 This month, the Business Roundtable (BRT) posted an alarming proposal: "More Intelligent, More Efficient, Cybersecurity Protection." The BRT is an association of the CEOs of the largest U.S. corporations. Its members represent companies that collect combined annual revenues of over $7.3 trillion, so when the BRT speaks, Congress tends to listen.
In brief, the 32-page declaration on cybersecurity states the BRT’s case for a legal alliance between the private sector and intelligence agencies that will exempt corporations from lawsuits as they wage cyber warfare.
The argument is simple: much of the American economy is privately owned: banks, chemical plants, toll roads, energy systems. If cyber-enemies were to attack and disable critical functions, the damage would be crippling. Therefore, government and the private sector must establish a new legal framework for cyber defense, and this arrangement will allow the fluid exchange of privileged information between the country’s intelligence agencies and the private corporations that sit at the Business Roundtable.
Here at GAP, where we work with whistleblowers from both the national security and the finance worlds, the prospect of secret collaboration between the two spheres is frightening. Over the course of the past ten years, whistleblowers have reported to us on cronyism, fraud, cover-up, illegality and corruption at the top of the National Security Agency, CIA, AIG and many of the country’s largest banks, costing taxpayers hundreds of billions of dollars.
Moreover, the self-interested crimes reported made the United States more vulnerable, not only to cyber threats, but also to economic collapse.
From one whistleblower we learned the NSA shut down an effective, inexpensive program that sorted through the sea of electronic communications washing around the world daily and found threatening email and telephone connections. The NSA preferred a costly and cumbersome program built by a well-connected private sector contractor – a program that, in the end, didn’t work and had to be abandoned.
Whistleblowers at majors US banks have produced documentation showing widespread fraud in the pre-2008 mortgage origination and servicing business that wrecked the industry. We’ve also seen far-reaching incompetence, negligence and cover-ups at financial institutions that brought on the Great Recession.
Nonetheless, the BRT and the USG are proceeding down the path toward a “partnership” between national intelligence agencies and private corporations that is virtually oversight-free. In January 2013, we’re seeing the BRT proposal in pre-publication detail for the first time. Yet a couple of weeks ago, Ellen Nakashima wrote a piece in the Washington Post indicating the collaboration between US financial institutions and the intelligence community is already well underway.
In fact, the Congress tried to set this up more officially just last year but failed: H.R. 3523, the Cyber Intelligence Sharing and Protection Act (CISPA), passed in the House last April. It would amend the National Security Act of 1947. According to the BRT, the legislation would:
[E]nable national intelligence agencies to share strategic threat assessments and other pertinent intelligence, including classified information, with private-sector entities that own or operate major information systems and other critical infrastructure systems. More important, the bill removes legal barriers to information sharing and establishes a protected framework for the bidirectional sharing of information between the public and private sectors (p. 4).
Although the legislation did not pass the Senate, the government and its private sector friends are evidently proceeding. This is never a good idea in a democracy. Insider CEOs sit down at their roundtable with select politicians and come up with a scheme for protecting and advancing their own interests, which they then announce publicly as a plan with benefits for all of us.
Because the scheme is designed to promote and protect specific interests, though, it’s not presentable in raw form. Therefore, it’s unveiled as an effort to protect us all, and it’s written in denatured bureaucratic prose that is hard to penetrate.
Let’s parse the BRT proposal just posted, for example.
The government must create a clear and concise legal framework for both private sector to private sector and private sector to public sector sharing, with appropriate liability, antitrust and freedom of information protections for those acting within the framework. All of the actions proposed by BRT depend on the advancement of information sharing and removal of current legal barriers.
“Current legal barriers” are, of course, our rights as citizens to privacy and to information about what the government is doing. What the BRT is actually proposing here is not liability, antitrust and FOIA “protections” from just anyone. The BRT is saying it needs protection from us. Although we’re all in this together, BRT firms must be protected not only from formidable cyber criminals and hostile “nation-state actors,” but also from U.S. citizens who might ask what’s going on.
John Wonderlich, Policy Director at the Sunlight Foundation, which works for transparency in government, had this to say about the prospect of public/ private cooperation on intelligence as proposed by CISPA:
Let's make something clear. The Freedom of Information Act is the law that lets the public force the government to determine whether information should be released or not. The Freedom of Information Act doesn't guarantee that information will be released, but just that anyone can request its release, and then have a legal process to try to provide a fair ruling on whether that information should be made public. Information that shouldn't be shared is already protected by law, through largely uncontroversial exemptions.
