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Re: whistleblowers

Postby admin » Sun Jul 30, 2017 10:15 pm


Whistleblower Movies List

SERPICO (1973)
“The Whistle Blower” (1987)
“The Nasty Girl” (1990)
THE FIRM (1993)
DICK (1999)
BREACH (2007)
FAIR GAME (2010)
The Fifth Estate 2013
War on Whistleblowers: Free Press and the National Security State (2013)
Citizenfour (2014)
Snowden (2016)

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Re: whistleblowers

Postby admin » Thu Feb 12, 2015 9:17 pm

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Even a Superior Court Judge fear retaliation from his peers for speaking out…even when speaking out about an abusive or out-of-order system in his own profession. Whistleblowing is the systemic "singling out" for retribution of anyone, who dares tell difficult truths about any company or organization. It is akin to ritualized tribalism….at any level.

By: Olivia Carville Staff Reporter, Published on Thu Feb 12 2015
A Superior Court judge has attacked the body that investigates complaints against federal judges in Canada, calling for an independent review into its “horrendous” disciplinary system.
“I wish that the role of the Canadian Judicial Council were re-examined carefully. My experience has made me lose faith in the integrity of the process,” Superior Court Justice Ted Matlow told the Star.
It is a rare move for a federal judge to hit out against the regulatory body, but after three decades on the bench, Matlow said he was retiring with no faith in the council.
In 2008, Matlow was the subject of a million-dollar public inquiry where the council backtracked on a recommendation to strip him of his job.
An initial five-member panel found Matlow’s involvement in a citizens’ battle against city hall was at odds with his role as a Superior Court judge and rendered him unfit for office.
But then a full public inquiry, made up of 21 chief justices and associate justices from across the country, overruled the decision. The full council found Matlow, 74, guilty of misconduct for using his judicial title for personal gain and “intemperate” language, but said this did not warrant his removal from the bench.
Matlow claims he was found guilty of “trivial” things and that his actions never amounted to judicial misconduct — he says the council overruling its own decision proves there are problems with its processes.
“I did not speak out earlier because I feared that I might be met with further consequences. I now have only 15 days to work and I no longer have reason to fear any retaliation,” he said.

Norman Sabourin, the council’s executive director, defended the council’s actions and said some of Matlow’s criticisms were “certainly surprising.”
“All council members who reviewed the matter came to a view that Justice Matlow engaged in behaviour unbecoming a member of the judiciary,” Sabourin said.
The council “is determined to ensure that any allegation of inappropriate conduct by judges is taken seriously and reviewed fulsomely, with sanctions to follow in appropriate cases. This is what took place in the Matlow matter,” Sabourin said.
Speaking publicly for the first time since the inquiry, Matlow said his 33-year judicial career was shadowed by the council’s “horrendous” public investigation into his involvement leading a crusade to stop a condo development in his Toronto neighbourhood.
“In my case, I think they did a terrible job. My case should not have consumed the time, effort and money that it did,” Matlow said.
“The whole thing was crazy.”
After reading a Star investigation highlighting the council’s secretive complaints process, Matlow said he felt obliged to go public with his own concerns before retiring.
“If a judge receives a bribe, robs a bank, or does terrible things, like insults litigants or sexist things, then I think that would legitimately lead to recommendation for removal,” Matlow said, but he questioned being stripped of office for challenging a neighbourhood development.
As a law student, Matlow was a driving force in the abolition of the death penalty. As a federal judge, he presided over some of the biggest fraud cases in the country and was praised in the media for going to extreme lengths to expose suspected police corruption in his courtroom. He has been the editor of a national law journal since 1977.
Matlow wants a full review of the council’s powers, ordinary people sitting on its inquiries, more transparency into its processes and said judges who are found guilty of misconduct should not automatically be entitled to have their legal fees paid by taxpayers — as is the case under current legislation.
Had his case been dealt with “intelligently and sensibly” it never would have proceeded, he said. “Even at worse, if I had used intemperate language, it did not justify getting me to go on a leave of absence for two years, while paying my $300,000 salary, and then spending millions of dollars to try and get me removed from the bench,” he said.
Matlow has estimated the full cost of his inquiry to be up to $4 million, but Sabourin disputed this and said he would be surprised if the cost exceeded $1 million.
At the end of the public inquiry into Matlow, several members of the council were of the view that he should still be removed from office, Sabourin said.
“The decision of the council was that no recommendation for removal should be made, on the basis that Justice Matlow belatedly acknowledged that his behaviour had been inappropriate,” Sabourin said.
Matlow got into trouble over his role in the early 2000s leading a community group that fought to stop a condominium complex being built on his dead-end street in Forest Hill. He lobbied politicians (including the attorney general) and tried to stir up media coverage against city hall, claiming the project was illegally authorized because it had grown in size and exceeded zoning bylaws.
Matlow continued to preside over legal cases involving the city during his fight. In 2005, when he ruled against the city in a high-profile but unrelated case, he was also privately continuing to push for media coverage of the condo battle. The city’s legal department filed a complaint to the judicial council claiming he was biased.
The council convened a panel, which reviewed the complaint and found that Matlow’s “inexcusable” misconduct rendered him unfit for office.
The panel said his activities, which included publicly suggesting city officials had been devious, stupid and dishonest, breached a judge’s ethical responsibilities and diminished public confidence in the impartiality of the justice system.
A full council inquiry was then called where the majority overruled the decision to strip Matlow of office. He was found guilty of misconduct for offering legal advice to the community group, for using intemperate language in the media, such as claiming city hall’s lawyer should not have passed law school, and for using the prestige of office to advance his private interests.
The council found Matlow’s “inappropriate and unacceptable actions” placed him in a position incompatible with the due execution of office, but it said the test for recommending his removal from the bench had not been met.
Matlow is one of only 11 judges to have faced a public inquiry in Canada — representing fewer than 0.5 per cent of all complaints lodged with the council.
He was ordered to comply with binding conditions, including apologizing to the city’s legal department, the attorney general and others, undergoing a judicial ethics course at the National Judicial Institute and seeking approval from the council before participating in any public debate in the future.
Matlow said he wrote the letters of apology, but he never knew what he was apologizing for. The ethics course he was ordered to attend was not available for more than two years after he returned to duty, which, Matlow said, defeated its purpose as a rehabilitation program.
“I acknowledge that I probably went overboard in some of the things that I said, but so what? That’s not judicial misconduct,” he said.
Despite everything that happened, Matlow said he still believes he had the right to fight against the condo development and that he could not have lived with himself if he had not.
“I never denied I did all of the things that were alleged. My defence was that I was entitled to do it,” he said. “I thought I had a legitimate right to say that the city was doing something wrong and just because I was a judge, it didn’t mean I should roll over and just let it happen.”
During the investigation, the council did not address the question of whether or not he was right in his fight against the city, Matlow said.
Ironically, the proposed condominium was never built. The parking lot on the corner of Thelma Ave. is still there.
Olivia Carville can be reached at ocarville@thestar.ca

http://www.thestar.com/news/gta/2015/02 ... judge.html
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Re: whistleblowers

Postby admin » Wed Sep 17, 2014 12:45 pm

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US wants higher rewards for Wall St whistleblowers

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America's top prosecutor has called for an expansion in the rewards that whistleblowers on Wall Street can receive.

Eric Holder, the US attorney general, said that a current cap of $1.6m for what whistleblowers can get under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) - a piece of legislation prosecutors have used against Wall St banks - isn't enough to persuade a Wall Street banker to come forward.

In a speech at New York University's Law School on Wednesday, Mr Holder said:

The amount an individual can receive in exchange for coming forward is capped at just $1.6 million – a paltry sum in an industry in which, last year, the collective bonus pool rose above $26 billion, and median executive pay was $15 million and rising.
By contrast, under a separate piece of legislation, the False Claims Act, whistleblowers are eligible to receive up to a third of any penalty the government levies in a successful case.

Changing the cap on the FIRREA could, Mr Holder, argues:

Significantly improve the Justice Department's ability to gather evidence of wrongdoing while complex financial crimes are still in progress – making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis.

see FT article here http://www.ft.com/intl/fastft?post=207832
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Re: whistleblowers

Postby admin » Thu Aug 28, 2014 1:00 pm

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The right to report malfeasance should be an unwaivable right in a democratic state; obstruction of that right is cartel-like conduct.

Jordan Thomas, a former attorney at the Securities and Exchange Commission and Department of Justice, chairs the whistle-blower representation practice at Labaton Sucharow.

AUGUST 27, 2014

Having served in senior positions at both the Securities and Exchange Commission and the Department of Justice, I know that the many settlements with banks arising out of the financial crisis are not mere “spankings,” but critical, hard-fought victories. But real change requires charging individuals, and not just balance sheets. And to take down the truly bad actors, law enforcement and regulatory authorities need whistle-blowers.

The right to report malfeasance should be an unwaivable right in a democratic state; obstruction of that right is cartel-like conduct.

In 2010, Congress ordered the Securities and Exchange Commission to create a program that allowed anonymous reporting and offered significant employment protections and monetary incentives to eligible whistle-blowers. Since the implementation of the program in 2011, the commission has received a flood of high-quality intelligence and evidence about possible securities violations — often from senior executives who historically have remained silent.

And yet, in my work representing corporate whistle-blowers, I regularly review employment contracts and confidentiality agreements that, among other egregious provisions, seek to prevent individuals from reporting unlawful conduct to the government.

The right to report malfeasance should be an unwaivable right in a democratic state; obstruction of that right is cartel-like conduct. With the Government Accountability Project, I have petitioned the S.E.C. to clarify its rules to guard against corporate attempts to silence, retaliate against or otherwise bully whistle-blowers.

Straightforward policymaking that encourages reports of misconduct, sets forth protocols for internal reporting, and establishes a zero-tolerance policy for retaliation is vital to repairing the integrity of our system.

To meaningfully repair faith in our banks, the financial markets and protect investors, we need to prosecute more of the senior bad actors. Until we do, these hard targets will have little to fear and nothing to lose. Accountability at the top starts from within, and those working inside of the system should feel safe enough to speak up about wrongdoing.

http://www.nytimes.com/roomfordebate/20 ... le-blowers
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Re: whistleblowers

Postby admin » Thu Aug 07, 2014 1:36 pm

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This article, probably the most concise and lucid summary Leymann ever penned of his foundational research, is published on the Heinz Leymann Memorial Website (http://www.mobbingportal.com/leymannmain.html) with the kind permission of the Springer Publishing Company, LLC, New York, NY 10036, 13 February 2009. Other sites are welcome to link to the article as published here, but any republication elsewhere requires explicit permission from the Springer Publishing Company.

Violence andVictims, Vol. 5,No. 2,1990 © 1990 Springer Publishing Company

Mobbing and Psychological Terror at Workplaces

Heinz Leymann, Ph.D.
University of Stockholm, and National Institute of Occupational Health Stockholm, Sweden

In recent years, the existence of a significant problem in workplaces has been documented in Sweden and other countries. It involves employees "ganging up" on a target employee and subjecting him or her to psychological harassment. This "mobbing" behavior results in severe psychological and occupational consequences for the victim. This phenomenon is described, its stages and consequences analyzed.

An ongoing program of research and intervention that is currently being supported by the Swedish government is then considered.
Through their national Work EnvironmentActs Sweden,Finland and Norway support the right of workers to remain physically and mentally healthy at work (National Board of Occupational SafetyandHealth, 1980). Yet,inrecentyears,aworkenvironmentproblem has been discovered, the existence and extent of which was not known previously.

