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Whistleblowers we're thankful for

Many thanks for sentinels who expose fraud



Here's the typical scenario. A loyal auditor — let's call her Sarah — suspects that management is coercing her supervisor to parboil the books. Sarah is conflicted; she could report her suspicions to her boss' boss, but he might be the ringleader. If she goes to someone higher in the food chain — such as the VP for accounting — she might be putting her head on the chopping block.

In this SOX-enlightened age, she decides to go to the chair of the audit committee. He assures her that he'll look into the matter, which he does. Soon her boss relegates Sarah to a small cubicle in the basement, reduces her responsibilities and withholds her raise. Within a year, the firm fires her after a negative job review. Sarah, a single mother, can't find another auditing job, so she finally accepts a job far below her skill set and pay grade.

As we approach Thanksgiving, I give thanks to whistleblowers like the imaginary Sarah. I risk drifting into cliché-speak here, but their actions personify courage. When fraud confronts them, they decide not to look the other way but instead risk their jobs, families and health "For Choosing Truth Over Self" — the motto inscribed on the ACFE's Cliff Robertson Sentinel Award.

When ACFE founder and Chairman Dr. Joseph T. Wells, CFE, CPA, established the Sentinel Award in 2003, he wanted to honor heroes whom society often ignores or despises. According to Dr. Wells, sentinels often are labeled as bigmouths, busybodies, snitches, tattlers and troublemakers. "And as CFEs, we wonder why employees don't come forward and tell us of the frauds they know about," he said shortly before he presented the ACFE's first Sentinel Award to its namesake during the 14th Annual ACFE Fraud Conference & Exhibition. At the height of his acting career in the 1970s, Robertson revealed a fraud scheme that one of Hollywood's top producers was perpetrating. The industry subsequently blacklisted Robertson for years.

"If we are ever to turn the corner on fraud," Wells said, "we must have the help of these people society has tarred forever with being 'whistleblowers.' And we certainly need to call these heroes by a different name. They are actually corporate sentinels — our front line of defense against wrongdoing. We must remember their heroic sacrifices."

Since then, I've written several articles about sentinels who told the truth with no guaranteed payoffs. For example, consider Regent Emeritus Cynthia Cooper, CFE.

Tenacious WorldCom auditor

"Don't ever allow yourself to be intimidated," Cooper's, mom, Patsy Ferrell, would say to her, after a grade-school bullying incident. Cooper remembered that exhortation years later when she discovered fraud of huge proportions at WorldCom.

Faced with the decision of vigorously investigating suspicious transactions or looking away, she did the honorable thing and pursued the crimes to the final conclusion but not without months of trepidation, a queasy stomach and shaking hands.

In 1994, Cooper landed a job in internal audit at WorldCom — then known as LDDS — in Jackson, Mississippi. When the company moved to her hometown of Clinton, Mississippi, population 23,000, she thought she'd settle into a comfortable niche, surrounded by her husband, children, extended family and lifelong friends. But her nightmare started in the summer of 2002 when, as the vice president of internal audit, she grew increasingly suspicious of some accounting entries. As she stepped up her team's investigations, none of their colleagues would give them straight answers.

"As an auditor, when someone is hostile or acting in a manner that is out of character, you should ask yourself why," she said in an interview article in the March/April 2008 issue of Fraud Magazine. "My instinct from ACFE fraud training and years of audit experience told me to take another look."

The efforts of Cooper and her team uncovered massive fraud. On June 25, 2002, WorldCom announced it had misstated its financial statements over the previous five quarters by $3.8 billion — an amount that would ultimately grow to some $11 billion, she said. WorldCom came to be known as the largest fraud in U.S. corporate history.

Some have said that WorldCom was the final impetus in encouraging Congress to pass SOX in 2002. In the same year, TIME magazine named Cooper a "Person of the Year" with Enron's Sherron Watkins and the FBI's Coleen Rowley. Cooper continues to encourage fraud examiners and auditors to always listen to their instinct in speaking engagements around the country.

