In 2007, Amy Stroupe, CFE, believed her former employer, Branch Banking & Trust Co. (BB&T) of Winston-Salem, N.C., fired her because she had exposed a $100 million North Carolina development scam. She sued BB&T under Sarbanes-Oxley Act whistle-blower provisions, Section 806. In April, the federal judge in the case ruled that BB&T should reinstate Stroupe with back pay. Earlier, the federal Occupational Safety and Health Administration had rejected Stroupe’s lawsuit, so she had appealed through SOX.
“I feel so happy and vindicated,” she told the media after the April ruling. “This has been an almost three-year ordeal. It’s been tough. I feel so happy that the judge was able to see the truth in all this.”
At the time, BB&T said the company believed the ruling was erroneous and didn’t accurately reflect what occurred.
Stroupe had investigated $20 million in loans that BB&T made to investors in the planned luxury Village of Penland development in the western mountains of North Carolina. Investigators later found the venture was a Ponzi scheme, and no houses were ever built. In his ruling, Federal Administrative Law Judge Stanley Tureck said the bank was “aiding” the fraud by making loans to investors.
“I find it virtually unfathomable that BB&T would fire an employee as highly regarded as Stroupe, and who had recently provided invaluable service to BB&T, over one or two essentially minor issues and without following its progressive disciplinary system,” Tureck wrote in his ruling.
Stroupe never did go back to work at BB&T. “All my matters with BB&T have been resolved,” she told Fraud Magazine.
On Aug. 1, 2005, BB&T hired Stroupe as a corporate investigator and assigned her to work in a Charlotte office. Prior to joining BB&T, she had worked for the Cleveland County, N.C., Sheriff’s Office as a detective. Her BB&T supervisor allowed her to continue part time with the sheriff’s office and complete classroom and weapons training to retain her law enforcement certification.
According to court documents, Stroupe received excellent performance evaluations throughout her employment with BB&T. “Amy is an asset to the BB&T Corporate Investigations team,” her supervisor wrote in her 90-day review report. “Amy has established herself as a consistent contributor to the investigative team.”
In her second annual review report, her supervisor wrote, “Amy’s future with BB&T is very bright. Amy is always willing and open to learn new ways to complete her job assignments in the most professional and timely manner.”
In February of 2007, a BB&T retail service officer came to Stroupe with concerns about a series of suspicious loans made by a BB&T financial center manager in a real estate development – the Village of Penland. Stroupe’s boss instructed her to share the information with a BB&T analyst. In March of that year, Stroupe contacted an FBI special agent to ask if he might be interested in investigating the possible fraud case, and he said he would.
Stroupe continued the investigation with help from several other BB&T employees. She contacted one of the Village of Penland borrowers whose credit report was flagged with a fraud alert to discuss the development. Within an hour of speaking with the borrower, the suspected BB&T financial center manager visited Stroupe. He had received a call from the developer, stating that someone from the bank had contacted one of the investors. He tried to explain the structure of the loans to Stroupe with a flow chart.
After Stroupe had a series of meetings with BB&T executives, she and a company portfolio manager interviewed the financial center manager to determine his role in making the loans and the possibility of fraudulent activity related to the Village of Penland development. At the time, employees involved in the investigation were using labels such as “securities fraud,” “Ponzi scheme,” and “bank fraud” to describe the loans.
Stroupe prepared a report of her investigation up to that point and presented it to BB&T executives and the company’s lawyers. One of the attorneys, a principal at the law firm, said he wouldn’t present Stroupe’s report at an upcoming meeting the next day with FBI special agents because, as he would later say at the lawsuit hearing, “It contained what I believe to be a materially inaccurate statement that she [Stroupe] confirmed that was inaccurate. And I didn’t have time to verify all the statements that were made in the report.”
He also believed, he said, that at the time, the report was an attorney-client privilege communication and “didn’t fit in with the overall approach we were taking.” Only senior members, not Stroupe, were allowed to attend the meeting with the FBI. (In his ruling, Tureck, however, wrote that the decision to exclude Stroupe from the meeting with the FBI agents didn’t “provide direct evidence that … led to her termination by BB&T.” The judge wrote that BB&T’s legal counsel “was acting appropriately in his representation of the bank, even if he did not act as Stroupe wanted or expected.”)
Meanwhile, Stroupe was having difficulties working with BB&T’s regional branch operations manager. She believed that he often interfered with, or tried to limit, her investigations. The manager said Stroupe wasn’t objective in her investigations, slanted facts, and wasn’t sensitive to the potentially negative atmosphere an investigation can create in the work environment. They tried to work out their differences with the help of other managers.
