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Re: whistleblowers

Postby admin » Thu Feb 23, 2012 10:31 am

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Thursday, February 23, 2012

Whistle-blowers key in health care fraud fight

By Kelly Kennedy, USA TODAY

WASHINGTON – About 36% of the almost $16 billion recovered by the Justice Department in health care whistle-blower fraud cases has come since 2009, records show, which reflects an increased focus on fighting fraud.

By Mark Wilson, Getty Images
Health and Human Services Secretary Kathleen Sebelius said her department's budget included an additional $300 million to take on health care fraud.
A bipartisan coalition backed strengthening the False Claims Act in 2009, and the Obama administration pushed for more money and tougher fraud-fighting provisions in the 2010 health care law, said Tony West, an assistant attorney general in the Justice Department's civil division.

The health care law "allows us to use it more effectively," West said of the False Claims Act. Whistle-blower cases are one of the "primary tools" they use to fight fraud, he said. "We've made health care fraud such a high priority; we've been using this tool very, very aggressively."

· STORY: $4.1B recovered from health care fraud

In the past 20 years, whistle-blower cases have increased so they average about three times as much money back to the government as non-whistle-blower cases.

In 2011, the federal government broke all records, bringing in nearly $2.3 billion in whistle-blower settlements and judgments. Since 1987, whistle-blower qui tam cases have earned about $16 billion; non-whistle-blower cases have collected about $5 billion.

Under the False Claims Act, the government can recover up to three times the amount fraudulently taken by a company, according to Justice Department spokesman Charles Miller. Large health care fraud cases often involve pharmaceutical companies either falsely advertising a product or marketing it for a use that hasn't been approved by the FDA.

Health and Human Services Secretary Kathleen Sebelius said last week that her budget included an additional $300 million to take on health care fraud.

Despite the successes, the law could be used even more aggressively, said Stephen Kohn, director of the National Whistleblowers Center. The non-partisan center educates the public about the law, as well as working to protect whistle-blowers. "About 3,500 fraud cases have not been investigated," he said, citing Justice Department figures. "Why don't they get the resources? For every case they prosecute, they bring in more money."

West agreed and said the government is moving in that direction. In 2011, the federal government prosecuted 417 whistle-blower cases, compared with 231 in 2008.

Three years ago, the government recovered $5 for every dollar spent fighting fraud. Recently, that increased to $7 for each $1. Government agencies, including the departments of Justice and Health and Human Services, have begun combining resources. That makes their efforts more efficient and better targeted, West said, and means that there are more resources available.

"The more resources we have, the more we can take on," he said.

Most whistle-blowers try to report fraud to company managers first and go to the government when they grow frustrated when the fraud continues, West said. "We find that their information is usually very credible," he said, but "we reject more cases than we accept. We're pretty choosy."

Justice Department action can have long-term consequences for a company, including bankruptcy, West said. That means Justice will try other steps beyond lawsuits and tend to focus on large cases that have the greatest impact, he said.

"It's not just the big cases that attract our attention," West said. "We look at whether public health is at risk."

In a 2010 case, Justice targeted a group of dentists and recovered about $25 million.

"They were engaging in practices that were absolutely barbaric," West said. One child received 16 unnecessary root canals in one sitting, he said.

http://www.usatoday.com/news/washington ... 53212468/1
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Re: whistleblowers

Postby admin » Thu Feb 23, 2012 10:11 am

From: Roger Boisjoly [mailto:boisjoly@sisna.com]
Sent: Wednesday, November 03, 2010 10:36 AM
To: Killoran Joe
Subject: Long Overdue Communication
Dear Joe:

I received the book you sent me titled $WINDLER$ and wish to express my very deep appreciation and thanks. However, at the same time I would like to express my shameful lack of communication with you for quite some time now. I almost don't know where to begin my explanation to you for my behavior because you have beaten me to do what I was planning to do recently by sending the book.

Several weeks ago, I had planned to write to you but a vacation with my wife put off that communication until now. Even in your latest note to me dated October 22, 2010, you thanked me for being your mentor and I am thrilled to know and to be reminded by you that my actions and lectures explaining my position for doing what I did on the Challenger launch decision has made a positive impact on you.

I tell you this because my only initial purpose in lecturing to students and practitioners was to inform my audiences about the overwhelming lack of Ethics, Integrity and Organizational Behavior that took place during the Challenger launch decision process and also that what I experienced was typical of our Industrial and Government complexes here in the U. S. and my hope was to try and make a difference in how everyone would act in their chosen professions.

After almost 24 years of speaking, I know that I have accomplished my original goal from some of the feedback I have received through the years and sometimes many years after some had heard me speak. I use this as my opening to what I have to say that will follow.

I want you to know that I have agreed and continue to agree with everything that you have tried to accomplish and have accomplished to some extent. You should be very proud of what you have accomplished and continue to accomplish. I admire your ability to stay the course through all the negative backlash that you had to contend with from the Establishment in Canada.

The heart of what I have to confess to you is that outside of being able to communicate my lectures to others, I have been essentially unable to do anything else outside of my lectures, except to help some Whistleblowers (Truthtellers - my term) with advice to help them cope with the circumstances they would find themselves in as the result of their actions concerning proper Ethics and Integrity. I do not know if I have ever informed you that I was diagnosed with Post Traumatic Stress Disorder (PTSD) from my ordeal with Challenger but I want to tell you now, not by way of excuse but for purposes of explanation.

The heart of what I have to confess to you is that outside of being able to communicate my lectures to others, I have been essentially unable to do anything else outside of my lectures, except to help some Whistleblowers (Truthtellers - my term) with advice to help them cope with the circumstances they would find themselves in as the result of their actions concerning proper Ethics and Integrity. I do not know if I have ever informed you that I was diagnosed with Post Traumatic Stress Disorder (PTSD) from my ordeal with Challenger but I want to tell you now, not by way of excuse but for purposes of explanation.

The 63 initial free college lectures I gave over three college semesters starting in January 1987 that were fully supported by my psychologist as the best thing I could do for myself to help me heal from PTSD provided me with a relatively quick recovery from PTSD and allowed me to work myself back into the mainstream of life with one very large restriction as told to me by my psychologist at the end of my last visit with him sometime in 1988. He told me that the speaking would help me accelerate my return to society much quicker than if I had just been able to see him over the course of perhaps 5 to 7 years without having the chance to share my story with others.

However, he also told me that PSTD is not fully curable and that I will definitely be subject to many unknown triggers that could affect me in a very negative way once again and that I would need to protect myself against such events to remain viable in general society. My psychologist's parting words of advice were to seriously consider at first to not listen to any nightly news programs, take a subscription to a newspaper or news magazine or listen to any talk radio programs so I would not once again be subjected to negative bombardment of information that could create a serious trigger resulting in a relapse into PTSD. I followed his advice for quite some time and as a result I remained quite upbeat and happy.

I loved my new career as a Professional Engineer in my own home based company with my wife totally free from the corporate structure of organizational misbehavior, etc. and I especially was thrilled to be able to use all my Aerospace Engineering experience in my practice as a Forensic Engineering consultant and Expert Witness primarily in Product Liability, Trade Secrets and Ethics cases. Even so, the arm of blackball retribution followed me into my own business by companies refusing to allow me to be hired on the Defense side of cases and so my business was unfortunately skewed towards working for Plaintiffs.

All this occurred from the erroneous Corporate belief that all Truthtellers should be prevented from having any type of decent recovery from the event in which they participated to correct a wrong. Interestingly, the few Defense cases that I managed to secure were cases that I won big time for my client attorneys but even with that, the invisible Blackball continued against me. After about five years of forensic work coupled with lecturing, I was literally on top of the world with my wildest dreams coming true and my wife and I were thrilled that we had come back so far from from the depths of the hell we were in during the aftermath of Challenger.

Well that feeling of well-being changed rather quickly when the Defense Bar of Attorneys in Nevada decided to try and run me out of the business by trying to find the triggers that would destroy either my business by having me revisit PTSD or by creating such a pressure cooker environment that I would probably have a heart attack. I figured that they were tired of being beaten in court every time by me as they continued to attempt to win their cases with smoke and mirrors instead of the true facts in the cases which is what I always used and was able to put my expert testimony in layperson's terms so that the jury was fully able to understand what I was explaining to them and that made all the Nevada defense attorneys very upset.

They made this attempt to destroy me by brutalizing me during two successive depositions by asking me questions on the two separate cases that had nothing to do with my case work but rather with my medical history with PTSD, Challenger and any other negative things they could bring up during over five hours of pounding questioning. Although I never missed an answer to any of their questions, they were killing me one question at a time and by the time the depositions were over, I was physically ill at home for the better part of the week succeeding each deposition but the attorneys never had a clue that they had been successful at the time.

After this happened in two successive depositions in Nevada, I had a serious discussion with my wife to discuss my health. I told her that we could continue to make a significant amount of badly needed income and have a very short life due to either a recurrence of PTSD or heart attack or we could get out of the forensic business after I completed my active cases in other states and have a chance for a longer life at a very much reduced income because lecturing only comprised about 10 to 15 percent of our income. The decision was easy from a health standpoint but very difficult to make from an income standpoint because I was not 100% confident that I could pull off my second business transition into a new business model by only lecturing full time, especially since I had been receiving invitations to speak up to this point without any promotion effort on my part.

This was a very sad occasion for me personally because I really loved what I was doing and was always able to act with full Integrity and there was no one upstream of me that could direct me to do otherwise. Well. to make a long story short, the second transition worked out okay and we ended up having sufficient funds for our needs plus a bit more and that is where we ended up. I officially retired at the end of 2005 from accepting invitations to speak where I had to fly to a destination because the security people at airports were putting me through hell on just about every flight I took and it did not matter that I had flown over a million miles on Delta alone. I felt at one point that I had the word terrorists carved into my forehead as I continued to be singled out for searches when passengers all around me were getting a pass.

What this is all leading up to is the fact that I still need to be very careful about possible triggers to avoid another bout with PTSD. To that end you have not heard from me for quite some time. I cannot remember the last time I communicated to you about something that you have sent to me and that is because I was starting to feel the negative effects from your struggles and I had to terminate my contact or potentially suffer another round of PTSD and that was and still is something I never want to experience again.

My good friend, I am so sorry that I had not informed you earlier about my problems with reading so much about your struggles and its upsetting effects on me. Please don't take what I am telling you as lack of my support for everything that you have done and are still doing, because I am still near or at your number one fan position but just unable to write and express my support until now.

Also, please know that this is very difficult for me to express to you since you have been so supportive of me. It's simply the PTSD and the fear of sliding back that keeps me focused on what the psychologist told me to do and it has worked for me nearly 25 years. Please accept my deepest apology for not writing to you sooner.

