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Postby admin » Sun Feb 10, 2008 2:32 pm

Merck Whistleblower Wins $68M Award

Merck Whistleblower's Long, Lonely Path Wins Him $68 Million Award

By Maryclaire Dale, Associated Press Writer
Thursday February 7, 6:00 pm ET

PHILADELPHIA (AP) -- A sales manager who "just couldn't abide" by the way Merck wanted him to market the drugs Vioxx and Zocor to doctors took the lonely step of filing a whistleblower suit against his employer.
Seven years later, Merck & Co. will pay $671 million to settle complaints it overcharged government health programs and gave doctors improper inducements to prescribe its drugs.

And whistleblower H. Dean Steinke, the Michigan sales manager whose lawsuit led to about $400 million of the recovery, gets a $68 million reward.

"He did it because he really, truly thought that Merck was doing the wrong thing and he just couldn't abide by it, even though he was putting his career on hold," said Steinke's lawyer, Steven Cohen of Chicago. His small firm, which specializes in such cases, will receive an undisclosed share of the award.

Steinke, who through his lawyer declined an interview, had climbed the sales ladder at Merck for about 12 years and was a district sales manager when he filed the lawsuit. He made the move only after his internal complaints were ignored, Cohen said.

Steinke believed that Merck, as it introduced the much-anticipated painkiller Vioxx and tried to ward off competition for Zocor, an anti-cholesterol drug, had crossed the line when it came to inducements to physicians.

The government investigated his sealed lawsuit, which also alleged that Merck overcharged government health plans, under the Federal False Claims Act.

Prosecutors ultimately alleged that Merck paid physicians, hospitals and others excess fees to run supposed educational programs, from lunches to speaking engagements to visiting professorships, in hopes they would favor their products.

Prosecutors also accused Merck of giving doctors and hospitals steep volume-based discounts on Vioxx, Zocor and Pepcid, in the hope that patients would come to rely on them. The company failed to offer Medicare and other government agencies the same price, as required by law, they said.

"It's heroin-dealer economics. Your first shot of dope is free and then it's more expensive," said Pat Burns, a spokesman for the whistleblower group Taxpayers Against Fraud.

As part of the agreement, Merck denied any wrongdoing.

Steinke left Merck a month after he filed his lawsuit in December 2000 and went to work for a small pharmaceutical company that shared his values, Cohen said. He made repeated trips to Philadelphia to help government investigators.

"The whistleblower is stuck in a very lonely and isolated circumstance while the government's investigation is proceeding," Cohen said.

His award includes $44.7 million from federal agencies -- roughly 20 percent of the government's recovery -- and about $23.5 million from various states, Cohen said.

The remainder of the settlement announced Wednesday stems from a lawsuit filed by a New Orleans doctor, William St. John LaCorte. His award had not yet been determined.

Cohen described Steinke, who is married with no children, as a reserved man from "good midwestern stock."

He recently left his drug-company job.
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Postby admin » Fri Jan 18, 2008 9:55 pm

whistleblowers are found to be out of a job and or a career in 80% of cases studied.

They can be bullied out of their livelihoods in any manner of ways. None of them obvious or punishable when looked at one at a time. But like a death from thousand cuts, the results are still a death.

Another way to look at it comes in the form of this story of the glass of water:


A lecturer when explaining stress management to an audience,
Raised a glass of water and asked
'How heavy is this glass of water?'

Answers called out ranged from 20g to 500g.

The lecturer replied, 'The absolute weight doesn't matter.
It depends on how long you try to hold it.

If I hold it for a minute, that's not a problem.

If I hold it for an hour, I'll have an ache in my right arm.

If I hold it for a day, you'll have to call an ambulance.

In each case, it's the same weight, but the longer I hold it, the heavier it becomes.'

He continued,

'And that's the way it is with stress management.

If we carry our burdens all the time, sooner or later,

As the burden becomes increasingly heavy,

We won't be able to carry on.
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Postby admin » Fri Sep 14, 2007 2:21 pm

Friday 17 April 1998

'His intent was to destroy the reporter's career'
Petti Fong
Citizen Special

VANCOUVER -- A reporter for the Vancouver Sun was awarded the second-largest libel suit judgment in Canadian history on Wednesday.

David Baines, a business writer, was awarded $875,000 plus $75,000 in special costs after Supreme Court Justice John Rowan found a Florida journalist had carried on a "campaign of vilification with the intention that Baines be left with no credibility. His intent was to destroy Baines's career."

There were three defendants: David J. Robinson, the Florida publisher of the Bull & Bear; Market News Publishing Inc., a Vancouver electronic publisher of business news; and Florida journalist George Chelekis. Judge Rowan found Mr. Chelekis liable for most of the damages.

Mr. Baines, who is on vacation, was unavailable for comment.

The suit against Mr. Chelekis and the publishers was filed by lawyers for Southam Inc., which owns the Sun, after a series of articles written by Mr. Chelekis was reprinted in the two newsletters and over the Internet.

Mr. Chelekis accused Mr. Baines of threatening his life and that of his secretary, and of working with former Vancouver Stock Exchange trader and private investigator Adrian du Plessis to manufacture negative news about selected companies to drive down their share prices.

"In the course of his campaign, Chelekis manufactured three separate and deliberate lies, the first, that David Baines threatened his life; the second, that Baines was trading against his column; and third, that Mr. Baines was involved in a homosexual relationship with Adrian du Plessis," Judge Rowan wrote in his judgment.

Judge Rowan termed Mr. Chelekis's conduct as arrogant, vindictive and continuous during the two-year campaign against Mr. Baines.

Sun editor in chief John Cruickshank said the suit against Mr. Chelekis and the two publishers was not the newspaper's preferred course.

"We did it after it was clear Chelekis was attempting to destroy the credibility and career of David Baines and damage the credibility of the Sun's business section and doing it with a calculated smear campaign fabricated entirely of lies, many of them despicable."