By early June 2007, Stroupe became hesitant to work on other investigations at the bank. She testified that she understood that the regional branch operations manager had requested that she no longer work from a particular bank branch or in the Western Region. Stroupe felt that he was attempting to have her terminated.
After a series of events, Stroupe’s supervisor fired her on June 20 of that year for insubordination, among other things. Stroupe testified that in the termination meeting her boss said, “Amy, it’s become obvious that you cannot conform to a corporate setting; therefore, we are terminating your employment.”
Stroupe later testified that prior to her termination, she hadn’t received any disciplinary actions or written warnings when she worked for BB&T and was unaware that anyone recorded that she was at risk of losing her job.
Stroupe said that during the two years she worked for BB&T, she received five positive performance evaluations, several with high performance marks. However, four months after receiving a positive performance evaluation and a month after being assured by her supervisors that they supported her 100 percent, she was terminated.
Tureck, in his decision, said Stroupe’s complaint against BB&T fulfilled SOX’s whistle-blower legal burdens of proof. He wrote that Stroupe’s “credibility is of utmost importance in this case. I had the opportunity to observe her over the more than two full days that she testified, and I found her to be a very credible witness. In particular, her candor, energy and strong sense of doing what is right were apparent.
“She displayed a strong work ethic and a desire to perform her job well,” Tureck wrote. “She did not resort to self-serving testimony, admitting mistakes and uncertainty. She was also cooperative and non-confrontational on cross-examination. Finally, she displayed remarkably little animosity toward anyone at BB&T. I give the greatest weight to her testimony.”
Stroupe, the recipient of the ACFE’s 2010 Sentinel Award for “Choosing Truth Over Self,” is now back to work as a deputy sheriff at the Cleveland County Sheriff’s Office.
“I love to work and I work hard,” she said. “It feels great to work for an employer who appreciates honest, courageous employees. I feel wanted there and that’s a great feeling.”
After BB&T terminated your employment, what made you fight back against the firm?
I fought back because I believed my termination was in retaliation for the investigation into the Village of Penland fraud. I believed my termination was a violation of Sarbanes-Oxley.
In the judge’s decision, he said your credibility was of utmost importance in this case. Did you feel vindicated by his decision and words?
Yes, I did. It made me proud that the judge saw me as the person he described. His observations were accurate and I live this way every day.
What were some of the red flags in the Village of Penland real estate development case that made you realize it was a Ponzi scheme?
- The developer was making payments for some of its investors.
- The investors were receiving financial incentives.
- There was an agreement for the developer to buy the property back from the investors if they changed their minds in the future.
- The same appraiser was used every time.
- The appraisal value appeared to be inflated.
- The closing attorney for the loans was also the surveyor of the lots and associated with the Village of Penland.
- All the loans were done as balloon loans.
- The same photographs in some of the appraisals were being used to represent different lots.
- The lots were being listed as improved on the loan documents, but the property was unimproved with no sewer or water.
- The lender had never met any of the investors.
- Most of the investors were from out of state.
BB&T eventually said it was a victim of fraud in the Penland case. How could BB&T not have realized this much earlier? Did you find other instances of mortgage fraud?
BB&T did have policy and procedures in place to detect and prevent this sort of fraud. It should have been detected easily because of the number of loans and their cumulative amounts.
How did your lawsuit come about?
The lawsuit began when I first filed my SOX complaint with OSHA because I felt that my termination was a clear violation of SOX and this was the first step to vindicating my reputation. I was surprised when OSHA concluded that my termination was not retaliatory. I believed that this decision was wrong, so I decided to litigate this claim before a Department of Labor administrative law judge and I won the claim.
BB&T officials testified that it terminated you because you had been told not to discuss your investigations with other employees who weren’t involved, not to talk about a regional bank manager with whom you had had several conflicts, insubordination, and because you missed a half day of work without receiving permission. How did you initially respond to those accusations?
The day I was terminated I was told, “It has become obvious that you cannot conform to a corporate setting; therefore, your employment is being terminated.” I was told I was being fired because I had discussed the Village of Penland lender’s termination with another witness involved in the case. Never once during the termination process was any other reason given to me as a reason for my termination. It was later that I learned that BB&T had other reasons for the termination.
Do you know if the Securities and Exchange Commission or other U.S. federal oversight agencies are investigating the case?
The only investigation I’m aware of is being done by the Financial Crisis Inquiry Commission. I last spoke to their agents on June 24.
Stephen Kohn, the executive director of the National Whistleblowers Center in Washington, D.C., is quoted as saying your case is significant because it’s hard to win cases under SOX. Why do you think your case was an exception?
