Christine Casey: whistleblower
Jan 16th 2003
>From The Economist print edition
The high risks and low rewards of making allegations about your employer
CHRISTINE CASEY'S heart was in her mouth when she telephoned the Securities
and Exchange Commission (SEC) in September 1999. Over the previous nine
months, Ms Casey was later to declare in court, she had come to believe
that her employer, Mattel, was misleading its shareholders about its likely
future sales performance. As she picked up the phone, she imagined federal
agents at her doorstep, daring undercover missions to gather evidence and,
ultimately, respect for making her company better. Three years later, she
has lost her job and (because big American employers routinely check
applicants' litigation histories) any chance of getting another like it.
She also lost the lawsuit she brought against Mattel for wrongful
dismissal�and Mattel is now petitioning the court in the hope of recovering
its legal costs from her.
Not long ago, it was celebrity bosses whose balding pates and bulging
waistlines filled the covers of America's news magazines. Now those same
magazines showcase the whistleblowers who are packing the bosses off to
jail. Last month, Time put three female whistleblowers�from Enron, WorldCom
and the FBI�on its cover, as its �Persons of the Year�. Business Week
declared that it would �not be too glib� to call 2002 the �Year of the
Whistleblower�, and cheerfully looked forward to a new age of squealing on
the boss. Yet however heart-warming, this optimism depends crucially on the
balance of incentives on offer to those who are brave (or foolhardy) enough
to blow the whistle.
Ms Casey's experience is not encouraging. She joined Mattel, a big
toymaker, in 1994. In 1997 the company put her to work developing a system
to allocate production among its factories. But Ms Casey soon discovered a
big problem: Mattel's official sales forecasts were so high that managers,
who were meant to use them to plan production, routinely ignored the
numbers. �It was a joke around the office,� she says. Some managers kept
two sets of figures, Ms Casey's documents show. Others would ring around to
find out what they should really tell their factories to produce. The
problem was most acute for Mattel's most profitable product: a pink plastic
doll called Barbie.
The toy industry can be a treacherous business. �Your customers are two
feet tall, their tastes are hard to determine, and they don't have a lot of
money,� as Ms Casey puts it. But Barbie's enduring success had turned Jill
Barad, the doll's chief marketer, into a star. By 1997, it had propelled
her right to the top of the company. By then, however, Barbie's fortunes
were peaking. What Ms Casey saw�as early as late 1997�clearly pointed to
falling demand. Yet Ms Barad, who was relying on the company's internal
sales forecasts to make public profit forecasts, kept reassuring
shareholders and remained upbeat through 1997, 1998 and for a good part of
1999. Mattel denies that its sales forecasts were inflated during that
period, and says that the earnings guidance it gave was based �upon
management's best judgment of the market place at the time�.
In February 1999, Ms Casey approached Ned Mansour, a Mattel director. She
had a proposal, she told Mr Mansour, that would fix the inflated numbers
and help Mattel to forecast profits more accurately. At first, Mr Mansour
appeared to be friendly. As Ms Casey persisted with her idea, however, the
company grew hostile, she says. In August, one executive called her into
his office and screamed at her, telling her he wanted her �out�. The same
month, she got a negative performance review. All previous reviews had been
full of praise.
Mattel then stripped her of most of her work and put her in a cubicle next
to a pile of packing boxes. In October, she wrote to Mattel's former chief
financial officer, Harry Pearce, expressing her concern that
�misrepresentation of earnings projections has made the company vulnerable
to shareholder litigation�. Having failed to get Mattel's human-resources
department interested in her treatment (on the contrary, they harassed her
as well, she says), she declined to negotiate an offer of money from Mattel
to waive her legal rights, and resigned the following month.
Little support from the law
In November 2000, Ms Casey filed suit against Mattel. Mattel hired John
Quinn, a lawyer famous for fighting (and winning) business lawsuits. Mr
Quinn portrayed Ms Casey as a grasping, self-interested career woman who
would do anything to climb the corporate ladder. Last September, the judge
ruled in favour of Mattel, finding that Ms Casey's treatment was not
sufficiently intolerable to warrant a finding of constructive discharge,
and that she was not protected by whistleblower laws because she had made
proposals to senior management instead of explicit complaints. Ms Casey is
appealing.
Mattel has not escaped entirely unharmed, however. Last month, the company
settled shareholder lawsuits (which had alleged deliberately misleading
inflation of sales forecasts) for $122m, but without acknowledging any
wrongdoing. Ms Barad left Mattel in February 2000, with $50m in her pocket.
Mr Mansour left the following month, with $5.8m. Ms Casey, on the other
hand, appears to have failed to get her information even properly looked at
by the SEC. In its latest correspondence, dated December 4th, the agency
advises her to contact the commission's �office of investor education�.
Under legislation passed last summer, managers face stiff new
penalties�including the possibility of long jail sentences�for retaliating
against whistleblowers. The new laws also beef up the board's audit
committee as a conduit for internal complaints. Ms Casey says that what is
really needed is a responsive outside investigator, anonymity, protection
from former employers and, above all, the potential to earn a large reward
for a job that, she now knows, can carry a heavy cost. So far, she has
nothing to show for her efforts except regrets.
_______________________________________________________
John D. Giorgis - [EMAIL PROTECTED]
"The liberty we prize is not America's gift to the world,
it is God's gift to humanity." - George W. Bush 1/29/03
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