The Silence of the
Whistleblowers
Sightings from The Catbird Seat
~ o ~
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I am a firm believer in the people. If given the truth they can be depended upon to meet any national crisis.
The great point is to bring them the real facts.
-- Abraham Lincoln
* * * * *
December 17. 2008
SEC Chairman says agency failed to investigate Madoff
Associated Press - Yahoo News
WASHINGTON – Securities and Exchange Commission chairman Christopher Cox said Tuesday his agency repeatedly failed for at least a decade to pursue allegations of wrongdoing by Wall Street figure Bernard L. Madoff, the alleged perpetrator of a $50 billion Ponzi scheme.
Cox ordered a probe by the SEC's inspector general, saying the agency's staff had never brought the Madoff matter to the attention of commissioners.
Since the SEC staff never recommended that the commission open a formal investigation, subpoena power was not used to obtain information and the staff relied on information voluntarily produced by Madoff and his firm.
"I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them," Cox said in a statement.
In a forceful condemnation of the SEC staff, Cox said there had been credible and specific allegations regarding Madoff's financial wrongdoing going back to at least 1999.
The SEC chairman's criticism of his own agency marks only the latest instance in which federal regulators have overlooked clear warning signs of possible fraud.
Its oversight of the Wall Street investment houses drew significant criticism. A review by the SEC inspector general determined that the agency's monitoring of the five biggest Wall Street firms, which included Bear Stearns, was lacking.
Cox's statement on Madoff was a stunning declaration in a scandal that has produced a series of dramatic developments.
Shock waves from the Madoff affair have radiated around the globe as the number of prestigious charitable foundations, big international banks and individual investors said to have fallen victim to an unprecedented fraud has grown. U.S. investigators are laboring to deconstruct the scheme.
The SEC chairman alleged that Madoff kept several sets of books and false documents, and provided false information involving his advisory activities to investors and to regulators.
Cox also ordered the removal from the ongoing investigation of any SEC staff members who have had contact with Madoff or his family.
Madoff remains free on $10 million bail.
Since his arrest on Thursday, the SEC has been under increasing pressure to explain why it didn't uncover the prominent Wall Street figure's criminal activity years ago.
Hours before Cox denounced his own staff, a former SEC chief accountant, Lynn Turner, said that "I can't comprehend how a well-run investigation would have missed a fraud of this magnitude."
Another expert agreed. "The fact that that this could go on for so long with someone who was known to the agency raises questions of the effectiveness of our regulatory scheme," said Charles Elson, the director of the Weinberg Center for Corporate Governance at the University of Delaware.
The SEC's enforcement division looked into Madoff's business in 2007. The agency did not refer the matter to commissioners for legal action. What did the investigators find and why didn't they look harder? Until Tuesday night, the SEC had refused to say anything beyond a brief statement it issued Friday revealing the 2007 probe.
Cox himself has come in for strong criticism.
In March, a few days before Bear Stearns nearly collapsed into bankruptcy, Cox told reporters the agency was closely monitoring the five firms and had "a good deal of comfort" in their capital levels. Then as federal officials orchestrated the rescue, Bear Stearns was bought by rival JPMorgan Chase with a $29 billion government backstop.
The chairman of the Senate Banking panel that oversees the SEC, Sen. Jack Reed, D-R.I., said in an interview Tuesday that the Madoff affair "illustrates the lack of credible enforcement over several years by the SEC." He criticized the agency's "lack of a strong commitment to be vigilant."
In the Madoff case, a securities executive, Harry Markopolos, complained to the SEC's Boston office in May 1999. Markopolos told the SEC staff they should investigate Madoff because he felt it was impossible for the kind of profit he was making to have been gained legally.
But the SEC's Boston office has itself been accused in the past of brushing off a whistle-blower's legitimate complaints, in a case that led the head of that office to resign in 2003. The whistle-blower, Peter Scannell, eventually persuaded state regulators and the SEC to act against mutual fund giant Putnam Investments, where Scannell worked.
"It's flabbergasting that nobody can nail the bums in the SEC who turn their back on and/or aid and abet people who defraud investors," Scannell said in a telephone interview Monday.
Before Tuesday, Cox said that his agency had taken decisive actions in response to the market turmoil, including an unprecedented temporary ban this fall on short-selling of stocks of financial companies. The SEC also has procured billions of dollars in settlements with big investment banks that have agreed to buy back auction-rate securities from investors hurt by the collapse of that market in February. Auction rate securities are debt instruments, typically issued by a municipality, in which the yield is reset on each payment date via a Dutch auction, a method of selling in which the price is reduced until a buyer is found.
http://news.yahoo.com/s/ap/20081217/ap_on_bi_ge/madoff_scandal
December 16, 2008
THE FINTAG NEWSLETTER
Madoff part 2.
Last Thursday the news broke and it hardly registered a blip on the news radar. Today we face financial meltdown of the hedge fund industry and the loss of tens of billions of dollars and the destruction of livelihoods.