Best Regards,


P.S. I continue to speak about four times each year at seminars arranged in Southern California by my very good professor friend, Mark Maier, and his wife. The seminars are all about Leadership versus Dictatorship type management and I speak about Challenger as a model for what goes wrong when professionals abdicate their Integrity.

I am currently in the process of giving all my written and recorded work to the Chapman University Library to archive all the material I have on Challenger and all my lectures on various related subjects. My wife and I drive from our home in Nephi, Utah and back to participate and thus avoid airport security. We have a wonderful time as we are treated very well by out hosts and audiences.

Other than getting older (I am now 72) we are as well as can be expected at this point in our lives. I sincerely hope that this note
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Re: whistleblowers

Postby admin » Thu Feb 23, 2012 10:07 am

images.jpeg (12.2 KiB) Viewed 8776 times
----- Original Message -----
From: Roger Boisjoly boisjoly@sisna.com
To: Joseph Killoran
Sent: August 18, 2003 3:27 AM

Subject: Re: IMAGINE: Made-in-Canada "Truthsayer" protection laws that are better

Dear Joe:

I hope the people in Canada grasp the significance of the difference between the terms "Whistleblower" and "Truthsayer/Truthteller." The first being the "Kiss of Death" (concerning career viability) for the person(s) sticking his/her neck out to attempt to correct a wrongdoing or stop a negative event because of all the negative interpretations by the "establishment" associated with the definition of "Whistleblower." However, use of the second term, "Truthsayer/Truthteller," would make it almost impossible for the "establishment" to twist the meaning into a negative interpretation, thus giving the person(s) involved the proper deserved credit and the very real chance to maintain a continuing desirable career.

I send this note because in the United States the public doesn't have a clue about the significant difference between the terms and the "establishment" (industrial complex & government) don't want any changes so they can continue to crush those who speak out. I wish you the best in making the attempt to create what I know to be a necessary change for the good of everyone, not only for those who are on the front line making the attempt to expose the truth.

Best Regards,


Roger Boisjoly-The Challenger Disaster

P.S. Feel free to quote my statements in any of your materials, if you desire to do so.
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Re: whistleblowers

Postby admin » Fri Feb 17, 2012 4:32 pm

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First Posted: 02/16/2012 10:29 pm
Citi Whistleblower: 'I Did It For My Children, My Grandchildren'

Sherry Hunt, Citigroup Whistleblower: 'I Have No Regrets'

* Citigroup settles mortgage fraud case for $158.3 mln

* Whistleblower says lawsuit followed bank's inaction

* Nearly one-third of insured loans went into default

* Bank acknowledged responsibility, says making changes

By Jonathan Stempel

Feb 16 (Reuters) - It wasn't Sherry Hunt's original intent to go public on the shoddy quality control at a mortgage unit at Citigroup Inc, her employer since 2004.

But by March 2011, as it became apparent to her that the problems were getting worse and not being addressed, the Missouri quality assurance manager decided enough was enough.

"I set up an appointment with human resources and ethics and told them everything," Hunt recalled in a telephone interview. "They did some cursory investigation. The sad part is, they never ever told me, 'Sherry, you were right,' or 'Sherry, you're looking at this wrong.' There were no assurances."

Instead, Hunt, who got her start in the mortgage industry in 1975 at age 18, filed a whistleblower lawsuit against Citigroup, the third-largest U.S. bank by assets.

The United States joined the civil fraud case, which raised claims under the False Claims Act, a federal law designed to recover money taken from the government by fraud, and discourage further wrongdoing. Whistleblowers can receive up to 25 percent of settlement amounts in such cases.

On Wednesday, Citigroup agreed to pay $158.3 million to settle. Hunt said her share will be $31 million, before taxes and attorney fees. Her lawyer declined to disclose those fees.

In settling, Citigroup accepted responsibility for conduct alleged in the complaint, dating back to 2004.

The government accused CitiMortgage of misleading it into insuring thousands of risky home loans that it knew or should have known did not qualify for insurance from the Federal Housing Agency, costing taxpayers nearly $200 million in claims.

CitiMortgage had certified for FHA insurance nearly 30,000 home loans valued at more than $4.8 billion since 2004, but more than 30 percent -- or 9,636 loans -- had gone into default, the Justice Department said. The default rate topped 47 percent for such loans made in 2006 and 2007, it added.

The government also said CitiMortgage failed to report many underwriting flaws and other problems as required to the FHA, part of the U.S. Department of Housing and Urban Development. This even extended to mortgages where borrowers were so stressed that they could not make their first payment.


In the settlement, Citigroup accepted responsibility for improperly certifying many loans for insurance, and failing to comply with disclosure rules.

A bank spokesman, Mark Rodgers, said the New York-based bank had improved its procedures, and plans to continue participation in the FHA program. Citigroup declined to comment on allegations in the complaint or by Hunt.

The complaint contended that senior bank personnel applied "brute force" to quality control managers to effectively sweep "defects" under the rug.

Hunt said such defects, mostly the fault of borrowers, included mismatched signatures on loan documents, white-out on income documentation, and mistakes on employment statuses. She said there were also errors on whether borrowers planned to live in homes they were buying as required for FHA loans.

But Citigroup had tied some salaries to the infrequency with which such defects cropped up, according to the complaint.

Hunt lives with her husband in Silex, Missouri, a St. Louis suburb close to CitiMortgage headquarters in O'Fallon, Missouri.

She said she began working in the mortgage industry in 1975 at the First National Bank of Fairbanks in Alaska, and has since April 2008 been a vice president and quality assurance manager at CitiMortgage.

At CitiMortgage, Hunt said she got pressure to keep the number of defects down, especially if the percentage were above the 5 percent that would be considered acceptable.

She recalled a January 2011 "Star Players Award" ceremony attended by about 1,000 people, to honor workers who challenged defects reported by the quality control unit.

"Three people won this award -- they stood up, everyone applauded, and they (were told) they effectively rebutted Quality Assurance's findings," Hunt recalled. "That statement made my team members and other team members feel like morons: that they were making bad decisions, when they were not."

By mid-year, long after she had first raised concern to the human resources unit, she recalled that "upper senior management told me and one of my peers that our asses were on the line if these defects didn't come down. I took that as a threat. That was the final act that pushed me into the direction I went."


What stands out is that some of the conduct targeted in the complaint took place so late -- the middle of 2011.

This was more than four years after the nation's housing downturn began, and nearly three years after a global financial crisis that resulted in Citigroup losing $27.7 billion in 2008 and accepting $45 billion of taxpayer bailouts.

While the bank has since repaid the government, longtime shareholders are still paying a price, with the stock down more than 94 percent since the end of 2006.

Finley Gibbs, Hunt's lawyer, said he reached out to the Justice Department before filing the lawsuit in August. The lawsuit in Manhattan federal court was kept secret until Wednesday.

"This case, and Citi's reaction to this case, exemplifies the reason we have the False Claims Act," he said. "It is a structure to allow the little guy to stand up when something is being done wrong that harms the U.S. government and taxpayers."

More than $34 billion has been recovered in False Claims Act cases since 1986, with the largest award totaling $1 billion, according to the Taxpayers Against Fraud Education Fund.

Hunt said she had seen improvements at CitiMortgage. "The reporting structure of the quality assurance function has changed, and I do believe the attitude of upper management is 'we're going to do this right.'"

Gibbs said Hunt remains a Citigroup employee, but has not been in the office for "a few weeks."

Hunt said she hoped the case would leave her colleagues feeling comfortable to do what's right if a comparable situation arose.

"I came forward out of a passion for what I do, and what I chose for a career, and I did it for my children, my grandchildren," she said. "I'm hoping that they can have the same opportunities that I had when I bought my first house and started my family.

"I didn't care if I lost my house, and I knew I would risk my career, but I was willing to go forward even if we had to start over in an apartment and I had to get a job outside the mortgage industry," she added. "And I have no regrets."

The case is U.S. ex rel. Hunt v. Citigroup Inc et al, U.S. District Court, Southern District of New York, No. 11-05473. (Editing by Robert Birsel)

http://www.huffingtonpost.com/2012/02/1 ... f=business
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Re: whistleblowers

Postby admin » Sun Jan 08, 2012 11:06 am

By Aruna Viswanatha
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http://www.huffingtonpost.com/2012/01/0 ... f=business

Jan 6 (Reuters) - Whistleblowers earned more than $532 million in 2011 through lawsuits alleging fraud against the U.S. government, a record for such payouts, according to a law firm study published on Friday.

Private parties suing on the behalf of the government collected $140 million more than they did the previous year, even as the Justice Department's total civil fraud sanctions remained consistent, the law firm Gibson, Dunn & Crutcher said.

The DOJ recovered some $3.02 billion last year through cases under the False Claims Act - the third-largest recovery ever, just shy of the $3.09 billion it won through cases in 2010.

But for the whistleblowers that helped bring them, 2011 was an even better year.

"The bounty provisions are so attractive," said Andrew Tulumello, who helps lead Gibson Dunn's Washington office and worked on the report. "When you look at $540 million going to basically the plaintiffs bar, that is going to attract more and more interest."

The Justice Department has used the Civil War-era law, designed to root out unscrupulous contractors, to aggressively go after healthcare providers and pharmaceutical companies for overcharging Medicare and Medicaid.

The law provides for whistleblowers to earn up to 30 percent of any recovery and in recent years such tipsters - referred to as relators in False Claims parlance - have helped bring an increasing number of the government's cases.

Eighty-four percent of such cases opened last year were brought by whistleblowers, up from 75 percent the year before. Twenty-five years ago, only 8 percent of the government's cases were based on lawsuits from relators.

The record payouts in 2011 come amid the ramp-up of a new whistleblower bounty program created by the Dodd-Frank financial regulatory overhaul to encourage individuals with information about securities law violations to come forward. That program has yet to provide its first award.

The 2011 numbers - based on the government's fiscal year from October through September - are helped by one of the largest payouts ever, to a former GlaxoSmithKline Plc employee.

In October 2010, a GSK quality manager won $96 million for exposing manufacturing defects at a plant in Puerto Rico. The company paid $750 million to settle the charges.

Whistleblowers earn a cut based on how far they advance a case before the government takes over. In cases where the Justice Department declines to intervene, they can win an even greater share of any eventual settlement.

The vast majority of the 2011 awards - some $490 million - came in cases where the Justice Department joined the case. Another $42 million came from cases the government declined to pursue.

