American Greed

Greed Report: How to Blow the Whistle on Your Boss—and Live to Tell About It

It started as a search for revenge by Amy Weatherford, after shecaught her boss—investment advisor Paul Kruse—sending lewd text messages to her17-year-old daughter. But when she went through his records looking for dirt,she quickly realized there was much more at stake. The business had all theearmarks of a scam, preying largely on retirees.

"You don't rip off retirees of IRAs," Weatherford tells AmericanGreed. "It waslike, oh my God, you poor people, you're never gonna get this back."

She saw money coming in and going out, but no evidence of anyactual investments on customers' behalf. At the same time, Kruse was spendinglavishly on himself—cars, parties, travel—he even paid $5,000 for breastenhancement surgery for a stripper he had taken a liking to. Earlier,Weatherford says she had walked in on Kruse apparently forging customersignatures on account documents.

Weatherford decided she had to take her findings to theauthorities.

"I needed somebody to help me stop this man," she recalls.

That somebody turned out to be Special Agent Byron Thompson, a20-year veteran of the FBI. He says Weatherford's assistance was huge, anddefinitely out of the ordinary.

"Most of the time in a financial case, you're hearing fromsomeone who's been a victim who is coming in to report that they've been avictim of a crime," Thompson says. This time, they had an insider—Kruse'spersonal assistant.

Investigators quickly determined that Weatherford's suspicionswere well founded. Kruse confessed to running a $1 million Ponzi scheme thatThompson says would have grown much larger if Weatherford had not blown thewhistle.

"It was better to us just opportunity-wise, because we had aperson come in very early while the scam was going on, and so we were able tointerrupt it before it grew to be much more in dollar losses and victims," hesays.

But Amy Weatherford would soon learn that blowing the whistle onPaul Kruse was not without peril.

In prison awaiting trial, Kruse tried to hire a hit man to killWeatherford along with two business associates and his older brother, David.Authorities foiled the plot, and Paul Kruse is serving a 30-year sentence at amedium security federal prison in South Carolina.

Today, Amy Weatherford says that even more frightening thanbeing at the top of Paul Kruse's hit list was turning him in in the firstplace.

"That was the scariest part was going to the FBI. I meanmy God," she says. "I'm not a snitch. You know, where I grew up you justdon't do that."

Risky Business

Paul Burns | Photodisc | Getty Images

Thousands of people every year alert authorities aboutwrongdoing by their employers, and rarely do any of them find their lives indanger as a result. But that's not to say it isn't risky business, according toBradley Birkenfeld, a former banker at UBS who in 2007 exposed the Swiss bank'sactivities helping Americans evade taxes.

"This whistleblowing is a very dangerous game and a lot ofpeople get intimidated, harassed. And they get financially ruined," hetells CNBC. "I think this is what's wrong with the system. And I think alot of people have to understand the complexities of that."

Birkenfeld knows a thing or two about complexities.

On the one hand, Birkenfeld earned the largest whistlebloweraward in IRS history—$104 million—for his assistance, which helped the agencycollect billions of dollars in unpaid taxes, and led to sweeping changes ininternational banking regulations.

But Birkenfeld was only able to collect the money after servingtwo-and-a-half years in prison for his own involvement in the conspiracy,uncovered during the investigation.

Since Birkenfeld came forward, the feds have opened multiple newavenues for whistleblowers to report wrongdoing, and created new protections.

The Dodd-Frank Wall Street Reform and Consumer Protection Act,passed in the wake of the financial crisis in 2010, created whistleblowerprograms at the Securities and Exchange Commission and the Commodity Futures TradingCommission to report financialwrongdoing. The law also creates incentives, allowing whistleblowers to collectbetween 10 and 30 percent of any recoveries over $1 million. Since the programbegan, the SEC says it has awarded more than $57 million to 26 whistleblowers,whose identities are protected under the law.

The Affordable Care Act includes sweeping provisions for workersto report health insurance violations by their employers. And since Birkenfeldused the IRS whistleblower law to report the UBS conspiracy, theagency recently beefed up its program.

Protecting Yourself

Whistleblowing
Eric Herchaft | Getty Images

All of the programs include provisions protecting whistleblowers from retaliation, such as getting fired, demoted, held back from promotions, or worse.

Much of the responsibility for protecting whistleblowers falls under the jurisdiction of the U.S. Occupational Safety and Health Administration (OSHA), which enforces some two dozen federal whistleblower protection laws, each with a common thread.

"Protection from workplace retaliation means that an employer cannot take an 'adverse action' against workers," the agency says. That can mean anything from outright firing to simple threats or even discipline.

But retaliation can be difficult to prove. Of more than 3,000retaliation cases decided in fiscal 2015, OSHA says only about 25 percent went in favor of the whistleblower, mostly through settlements.

That makes it all the more important to be meticulous. Most whistle blower protection laws require you to report any suspected retaliation within 30 days in order to preserve your rights.

Indeed, Birkenfeld says before you even get started, make sure all your ducks are in a row, and don't go it alone.

"Well, I think number one, you should have proper legal counsel. Make sure you have an attorney that understands what you're doing, (understands) your job on a daily basis and what fraud, or corruption or waste you're exposing," he says.

"Number two: Feel confident that what you have is actually confirmed. You have documents to support that. You have maybe other colleagues that can testify to that and that's important as well. And then just to have the real moral courage to come forward to do this."

Amy Weatherford credits much of her whistleblowing success to the FBI—"They're my heroes," she says.

Agents managed to piece together the information she provided,and firmly establish the case against Paul Kruse.

"I turned the stuff in. They figured it out," she says.

She also says agents were also able to put her at ease throughout the process—even when Kruse was trying to put a contract on her life. In the end, not only did she live to tell about the experience, but she feels good about what she accomplished, and encourages other would-be whistleblowers to come forward.

"You've got to kind of understand the process does take a longtime," she says. "But you should never hesitate on doing the right thing."

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