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Trump Appointee Implicated In Whistle-Blower Scandal At Dept. Of Veterans Affairs

Veterans Affairs Investigators Fault Whistleblower Office Created By Trump.Trump Appointee Implicated In Whistle-Blower Scandal At Dept. Of Veterans Affairs

Body to protect employees exposing wrongdoing instead retaliated against them, watchdog says.

An office formed by President Trump to protect whistleblowers in the Department of Veterans Affairs was instead used to stifle claims and retaliate against those trying to expose problems at the agency, according to an inspector general report released Thursday.

First created by presidential order in 2017 and later mandated by Congress, the VA’s Office of Accountability and Whistleblower Protection was set up as a clearinghouse for employees exposing wrongdoing at the department and was part of the president’s efforts to carry out campaign pledges to overhaul the VA.

But the office’s first executive director, Peter O’Rourke, instead used his position to stifle claims and retaliate against the employees the new organization had been designed to protect, the IG report found. Mr. O’Rourke, who once directed a conservative political action committee and then consulted for the VA, leveraged his power as head of the whistleblower office to end investigations into allies and failed to provide basic reports to Congress on the office’s operations, investigators said.

Mr. O’Rourke eventually rose to acting secretary of the VA before leaving the department last year. He is now the executive director of the Florida Republican Party.

Mr. O’Rourke declined to comment on the report, referring all questions to the VA, which didn’t respond to a request for comment.

In its official response to the investigation, the VA concurred with all recommendations made by investigators and said office employees are receiving more training, the new head of the office is reviewing disciplinary decisions and the office will do more to protect whistleblower anonymity.

“The report’s findings of failings in all these areas help explain the significant challenges [the office’s] leaders face today in establishing trust and achieving its intended goals,” said Michael Missal, the department’s inspector general, in a statement.

Requests from Congress and multiple complaints made to the inspector general prompted the investigation.

“In its first two years of operation, the [office] acted in ways that were inconsistent with its statutory authority, while it simultaneously floundered in its mission to protect whistleblowers,” the report from the VA’s watchdog said. “The [office] itself engaged in actions that could be considered retaliatory.”

News of whistleblower disregard at the VA comes as the administration wrestles with high-profile whistleblower allegations related to Mr. Trump’s relationship with Ukraine. Mr. Trump, now the subject of a congressional impeachment investigation, has said he would like to see whistleblowers face more scrutiny.

The White House didn’t respond to a request for comment on the investigation or on whether the office is performing in accordance with Mr. Trump’s intent.

Mr. Trump’s efforts at the VA continue a process that began in the wake of a 2014 wait-time scandal, which led to the resignation of then Secretary Eric Shinseki and sweeping, congressionally mandated changes at the department. The Phoenix scandal became public largely through the efforts of VA whistleblowers.

According to the report, the new VA whistleblower office employed investigators to check on whistleblower claims, yet they often lacked adequate training to conduct investigations and “did not have an approach that ensured comprehensive and impartial investigations.”

The office’s investigators often didn’t interview an adequate number of witnesses or spoke only with witnesses who seemed to corroborate practices exposed by whistleblowers, ignoring any exculpatory witnesses, leading to what appeared to be biased investigations, the report says.

One witness quoted in the report said the investigations often began with conclusions about the accused person and were just searches for evidence that would fit. In one case, the office determined the need to discipline an employee without interviewing that employee.

Mr. O’Rourke himself appeared to intervene to tamp down an investigation involving someone he had a personal relationship with, according to investigators. Mr. O’Rourke allegedly sped the investigation to a favorable conclusion while the whistleblower became the subject of an investigation.

On two other occasions, Mr. O’Rourke directly engaged in retaliatory actions against whistleblowers, according to investigators, downgrading their jobs. In one case, Mr. O’Rourke opened an investigation into a whistleblower that ended in disciplinary action in a less-than nine-day investigation, the report said. At the time, an average investigation took 215 days to complete, according to the report.

The office didn’t value protecting the identities of whistleblowers, according to investigators, and routinely closed investigations when whistleblowers requested to remain anonymous out of fear of retribution. The office would also inform other offices in the VA about allegations, exposing whistleblowers to identification and retribution, the report said.

One whistleblower who wanted to remain anonymous told investigators, “I just don’t want my own HR to investigate this and stir up yet more problems when they’ve been involved at every step.”

When the office told the whistleblower that disclosing their identity was a requirement, the person requested the case be closed.

“It effectively closed the [office’s] doors to VA employees who alleged retaliation for whistleblowing and did not want their identities revealed to other VA components,” the report said.

The report also addressed alleged improprieties by Kirk Nicholas, Mr. O’Rourke’s successor in the whistleblower office, finding he awarded a contract to a company associated with someone with whom he had a personal relationship. The contract was later canceled when it was found to be for work beyond the scope of the whistleblower office.

The inspector general said in its report it has referred the Nicholas matter to the Justice Department for possible criminal investigation.

Mr. Nicholas didn’t respond to multiple requests for comment. The Justice Department didn’t respond to a request for comment on the matter.