Mr. Baines' work has always been in the public interest, Mr. Cruickshank said. "His powerful investigative stories about the VSE have always been important for investors and important for the health and welfare of the exchange itself."

The largest libel award in Canadian history was against the Church of Scientology, which was held liable for $1.6 million over statements made about an Ontario lawyer.

Mr. du Plessis, who has also launched a suit against Mr. Chelekis and the two publishers, said the judgment is gratifying.

"I can only hope when my lawsuit goes through the system, there will be similar results," he said.
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Postby admin » Thu Jul 12, 2007 2:31 pm


Summary - What the Whistleblower Can Expect
The whistleblower needs to be especially careful during the entire process of the
case being before both the OSC and the MSPB for being “set up” at work for what
might be able to be used against him/her. Everything the whistleblower does and
does not do from the time the complaint is filed will be watched closely, and the
whistleblower may not be aware of it. I have even heard from whistleblowers that
say they were threatened and watched outside of the work environment. Many have
also said that fellow employees were told that the whistleblower was trying to “get”
somebody and were asked for their help in discrediting the whistleblower, even by
making false accusations against him in some cases. Then, although the
accusations are unfounded and no formal charges were brought; the fact that the
whistleblower was accused is still brought out by the agency attorneys for the effect it
has in damaging his creditability.
From the moment one becomes known as a whistleblower, everything becomes “fair
game” and a very public battle in some cases. Attacks on his personal integrity and
character may be spread around the office and in many cases be publicized through
other channels, which often lead to his family hearing of the accusations and
becoming involved indirectly. All of this takes a huge toll on the whistleblower and his
family emotionally. He/she is often shunned at work by people who don’t understand
the what and/or why he has “blown the whistle”. Others may be afraid to be
associated with him anymore, or because they think the boss may like them better,
will be against him too, or won’t associate with him any longer. The whistleblower
needs to be ready for this; it can hit like a 2x4 in the face and kick in the stomach. It
is also a shock, to most people to find that their very highest levels of management
may support the person reported for wrongdoing, rather than the whistleblower. This
may be done just to teach him that he isn’t playing the game the way they do, and
want him to. Whether the allegation of wrongdoing reported is true or not, becomes
irrelevant. The whistleblower may have been considered a very good employee
before but now he may be a “problem” employee with poor performance, that doesn’t
get along with anybody, etc. These are routine tactics used to bring down the

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Postby admin » Thu Jul 12, 2007 2:03 pm

Welcome to Worldwide Whistleblowers.com

New Brunswick is the only Canadian Jurisdiction Providing Specific Protection for Whistleblowers
Thursday, March 10 2005 @ 06:59 PM PST
Views:: 1,390
In New Brunswick, Section 28 of the Employment Standards Act, Chap. E-7.2 provides, in part, as follows:

28. Notwithstanding anything in this Act an employer shall not dismiss, suspend, lay off, penalize, discipline or discriminate against an employee if the reason therefor is related in any way to

(b) the making of a complaint or the giving of information or evidence by the employee against the employer with respect to any matter covered by this act; or

(c) the giving of information or evidence by the employee against the employer with respect to the alleged violation of any Provincial or federal Act or regulation by the employer while carrying on the employer's business; or if the dismissal, suspension, layoff, penalty, discipline or discrimination constitutes in any way an attempt by the employer to evade any responsibility imposed upon him under this Act or any other Provincial or federal Act or regulation or to prevent or inhibit an employee from taking advantage of any right or benefit granted to him under this Act.
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80% of whistleblowers end out of work due to telling truth

Postby admin » Sat Jun 16, 2007 10:15 pm

When the axe falls: Adjusting to life after job loss

Globe and Mail Update

June 15, 2007 at 11:59 PM EDT

Eleanor Clitheroe recalls feeling numb, disoriented and barely able to comprehend “what was coming down” five years ago, when she was fired from her post as chief executive officer of Hydro One in a controversy over expenses.

“It was an awful feeling … a hollow feeling … realizing what I had thrown so much effort into was now finished and over.”

Ms. Clitheroe's distress was amplified by the public nature of her firing. However, she adds, anyone who is suddenly fired or laid off is likely to be swept up by the same tsunami of emotions.

“There's a sense of loss of control and embarrassment, and a question of self-worth,” says Ms. Clitheroe, who tells her story in a podcast recently posted on the website of Ottawa-based coaching firm, CareerJoy (www.careerjoy.com).

Eleanor Clitheroe recalls feeling numb, disoriented and barely able to comprehend “what was coming down” five years ago, when she was fired from her post as chief executive officer of Hydro One in a controversy over expenses. (The Globe and Mail)

Internet Links
CareerJoy podcast: Eleanor Clitheroe on dealing with job loss

Ms. Clitheroe, who is now an Anglican priest, said in an interview this week that her aim in doing the podcast was to help others adjust to life after a job loss.

“Whether it is public or otherwise, people will be very severely and strongly impacted by it,” says Ms. Clitheroe, who sold her $2-million home after she lost the top job at Hydro One and moved with her family into married students' quarters at the University of Toronto, where she studied theology.

Alan Kearns, founder and head coach of CareerJoy, says a layoff is one of the most traumatic events an employee can experience – and it makes no difference whether the person is a front-line worker or a top executive. (Although, from a number of negative e-mails he has received about the half-hour-long Clitheroe interview on his website, it is apparent there is far less sympathy for fired CEOs than for average working Canadians who have lost their jobs, Mr. Kearns concedes.) Still, he says, Ms. Clitheroe's story is instructive in terms of how to deal with the emotional trauma of a layoff, how to figure out what to do next, and how to “move on.”

To recap: Ms. Clitheroe, who initially trained as a lawyer, worked in senior roles at Canadian Imperial Bank of Commerce and as a deputy finance minister with the Ontario government before moving to Hydro One, where she was appointed CEO in 1999, with a mandate to take the power transmission company private – a mandate that was later reversed as a result of changing political priorities. In June, 2002, the entire board of directors resigned in a power struggle with the provincial government over executive compensation. Shortly thereafter, Ms. Clitheroe was fired – with no severance – from her $2.2-million-a-year post and publicly castigated for her expenses, which allegedly included $330,000 in limousine services over three years.