(Reporting By Aruna Viswanatha; editing by Andre Grenon)
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Re: whistleblowers

Postby admin » Thu Oct 20, 2011 11:00 am

How Bank of America Covered Up Fraud by Silencing Whisteleblowers

By Michael Hudson, IWatch News
Posted on October 13, 2011, Printed on October 19, 2011
http://www.alternet.org/story/152723/ho ... tleblowers

In the summer of 2007, a team of corporate investigators sifted through mounds of paper pulled from shred bins at Countrywide Financial Corp. mortgage shops in and around Boston.
By intercepting the documents before they were sliced by the shredder, the investigators were able to uncover what they believed was evidence that branch employees had used scissors, tape and Wite-Out to create fake bank statements, inflated property appraisals and other phony paperwork. Inside the heaps of paper, for example, they found mock-ups that indicated to investigators that workers had, as a matter of routine, literally cut and pasted the address for one home onto an appraisal for a completely different piece of property.
Eileen Foster, the company’s new fraud investigations chief, had seen a lot of slippery behavior in her two-plus decades in the banking business. But she’d never seen anything like this.
Countrywide protected fraudsters by silencing whistleblowers, say former employees

Todd Wawrychuk/Image Group LA
Eileen Foster was mortgage fraud investigations chief for Countrywide Financial Corp., which eventually became Bank of America.
“You’re looking at it and you’re going, Oh my God, how did it get to this point?” Foster recalls. “How do you get people to go to work every day and do these things and think it’s okay?”
More surprises followed. She began to get pushback, she claims, from company officials who were unhappy with the investigation.
One executive, Foster says, sent an email to dozens of workers in the Boston region, warning them the fraud unit was on the case and not to put anything in their emails or instant messages that might be used against them. Another, she says, called her and growled into the phone: “I’m g--d---ed sick and tired of these witch hunts.”
Her team was not allowed to interview a senior manager who oversaw the branches. Instead, she says, Countrywide’s Employee Relations Department did the interview and then let the manager’s boss vet the transcript before it was provided to Foster and the fraud unit.
In the end, dozens of employees were let go and six branches were shut down. But Foster worried some of the worst actors had escaped unscathed. She suspected, she says, that something wasn’t right with Countrywide’s culture — and that it was going to be rough going for her as she and her team dug into the methods used by Countrywide’s sales machine.
By early 2008, she claims, she’d concluded that many in Countrywide’s chain of command were working to cover up massive fraud within the company — outing and then firing whistleblowers who tried to report forgery and other misconduct. People who spoke up, she says, were “taken out.”
By the fall of 2008, she was out of a job too. Countrywide’s new owner, Bank of America Corp., told her it was firing her for “unprofessional conduct.”
Foster began a three-year battle to clear her name and establish that she and other employees had been punished for doing the right thing. Last week, the U.S. Department of Labor ruled that Bank of America had illegally fired her as payback for exposing fraud and retaliation against whistleblowers. It ordered the bank to reinstate her and pay her some $930,000.
Bank of America denies Foster’s allegations and stands behind its decision to fire her. Foster sees the ruling as a vindication of her decision to keep fighting.
“I don’t let people bully me, intimidate me and coerce me,” Foster told iWatch News during a series of interviews. “And it’s just not right that people don’t know what happened here and how it happened.”
‘Greedy people’
This is the story of Eileen Foster’s fight against the nation’s largest bank and what was once the nation’s largest mortgage lender. It is also the story of other former Countrywide workers who claim they, too, fought against a culture of corruption that protected fraudsters, abused borrowers and helped land Bank of America in a quagmire of legal and financial woes.
In government records and in interviews with iWatch News, 30 former employees charge that Countrywide executives encouraged or condoned fraud. The misconduct, they say, included falsified income documentation and other tactics that helped steer borrowers into bad mortgages.
Eighteen of these ex-employees, including Foster, claim they were demoted or fired for questioning fraud. They say sales managers, personnel executives and other company officials used intimidation and firings to silence whistleblowers.
A former loan-underwriting manager in northern California, for example, claimed Countrywide retaliated against her after she sent an email to the company’s founder and chief executive, Angelo Mozilo, about questionable lending practices. The ex-manager, Enid Thompson, warned Mozilo in March 2007 that “greedy unethical people” were pressuring workers to approve loans without regard for borrowers’ ability to pay, according to a lawsuit [3] in Contra Costa Superior Court.
Within 12 hours, Thompson claimed, Countrywide executives began a campaign of reprisal, reducing her duties and transferring staffers off her team. Corporate minions, she charged, ransacked her desk, broke her computer and removed her printer and personal things.
Soon after, she said, she was fired. Her lawsuit was resolved last year. The terms were not disclosed.
Bank of America officials deny Countrywide or Bank of America retaliated against Foster, Thompson or others who reported fraud. The bank says Foster’s firing was based only on her “management style.” It says it takes fraud seriously and never punishes workers who report wrongdoing up the corporate ladder.
When fraud happens, Bank of America spokesman Rick Simon says, “the lender is almost always a victim, even if the fraud is perpetrated by individual employees. Fraud is costly, so lenders necessarily invest heavily in both preventing and investigating it.”
When it uncovers fraud, Simon says, the bank takes “appropriate actions,” including firing the employees involved and cooperating with law-enforcement authorities in criminal investigations.
Mozilo’s attorney, David Siegel, told iWatch News it was “unlikely that Mr. Mozilo either would have had a direct role with, or would recall, specific employee grievances, and it would be inappropriate for him to comment on individual employment issues in any event.” Siegel added that “any implication that he ever would have tolerated much less condoned to any extent misconduct or fraudulent activity in loan production and underwriting … is utterly baseless.”
In closed-door testimony a year ago, the ex-CEO defended his company, telling the federal Financial Crisis Inquiry Commission that Countrywide “probably made more difference in society, in the integrity of our society, than any company in the history of America.”
Foster says that, in her experience, Mozilo urged managers to crack down on fraud. If he saw an email about a fraudster within the ranks, she says, he would hit “reply all” and type, “Track the bastard down and fire him.”
She says, though, that others within the company often screened his emails, and it’s likely Mozilo never saw Thompson’s email or many other messages about fraud.
“My sense is they kept things from Angelo,” she says.
‘An old matter’
When Bank of America announced in January 2008 that it was going to buy Countrywide at a fire-sale price, some analysts thought it was a great move, one that would leave the bank well positioned once the home-loan market recovered.
Almost three years later, defaults on loans originated by Countrywide have soared and Bank of America’s stock price has plunged as investors and government agencies have pursued mortgage-related claims totaling tens of billions of dollars.
Federal and state officials are pressing Bank of America and other big players to settle charges they used falsified documents to speed homeowners through foreclosure. Lawsuits filed on behalf of investors claim Countrywide lied about the quality of the pools of mortgages that the lender sold them during the home-loan boom.
Bank of America says issues related to Countrywide are old news. Last year a spokesman described fraud claims by state officials as “water under the bridge,” noting that the bank settled with dozens of states soon after buying Countrywide.
When federal officials announced Foster’s victory last week, Bank of America dismissed the case as “an old matter dating from 2008.”
Accounts from Foster and other former employees, however, put the bank in an uncomfortable position. These accounts, as well as lawsuits pushed by investors, borrowers and government agencies, raise questions about how diligently the bank has worked to clean up the mess caused by Countrywide — and whether the bank has tried to curtail its legal liability by papering over the history of corruption at its controversial acquisition.
In Foster’s case, the Labor Department notes [4] that two senior Bank of America officials — not former Countrywide executives — made the decision to fire her.
The agency says the investigations led by Foster found “widespread and pervasive fraud” that, Foster claimed, went beyond misconduct committed at the branch level and reached into Countrywide’s management ranks.
Foster told the agency that instead of defending the rights of honest employees, Countrywide’s employee relations unit sheltered fraudsters inside the company. According to the Labor Department, Foster believed Employee Relations “was engaged in the systematic cover-up of various types of fraud through terminating, harassing, and otherwise trying to silence employees who reported the underlying fraud and misconduct.”
In government records and in interviews with iWatch News , Foster describes other top-down misconduct:
She claims Countrywide’s management protected big loan producers who used fraud to put up big sales numbers. If they were caught, she says, they frequently avoided termination.
Foster claims Countrywide’s subprime lending division concealed from her the level of “suspicious activity reports.” This in turn reduced the number of fraud reports Countrywide gave to the U.S. Treasury’s Financial Crimes Enforcement Network.
Foster claims Countrywide failed to notify investors when it discovered fraud or other problems with loans that it had sold as the underlying assets in “mortgage-backed” securities. When she created a report designed to document these loans on a regular basis going forward, she says, she was “shut down” by company officials and told to stop doing the report.
In Foster’s view, Countrywide lost its way as it became a place where everyone was expected to bend to the will of salespeople driven by a whatever-it-takes ethos.
The attitude, she says, was: “The rules don’t matter. Regulations don’t matter. It’s our game and we can play it the way we want.”
Bank of America declined to answer detailed questions about Foster’s allegations. Simon, the bank spokesman, told iWatch News “we are certain” that Foster’s claims “were properly and fully investigated by Countrywide and appropriate actions were taken.”
And not all former Countrywide workers say that fraud was condoned by management.
Frank San Pedro, who worked as a manager within the investigations unit from 2004 to 2008, told the Financial Crisis Inquiry Commission the company worked hard “to root out all the fraud that we could possibly find. We continued to get better and better at it.”
He said most of the fraud was “external” — outsiders trying to rip off the lender — and in-house sales staffers who tried to push through fraudulent loans “seldom got away with it.”
Gregory Lumsden, former head of Countrywide’s subprime division, Full Spectrum Lending, says there are thousands of ex-Countrywiders who can vouch for the company’s honesty. When bad actors were caught, he says, Countrywide took swift action.
“I don’t care if you’re Microsoft or you’re the Golf Channel or Dupont or MSNBC: companies are going to make some mistakes,” Lumsden told iWatch News. “What you hope is that companies will deal with employees that do wrong. That’s what we did.”
The American Dream
In February 2003, Countrywide’s founder and CEO, Angelo Mozilo, gave a lecture hosted by Harvard’s Joint Center for Housing Studies titled “The American Dream of Homeownership: From Cliché to Mission.”
Mozilo, the Bronx-born son of a butcher, had started Countrywide with a partner in 1969 and built it into a home-loan empire that was now on the verge of becoming the nation’s largest home lender.
But he saw trouble on the horizon. Before his audience of academics and business people, he complained that a “regulatory mania” was hurting Countrywide and other “reputable” mortgage lenders. Overreaching predatory lending laws, he said, were threatening shut the door to homeownership for hard-working low-income and minority families. Industry and citizenry needed to work together to prevent government from strangling the mortgage market, he said.
It wasn’t, Mozilo added, that he was against cracking down on bad apples that took advantage of vulnerable borrowers.
