5 Financial Whistleblowers Who Changed History

October 17, 2019
The C2FO Team

It’s a gut-check moment for any finance professional: That day the numbers don’t add up, and you strongly suspect you know why.

You’ve noticed some shady dealings in your organization. What do you do? Keeping silent makes you part of the problem. Speaking out may put everything at risk—your career, friendships, even your family.

What do you do?

In a large organization with big goals but questionable ethics, it’s tempting for even an honest person to look the other way. It takes an individual with uncommon courage to confront upper management, ask the tough questions and keep digging for the truth.

Below are the stories of five whistleblowers who put everything on the line to uncover financial fraud at their organizations. None of them wanted fame. In most cases, they had everyday jobs ranging from internal auditor to newspaper printer to plainclothes police officer.

All of these whistleblowers, however, were driven by a powerful sense of justice and fairness, despite everything they stood to lose. In each case, their determination made a profound impact on their industries.

1. Sherron Watkins, Enron Corp.

In August 2001, Enron Vice President Sherron Watkins sent an anonymous memo to Chairman Kenneth Lay and other top executives, warning that “we will implode in a wave of accounting scandals.”

She was concerned that the off-balance-sheet deals designed to help the energy trading company meet its financial statement goals would ultimately sink Enron.

This was unwelcome news at Enron’s C-suite, but Watkins was right. That December Lay informed 5,000 employees that their most recent paychecks would be their last. Enron, the world’s seventh largest company at the time, was out of business. Its “Big Five” accounting firm, Arthur Andersen, would soon collapse as well.

While Watkins did not take her concerns about Enron’s accounting improprieties public, she was lauded as an internal whistleblower. She later testified against her former bosses in Senate and Congressional hearings.

Enron’s shocking collapse spurred Congress to pass the 2002 Sarbanes-Oxley Act, a sweeping auditing and financial regulation for publicly traded companies that also provided protection for whistleblowers.

Interesting Fact: Watkins first grew suspicious of Enron’s corruption when the company required employees to plan business trips with a travel agency owned by Ken Lay’s sister.

Business analyst looking at computer screens

2. Cynthia Cooper, WorldCom

Under the aggressive leadership of CEO Bernie Ebbers, WorldCom Corp. did everything big.

The Mississippi-based telecom company was once the fifth most widely held NYSE stock and offered the best return for investors over a 10-year period. In 1998, WorldCom leveraged the largest debt offering in corporate history when it acquired MCI, a company three times its size.

Then, the telecom bubble of the late 1990s burst. In 2002, WorldCom collapsed after reporting that it had inflated its earnings by billions of dollars.

WorldCom had to admit the scandal due to the determined work of Cynthia Cooper, its vice president of internal audit.

Cooper had warned executives for months of shady accounting practices, but they stonewalled her. In 2002, she and her team of auditors worked together—often in secret and late at night—to uncover $3.8 billion in fraudulent earnings at WorldCom. That number would eventually total $9 billion, leading to the imprisonment of five WorldCom executives, including Ebbers.

Being in the public spotlight over a financial scandal as big as WorldCom took an emotional toll on Cooper. Asked years later if she would do it all over again, she said she would.

“It’s important to be able to dig down and find your courage, which isn’t always easy,” Cooper told Time magazine in 2008. “My mother would say, don’t ever allow yourself to be intimidated.”

Interesting Fact: In 2002, Time named Cooper one of three Persons of the Year, along with fellow whistleblowers Sherron Watkins of Enron and Coleen Rowley of the FBI.

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3. Richard Bowen, Citigroup

Remember the subprime mortgage loan crash that triggered the Great Recession of 2008?

It came to light two years earlier when Richard Bowen, a senior vice president and underwriter at Citigroup, blew the whistle on risky subprime loans that his company’s mortgage operation was backing.

Citigroup bought and sold $90 billion worth of residential mortgages annually at that time. Bowen estimated 60% of those loans were defective. In his view, the company was treating poor mortgages as quality loans, then selling them to Fannie Mae, Freddie Mac and other investors.