The FOIA is, in many ways, the fundamental safeguard for public oversight of government's activities.
So as it stands, FOIA does not automatically trigger the release of information from a government agency. At GAP, where we work frequently with FOIAs, we wouldn’t argue that the FOIA is an expeditious and efficient way to obtain information. For example, when Google called on our spy agencies to help with cyber attacks in 2010, the Electronic Privacy Information Center (EPIC) filed a request for data about the deal under the Freedom of Information Act. The FOIA was denied, and when EPIC appealed, it was denied again.
Nonetheless, the BRT wants even the law that permitted the request to be diluted, just in case some judge someday decides that the public has a right to information about back-channel, high-level public/private intelligence collaboration.
Since 9/11, we’ve learned the hard way that “national security” can be used to cover a multitude of sins. Think “enhanced interrogation techniques” and Abu Ghraib. Do we really want to cast the cloak of national security over credit default swaps and the shadow banking system?
Because that’s exactly what the Business Roundtable is proposing. And not just that. The BRT also wants much of the same legal immunities that the government has. If the proposal for this “More Intelligent, More Efficient Cybersecurity Protection” proceeds, we’re surrendering the right to ask anything about it: Like how much it costs and what it’s authorized to do – to us.
Bea Edwards is the Executive Director for the Government Accountability Project, the nation's leading whistleblower protection and advocacy organization.
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Groups Leafleting Bank Employees in 15 Cities Nationwide
 (Washington, DC) – Today, the Government Accountability Project (GAP) and several other organizations are announcing an educational campaign aimed at employees of large banks and financial institutions. The campaign, one of the first major coordinated national efforts of its kind, will inform workers of whistleblower protections that potentially apply to them, if they have witnessed wrongdoing.
“Bankers and workers at financial institutions should know that they do have rights to report corporate wrongdoing safely,” stated Louis Clark, GAP President and Corporate & Financial Accountability Director. “We want bank employees to be aware of the protections that Congress has given them. These laws are on the books for a reason.”
Leafleting is set to take place today in the Bay Area, Los Angeles, San Diego, Sacramento, Seattle, New York City, Charlotte, Atlanta, St. Louis, Chattanooga, Las Vegas, Orlando, Minneapolis, and Chicago. Primarily, the materials being distributed seek to educate employees on the whistleblower protections that were enacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and drive them to a website (BankWhistleblower.org) and a informational number (1-855-BANK-KYR) for more information. Copies of materials that are being distributed can be found here. On both the website and phone message, employees can find additional information such as whistleblower survival tips, whistleblower protections under Sarbanes-Oxley, and tips for filing complaints with the Department of Labor.
Any civic-minded group is welcome to join in this effort and distribute flyers to Bank employees, or make workers aware of the website and phone number.
Michael Termini, GAP Corporate & Financial Accountability Deputy Director, added: “Sometimes the only individuals who can prove financial corruption are employees themselves. We’re trying to make them aware of their rights.”
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The New York Times reported yesterday that as whistleblowers cash in on rewards programs set up by financial reform laws, the Obama administration, which “cracked down on corporate fraud” by promoting the programs, is reaping the real payoff. For-profit whistleblower lawyers, flush with their clients’ settlements, are shoveling money into the Obama campaign.
There are a couple of problems with this account of reality in the world of whistleblowing. Most importantly, Obama did not crack down on corporate fraud. Far from it. The Dodd-Frank reform, which set up the whistleblower rewards at the Securities and Exchange Commission (SEC), is so loaded with loopholes that whistleblowers are probably the best and only hope the public has to combat corruption and fraud in banking.
First, Dodd-Frank does not make the obvious reform: break up the Too-Big-To-Fail banks.
Clearly, this needed to happen and did not. Instead we got the Financial Stability Oversight Council (FSOC). Its Chairman is the Secretary of the Treasury (Timothy Geithner – enough said). Although the Treasury Department is happy to answer our questions about this committee and the ways in which it will protect us from future financial cataclysms, its account of itself does not inspire confidence. For example: in answer to your question, “What can the American people expect from the FSOC,” we have this response:
The FSOC can help provide a coordination role among the member agencies to help bring agencies together and to coordinate complex interagency rulemakings, where appropriate. The FSOC released an integrated roadmap following its first meeting that is based on each independent agency’s internal planning processes, which puts into the public domain timeframes statutory deadlines for key deliverables.