This phenomena has been called "mobbing," "ganging up on someone" or psychic terror. It occurs as schisms, where the victim is subjected to a systematic stigmatizing through, inter alia, injustices (encroachment of a person's rights), which after a few years can mean that the person in question is unable to find employment in his/her specific trade. Those responsible for this tragic destiny can either be workmates or management.

Consider the case of Leif:

Leif worked inalarge factoryinNorway. Hisjob, asarepairman,wastokeepthemachine park up and running. He was a skilled worker on high wages. He came originally from Denmark and his workmates often made fun of him as he spoke Norwegian with a Danish accent. This happened so often that his personal relations became seriously disturbed — he became isolated. On one occasion he became so irritated that he thumped the table with his fist and demanded an end to all further jokes about his accent. From that point, things became worse. His workmates intensified and widened the range of their "jokes." One of these was to send him to machines which didn't need repairing.

In this way Leif gradually gained the reputation of being "The Mad Dane." At the beginning, many workers and foremen did not know that his sudden appearances were the results of "Jokes." His social contact network broke down, and more and more workmates joined in the hunt. Wherever he appeared, jokes and taunts flew around. His feeling of aggression grew and this drew the attention of management. They got the impression that it was Leif's fault and that he was a low-performance worker (which he gradually became). He was admonished.

His anxiety increased and he developed psychosomatic problems and had to take sick leave. His employers reassigned him to less skilled work without even discussing his problems; this Leif experienced as unjust. He considered himself to be blameless. The situation gradually developed into one of serious psychosomatic disorders and longer periods of sick leave.

Leif could not keep his job, nor could he get another one, as his medical history could be only too clearly seen in his job applications. There was nowhere in society where he could turn for help. He became totally unemployable — an outcast. One of the ironies of this case is that Leif had previously been employed by a number of companies where he had performed well, had been a good workmate and had been given good references by his employers. (We have found similar cases in Sweden, Denmark, Western Germany,England, Austria, USA, and Australia.)

Although "mobbing," at the lowest denominator, is probably the result of ignorance, it may have fatal consequences.

This paper gives (a)a brief overview occurrent Swedish and Norwegian research into this problem in ordinary work place situations (Leymann, 1986,
1987,1988), and (b) a description of an ongoing development of procedures where lawyers and psychologists cooperated to ameliorate this problem.

The Operational Definition of Mobbing
Investigations carried out notably in one of the major Swedish iron and steel plants (Leymann & Tallgen, 1989) support the following definition of mobbing:
Psychical terror or mobbing in working life means hostile and unethical communication which is directed in a systematic way by one or a number of persons mainly toward one individual.

There are also cases where such mobbing is mutual until one of the participants becomes the underdog. These actions take place often (almost every day) and over a long period (at least for six months) and, because of this frequency and duration, result in considerable psychic, psychosomatic and social misery. This definition eliminates temporary conflicts and focuses on the transition zone where the psychosocial situation starts to result in psychiatric and/or psychosomatic pathological states.

In order to establish the mobbing frequency in an organization, I have developed the LIFT questionnaire (Leymann Inventory of Psychological Terrorization, Leymann, 1989). The method has been validated and has an enhanced capacity to differentiate between mobbed and non-mobbed employees. It also shows that this social situation is not linear, that is, people hardly ever suffer from degrees of mobbing — either one is a victim or one is not.


Mobbing of adults as a phenomenon has, up to now, been discussed in our research in detail from the point of view of social structure, the occurrence of specific actions and the different ways in which the victim risks being expelled from working life. Also there have been some, what I would like to call, indicatorial investigations that point to a frighteningly high occurrence of this mode of behavior.
This research work has, up to now, concentrated on the conceptualization of the phenomenon and its localization in society, which proved to be extremely difficult since it was well hidden. The conceptualization permitted a number of deductive conclusions. In addition, a number of preliminary investigations of an indicatorial type were carried out that attempted to locate quantitative occurrences of individual subaspects (the suicide study mentioned below is one such indicatorial investigation).

Important: See note at beginning of article!
Mobbing andPsychologicalTerroratWorkplaces 121

The Structure of Critical Events: From Mobbing to Expulsion

At present the real reason why mobbing occurs at workplaces is unknown, although there are a number of hypotheses, as will be shown later. Harassment can go on for years, despite the fact that a supervisor, or some other manager, should have been able to stop it very early. In some cases it is not clear, at the start, who will be the victim. In these cases, the victim becomes apparent when one party to the conflict gains the upper hand. In this field of research, the victim is defined as the person in the schism who has lost his/her "coping resources" (Leymann, 1988 - see also below). Four critical incident phases can be found:

Phase 1: The Original Critical Incident

As regards the investigated situations, it is known that the triggering situation most often observed is a conflict (usually over work); but not much is known in detail about critical incidents and other probable triggering states in working life. Hypothetically, this phase is very short and the next phase will be entered into as soon as the focused person's workmates and management reveal stigmatizing actions. In Leif's case, the real reason was envy over his wages.

Phase 2: Mobbing and Stigmatizing

Many of the communicative actions which can be observed occur fairly often in everyday life. But within the framework of the harassment phenomenon, they have an injuriou seffect, as these actions are used consistently and systematically over a long period, with the in- tention of causing damage (or putting someone out of action). All the observed actions have the common denominator of being based on the desire to "get at a person" or punish him/her. Thus manipulation is the main characteristic of the event. What is shown to be manipulated is:
1. The victim's reputation (rumor mongering, slandering, holding up to ridicule).
2. Communication toward the victim(the victim is not allowed to express him/herself, no one is speaking to him or her, continual loud-voiced criticism and meaningful glances).
3. The social circumstances (the victim is isolated, sent to Coventry).
4. The nature of or the possibility of performing in his/her work (no work given,
humiliating or meaningless work tasks).
5. Violence and threats of violence.

For an exhaustive description of all these attitudes of hostility, see Leymann (1986). For Leif s part the mobbing sequence was that he, at a first stage, was ridiculed and derided and then, when he protested, treated as an enemy and sent on false missions to damage his reputation.

Phase 3: Personnel Administration

When management steps in, the case becomes officially a "case." In the research mentioned above it has been shown that, during this phase, people can be confronted with serious violations of justice. Management tends to take over the prejudices of the victim's work- mates. Thisisoneoftheoutcomesofthemobbingsituation,whichturnsthepersonintoa marked individual. Those around regularly assume that the cause of the problem lies in the deviant personality of the victim (that is, one observes the victim's defensive behavior and from that draws the conclusion that the victim is suffering from a personality problem). The situation is complicated since personnel administration is governed by different working- environment legislation in different countries, with the notion of what constitutes a violation varying according to the applicable law.

Leif's work situation became so manipulated that his superiors noticed his low performance; they "bought" the rumors that had been spread about him (the mad Dane) and relocated him to a job where he could not "do so much damage."

Phase 4: Expulsion

As far as the mobbing scenario at workplaces is concerned, one knows quite well what social circumstances people end up in, when they have been expelled from working life. In the Scandinavian countries, the most dangerous situations that give rise to further stigmatizing are long-term sick leave, no work provided (but still employed), relocation to degrading work tasks, and psychiatric treatment.
Leif suffered psychosomatic problems because of his treatment, went on the sick list, defended himself aggressively against his assailants, became a persona non grata and ended up in a situation where it became increasingly difficult for him to find new work. (Staff departments usually ring each other to obtain references about applicants for jobs.)

Psychical, Social, and Psychosomatic Effects

It seems to be a general clinical experience among physicians working in occupational health departments that immediate and grave psychosomatic effects can be observed. I have located (Leymann, 1987) the number of suicides having this background as being between 100 and 300; this means that about 10%-15% of the total number of suicides in Sweden each year have this type of background. The Swedish Salaried Staff Union and the Civil Service Staff Association have found that over half of their members, who resign without having another job to go to, have done so because they can no longer stand the conflicts they have been exposed to (Askling, 1987).

In Norway, an opinion poll among members of unions affiliated with the Norwegian TUC showed that about 1 % of the working population (some 20,000 inNorway) have or had this problem. Translated into Swedish terms, this would mean about 50,000 people — a figure which can also be obtained from other estimates.

In the United States, this would mean that about one million employees might suffer from this type of problem.
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Among the social consequences, we can assume a presumably high expulsion percentage (according to the definition above), many periods of sick leave over the years, discreditable transfers to other work, social isolation, employment without any real work to do, as well as ignominious psychiatric examinations and diagnoses. (We suspect that there is a substantial amount of "overkill" in psychiatric diagnoses because of inefficient social anamneses. It is clear that here we must expect considerable psychosocial occupational illness.)

To sum up, one can point to a number of effects which, up to now, have only been examined clinically and not statistically. However, these effects are very grave:

Socially: Social isolation, stigmatizing, voluntary unemployment, social maladjustment.

Social-psychological: Loss of coping resources; many coping resources are linked to
social situations, and as these change in a negative direction, the coping system breaks down.

Psychological: A feeling of desperation and total helplessness, a feeling of great rage about lack of legal remedies, great anxiety and despair.

Psychosomatic and psychiatric: Depressions, hyperactivity, compulsion, suicides, psychosomatic illness. There are suspicions that the experiences deriving from this social situation have an effect on the immune system (one company physician observed a couple of "mysterious" cases of cancer).

The Economic Consequences for the Organization and for Society

We must assume that the economic consequences—like the psychosocial—are considerable. A person can be paid without having any real work to do (or none at all), and this can go on for years. Long periods of sick leave; a catastrophic drop in production by the whole group; the necessity for frequent intervention by personnel officers, personnel consultants, mana- gers of various grades, occupational health staff, external consultants, the company's health care centers and so on.

All this extra effort, combined with loss of productive work, can be estimated to amount to between 30,000 and 100,000 U.S. dollars per year for the employee exposed to such mob- bing. We know of cases in the USA, United Kingdom, Australia, Canada, West Germany, and Scandinavia where these situations have lasted for ten years or more.

Ongoing Research

With grants from the Swedish Work Environment Fund, a number of research projects will be initiated during the next three years. First and foremost of interest is the qualitative occurrence of mobbing both in Sweden as a whole and in various branches of industry and commerce. These investigations have already begun. An examination will also be made of causal relationships: Are there specific organizational factors which favor the growth of these situations and course of events? In what respects can it be a group phenomenon or does it depend on personal characteristics? The target of this research will be to develop preventative working methods and techniques to help the victim break the vicious cycle. International comparisons will also be made. Hypothetically, one can assume that in the progression of critical events in mobbingPhases 1and 2 are similar, regardless of the cultural background of the countries concerned. Phases 3 and 4 will probably show major differ- ences, as the course of events will be affected greatly by labor law legislation in the various countries (Phase 3) and their national health and social security organization (Phase 4).


Obviously, there is reason to assume that in Phases 3 and 4, there is, or at least should be, close cooperation between psychologists and lawyers in responding to the phenomenon of mobbing. If, in any country, trade unions play a prominent role, they will of course be involved. In the account given below, I have assumed a "Scandinavian situation" where the unions are powerful. In countries where this is not the case, their part must be taken by a lawyer or some other person.