Yesterday I looked critically at the investors who had not read the prospectuses or carried proper due diligence. The problem with Madman Madoff's funds is you could only touch them by investing through feeder funds. These feeder funds were promoted by interested parties who put layers of fees on top and sold them as proper fund of funds.
Take the Fairfield Sentry fund. It has a proper Auditor - PWC, an administrator and a custodian - Citco. It is a BVI fund and is managed by a well known Investment Manager. So far, so good. Ok, the custodian only looks after 5% of the assets (the other 95% are looked after by Madoff) but unless you like reading small print it looks like fine.
The biographies of the managers are respectable, including Jeffrey Tucker who used to work as a lawyer for the SEC. The fund has a board including 2 directors located in risk adverse Switzerland. One of the directors is not paid which is strange but I guess he must be paid elsewhere. Thankfully, Goldman Sachs is a sub custodian although I think Refco must have been a misprint.
The Investment objective is "The Fund seeks to obtain capital appreciation of its assets principally through the utilization of a nontraditional options trading strategy described as "split strike conversion", to which the Fund allocates the predominant portion of its assets. This strategy has defined risk and profit parameters, which may be ascertained when a particular position is established ..." and sounds quite convincing.
I am not so sure about the Investment Restrictions including "e) no more than 10 percent of the Net Asset Value of the Fund may be invested in securities of countries where immediate repatriation rights are not available;" but I like the fact US citizens are excluded - "The Fund will require as a condition to the acceptance of a subscription that the subscriber represent and warrant that he has a net worth in excess of U.S. $1,000,000 and is not a U.S. person".
The 13 year track record averages in excess of 10% a year and its volatility is very low indeed. The fund has grown and subscriptions exceed redemptions so it must be a popular.
Excellent. So where did it go wrong? Well PWC have some explaining to do. It looks like they never validated the underlying investments. Madoff obviously just gave them the NAVs and they took them as red. Citco's care of duty is to look after the assets and it has done so. Shame it only looked after 5% but that is better than nothing. The manager should perhaps have carried out some proper due diligence on the underlying but then it made so much in fees it got a bit punch drunk.
So there you go. A sound investment run by people who didn't quite do their jobs. I take back all my negative posturing and instead tell you how I see it through a slew of crap cartoons and virals....
Date: Thu, 5 Jun 2008 10:51:02 -0400 (EDT)
From: "Public Citizen" <publiccitizen@mail.democracyinaction.org>
Subject: Whistleblowers still at risk
Tell Congress to stop dragging its feet and protect government employees who risk their jobs to expose wrongdoing.
Take Action!
It's not too late to contact your members of Congress to protect government whistleblowers!
When scientific research is altered or suppressed, government contractors waste millions of taxpayer dollars, or national security documents are falsified, witnesses need to know that they can blow the whistle without reprisals endangering their careers and their lives.
Last year, strong whistleblower protection bills were passed in both houses of Congress. Now it's time for Congress to finish the job by passing a final bill.
We will continue to push for strongest possible protections for government employees who blow the whistle on waste, fraud and abuse -- and you can still make a difference.
TAKE ACTION: Demand that Congress pass the strongest possible bill for consumers!
Thank you,
Daniel De Bonis
http://action.citizen.org /signUp.jsp
DOJ Whistleblower Spotlighted on "This American Life"
Posted on June 3, 2008 by Marshall Chriswell
Last week on "This American Life," Chicago Public Radio's overwhelmingly popular radio show, thousands of listeners heard the riveting story of DOJ whistleblower Rick Convertino.
Mr. Convertino is a former top United States Prosecutor who successfully prosecuted the first terrorist case after 9/11. After winning the case, he blew the whistle to the U.S. Senate about serious DOJ misconduct in the war on terror. He was severely retaliated against and lost his career. In an unprecedented act of vengeance, the DOJ indicted him for obstruction of justice. A jury of his peers found him not guilty on all counts.
Mr. Convertino is currently pursuing a privacy act violation case against the Department of Justice.
http://www.whistleblowersblog.org/
FBI Whistleblower's Testimony Spurs Congressional Action
Posted on May 28, 2008 by Marshall Chriswell
Last week Supervisory Special Agent Bassem Youssef testified before members of the House Judiciary Committee, telling them that two of every three positions in the FBI's critical counterterrorism units have remained unstaffed since 9/11. He also explained that, of the agents who are currently working counterterrorism, few have the expertise or the training required to do the job correctly.
In a extraordinarily positive step, House and Senate leaders have taken notice of Mr. Youssef's forthright testimony, and a bi-partisan group of lawmakers is now calling for the GAO to conduct an independent "review of the FBI’s human capital management strategy."