Arguing that her controversial perks and expenses had been approved by the former chairman of Hydro One – in part to help her juggle her dual roles as CEO and the mother of two young children – Ms. Clitheroe launched a wrongful dismissal suit against the company. The case is still before the courts.

It was a hard fall from the top, says Ms. Clitheroe, who set about reassessing priorities and putting her life back together.

The job, she realized, had consumed most of her waking hours, to the detriment of her family life. And even if she had wanted to lead another company, “it was very clear that I wouldn't have the opportunity to do another significant job like that, at that time, in Corporate Canada … because of the controversy that was raised at that time,” says Ms. Clitheroe, whose wrongful dismissal case is still before the court.

When the initial shock wore off, she started consulting friends and family – and went on two religious retreats – to figure out her next move. In the end, it was four of her closest friends who influenced Ms. Clitheroe, at the age of 47, to abandon corporate life, return to school and train to become a parish priest – a calling she had considered in her younger years.

But starting over was not easy. Ms. Clitheroe found her study skills were rusty; she had forgotten how to do footnotes; she sometimes found herself weeping over textbooks at 3 a.m., pulling “all-nighters like a 20-year-old … “I thought: ‘How did this happen to me? This isn't my life.' But it was my life, and it's become a very joyful life,” says Ms. Clitheroe, who serves as executive director of Prison Fellowship Canada, which assists offenders and their families, as well as serving as a parish priest in Oakville, Ont.

Her advice to others who have suddenly lost their jobs is to be open to change, even if the change might initially appear to be a step backwards.

Mr. Kearns adds that the loss of a job is particularly traumatic – and the options are less apparent – when the person involved has no life outside of work.

As with a death, the grieving process generally goes through stages: denial (“this is not real – I'm having a bad dream”); anger (how dare you lay me off, I have given so much”); bargaining (“is it possible to finish this major project?”); depression (“I don't have anything to offer, what will be the financial implications?”); and acceptance (“now I can move forward”).

It is important to analyze what might have gone wrong that led to the layoff, Mr. Kearns says. Often jobs are lost because of mergers, acquisitions and other events that have nothing to do with the displaced employee's performance, he says.

But whatever the reason, too much obsessing about the past is neither healthy nor productive, he says. “If you don't move on, it's not the company's fault … it's tough, but that's also part of life.”

Obviously, money helps make the transition to new employment easier, he adds. “When you don't have as many resources, you have to use the resources that are out there … there are tons of online resources where you can get great advice and listen to great information, and you don't have to pay a dime for it.”

Mr. Kearns says Ms. Clitheroe's experience stands as “an excellent example of people just rethinking where they want to go.”

Ms. Clitheroe said in an interview this week that she loves her work as a priest. “The people who knew me well helped give me the courage to believe that following this path was possible.”

She now counsels others that, while people often have little or no control over the circumstances that lead to the loss of their jobs, they can and should take control over what happens next.

“If you do jump at that first job, don't stop trying to figure out who you are and what drives you – you can always change again, if you realize that you have just repeated a pattern that doesn't work for you and your family.”
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Postby admin » Mon Jun 04, 2007 1:24 pm


Bullying Studies

The Effects on the Bullied, the Target Person

The Many Faces of Work Trauma We've organized the range of injuries that Targets endure into four groups. Damage to:
- Emotional/psychological health
- Physical health
- Social relations
- Economic-Financial health

Work Shouldn't Hurt! 1. Emotional-Psychological Health Damage

- Poor concentration, forgetfulness
- Loss of sleep, fatigue
- Stress, irritability
- Mood swings, bursts of anger
- Spontaneous crying, lost sense of humor
- Indecisiveness
- Panic attacks, anxiety
- Clinical depression
- Feelings of insecurity, being out of control
- Nightmares about the bully
- Obsessive thinking about the bully
- Always anticipating the next attack (hyper-vigilance)
- Shattered faith in self-competence, feelings of worthlessness
- Shame, embarrassment, and guilt
- Self-destructive habits: Substance abuse, workaholism
- Altered personality, unrecognizable to family & friends
- PDSD/PTSD (Post-Traumatic Stress Disorders)
- Suicidal thoughts
- Violence: suicide or violence against others

Bullying Can Be Hazardous To Your Health
It Causes Psychological INJURY
Targets Are Not Mentally Ill!
Psychological pain should not be minimized or denied by Targets themselves or by others. Stoic bravery or toughness are no match for suicidal thoughts or feelings of terror when you turn into the company parking lot in the morning. Seek help. You owe it to yourself and the people who love you. They recognize and want the very real pain you endure from bullying to stop.

The greater the severity of psychological pain, the more dangerous and the longer the effects seem to last. It is a fact that those exposed to domestic violence are hurt more by the verbal abuse rather than physical wounds which heal easily.

2. Physical Health Damage

- Reduced immunity to infection: more colds, flu
- Menstrual difficulties
- Itching, skin disorders
- Stress headaches
- Increased allergies, asthma
- Indigestion, colitis, irritable bowel syndrome
- Rheumatoid arthritis, fibromyalgia
- Hair loss
- Weight swings
- Hyperthyroidism: overactive thyroid gland
- Migraine headaches
- Hypertension: high blood pressure
- Diabetes mellitus
- Peptic ulcers
- Heart palpitations
- Micro-shredding: weakened heart
- Heart attack
Read recent medical research linking increased heart disease risk with psychosocial factors.