Actions Against Expulsion: Conciliation and Arbitration

Whatever is done to intervene in this iniquitous progression, action or actions taken must, primarily, be aimed at preventing the victim from sliding down the slope toward expulsion. This process mustbe stopped dead in its tracks the momentone starts working on the case.

If the problem has gone as far as Phase 3, both psychological and legal action will be needed. By this stage, at the latest, it will be essential for the victim to be represented by somebody — a representative of the local union branch or, in more difficult cases, from the union head office. In Norway, for example, those who have been victims of mobbing have built up a very effective self-help organization.

Unfortunately we have not found, so far, very much help in the existing negotiation literature. The reason for this might be that the psychological as well as the legal work procedures to be carried out have to be integrated. Nevertheless, the recent work of de Bono (1985) seems to be in line with our observations to date. The description of our experiences, given below, is our first publication of them so far.

There exist a number of prerequisites for the successful conclusion of conciliation negotiations or arbitration procedures. The principles for mediation in very grave cases of conflict between workers should be:

- setting up an ethically defensible form of discussion;
- setting up formal procedures, agreed to by both the parties;
- absolutely avoiding psychic o r social damage;
- treating the two parties are as if they are "on the same level with each other"; neither
treats the other in a patronizing manner; and
- having a conciliator be very active in commuting between the parties and in making
independent proposals.

The principle of avoiding social damage dictates that the target of conflict solution should not be, as it is at present, elimination of the conflict by the expulsion of the marked person. One would not look for a social solution for the individual in society's so-called "Caring services" (the National Health Service or the Department of Health and Social Security in the U.K, for example). The principal aim of conciliation to solve a conflict must be the elimination of (preferably, a solution to) the conflict, while granting the weaker party cer- tain basic rights.

Experience from other forms of conciliation work in the labor market shows that two more important prerequisites must exist:

First, the conciliator must have such a status that s/he can act as a conciliatory authority vis-a-vis the higher-ranking party.

Second, both parties must have access to ethical reprisals if conciliation should become deadlocked. Examples of such reprisals are: (a) ethically based social pressure from those closest to the case forcing both parties to reach a solution; (b) publicity for the case to create a wider social interest which, in turn, can exert pressure in the form of a moral point of view; (c) access to an impartial hearing, but not, however,before certain formal procedures have been exercised; in the United States for example, collective bargaining agreements between employer and employees specify these procedures (Library of Congress, 1983).

My experience, gained from insight into a large number of conflicts, is that legal matters are not usually a hindrance. Often the weaker party, the one threatened with expulsion, wants some sort of honorable rehabilitation or an assurance that s/he was not solely the guilty party in the conflict. It is puzzling that we have never found a single case where the employer, as the other party, could find himself at fault and give the employee some redress for wrongs suffered. Usually, in cases where the conflict has gotten completely out of hand, the employer representative demands some form of total capitulation to his demands. As I have said, my experience inclines me to think that this kind of experienced violation is the factor which drives the situation to its climax. For this reason the problem, in principle, should be easier to solve if one can find suitable conflict-reducing forms of conciliation, as well as a humane and ethical approach toward dealing with those in a state of extreme mental and social desperation.

The means by which the conciliation is carried out, the principles which should exist and how they are to be developed are, at this moment, the subject of a research project in cooperation with employer federations and trade unions. The work will require both legal and psychological expertise. The proposed procedure to be carried out is as follows:

1. The parties agree that conciliation is to take place.
2. A representative is provided for the employee, either from the trade union or a firm of
consultants. (It is absolutely necessary for the employee to have a representative; the employer side should also have one. Under no circumstances should the opposing parties be allowed to personally come into conflict during the conciliation process.)
3. The parties and those involved in the conciliation listen to a lecture on the results of research up to that time. (The objective is to refocus from personalities as a cause of the conflict to complicated situations in general as a cause of conflicts.)
4. The conciliator negotiates on the conciliation procedures.
5. The conciliator commutes between the parties with proposals while at the same time
tryingtomoderatetheirexpectations. (Itisnotunusualforeachpartytodemandthe
total capitulation of the other; a compromise solution is required in most cases.) 6. A binding legal agreement is drawn up.
7. In most cases the victim will need psychic rehabilitation.

But even if we will be able to solve many cases in the future, there will always be people who will either be expelled and/or so damaged that psychological and social rehabilitation must be considered. Ego-supportive and/or reality-supportive psychother- apy will then be of immediate importance. However at the moment it is not clear that this approach would help some of the people who have been the victims of mobbing, as they seemed to have been gravely impaired both psychologically and socially. In these cases supplementary rehabilitation methods may have to be developed, paying special attention to the social and legal factors.
It is remarkable how central is the feeling of violation of rights in all the cases which have been examined.

From the psychiatric point of view this observation is highly interesting. A logically justified experience of being gravely violated in connection with the typical (and logical) behavior pattern in this situation — namely, a struggle for moral redress against forces which portray the victim as someone with personality problems, is frequently misinterpreted by psychiatrists as a sign of paranoia. There have been a number of observed cases where the victim of mobbing has been subjected to a compulsory de- tention order in a psychiatric hospital on those very grounds (for instance, see Leymann, 1986). Further research will need to find ways of improving the psychiatric anamneses so that its social sector is given a more reasonable level of diagnostic weight.

Askling, M. (1987). Studie over arbetsloshet som grundar sig p£ uppsagning p£ egen begaran. Stockholm: Statstjanstemannaforbundet.
de Bono, E. (1985). Conflicts, a better way to resolve them. London: Harrap. * Reports with Swedish titles are written in Swedish


