insights (2007-02)

Thank Heaven for Whistlers

More than 11,000 people who needed cardiac care in our region over the past several years owe a debt of gratitude to Kristi Moore and Valerie Byrd, the East Tennessee Heart Consultants (ETHC) employees who alerted authorities to accounting errors that resulted in overpayments by patients and their insurers. Our legal system reflects the gratitude of those due refunds. Moore and Byrd will share a $300,000 award as part of a settlement announced last week.

Moore and Byrd first alerted their employer to the mistake, but when ETHC opted not to refund the overpayments, the two women contacted investigators and wound up filing suit under the False Claims Act, which allows private citizens to sue on behalf of the government and collect 30 percent of any settlements or awards. The act also triples penalties, and ETHC must be regretting its inaction at this point.

The case parallels a much larger suit that could make a native Tennessee man a millionaire. Bobby Maxwell left Tennessee decades ago to join the Army, later earned undergraduate and graduate degrees in business, and eventually made a career as a federal auditor. During his time with the Department of Interior’s Minerals Management Service, responsible for collecting royalties on oil, gas, coal and timber taken from federal lands, Maxwell uncovered hundreds of millions of dollars worth of fraud. A Montana coal mine paid the federal government $100 million after Maxwell discovered it had been underreporting its take, and Maxwell helped an Apache tribe recover $20 million worth of natural gas royalties.

Such diligence earned him accolades and promotions, but it did not make him wealthy. Now that he is retired, however, Maxwell has filed suit against Kerr-McGee, alleging underpayment of $10 million in royalties for oil. The trial is due to begin on Jan. 16 in Denver. As with the local case, Maxwell first alerted his supervisors, but they refused to pursue the matter. He decided to retire and become a whistleblower.

Maxwell alleges mismanagement, claiming Interior officials ignored reports showing inaccuracies and underpayments of royalties and even impeded collection efforts. Three of his fellow auditors, still federal employees, have filed similar suits against other oil companies.

The other industries Interior regulates get favorable treatment—lax permitting, small or unenforced fines, subsidies, obsolete pricing—but the costliest example of all might be the offshore oil drilling contracts written in the 1990s. Interior officials call it an inadvertent mistake, but standard language linking royalty payments to the market price for a barrel of oil was omitted from agreements. A Congressional investigation is underway, but if the problem is not rectified, the federal government will miss out on an estimated $7 billion in royalties.

The problem is not career bureaucrats like Maxwell, but their superiors, political appointees who come and go with administrations. Often these appointees come from the industries they are charged with regulating and return as lobbyists or board members after their stint on the federal payroll. In September, Interior’s own inspector general, Earl Devaney, told Congress, “Short of crime, anything goes at the highest levels of the Department of the Interior.”

The nonchalance of the ETHC board when confronted with their accounting problem is symptomatic of a similar attitude in the corporate world. If it looks good on the bottom line, it must be good. Perhaps this is why CEOs demand exorbitant salaries and severance packages: They are expected to break laws and find ways to obscure their actions or buy off inspectors, so they want compensation for their potential criminal exposure, should the permissive political winds shift.

Fat chance. Corporations spend tens of millions of dollars on political campaigns and lobbyists each year to stay in favor with whoever is in power. These are not charitable contributions to the democratic process, but investments. They buy loopholes, earmarks, reduced fines and favorable appointments to the agencies that oversee their industries. Such favors are doled out by Republican and Democratic administrations alike, and the congressional committees that approve nominations get their wheels greased too.

Rather than working to end corruption, politicians are looking for new ways to hide it. The Bush administration wants to crack down on leaks by selling the fiction that whistleblowers jeopardize national security. There is a word for people who do that sort of thing, and it’s not “whistleblower.” It’s “spy,” and spies do not alert media and law enforcement to their actions and hope terrorists read the newspaper the day their story appears. If insiders are helping our enemies, they are doing it clandestinely.

Whistleblowers are the good guys. They see when secrecy is used not to protect corporate property or American agents, but to hide corruption. Right now we have laws protecting whistleblowers, but they still face job loss, harassment and character assassination. Corporate boards and politicians want to erode whistleblower protections. Just trust us, they say, but accounting scandals and cover-ups betray their real motives.

If you are one of the thousands getting a refund from ETHC, you know what the good whistleblowers can achieve. It takes a great deal of courage to expose corruption in government or in a corporation, and whistleblowers deserve protection and every penny courts award. In a culture that too often mistakes wealth for virtue and fealty for loyalty, we need more people like Bobby Maxwell, Kristi Moore and Valerie Byrd. Our forefathers who rebelled against kings and fought tyrants would be proud of them, all the more so for battles that are not epic, but everyday.