Bowen provided weekly reports on the growing crisis, but Citigroup’s executives chose to ignore him (recognize a common theme yet?). In 2008, Citigroup placed Bowen on administrative leave, telling him his services were no longer needed.

Bowen kept up the good fight, testifying about the subprime loan scandal before the Securities and Exchange Commission, the Financial Crisis Inquiry Commission, and in interviews with “60 Minutes” and The Wall Street Journal. He was dismayed that the federal government bailed out Citigroup and other banks that bet heavily on subprime mortgage loans. Eventually, Bowen believes his efforts contributed to Citigroup’s $7 billion settlement with the government in 2014.

Being a committed whistleblower isn’t for everyone, Bowen says. Raising awareness with your superiors about a questionable issue, then retreating, is not cowardice.

“There’s nothing wrong with slowly lowering your hand and quietly looking for another job,” Bowen told the The Dallas Morning News in 2015. “But for God’s sake, don’t stick around and do nothing.”

Interesting Fact: Like many whistleblowers, Bowen has turned his experiences into a second career. He’s now a published author and a speaker on ethical leadership.

4. Frank Serpico, NYPD

Frank Serpico wasn’t a numbers guy, but he was the first cop to expose decades of corruption in the New York City Police Department. In the late 1960s, he told his superiors about officers in his precinct being bribed by criminals with everything from money to free meals. None of the higher-ups seemed to care.

In 1970, Serpico contributed to a New York Times front-page story about the rampant bribery in the NYPD, and later testified about systemic corruption across all levels of the department. His willingness to speak out led to several reforms to prevent police fraud in New York City.

Serpico’s honesty put his life at risk. In 1971, he was shot in the face during a drug bust many believe was set up by his fellow officers. He retired from the force a year later and became internationally known after Al Pacino’s iconic portrayal of him in the 1973 film, “Serpico.”

Interesting Fact: Before leaving the NYPD, Serpico received the department’s Medal of Honor. There was no ceremony—Serpico claims the medal was tossed on his desk “like a pack of cigarettes.”

5. Harry Templeton, Mirror Group

A printer for the British tabloid newspaper chain Mirror Group, Harry Templeton caused a stir in 1988 when he challenged owner Robert Maxwell’s use of the company’s employee pension fund. As a union-appointed trustee of Mirror Group’s pension scheme, Templeton found himself on the losing end of a 13-1 vote against holding Maxwell more accountable in how he managed the pension money.

Maxwell was one of the world’s most powerful media moguls at the time of his death in 1991. But his passing unveiled a massive fraud that cheated Mirror Group employees out of more than £400 million ($900 million in U.S. dollars) in pension funds.

By that time, Templeton was long gone from the company—he lost his job shortly after questioning Maxwell’s financial dealings. Templeton went on to help lead a British nonprofit aimed at assisting corporate whistleblowers.

“Companies don’t sack someone for blowing the whistle,” Templeton told British newspaper The Guardian in 2018. “They find other reasons to, and they offer people incentives to keep their mouths shut.”

Interesting Fact: Templeton was fired in 1988 under the pretext that he had threatened another employee. At the time, Maxwell publicly criticized the printer, saying he’d never get another job in the media ever again.

Business associates sharing secrets during a meeting

A matter of integrity

Reporting corruption at a large organization takes courage, particularly when you think your job and reputation might be at risk.

There are laws in place that support whistleblowers, like Sarbanes-Oxley and the Whistleblower Protection Act of 1989. But legislation only goes so far. There’s no guarantee that you won’t pay some sort of price for speaking out against fraud.

Ultimately, deciding whether or not to call out questionable business practices comes down to personal integrity. For whistleblowers like Cynthia Cooper, the choice was a simple one.

“I really found myself at a crossroads where there was only one right path to take,” she said in 2008.

Sources: National Whistleblower Center, Wikipedia, Fraud Magazine, The Dallas Morning News, The Guardian, Forbes

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