I don’t know what this means, do you?
Secondly, Dodd-Frank was supposed to protect us with the Volcker Rule. Here’s what Robert Reich tells us we need to know about that:
But under pressure of Wall Street’s lobbyists, the rule – as officially proposed last week – has morphed into almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.
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UBS whistleblower Bradley Birkenfeld voluntarily came forward as a whistleblower and handed the government the biggest tax fraud scandal in history on a silver platter. As I wrote yesterday, it is fitting that the most important tax whistleblower in history, who shattered 75 years of Swiss bank secrecy, should receive the first award under the Internal Revenue Services (IRS) whistleblower reward program - $104 million.
It's great that at the U.S. has recovered billions in fines and fees as a result of Birkenfeld's information. However, the history of Birkenfeld's case still includes a sad demonstration in missed opportunities to recoup unpaid taxes and punish tax dodgers.
Birkenfeld is the only official to face jail time as a result of the scandal he revealed - not the fate a whistleblower deserves. The IRS whistleblower reward law recognizes that participants in wrongdoing are eligible under the statute for an award. The law is intended to encourage whistleblowers - even those who participated in schemes - to come forward. It should not be used to entrap whistleblowers into criminal prosecutions.
It's worth noting that Birkenfeld did not "get caught." He blew the whistle internally at UBS before going to government investigators.
[Birkenfeld] . . . learned in 2005 that the bank’s advice to clients was illegal, and after reporting it to the UBS compliance office to no avail, he decided to become a government informant.
When UBS ignored his concerns, Birkenfeld voluntarily gave the Treasury, Justice Department, IRS, SEC and Senate their entire tax evasion case against UBS. During multiple meetings in 2007, Birkenfeld met with and provided extensive documentation and intricate testimony to Daniel Reeves (a lead IRS agent in the UBS case), John McDougal (an IRS special trial attorney) and Robert Roach (counsel and chief investigator of the U.S. Senate Permanent Subcommittee on Investigations). He cooperated fully in the prosecution of Lichtenstein banker Mario Staggl and billionaire real estate developer Igor Olenicoff, who evaded U.S. taxes on $200 million in assets hidden offshore.
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After recent rumors of a turnaround for financial whistleblowers seeking rewards under the Internal Revenue Service's (IRS) whistleblower reward program, it is fitting that one of its rare financial awards goes to United Swiss Bank (UBS) whistleblower Bradley Birkenfeld. Not only is Birkenfeld the biggest tax fraud whistleblower in history (who handed the IRS key information on a silver platter), but he is especially deserving as he is the only person to go to prison among the thousands of Swiss bank account tax cheats he exposed. (Easy to understand now that we have a presidential candidate who hides money in offshore tax havens.)
Birkenfeld was released from prison in August after an usually harsh sentence. Despite the fact that Birkenfeld shattered 75 years of Swiss bank secrecy when he approached investigators about a UBS tax evasion service involving thousands of illegal offshore accounts – held by some of your favorite actors, politicians, and sports figures – and billions of U.S. dollars. Instead of targeting UBS kingpin Martin Liechti, the Justice Department turned on Birkenfeld. To add insult to injury, the prosecutor, Kevin Downing, is now in private practice at Miller & Chevalier defending the very tax cheats Birkenfeld turned in.
Until recently, to say the Internal Revenue Service (IRS) had been slow to implement the IRS whistleblower reward program would have been an understatement. The IRS' implementation (or lack thereof) was so extreme that this summer it caused longtime whistleblower supporter Charles Grassley (R-IA) to object to two Department of Treasury nominees.
The award for Birkenfeld marks a much-needed turnaround for the IRS' whistleblower office, and will hopefully encourage other financial whistleblowers to come forward.
I wrote extensively about Birkenfeld's case during his prosecution and sentencing (here, here, here, and here). After complaining internally to UBS for two years, in June 2007 Birkenfeld voluntarily met with Justice Department prosecutors and an IRS Special Agent during three full days in which he provided unprecedented and voluminous information about UBS’s cross-border and offshore business activities, the UBS offices and private bankers that were directly involved, and the details of 19,000 UBS accounts for its American customers.
