuit.

After Esserman was fired, she did sue for wrongful termination under Indiana’s False Claims and Whistleblower Protection Act and the State Employees’ Bill of Rights.  The suit was complicated by the fact that no false claims were made or even attempted.  The trial court accepted IDEM’s argument that the Act applied only to private employees, not to someone in Esserman’s position.  Her appeal for reconsideration was accepted, and the case is on its way to being heard in the Indiana Supreme Court.

A key question in Esserman’s whistleblower complaint is whether IDEM was misusing government funds.  If it was, then her objections would be protected activities and she may succeed in her lawsuit.

The answer hinges on the balance issue raised in her unemployment claim dispute: if the expected cost of making excessive payments exceeded the social benefit of achieving complete payment accuracy, then IDEM arguably did misuse state funds by diverting Esserman from her personal mission to get it right.  On the other hand, if the cost of exceptional accuracy outweighed the probable benefits, then IDEM acted reasonably.

Many whistleblower cases involve this problem of finding a fair balance.  If, for example, Wells Fargo’s sales goals and control systems – however faulty they have been found by press, courts, and government agencies – produced (as the bank effectively claimed) greater social benefit, in the form of new services and greater business effectiveness, than social costs, then employee complaints of wrongdoing amounted to a misunderstanding of the nature of that balance.  Or if, as the federal government claims, the NSA surveillance techniques exposed by Edward Snowden provided social benefit (e.g., in fighting terrorism) that outweighed their social cost (e.g., loss of privacy), then Snowden misperceived the balance.

My lack of success in arguing my complaints against HomeFirst may imply that I misread the balance.  Some authorities clearly weighed the factors differently than I did: The Department of Justice attorney warned that the DoJ didn’t like to hurt companies that did good; neither Santa Clara County nor HUD wanted to risk stopping the company’s good work by demanding the return of improperly obtained money.  The California licensing department and the Santa Clara County food inspection group both allowed the company to explain how it had fixed the problems that I identified.

Powerful organizations are constantly playing that balance, and they rigorously defend their view of the scale[1]. HomeFirst echoed the conclusion of Professor Sissela Bok[2] when it claimed that my allegations of the company’s misdeeds were offensive and I had no right to suppose that I was right in my allegations.

As social complexity deepens and groups grow intensely interconnected, more competing perceptions of the proclaimed benefits and charged costs must be weighed.  Multiplying laws and regulations provide an ample context for disputes; expanding government purchases of goods and services unaccompanied by a commensurate investment in resources to test the fairness of the balances leave the determination to the most powerful. 

Whether or not the complaint of Suzanne Esserman, me, or any whistleblower is justified in an unbiased court – if such a place can be found – should not be our determining concern.  What counts for the individual and society is our independent assessment of benefits and costs of organizational actions.  

Organizations already enjoy great power to wreak havoc on individual lives.  In judging cases of retaliation against whistleblowers, the scale must be weighted to favor the whistleblower; we should not pretend that failing to favor the whistleblower is in any way fair.

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

[2] “The whistleblower hopes to stop the game; but since he is neither referee nor coach, and since he blows the whistle on his own team, his act is seen as a violation of loyalty.”  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

The Punishment for Whistleblowing

The Punishment for Whistleblowing

News reports on whistleblowers tend to describe three kinds of cases: (a) False Claims Act suits, which focus on the accused organization’s overcharging the government and care little about the whistleblower except as a source of evidence; (b) complaints involving private companies, which are usually settled out of court to limit the availability of information; and (c) disclosures by employees who accuse public agencies or employees of wrongdoing.   

The retaliations against the whistleblower described in these reports come in waves.  First come the usual informal[1] organizational actions – such as different forms of ostracism and modifications of the protester’s job.   Examples from articles over the past month or so:

Joel Allen – mental health was questioned by his boss in a large setting

Steven Babyak – sales region reduced but quota increased

Joann Brown – verbal abuse, exclusion from leadership training event,

Sabrina Burton – lost university grant and committee seats, physically threatened.

April Grundfor – assigned to work area with no private phone access, no adequate computers/printers, denied access to patient medical records.

Dale Klein – stripped of hospital duties.

Kim Martin – stripped of supervisory responsibility.

Walter Tamosaitis – moved to basement office with no meaningful work for 15 months.

Barbara Temeck ­– office moved to basement

Pamela Treadwell – threatened with jail time for the misdeed she disclosed.

Richard Trusz – limited exposure to clients, reduced responsibilities,

Occasionally, informal actions assume extreme forms:

Kim Martin – cardboard rats place on her desk.

Joe Crystal – a dead rat placed on his patrol car windshield.

Then come formal actions that typically involve official documentation:

Jonathan Blaylock – challenged on sick time & hours worked, unusual discipline for alleged mistakes, performance improvement plan.

