Magazine article American Banker

An Insider's Guide to Whistleblowing; How Does One Tip off Investigators about Fraud and Other Abuses Occurring at the Financial Regulatory Agencies? Very, Very Carefully

Magazine article American Banker

An Insider's Guide to Whistleblowing; How Does One Tip off Investigators about Fraud and Other Abuses Occurring at the Financial Regulatory Agencies? Very, Very Carefully

Article excerpt

A History

Whistleblowing in the banking and financial services regulatory field is not as well known or publicized as, say, cases involving the Defense Department or the Environmental Protection Agency. Nonetheless, financial regulatory officials and agencies are the subjects of tips and complaints. Many come from agency employees telling on a boss or coworker. Many are from bankers, lawyers, and others who have dealings with an agency. And many more come from, well, no one is quite sure where. These come in anonymously, mostly because of fear of reprisals.

Investigators, especially those who work for a regulatory agency, generally are reluctant to discuss details of their work. But it appears that investigations involving banking agencies run the gamut of allegations. They can be relatively minor charges -- on the level, say, of an examiner cheating on a travel voucher or spending more time examining a bank's female tellers than doing his job. Or they can be fairly serious allegations -- conflicts of interest, unfair labor practices, fraud, failure to enforce the laws, multimillion-dollar mismanagement, and so on.

"Each week we get a thing in the mail or an anonymous phone call about someone cheating on a travel voucher or an examiner leaving work early," says Paul F. Gibbons, director of the 14-person internal evaluation and compliance office at the Federal Home Loan Bank Board. Recent investigations, he said, involved a contractor who claimed to have been billed improperly and a district office employee who was believed to be improperly involved in partisan politics. Mr. Gibbons' office also conducts audits of programs and policies to see if they are working efficiently.

Bank Board Chairman Edwin J. Gray apparently is among the latest targets of whistleblowers. It was reported recently that FBI and Bank Board investigators are checking into a variety of allegations, including charges that Mr. Gray may have misspent funds for office decorations and food. The charges are not expected to result in any serious violations, and the Bank Board denies any wrongdoing on Mr. Gray's part.

Mr. Gibbons, because of a general policy about possible internal inquiries, declined to comment on whether Mr. Gray has been under investigation.

Because so little is known publicly about investigaitons, it is difficult to know how many result in uncovering problems and taking corrective action. According to interviews with government sleuths, many tips are found to be accurate and have led to congressional hearings, changes in agency procedures, reprimands, job dismissals, and, in rare cases, indictments and convictions.

But the system has faults. According to interviews with lawyers, government staffers, and others, there is a major concern that despite a variety of protections, too many informants still can get into trouble. And too many potential informants keep their motuhs shut for fear of reprisals. For a financial industry executive who blows the whistle on an agency, there always is the fear, justified or not, that an examiner will be tougher next time, that an application will get rough treatment, and so on.

For a government employee who blows the whistle on his or her own agency, there is the fear that job evaluations suddenly will turn sour, anticipated raises will disappear, that they will be transferred to the mail room or the Siberian division -- or that they will be fired for "substandard performance" or "insubordination."

David Black, a former research assistant at the Comptroller of the Currency, alleged that he was dismissed from his job in 1977 because he questioned the validity of a study of mortgage lending discrimination at banks. He initiated a grievance procedure against the Comptroller but failed to win his job back.

Bridget Mugane, an attorney here who represented Mr. Black, claims that as a result of this and other caes, "I always advise people [who want to blow the whistle] to do it anonymously. …

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