Federal watchdog says DoL likely blocked protections for Wells Fargo fraudulent accounts whistleblowers
There's a "substantial likelihood" the Department of Labor colluded with large corporate defendants in failing to protect whistleblowers, including some who reported Wells Fargo's widespread practice of opening fraudulent accounts, according to a new decision by the U.S. Office of Special Counsel.
The office, an independent federal watchdog that handles complaints against the government from federal employees, called on the Department of Labor to investigate claims of systemic and long-standing corruption at the San Francisco office of the Whistleblower Protection Program, run by the department's Occupational Safety and Health Administration.
The case could have broad implications for advisors and other financial services whistleblowers who report fraud by their employers to federal regulators. The chances of those advisors now prevailing in their claims is vanishingly small.
A DoL spokesman says the agency “is reviewing OSC's request and takes it seriously.” Henry Kerner, who heads the special counsel’s office, did not respond to a request for comment.
Darrell Whitman, a former whistleblower investigator at OSHA's San Francisco office, brought the case that prompted the special counsel’s decision. As an investigator, Whitman handled Wells Fargo fraudulent accounts complaints and another from a JPMorgan whistleblower, among others in different industries.
In an ironic turn, Whitman alleges he found himself on the receiving end of the kind of retaliation routinely faced by the people whose cases he investigated; after he raised his concerns, the DoL fired him in 2015.
The decision is "validation of what I've been doing for the last three and a half years" in pursuing the case, says Whitman, who decided he needed a brand new start and moved to the small Eastern European country of Moldova after he was unable to find work following his termination. "It's an admission that this case needed to be investigated,” he adds.
Jon Brock, an academic and whistleblower expert who OSHA tapped eight years ago to help improve its troubled whistleblower program, agrees. Brock worked at the DoL during the Nixon, Ford and Clinton administrations. An emeritus professor of public affairs at the University of Washington, Brock served on OSHA's Whistleblower Protection Advisory Committee from 2010 until 2017.
"That the investigation [into the DoL] is deserved shouldn't, in my mind, be a question, if we are to protect the integrity of and learn about how to ensure the quality of whistleblower investigations and, therefore, make whistleblower rights real," Brock says. The failings of the whistleblower program have been documented for nearly 30 years through successive reports by the Government Accountability Office.
For reasons both "nefarious and well-intentioned," Brock claims, OSHA whistleblower investigators often find themselves pushed to close cases too rapidly. "Their case loads are enormous. It's not a hard leap for there to be pressure either for the agency to say, 'Come on, get going, close your cases or why are you wasting your time?' [or] a lawyer for the company can say, 'Come on, you haven't done anything with this. What else do you want from us?' and create a different kind of a pressure to close,” he says.
The DoL has acknowledged problems with its whistleblower program. Reviews by the agency’s inspector general found that across 1,200 whistleblower investigations in 2009 and 2010, the program failed to follow its own rules in 80% of cases – and that by 2015 there was little improvement.
For these and other reasons, OSHA's historical record of finding merit in less than 2% of all whistleblower cases is "far below what common sense would tell you it should be," Brock says.
Whitman says about one-third of the cases filed with OSHA from 2010 to 2015 when he worked there should have received merit findings. Of 3,432 cases in 2017, just 49, or 1.4%, were found by officials to have merit. Brock agrees with Whitman, but suspects the percentage is higher still.
For 20 years, Brock chaired an organization that was created to mediate complaints from whistleblowers at a decommissioned nuclear facility in Washington – one that posed public safety risks and required steady monitoring. In the overwhelming majority of approximately 125 cases, only two cases were entirely without merit and only one came from a whistleblower "where the motivation might have been a personal agenda," Brock says.
Former Department of Labor officials allege systemic breakdown of whistleblower protection; two also handled Wells Fargo cases that went nowhere.December 9
The mishandling of the two former employees’ complaints, detailed in documents and by former OSHA officials, raises questions about the government’s treatment of whistleblowers throughout the financial services industry.August 14
“Our whistle-blower program is a critical component in our investor-protection toolbox,” SEC Chairman Jay Clayton says.June 29
The Office of Special Counsel also has a low record of protecting whistleblowers, alleges Gary Aguirre, a former SEC whistleblower and a lawyer who’s referred cases to the special counsel on behalf of clients.
Any finding on behalf of a whistleblower is "exceedingly rare," he says. "You have to have a valid claim, but a lot of people have valid claims and the OSC doesn’t act on them. And then you have to have Congress and the media or some combination of them looking into the facts of your claim, and that's what's going on with Darrell's situation."
The special counsel office’s finding follows investigations by Financial Planning and other media outlets into Whitman's allegations.
At OSHA, Whitman handled cases brought by Yesenia Guitron and Judi Klosek, both of whom were Wells Fargo sham accounts whistleblowers. He also handled a case brought by RIA and former JPMorgan broker Johnny Burris, who accused JPMorgan of fiduciary breaches. While Burris’ case proceeded, JPMorgan ultimately paid $307 million in regulatory fines after admitting it committed similar breaches.
While happy the special counsel found probable merit to his complaint, Whitman says he is concerned the DoL has been asked to investigate its own agency. An independent entity should be brought in, he says. "You need to go to the Government Accountability Office, [which] has real authority," he says.
But by law, the special counsel’s office must refer such investigations to that agency’s inspector general, a spokesman says. Brock counters that there's nothing stopping the DoL from seeking an outside entity to investigate to ensure credibility.
“The whistleblowers and their investigators who try to do a good job are not the ones who should be ignored," he says.