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Re: whistleblowers

Postby admin » Sun Jun 01, 2014 9:08 am

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May 30, 2014 1:01 pm
William D Cohan on Wall Street whistleblowers
By William D Cohan
The personal price of exposing financial wrongdoing can be devastating. William D Cohan meets three men who went public and paid for it
Whistleblowing is not for the faint-hearted – and especially not on Wall Street.
On Wall Street, as every­one now knows, wrong­doing by bankers, traders and executives led to disaster in 2008 after they were rewarded for taking risks with other people’s money. Leading bankers and traders were motivated – by the hope of getting large bonuses – to package up mortgages into securities and then sell them off as AAA-rated investments all over the world. This happened even though one damning email after another makes clear they knew some of the mortgages would probably default and that the securities should never have been sold in the first place. But some people did try to blow the whistle – the problem is they were not listened to. Worse than that, they were treated in a way that would discourage anyone from following in their footsteps.
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I interviewed three whistleblowers – from different periods of the recent crises that have befallen Wall Street. All three of them made allegations of wrongdoing at their banks, made strenuous efforts to report what they had discovered through internal and external channels and all three were either fired from their jobs after trying to share the information they had stumbled upon or quit in frustration.
Their testimonies and the details of what happened to them are important. Not only do they illustrate the existential risks that whistleblowers take when they attempt to point out wrongdoing that they uncover at powerful institutions. They also matter because their stories show just how uninterested these institutions genuinely remain – despite the lip service of internal hotlines and support groups – in actually ferreting out bad behaviour. The stories of these three whistleblowers reveal, too, how little the regulators charged with keeping watch over the Wall Street banks seem to care about holding them in any way accountable. Often the regulators seemed to be willing to ignore the allegations presented to them.
None of this surprises the experts who have tracked whistleblowers across a variety of industries, including Wall Street. Eliot Spitzer is the former governor and attorney-general of New York state, once known as the sheriff of Wall Street. (He resigned as governor in 2008, following a prostitution scandal.) When he was attorney-general, between 1999 and 2006, he prosecuted wrongdoing on Wall Street and won billion-dollar settlements from many banks. Among the purported crimes were “spinning” – when favoured clients received hot, pre-IPO stock and sold it after the price rose when trading began; ­“laddering” – when preferred clients received hot, pre-IPO stock from banks who knew they would sell the stock into a rising market and then buy more; and “late trading” – when hedge funds were allowed to trade in shares of mutual funds after trading had closed for the day. Spitzer also won settlements from banks after discovering that research analysts were positively tailoring their reports about a company’s prospects in exchange for investment-banking business.
“The pushback against the status quo in any context is extraordinarily difficult,” says Spitzer. “It is not merely Wall Street. It is a phenomenon that exists within large institutions that have significant power – Wall Street, government, among them. There is this overwhelming rigidity in organisations that makes them hesitant to believe. When money is involved, the powers are very, very significant. Those people who pushback on Wall Street are often made to pay a penalty. They’re fired. They’re blackballed. It is a cultural issue which we have to deal with.”
Spitzer recalls how, when he was working at CNN a few years ago, he invited on to his show three whistleblowers from the National Security Agency, each with more than 20 years of experience. “Highly regarded, well-respected individuals who alleged that the NSA was collecting data – metadata, as they referred to it – that related to all phone calls being made around the country,” he explains. “They were fired, drilled out of the agency and disregarded, maligned.” Of course, he notes, the three men were absolutely right in their allegations. Thanks to Edward Snowden, we now know that the NSA has been collecting and analysing data about individual Americans, and others, for years.
Prosecutors often need whistleblowers to come forward in order to make a substantive case of illegality. They play an essential role in keeping Wall Street’s collective feet to the fire by exposing wrongdoing when it occurs. “Very few prosecutors would claim that they could make great cases without individuals on the inside,” Spitzer says. “We cannot make the complicated cases or begin to see the difficulties there without people who come forward to discuss what is going on that’s improper. So we desperately need them and we’re going to continue to apply pressure to ensure that Wall Street and the other major institutions live by the rules.”
The 2010 Dodd-Frank financial reform law, which was supposedly designed to try to prevent the kind of economic meltdown that occurred in 2008, contains a number of new provisions that provide whistleblowers with protection and financial rewards – known as “bounties” – for bringing wrongdoing to light. Occasionally whistleblowers actually receive those rewards. But, Spitzer notes, there remains a high degree of treachery to contend with for anyone who chooses to buck the social norms and report questionable behaviour. “I don’t want to discourage people from being whistleblowers but on the other hand there are significant challenges that await them down the road,” he says. “The momentary reduction of angst they get from the media [when a whistleblower goes public] is often outweighed by the significant problems they face after and often personally in the environment in which they had lived before they were a whistleblower.” That is clearly the case for Eric Ben-Artzi, Peter Sivere and Oliver Budde – the whistleblowers profiled in these pages – all of whose Wall Street careers were curtailed in one way or another by what they discovered and then reported.
People who pushback on Wall Street often pay a penalty
- Eliot Spitzer
Beatrice Edwards is the director of the Government Accountability Project, a leading Washington-based public-interest law firm that represents and advocates the cause of whistleblowers. She notes that while the Dodd-Frank law created new paths for whistleblowers to report wrongdoing to both the Securities and Exchange Commission – for securities violations – and to the Commodity Futures Trading Commission – for commodities-related violations – she fears that the SEC’s “bounty programme” is not working as she hoped it would. In 2013, she explains, whistleblower reports to the SEC increased 8 per cent on the year before and such reports to the Department of Defense rose 125 per cent between 2009 and 2013. However, she says that while the SEC’s reward programme was slow to get going, the pace of payouts has picked up in the past year or so. Nevertheless, “whistleblowers are still paying for their disclosures with their jobs, in general,” she adds. “What we see when people come to us is they’ve already been subjected to retaliation, and the retaliation in banking does seem to be very fierce. People aren’t just transferred or demoted, they’re dismissed.”
As a further harbinger of danger, Edwards points to the secret $14m award the SEC made recently to an anonymous whistleblower at an unnamed financial institution. The SEC didn’t even reveal the nature of the wrongdoing the whistleblower uncovered, so both the company’s shareholders and the public remain in the dark about what was specifically uncovered and where. All that is known is that the SEC did bring a major enforcement action against a financial institution that resulted in a large penalty and the corresponding $14m award to the whistleblower. “If you allow this – that the award can be made without naming the company or the type of fraud – it’s really nothing more than hush money,” she says. “How is it different? The SEC of course defends itself by saying, ‘We’re not revealing the name of the company or the nature of the fraud because we’re protecting the identity of the whistleblower.’ But the SEC is a disclosure agency, so they should have to establish that [not revealing the information] is really required in order to protect the whistleblower, if they’re going to in a sense subvert their mission . . . They really are not able to justify why they are silent about the name of the company or the nature of the fraud.”
She believes the SEC’s failure to release publicly the details of the $14m reward sends precisely the wrong message. “The one effect obviously it has is that it protects the reputation of the fraudulent corporation,” she adds. “[Reputational damage] is probably the main deterrent in cases like this, since there have been really no prosecutions of senior managers for fraud over a period of time on Wall Street. If even the name of the company is withheld by the SEC when it makes a bounty award, there’s no reputational risk, either. What’s the downside of trying to get away with it?”
Dennis Kelleher, a former attorney at Skadden, Arps and now the CEO of Better Markets, Inc, a Washington-based non-profit organisation that is a leading advocate for tough banking regulations, says that the architects of the Dodd-Frank law – of whom he was one – were trying to balance the need for disclosure about financial wrongdoing with provisions to protect the whistleblower from public humiliation and retaliation. “The most important thing is to incentivise whistleblowers to come forward, and all the incentives previously were dramatically stacked against whistleblowers, and it’s still an incredibly high-risk action,” he says. Although critics remain, he thinks the new whistleblower provisions in Dodd-Frank strike the right balance. “I would be significantly more likely to encourage a whistleblower post-Dodd-Frank than pre-Dodd-Frank,” he says.
Jordan Thomas, a former senior enforcement official at the SEC and now a partner at the law firm Labaton Sucharow, where he leads the firm’s whistleblower practice and represents Eric Ben-Artzi, agrees with Kelleher. He believes the fact that Dodd-Frank allows anonymity for whistleblowers facilitates the reporting of wrongdoing while offering them protection from retaliation, which is the point after all. “Essentially most whistleblower horror stories start with retaliation,” he says. “And to be retaliated against, you have to be known. The genius of Dodd-Frank was it created a way for people with knowledge to report without disclosing their identity to their employers or the general public. That has been a game changer because now people with knowledge are coming forward with a lot to lose, but they have a mechanism where they can report this misconduct without fear of retaliation or blacklisting.” He says the fact that the SEC could award $14m to a single whistleblower whose identity has remained unknown, despite efforts by the media to uncover it, sends a powerful message that whistleblower identities will be protected.
Maybe so. But then there is the message being sent by prosecutors who allow the big Wall Street banks to pay large fines to make their troubles disappear. Bea Edwards, for one, thinks that the government’s apparent policy of permitting Wall Street banks to purge their liability using their shareholders’ money will not deter bad behaviour. The fines – she specifically cites JPMorgan Chase’s $13bn settlement last year with the government over its role in manufacturing and selling faulty mortgage-backed securities in the years leading up to the 2008 financial crisis – are merely seen as a cost of doing business, and are a major source of revenue for the US Treasury and a way for the SEC and the Justice Department, among others, to argue for a larger budget allocation from Congress.
“It’s win-win for everybody [involved],” she fears. “The calculation for the bank is going to be, ‘OK, how much money can we make by doing this [bad behaviour] before we get caught? Are we going to be able to cover the fine, at the very least, and then make a fairly substantial profit and just pay the fine?’ And that would explain why there aren’t any prosecutions, because if the DOJ starts prosecuting, then the gravy train kind of shuts down . . . Calculate how much money you can make doing ‘x’ or selling ‘y’ before getting caught at it, and what you think essentially you could settle for, and if what you can make is substantially more than what you can settle for, then you go forward. If getting caught means [there is] a whistleblower, then you just grind up that employee in the cost of doing business. If the employee whistleblower is lucky, he or she comes out of it with a successful anti-retaliation claim, three or four years after the blood was shed. Or the whistleblower, if successful, gets an amount of money that may make it possible to go on living – but it is certainly not an amount of money that caused real pain to a major financial institution on Wall Street.”
Edwards pauses, and then concludes: “It’s a cost-benefit analysis. It works because nobody’s going to jail. Jail would put a stop to it.”
. . .
Former legal adviser, Lehman Brothers
Ignored by regulators
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Oliver Budde, former legal adviser, Lehman Brothers; ignored by regulators
The last place Oliver Budde expected to end up was Wall Street. After graduating from Columbia University in 1983 – the same year as Barack Obama – he took a year off to sail around the Caribbean, then spent five years as a ski bum, driving a taxi and working as a paralegal. He started his Wall Street career at the big law firm Skadden, Arps, initially through an employment agency placement. Skadden encouraged him and subsidised the cost of his law school studies. After receiving his law degree and passing the Bar exam, Budde returned as an associate but started looking for a new job in 1997 when Skadden let him know he would not become a partner. By serendipity, in December that year he ended up in the legal department of Lehman Brothers.
One of Budde’s responsibilities at Lehman was to prepare the “proxy”, an annual document filed publicly with the Securities and Exchange Commission that includes, among other information, details of shareholder ownership and management compensation. Within a month of starting at Lehman, Budde says, he could tell something wasn’t right with the way Lehman was accounting for the granting of management “restricted stock units”, known as “RSUs”. “Early on at Lehman I see this template where they’re hiding these RSU awards,” he says.
According to Budde, Lehman was awarding to Dick Fuld, the long-time Lehman chairman and CEO, large unvested stock grants and not fully disclosing them, as required by law. The rules governing the granting of RSUs are specific but generally require disclosure in the proxy. However, there was also “a loophole”, Budde says, by which if the RSU “vesting” (the moment when the stock awards can be cashed in) was dependent on a benchmark being reached – say, a return on equity ratio – the amount of the award would not need to be disclosed until then. When the amount of stock to be issued was known, then its value had to be put in the proxy.
When the tone at the top is ‘anything goes’, anything will go
- Oliver Budde
Lehman’s plan had a performance component, Budde says. “But those goals were ridiculously low and they got over them massively. They paid themselves multiples of what the plan was supposed to pay out.”
Budde says that, although he was appalled by the size of Fuld’s RSU awards and how easy the benchmarks were to achieve, his only professional concern was the lack of adequate disclosure. “OK, this stinks,” he told himself. But he was new to the firm and didn’t want to rock the boat. “I thought, let me pick my battles.” Then he says he noticed the Lehman executives “started playing with the vesting” – pushing the dates further and further out to the end of the executives’ careers “so that they never had to show those awards”. “It felt worse and worse,” Budde remembers. “Every year at proxy time, it made me sicker and sicker.”
According to Budde, he made a point each year of asking Simpson Thacher, Lehman’s external attorneys, to verify their opinion that Lehman’s limited disclosure about the RSUs continued to be legally adequate. “And each year they came back with some tortured analysis that said, ‘Yes it is,’” he says. “In fact, they would periodically tweak the disclosure footnote: Let’s put in a little more info here and there to shore things up.” But, in Budde’s view, these incremental changes did not satisfy disclosure requirements.
What’s interesting to note, Budde says, is that when Lehman first raised the topic of the disclosure with Simpson in 1995, the law firm agreed with Budde’s analysis that the RSU awards required a full-blown disclosure in a “summary compensation table”. Budde says Lehman’s files include a letter from Simpson Thacher stating its view that the full-blown disclosure advocated by Budde was legally required. And yet, according to Budde, after “pushback” from Lehman executives, the law firm somehow found a way to agree to the executives’ preference for limited disclosure concerning the RSUs. A spokesperson for Simpson Thacher declined to comment on Budde’s description of events.
©Pari Dukovic
Budde says he considers that there were other transgressions, too, including by Lehman executives who sold stock in the middle of a corporate acquisition, as well as the decision to create a tax scheme to move Lehman’s medical liabilities off its balance sheet. By the beginning of February 2006, Budde had had enough. “I can’t continue to take the money,” he thought. “I’m doing too many things wrong here.” He collected his bonus for 2005 and, on February 1, wrote a letter of resignation. “I have to acknowledge, after a number of years more or less howling at the moon,” he wrote to his boss, “that my view of things seems to find very little purchase inside Lehman. Result? Extreme career dissatisfaction.” His colleagues at Lehman thought he was “nuts”, he recalls. “It was no mystery . . . I said fairly freely that I was concerned about the tone of this firm and the ethics of the place.”