3. Damage to Social Relations

- Co-worker isolation from personal fear
- Parents encourage compromise with bully
- Co-worker resentment, attempts to silence you
- Spouse questions your role in dispute with bully
- Children and friends outside work show strain
- Wavering support from family
- Abandonment/Betrayal by co-workers
- Separation/Divorce by immediate family
- Abandonment by friends outside work
4. Economic-Financial Damage

- Sympathetic medical provider's off-work for job stress
- Paid Time Off accounts begin to be used
- Sick leave exhausted, switch to short-term disability
- Employer encourages unpaid leave under FMLA (Family Medical Leave Act)
- Employer orders you to choose termination vs. Workers' Compensation (WC)
- PTO accounts exhausted, no days left
- Placed on long-term disability, income cut
- Personal savings tapped
- Creditors renegotiate payment structure
- File for WC, potentially lose right to sue
- Formally terminated in a way so employer can deny unemployment compensation
- Disability payments run out
- House and property sold
- Personal savings depleted
In a matter of a few months, it is possible that a vibrant, healthy, competent employee can be driven to ruin--economic, personal health and the loss of a support network. And this is all due to the unilateral decisions made by an incompetent, insecure, vicious individual backed by the power of an employer who did not want to get involved in a "personality conflict" between two people.

Stages of Stress

The Bully is the source of stress, the Stressor. It's the body and mind's response to stressors that determines the extent of damage inflicted. The sequence of biological stress is well known. There are three stages (Hans Selye):

1. Alarm--the turning on of the body's defense systems, that is designed to be brief for it is truly widespread in its effects throughout the body--it enables the "flight or fight" response in the face of danger--physical or psychological. The body reacts the same to fright from the impending pounce of a tiger as it does to an insult from the bully. Alarm triggers the sympathetic nervous system that releases adrenaline, in addition to many other functions.

2. Resistance--the maintenance of an alert stage that the body expected, and needs, to be turned off. Resistance to the bully and all that that requires depletes the body's defenses. If you stay in the resistance stage too long, the body will rebound then it's finally turned off, the body rebounds and the actual damage occurs when the stressor is gone. The parasympathetic nervous system restores normalcy; it turns off the sympathetic.

3. Exhaustion-- which can lead to death if the stressor never disappears and the body and mind must fight indefinitely. Exhaustion is a full system breakdown, mentally and physically. It demands that the stressor be removed or it will claim your life. To get to exhaustion, you have to ignore all the warning signs that your body gives you (see above psychological and physical effects).

A cautionary word about stress "management." It is usually the wrongdoer's prescribed solution for the Target. No amount of cognitive distortion or discounting will stop life-jeopardizing stress caused by a bully and her accomplices. The only long-term solution to stress is to REMOVE THE STRESSOR. Separation from the bully is an imperative first step. To argue otherwise prolongs the Target's misery.

Return to the Bullying Studies Index page | To QuickLinks, the site directory

Workplace Bullying Institute
U.S. and Canada
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Postby admin » Mon Jun 04, 2007 1:09 pm

WBI Comments:

The relevance of this study to bullying is twofold.

First, this study demonstrates the equivalence of the impact of nonphysical stressors (which are also considered torture by U.N. conventions, but not current U.S. standards under the Bush administration) on PTSD, depression and the perception of control over one's life. Psychological mistreatment mimics physical torture as it impacts abused individuals.

The authors make the related point in the original article that stress is reduced when the abused person has the ability to aggress against the torturers. In the workplace, with so much bullying perpetrated by higher ranking people, the target is prevented from responding aggressively. Thus, suffering is magnified by a sense of helplessness and uncontrollability.

Second, witnesses to mistreatment of others also suffer. This is vicarious trauma. Clearly physically torturing individuals in front of families is much more extreme than typical workplace bullying. But the human psyche, however resilient when under extreme duress, is prone to injury and harm from psychological manipulations of a person's reality. Robbing people of control over their own circumstances is a fundamental, cruel deprivation that causes serious psychological harm. But bullied targets always knew this.
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New York Times

Postby admin » Mon Aug 21, 2006 3:45 pm

August 19, 2006
Save the Endangered Whistle-Blower
If ever government whistle-blowers needed protection from official retaliation it is now, in the secrecy-obsessed Bush administration. Federal employees daring to disclose fraud and abuse in their bureaucracies have been under virtual siege, isolated as pariahs and shipped off under gag orders to lesser jobs in far-off places.

Appeals to court review under the 17-year-old Whistle-Blower Protection Act have proved fruitless, with the Supreme Court ruling in May that workers have no right to First Amendment protection when they warn lawmakers and taxpayers of government waste and folly. The ruling has thrown the issue back into the lap of Congress. Fortunately, there is enough anger emerging on both sides of the aisle to raise hopes for remedial legislation.

The Senate has unanimously approved an amendment to close loopholes and spell out whistle-blowers’ rights in more forceful detail for the courts. It is attached to a pending military bill, with proponents working for comparably tough legislation to be accepted by the House.

The outcome is not certain. The Justice Department has been opposed to strengthening the law, and a countermove is afoot to give the administration even more power to prosecute whistle-blowers as leakers of official secrets. The coming showdown is a chance for electioneering incumbents to take a stand against the administration’s mania for foiling the public’s right to government transparency.

The best display of Congressional intent would be for lawmakers to not just reaffirm the 1989 law but to extend it to all the national security bureaucracy and to private contractors. The nation’s need for timely whistle-blowers has been painfully driven home by gaffes in pre-9/11 homeland security, the premises for the Iraq invasion, and the administration’s illicit intelligence gathering at home.
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Postby admin » Mon May 01, 2006 1:08 pm

The song and dance that is Enron trial
While Lay tries to deflect blame, whistleblower tells it like it was

Diane Francis
Financial Post

Saturday, April 29, 2006

This week in a Houston courtroom, it has been entertaining to read how Enron Corp.'s Kenneth Lay blames everyone for his firm's collapse except himself and his former CEO Jeff Skilling.

To hear Mr. Lay tell the tale, he was just doing his duty and the whole mess was the result of negative press articles, a crooked CFO, short sellers and pessimism.