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Yesterday marked the end of Bradley Birkenfeld’s prison term for conspiracy to defraud the United States. However, what he actually did was save taxpayers billions of dollars after exposing the secret corruption of UBS, the largest bank in Switzerland. UBS conducted a tax evasion scandal, allowing thousands of Americans to illegally evade taxes by using offshore bank accounts. After complaining to the UBS with no response, Birkenfeld blew the whistle to the U.S. government about the scheme. He provided extensive information about the company’s illegal operation, including the UBS agents directly involved and the details of 19,000 American-owned accounts.
In return, Birkenfeld was prosecuted, after pleading guilty to conspiracy in 2008. The DOJ claims Birkenfeld was not forthcoming about his status as a private banker for Igor Olenicoff, but Birkenfeld made his status known prior to the indictment in testimony to the Senate. In this same testimony, he revealed Olenicoff’s money laundering scheme. From GAP’s Jesselyn Radack:
After negotiations with the Justice Department broke down over its refusal to provide Birkenfeld a "friendly subpoena," which would provide the compulsory process necessary for him to reveal client names without violating Swiss bank secrecy laws, he reached out to the U.S. Senate Permanent Subcommittee on Investigations, which was investigating tax havens and more than happy to subpoena him. Accordingly, Birkenfeld testified to the Senate on October 11 and November 13 of 2007, in which he identified Igor Olenicoff by name as one of his biggest clients. At the same time, Birkenfeld also provided substantially the same information on Olenicoff to the IRS and the SEC.
In other words, prior to Olenicoff himself being charged criminally by the Justice Department, Birkenfeld had provided sworn testimony to the Senate identifying him, described his $200 million account at UBS, and detailed his own involvement as Olenicoff’s private banker at UBS.
For his truthful exposures, Birkenfeld spent two and a half years in prison, while those involved in the tax evasion scheme received little to no punishment. Martin Liechti – the UBS executive who led the illegal operation – returned to Switzerland without further punishment. As the kingpin walked with impunity, other small time crooks who assisted in the scandal were granted amnesty in return for small fines. The bank received a $780 million dollar fine, although the scandal cost the U.S. billions of dollars.
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Earlier this month, Senator Chuck Grassley (R-Iowa) – a longtime supporter of whistleblower rights – objected to two Treasury Department nominees due to his concerns about the implementation (or lack thereof) of the IRS whistleblower reward program in the Dodd-Frank financial reform law. Grassley said in a floor statement:
My support for the final confirmation of these nominees will depend on both Treasury and Internal Revenue Service responses to questions I have posed regarding their implementation of the tax whistleblower program. I rewrote the statute in 2006 to encourage whistleblowing on big-dollar tax cheats. However, nearly six years since those changes were enacted, Treasury has yet to issue much needed regulations and IRS has paid less than a half dozen awards under the new program.
The much-needed whistleblower-reward program has instead been used against whistleblowers instead of in favor of them. Meanwhile, UBS whistleblower Bradley Birkenfeld is set to be released from prison next week after an usually harsh sentence. Despite the fact that Birkenfeld shattered decades of Swiss bank secrecy when he approached investigators about a UBS tax evasion scandal involving thousands of illegal offshore accounts and billions of U.S. dollars. Instead of targeting UBS "kingpin" Martin Liechti, the Justice Department turned on Birkenfeld.
I wrote extensively about Birkenfeld's case at the time of his sentencing. (here, here, here, and here). After complaining internally to UBS for two years, in June 2007 Birkenfeld voluntarily met with Justice Department prosecutors and an IRS Special Agent during three full days in which he provided unprecedented and voluminous information about UBS’s cross-border and offshore business activities, the UBS offices and private bankers that were directly involved, and the details of 19,000 UBS accounts for its American customers.
Birkenfeld had the potential to change an entire industry designed to evade U.S. taxes. Instead, the U.S. has been soft on UBS: letting bank kingpin Martin Liechti go free; under-fining the bank only $780 million for a multi-billion dollar fraud; settling for only 4,500 customer names of the 52,000 our government originally sought; and setting up an amateurish amnesty program that allowed the worst offenders to avoid criminal liability by paying fines. But worse, the Justice Department’s treatment of Birkenfeld is chilling would-be financial whistleblowers from coming forward, and will continue to do so for decades, to the detriment of the U.S. economy and all taxpayers—something that should be inconceivable during a global financial crisis.