“These lenders,” the CEO said, “deserve unwavering scrutiny and, when found guilty, an unforgiving punishment.”
Around the time Mozilo was giving his speech back east, one of his employees was finding what she later claimed to be evidence of serious fraud at Countrywide’s Roseville, Calif., branch.
Employees were falsifying loan applicants’ salaries in mortgage paperwork and forging their names on loan documents, according to a lawsuit [5] filed by Michele Brunelli, who was a loan processor and later a branch operations manager for Countrywide. In March 2003, Brunelli recalled, she used the company’s “ethics hotline” and lodged what she thought was a confidential complaint.
Immediately after, Brunelli claimed, her regional manager yelled at her for calling the hotline. Then, she said, her immediate supervisor called her in and reprimanded her for making the complaint.
“Not everyone’s hands are clean in this office,” the branch manager said, according to Brunelli. “Are you ready for that?”
Brunelli didn’t back down. She continued reporting evidence of fraud to the executives above her, her lawsuit said. They dismissed her concerns, she said, saying she was having “emotional outbursts” and accusing her of being “on a witch hunt.”
In court papers, the company flatly denied her allegations, accusing Brunelli of acting in “bad faith.” Her lawsuit was resolved in 2010.
Two other former Countrywide workers, Sabrina Arroyo and Linda Court, claimed they lost their jobs in 2004 after they complained supervisors were directing them to forge borrowers’ signatures on loan paperwork. After they informed Employee Relations about the forgeries, the company quickly fired them, they claimed.
“Corporate came in. We told them the story. We told them everything,” Arroyo told iWatch News. “They said don’t worry, whatever you say, you’re going to be covered. A month or so later, I was let go.”
Arroyo and Court sued [6] Countrywide in state court in Sacramento, but Countrywide won an order forcing the case into arbitration. They decided to drop their claim because the odds are stacked against workers in arbitration, their attorney, William Wright, said.
Some ex-employees say they went high up Countrywide’s chain of command to raise red flags about fraud. Mark Bonjean, a former operations unit manager in Arizona, complained to a divisional vice president, according to a lawsuit [7] in state court in Maricopa County. Within two hours of sending the VP an email about what he believed were violations of the state’s organized crime and fraud statutes, the suit said, he was placed on administrative leave. The next day, according to the lawsuit, he was fired.
Another ex-Countrywider, Shahima Shaheem, claimed she took her complaints to the very top. Like Enid Thompson before her, she said she wrote an email directly to Mozilo, the CEO, about fraud and retaliation. She never heard back from Mozilo, according to her lawsuit [8] in Contra Costa Superior Court. Instead, the suit said, she was subjected to a campaign of harassment by company executives and human-resources representatives that forced her to leave her job.
Shaheem’s case was settled out of court, her attorney said.
A Bank of America spokesman declined to respond to questions about allegations by Shaheem, Bonjean and other former Countrywide employees, noting that their claims “are related to situations and investigations that took place at Countrywide prior to Bank of America acquiring the company.”
‘Fund the loans’
Countrywide had been slower than many other mortgage lenders to fully embrace making subprime loans to borrowers with modest incomes or weak credit. By 2004, though, Countrywide had become a player in the market for subprime deals and many other nontraditional mortgages, including loans that didn’t require much documentation of borrowers’ income and assets.
These loans were part of the plan for meeting its CEO’s audacious goal of growing his company from a giant to a colossus. Mozilo had vowed that his company would double its share of the home-loan market to 30 percent by 2008.
Some former Countrywide employees say the pressure to push through more and more loans encouraged an anything-goes attitude. Questionable underwriting practices often helped risky loans sail through the lender’s loan-approval process, they say.
In one example, Countrywide approved a loan for a borrower whose application listed him as a dairy foreman earning $126,000 a year, according to a legal claim later filed by Mortgage Guaranty Insurance Co., a mortgage insurer. It turned out that the borrower actually milked cows at the dairy and earned $13,200 a year, the lawsuit alleged.
The borrower provided the correct information, but the lender booked the loan based on data that inflated his wages by more than 800 percent, the legal claim said.
In another instance, according to a former manager cited as a “confidential witness” in shareholders’ litigation [9] against the company, employees appeared to be involved in a “loan flipping” scheme, persuading borrowers to refinance again and again, giving them little new money, but piling on more fees and ratcheting up their debt. The witness recalled that when the scheme was pointed out to Lumsden, Countrywide’s subprime loan chief, the response from Lumsden was “short and sweet”: “Fund the loans.”
Such episodes weren’t uncommon, the witness said. In early 2004, he claimed, he discovered that Nick Markopoulos, a high-producing loan officer in Massachusetts, had cut and pasted information from the Internet to create a fake verification of employment for a loan applicant. Markopoulos left the company of his own accord, the witness said, but he was soon rehired as a branch manager.
The witness said he contacted a regional vice president to object to rehiring an employee with a history of fraud. But he said the regional VP — citing Markopoulos’s high productivity — overruled his objections.
Markopoulos couldn’t be reached for a response. Lumsden says he doesn’t recall any incident involving “loan flipping” allegations.
Brushed off
Eileen Foster knew little about Countrywide’s fraud problems when she took a job with the company in September 2005.
For Foster, the move seemed like a natural progression. She’d accumulated 21 years’ experience in the banking business, starting out as a teller at Great Western Bank and working her way up to vice president for fraud prevention and investigation at First Bank Inc.
Countrywide brought her on as a first vice president and put her in charge of a high-priority project: An overhaul of how the company handled customer complaints.
The company’s systems for handling complaints, Foster recalls, were disjointed and ineffective. Various divisions had differing policies and there wasn’t much effort to ensure that complaints got addressed. Things had gotten so bad, she says, federal banking regulators ordered the company to do something about the problem. Foster’s task was to standardize the company’s procedures and ensure that people with complaints didn’t get brushed off.
As she set about fixing the problems, she says, she encountered things that gave her pause.
The company’s mortgage fraud investigation unit, Foster says, refused to share data about the complaints it received. Each time she requested the stats, she says, she hit a brick wall.
Foster says she also ran into a hitch when she began distributing a monthly report that broke down complaint data for each of the companies’ operating divisions.
Countrywide Home Loans Servicing, which collected borrowers’ payments each month, was the subject of complaints about its foreclosure practices and other issues. The volume of serious complaints involving the servicing unit topped 1,000 per month, dwarfing the number for other divisions.
This upset officials with the servicing unit, Foster recalls. The complaints weren’t “real complaints,” the servicing execs argued, and Foster was making the unit look bad by including them in her reports.
The upshot: Foster was ordered, she says, not to include many of the complaints about the servicing unit in her reports. She thought it was odd, she says, but she didn’t think it was evidence of a larger pattern. She figured it was mostly an exercise in backside-covering.
“When we lost at the meeting, I was like, ‘OK, they want to just cover this up,’” Foster says. “But it wasn’t anything to the scale that I thought it would cause great harm.”
Only later — after she took over the mortgage fraud investigation unit — did she realize, she says, that cover ups were part of the culture of Countrywide, and that efforts to paper over problems had less to do with bureaucratic infighting and more to do with hiding something darker within the company’s culture.
“What I came to find out,” she says, “was that it was all by design.”
Bouquets and handbags
State law enforcers would later charge that Countrywide executives designed fraud into the lender’s systems as a way of boosting loan production. During the mortgage boom, critics say, Countrywide and other lenders didn’t worry about the quality of the loans they were making because they often sold the loans to Wall Street banks and investors. So long as borrowers made their first few payments, the investors were usually the ones who took the hit if homeowners couldn’t keep up with payments.
Countrywide treated borrowers, California’s attorney general later claimed, “as nothing more than the means for producing more loans,” manipulating them into signing up for loans with little regard for whether they could afford them.
Countrywide’s drive to boost loan production encouraged fraud, for example, on loans that required little or no documentation of borrowers’ finances, according to a lawsuit by the Illinois attorney general. One former employee, the suit said, estimated that borrowers’ incomes were exaggerated on 90 percent of the reduced-documentation loans sold out of his branch in Chicago.
One way that Countrywide booked loans was by paying generous fees to independent mortgage brokers who steered customers its way. Countrywide gave so little scrutiny to these deals that borrowers often ended up in loans that they couldn’t pay, the state of Illinois’ suit said.
In Chicago, the suit said, Countrywide’s business partners included a mortgage broker controlled by a five-time convicted felon. One Source Mortgage Inc.’s owner, Charles Mangold, had served time for weapons charges and other crimes, the suit said.
One Source received as much as $100,000 per month in fees from Countrywide, banking as much as $11,000 for each loan it steered to the lender. Mangold, in turn, showered a Countrywide branch manager and other employees with expensive gifts, including flowers and Coach handbags, the suit said.
Countrywide in turn funded a stream of loans arranged by One Source, the suit said, even as the broker misled borrowers about how much they’d be paying on their loans and falsified information on their loan applications. One borrower provided pay stubs and tax returns showing he earned no more than $48,000 per year, but One Source listed his income as twice that much, according to the suit.
Mangold couldn’t be reached for comment. His attorney said in 2007 that Mangold denied all of the state’s allegations against him.
Countrywide, the state’s suit said, kept up its partnership with One Source for more than three years. It didn’t end the relationship until the state sued One Source for fraud and slapped Countrywide with a subpoena seeking documents relating to the broker.
As questionable practices continued, Countrywide’s fraud investigation unit had trouble keeping up, according to Larry Forwood, who worked as a California-based fraud investigator for Countrywide in 2005 and 2006, before Foster took over the fraud unit. His personal caseload totaled as many as 100 cases at a time, many of them involving dozens or hundreds of loans each.
Some cases involved mortgage brokers or in-house staffers who pressured real-estate appraisers to inflate property values. The company maintained a “do not use” list of crooked appraisers who’d been caught falsifying home values, but the sales force often ignored the list and used these appraisers anyway, Forwood says.
Countrywide’s fraud investigation unit did have some successes during Forwood’s tenure. It shut down a branch in the Chicago area, he said, after a rash of quick-defaulting loans sparked a review that uncovered evidence of bogus appraisals and
forged signatures on loan paperwork. One manager, Forwood says, tried to rationalize the fraud, telling investigators: What was the big deal if, say, five out of every 30 loans was fraudulent?
When the unit shut down a branch in southern California after uncovering similar evidence of fraud, Forwood recalls, it got some pushback. It came all the way from the top, he says, via a phone call to the fraud unit from Mozilo.
“He got very upset,” Forwood says. “He basically got on the phone and said: ‘Next time you need to do that, clear it with me.’”
Mozilo’s attorney didn’t respond to questions from iWatch News about Forwood’s account.
For Part 2 of Eileen Foster’s story, go to iWatch News and read Mortgage industry tanks, fraud continues at Countrywide
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Re: whistleblowers