Budde decided he needed a change and spent two years travelling back and forth to Germany to care for a sick relative. “I wanted to take a couple of years off, just get rid of the stink,” he says. “I had a big pile of winnings [the years of the after-tax proceeds of his bonus cheques] and I was going to relax . . . Just get back to the guy that I was.”
Around the time that Budde quit, the SEC changed the required disclosure for RSU awards. “This was like a gift from the gods,” he says. “I thought, now they’re going to have to disclose these awards.” Back at his home in Vermont, Budde opened a copy of Lehman’s March 2008 proxy. For the first time, he expected to see a summary table similar to what he had long advocated and the back-up for all the RSU awards that Lehman had granted Fuld and other top executives. “At least I’d have the satisfaction that that s*** that had been bothering me for years was now at least out in the open,” he recalls.
But there was no new disclosure. Budde believes Lehman had made a decision that since Fuld’s RSU awards had more or less vested, or would soon do so (ie they could be cashed in), they would simply not disclose them – as if they were saying: “We’re just not going to count them and we’re not going to show them to you.” That broad assumption, he says, eliminated the disclosure of $264m of Fuld’s RSUs. Instead of showing $410m of RSUs in Fuld’s name, the proxy showed $146m.
At that moment, Budde knew that he had to go to the SEC. “I just felt like someone’s got to tell,” he recalls. But he was not naive.“Whistleblowers have a hard time,” he says, but he decided, “No, I’m going to double down on this.”
At almost nine o’clock on the night of April 14 2008, Budde sent an email to the SEC’s enforcement division in which he outlined how Lehman had misled its shareholders and employees by failing to properly disclose the extent of the RSU awards that Fuld and other top executives had received over the years. He included detailed charts analysing Fuld’s compensation and a full explanation of the scheme.
Budde thought that this was certain to capture the SEC’s attention. What happened? “Zip. Zero. Nada,” he says.
To this day I have never heard from anybody at the SEC
- Oliver Budde
He wrote to the SEC again in June and July, on September 11 – four days before Lehman Brothers blew up – and again on September 13 when he informed the SEC that he had sent a letter to Lehman’s non-management directors apprising them of a “laundry list” of “issues and concerns and potential liabilities” going well beyond the proxy disclosure issues he had already shared.
On October 6 Richard Fuld testified before the powerful House Committee on Oversight and Government Reform. During his testimony, Fuld sparred repeatedly with Henry Waxman, the committee chairman, about how much money he had made at Lehman. Waxman released a chart showing that Fuld had made $484m from 2000 to 2007. Under oath, Fuld denied he had made that amount and said he had received closer to $310m. Later in the hearing he conceded that it might have been closer to $350m.(A subsequent analysis by Harvard law professor Lucian Bebchuk and colleagues concluded that Fuld had made $522.7m between 2000 and 2007.)
Budde was incensed. He believed from his own calculations while he was at Lehman that Fuld had made $529.4m, a figure that was never disclosed. “When the tone at the top is ‘anything goes’, anything will go,” he says. “Anything will happen, inevitably . . . If Dick Fuld was willing to lie about his compensation, he’s willing to lie about anything.”
Still, Budde tried to work within the system, without airing his concerns publicly. He contacted the FBI, Waxman and two state attorneys-general. He wrote to the New Jersey Bureau of Securities. He also wrote to Edolphus Towns, who had just replaced Waxman as the chairman of the oversight committee. He contacted the SEC’s inspector general. But, essentially, he says, “to this day I have never heard from anybody at the SEC”.
In April 2010, Budde got in contact with James Sterngold at Bloomberg Businessweek and shared his story about Fuld’s compensation and his campaign of obfuscation. A few other journalists, including me, picked up on Budde’s story while writing about the Lehman Brothers collapse.
When I contacted Fuld’s attorneys Allen & Overy regarding Budde’s statements, they replied: “This set of allegations surfaced several years ago, and at the time we issued the following statement. We will have no further comment. ‘The allegations by Mr Budde were previously raised with Lehman Brothers Holdings Inc and its non-management directors in the spring of 2008. After being vetted by legal counsel, they were determined to be without merit. In 2006 there were amendments to the SEC regulations for disclosure of executive compensation. Lehman Brothers complied with the amended SEC regulations.’”
Budde now spends his time writing a book about what he witnessed at Lehman and about his failed efforts to be a whistleblower. He also provides a few clients with legal advice. He hopes his book will appeal to ordinary people, curious about how without ethical leadership at the top of a bank, disaster is inevitable. “It’s just a question of time,” he says. “These guys run the banks like they’re in Das Boot: ‘Give me 110 per cent of reactor power.’ ‘But we could blow.’ ‘I don’t care.’ They think: we’re cashing out all along. What’s the worst that could happen?”
. . .
Former analyst, Deutsche Bank
Still fighting for reinstatement
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Eric Ben-Artzi, former analyst, Deutsche Bank; still fighting for reinstatement
Eric Ben-Artzi, like another whistleblower featured here (Peter Sivere), didn’t talk to the press until his employer, Deutsche Bank, had fired him.
“I never wanted or expected to be a whistleblower,” he says. “I reported internally first – and extensively, in accordance with bank policies and procedures. But as the problem was not acknowledged or corrected, I felt compelled to inform the law enforcement authorities. Unfortunately my family and I are paying a heavy price for doing the right thing.” Ben-Artzi alleged that, during the financial crisis, Deutsche Bank had overstated the value of more than $130bn of collateralised debt obligations or CDOs (securities containing different pieces of debt) on its balance sheet, to the tune of $12bn. If true, this would mean that Deutsche Bank had misstated its financial performance and its officers had signed off its financial statements illegally. The Financial Times first reported many of Ben-Artzi’s concerns about Deutsche Bank in December 2012.
Ben-Artzi’s saga began in June 2010 when, after stints at both Citigroup and Goldman Sachs, he was hired by Deutsche Bank as a quantitative analyst and a vice-president in its Legal, Risk and Capital division, based in New York. His first assignment was to create a “stress test” for Deutsche Bank’s bespoke credit derivatives portfolio, the purpose of which was to analyse what the potential losses, or “tail risk”, would be if, say, the big Wall Street banks experienced a series of financial events similar to those in 2008. This was not just a theoretical exercise but a calculation required from banks by the SEC.
The bank itself had pegged the potential losses – in its bespoke portfolio and also in one tied to indices – at about $1.6bn but after applying his own judgment to the calculations Deutsche had made, Ben-Artzi believed that this could not be right. The methodology, he thought, was flawed. He recalled that at Goldman the models had suggested the tail risk could be as much as 8 per cent. This would put Deutsche Bank’s exposure closer to $10.4bn than $1.6bn.
My family and I are paying a heavy price for doing the right thing
- Eric Ben-Artzi
Ben-Artzi decided to raise his concerns with his Deutsche Bank colleagues. “I didn’t like the answers I was getting,” he says. When he spoke with the risk manager in charge, he became doubly worried. “Initially he said he didn’t know what I was talking about,” he recalls. “After that he said, ‘Those are worthless,’” meaning there should be no potential liability embedded in the CDO portfolio as opposed to the billions of dollars that Ben-Artzi had calculated. To check the mathematics properly required complex modelling but Ben-Artzi says that despite his efforts to pursue the matter he couldn’t get anyone at the bank to allow him to do it.
In March 2011, after two months of growing frustration, Ben-Artzi made two phone calls. The first was to the SEC, which eventually initiated a still-pending investigation. Four days later he called the internal Deutsche Bank Hotline, which is intended to allow employees to report wrongdoing or concerns without reprisal. “There are credit derivatives trades that I think are overvalued,” Ben-Artzi told the hotline, while declining its offer of anonymity. He says he went to the SEC first because “there were sufficient red flags” and he also wanted to give the SEC “a tip” in case he was fired after going to the hotline. He thought that “I could be terminated instantly, without any access to any information, so then essentially there would be no protection for me.”
A few days after his hotline report, Ben-Artzi says he was summoned to a meeting with Robert Rice, the bank’s head of governance, litigation and regulation in the Americas. Rice told him he thought the SEC was already aware of the internal disagreement about how to value the credit-derivatives portfolio and that an outside attorney, William Johnson, a partner at the Wall Street law firm Fried Frank Shriver & Harris, was investigating it. Ben-Artzi would be asked to meet him.
Toward the end of March 2011, Ben-Artzi had a two-hour meeting with Johnson and Rice. Ben-Artzi says he was informed Deutsche Bank was aware of the problem of properly valuing the “gap option” – which allows a counterparty to unwind the transaction under certain circumstances, putting a portion of the cost of the trade back on Deutsche Bank – and was told that the bank had decided to take an across-the-board 15 per cent “haircut” (or discount) to the derivatives, which resulted in a reduction in their value in the millions of dollars. (This was well below the billions of dollars, however, that would have been required in Ben-Artzi’s reckoning.) Finally, he was informed, a “reserve” – an accounting provision – had been taken on the trades but that was not the same as valuing the “gap option” properly, either.
Ben-Artzi says he had not been aware of these valuation efforts but that in his opinion it all seemed like obfuscation. “What they were trying to do was to be able to establish that I didn’t have all the facts, and therefore I didn’t know what I was talking about,” he says. Robert Rice and William Johnson did not respond to requests for their comments on this meeting. (Robert Rice no longer works for Deutsche Bank and is now general counsel to the SEC chairman.)
They accused me of trying to bring down the bank
- Eric Ben-Artzi
For weeks afterwards, Ben-Artzi heard nothing. Frustrated, he informed his boss that he had also discussed the situation with the SEC. Within an hour, he says, Rice called him back to his office. “It’s not my place to discourage you from going to the SEC, of course, but have you gone?” Ben-Artzi says Rice asked him. Ben-Artzi told Rice he did not want to discuss it as he was worried about retribution. Rice arranged for Ben-Artzi to meet with senior managers in New York, including top risk management executives. At these meetings, Ben-Artzi says his judgment was questioned and he was asked why he knew better than the smartest people at the firm who had not been able to come up with a viable model to value the gap option. He mentioned his Goldman findings. “Their response was, ‘If we used a gap option model, that’s the kind of thing that requires a bailout,’” because the potential losses would be so great that accounting for them could vastly diminish Deutsche Bank’ s equity account, he recalls. “They accused me of trying to bring down the bank.” (A spokesman for Deutsche Bank declined to comment on the internal meetings between Ben-Artzi and bank executives.)
Between late June and mid-October, Ben-Artzi took extended paternity leave. He worked remotely and gave serious thought to moving to Berlin to work in a related part of the bank. Then on November 7 2011 he was summoned to a conference room at Deutsche Bank in Wall Street and fired. He says he was told his job had been moved to Berlin and he could not have it. He was also told his termination was not related to his job performance. Ben-Artzi did not believe it. “I can’t see any other reason other than retaliation,” he says. At the end of the meeting, he was escorted out of the building. He received about $30,000 in severance pay and would have received more had he signed away his right to sue the bank. But he did not sign.
Three days before he was fired, Ben-Artzi filed a confidential “whistleblower” complaint with the SEC against Deutsche Bank, then another one with the Occupational Safety and Health Administration (OSHA) seeking reinstatement and payment of lost wages. Neither Ben-Artzi nor his attorney would disclose the SEC complaint, which is still being investigated.
In response to a request for comment, Deutsche Bank issued the following statement: “Issues about the credit correlation book were initially raised and self-reported to the SEC by the Bank in 2010, prior to Eric Ben-Artzi’s employment at Deutsche Bank. The Bank continues to co-operate with the investigation.”
While awaiting the outcome of his legal battles, Ben-Artzi started looking for a new job. At first, he tried to find a position on Wall Street. He had a few interviews but they went nowhere. He and his family then moved to Seattle, where Ben-Artzi hoped to find a job in the technology sector. But Seattle didn’t work out either. Recently, he was hired to teach finance and applied mathematics at Ohio State University.
He believes there is a chance he will succeed with the OSHA lawsuit and be reinstated at Deutsche Bank but he is still angry. “Obviously I’m not too happy but I’m forward-looking,” he says. “I have a lot of faith in the Department of Labor. I want to have faith in the SEC investigation . . . I think there are a lot of forces that are working in the right direction, so I hope these things will right the wrongs.” He is currently writing a book about his experiences.
Like the other whistleblowers featured here, Ben-Artzi has no regrets. “I think I did do the right thing,” he says. “I just think of the alternative of not doing anything . . . There aren’t a lot of people who were in a position to understand what happened, and a lot of people relied on me. I don’t think I could have or should have done anything else.”
. . .
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Peter Sivere, former compliance officer, JPMorgan Chase; now believes he was ‘naive’
Former compliance officer, JPMorgan Chase
Now believes he was “naive”
Towards the end of 2003, Peter Sivere, a mid-level compliance officer at JPMorgan Chase, blew the whistle on the Wall Street behemoth. In the course of his job, he had found emails and documents relating to a subpoena from the SEC, which was investigating “late trading” – Sivere believed the bank had failed to turn them over. In October 2004, he paid for his “insubordination”, as JPMorgan Chase executives referred to it, with his job and nearly with his career. It’s an old story that has happened repeatedly on Wall Street and in other industries: someone sees wrongdoing, tries to alert his or her superiors, as well as the authorities, and the thanks they get for trying to do the right thing is their notice and an overwhelming feeling of helplessness.
Although the events occurred nearly 10 years ago, Sivere still feels their effects. “Immediately after I was let go, you feel the emotions that you would [expect to] feel – let down, rejected,” he says. “You felt like if you did the right thing, the firm would stand up for you. That didn’t happen.”
He concedes, looking back, that he could have been more alert to the warning signals. Soon after he first raised his concerns, he was demoted and forced to report to people he once supervised. “Being demoted was humiliating,” he says. “But I [also] found it strangely exhilarating because it taught me how a corporation can bully a person to keep others in check.” He remained emboldened to keep trying to report the bank’s actions. “When I first asked my own compliance department to alleviate the concerns that I had and they didn’t, I was suspicious,” he continues. “Most people would have let it go but I couldn’t. I felt I did the right thing, escalating my concerns to my superiors, and when they were dismissive I felt I did the right thing by going to the SEC.”
I had lost my job and now I was at risk of losing my marriage
- Peter Sivere
Eventually, JPMorgan Chase dismissed Sivere. “You knew what was coming. One morning I came in and I couldn’t access any of my [computer] applications. Then security came to my desk and escorted me out.” He was dumbfounded and depressed by the melodramatic firing. He had trouble paying his bills, drained his savings and sold his New York apartment. The strain on his new marriage was almost overwhelming. “I had lost my job and now I was at risk of losing my marriage,” he says. “Coming to the realisation that I may not be able to provide for my family was by far the worst single moment: it played in my head every minute of every day.” He continues to find the topic very difficult to discuss with his two boys. “To this day my wife Krissy still feels sad hearing me try to explain to my sons Mickey and Bodie [aged 10 and seven] when they say, ‘Dad, why were you fired from your job for doing the right thing?’ Such a simple question and yet so painstaking to answer because it exposes what people are capable of doing to other people when one person’s ‘right thing’ is another person’s ‘wrong thing’.”
He has no regrets about becoming a whistleblower. But he still wonders why JPMorgan Chase did not support him. He quotes – with some irony – an expression used by Jamie Dimon, the bank’s chairman and CEO, in a 2009 speech to the Harvard Business School in which he said, “Do the right thing, not the expedient thing.” According to Sivere, “I had no reason to believe what I did was contrary to what senior management would expect from me and any JPMorgan Chase employee. You are taught at a young age right from wrong. Yet as we grow older and have our own self-interests in sight many of us lose that feeling of right and wrong.” (I have some personal experience myself of losing a job at JPMorgan Chase, as I have written elsewhere, though not as a whistleblower. I formerly worked for the bank, lost an arbitration case against it for wrongful dismissal after being laid off in 2004 and am currently in dispute with it over money it claims I owe it regarding an investment fund.)