Of course, the CFO was the reason behind the negative press articles, the short sellers and the pessimism. And, last time anyone checked, the CFO is a person who is appointed by and reports to the CEO and chair of a company.

What's going on here is Messrs. Lay and Skilling are trying to blame everything on Enron's CFO, Andrew Fastow, who has already gone to jail. But Fastow has testified that Messrs. Lay and Skilling knew about troubles and lied to the public, investors, regulators and employees. The two are charged with fraud.

What is pertinent to remember is that no matter how Mr. Lay recasts the facts, one CFO stealing US$45-million does not a US$25-billion fraud make.

Enron was a rotten culture and didn't suddenly hit trouble. The US$45-million that Mr. Fastow stole was a drop in the bucket compared with the tens of billions that were hidden from balance sheets in offshore entities that Messrs. Lay and Skilling inked.

Take what Enron whistleblower Sherron Watkins said in an interview with me in Banff in 2004. She has appeared as a prime witness this month at the Houston trial.

"Enron was different than WorldCom where just a few people decided to cook the books," she said. "This was systemic. Ken Lay made everyone use his sister's travel agency. People were co-opted. I can't tell you how many times I heard the phrase from executives, 'it's not exactly legal, but I think it'll stand up in a court of law.' "

(This week, Mr. Lay admitted to another "breach" when the prosecutor asked him about a company that he and Mr. Skilling had privately invested in, which was doing lots of business with Enron. Under the rules, the two were supposed to tell the board of directors about such "related party transactions," but Mr. Lay admitted this week they did not.)

Sherron Watkins told me she had doubts about Enron for years, but in 2001 came to understand the byzantine nature of Enron's outside activities.

In her case, she found out the portfolio of assets she was in charge of were used to pump up earnings, hide losses and camouflage fraud.

"The chief financial officer had set up a paper company he and others owned, which was funded with Enron stock options, to do business with Enron. In other words, he was doing business with himself," she said. "You can't do this."

In spring, 2001, she asked for an audience with Mr. Lay after Enron CEO Jeff Skilling suddenly quit, cashing in US$66-million in options, saying he left because he could not keep the stock rising in value.

"It made a bunch of us angry at Enron. We said he didn't call in sick, he called in rich," she said. "It confirmed my fears that something horrible was facing this company."

As a savvy investment banker and accountant, she realized the company and its investors were being defrauded. In summer, 2001, she sent an anonymous letter to Mr. Lay, then followed up by describing in detail all of the accounting irregularities to him in a 30-minute meeting that August.

Things didn't change and the company went into bankruptcy in December that year.

By December, 2001, the company admitted its US$13-billion in debts were really US$38-billion. Sherron testified before Congress and ended up on the cover of Time magazine for her courage.

Despite all the evidence about wrongdoing and billions in hidden debt, Mr. Lay told the jury this week that Enron had no underlying business problems that a little public relations couldn't have solved.

He also blamed his accountants (defunct Arthur Andersen) for restatements of earnings, never mind that the restatements were needed because of bad business practices.

As for Sherron Watkins' letter and warnings, his memory was fuzzy but he did recall that his accountants and lawyers dismissed its allegations.


© National Post 2006
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Postby admin » Wed Apr 19, 2006 8:06 am

04-19-06 FP: "Truth-tellers" -- A company's best defence

(( advocate comment.....This article sums up fairly accuarately the management cover-ups, and retaliation when I reported allegations of double dipping of investment fees on top of commission being charged by certain RBC investment advisors. These and other mutual fund sales practices were being used by some to earn the coveted "vice-president" title given out by RBC to top billers. The response by management to these allegations was to do the exact opposite of what their internal codes call for, and to attempt to shoot the messenger rather than investigate the message. The case to be heard in court in Alberta in '06 or '07))

A company's best defence
CEOs should think of whistle-blowers as friends, not foes -- it just might save them from prosecution

Joanna Gualtieri, a lawyer and founder of Federal Accountability Initiative for Reform in Ottawa, says new accountability rules in the United States are making disclosure the cornerstone of every company.

Philip Quinn
Financial Post

Wednesday, April 19, 2006

CREDIT: Dave Einsel, Getty Images
Enron whistle-blower Sherron Watkins wrote letters to former Enron CEO Kenneth Lay concerning questionable accounting practices.

Senior executives in Canada should encourage whistle-blowers -- employees who are prepared to stick out their necks when they spot a wrong -- because they just might help executives save their necks from prosecution and civil action.

"With Kenneth Lay and Jeffrey Skilling [Enron's former chief executives], their defence is going to be that they didn't know [about the illegal accounting practices taking place]," says Joanna Gualtieri, http://www.careeractivist.com/my-articl ... ht-way.htm a lawyer and the founder of Federal Accountability Initiative for Reform in Ottawa. http://primetimecrime.com/contributing/ ... ltieri.htm

Complicating their defence is the fact former Enron executive Sherron Watkins did warn Lay about the company hiding financial losses in so-called Raptor hedges but he dismissed her concerns.

"The obvious question becomes 'well why didn't you listen more closely when you were warned and if they are truly innocent that becomes a sort of hallmark case.' "

A whistle-blower can not only help a company prevent financial losses from theft and fraud but also protect senior executives from prosecution and civil action.

"Yes it [whistle-blowing] assists the company but I'm also suggesting something even more fundamental is that it's going to assist you the CEO or CFO and save you from possible prosecution," Ms. Gualtieri says.

"I tell people that because of these new accountability rules, you want to know what is going on. In other words, disclosure is really the cornerstone of your organization. You want to simply reduce the possibility you as the CFO or CEO will be blindsided by these risks being taken way down the line."

Corporate meltdowns at major U.S. firms such as Enron and WorldCom led to the Sarbanes-Oxley Act -- legislative reform that puts increased responsibility on a company's board of directors to prevent corporate malfeasance.

In Canada, there is both a legislative and corporate lag to making the changes that would help whistle-blowers step forward without fear of suffering job loss or marginalization if they remain at the company.