Postby admin » Fri Sep 23, 2011 7:12 pm

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September 19th, 2011
Bullies bad for bottom line

by Rex Huppke, Chicago Tribune, September 18, 2011
When push comes to shove, workplace bullies are costing the company money. And that’s a good focus when dealing with them.
As a species, it seems we’re doomed to interact with jerks.
It happens in high school, and we think, “Once I get to college, things will be different.”
Then it happens in college, and we think, “Once I get a job, people there will be more mature.”
Not so much. Jerks abound, and, as fate would have it, the workplace is as much a breeding ground for bullies as the playground.
While much has been done in recent years to address bullies in the schoolyard, the issue of bullying at work remains largely under the radar. In fact, because of a work culture that often rewards aggressiveness, bullies have a nasty tendency of succeeding at work.
“This is one of the great undiscussables in the American workplace because it seems if you haven’t experienced it, you’re likely to believe it doesn’t happen,” said Gary Namie, a social psychologist and co-founder of the Workplace Bullying Institute. “What we’re seeing is a lot of abusive conduct, but it’s accepted as routine in the American workplace.”
Last year, Namie commissioned the polling group Zogby International to survey U.S. workers. The research found that 35 percent of the country’s workforce has experienced bullying on the job, and another 15 percent has seen it happen.
The remaining 50 percent of respondents had neither seen nor experienced bullying, a statistic that Namie said makes it hard for some to relate to the problem. He calls it a “silent epidemic.”
“So often in the workplace the feeling is, ‘Hey, you’re an adult, handle it yourself,’” Namie said. “They sometimes even blame the victim. But you know what? We said that for domestic violence for a long, long time until they criminalized it. So people need to stop the silly rationalizations.”
To be clear, “workplace bullying” doesn’t apply to acts of violence.
“What separates bullying from workplace violence or harassment is the fact that the bullying is something that’s done on a continuous basis,” said Timothy Dimoff, founder of SACS Consulting & Investigative Services, an Ohio-based company that specializes in high-risk workplace and human resource issues. “It’s constant and repetitive; someone who’s using different means of harassment, whether it’s complaining about the person, spreading rumors, blaming them, encouraging others not to talk to the person. It’s more psychological and emotional abuse.”
Think about your workplace, and there’s a good chance you’ve seen this or dealt with it. In the most severe cases, a manager tries to sabotage an employee by taking credit for work or writing a negative performance review. More routinely, a co-worker or manager picks away at an employee, making cracks about them in front of other people, demeaning them even in subtle ways.
This behavior may seem routine in a world of snarkiness, but when it happens day in and day out, and when the targeted person feels unable to fix the situation, it can lead to serious physical and mental health problems. Consider how difficult it might be, particularly in this job market, for a victim to protest the way a manager is treating them.
“Many people nowadays feel really locked in,” Namie said. “Like there’s no escape route, and that just makes the situation worse.”
The fact is, some folks will find themselves in situations where the only way out is to quit. That’s obviously a worst-case scenario, but if a bully is making your life so miserable it’s affecting you physically and mentally, you’ve got to cut ties and take care of yourself.
Before that, however, there are steps you can take to try to put the bully in his or her place.
“They need to take it to their human resources person or their immediate supervisor,” Dimoff said. “If they don’t get any results, then they need to go to somebody higher. In the meantime, they need to document when these things happen, where they happen and what was said and done. If they don’t write it down, it’s hard to remember details, and things get distorted. When management sees an employee come in with this in writing, they react much more quickly and thoroughly to it.”
Namie suggests that the target look for ways to quantify the harm a bully is causing a company. How many people has the person driven away? How much work time is eaten up contending with problems relating to the bully?
“You want to be able to tell the executives that the bully is too expensive to keep; actually present the business argument that the bully is too expensive,” Namie said. “What can discredit the person who is the target is emotionality. The emotionality is scary to management. So you make a dispassionate argument.”
Of course, management is, or should be, responsible for creating an environment that repels bullies.
“The company needs to have policies and procedures against bullying and workplace violence, and they need to let those procedures be very well known to their management and employees,” Dimoff said. “Companies need to work on creating a more positive culture. In positive cultures, we don’t see the bullying. People work together and don’t resort to negative tools.”
Namie’s Workplace Bullying Institute is pushing a Healthy Workplace Bill, which is being considered in 11 states, that would crack down on office bullies and clearly define what it means to have an “abusive work environment.” You can learn more about the bill at healthyworkplacebIll.org.
A final point: If you think a bullying co-worker is trying to make you a target, be proactive.
Bullies, at the end of the day, are cowards. They feed off people who put up with their abuse. So the moment someone begins to pick at you, stand up to them. Let them know you won’t tolerate improper treatment.
The alternative is to let it go, and that’s almost guaranteed to not end well.
From the Chicago Tribune
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Re: whistleblowers

Postby admin » Thu Sep 15, 2011 8:52 am

Countrywide Employee Fired For Reporting Fraud Will Get $930,000 And His Job Back
Courtney Comstock | Sep. 14, 2011, 3:46 PM

A Countrywide (now Bank of America) employee who was fired after reporting fraud at the company is getting his job back.
According to Bloomberg:
The employee ... had claimed that people who tried to report fraud to Countrywide’s employee- relations department suffered persistent retaliation.
He was fired after BofA bought Countrywide. The firing was found to be in violation of the whistleblower act. Now BofA will pay him $930,000 and reinstate him.

Read more: http://www.businessinsider.com/bank-of- ... z1Y2LkwedS
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Re: whistleblowers

Postby admin » Wed Sep 14, 2011 11:47 pm

http://www.huffingtonpost.com/2011/09/1 ... 62702.html
First Posted: 9/14/11 04:01 PM ET Updated: 9/14/11 06:09 PM ET
BofA Used 'Retaliatory Tactics' Against Worker: Labor Dept.

WASHINGTON (Reuters) - Bank of America Corp must reinstate a Countrywide whistle-blower fired shortly after the two companies merged in 2008 and pay the employee $930,000, the Labor Department said Wednesday.

The employee, whose name was not given, led internal investigations that found widespread fraud involving Countrywide employees. Reporting fraud to Countrywide's Employee Relations Department led to retaliation, the employee told the Labor Department.
``It's clear from our investigation that Bank of America used illegal retaliatory tactics against this employee, ''Occupational Safety and Health Administration Assistant Secretary David Michaels said in a statement.
Bank of America disagreed. ``We are disappointed with the ruling and plan to exercise our option to challenge the order,'' spokeswoman Shirley Norton said by email.
``The bank's actions to dismiss were solely based on issues with the employee's management style and in no way related to the employee's complaints and the allegations made in the complaint,'' she said.
Bank of America has had a rash of problems related to its 2008 purchase of Countrywide Financial Corp, a major subprime lender accused of churning out loans to high-risk borrowers with little effort to check their incomes or ability to repay.
The Charlotte, North Carolina-based bank paid $2.5 billion to buy Countrywide, but writedowns and legal costs have pushed the estimated cost of that purchase to more than $30 billion.
The $930,000 payment to the dismissed employee includes back wages, compensatory damages and attorney fees, the Labor Department said. (Reporting by Diane Bartz; editing by Andre Grenon and Tim Dobbyn)
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Re: whistleblowers

Postby admin » Sat Sep 10, 2011 9:05 pm

National Post
http://business.financialpost.com/2011/ ... -employee/

Legitimate whistleblower or disloyal employee?
Julius Melnitzer Sep 9, 2011 – 12:56 PM ET

An adjudicator at the Public Service Labour Relations Board recently ruled that three scientists at Health Canada who made critical comments to the press were not legitimate whistleblowers but rather had breached their duty of loyalty to the government.

The grievors’ allegations included cover-ups, corruption, and incompetence and undue pressure in the veterinary drug approval process. An internal investigation determined that the claims were baseless and contained misleading scientific information. The grievors were suspended.

The adjudicator in Chopra v. Treasury Board upheld the suspensions, ruling that the grievors’ conduct met none of the exceptions to an employee’s duty of loyalty as set out by the Supreme Court of Canada in Fraser v. Public Service Staff Relations Board.

Lyne Duhaime, Karen Sargent and Brian Smeenk of Fasken Martineau Dumoulin have more in The HR Space.
The HR Space: Employees, Public Criticism and the Media
http://www.fasken.com/files/Publication ... 7_2011.pdf
Labour, Employment and Human Rights Bulletin

September 7, 2011

The HR Space is edited by Lyne Duhaime, Karen M. Sargeant and Brian P. Smeenk.

Your employee makes critical comments to the press about your company. Is he a legitimate whistleblower or has he violated his duty of loyalty to his employer? In Chopra et al. v. Treasury Board (Department of Health) an adjudicator at the Public Service Labour Relations Board recently considered just that. He considered whether three scientists at Health Canada ("the grievors") breached their duty of loyalty to their employer when they criticized the government in the media. For the reasons outlined below, he determined that the grievors were not legitimate whistleblowers and instead breached their duty of loyalty to their government employer.
The Facts
The grievors worked as drug evaluators for Health Canada's Veterinary Drugs Directorate. Over a period of several years, they publicly criticized Health Canada and the Canadian government in television and radio interviews, at press conferences, and through open letters to various organizations. They made allegations of corruption, cover-ups, and incompetence in the veterinary drug approval process. They also alleged that Health Canada scientists were pressured to approve drugs by high-level figures in the Privy Council Office and the Prime Minister's Office. They further claimed that when they stood up to these pressures, they were harassed at work.
In response to some of their early comments, the government started an internal investigation. This investigation ultimately determined that the grievors' claims were baseless and that they had made misleading statements to the public about scientific matters. In response, the grievors were suspended. The suspensions led to the termination of the grievors' employment through progressive discipline after long-standing performance issues were not resolved.
The Decision
Adjudicator Mackenzie determined that the grievors' suspensions were justified. In making that decision, he relied on the Supreme Court of Canada's decision in Fraser v. Public Service Staff Relations Board. In that case, the Supreme Court of Canada set out a list of exceptions to an employee's duty of loyalty to his or her employer:
· revealing illegal acts by the employer;
· revealing policies that jeopardize the life, health or safety of employees or the public;
· the statement has no negative impact on the employee's ability to effectively perform his or her duties.

None of these exceptions applied to the grievors. With respect to the first two exceptions – the public interest exceptions – the Adjudicator made it clear that employees must have evidence of the wrongdoing for them to apply. In the case of two of the grievors, they had no evidence of wrongdoing, and instead made completely unsupported allegations, particularly with regard to criminality or corruption inside Health Canada. That one of the grievors had the expertise to make the statements he did, did not change the Adjudicator's decision – the remarks were still inappropriate.

Further, assessment of "evidence" is to be based on the employee's knowledge at the time the statement is made, and not with the benefit of hindsight. Even though the third grievor was correct in his allegations against the employer, he could not have known that they were true when he made them. The fact that his allegations were later proven correct did not justify his criticism at the time he made his comments.
As a result, all three grievors' statements to the media violated their duties of loyalty to their employer.