The ordeal taught Sivere much about the way the world works and the powerful forces aligned against whistleblowers. He ticks off a list of what would have been nice to know before he embarked along this path: “I wish I had known about the revolving door between Wall Street and Washington. I wish I had known how ruthless external counsel for a corporation could be. I wish I had known that even if company policy may indicate it does not tolerate retaliation, retaliation may be in the eye of the beholder. I wish I had known how in bed the [Wall Street regulators are] with the firms they regulate. I wish I had known that the compliance department is mostly there for window dressing and is really not supposed to find anything. I wish l had known that at the end of the day compliance will be silenced by other forces. I wish I had known that the house always wins. I wish I was not so naive.”
JPMorgan Chase declined to respond to Peter Sivere’s description of events.
William D Cohan’s latest book is ‘The Price of Silence: The Duke Lacrosse Scandal, the Power of the Elite, and the Corruption of Our Great Universities’ (Scribner, $35). To comment on this article please post below, or email

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Re: whistleblowers

Postby admin » Sat May 24, 2014 9:20 pm

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It doesn’t pay to be a whistleblower in Canada’s corporate world. Not only are there absolutely no financial incentives in place to reward people for coming forward with incriminating information, but there is also a very real possibility those who shed light on wrongdoing will have to find another job.

Ottawa lawyer Harold Geller advised his client, a mutual fund salesman named Don Andrews, to go to authorities with his belief that a superior had involved them in a pair of schemes that contravened the rules at the large financial services firm where they worked.

The information led to an investigation that ultimately took Mr. Andrews’ former mentor out of the business. But, with a three-year prohibition for Mr. Andrews, combined with a loss of clients and a reputation hit, he’s out too, according to his lawyer.

“Mr. Andrews is being harshly penalized for doing the right thing,” says Mr. Geller. “There’s no incentive for people who get caught in schemes to come forward and self-report.”

By contrast, U.S. authorities are willing to pay hundreds of thousands of dollars for information, and to go easier on those who expose wrongdoing. Last week, a whistleblower was cut a cheque for about US$240,000 by the U.S. Commodity Futures Trading Commission.

Even “culpable whistleblowers” – those who are involved in the improper activities they bring to light – are eligible for leniency and bounties, albeit reduced ones, paid by the U.S. Securities and Exchange Commission.

U.S. regulator to award US$240,000 to whistleblower as Ontario considers incentives
Whistleblower incentives still on Canadian regulator's agenda
Despite years of study, Canadian securities authorities have so far balked at putting any reward money into the system. The one exception in this country is the Canada Revenue Agency, which established an incentive-backed program in January to crack down on international tax evasion. No financial awards have been paid so far but even if someone has come forward, there hasn’t been enough time for it to have worked its way through the system.

Canadian securities authorities have set up whistleblower hotlines in recent years, and are more than happy to take information. But with no obvious incentives and no guarantee of identity protection, those hotlines aren’t exactly ringing off the hook. The Investment Industry Regulatory Organization of Canada, for example, logged a total of eight calls in 2013.

In the United States, more than 3,200 tips were delivered to the U.S. Securities and Exchange Commission last year, up 7% from the year before.

There’s an argument to be made that if those who see malfeasance aren’t encouraged to step forward and expose it, investors will continue to be hurt, says Mr. Geller, whose Ottawa law practice frequently handles disputes between aggrieved investors and their advisors.

He says there was no indication the Mutual Fund Dealers Association of Canada knew about the wrongdoing that Mr. Andrews became entangled in through his mentor before the younger man put what he knew in a letter and sent it to regulators.

There’s no incentive for people who get caught in schemes to come forward and self-report
The system adopted by regulators in the United States fully embraces the idea that “it sometimes takes a rogue to catch a rogue,” says Kathleen Clark, a law professor at Washington University who specializes in whistleblower law and ethics.

“You don’t have to have completely clean hands to take advantage” of the system’s financial bounties and other protections, she said.

In fact, U.S. lawyers say, the whistleblower system in the United States relies on insiders to expose wrongdoing and recognizes the power of financial and prosecutorial incentives.

“What the SEC does is if there’s a co-operator or a culpable whistleblower who’s really helped out the SEC, they’ll give credit to that person, so maybe a reduced penalty,” says Jennifer Pacella, an assistant professor at City University of New York whose focus is federal whistleblower programs and securities regulation.

“They may also decide to follow a non-prosecution or deferred prosecution agreement and not even go after that person…. I think that’s really important, too, as kind of an added incentive to get such persons to come forward,” Ms. Pacella said.

The financial crisis of 2008 prompted securities regulators around the world to mull and develop whistleblower programs.

Both the SEC and the U.S. Commodity Futures Trading Commission began offering cash for tips leading to successful enforcement action as part of whistleblower programs established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

They pay whistleblowers up to 30% of money collected through sanctions of $1-million or more.

AP Photo/Mark Lennihan, FileBoth the SEC and the U.S. Commodity Futures Trading Commission began offering cash for tips leading to successful enforcement action as part of whistleblower programs established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The CFTC paid out its first award this week – about US$240,000 — for “specific, timely and credible information” about securities violations. Last fall, the SEC handed out a record $14-million award to a whistleblower.

Canada’s first whistleblower hotline in the securities industry was set up in 2009 by the Investment Industry Regulatory Organization of Canada. A total of 37 calls have been logged since February 2011, though a spokesperson for IIROC points out that “some of these may not have been true whistleblower matters.”

IIROC’s policy says the agency will do its best to keep the identity of a whistleblower private, but may be compelled by law to disclose it.

The same goes for the Canadian investment industry’s other self-regulatory agency, the Mutual Fund Dealers Association (MFDA), which just established a whistleblower program in February.

On its website, the MFDA says it hopes tips and information from whistleblowers will help the enforcement team “identify fraud and other misconduct and take the necessary regulatory action against responsible parties earlier than otherwise possible.”

Canada’s largest capital markets regulator, the Ontario Securities Commission, has been considering creating a formal whistleblower program that would pay monetary awards like the SEC since 2010. So far, though, an incentive-backed program has not advanced beyond the study stage.

The OSC plans to publish a “concept” paper this fall and invite input from interested parties that will “inform the direction the commission ultimately takes.”

The regulator already has a program that offers credit for co-operation with the regulator in some circumstances, and a new program for explicit no-enforcement action agreements was put in place in March. The OSC also clarified a process for self-reporting.

But Mr. Geller, who is a member of an advisory panel convened by the OSC to advise the regulator on investor issues, says he believes the Canadian regulatory system would work better if the important role of whistleblowers was clearly recognized and acknowledged across the board.

“Insiders should be encouraged to self-report, which is key to a reasonable consumer protection regime,” he said.

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Re: whistleblowers

Postby admin » Fri Nov 29, 2013 10:26 am

Sadly, this short minute and a half video, illustrates a hidden kind of adult bullying, corporate-style abuse. It is just a glimpse into the world that a corporate whistleblower, or as they say, "non team player" has to endure. Psychological torture and trauma.
Click the link below this image to watch how if feels.......
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http://www.youtube.com/watch?v=EpT9PL8R ... JBa_l0w7AQ
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Re: whistleblowers

Postby admin » Sun Sep 01, 2013 9:08 pm

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Wall Street’s Greatest Enemy: The Man Who Knows Too Much
August 30, 2013
by David Dayen

This post first appeared on Salon.

You may know Michael Winston’s story from a series of articles by Gretchen Morgenson in The New York Times, or from a celebrated Frontline episode, “The Untouchables,” about the lack of prosecutions on Wall Street. He was a Ph.D. who rose to the corporate elite, with stints at Lockheed Martin, McDonnell Douglas, Motorola and Merrill Lynch. He was recruited to mortgage originator Countrywide Financial with the promise that it wanted to become the “Goldman Sachs of the Pacific,” a full-service global financial corporation.

“They talked about the importance of ethics and principles, and they said they heard I was a high-integrity guy,” Winston tells Salon, noting his father had a vanity plate that read “HONOR.” Winston initially succeeded as enterprise chief leadership officer at Countrywide, getting promoted twice in 14 months and building a team of 200 working on corporate strategy.
But he could not ignore the rot at the heart of the company’s profitmaking approach.

So now, a successful high-level executive for 30 years, he has been embroiled in seven years of lawsuits with Countrywide and the company that bought it, Bank of America. His determination to speak out against multiple violations of law at Countrywide earned him retaliation, and eventually, he was frozen out of corporate boardrooms, unable to find a new job. He won a jury verdict in his case, but after two and a half more years of fighting, an appellate court reversed the ruling in highly unusual circumstances.

“I keep hearing about whistleblower protections,” he tells Salon, exasperatedly. “It certainly didn’t happen for me.”

Now, Bank of America wants to gouge Michael Winston one last time, demanding an interest payment on money awarded to him that he never received.

“Thus far, the person who did the right thing got punished, and the person who did the wrong thing got rewarded,” Winston said. The chilling case shows that the greatest enemy for Wall Street is the man or woman who actually tries to expose its secrets.

* * *
The lesson is clear: If you object to the corrupt practices at financial giants like Countrywide and Bank of America, you will be marginalized and financially ruined. And even if you think you’ve won, over time you will lose.“FUND-EM.” That’s what the license plate read when Winston pulled into Countrywide headquarters at the end of 2005. It was the car of CEO Angelo Mozilo. “What does that mean?” Winston asked a colleague.
“That’s Mozilo’s growth strategy for 2006,” his colleague replied. “We fund all loans.”“What if the borrower has no job?” Winston asked.