For further information, see this article in Congressional Quarterly
The National Whistleblower Center has issued an Action Alert on this issue , urging supporters to help protect Mr. Youssef from retaliation by emailing the Attorney General.
http://www.whistleblowersblog.org/
April 3, 2008
FAA Whistleblower Says
He Was Threatened
(CBS/AP) A House committee reported the findings of its investigation into the Federal Aviation Agency's safety oversight Thursday and heard testimony from airline safety inspectors and the Transportation Department's inspector general.
The whistleblowers who exposed maintenance and inspection problems at Southwest Airlines told Congress their jobs were threatened and their reports of noncompliance were ignored for years by their superiors.
FAA inspector Douglas Peters choked up Thursday at the hearing and needed a few sips of water to tell lawmakers about how a former manager came into his office, commented on pictures of Peters' family being most important, and then said his job could be jeopardized by his actions.
Rep. James Oberstar, chairman of the House Transportation and Infrastructure Committee, said FAA managers' actions displayed "malfeasance bordering on corruption," adding that if presented to a grand jury, the evidence would result in an indictment.
The Minnesota Democrat led Thursday's hearing.
The FAA last month took the rare step of ordering the audit of maintenance records at all domestic carriers following reports of missed safety inspections at Dallas-based Southwest. The airline was hit with a record $10.2 million fine for continuing to fly dozens of Boeing 737s that hadn't been inspected for cracks in their fuselages.
Both FAA whistleblowers - Charalambe Boutris and Peters - said the agency views the airlines as its "customers" instead of companies to be regulated. They said the FAA's chief maintenance inspector at Southwest, Douglas T. Gawadzinski, knowingly allowed Southwest to keep planes flying that put passengers at risk, and that another inspector knew of the problem and did nothing.
Gawadzinski is still employed by the FAA, but has no responsibility for safety decisions, said Nicholas Sabatini, the agency's associate administrator for aviation safety. The FAA will "take whatever action the law will allow" when the investigation into the Southwest episode is complete, he added.
Gawadzinski was not asked to testify at Thursday's hearing because he was considered to be a hostile witness who would most likely refuse to answer questions that could have incriminated himself, according to a spokesman for the House Transportation and Infrastructure Committee.
Chairman Oberstar said as long as the FAA views the airlines as customers "that culture of safety will not take hold and is not going to permeate the organization."
Southwest is not the only carrier that has benefited from a "cozy" relationship with regulators, said Tom Brantley, president of the Professional Aviation Safety Specialists union that represents FAA inspectors.
In testimony prepared for the hearing, Brantley details maintenance and safety issues at United, Continental Airlines Inc., Northwest Airlines Corp., Hawaiian Airlines Inc. and elsewhere where the carriers were given great leeway by the FAA to correct problems that inspectors on the ground said merited more serious attention. Financial penalties for infractions suggested by inspectors against United and other carriers also were ignored or significantly reduced by the time they were assessed, he added.
Adding to the airline industry's problems is the growing number of U.S. air travelers who have endured longer lines, more delays and the loss of amenities like meals and blankets.
And now they are getting hit with a wave of schedule disruptions caused by airlines scrambling amid increased regulatory scrutiny to ensure that the expanding air transport system stays safe.
The latest complication came Wednesday, when United Airlines temporarily grounded dozens of Boeing 777s to test their cargo fire-suppression systems.
United said it canceled 41 flights and delayed dozens of others as it carried out work on the long-haul jets after a review of maintenance records showed that a test on a bottle in the fire suppression system hadn't been performed.
The move affected thousands of passengers around the world, as United's 777s mostly fly international routes from its major hubs. Among those grounded was a 777 used by many members of the White House press corps, who were traveling with President Bush in Romania - though it wasn't set to fly again until Friday....
The FAA said Wednesday that four U.S. airlines are under investigation for failing to comply with federal aviation regulations, but would not name the carriers. Officials said three airlines had missed inspection deadlines and that penalties could be levied, though it would be several months before the probe was complete....
The last U.S. crash of a jumbo jet was Nov. 12, 2001, when American Airlines Flight 587 lost part of its tail and plummeted into a New York City neighborhood, killing 265 people.
www.cbsnews.com/stories/2008/04/03/travel/main3991452.shtml
August 24, 2007
Whistleblowers on Fraud
Facing Penalties
By DEBORAH HASTINGS, Associated Press
One after another, the men and women who have stepped forward to report corruption in the massive effort to rebuild Iraq have been vilified, fired and demoted.
Or worse.
For daring to report illegal arms sales, Navy veteran Donald Vance says he was imprisoned by the American military in a security compound outside Baghdad and subjected to harsh interrogation methods.
There were times, huddled on the floor in solitary confinement with that head-banging music blaring dawn to dusk and interrogators yelling the same questions over and over, that Vance began to wish he had just kept his mouth shut.