"Even in the U.S., the whistle-blower still has a hell of a ride," says Ms. Gualtieri, who exposed the excessive costs for diplomatic accommodations at the Department of Foreign Affairs in the 1980s. "Really credible reports are that 85% of whistle-blowers will suffer serious repercussions. In Canada, it's probably higher. I would say closer to 95%. I've never spoken to anybody who has stepped up who hasn't suffered."

http://www.onlineethics.org/moral/boisj ... intro.html

It is in the interest of the bottom line to find out about fraud or misappropriation of goods. One of the key ways to do that is to encourage employees to step forward without fear they will end up being victimized.

"If they [the employees] notice that management is serious, it sends a strong message," says Ray Haywood, Investigations and Forensic Services, PricewaterhouseCoopers.

"We [executives] are not looking for people to tell tales on the person working next to them but if it's a thing that affects the integrity or the brand or the bottom line of our company, we'd like to know about it and we'll react to it."

Canadian companies often incorporate whistle-blower policies into a larger loss prevention package.

"I think they are much more interested when we talk about this [whistle-blowing] in a much more holistic or expanded sense," Mr. Haywood says. "That it fits in to their whole approach to preventing theft and fraud and other things that impact negatively on the company."

Companies have tried various approaches to handling whistle-blower complaints, such as setting up a corporate ombudsman to deal directly with the issue or allowing employees to file anonymous complaints via the phone or e-mail. Usually, anonymous red flags are handled by third parties who then funnel the information to a company executive or HR department.

Anonymity will most likely be sacrificed as the claim moves forward especially if it involves complex issues. Employees have to feel there is something in place to protect them beyond just words in a policy statement.

"Enron had an ethics professor on their board; Enron had a wonderful code of ethics and a number of the trappings of an integrity program," says David Nitkin, president of EthicScan Canada. http://ethicscan.ca/ "The problem was it didn't have protection for the whistle-blower and the woman who did come forward didn't have her activities acted on."

He says there were at least 50 Enron employees who would put on a show every time Wall Street analysts toured the company to make them believe they were making millions selling energy futures.

"Don't tell me people didn't know, that's my experience whether it's a secretary, whether it's a co-worker or a spouse, somebody knows or suspects."

That fear of how they will be treated often turns potential whistle-blowers silent.

"I think we do need to see more actual examples of people who blow the whistle and are protected by their company," says Mark Schwartz, assistant professor, Atkinson School of Administrative Studies at York University in Toronto.

"Firms still focused on the bottom line continue to abuse and punish their whistle-blowers even if they claim to protect them."

There is the obligation, on the part of the whistle-blower, to report the matter internally before running to the media. They should only go outside the company if there is the chance they will be severely punished and the matter not acted on. In turn, whistle-blowers should be able to expect they will be treated with respect and protected.

"[They need to know] they will be protected from harassment if they do blow the whistle, says Prof. Schwartz. "It's not just a question of putting it on paper. You need to have managers that are constantly reminding employees about all of this right up to the CEO. There are examples of some CEOs saying, 'if you see a problem you should actually feel comfortable contacting me'. Warren Buffett did that right after the whole Salomon Brothers incident, sent out a memo to all employees and gave everyone his home phone number."

There is also enormous pressure on a company's board of directors (of particular concern to Canadian companies trading on U.S. markets) because of Sarbanes-Oxley to stay completely informed about what is occurring at their company, either through a channel a whistle-blower can use to contact them directly or at least making sure the CEO keeps them fully aware.

"I would put the elementary obligation on the independent member of the board," Mr. Schwartz says. "He or she is the final gate keeper and when someone like Sherron Watkins blows the whistle to Ken Lay, he should have presented it to the board of directors and he didn't."

© National Post 2006
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Postby admin » Tue Apr 18, 2006 11:51 pm

Edmonton Journal


Mutual fund industry's trading guidelines may not be tough enough for OSC

Lack of protection for whistle-blowers hinders exposure of illicit acts

Ray Turchansky

August 28, 2004

Guidelines released by the mutual fund industry this week to detect and deter inappropriate short-term trading and market timing may be "the calm before the storm," according to a lawyer in mutual fund practice.

"I think this is just the first shoe to drop," said Rebecca Cowdery, a lawyer with Toronto-based Borden Ladner Gervais, and a former regulator with the Ontario Securities Commission.

"I think what everybody is waiting for is, what is the OSC going to do? They have been on site asking 15 companies for more information. There is tremendous uncertainty about how the OSC is going about this review, what they are looking at and what they will allege is improper."

Late trading, where trades are made at the market's net asset value, or NAV, after stock markets close, is considered a non-issue in Canada, where trades are given an electronic time stamp.

But market timing, which involves taking advantage of the "stale prices" of foreign securities used to determine a fund's NAV, and short-term trading, namely buying and purchasing the same securities within a short time frame, do occur in this country.

The practices tend to make money for a few investors while increasing costs and therefore reducing returns for most people.

Investment Funds Institute of Canada guidelines propose imposing fees on short-term moves -- using fair value pricing, where fund managers estimate values of securities that release news after market closing -- and refusing to sell to clients who have made abusive short-term trades.

Reaction to the guidelines has been that many mutual fund companies already adhere to such policies, and that the IFIC has no regulatory power to enforce them.

"If I can criticize the IFIC paper, and I don't mean to, it doesn't go into enough detail about what was so wrong with some of those cases of short-term trading in the United States," said Cowdery.

She cited "sticky assets" as one example.

"You say to market timers, 'You can come in and out of our fund as long as you put $5 million into our other funds.' And in some cases the fund manager almost facilitated the market timing by giving them advance information of what was in the portfolio."

Few people shed light on unethical practices in Canada's investment industry because of a lack of protection for whistle- blowers.

Lethbridge financial adviser Larry Elford found abuses in the mutual fund industry "so prevalent and so pervasive" that last fall he filed a $13.1-million lawsuit against RBC Dominion Securities Inc. and RBC Dominion Securities Ltd.