“Fund ‘em.”

“What if they have no assets?”

“Fund ‘em.”

“No income?”

“If they can fog a mirror, we’ll give them a loan.”

Winston relayed his fears about this doomed strategy to Drew Gissinger, head of Countrywide Home Loans, offering proposals on how to prioritize customer satisfaction and strong fundamentals over making dicey loans. “I was trying to save Countrywide from itself,” Winston said. These proposals were politely taken and discarded. Later Gissinger would say he never received them.

A separate triggering event had nothing to do with loans, but how Countrywide treated its employees. In addition to selling toxic mortgages, Countrywide also housed its staff in toxic buildings. One in particular, on Tapo Canyon Road in Simi Valley, Calif., was notorious for noxious air, exposed wiring and a generally hideous atmosphere. Winston worked in this building, and he and his team experienced shortness of breath, dizziness and headaches. One female employee, 35 weeks pregnant, said she was afraid to work there. Michael himself was struck by a toxic substance coming from an overhead air vent. “I thought I was being poisoned,” he said. This is at a company that made $2.7 billion in net revenue in 2006.

Countrywide claimed that it did an investigation of the air quality and found nothing wrong, when Winston knew it was still taking air samples in his office. Winston confronted his boss over this, and she replied that she lied to “prevent a panic” at the company. That’s when Winston submitted a complaint to California’s Occupational Safety and Health Administration (Cal-OSHA).

The retaliation was swift. Winston’s team was assigned elsewhere, his budget was cut, and his responsibilities reduced. Winston stayed out of a sense of loyalty to the team he persuaded to join Countrywide. “Everyone I recruited sold their houses in New York and moved to California,” Winston told Salon. “If not for that, I would have been gone at the first sign of trouble. I felt an obligation to them.”

After months of hardship, the president of Countrywide, Dave Sambol, asked him to come to New York and basically lie to the credit rating agency Moody’s about its corporate governance practices. Countrywide had gone without a president and chief operating officer for five months without informing investors, and had delivered top executives outsize compensation. Countrywide wanted Winston to fabricate a story about these practices and deliver it to Moody’s. Winston refused to lie. Three weeks later, the CEO, Angelo Mozilo, demanded Winston’s termination because he wouldn’t break the law. (The termination would not come until 2008, by Bank of America when it bought the company.)

For the next several years, Winston pursued a series of court cases, first against Countrywide and then against its new corporate parent, Bank of America, over the illegal retaliation. Winston and his lawyer, a former prosecutor at the Los Angeles district attorney’s office, saw so many lies from top Countrywide executives at their trial, that they wanted to get criminal charges instituted. Winston’s lawyer actually wrote to then-DA Steve Cooley, but nothing came of it (the DA’s office claimed it was never sent the material).

To use just one of a hundred examples, Mozilo claimed under oath he was “unimpressed” with Winston, despite a large documentary record of praise. “The assumption when someone raises their right hand, you see a check go off in the head of the jury, now we’ll hear the whole truth,” Winston said. “But no part of it was truthful.” In early 2011, after a month-long trial, the jury found in Winston’s favor, awarding him $3.8 million.

Sadly, the story doesn’t end there. First, Bank of America tried to get a “judgment notwithstanding the verdict” in its favor. When a judge tossed that out, the bank “went shopping for justice,” Winston said. The company would eventually find an appellate court in California to conduct a 29-minute hearing with no transcript made of the proceedings, a highly unusual practice. It didn’t bother to hear from Winston – he was 3,000 miles away at the time of the hearing. The court heard no new information in the case, only the two-year-old trial record, filled with “perjurious content” from Countrywide executives, in Winston’s view.

Though legal precedent requires appellate courts to not reevaluate evidence heard by a jury, in this case they did, creating new evidence requirements that they said Winston did not meet. According to the Government Accountability Project, which presented an amicus brief to Winston in the case, “respect for the jury’s determinations is the rule in California and the federal system.” Nonetheless, the appellate court reversed the jury verdict, rescinding the $3.8 million award. The court claimed that Bank of America could not be held liable for Winston’s travails, despite clear legal precedent that it assumed those liabilities when it bought Countrywide. “They reversed my verdict and they broke the law to do it,” Winston said.

* * *
Despite Bank of America taking two years to delay and appeal the verdict, Winston has no right to appeal. He sought a rehearing and then an appeal to the California Supreme Court, to no avail. He’s working on an appeal to the U.S. Supreme Court, arguing that his constitutional rights were violated. “The Constitution gives you the right to a trial by jury. It doesn’t say ‘only if the jury finds in favor of Bank of America,’” said Winston.

The insult on top of injury comes from Bank of America retributively seeking monetary damages from him. It filed in Superior Court to recoup roughly $65,000, allegedly the cost of posting a bond that was ordered by the trial judge after the original $3.8 million jury award. But Bank of America never paid the award to Michael Winston. “I never saw a dime and paid $600,000 in legal fees,” Winston said. The egregious demand for restitution – from a multibillion-dollar company – is a symbol of the vindictiveness of a corporate giant lashing out at someone who dared to expose them.

Winston, 62, has not been able to find work since this ordeal, despite a stellar record over three decades. Bank of America even tried to subpoena speaker’s bureaus Winston had signed up with to tell his story on the lecture circuit, causing those organizations to break ties with him. So the $65,000 is not a trivial amount for him. And the principle of having to pay Bank of America after it put him through hell for years is stinging.

The lesson is clear: If you object to the corrupt practices at financial giants like Countrywide and Bank of America, you will be marginalized and financially ruined. And even if you think you’ve won, over time you will lose. “No one who receives a jury verdict can feel safe,” Winston said. His actions – filing a health and safety complaint and refusing to misrepresent material facts for the company – are supposed to be protected by law. None of that mattered. Says Winston, “If I can’t get this case heard, why would any whistleblower speak up?”

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Re: whistleblowers

Postby admin » Wed Apr 10, 2013 6:20 am

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Whistleblowers are not spies or traitors, as the Bush and Obama administration’s lawyers have alleged. They are patriotic and often conservative Americans who work inside the government and with military contractors, and who find unacceptable—and often life-threatening—or illegal behavior goes unheeded when they report it through the traditional chain of command. They worry about doing nothing and feel compelled to go to the press, even if they suspect they may lose their jobs. What they don’t realize is that their lives will never quite be the same again, because they underestimate the years of government persecution that follows.

The documentary portrays the whistleblower as a special kind of American hero—one whose importance is easily forgotten in today’s infotainment-drenched media. Since the Vietnam War in the 1960s, whistleblowers have been part of many history-changing events: questioning the war in Vietnam by releasing the Pentagon Papers on military’s failings; exposing the Watergate burglary that led to President Richard Nixon's resignation; exposing the illegal nationwide domestic spying program by the George W. Bush administration after 9/11; revealing the military’s failure to replace Humvees in Iraq and Afghanistan with better bomb-deflecting vehicles, leading to hundreds of deaths and maimings; revealing how the nation’s largest military contractor was building a new Coast Guard fleet with ships whose hulls could buckle in rough seas and putting radios on smaller rescue boats that wouldn’t work when wet.

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Re: whistleblowers

Postby admin » Fri Mar 22, 2013 11:18 am

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Michael Winston
FRONTLINE | The Untouchables
A great many people around the county were rightfully shocked and horrified by the recent excellent and hard-hitting PBS documentary, The Untouchables, which looked at the problem of high-ranking Wall Street crooks going unpunished in the wake of the financial crisis. The PBS piece certainly rattled some cages, particularly in Washington, in a way that few media efforts succeed in doing. (Scroll to the end of this post to watch the full documentary.)

Now, two very interesting and upsetting footnotes to that groundbreaking documentary have emerged in the last weeks.

The first involves one of the people interviewed for the story, a former high-ranking executive from Countrywide financial who turned whistleblower named Michael Winston. You can see Michael's segment of The Untouchables at around the 4:20 mark of the piece. The story Winston told during the documentary is essentially an eyewitness account of the beginning of the financial crisis.

When I spoke to him last week, Winston was still as amazed and repulsed by what he saw at Angelo Mozilo's crooked subprime mortgage company as he was when he worked there. Winston, who had worked for years at high-level positions at companies like Motorola and Lockheed before joining Countrywide in the 2000s, described a moment in his first months at the company, when he rolled into the parking lot at the company headquarters.

"There was a guy there, a well-dressed guy, standing next to a car that had a vanity plate," he said. "And the plate read, 'FUND'EM.'"

Winston, curious, asked the guy what the plate meant. The man laughed and said, "That's Angelo Mozilo's growth strategy for 2006." Here's how Winston described the rest of the story to PBS – i.e. what happened when he asked the man to elaborate:

"What if the person doesn't have a job?"

"Fund 'em," the – the guy said.

And I said, "What if he has no income?"

"Fund 'em."

"What if he has no assets?" And he said, "Fund 'em."

Later on, Winston would hear that the company's unofficial policy was that if a loan applicant could "fog a mirror," he would be given a loan.

This kind of information is absolutely crucial to understanding what caused the subprime crisis. There are people out there still willing to argue that the government somehow "forced the banks to lend" to unworthy applicants. In reality, it was unscrupulous companies like Countrywide that were cranking out loans en masse, knowing that these loans would be unloaded down the line, first to banks and then to sucker investors like pension funds and foreign trade unions, almost as soon as they were created.

Winston was a witness to all of this. Eventually, he would be asked by the firm to present false information to the Moody's ratings agency, which was about to give Countrywide a negative rating because of some trouble the company was having in working a smooth succession from one set of company leaders to another.

When Winston refused, he was essentially stripped of his normal responsibilities and had his corporate budget slashed. When Bank of America took over the company, Winston's job was terminated. He sued, and in one of the few positive outcomes for any white-collar whistleblower anywhere in the post-financial-crisis universe, won a $3.8 million wrongful termination suit against Bank of America last February.

Well, just weeks after the PBS documentary aired, the Court of Appeals in the state of California suddenly took an interest in Winston's case. Normally, a court of appeals can only overturn a jury verdict in a case like this if there is a legal error. It's not supposed to relitigate the factual evidence.

Yet this is exactly what happened: The court decided that the evidence that Winston was wrongfully terminated was insufficient, and then from there determined that the "legal error" in the original Winston suit against Bank of America and Countrywide was that the judge in the case failed to throw out the jury's verdict:

In short, having scoured the record for evidence supporting the jury's verdict on the issue of causation, we have found none. It follows that the trial court erred in denying defendants' motion for judgment notwithstanding the verdict.

"I was flabbergasted," Winston says now. "Think of all the hard work the jury did, and [the court] overturns it just like that."

While it's impossible to say just exactly what a fair financial award should be for a person who reports bad corporate activity to the public, it's certainly true that when these whistleblower suits end in failure, it has a chilling effect on other people thinking about coming forward. Not many people are willing to risk their jobs if they think it will cost them every last dime in the end. This is just one more example of how hard it is for whistleblowers to come out even, even if they win jury trials.

That decision came down on February 19th, and is the first of the two interesting post-Untouchables footnotes.