He had thought he was doing a good and noble thing when he started telling the FBI about the guns and the land mines and the rocket-launchers - all of them being sold for cash, no receipts necessary, he said. He told a federal agent the buyers were Iraqi insurgents, American soldiers, State Department workers, and Iraqi embassy and ministry employees.
The seller, he claimed, was the Iraqi-owned company he worked for, Shield Group Security Co.
"It was a Wal-Mart (nyse: WMT - news - people ) for guns," he says. "It was all illegal and everyone knew it."
So Vance says he blew the whistle, supplying photos and documents and other intelligence to an FBI agent in his hometown of Chicago because he didn't know whom to trust in Iraq.
For his trouble, he says, he got 97 days in Camp Cropper, an American military prison outside Baghdad that once held Saddam Hussein, and he was classified a security detainee.
Also held was colleague Nathan Ertel, who helped Vance gather evidence documenting the sales, according to a federal lawsuit both have filed in Chicago, alleging they were illegally imprisoned and subjected to physical and mental interrogation tactics "reserved for terrorists and so-called enemy combatants."
Corruption has long plagued Iraq reconstruction. Hundreds of projects may never be finished, including repairs to the country's oil pipelines and electricity system. Congress gave more than $30 billion to rebuild Iraq, and at least $8.8 billion of it has disappeared, according to a government reconstruction audit.
Despite this staggering mess, there are no noble outcomes for those who have blown the whistle, according to a review of such cases by The Associated Press.
"If you do it, you will be destroyed," said William Weaver, professor of political science at the University of Texas-El Paso and senior advisor to the National Security Whistleblowers Coalition.
"Reconstruction is so rife with corruption. Sometimes people ask me, `Should I do this?' And my answer is no. If they're married, they'll lose their family. They will lose their jobs. They will lose everything," Weaver said.
They have been fired or demoted, shunned by colleagues, and denied government support in whistleblower lawsuits filed against contracting firms.
"The only way we can find out what is going on is for someone to come forward and let us know," said Beth Daley of the Project on Government Oversight, an independent, nonprofit group that investigates corruption. "But when they do, the weight of the government comes down on them. The message is, 'Don't blow the whistle or we'll make your life hell.'
"It's heartbreaking," Daley said. "There is an even greater need for whistleblowers now. But they are made into public martyrs. It's a disgrace. Their lives get ruined."
Bunnatine "Bunny" Greenhouse knows this only too well. As the highest-ranking civilian contracting officer in the U.S. Army Corps of Engineers, she testified before a congressional committee in 2005 that she found widespread fraud in multibillion-dollar rebuilding contracts awarded to former Halliburton (nyse: HAL - news - people ) subsidiary KBR (nyse: KBR - news - people ).
Soon after, Greenhouse was demoted. She now sits in a tiny cubicle in a different department with very little to do and no decision-making authority, at the end of an otherwise exemplary 20-year career.
People she has known for years no longer speak to her.
"It's just amazing how we say we want to remove fraud from our government, then we gag people who are just trying to stand up and do the right thing," she says.
In her demotion, her supervisors said she was performing poorly. "They just wanted to get rid of me," she says softly. The Army Corps of Engineers denies her claims.
"You just don't have happy endings," said Weaver. "She was a wonderful example of a federal employee. They just completely creamed her. In the end, no one followed up, no one cared."
But Greenhouse regrets nothing. "I have the courage to say what needs to be said. I paid the price," she says.
Then there is Robert Isakson, who filed a whistleblower suit against contractor Custer Battles in 2004, alleging the company - with which he was briefly associated - bilked the U.S. government out of tens of millions of dollars by filing fake invoices and padding other bills for reconstruction work.
He and his co-plaintiff, William Baldwin, a former employee fired by the firm, doggedly pursued the suit for two years, gathering evidence on their own and flying overseas to obtain more information from witnesses. Eventually, a federal jury agreed with them and awarded a $10 million judgment against the now-defunct firm, which had denied all wrongdoing.
It was the first civil verdict for Iraq reconstruction fraud.
But in 2006, U.S. District Judge T.S. Ellis III overturned the jury award. He said Isakson and Baldwin failed to prove that the Coalition Provisional Authority, the U.S.-backed occupier of Iraq for 14 months, was part of the U.S. government.
Not a single Iraq whistleblower suit has gone to trial since.
"It's a sad, heartbreaking comment on the system," said Isakson, a former FBI agent who owns an international contracting company based in Alabama. "I tried to help the government, and the government didn't seem to care."
One way to blow the whistle is to file a "qui tam" lawsuit (taken from the Latin phrase "he who sues for the king, as well as for himself") under the federal False Claims Act.
Signed by Abraham Lincoln in response to military contractors selling defective products to the Union Army, the act allows private citizens to sue on the government's behalf.
The government has the option to sign on, with all plaintiffs receiving a percentage of monetary damages, which are tripled in these suits.
It can be a straightforward and effective way to recoup federal funds lost to fraud. In the past, the Justice Department has joined several such cases and won. They included instances of Medicare and Medicaid overbilling, and padded invoices from domestic contractors.