Joann Brown – critical performance review, vague & impossible performance improvement plan (fairly common retaliations; also see: April Grundfor)

Dale Klein – lost patient contact and hospital privileges; the VA closed his pain management clinic

Joseph Lovelace – coded language in performance appraisal that made promotion impossible

David Scrip – disciplined for trivial infractions.

Jerry Speziale – denied security credentials, work vehicle taken away, denied medical leave benefits for terminally ill wife.

Barbara Temeck ­– demoted, clinical privileges withdrawn.

Frank Timek – suspension without pay, job changed.

The final formal action is termination, which leads to some sort of complaint by the whistleblower.  The accused organization sometimes responds with its own explanations that the whistleblower without disproving his allegations.  These false criticisms will be used to fight the whistleblower’s application for unemployment benefits and will complicate his personal relations and his search for a new job.

Joel Allen – vandalism, threatened other employees, made false allegations.

Svetlana Blackburn – ongoing performance problems (a common accusation).

Jason Blasdell – disruptive.

Sabrina Burton – behaved unprofessionally, disrespectful, harassing and intimidating behavior (another common complaint).

Glen Brooks – lying.

Johnny Burris – complaints from customers.

John Connors – violated media policy.

Stephen Furst – obscene photos on his computer.

Woody Hildebrandt – stole from school.

Kuaahtemoc Rodriguez – violated privacy policy.

Walter Tamosaitis – lack of work (another common explanation; for example, Tracy Woodward).

Robert Trojan – boss sent email to broad list suggesting he’d been fired for cause

Even after termination, the organization may instigate further retaliations against the whistleblower.  It may informally discourage other organizations from hiring the whistleblower, or it may take more aggressive actions against him:

Craig Price – employer held him responsible for $14,000 customer loss, comment on the financial industry’s U5 record (the U5 record comment is a common technique of banks: Jeremy received one after being fired by Wells Fargo; Johnny Burris also was hit by comments that kept him from being hired at other financial firms).

Nick Ramler – sued by the organization; Thomas Guilfole was also sued by his former employer after his whistleblower complaint was dismissed.

The combined effects of these retaliations can make whistleblowers regret that they ever made their disclosures:

Lisa Magin – “It has been hell”, almost lost her home, no medical insurance.

Research[2] on the experiences of whistleblowers has found similar types of retaliations across broader populations.  My own experience at HomeFirst, though far less harsh than that of most whistleblowers, included many of the same elements: the ostracism, exclusion from meetings, reduction in responsibilities, reprimands for actions that might not have earned reprimands for others, termination without notice, and later the threat of a lawsuit if I continued to complain about the company’s behavior or if I contacted anyone at the company.

Just as the misdeeds disclosed by whistleblowers are common in corporations, these retaliations resemble actions that organizations regularly take against employees they no longer appreciate and would like to see leave, even without whistleblowing as a factor.  Thus, it is no surprise that the organization claims that the whistleblowing did not influence its behavior – the wrongdoing and the behavior toward an unwanted employee are actions the organization takes all the time.

Although the personal pain they cause can be intense, retaliations against whistleblowers are commonplace.  By themselves, they raise no one to an exalted status; they surprise no one.  Likewise, the organization’s disingenuous defense of its attack on an employee who speaks up should surprise no one.  Yet its claim on the loyalty and commitment of employees too often garners sympathy[3].

The decision to blow a whistle changes the game for both parties.  It moves the organizational misdeed from the routine to the noteworthy and actions against the employee from conventional to unlawful (or at least reprehensible). Whistleblowing shifts the expression of an employee’s displeasure from simply leaving a nasty situation to malicious behavior that may be protected by law.

The punishment dealt to the whistleblower provides a shortcut for each side: the tedious dickering over relations and behavior that should be improved is exchanged for a high cost transaction in which both sides claim, without convincing justification, to take the higher ethical ground.

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[1] The distinction between informal and formal control systems is discussed in 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

[2] For example, Devine, Tom and Tarek F. Maassarani. The Corporate Whistleblower’s Survival Guide. San Francisco: Berrett-Koehler Publishers, Inc. 2011.  “12 Most Common retaliation Tactics.” Forbes.  See also my earlier post.

[3] For example, Schrag, Brian.  “The Moral Significance of Employee Loyalty.” 11.1 (January 2001): 41-66; and Goldsmith, Marshall. “How to Increase Employee Commitment.” Harvard Business Review. January 28, 2008

The Role of False Memories

The Role of False Memories

Elizabeth Loftus’s research into human memory sheds light on the whistleblower’s long battle with her accused wrongdoers over their recollections of events. 

In “Brief Exposure to Misinformation Can Lead to Long-Term False Memories” study participants were shown slides depicting two incidents – a man breaking into a car and another man taking a woman’s wallet.  Thirty minutes later some participants were given false narrations of the incidents (e.g., the man placed the wallet in his jacket rather than his pants).  The participants were asked shortly afterward what they remembered from the incidents, and 1.5 years later they were asked again.  Loftus and her fellow researchers found that the mistaken memories were retained just as well as the correct memories were.