The other involves some of the comments made by the head of the Justice Department's Criminal Division, Lanny Breuer, who said (as he has on other occasions, including after the recent non-prosecutions of HSBC and UBS for major scandals) that his Justice Department has to weigh the financial consequences of bringing prosecutions. Quoting from the PBS show, Breuer explained:

But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there's some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it's a factor we need to know and understand.

When Breuer said that, it raised a serious red flag on the Hill. A number of people in positions of power wanted to know just what "experts" people like Breuer had consulted with before deciding not to press charges in certain cases. Iowa Republican Senator Chuck Grassley and Ohio Democrat Sherrod Brown, specifically, sent Attorney General Eric Holder a letter asking a number of questions.

Among other things, the two Senators wanted to know if certain companies had been designated "Too Big to Jail." Then they had a series of very obvious and reasonable questions about those "experts":

4. Please provide the names of all outside experts consulted by the Justice Department in making prosecutorial decisions regarding financial institutions with over $1 billion in assets.

5. Please provide any compensation contracts for these individuals.

6. How did DOJ ensure that these experts provided unconflicted and unbiased advice to DOJ?

Well, at the end of last week, on February 27th, the Department of Justice sent Brown and Grassley a letter in return. The letter is, to describe it very generously, not terribly informative.

Most of the letter is just a long list of the many wondrous accomplishments the DOJ has secured under Eric Holder's watch, including felony manslaughter convictions against BP, or "fraud convictions for a board member of Goldman, Sachs," or the ongoing LIBOR investigation, or the prosecution in the Stanford Ponzi case. But the rest of the letter totally ignores the Brown/Grassley questions, particularly on the matter of which experts were and are being consulted.

On those questions, the DOJ would say only that "it is entirely appropriate for prosecutors to hear from subject matter experts at relevant regulatory authorities" and that . . .

When the Department consults with relevant regulatory authorities, or hears from companies who are targets of the Department's investigations and their counsel regarding potential collateral consequences of enforcement actions, neither those agencies nor the target companies receive any compensation from the Department.

That is one hell of a slippery piece of language. It's great that the Department of Justice is not paying, say, HSBC to consult with them on the question of whether or not HSBC should be prosecuted. What a relief! But that doesn't mean they're not paying someone else for that kind of advice.

The DOJ similarly blew off naming any individual experts and they refused absolutely to turn over information about any compensation they may have paid out to whomever it is who is whispering in their prosecutorial ears.

The two Senators late last week issued a blistering answer to the DOJ letter, saying, "the Justice Department's response is aggressively evasive," and that "the Department's only clear response was that it speaks to regulators and the banks themselves."

The Department of Justice is now saying that it misunderstood the two Senators, that it didn't know that they were asking for the actual names of those experts. Moreover, the Department claims it is working on answers to those queries.

In the meantime, Eric Holder is appearing before the Judiciary Committee this Wednesday, and it will be interesting to see how he handles questioning from Senator Grassley. It may get ugly before the answers actually come out, but it seems that someone is finally determined to get some real information.

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Re: whistleblowers

Postby admin » Wed Feb 27, 2013 4:22 pm

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When Telling the Truth Becomes a Crime.........3 minute trailer for new documentary about blowing the whistle and destroying lives of truth tellers.

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Re: whistleblowers

Postby admin » Thu Jan 31, 2013 5:54 pm

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What do Mark Klein, Frank Serpico, Joseph Wilson, Daniel Ellsberg, Jeffrey Wigand, W. Mark Felt, Julian Assange etc. have in common? They are what we subsume under the term whistleblower. While whistleblowers often become quite famous for the stories they help uncover, seeking fame is not generally their motive for speaking up. But to any general rule there are always exceptions.

How do we treat the so-called whistleblowers once they are identified? Are they heroes for speaking up and opening them selves up to public scrutiny and/or praise? No doubt, the public’s opinion about whistleblowers is marked by the motives behind the whistleblowing. If there’s one thing we like as a people, it’s a whistleblower with an honest and humble motive to speak up against an organization’s misconduct or against the government’s dishonest or illegal activities.

Whistleblowers are not always right but many are. Today, however, there is no affection for whistleblowers from the government or even the media. Those who dare to speak the truth tend to be vilified. The trend seems to be, that it is far more of a crime to speak out against any wrongdoing than the actual wrongdoing itself.

When we recollect the Watergate scandal and consider the important part W. Mark Felt played in uncovering the truth, which ultimately led to President Richard Nixon resigning from office. It is safe to say that few whistleblowers have, to this day, had as much impact as Felt.

Frank Serpico, who helped uncover widespread corruption among cops of the NYPD, was one of the unlucky whistleblowers. He was shot during a “questionable shooting” incident. For him, the Whistleblower Protection Act of 1989 came too late.

The Whistleblower Protection Act is meant to protect employers of the government who report agency misconduct, from retaliatory personnel action by agency authorities.

This brings us to some of today’s famous whistleblowers Bradley Manning, who was arrested on suspicion of having passed on classified information and material to the website Wikileaks and John Kiriakou, a former CIA officer, who helped expose the Bush administration’s torture program. It is important to note, that Kiriakou was sentenced to 30 months in prison, while those who committed the acts of torture have not been charged until today. As for Manning, the U.S has labeled him a traitor for revealing some of the American military’s shadier practices and held him for three years, before giving him his day in court.

The Whistleblower Protection Act has not served these two men very well. The Obama administration has prosecuted more government officials under the Espionage Act of 1917 for sharing classified information with the media than all previous administrations combined, despite the fact that President Obama vowed to fight for more protection for whistleblowers.

To protect against corruption, the government of the United States was created with checks and balances. Looking at the situation today, the government no longer tolerates any questioning from its citizens. Corruption often goes unchallenged when people don’t speak out about it. Ultimately, institutions, societies and citizens lose out when no one is willing to cry foul in the face of corruption. But the truth is, most whistleblowers go through hell. They pay a great price personally for telling the truth, especially since the government is hell-bent on prosecuting whistleblowers. This should be alarming to us, because these are not the actions of a truly transparent government that has nothing to hide.

Every whistleblowing story is different. But we owe every one of them a big junk of gratitude for making a moral decision to try and expose wrongdoings. Freedom is merely an illusion without the truth.

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Re: whistleblowers

Postby admin » Thu Jan 10, 2013 8:52 pm

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Brad Birkenfeld, the man who blew the whistle on a massive tax evasion scam that cost the U.S. government billions in lost revenue, has been awarded US$104-million by the U.S. Internal Revenue Service.

The massive payout is understood to be the largest such reward to an individual ever made. It highlights the stark difference between the United States, where even criminal whistleblowers can become fantastically wealthy for selling out their company’s shady tax practices, and Canada, where critics complain there is no incentive to point out wrongdoing.

As an executive at Swiss banking giant UBS AG in Zurich in 2007, Birkenfeld approached the IRS and the information he provided served as the basis for a landmark court case that saw UBS pay a US$780-million settlement and turn over details on thousands of U.S. holders of offshore accounts.

Birkenfeld, now 47, also revealed details of the bank’s operations in Canada.

Evidence presented before a U.S. Senate subcommittee that was looking into the matter included information about a major offshore business in this country run out of UBS’s offices in Switzerland, managing more than $5-billion of Canadian assets at one point.

Tax haven crackdown reaps big rewards
Foreign banks shun U.S. millionaires thanks to tough tax evasion rule
Officials in Ottawa vowed to crack down when the information was reported but so far no Canadian holders of UBS offshore accounts have been successfully prosecuted.

“People realized that it’s a question of time before we get them,” Jean-Pierre Blackburn, then the minister of revenue, told the Financial Post in 2009. “I tell them, we’ll get you, we’ll find you.”

Despite his efforts to secure immunity in the U.S, Birkenfeld was himself caught up in the legal wrangling around UBS and was sentenced to 40 months in prison for conspiracy to defraud the U.S. government. (He was released on Aug 1.)

According to court documents, UBS bankers in the U.S. trolled art shows, yacht races and other high-end events in search of potential clients looking for ways to avoid paying income tax. As a senior member of the bank’s wealth management team, Birkenfeld had a ring-side seat and also took part, at one point helping a client to stuff diamonds into a toothpaste tube to avoid airport security.

Under U.S. law, such practices are illegal and Birkenfeld reportedly became uncomfortable with what UBS was doing and complained to senior officials at the bank. Birkenfeld claims that it was only when his concerns were ignored that he went to the IRS.

In a statement on Tuesday the U.S. tax authority praised Birkenfeld’s evidence, calling it “comprehensive” and “exceptional in both its breadth and depth. While the IRS was aware of tax compliance issues related to secret bank accounts in Switzerland and elsewhere, the information provided by the whistleblower formed the basis for unprecedented actions against UBS.”

Offshore banks in Switzerland and other tax haven jurisdictions had largely avoided the gaze of tax authorities in countries such as the U.S. and Canada, but that changed in the wake of a series of scandals involving former employees going public with incriminating information and computerized client files.

One of the first tipsters was Heinrich Kieber, a former computer technician at LGT Bank in Liechtenstein, who sold details about account holders to Britain, France and Germany among others. Thanks to Mr. Kieber, the CRA came into possession of details of more than 100 Canadian clients of LGT bank.

The CRA subsequently obtained similar lists of offshore account holders UBS and HSBC.

Because of its efforts to chase after Canadian tax evaders and the publicity around the matter, the CRA says it has collected tens of millions of income tax that it would otherwise not have received.

But critics say it would collect a lot more if took a more aggressive approach, perhaps prosecuting tax evaders in court.

Another strategy employed in the U.S. but not in this country is encouraging whistleblowers to come forward by offering financial rewards— as much as 30% of the tax collected as a result of the information provided.

Indeed, critics frequently complain that far from being rewarded, whistleblowers are more likely to be punished in Canada.

Howard Wetston, chair of the Ontario Securities Commission, raised the possibility of creating a whistleblower program in the securities industry shortly after taking top job at Canada’s largest capital markets regulator in November of 2010. But nearly two years later no such program exists.

Al Rosen, founder of forensic accounting firm Al Rosen & Associates, said the failure of the CRA to aggressively pursue tax dodgers is part of a much larger problem.

“There is no investigation, no prosecution to speak of in Canada,” he said.

Whether it’s the tax authority, financial or securities regulators, there is no will to ensure that players follow the rules.

Mr. Rosen said he recently reported a case of tax fraud to the CRA “but quite likely they won’t even pursue it… [far from giving out rewards for information] they don’t even follow up when you give it to them for free.”

With files from Barbara Shecter
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Re: whistleblowers

Postby admin » Sun Dec 02, 2012 10:26 am

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Challenger Shuttle Whistleblower Reflects On Struggle With PTSD

Roger Boisjoly
The following is a letter from Roger Boisjoly to a friend, in which he reminisces about his life since blowing the whistle on the Challenger Shuttle disaster, and his struggle with Post Traumatic Stress Disorder (PTSD).

Boisjoly was one of three engineers who, the day before the il-fated January 1986 mission, strenuously objected to the launch, predicting correctly that the O-rings in the solid rocket boosters would fail in the very low temperatures forecast for that day. Their subsequent mistreatment by their employer – and public outrage at this – led to demands for whistleblower protection in the USA.

Published with the kind permission of Roger Boisjoly, in the hope that this may help others who suffer from PTSD.

Sent: Wednesday, November 03, 2010
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 sometime 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 finds everything well at your end.

http://fairwhistleblower.ca/content/cha ... uggle-ptsd
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