But the government has not joined a single quit tam suit alleging Iraq reconstruction abuse, estimated in the tens of millions. At least a dozen have been filed since 2004.
"It taints these cases," said attorney Alan Grayson, who filed the Custer Battles suit and several others like it. "If the government won't sign on, then it can't be a very good case - that's the effect it has on judges."
The Justice Department declined comment.
Most of the lawsuits are brought by former employees of giant firms. Some plaintiffs have testified before members of Congress, providing examples of fraud they say they witnessed and the retaliation they experienced after speaking up.
Julie McBride testified last year that as a "morale, welfare and recreation coordinator" at Camp Fallujah, she saw KBR exaggerate costs by double- and triple-counting the number of soldiers who used recreational facilities.
She also said the company took supplies destined for a Super Bowl party for U.S. troops and instead used them to stage a celebration for themselves.
"After I voiced my concerns about what I believed to be accounting fraud, Halliburton placed me under guard and kept me in seclusion," she told the committee. "My property was searched, and I was specifically told that I was not allowed to speak to any member of the U.S. military. I remained under guard until I was flown out of the country."
Halliburton and KBR denied her testimony.
She also has filed a whistleblower suit. The Justice Department has said it would not join the action. But last month, a federal judge refused a motion by KBR to dismiss the lawsuit.
Donald Vance, the contractor and Navy veteran detained in Iraq after he blew the whistle on his company's weapons sales, says he has stopped talking to the federal government.
Navy Capt. John Fleming, a spokesman for U.S. detention operations in Iraq, confirmed the detentions but said he could provide no further details because of the lawsuit.
According to their suit, Vance and Ertel gathered photographs and documents, which Vance fed to Chicago FBI agent Travis Carlisle for six months beginning in October 2005. Carlisle, reached by phone at Chicago's FBI field office, declined comment. An agency spokesman also would not comment.
The Iraqi company has since disbanded, according the suit.
Vance said things went terribly wrong in April 2006, when he and Ertel were stripped of their security passes and confined to the company compound.
Panicking, Vance said, he called the U.S. Embassy in Baghdad, where hostage experts got on the phone and told him "you're about to be kidnapped. Lock yourself in a room with all the weapons you can get your hands on.'"
The military sent a Special Forces team to rescue them, Vance said, and the two men showed the soldiers where the weapons caches were stored. At the embassy, the men were debriefed and allowed to sleep for a few hours. "I thought I was among friends," Vance said.
The men said they were cuffed and hooded and driven to Camp Cropper, where Vance was held for nearly three months and his colleague for a little more than a month. Eventually, their jailers said they were being held as security internees because their employer was suspected of selling weapons to terrorists and insurgents, the lawsuit said.
The prisoners said they repeatedly told interrogators to contact Carlisle in Chicago. "One set of interrogators told us that Travis Carlisle doesn't exist. Then some others would say, 'He says he doesn't know who you are,'" Vance said.
Released first was Ertel, who has returned to work in Iraq for a different company. Vance said he has never learned why he was held longer. His own interrogations, he said, seemed focused on why he reported his information to someone outside Iraq.
And then one day, without explanation, he was released.
"They drove me to Baghdad International Airport and dumped me," he said.
When he got home, he decided to never call the FBI again. He called a lawyer, instead.
"There's an unspoken rule in Baghdad," he said. "Don't snitch on people and don't burn bridges."
For doing both, Vance said, he paid with 97 days of his life.
http://www.forbes.com/feeds/ap/2007/08/24/ap4052736.html
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See also: http://www.veteransforcommonsense.org/ArticleID/8324
For more, GO TO > > > Leahy Targets Corruption
May 10, 2007
Expand Whistleblower Protections
Dear Bobby,
Your help is needed to protect whistleblowers |
When courageous people risk their careers to bring about a more honest and accountable government, they should be protected.
In 2004, Dr. David Graham blew the whistle on the government's inability to protect the public from dangerous drugs. He testified before the U.S. Senate about Vioxx, which caused between 88,000 and 139,000 heart attacks in his 5-year study. Graham's supervisors tried to suppress the study and muzzle the truth. While the FDA tried to discredit him, Merck pulled Vioxx off the market.
Next week, more than 40 public interest groups and hundreds of whistleblowers will gather for an unprecedented event to highlight the need to strengthen whistleblower protections.
If you will be near Washington, D.C. next week or know someone who will, please join us for "Washington Whistleblower Week."
Public Citizen President Joan Claybrook is the keynote speaker for the kickoff event. Learn more and get the details here.
The week's events could not be timelier. The "Whistleblower Protection Enhancement Act of 1007" (H.R. 985) just passed the U.S. House in a 331 to 94 landslide and would better protect federal government contractors and federal employees who work in national security and scientific areas.
