Class is Monday night, and again, I find myself faced with a difficult lecture to develop. I consistently teach my graduate students about the importance of whistle-blowing. Specifically, how 40% of frauds are discovered by an internal tip. I stress the importance of how CPA’s have a fiduciary responsibility to report suspected fraud. Given that the Department of Justice has made several policy changes focusing more on individual accountability in corporate misconduct cases, it is far more important to speak up than ever before. But how do I convince my millennial graduate students who are typically skeptical of “corporate morality” when they see the negative experiences of the Wells Fargo whistle-blowers? CNN reported that multiple whistle-blowers attempted to report the fraud and were fired. Yes, fired! How could this be? How can employees using the appropriate reporting channels be fired for doing the right thing? Research shows that employees prefer to report wrongdoing using internal reporting channels, so what happened at Wells Fargo is confusing. Did they not know their own culture or frankly not care? As I wrote in a 2011 blog post, detecting fraud at corporations using outside sources is difficult, so discovering fraudulent activity often starts with employees. Firing employees for stopping misconduct sends a message within a company but it also sends a message to those of us who are charged with shaping the minds of tomorrow’s business leaders. What do I tell them? Report the fraud and risk getting fired or don’t report the fraud and risk being indicted by the Department of Justice?
According to a 2014 survey by the Ethics Resource Center, only 63% of employees report observed misconduct. The fear of retaliation is often cited as the primary reason employees choose not to report and this Wells Fargo case serves as proof that this fear is real. My class watched the C-Span coverage of Senator Elizabeth Warren’s confrontation with Wells Fargo CEO John Stumpf. When the clip was over, I turned to my class and they looked back at me with a look of hopelessness. One student asked, “What are we really supposed to do in an environment like that?” Another student stated that it would be easier to engage in the fraud than fight. For the first time, I was out of advice. When 5,300 employees are out of a job because they were caught following the policies established by upper management and that Stumpf could walk away with $200 million if he resigns makes my job extremely difficult. Wells, what do I say on Monday? The stakes are much higher. Job loss versus criminal charges are two very serious problems. The need for the correct tone at the top, mood in the middle and buzz at the bottom has never been more important than it is in today’s regulatory environment.
On Monday whistle-blower Mary Willingham from the UNC Academic Fraud debacle will visit the class and share her story and her belief that speaking up and whistle-blowing is for the better good. As much as I know the whistle-blowers are our only hope for discovering fraud, we must admit that whistle-blowers are taking a risk. Many whistle-blowers experience demotion, isolation and depression however some are perceived as heroes. Whistle-blower Kathe Swanson from my upcoming documentary All the Queen’s Horses discovered the $53 million fraud scheme committed by her then boss Rita Crundwell. Luckily, Kathe was able to report the fraud and get the support needed to investigate the scheme and save the City of Dixon. But Kathe came forward because the environment she worked in truly encouraged the see something/say something mantra. Establishing a whistle-blowing culture is key.
As I begin to prepare for Monday’s class, I am still going to stress the importance of whistle-blowing. Mary will be in class with me to help and if there are any Wells Fargo whistle-blowers who would like to Skype into class on Monday night, we would love to hear from you!