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*Note: GAP Legal Director Tom Devine and Confessions of a Microfinance Heretic author High Sinclair will be speaking tomorrow (Friday, July 13) at Politics and Prose. Both Confessions and Devine's book The Corporate Whistleblower's Survival Guide: A Handbook for Committing the Truth will be available at the event.
Event details:
Politics and Prose, 7 p.m.
5015 Connecticut Avenue Northwest
Washington, DC 20008
Whistleblowers are individuals who use free-speech rights to challenge abuses of power that betray the public trust. Frequently they are human wild cards who speak truth to power and change the course of history by challenging bureaucratic bluffs with reality. A new whistleblowing book by British microfinance expert Hugh Sinclair, Confessions of a Microfinance Heretic, exposes a particularly painful truth: What has been promoted as a charity structured to empower the poor in fact is camouflage for heavy-handed loan sharking that regularly victimizes its so-called beneficiaries.
The noble vision, which led to a Nobel Prize for its modern champion, Muhammad Yunus of Bangladesh, is to empower the poor, usually women, in underdeveloped countries through seed capital to start small businesses and a chance at economic self-sufficiency, both normally out of their reach.
Sinclair realistically labels himself a heretic, and he is criticizing myths as sacred but false as celibacy by Catholic priests. Indeed, the churches are major players in this popular outlet for donations within congregations wanting to help. The burgeoning microfinance industry has grown to $70 billion in loans annually and has been celebrated by celebrities ranging from Bono to Oprah (and even Lisa Simpson on aSimpsons episode).
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 The Ethics Resource Center (ERC) – a research-oriented nonprofit aimed at promoting high ethical standards in business – released its 2011 National Business Ethics Survey (NBES) report recently.
Turns out the past couple years have been a pretty mixed bag for whistleblowers. So... good news or bad news first?
Let's start with the good news. The percentage of corporate employees surveyed who said they've seen misconduct at work fell to just 45 percent, compared to 49 percent in 2009 and a record high of 55 percent in 2007. On the flip side, the number of those who are reporting that misconduct at work is at a record high – 65 percent. This is up an impressive 12 points from 2005 (53 percent).
This is an uplifting trend. Employees are witnessing less misconduct at work, but when it happens, it is more likely to report it. This is one of the most effective ways to ensure the misconduct levels stay low.
Now for the bad news. The ERC also reports "ominous warning signs of a potentially significant ethics decline ahead." Retaliation against employees who reported misconduct rose 10 points from 2007 to 22 percent. That's more than one in five who faced some sort of retaliation for their disclosure. In addition, 42 percent of companies are reported to have weak ethics cultures, a steep rise from 35 percent two years ago. More employees (13 percent) are feeling pressure to compromise their ethical standards since 2000.
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 Journalist John Seigenthaler presented the Ridenhour Courage Prize to Rep. John Lewis (D-Ga.)Working in the nonprofit world can often be discouraging. So much to do, so little time. Not to mention fewer resources, less money, not enough people. Try to address one issue and five more take its place. Like I said, discouraging. And I haven’t even been around that long.
So, what keeps us going? Obviously, it’s a lot of things – optimism, idealism, determination, our “Save the world!” complex. But, really, it’s the moments. Those moments when you can see the difference you are making, when you realize you are a part of something larger.
I had one of these moments recently. I have been working at GAP for less than a year, and so this was my first time attending the Ridenhour Prizes. For those of you who don’t know, the Ridenhour Prizes honor people who speak truth to power – whether whistleblowers, lawmakers, authors or filmmakers.
Countrywide/Bank of America whistleblower (and GAP client, it so happens) Eileen Foster and Afghan war whistleblower Lt. Col. Daniel Davis co-won the Prize for Truth-Telling. The film Semper Fi: Always Faithful about one marine uncovering the military cover-up of contaminated water won the film award. Ali Soufan won the book prize for his memoir, The Black Banners: The Inside Story of 9/11 and the War Against al-Qaeda. Finally, Representative John Lewis (D-Georgia) was honored with the Courage Prize for his endless work in the civil rights movement.
Having those kind of people around will, of course, make for an inspiring event. But the ceremony was more than a sum of its parts. Being reminded that people like this exist renews your faith in the system. The corrupt ones will eventually be revealed. The military can’t hide behind “national security” forever. The disenfranchised won’t always be voiceless. Isn’t this what we’re working for?
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