Your help is needed to make this bill law. It has yet to be debated by the Senate and faces a possible veto from President Bush. Take action by telling your senators to pass strong whistleblower protections like those passed in the House.
Whistleblowers are true heroes. They stand up to the tyranny of entrenched interests and expose fraud and abuse, often at a terrible personal cost. Please take this chance now to stand up for them.
Thank you,
Daniel De Bonis
Online Organizer
Public Citizen's Congress Watch
action@citizen.org
December 22, 2006
AIG Sues Former Worker for Extortion
Forbes, Associated Press
American International Group Inc. sued a former accounting vice president Friday, alleging she has refused to return company computers and confidential information and has attempted to "harass, extort and injure" the insurer.
The insurance company filed its breach-of-contract claim against Dong "Dee" Chung in federal court in Manhattan on Friday, saying she made allegations of accounting improprieties at the company after being terminated earlier this month for "performance deficiencies and rank insubordination."
AIG said in its lawsuit that Chung, who worked for the insurer for less than a year, has a history of "harassing her former employers and lodging baseless allegations."
"AIG committed to investigate her allegations - which, AIG determined, related to issues that had previously been surfaced and shared with appropriate regulators - but refused her demand for a settlement," the lawsuit says.
Chung responded with "what has become an escalating campaign of harassment and intimidation" that included sending privileged and confidential company legal memoranda to competitors and litigation adversaries and a "daily barrage of emails from numerous changing email aliases to AIG directors, officers and employees," according to the lawsuit.
The complaint alleges that Chung also has ignored AIG's demand that she return a BlackBerry e-mail pager and two company laptops issued to her.
Chung, a U.S. citizen who is believed to be living in Hong Kong, couldn't immediately be located for comment on Friday.
Last year, New York-based AIG announced it would restate more than four years of its earnings and said, without naming its former Chairman Maurice "Hank" Greenberg directly, that former executives at times were able to "circumvent internal controls over financial reporting." Greenberg retired from AIG last year.
Earlier this year, AIG agreed to pay more than $1.6 billion to settle accounting fraud allegations by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission. Spitzer, who was recently elected as New York's governor, is pursuing a civil action against Greenberg.
"The complaint speaks for itself," said Chris Winans, an AIG spokesman, on Friday.
Chung joined AIG's New York office in January as a vice president and assistant director for accounting policy in its Comptroller Division and was assigned to be the company's Hong Kong designate in its Office of Accounting Policy in June, according to the lawsuit.
AIG said Chung was "unwilling to cooperate with others at AIG or take direction" from her superiors after her hiring and received a verbal warning in July that her performance was deficient.
The lawsuit says Chung didn't respond to a request for a meeting with her new supervisor in November and didn't report to the office for an 11-day period in late November, even though her supervisor hadn't approved her request for leave.
She also refused a request in early December to work from a new office in Hong Kong and ignored additional requests to meet with her new supervisor, according to the complaint. Chung was terminated on Dec. 6, according to the lawsuit.
"Defendant, in response, alleged that AIG had engaged in accounting irregularities," the lawsuit says. "Defendant concluded her remarks by demanding to know what her 'settlement' would be. Defendant was informed that she would not receive any 'settlement' and that she should raise any concerns about purported improprieties through appropriate channels."
In its complaint, AIG also said that Chung, who was acting as her own legal representative, harassed her former employee, KPMG LLP, in a prior lawsuit and was sanctioned by an appellate court in Chicago.
In an order in June 2004, the 7th Circuit Court of Appeals admonished and reprimanded Chung for "abuse of the court system through frivolous and vexatious litigation."
"Any further such abuse will result in the imposition against her of a bar to further access to the federal courts, except in criminal cases and applications for writs of habeas corpus," the appeals court found.
http://www.forbes.com/feeds/ap/2006/12/22/ap3279106.html
November 24, 2006
Whistle-blowers tell of cost of conscience
By Catherine Rampell, USA TODAY
He knew there were problems. He didn't think he was one of them.
In 2002, decorated FBI Special Agent Mike German was investigating meetings between terrorism suspects. When he discovered other officers had jeopardized the investigation by violating wiretapping regulations, he reported what he found to his supervisors, in accordance with FBI policy.
At the time, Colleen Rowley, the FBI agent who had raised concerns about how the pre-9/11 arrest of al-Qaeda conspirator Zacarias Moussaoui was handled, was being hailed as a national hero. German says he had also just received a mass e-mail from FBI Director Robert Mueller, urging other whistle-blowers to come forward.
"I was assuming he'd protect me," German says.
Instead, German says his accusations were ignored, his reputation ruined and his career obliterated. Although the Justice Department's inspector general confirmed German's allegations that the FBI had "mishandled and mismanaged" the terrorism investigation, he says he was barred from further undercover work and eventually compelled to resign. FBI spokesman Bill Carter declined to comment.