Exhaustion of Internal Remedies
The grievors were also criticized for not waiting on the outcome of the government's internal investigations: "a loyal employee will give the employer a reasonable opportunity to correct the problem." Adjudicator Mackenzie continued by adding that "implicit in the exceptions to the duty of loyalty is the idea that the concern being raised is not already in the public sphere or is not being addressed by anyone as a pressing public safety or health concern."
Roleplaying: When Does an Employee Speak as a Private Citizen?
All of the grievors argued that they were entitled to comment on these matters as concerned private citizens. Previous cases, such as Re Snow Lake District School District 239, have allowed a separation between an individual's different roles inside and outside the workplace. Not in this case. Here, the Adjudicator repeatedly emphasized that as scientists, the grievors' comments would attract a high degree of media interest, and carry significant weight with the public. For technical personnel with expert knowledge, it may be more difficult to shed the role of employee when speaking publicly.

Criticism by (Silent) Endorsement
In addition to public statements, the third grievor was suspended for merely attending a press conference whose objective was to "denounce Health Canada's practices." He was introduced by the organizers, but did not speak. The Adjudicator was critical of the third grievor in this regard as well, saying "by his very presence, he supported the purpose of the news conference," and that the attendance of Health Canada scientists "added legitimacy" to the concerns of the press conference organizers. Despite not speaking at the press conference, the third grievor was deemed to have publicly criticized his employer. This, plus his earlier statements about the loss of his position, justified his five-day suspension.

Lastly, the grievors' argued that by delaying any punishment for over two years, the government had condoned their actions. This was rejected out of hand. Because the government was waiting for the results of its internal investigation, and because it had repeatedly cautioned the grievors about speaking to the media, the employer could not be said to have condoned their actions.
What This Means for Employers
This ruling clarifies the boundaries of acceptable criticism by employees of their employer. It helps employers distinguish between true whistleblowers, who will be protected by the law, and others whose comments do nothing to advance the public interest. Employers should keep the following in mind:
· Because the ability to publicly criticize the employer under the public interest exceptions depends on exhaustion of internal remedies, employers should carefully follow up on all internal complaints or allegations. Employers should gather documentation of the information available to the employee at the time the statement is made, since this is the relevant factual context for the allegations.
· If an issue is already highly publicized, or if demonstrably effective measures are already being taken to deal with an issue, employees cannot claim to be whistleblowers, since their criticism brings nothing new to the public sphere.
· Employers should assess the expert or confidential knowledge of employees who publicly criticize their company. This expertise (or lack thereof) may inform the arbitrator's decision the extent to which an employee can justifiably comment on a controversy, scientific or otherwise.
· The visible presence of employees at an event can be criticism if their presence would be interpreted by the public as adding legitimacy to critical statements made by others.
· Employers should deal promptly with public criticism to avoid being accused of condoning the employee's behaviour, and should document any delay in the response and the reason for it.
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Re: whistleblowers

Postby admin » Wed Aug 24, 2011 8:22 am

http://www.usatoday.com/money/jobcenter ... 50081460/1
August 21, 2011

Workplace becomes new schoolyard for bullies

Many adults shake their heads in dismay over bullying that targets children and teenagers online and in school; they even push for lawmakers and schools to do more to stop the harassment.

If only bullying ended in the schoolyard, as in this scene from the video game "Bully" for Sony Play Station 2. Enter the workforce, and you can find many bullies in management.
By Anita Bruzzese, Gannett

But many are afraid to admit another dirty little secret: Bullying is just as big a problem for the adults in the workplace.

STORY: Bullying by boss is common but hard to fix

Up to 70 percent of working adults say they've been bullied at some point in their working lives, and 53 percent to 71 percent of the bullies are in management positions, Civility Partners LLC says.

The prevalence of bully bosses is why many don't report they've been bullied, says Bert Alicea, a licensed psychologist and vice president of employee-assistance programs and work/life services at Health Advocate Inc.

"A lot of people would rather leave than stir the pot and fear retaliation," he says. "But even if they want to leave, with the bad job market there's nowhere for them to go."

The problem of workplace bullying is not new, nor is it illegal.

If bullying leads to illegal workplace acts, such as discrimination or harassment, then the courts can act. Legislation called the Healthy Workplace Bill would make bullying illegal and has been introduced in more than 20 states since 2003.

Even without the bill, Alicea says many companies are beginning to take steps to reign in workplace bullying because of its bottom-line consequences: Bullying can cost a company $83,000 a year from absenteeism and stress-related issues.

Companies often ask Alicea to provide harassment awareness or sensitivity training as a way to make supervisors and employees more aware of bullying behavior and the steps needed to protect workers. But businesses may have another incentive to offer such training.

In some court cases, companies that have provided anti-bullying training are not always held solely responsible if an employee's lawsuit alleging harassment or discrimination is successful, Alicea says. Instead, individual supervisors may be held personally liable for some financial damages awarded to an employee if a company can show the supervisor received anti-bullying training.

Still, despite more interest from companies in anti-bullying measures, Alicea says he remains concerned.

"If the bully is in a power position or someone like a rainmaker in the organization who brings in $5 million a year, then no one really wants to rattle that cage," he says.

Another worry for Alicea — a growing use of online bullying.

"Cyber-bullying is more prevalent in the workplace. People become friends with their supervisors on Facebook, for example, and they become more emotionally connected. It begins to blur the objectivity of those involved. I just think it opens up a whole can of worms," he says.

Workers also can feel bullied via other online communications, such as email, he says.

"I think there's a real need for email etiquette to be taught in workplaces today," he says. "Sending an email, written in bold with 15 exclamation points sends a message in a degrading way."

If an employee feels bullied at work, Alicea says that person should:

• Contact the company's employee assistance program. While acknowledging that some employees may fear word getting back to the bully, "you have to be able to take that risk because you're tired of feeling the way you're feeling," he says. "You need to be able to talk to an objective third party who knows how to deal with these kinds of issues."

• Tell human resources. While you don't have to provide the name of the bully, it's important to have a record so if you experience retaliation, you have proof that it took place after your complaint.

• Ask for dignity and respect. You don't have to launch into a litany of complaints but simply state you want fair treatment. This often prompts companies to bring in outside help to educate and train supervisors and employees.

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Re: whistleblowers

Postby admin » Sun Aug 14, 2011 5:53 pm

AUGUST 12, 2011, 10:36 AM

Facing Complaints, S.E.C. Opens Whistle-Blower Office

Mary Altaffer/Associated Press

The S.E.C. was hammered by critics for ignoring tips about Bernard L. Madoff’s huge Ponzi scheme.


Get your whistles out, corporate employees.

The Securities and Exchange Commission’s whistle-blower office opened its doors on Friday, much to the delight of plaintiffs’ lawyers and the consternation of corporate America.

The new program will issue cash rewards to employees who report fraud to the government, an effort by the S.E.C. to expose corporate crime in the aftermath of the financial crisis. The S.E.C., hammered by critics for ignoring tips about Bernard L. Madoff’s huge Ponzi scheme and other corporate malfeasance before the crisis, is gearing up to spend top dollar for first-class tips.

Under the program, corporate tipsters could reap as much as 30 percent of the money the S.E.C. collects from a company or its executives. To qualify for the reward, an employee must turn over new information that leads to successful enforcement actions yielding more than $1 million in fines. The agency will tap the $450 million Investor Protection Fund to dole out awards.

Still, the S.E.C. says the whistle-blower program will actually save money in the long run, as tipsters offer guidance to the agency’s strapped staff of lawyers and investigators.

The program “will strengthen our ability to carry our mission and it will save us much time and resources in the process,” Sean McKessy, chief of the S.E.C.’s whistle-blower office, said in a speech on Thursday at Georgetown University’s McDonough School of Business.

The agency, Mr. McKessy said, has already received an uptick in quality tips, including lengthy letters laying our elaborate schemes. On Day 1, the office has seven employees to review the claims and a revamped Web site to collect them.

The program is the product of the Dodd-Frank financial regulatory law, which mandated an overhaul of the S.E.C.’s whistle-blower provisions. Until now, the agency limited its whistle-blower program to insider trading cases, and capped awards at 10 percent of the penalties.

Once the S.E.C. adopted the changes in May, Mr. McKessy began a charm campaign to tame some fierce opposition from corporations and their lawyers. He joined some 10 panel discussions and Webinars about the topic and huddled with various lawyers, ultimately reaching more than 1,000 people, he said.

And yet, Mr. McKessy said, “there exists still some misunderstanding about the hotly contested issues.”

Corporate lawyers and lobbyists have compared Mr. McKessy’s office to a bounty program, saying it will generate bogus tips while producing a windfall for plaintiff’s lawyers who represent scorned employees.

When the S.E.C. first announced plans for the office in November, it incited a contentious six-month lobbying campaign by corporate interests. The agency received a flood of more than 200 comments and 1,300 forms letters about the program from a cross section of Wall Street firms and corporate America – including JPMorgan Chase, Citigroup, General Electric and Google. Some of the loudest complaints came from the United States Chamber of Commerce, which alone sent four comment letters and held at least three discussions with S.E.C. officials.

When a divided S.E.C. approved the whistle-blower program in a 3-2 vote in May, the chamber lashed out at the agency.

“In approving this new whistle-blower rule, the S.E.C. has chosen to put trial lawyer profits ahead of effective compliance and corporate governance,” David Hirschmann, president and chief executive of the Chamber’s Center for Capital Markets Competitiveness, said at the time. “This rule will make it harder and slower to detect and stop corporate fraud.”

The chamber’s concerns centered on the most controversial aspect of the program, which allows whistle-blowers to expose fraud without first sounding the alarms at their company. The program, the chamber argues, will undermine internal compliance departments that corporations were forced to bolster under the Sarbanes-Oxley Act.

Mr. McKessy, who previously served as corporate secretary for both AOL and the Altria Group, which owns tobacco giant Phillip Morris, disputed the industry’s alarmist claims. By not mandating internal reporting, he said, the program will enable employees to report fraud, even when their bosses are involved in the scheme.

He also noted that the agency tweaked it original whistle-blower proposal to address some industry concerns. Under the final rules governing the program, the S.E.C is allowed to dish out heftier awards to employees who first report securities violations to corporate compliance departments.

In a December letter to the S.E.C., the Financial Services Roundtable asked the agency to do just that, urging that reporting internally “must be a specific factor in determining the amount of any award.” The language appeared nearly word for word in the S.E.C.’s description of the final regulation, which said working with internal compliance departments was “a factor that can increase the amount of an award.”

The program also allows tipsters to collect their bounty even when they first reported wrongdoing to the company’s compliance department, so long as the employee shares the same information with authorities within 120 days.