Despite changes, the office has seen a widespread departure of senior personnel, and legislators are concerned the office isn’t performing well under the leadership of Assistant Secretary Tamara Bonzanto. The House Committee on Veterans Affairs sent a letter to the VA on Sept. 30 raising questions about the office, saying that it hadn’t taken adequate actions on whistleblower cases or provided mandated reports to the secretary.

The office “is simply not performing its required duties,” the letter said.

Ms. Bonzanto, through the VA, didn’t respond to a request for comment.

The House Committee on Veterans Affairs has scheduled a hearing on the whistleblower office for next Tuesday.

Updated: 11-11-2019

CFTC Whistleblower Tips and Awards Fall After Record 2018

The Commodity Futures Trading Commission’s whistleblower program has issued 14 awards, totaling more than $100 million, since 2011.

The number of tips to—and awards given out by—the Commodity Futures Trading Commission’s whistleblower program have fallen from records set last year, according to the regulator’s annual report to Congress.

The U.S. regulator for derivatives and commodities markets issued five whistleblower awards totaling about $15 million during the fiscal year 2019 ending in September, the report said. The total represents a decline from the full-year record total of about $75 million issued by the commission during the previous fiscal year, when five awards went to tipsters, including the largest award of $30 million, according to the commission.

The CFTC, meanwhile, received 455 whistleblower tips in 2019—40% less than during 2018, when tips surged in part because of efforts to increase awareness of virtual currency fraud enforcement through the whistleblower program, according to the regulator.

The decline in the number of tips could be attributable to waning interest in digital currencies from the public in 2019, according to a CFTC spokeswoman.

The 2019 tip total represented the first annual decline since the program started in 2011, but it was still above the annual average of 308 tips between 2012 and 2018, according to a Wall Street Journal analysis of the data.

The CFTC—which has issued 14 awards, totaling more than $100 million, to tipsters since 2011—in recent years has focused more on marketing and outreach efforts to raise awareness of its whistleblower program.

Matthew Stock, director of the whistleblower rewards practice at Zuckerman Law, pointed to regular advisories issued by the agency, warning investors about types of fraud. “These investor alerts are helping people understand certain areas,” he said.

For instance, the regulator recently encouraged people to blow the whistle on suspected foreign bribery practices and potential violations of anti-money-laundering rules in the commodities and derivatives markets, said Erika Kelton, a lawyer representing whistleblowers at Phillips & Cohen LLP.

Under the rules of the CFTC’s whistleblower program, tipsters who voluntarily provide original information or analyses of a potential violation of the commodities and derivatives markets’ regulations are entitled to 10% to 30% of monetary penalties when their information results in a successful enforcement action and when the monetary penalties are more than $1 million.

Updated: 11-18-2019

SEC Whistleblower Tips Decline As Agency Looks To Limit Big Awards

Tips to the U.S. securities regulator about corporate wrongdoing declined in fiscal 2019 for the first time since the program was established.

The U.S. Securities and Exchange Commission reported its first annual decline in tips from corporate whistleblowers as the agency prepares to finalize a proposal that could limit the size of big awards.

The SEC received 5,212 tips during the 2019 fiscal year ended in September, down 1% from a year earlier, the agency said Friday in an annual report to Congress. The largest drop was in tips about potential cases of fraud in securities offerings, which had spiked the previous year.

The overall decline follows years of steady growth since the program was established by Congress after the financial crisis. Tips in 2018 jumped 18% from 2017.

Under the SEC whistleblower program, tipsters are entitled to awards that can reach tens of million dollars if they provide useful information in cases that result in corporate penalties. Awards range between 10% and 30% of the monetary penalties in cases in which companies are fined more than $1 million.

In March, the agency issued its third-largest award, providing $50 million to two whistleblowers who provided information in a case against JPMorgan Chase & Co. It handed out its largest award in 2018, providing $83 million to three tipsters who offered information in a case against Bank of America Corp.

The SEC could begin imposing limits on its largest awards under a proposal introduced last year that would give the agency discretion to scale back awards above $30 million.

Whistleblower advocates and lawyers have criticized the proposal, saying it could discourage people from reporting information about corporate wrongdoing.

SEC Chairman Jay Clayton addressed those concerns in a statement Friday, saying critics have mischaracterized the proposal as imposing a cap on future awards.

“Congress vested in the commission the authority and responsibility to use our good judgment and experience to determine award amounts,” Mr. Clayton said.

Erika Kelton, a whistleblower lawyer at Phillips & Cohen LLP, said the proposal to limit some awards may have been one reason why the number of tips leveled out this year.

“I have many clients who are deeply concerned about this—people who have come forward already and are really concerned that the rules are changing on them midstream,” she said.

“Then there are others who are contacting us at the beginning of the process and they’re raising this issue as a concern also,” she added. “And it’s definitely coloring their decision whether to proceed and become an SEC whistleblower.”

During the 2019 fiscal year, the SEC received the most tips in three major categories: corporate disclosures, offering fraud and manipulation. The agency also said it received 289 tips about cryptocurrencies, after it introduced that category in 2018.

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