The experience is familiar to other government employees who have blown the whistle on matters of national security since 9/11.
Whistle-blower filings
Since the terrorist attacks on Sept. 11, 2001, the average number of employees filing whistle-blower disclosures with the government has risen 43%, from an average of 376 annually in the four years before the attacks to 537 annually after. The statistics are kept by the Office of the Special Counsel, an independent federal investigative agency that handles whistle-blower cases if employees prefer not to directly confront their bosses about suspicions of wrongdoing.
An increasing number of whistle-blowers allege that rather than being embraced, they're being retaliated against for coming forward.
In the four years before the terrorist attacks, whistle-blowers filed an average of 690 reprisal complaints with the OSC annually. Since the attacks, an average of 835 complaints have been filed each year, a 21% increase.
The number of whistle-blower reprisal complaints is higher than the number of whistle-blower disclosure complaints because employees can file reprisal complaints with the OSC even if they had not previously filed their disclosure with the OSC.
"The sad reality is that rather than learning lessons from 9/11, the government appears to have become more thin-skinned and sensitive," says Tom Devine, legal director of the Government Accountability Project, a non-profit group that offers legal aid to whistle-blowers.
Even advocates have begun to dissuade some government employees from coming forward.
"When I get calls from people thinking of blowing the whistle, I tell them 'Don't do it,' " says William Weaver, a professor at the University of Texas at El Paso and a senior adviser to the National Security whistle-blowers Coalition. "Most of the time they go ahead and do it anyway and end up with their lives destroyed."
Those who come forward often face harassment, investigation, character assassination and firing — not to mention the toll their whistle-blowing takes on their families, Weaver and Devine say.
Lack of protection
For those who are fired or have their security clearances revoked — tantamount to firing in the intelligence agencies — there is little recourse.
Most national security whistle-blowers are not protected from retaliation by law. That's because the intelligence-gathering agencies are exempted from the 1989 whistle-blower Protection Act, which guarantees investigations into disclosures made by federal employees and protects whistle-blowers from retaliation.
Whistle-blowers employed by these agencies must seek recourse within the same agency they are blowing the whistle on. And even if the investigators within their own agency confirm reprisal allegations, the investigators have no power to remedy the situation.
Devine says the U.S. Court of Appeals for the Federal Circuit has ruled against whistle-blowers in 125 of 127 of the reprisal cases seen by the court since 1994. "They've gutted the law," Devine says, "and it's degenerated into a rubber stamp for retaliation."
Lawmakers recently considered two sets of legislation that would affect whistle-blowers. One attempted to extend the whistle-blower Protection Act to cover intelligence agency employees through amendments to the 2007 Defense Authorization Bill.
In October, a conference committee removed the whistle-blower amendments from the final version of the bill.
The other bill that might affect whistle-blowers stiffens penalties for knowingly leaking classified information to those not authorized to receive it. That bill was introduced by Sen. Kit Bond, R-Mo., in response to recent leaks to the media about national security programs, says Bond's press secretary, Rob Ostrander.
"When classified information is printed in the newspapers, it's not just Americans who read it," Ostrander says. "It's also America's enemies."
Bond's legislation would make prosecuting leakers easier by eliminating the need to prove the disclosure damaged national security. The measure would subject those who leak classified information to a fine and up to three years in prison. It would apply to those who signed a non-disclosure agreement, regardless of their job at the time of the leak.
The bill uses language identical to that in a 2000 bill — dubbed the "Official Secrets Act," after a similar British law — that was vetoed by President Clinton. It has been endorsed by the Association of Intelligence Officers, a 31-year-old group of 4,500 current and former intelligence officers.
Bond's legislation has been referred to the Senate Judiciary Committee. If it does not make it to a floor vote by the end of this session, he will have to resubmit it when the next session begins in January.
The National Security whistle-blowers Coalition, the Government Accountability Project and various media organizations have criticized the legislation and claimed it would deter whistle-blowers from coming forward.
Ostrander says, "There are adequate opportunities for whistle-blowers to contact superiors and the federal inspector general's office or their own representatives" without leaking classified information to outside sources.
National security whistle-blowers who have come forward since 9/11 aren't so sure.
Many had been star employees at the top of the pay scale and had spent decades in civil service before blowing the whistle. The median number of years of government service for National Security whistle-blowers Coalition members is 22 years, says Sibel Edmonds, an FBI whistle-blower who founded the coalition. Edmonds and others worry that fear of committing career suicide may dissuade others from coming forward.
"I'm one of the last people who survived," says Rowley, the former FBI whistle-blower and Time magazine "Person of the Year" who recently lost her bid for a U.S. congressional seat in Minnesota. She says widespread, favorable media coverage saved her FBI career
"But is that the important story here — that one person in the country has been fired or is not being used to their fullest potential?" she asks. "It's the country that's going to suffer from a lack of whistle-blower protections."
