April 3, 2016
Chairman Jason Chaffetz
House Committee on Oversight and Government Reform
2157 Rayburn House Office Building
Washington, DC 20515
Ranking Member Elijah Cummings
House Committee on Oversight and Government Reform
2471 Rayburn House Office Building
Washington, D.C. 20515
Dear Chairman Chaffetz and Ranking Member Cummings:
We, the founding members of Bank Whistleblowers United (BWU), write to express our support for the “Whistleblower Augmented Reward and Nonretaliation (WARN) Act of 2016,” introduced by Ranking Member Cummings and Senator Tammy Baldwin. We are co-signatories of the joint letter of support with the Bill of Rights Defense Committee/Defending Dissent Foundation, the Government Accountability Project, OpenTheGovernment.org, the Project On Government Oversight, and Public Citizen.
We write separately to note two strategic points not discussed in the joint letter. We are a pro bono effort by a group of senior whistleblowers from the largest lenders and key government regulators. We have functioned as senior policy makers in very large organizations. Here, we will discuss only the private sector, but we stress that very similar pathologies exist in the public sector.
The specific comments of the joint letter need to be supplemented with two vital strategic observations. First, why in every case of whistleblowing was the reaction of the firm’s senior managers and attorneys virulently hostile to the whistleblowers? The whistleblowers were the only people doing the right thing. In the case of two our Founding Members, Richard Bowen (Citigroup) and Michael Winston (Countrywide), the misconduct that both were trying to stop was sure to cause catastrophic losses to the bank – but produce record income for the senior officers. Bowen and Winston both discovered that their banks were making and buying loans with horrific underwriting. We have known for centuries in banking that terrible underwriting leads to massive losses. When senior managers destroy effective underwriting they do so for the purposes of fraud.
It is even more obvious, however, when the senior managers respond to a whistleblower warning (1) that underwriting has been destroyed, (2) the inevitable result is the origination and purchase of terrible quality loans, and (3) the inevitable result of that is fraud and losses. The other founding members, Gary Aguirre (SEC) and Bill Black (a former financial regulator, enforcement head, white-collar criminologist, trainer of FBI agents and prosecutors, and expert witness for successful prosecutions of elite financial frauds) are uniquely positioned to explain why whistleblowers provide unique benefits to enforcers such as the SEC and prosecutors. The most difficult requisite to take effective enforcement and criminal justice actions against elite fraudsters is to establish mens rea (the “guilty mind”). When senior managers retaliate against whistelblowers who are trying to protect the firm from losses, that conduct establishes the mens rea. As the saying goes, it is often the cover up of the original crime that brings elites down in prosecutions. We note that in addition to our Founding Members’ experiences at Citigroup and Countrywide, whistleblowers at JPMorgan, Bank of America, and Greenpoint (to name only three) were retaliated against because they tried to save their banks from massive fraud losses. No honest bankers would retaliate in such circumstances.
Retaliation against whistleblowers is typically an act designed to obstruct justice. Any form of agreement designed to suppress whistleblowers should be declared void as against public policy and should be punishable as an offense.
Second, the senior corporate officials know how uniquely valuable whistleblowers are to public enforcers and prosecutors. That explains why in addition to many forms of retaliation designed to intimidate whistleblowers and discredit them through personal attacks it is almost universally the case that firms seek to gag the most credible whistleblowers. Bill Black, one of our Founders, makes the point that during the savings and loan debacle there was not a single whistleblower who even approached the level and quality of Richard Bowen and Michael Winston. Whistleblowers of their quality remain unusual, but they are not rare in America. Whistleblowers of exceptional quality provided cases to the SEC and the Department of Justice on a platinum platter against many of the most elite bankers in America. In nearly all of these cases the elite banks sought to suppress the testimony of the whistleblowers through gag orders. One particularly pernicious means of suppression is tying any termination settlement to the whistleblower signing a statement under oath that he or she has no evidence that the firm engaged in any misconduct or violation of the law or regulation. Elite firms are suborning perjury – in return for a termination package. In substance, this is an effort to bribe people in order to obstruct justice. These crimes are also pernicious because they leave the would-be whistleblower helpless to protect the public and if they take the money soiled by the de facto bribe.
The extraordinary efforts by major firms to gag whistleblowers reveal just how much dishonest senior corporate officials fear the truth that whistleblowers will make public. While our focus is on financial fraud, we also note that the truth being suppressed is often vital to protect Americans from physical injury and death.
We applaud the sponsors of the WARN Act and offer our enthusiastic support for their efforts.
The Founders of Bank Whistleblowers United
William K. Black
Richard M. Bowen
Michael G. Winston
Cc: Senator Tammy Baldwin