"Unfortunately, I was naive enough to expect management to truly want to become part of the solution, and I did not recognize that they were in fact part of the problem," said Elford.

Supported in private but shunned in public by colleagues, he retired this July.

Then there's Saskatoon financial adviser Kent Shirley, who has filed a $50,000 claim against his former Assante boss, Brian Mallard.

Shirley alleges Mallard wanted him to participate in or ignore "unethical practices," such as providing insider information to clients, making personal loans to clients, giving stock advice to clients, facilitating trades while not properly licensed to do so, selling personal stock to clients, and issuing personal guarantees on client accounts.

Mallard, as founding chairman of Advocis, the umbrella group of Canadian financial advisers and insurance sellers, said this past January that having security regulators oversee financial advisers and planners was like "killing a bug with a bat."

He suggested letting advisers and planners police themselves.

In 1989 the U.S. beefed up protection for whistle-blowers, but Canada hasn't followed.

"It has been raised before, but I don't know if it's been discussed at the security regulators level," said Cowdery.

"I really don't think it's being addressed in Canada, and probably should be."

Ray Turchansky is a freelance writer and income tax preparer. He may be contacted at turchan@telusplanet.net
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Postby admin » Thu Apr 13, 2006 11:34 am

SUBJECT: Assante pioneer leaves the fold
One of the first independent financial planners to be acquired by fund distribution giant Assante Corp. has left, presumably to be once again independent.

A letter making the rounds on e-mail lists informs clients that “We, at Brian Mallard and Associates, have decided to transfer our mutual fund registrations from our current dealer, Assante Financial, to Quadrus Investment Services Ltd.”

The letter adds, “While you are not a new client to me, you will be a new client to Quadrus.” It asks clients to confirm their identification with proper documentation in order to “comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.”

In recent months, consumer advocate Joe Killoran did jail time after trying to shed light on the alleged suicide of Mallard’s former assistant and would-be whistleblower Kent Shirley. Regulators, Advocis, the press and now Assante all seem happy to leave this one swept under the rug.

Posted by Jonathan Chevreau on 4/13/2006 10:39:42 AM
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Postby admin » Thu Mar 16, 2006 3:08 pm

article below demonstrates how whistleblowers are never looked upon as welcome by the company's or organizations they work with. They are considered as traitors worthy of discrediting or worse by many. Their only crime is in holding the interests of the public, the safety of the public or some other principle above and beyond the interests of that of the company, or a select few members of the company.

read on

March 16, 2006

Famed Enron Critic Watkins Helps
U.S. Shine Light on Lay's Conduct

March 16, 2006; Page C3

HOUSTON -- Federal prosecutors drew on a bit of star power in their effort to prove that former Enron Corp. Chairman Kenneth Lay1 took part in a criminal conspiracy to hide financial problems at the company in the months before it collapsed into bankruptcy in December 2001.

Former Enron Vice President Sherron Watkins2 is probably the closest thing to a public hero to emerge from the Enron saga. Her efforts in the summer of 2001 to warn Mr. Lay about possible accounting scandals at the energy titan have won her praise in the media and Congress.

In testimony yesterday at the conspiracy and fraud trial of Mr. Lay and former Enron President Jeffrey Skilling3, Ms. Watkins recounted how she went to Mr. Lay in August 2001 with concerns about some of the company's financial transactions.

The transactions, which masked hundreds of millions of dollars of losses on Enron investments, were done with partnerships run and partly owned by the company's chief financial officer, Andrew Fastow4, who was Ms. Watkins's boss at the time.

Prosecutor John Hueston went through Ms. Watkins's memos to Mr. Lay, including one containing her now-famous warning that Enron might "implode in a wave of accounting scandals." Enron's bankruptcy filing a few months later was partly caused by rising public concern over Enron's accounting and its dealings with the Fastow partnerships, known as LJM1 and LJM2. (See Watkins's memo to Lay5 and a glossary of Enron terminology6.)

While Ms. Watkins didn't break any new ground, she did give prosecutors an opportunity to raise questions about Mr. Lay's conduct through a witness untainted by the problems that have burdened several others.

Among the previous government witnesses in the trial's first six weeks were former Enron executives who have pleaded guilty to company-related crimes, including Mr. Fastow.

Like Mr. Fastow, Ms. Watkins drew a nearly packed courtroom, and the crowd didn't seem to faze her. She appeared relaxed and animated, often gesturing with her hands as she looked at the jurors and elaborated on a particular point.

In describing her August 2001 meeting with Mr. Lay, Ms. Watkins said the Enron chairman "seemed surprised" by some of her concerns, but "seemed to take me seriously" and promised to investigate.

However, she again criticized both the scope and independence of the resulting internal investigation. Ms. Watkins also criticized as misleading some of the public statements Mr. Lay made subsequent to their August meeting about Enron's financial condition and its dealings with the LJM partnerships.

During cross-examination, Chip Lewis, one of Mr. Lay's attorneys, pointed out that the LJM transactions had been approved by accountants and attorneys inside and outside Enron. He also emphasized that Mr. Lay had listened to Ms. Watkins's concerns, ordered an investigation and protected her from possible retribution from Mr. Fastow.

He noted that in that same 2001 third quarter, Enron decided to unwind the LJM-related transactions that Ms. Watkins had complained most strongly about.

The closing down of the "Raptor" financial vehicles resulted in a more than $500 million charge to earnings that quarter. While Ms. Watkins conceded some points to Mr. Lewis, she didn't back down from her principal criticisms of what occurred at Enron.

In an apparent effort to take some shine off Ms. Watkins's public image, Mr. Lewis probed her sales of Enron stock in August and then in October of 2001. She acknowledged that "I had information the public didn't have. I wish I hadn't sold."

However, Mr. Lewis, perhaps mindful that his client had also cashed in large amounts of stock during this period, said it wouldn't be insider trading if there was not a fraud.