“The whistle-blower program will bolster, not hamper, internal compliance departments,” Mr. McKessy said.
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Re: whistleblowers

Postby admin » Sun Aug 14, 2011 5:51 pm

August 13, 2011

Effectively silencing Canada’s whistleblowers

Steve Ansul/Newsart

David Hutton

Last week an adjudicator at the Public Service Labour Relations Board handed down rulings related to three Health Canada scientists that confirm what many Canadians — and international observers — had already concluded:

- that Canada is not a safe place for honest employees, especially if they work for the federal government.

After four-and-a-half years of proceedings, it took a further year for the adjudicator to deliver his 208-page decision, which dismissed seven out of eight grievances and ordered one whistleblower reinstated — but not the others. Having followed this case closely from the start, the end result seems absurd to me — as do the reasons given for treating one scientist differently from the others.

The scientists — Dr. Shiv Chopra, Margaret Haydon and Gerard Lambert — had for years valiantly resisted repeated efforts by Health Canada management to pressure them into approving the release of antibiotics, hormones and chemicals into the food supply without the legally required evidence of human safety. They asserted that this pressure came from the highest levels of the bureaucracy — the Privy Council Office — at the urging of powerful corporations. Their epic battle is described in Dr. Shiv Chopra’s book about his career at Health Canada, aptly entitled Corrupt to the Core.

Their bravest moment was to raise the alarm to the Senate in 1998 regarding the imminent approval of Monsanto’s bovine growth hormone, a controversial drug designed to boost the milk production of dairy cattle. Their testimony caused headlines around the world and led to the drug being banned in Canada and most other developed countries. For this alone they are known internationally and regarded as heroes.

They were promised protection for their testimony, but when all three were fired simultaneously in 2004 the Senate took no action. As their union battled to have them reinstated, the government agency created specifically to protect whistleblowers also sat idle: former public sector integrity commissioner Christiane Ouimet refused to deal with the scientists’ complaints — even though a judge had already ordered a proper investigation. Her office sat on their disclosure of wrongdoing until it was more than four years old, then decided not to proceed, saying that it was “not in the public interest” to do so.

With these “insubordinate” employees conveniently out of the way, Health Canada rapidly approved seven drugs and other commercial products that the scientists had been blocking — including the use of Baytril (an antibiotic in the fluoroquinolone class) for veterinary purposes. This is a highly controversial decision that leaves Canada out of step with many other developed countries.

The overuse of antibiotics on factory-farmed animals is recognized as the main source of superbugs — deadly new strains of diseases such as E. coli that have acquired the ability to resist most antibiotics. By approving Baytril, Health Canada has endangered what was our last line of defence. New strains are already emerging that are resistant to every existing antibiotic including the fluoroquinolones.

Like many other drug approvals, this is a matter of life and death, and illustrates why we need Health Canada to be focused on protecting our health, not promoting corporate interests.

The ordeal of these scientists is part of a larger pattern: one of fierce bureaucratic hostility toward anyone who causes embarrassment to their department — especially if they expose incompetence or illegality. With this mindset,

- “loyal” employees who follow orders without question — even unethical or illegal orders — can be rewarded and promoted,

while honest employees who refuse to take part in corrupt schemes are persecuted.

The PSLRB rulings follow hard on the heels of a closely-related scandal — the outrageous misconduct of Christiane Ouimet, whose job was to protect government whistleblowers. Ouimet closed hundreds of files, often without proper examination, conducted few investigations and, unbelievably, managed to find absolutely nothing amiss in the federal bureaucracy during her three-and-a-half years on the job.

It’s hard to grasp the magnitude of Ouimet’s misconduct:

- the effect of her actions was to create a massive obstruction of justice, throwing to the wolves whistleblowers who had been promised protection by her office, and giving cover to more than 200 alleged wrongdoers.

Yet her “punishment” for this misconduct, which was exposed by a whistleblower complaint to the Auditor General, was to be sent into early retirement on the equivalent of a full pension, complete with a $500,000 “severance package.” This sets a terrible precedent — is this how future wrongdoers will be sanctioned?

No other developed country has had such a spectacular, public meltdown of their national whistleblower protection system. One consequence of Ouimet’s misconduct — and the government’s actions in protecting and rewarding her — is that Canada is now seen by observers around the world as the “Enron” of whistleblower protection. The PSLRB’s latest rulings merely confirm that impression. How can it be, observers ask, that scientists who are internationally recognized as heroes for their efforts to protect the safety of the food supply can be so badly treated?

Our concerns regarding the board’s decision only get worse as we look more closely at the process. For example, the principal alleged wrongdoer — the manager who is said to have orchestrated the scientists’ abrupt dismissal — retired soon after, and was then hired by Treasury Board to coordinate the government’s legal team, all at the taxpayer’s expense. Access to information requests have revealed that she was paid close to a million dollars through a numbered company, effectively to defend her own actions.

This case also has parallels with another internationally known whistleblower case: that of Joanna Gualtieri, a conscientious Canadian public servant who by diligently carrying out her job exposed massive waste and extravagance at Foreign Affairs — and was then forced out of the department. When Gualtieri sued her bosses for harassment, government lawyers dragged out her case for almost 12 years. They abused the legal process by forcing her to answer more than 10,500 questions during pre-trial discoveries, then settled virtually on the courthouse steps — thus confirming that after spending millions on an absurd, abusive “defence,” they did not have a case after all.

In each of these scandals (at the Office of the Public Sector Integrity Commissioner, at Health Canada and at Foreign Affairs) we see a similar pattern:

§ hostility toward honest employees whose work threatened to expose management misconduct;

§ thinly disguised workplace reprisals carried out under various pretexts;

§ justice denied by endless legal and procedural delays; and

§ taxpayer dollars lavished on protecting the alleged wrongdoers and pursuing aggressive action against the truth-tellers.

There are good reasons why the fate of Chopra and his colleagues is being watched closely in other countries. The safety of our planet’s food system is at greater risk now than any time in history — threatened by lethal superbugs, carcinogenic chemicals and pesticides, hormones, heavy metals and illegal additives. In this context it seems incomprehensible that Canadian scientists who sacrificed their careers to keep our food safe are still being punished for their efforts.

Shame on Health Canada, shame on our government and shame on us if we turn our backs on honest employees such as these, who risk their careers to protect us.

David Hutton is executive director of FAIR (Federal Accountability Initiative for Reform), which works to protect whistleblowers who protect the public interest.
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Re: whistleblowers

Postby admin » Fri Jul 01, 2011 3:50 pm


Alison MacAlpine / December 24, 2010
Let’s set the scene: You’re at an industry gathering, the wine flowing freely, when another advisor boasts about getting his most conservative clients into a portfolio of emerging market equities.
Or maybe you’re walking past your colleague’s open office door, on your way to a client meeting, when you overhear her placing an order you’re pretty sure is insider trading.

Most damning of all, perhaps your assistant mistakenly opens a letter addressed to another advisor and comes to you with hard evidence of that advisor’s fraud.

What do you do? We’re taught from a young age not to tell tales—and, in the schoolyard, the whistleblower frequently fares worse than the bully.

Yet financial advisors have a professional responsibility to report wrongdoing by other advisors, whether they’re working under the auspices of the Mutual Fund Dealers Association (MFDA), the Investment Industry Regulatory Organization of Canada (IIROC) and/or the Financial Planning Standards Council (FPSC).

“Under Policy 6, approved persons [advisors] who are aware of any serious misconduct like fraud or theft or misappropriation have an obligation to tell the member [dealer] about the conduct,” says Shaun Devlin, vice-president of enforcement at the MFDA. “Then the member has an obligation to electronically report the information to us on the Member Event Tracking System. We screen those electronic reports and open the serious ones as cases.”

Connie Craddock, vice president of public affairs at IIROC, says while that organization doesn’t impose a positive obligation to report wrongdoing, the applied ethics section of IIROC’s Conduct and Practices Handbook does suggest registrants should feel an obligation to report wrongdoing if they’re aware of it.

And the FPSC’s Code of Conduct clearly states, under Principle 6, that

n “A CFP professional who has knowledge that another CFP professional has committed a violation of this Code, which raises substantial questions as to the CFP professional’s honesty, trustworthiness or fitness as a CFP professional in other respects, shall promptly inform FPSC.”

If you’re feeling torn between hard-learned lessons from childhood that taught you not to be a tattletale and your professional responsibility to raise concerns about the behaviour of your fellow advisors, the best move is likely to speak with your firm’s compliance officer. Get guidance from someone who understands the relevant regulations, who can prepare you if you decide to move forward and who can help you steer clear of potential pitfalls.

The reporting process

The provincial securities commissions, MFDA, IIROC and FPSC all have complaints and enforcement processes in place to take your calls and, if they would be better handled by another organization, to forward them to the appropriate place.

The securities commissions focus on violations of securities law, including illegal insider trading and activities by advisors who aren’t members of either the MFDA or IIROC. The MFDA and IIROC address violations of their own rules and bylaws, including the Know Your Client and suitability rules. The FPSC enforces its Code of Ethics for CFP professionals.

These organizations pay attention to what the others are doing, so a complaint that lands in one place may result in actions taken by several regulatory bodies.

At the Ontario Securities Commission (OSC), investigations into misconduct lead to a preliminary review that may prompt a formal investigation, and may in turn lead to proceedings and a public hearing. In addition to the disgrace of an announcement published on the commission’s Web site, the OSC has authority to impose reprimands, fines, suspensions and bans from the securities industry.

The OSC advises complainants to put as much as possible in writing, in sequential order; to assemble a file of supporting documents; and to create a comprehensive log of telephone conversations, e-mails and faxes related to the case. The commission also offers whistleblowers the option to file an anonymous tip if they know of potential violations of Ontario securities law.

At the MFDA, the first step after a complaint is received is generally to notify the dealer, who has a responsibility to supervise the advisor who’s the subject of the complaint. The dealer is expected to respond with any relevant information it has, and also to arrange to get a statement from the accused advisor and forward it to the MFDA.

If a full investigation is required, the MFDA’s enforcement department gathers information, conducts interviews, analyzes cases, and prepares reports and recommendations. All this background work can lead to a disciplinary hearing with the power to impose penalties such as reprimands, fines, suspensions and permanent prohibition and termination. The MFDA may also place conditions on an advisor’s authority to conduct securities-related business, put terms and conditions on the dealer’s membership and even appoint a monitor to oversee the dealer’s activities.

Of course, not every case gets that far.

“Anything that comes directly from a member of the public that could potentially be an issue under our rules gets opened as a case,” says Devlin. “We’d put it to the dealer, obtain any additional information necessary, and review the evidence. If we felt there was no violation, then we’d report back to the complainant and say we’re not taking action because there’s insufficient evidence to establish any violation.”

IIROC launched a dedicated whistleblower service in May of 2009 to connect advisors who have first-hand knowledge or tangible evidence of potential systemic wrongdoing, securities fraud or unethical behaviour by individuals or firms in the investment industry to senior and experienced professionals.