I don’t know. I believe my case was supported by evidence and I had the assistance of lawyers who believed in me and my case.
Throughout your employment before the Penland case, you received excellent performance evaluations. Your supervisor wrote in an evaluation that your “work ethic is unmatched, which is reflected in her case work. Amy investigated 250 cases and solved 243 (97 percent) of her assigned investigations. Amy works each case with an abundance of energy, and constantly strives to find the facts of each case and works hard to recover any losses to BB&T.” Did most of these cases involve standard employee fraud that wasn’t related to mortgage fraud? Were your bosses happy with your performance as long as it didn’t threaten BB&T’s profits and reputation?
The majority of the cases I worked were not mortgage-fraud related. My supervisors were very pleased with my performance as they reflected in my evaluations. I recovered and prevented the loss of millions of dollars for BB&T. I love to work, and I work very hard at any job I have.
In your supervisor’s later evaluation after you discovered the Penland scheme, he wrote: “Amy needs to continue to work on her communication style in a corporate setting, such as keeping her opinions or recommendations about her cases only for BB&T Investigation’s management, Human Systems and Regional Management. Amy needs to continue to work on ensuring accuracy on her regulatory reports.” He also said you should continue to aggressively investigate your cases and do less “police work.” In your opinion, what was your supervisor trying to do here?
As my former supervisor testified, he wrote most of these comments on all his investigators’ evaluations in the area for improvement. The “do less police work” comment is specific to one event unrelated to the Village of Penland investigation.
Did you have any indication that you might be wading into treacherous waters when you contacted FBI Special Agent Mike McNeely about the suspected mortgage fraud in the Penland case?
I did not think it was treacherous waters because it was my job to contact law enforcement about fraudulent activity.
Dr. Joseph T. Wells, CFE, CPA, was motivated to found the ACFE in 1988 by a desire to teach fraud examiners how to prevent and deter fraud and to equip them with ways to stand up to management when the facts are clear. What can fraud examiners do to proactively deter the kind of management behavior you had to endure?
I am in agreement with Dr. Wells; knowledge is power. In my case, it would have been difficult to deter the retaliation because I cannot think of one more thing I could have done differently to have prevented the retaliation I endured. I wrote reports describing the retaliation for management and spoke to them on numerous occasions.
I think it’s important that fraud examiners always have facts and evidence to support any position they take concerning a case.
I imagine that you had a much more free hand in investigations in the sheriff’s office. How could BB&T be surprised at your investigative tactics when they had hired a sheriff’s detective?
BB&T was not surprised at my investigative techniques. I was urged to be more “hard-nosed” when it came to making recoveries and incidents when BB&T was the victim.
What were your thoughts and feelings during this time when you were trying to honestly report the truth?
I became very frustrated. You feel like no one wants to know the truth.
What encouragement can you share with ACFE members who might be in a similar situation in which they need to blow the whistle, but they’re pondering the inevitable consequences?
When everything is taken away and all a person has is their integrity and reputation, remember that these are the most important things to maintain in any circumstance.
What lessons have you learned from your ordeal?
The biggest lessons I have learned is that I have to forgive people and I have to pray for them.
Many, if not most, go through similar trials as you have by stepping forward and being honest. Their lives have never been the same. Why do you think that is?
When you come through a trial like this, you find that it adds to your courage and confidence. No one could be the same after such an experience.
What do you enjoy about being a fraud examiner and investigator?
I love investigations. I love to dig and get the information, facts, and evidence needed to solve a case. It’s a great feeling to discover all the pieces needed to get a full picture of the fraud and to help make the situation right.
Has this experience made you more cautious, or are you just as determined to report the truth?
I think this experience has made me as determined as ever to report the truth. I have a lot more courage and confidence in myself.
How have you paid personally for this ordeal? What have been some benefits? What have you learned about yourself?
I fought for more than two years trying to vindicate my reputation. During that time I became focused on God and my faith. That has been the biggest benefit – dedicating myself to my faith. I learned if I put God first in my life, all things will be added unto me by Him.
What advice do you have for other public companies like BB&T that hire fraud examiners to prevent fraud in their organizations? In your opinion, how should they react when a fraud examiner employee reports potential fraud?
Every reputable company should be honest about every situation. This will earn the respect of their employees, clients and community. Accept the facts of the case, good or bad. If the situation reflects badly on the company, have the integrity to take responsibility and try to make things right. Denials only make the company look guilty.
Dick Carozza is editor-in-chief of Fraud Magazine.
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