Other sentinels profiled in Fraud Magazine included Marta Andreasen, the European Commission's chief accounting officer in 2002, who reported that the US$120 billion EC budget was "massively open to fraud." The reward for her forthrightness was suspension from her duties and forced residence into professional limbo. (See Andreasen's interview article in the Sept./Oct. 2004 issue.)

Then there's Bunny Greenhouse, who was in charge of contract procurement for the U.S. Army Corps of Engineers. In 2005, she testified to a Congressional panel and alleged Halliburton's waste, fraud and abuse in its operations in Iraq since the 2003 invasion. She soon faced poor performance reviews and demotions.

"Integrity in government is not an option," she said. "It is an imperative," Greenhouse said in a July/August 2006 FM interview.

Preventing VIOXX deaths

The long, sloping wall of the Vietnam Veterans' Memorial in Washington, D.C., contains the names of 58,000 men and women who died during that war. As Dr. David J. Graham, a scientist at the Food and Drug Administration (FDA), said in the Sept./Oct. 2005 issue of FM, that's 2,000 less than the estimated U.S. citizens he believes have died from the effects of the arthritis drug Vioxx

"Between 1999 and 2004, an estimated 20 million Americans took Vioxx, 80 million worldwide," Graham said. "We've estimated that up to 140,000 patients [who took Vioxx] suffered heart attacks. … Of this number, 60,000 died," said Graham, who is still the associate director of the FDA's Office of Drug Safety.

In November of 2004, Graham testified before the Senate Finance Committee that the FDA had silenced him and his colleagues from reporting on the risks of Vioxx and other drugs. "The FDA has let the American people down and sadly betrayed a public trust," Graham said during his testimony. He alleged that because the FDA is unduly influenced by the pharmacy industry it's "incapable of protecting America against another Vioxx. We are virtually defenseless." Merck & Co. Inc., the maker of Vioxx, eventually pulled the drug from the marketplace.

"If I failed to speak the truth," said Graham, "I would become part of the problem, and all these deaths would, in part, be my responsibility. … The decision to speak the truth wasn't difficult. My conscience guided me in the way I should go."

Graham said the personal costs have been high. "Internal criticism, threats and ostracism, coupled with an orchestrated campaign of slander and innuendo, initiated and carried out by FDA managers, took a great toll on my family," he said. "Apparently, pharmaceutical representatives and lobbyists also participated in this smear campaign on Capitol Hill."

But there have been great rewards for his persistence, he said. "Human life is worth far more than a little difficulty at the office and being able to look my children in the eye and for them to know that I have acted with integrity is priceless. Plus, I'm able to sleep at night."

A good night's sleep

So many more sleep like babies. William Sanjour, who spent more than three decades confronting deception and inequities in the U.S. Environmental Protection Agency. James Holzrichter, driven into impoverishment and ruined health while spending 17½ years of his life suing his former employer, Northrup Grumann, for defrauding the U.S. government in the longest False Claims Act qui tam case in history. Dinesh Thakur, who blew the whistle on the Indian company, Ranbaxy Laboratories, for falsifying data to receive approval of its generic drugs. Michael Woodford, the former CEO of Olympus Corporation, who accused his company of covering up unknown investment losses with false accounting of more than $1.7 billion.

And then, of course, we have to include arguably the most well-known, would-be sentinel of the 21st century, Harry Markopolos, CFE, who tried to alert the U.S. Securities and Exchange Commission of Bernard Madoff's widespread Ponzi scheme.

Not jaded

In more than 20 years as editor-in-chief of Fraud Magazine, I've written hundreds of articles about fraudsters and how they've destroyed so many lives, including their own. But I'm not jaded because I've also had the fortune of interviewing heroic fraud examiners and sentinels who counted others more important than themselves. 

Dick Carozza, CFE, is editor-in-chief of Fraud Magazine. His email address is: dcarozza@ACFE.com. 





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