Whistleblowers Are Not PrettyBy Francine • Feb 3rd, 2011 • Category: Food for Thought, Fraud, Internal Audit, Madoff, SEC
This article was originally published at GoingConcern.com on March 3, 2010.
Most don’t wear stilettos, although Cynthia Cooper is fairly attractive for a blond. Harry Markopolos, the Madoff “hero” whose new book is out is being called a whistleblower. I do not see him really warming up to that label or really warming up at all. He did admit that, early on, he was partially motivated in his quest to get the SEC to listen to his theories about Madoff’s fraud by the potential for whistleblower rewards.
From The Boston Globe in January 2009: Markopolos allows that at times he was motivated partly by the opportunity to receive a bounty that the government pays to whistleblowers in successful prosecutions, if the fraud falls within certain categories – the front running issue, for example… Over time, Markopolos concluded that he wasn’t likely to get a whistleblower payment, but he continued nonetheless, spurred on by the pure intellectual challenge of cracking a Wall Street legend…
Now Markopolos works to seek out other whistleblowers and shares in the bounty if they successfully file claims.
From a recent Fortune interview:
You were a whistleblower and you work with them now. What is the profile of the whistleblower’s personality? If you don’t have a strong belief system, you’re not going to be a whistleblower. You have to be crazy-brave. The risks are all weighted to the downside.
Crazy-brave? Yes. You cannot have self-doubt. You just have to go forward and say I believe in this country. I believe in these core values. I know if I get outed and get caught, I’ve committed economic suicide for myself and my family. I’m going to be on the industry blacklist.
Markopolos reminds me of many internal auditors I have known over the years. Many are introverted, not comfortable with the spotlight, anal-retentive but with a pit-bull, black-and-white, judgmental sense of right and wrong. It’s what it takes to do the job.
One of the biggest challenges for the internal audit profession after Sarbanes-Oxley was passed was to live up to the enormous expectations. Internal audit functions were mandated. Controls were front and center. I expected Internal Audit to gain more prominence as Chief Audit Executives began reporting directly to the Audit Committee and started making their own Board presentations instead of hiding behind the CFO.
Unfortunately, as my friend Chuck Eldridge from Korn Ferry told me back in 2003, very few internal auditors at the time were prepared to be “outside guys” instead of inside guys. In fact, it should be suspect if the internal auditor is too cozy with senior executives. We’ve seen internal audit come back again full circle to having to justify their existence via consulting and cost-savings initiatives.
It is hard out there for the internal auditors, external auditors, and accounting professionals, who want to expose fraud and illegalities and still live to work another day. Markopolos said he feared for his life. I know I’ve been more wary about my own safety since November. Cynthia Cooper of WorldCom fame received death threats.
“For me, this has been the most difficult thing I have gone through in my lifetime…There were times when I was scared to death,” Cooper told the audience, adding that she had to dig down to find her courage and push forward.
Few are prepared for the consequences or realize fully how bad they can be. Ideally you are either independently wealthy or so poor that you have nothing to lose. Sticks and stones can’t hurt you.
I know one real-life whistleblower personally. He’s actually a former Chief Audit Executive who is more of an outside guy than usual. He was always active in professional associations like the IIA, was comfortable presenting to outside counsel and the Board of Directors and has the chops to deal with tough issues. When asked to look the other way in a job that was supposed to be a repair and renewal assignment rather than all CYA, he balked. He’s currently working as the CFO of a startup while pursuing his claims.