August 28, 2006
HURRICANE EXPERT THREATENED
FOR PRE-KATRINA WARNINGS
A Greg Palast special investigation for Democracy Now!
DON'T blame the Lady. Katrina killed no one in this town. In fact, Katrina missed the city completely, going wide to the east.
It wasn't the hurricane that drowned, suffocated, de-hydrated and starved 1,500 people that week. The killing was done by a deadly duo: a failed emergency evacuation plan combined with faulty levees. Behind these twin failures lies a tale of cronyism, profiteering and willful incompetence that takes us right to the steps of the White House.
Here's the story you haven't been told. And the man who revealed it to me, Dr. Ivor van Heerden, is putting his job on the line to tell it.
Van Heerden isn't the typical whistleblower I usually deal with. This is no minor player. He's the Deputy Director of the Louisiana State University Hurricane Center. He's the top banana in the field -- no one knew more about how to save New Orleans from a hurricane's devastation. And no one was a bigger target of an official and corporate campaign to bury the information.
Here's what happened. Right after Katrina swamped the city, I called Washington to get a copy of the evacuation plan.
Funny thing about the murderously failed plan for the evacuation of New Orleans: no one can find it. That's right. It's missing. Maybe it got wet and sank in the flood. Whatever: no one can find it.
That's real bad. Here's the key thing about a successful emergency evacuation plan: you have to have copies of it. Lots of copies -- in fire houses and in hospitals and in the hands of every first responder. Secret evacuation plans don't work.
I know, I worked on the hurricane evacuation plan for Long Island New York, an elaborate multi-volume dossier.
Specifically, I'm talking about the plan that was written, or supposed to have been written two years ago by a company called, "Innovative Emergency Management."
Weird thing about IEM, their founder Madhu Beriwal, had no known experience in hurricane evacuations. She did, however, have a lot of experience in donating to Republicans.
IEM and FEMA did begin a draft of a plan. The plan was that, when a hurricane hit, everyone in the Crescent City would simply get the hell out in their cars. Apparently, the IEM/FEMA crew didn't know that 127,000 people in the city didn't have cars. But Dr. van Heerden knew that. It was his calculation. LSU knew where these no-car people were -- they mapped it -- and how to get them out.
Dr. van Heerden offered this life-saving info to FEMA. They wouldn't touch it. Then, a state official told him to shut up, back off or there would be consequences for van Heerden's position. This official now works for IEM.
So I asked him what happened as a result of making no plans for those without wheels, a lot of them elderly and most of them poor.
"Fifteen-hundred of them drowned. That's the bottom line." The professor, who'd been talking to me in technicalities, changed to a somber tone. "They're still finding corpses."
Van Heerden is supposed to keep his mouth shut. He won't. The deaths weigh on him. "I wasn't going to listen to those sort of threats, to let them shut me down."
Van Heerden had other disturbing news. The Hurricane Center's computer models showed the federal government had built the levees around the city a foot-and-a-half too short.
After Katrina, the Hurricane Center analyzed the flooding and found that, had the levees had just that extra 18 inches, they would have been "overtopped" for only an hour and a half, not four hours. In that case, the levees would have held, and the city would have been saved.
He had taken the warning about the levees all the way to George Bush's doorstep. "I myself briefed senior officials including somebody from the White House." The response: the university's trustees threatened his job.
While in Baton Rouge, I dropped in on the headquarters of IEM, the evacuation contractors. The assistant to the CEO insisted they had "a lot of experience with evacuation" -- but couldn't name a single city they'd planned for when they got the Big Easy contract. And still, they couldn't produce the plan.
An IEM press release in June 2004 boasted legendary expert James Lee Witt as a member of their team. That was impressive. It was also a lie. In fact, Witt had nothing to do with it. When I asked IEM point blank if Witt's name was used as a fraudulent hook to get the contract, their spokeswoman said, weirdly, "We'll get back to you on that."
Back at LSU, van Heerden astonished me with the most serious charge of all. While showing me huge maps of the flooding, he told me the White House had withheld the information that, in fact, the levees were about to burst and by Tuesday at dawn the city, and more than a thousand people, would drown.
Van Heerden said, "FEMA knew on Monday at 11 o'clock that the levees had breached… They took video. By midnight on Monday the White House knew. But none of us knew ...I was at the State Emergency Operations Center." Because the hurricane had missed the city that Monday night, evacuation effectively stopped, assuming the city had survived.
It's been a full year now, and 73,000 New Orleanians remain in FEMA trailers and another 200,000, more than half the city's former residents, remain in temporary refuges. "The City That Care Forgot" -- that's their official slogan -- lost a higher percentage of homes than Berlin lost in World War II. It would be more accurate to call it, "The City That Bush Forgot."
Should they come home? Rebuild? Is it safe? Team Bush assures them there's nothing to worry about: FEMA won't respond to van Heerden's revelations. However, the Bush Administration has hired a consulting firm to