“It could be an insider calling about some fairly sophisticated or complex financial transaction,” explains Craddock. “We want to make sure the people who are taking those calls… are really able to evaluate the nature of that information.”

From the whistleblower service, a complaint may go to IIROC’s enforcement department, which conducts an investigation that may lead to a hearing. IIROC hearing panels can impose penalties, including fines, suspensions, permanent bars for individuals and termination of membership for member firms.

The FPSC does a few initial checks when a complaint comes in: Is the subject of the complaint a licensed CFP professional? And, if the facts of the complaint were true, would it constitute a breach of the Code of Ethics?

If the answer is yes, a full investigation is launched and the subject of the complaint is given an opportunity to respond.

If the FPSC enforcement staff believe a code violation has occurred, the matter goes before a hearing panel that can impose sanctions ranging from a letter of admonishment to permanent revocation of the right to use the CFP marks. Stephen Rotstein, vice-president of policy and enforcement and general counsel at the FPSC, says the lightest sentence for a breach of the code would likely be some form of continuing education.

“We take ethics and our disciplinary approaches very seriously,” he adds. “If CFP professionals are out there doing unethical things, it speaks to the whole integrity of our licensing. That’s why we have a robust enforcement process.”

Protection for whistleblowers

Being a whistleblower isn’t risk-free, though. For starters, no organization can guarantee anonymity once a case reaches a public hearing—and once word gets out, there may be a backlash from colleagues.

“Whistleblowers tend to come to a bad end. They may think they’re being ethical heroes, but they’ll be seen as rats or betrayers by their co-workers and, instead of being rewarded or praised, very often they’re sanctioned or demoted or fired,” acknowledges James Hunter, president of KPMG Forensic, who nevertheless relies on whistleblowers to bring to light many of the cases he investigates.

The stakes are rising, too, with the proposed Canadian Securities Act (still in draft form) giving the new Canadian Securities Regulatory Authority (CSRA) the power to impose sanctions for regulatory offences of up to $5 million in fines or imprisonment for a maximum term of five years less a day.

“There’s been a huge movement in Canadian law to provide harsher penalties for regulatory offences,” says Tyler Hodgson, counsel at Borden Ladner Gervais LLP. “You can go to jail for a strict liability offence—meaning that once the Crown has proved the acts have occurred, the onus shifts to the party defending it to prove… that they didn’t commit the offence.”

No advisor is going to look fondly on the whistleblower who caused him or her to face a possible jail term. And there’s some legal hot water swirling around whistleblowers too.

For one thing, what if you’re wrong?

“Defamation is when you publish a statement about another person that causes them to suffer harm to their reputation or otherwise. If you go to a regulator with information about a person, that would, in general, constitute publication. Of course, there are a number of defences to defamation claims, not the least of which is the defence of truth,” points out David Di Paolo, partner at Borden Ladner Gervais LLP. But “if it turns out [the accusing advisor] is wrong, absent some other defence, the other advisor could sue him for defamation.”

Di Paolo says if he were an advisor who suspected a colleague of wrong-doing, he’d be loath to start digging on his own to try to prove an allegation.

“If I became privy to a rumour that had some teeth to it, I’d just go to my compliance department and say, ‘I’ve heard this rumour. I don’t know if there’s any merit to it, but I thought I should bring it to your attention.’

“You’ve done your duty, and it’s up to the compliance department at that point to investigate the allegation and, if there’s merit to it, deal with it,” he suggests.

Whistleblower protection is being considered in the proposed Canadian Securities Act to give people who cooperate and disclose information to regulatory or criminal investigators immunity from civil action. But “they have to reasonably believe the information is true,” Hodgson emphasizes. “Suspicion is not enough.”

In the meantime, Di Paolo offers this reminder to those who know another advisor is doing something wrong but fail to report it: “It certainly would increase the exposure of the firm… if one of its advisors is in possession of information that suggests another advisor is engaging in inappropriate conduct that’s causing a client to suffer a loss. Then the firm is impressed with that knowledge.”

It may seem like a damned if you do, damned if you don’t situation, but as Craddock puts it, “We’re in a self-regulatory world [and] our members are certainly encouraged to have the highest standards possible. It’s in everybody’s best interests to ensure high standards of ethical and professional conduct, because the reputation of the industry, and [of] the individuals working within it, depends on that shared commitment to high standards.”

The overall message seems to be if you have well-founded suspicions, you should in good conscience avail yourself of one of the many avenues available to report them. Just be sure to tread carefully.

“Get advice before you do anything,” urges Hunter. “Speak to your professional association. Speak to a senior colleague. Be very, very careful, because on the one hand you don’t want to ignore wrongdoing, but on the other hand you don’t want to find yourself making false accusations. So the best thing is to consult and get senior advice.”

Filed by Alison MacAlpine, editor@Advisor.ca
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Re: whistleblowers

Postby admin » Sun Jun 12, 2011 7:06 pm

images.jpeg (13.87 KiB) Viewed 8486 times
The road to hell is paved with government "protecting us" programs.


June 9, 2011
Ex-N.S.A. Aide Gains Plea Deal in Leak Case; Setback to U.S.
WASHINGTON — A former spy agency employee agreed late Thursday to plead guilty to a minor charge in a highly publicized leak prosecution, undercutting the Obama administration’s unusual campaign to prosecute government officials who disclose classified information to the press.

The National Security Agency official, Thomas A. Drake, had faced a possible 35 years in prison if convicted on felony charges under the Espionage Act. Instead, he agreed to admit to a misdemeanor of misusing the agency’s computer system by providing “official N.S.A. information” to an unauthorized person, a reporter for The Baltimore Sun. Prosecutors said in the written plea agreement that they would not oppose a sentence under which Mr. Drake would serve no time.

A formal plea hearing was set for Friday morning in Baltimore. The presiding judge, Richard D. Bennett of the district court, could impose a sentence of up to a year in prison. But legal experts said it would be highly unusual to impose a prison term when the Justice Department was not seeking incarceration.

The deal represented the almost complete collapse of the government’s effort to make an example of Mr. Drake, who was charged last year in a 10-count indictment that accused him of obstructing justice and lying to investigators. It is uncertain whether the outcome will influence the handling of three pending leak cases or others still under investigation.

The case against Mr. Drake is among five such prosecutions for disclosures to the news media brought since President Obama took office in 2009: one each against defendants from the National Security Agency, the C.I.A., the F.B.I., the military and the State Department. In the past, such prosecutions have been extremely rare — three or four in history, depending on how they are counted, and never more than one under any other president.

Officials say they have been prompted by a bipartisan belief in Congress and in both the George W. Bush and Obama administrations that leaks were getting out of hand.

The flurry of criminal cases has led to both praise and criticism for Mr. Obama, who entered office promising unprecedented transparency but in less than three years in office has far outdone the security-minded Bush administration in pursuing leaks. Some political analysts say Mr. Obama’s liberal credentials may give him political cover for the crackdown.

The Drake case was seen as a test of the tougher line against unauthorized disclosures. But news media coverage of the charges against Mr. Drake, 54, an introspective computer specialist, has highlighted his motivation for sharing information about N.S.A. technology with a reporter for The Baltimore Sun in 2006 and 2007: the agency was rejecting a $3 million in-house program called ThinThread in favor of a $1-billion-plus contractor-run program called Trailblazer. His supporters have portrayed him as a diligent public servant who was trying to save taxpayers’ money and strengthen national security, not damage it.

To make it easier to convict him, prosecutors shifted strategies last year and decided to charge him not with giving information to the Sun reporter, Siobhan Gorman, now at The Wall Street Journal, but with illegally holding classified documents at home.

But after Judge Bennett ruled last week that the government would have to show some of the allegedly classified material to the jury, prosecutors on Sunday withdrew four of the documents and redacted information from two others about “N.S.A.’s targeting of a particular telecommunications technology.”

That undermined much of the case, leading prosecutors to make a series of last-minute plea offers. Friends said Mr. Drake resisted during long hours of negotiations because he did not want to admit to a crime, however minor, that he believed he had not committed.

Mr. Drake’s lawyers, James Wyda and Deborah Boardman of the federal public defender’s office, declined to comment. But Jesselyn A. Radack, a lawyer for the nonprofit Government Accountability Project who had rallied support for Mr. Drake, hailed the outcome.

“This is a victory for national security whistle-blowers and against corruption inside the intelligence agencies, she said. “No public servant should face 35 years in prison for telling the truth.”

Matthew A. Miller, a spokesman for the Justice Department, declined to comment on the Drake case but said the prosecutions were based strictly on facts uncovered in investigations, some of which have lasted for several years.

“These are tough cases by their nature,” Mr. Miller said. “But it’s an important principle that people who have access to classified information follow the law and the agreements they have signed to protect that information.” He denied that the prosecutions were designed to deter legitimate whistle-blowing.

N.S.A., based at Fort Meade in Maryland, is the largest American intelligence agency and intercepts communications, including phone calls and e-mails. Employees have joked for decades about its hypersecrecy, saying the initials stand for “No Such Agency” or “Never Say Anything.”

Perhaps the most hotly debated of the other leak cases is the military prosecution of Pfc. Bradley E. Manning, accused of passing hundreds of thousands of military and State Department documents to WikiLeaks. In addition, the Justice Department is still investigating Julian Assange, the group’s founder, and his associates. There has never been a successful prosecution of a nongovernment employee for disseminating classified information, as opposed to leaking it. Press advocates generally believe that such a conviction would set a dangerous precedent for criminalizing the publication of government secrets.

In other cases, an F.B.I. translator, Shamai Leibowitz, was sentenced to 20 months last year for disclosing classified information to a blogger; Stephen Kim, a State Department expert on North Korea, is accused of disclosing secrets to Fox News; and Jeffrey A. Sterling, a former C.I.A. officer, is awaiting trial accused of sharing classified information on intelligence operations against Iran to James Risen for a 2006 book.

The Sterling case reflects the administration’s aggressive approach to leak cases. Last fall, prosecutors subpoenaed a lawyer for Mr. Sterling, Mark S. Zaid, to testify to a grand jury investigating his client, a move Mr. Zaid called “not improper but extraordinary.” Mr. Risen, a New York Times reporter who successfully fought a subpoena during the investigation of Mr. Sterling, has been subpoenaed again for the trial and is fighting the subpoena.

Beyond the prosecutions, the Obama administration has been entangled in other perplexing disputes over classified information. Last September, the Defense Department spent $47,300 to buy and destroy the entire first printing of an intelligence officer’s Afghanistan war memoir, saying it contained secrets.

In April, the Justice Department warned lawyers for Guantánamo detainees that they could not read or discuss publicly military documents published by WikiLeaks describing their clients, even though the documents are freely available on the Web.
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