In “Make-Believe Memories,” Loftus observed that memories are malleable.  After-the-fact suggestions can contaminate what is recalled, and false memories can be implanted as though true.  Her controversial conclusion has been that eye-witness evidence of a wrongdoing – say, sexual abuse, corporate misfeasance, or individual misbehavior on the job – is not reliable on its own.

Attorney Joanne Hoeper disclosed fraudulent billings of sewer repairs and was fired by the City of San Francisco.  After a jury decided unanimously to award Hoeper $2 million at the end of her three-year long retaliation suit in March, the City’s attorney said, “We are surprised and disappointed.  We take our responsibilities to our clients and to the public seriously.”  In this instance, her recollection held.  Hoeper celebrated, “The 12 jurors looked at the same thing I saw back in 2012.” 

Sometime around 2005, Wells Fargo Bank began to form its narration of employees who revealed the opening of false customer accounts: they were not friends of the bank.  The creation of up to 2 million unauthorized accounts continued, of course.  By the time of its $35 million settlement with the U.S. Comptroller of the Currency in 2016, the bank was proud to say it “neither admits nor denies” an assortment of misbehaviors, including having engaged in reckless, unsafe or unsound banking practices that were part of a pattern of misconduct.

Corporations accused by the government of wrongdoing frequently settle the matter with the payment of a large sum of money but without admitting they did anything wrong[1].  Wells Fargo’s recollection of the facts was so well shaped – and so contrary to, for example, Senator Elizabeth Warren’s view which calls for criminal prosecution – that its board-sponsored investigation could conclude the problem was merely one of lax oversight, particularly on the part of former CEO Stumpf and former head of Community Banking Tolstedt.  There was no evidence, the report said in a passing footnote, of systematic retaliation against the employees the bank hurt after they reported the misconduct.

In my dance with HomeFirst, two sorts of recollections came into play.  The first was small and discrete: in August 2013, shortly after I disclosed the County overbilling externally and the licensing violation internally, the board’s executive and finance committee members met.  There, Board Chair St. John-Crane told me not to reveal any more problems externally. 

Separately after the meeting, Audit Committee Chair Scordelis confirmed the directive, but he encouraged me to talk with him on such matters.  A November letter from Scordelis and St. John-Crane (responding to my whistleblower complaint to Scordelis) again tacitly affirmed the directive.  The day after my March 2014 admission that I had reported the bid collusion issue externally, Board director Chin suggested to other directors that I had disobeyed the order.  St. John-Crane then informed their attorney that the board members had decided I should be fired for insubordination.

The attorney warned that the word “insubordination” should not be used when dealing with a whistleblower.  The facts then changed.  When St. John-Crane recalled the August incident three weeks later, she had not told me not to report compliance problems; quite the contrary, compliance was a top priority.  HomeFirst’s recollection continued in that vein a year-and-a-half later in their response to my retaliation complaint.

A second, more conventional strategy for molding memories is the organization’s repeated pronouncement of its honesty and integrity.  Faced with a new lawsuit relating to its improper opening of customer accounts, this time on behalf of immigrants, Wells Fargo declared, “These allegations are inconsistent with our policies, values and the relationships we work hard to build with all parts of our community.”  Echoing HomeFirst’s reaction to my complaints, Wells Fargo felt, “These assertions are offensive.”  The bank had similarly proclaimed its virtue in this matter in 2013, 2015, and 2016.

Since 2003, HomeFirst has publicly declared as its purpose to end homelessness in Santa Clara County.  Also since 2003, the company has advertised the value of the housing first model it says it employs today to house the homeless.  The fact that area homelessness remains epidemic has not discouraged HomeFirst’s insistence on the value of its work. 

Like Wells Fargo’s delusional assertions – perhaps made with an eye toward a defense against possible lawsuits – HomeFirst’s contentions would be of no consequence if they were not reflected in public policy.  But Santa Clara County and HUD both relied on their recollection of HomeFirst’s good work to defer demanding repayment of money unfairly taken from them by HomeFirst.

While whistleblowers are no less susceptible to misremembering the past, the scale and reach of organizations enables them to use flawed descriptions to do far greater harm to those who challenge them and to the public in general.  The cases of Bill Bado, the whistleblower whom Wells Fargo fired, and the people associated with the 2 million accounts that Wells Fargo opened without proper authorization provide examples of that organizational misuse of power.

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[1] Cf. Khuzami, Robert.  “Testimony on ‘Examining the Settlement Practices of U.S. Financial Regulators.’” Committee of Financial Services, U.S. House of Representatives.  May 17, 2012.  See also the recent case of whistleblower Dr. Lance Garber.