Ronald Woods, a Skilling attorney, criticized Ms. Watkins for "making outrageous statements" about the defendants, including comparing Mr. Skilling to a mob boss, in speeches and interviews she has given since Enron's collapse. He said that if the pair were acquitted, Ms. Watkins could see her income source from the speeches -- at as much as $30,000 a pop -- dry up. Ms. Watkins replied that her speeches were mostly about leadership, and whatever the trial's outcome, the men would "remain failed business leaders."

In questioning earlier in the day, defense attorneys worked to repair any damage done on Tuesday by the testimony of Vince Kaminski, a former Enron risk-management executive, who had said Mr. Skilling transferred his group in 1999 to another part of the company after he criticized an LJM-related transaction. Yesterday, Mr. Kaminski acknowledged that transfers at Enron were commonplace, and that he wasn't unhappy about the 1999 move. He added that Mr. Skilling had never done anything to restrict the work he did.

The trial is scheduled to resume on Monday.

Write to John R. Emshwiller at john.emshwiller@wsj.com26 and Ann Davis at ann.davis@wsj.com27

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Postby admin » Wed Mar 15, 2006 9:25 am

I feel that whistleblowers are still not well enough protected. The myriad of ways that management or superiors (or others) can use to obtain the "bureaucratic payback", or "ostracization" of someone who makes the mistake of committing the truth cannot even be imagined, much less protected against by the legislators. Examples, stories, awareness and work with those who have gone through it are needed to make this kind of abuse a thing of the past. See an Enron example below.

Watkins set to take the stand today

By Greg Farrell, USA TODAY

The first time Sherron Watkins tried to tell the truth about Enron, in an anonymous memo to Enron's CEO in August 2001, she stood alone. No one else was willing to point out what the world now knows: Enron achieved its stunning earnings growth through questionable accounting gimmicks.

Sherron Watkins wrote a memo warning that Enron could "implode" from accounting misdeeds.
By Shawn Thew, AFP

But when the former Enron vice president takes the stand Wednesday as a prosecution witness in the government's trial of former Enron CEOs Ken Lay and Jeff Skilling, she'll no longer be alone.

Instead, the woman who is perceived as the lone truth-teller in a company built on lies will come before jurors as one of many witnesses in the prosecution's case against Enron's top management. (Watkins memos: August 2001 memo to Ken Lay | October 2001 memo)

In the summer of 2001, Watkins joined Chief Financial Officer Andrew Fastow's global finance group. A former accountant at Arthur Andersen, she soon learned the secret to Enron's success: a bogus accounting gimmick that allowed the company to hide hundreds of millions of dollars in losses from investors.

Scores of executives, lawyers and accountants had approved the company's financial statements. But Watkins realized immediately that the company couldn't hedge its losses with partnerships that were capitalized with Enron's own stock.

Timeline of events
Feb. 12, 2001: Jeff Skilling named CEO.
Aug. 14: Skilling resigns. The next day, Sherron Watkins sends anonymous letter to Ken Lay, now Enron's chairman and CEO.
Aug. 22: Watkins meets with Lay to discuss her concerns.
Oct. 16: Enron reports $638 million third-quarter loss and $1.2 billion reduction in shareholders' equity in company.
Oct. 24: Chief Financial Officer Andrew Fastow ousted.
Oct. 30: Watkins meets with Lay again and gives him another memo.
Nov. 8: Enron restates earnings for previous five years to account for $586 million in losses.
Dec. 2: Enron files for bankruptcy-court protection.
Jan. 23, 2002: Lay resigns as chairman and CEO.

After Jeff Skilling resigned abruptly as CEO that August, she wrote her now famous anonymous memo, warning Lay that Enron could "implode in a wave of accounting scandals." A few days later, she came forward and met with Lay, now chairman and CEO.

After Jeff Skilling resigned abruptly as CEO that August, she wrote her now famous anonymous memo, warning

Thinking that Lay had been duped by Skilling and others, she urged him to get an outside law firm to review the transactions approved by Enron's auditors at Andersen and the company's lawyers at Vinson & Elkins.

When Fastow learned that Watkins had gone behind his back to complain to Lay, he was furious. Watkins eventually told a congressional committee that she feared for her safety.

When Watkins met with Lay again in October, she urged him to fire Andersen and Vinson & Elkins, restate Enron's earnings, and blame Skilling and Fastow.

Lay didn't do that, and Enron wound up in Chapter 11 bankruptcy protection. Watkins eventually became one of Time magazine's persons of the year for 2002, and she co-authored a book about her experience at Enron, Power Failure.

Witness for the prosecution

Watkins is expected to testify about her conversations with Lay. Through the first six weeks of the trial, prosecutors have introduced a parade of cooperating witnesses who have implicated Skilling, but it wasn't until last week, when Fastow testified that he warned Lay repeatedly of Enron's financial problems, that the government did any real damage to Lay.

"Sherron Watkins will testify that she told Lay Enron was a house of cards," says John Coffee, an expert in securities law at Columbia University. "She is going to be a bridge from Fastow, who is not the most reliable or credible witness."

Defense lawyers are expected to remind jurors that auditors and lawyers approved all of Enron's accounting transactions. They're also likely to point out that Watkins sold $48,000 worth of stock after meeting with Lay and advising him of the accounting problems.

On the questionnaire all prospective jurors fill out, at least one of those chosen said she admired Watkins' bravery in writing to Lay. According to a court transcript, the unidentified juror said she could be open-minded about Watkins' testimony, but knew how women were sometimes treated at big companies.

"I know how it is with a woman in the corporate world," she told Judge Sim Lake during jury selection.

Lay's lawyer is "going to have to be diplomatic," says Christopher Bebel, a former federal prosecutor. "If someone's up there, and he's 280 pounds and he wears a leather jacket that says Hell's Angels, you can be pretty tough, but if you've got Mother Teresa on the stand, you've got to be balanced."

March 15, 2006 USA Today
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