Professionalism/Amy Stroupe and BB&T

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Amy Stroupe and BB&T is a professional ethics case that concerns whistleblowing. Amy Stroupe was hired by BB&T on August 1, 2005 as a certified fraud examiner (CFE) in Charlotte, N.C., and her courage as a whistleblower and dedication to encourage transparency within BB&T are tribute to her professionalism. In February, 2007, concerns were raised about a series of suspicious loans made by a BB&T financial center manager in a real estate development, and Stroupe was notified by a retail service officer. In her investigative report, she indicated that a BB&T employee had helped Village of Penland's developer design a $100 million Ponzi scheme. [1] BB&T fired Stroupe soon after a meeting with the FBI, claiming that she had violated company policies during her investigation, though she countered in court that she was fired as punishment for pushing too hard on the investigation.[2] She sued BB&T under Sarbanes-Oxley Act whistleblower provisions, Section 806, and the federal judge in the case ruled that BB&T must reinstate Stroupe with back pay. [3]

Professional Career[edit]

Early Career[edit]

Prior to her career at BB&T, Amy Stroupe worked for the Cleveland County, N.C., Sheriff's Office as a detective. [3]

Whistleblowing and BB&T[edit]

Stroupe began working for BB&T at their Shelby branch on August 1, 2005, and while employed she excelled at her job as a corporate investigator. In her 90 day review report, her supervisor wrote, “Amy is an asset to the BB&T Corporate Investigations team. Amy has established herself as a consistent contributor to the investigative team.”[4] During her two years with BB&T, she had five positive performance reviews.[3]

In February 2007, Stroupe was alerted about suspicious loans with Peerless Development Group. A branch manager named Bryan Drum had approved $20 million in loans for a development called the Villages of Penland.[4] Several suspicious patterns were apparent: all loan applicants were from out of state, the lots were appraised at a higher value than they were worth, all loans had the same appraiser and closing attorney, and Peerless used funds from their account to pay for some customer’s loans.[4] Additionally, Drum was the only employee who worked with the Peerless loans.[4] She first notified her supervisor, Brian Prater, and the Direct Retail division of her findings, but when no action was taken, she notified the Regional Portfolio administrator. Later, Stroupe informed the FBI; Charlie Mattox, Drum’s supervisor; and several other BB&T employees including the Regional President. In one meeting, an employee noted that the case “looks like securities fraud."[4] Upon further investigation, Stroupe found that Drum had been given a $10,000 bonus for the amount of loans he approved, and Drum had developed an incentive program between Peerless and its customers in which Peerless could pay its customer’s loans.[4] She also visited the Villages of Penland and found little development had been done on any of the lots. Despite her findings, Mattox did not immediately terminate Drum; instead he approved three additional Peerless loans that were already in the process of being approved. He contacted Stroupe advising her to work on other investigations and claimed that many parts of her report about Drum were false.[4] In April 2007, Drum was fired, and in retaliation, Mattox moved Stroupe from the Shelby branch to the Charlotte headquarters.[4]

On May 22, 2007, a BB&T attorney prevented Stroupe’s report to the FBI from being sent since it contained incriminating information.[4] BB&T would not only be liable for the $20 million they loaned but also for $120 million loaned to Peerless through other banks. The following day, the attorney stopped Stroupe from attending a meeting with FBI officials stating that she would answer any question they asked her.[2] Afterwards it was apparent that BB&T denied any involvement in the scandal and failed to mention Bryan Drum. Despite resistance from upper management, Stroupe continued to investigate the scandal, and in retaliation, BB&T fired her on June 20, 2007 stating that she had wrongfully discussed the details of her investigation with unauthorized personnel.[3] At this time, her boss said, “Amy, it’s become obvious that you cannot conform to a corporate setting; therefore, we are terminating your employment." [3]

Aftermath[edit]

After termination, Stroupe filed a complaint with OSHA, but after months of investigation, they found that her claims lacked any merit.[5] She appealed under the Sarbanes-Oxley Act and won three years later, winning her job back with back pay plus interest.[2] Her case is notable because it is one of the 3.6% that have won under the SOX act.[2]

Whistleblowing[edit]

Whistleblowing refers to making a disclosure that evidences illegal or improper government or corporate activities. [6] By disclosing information about corruption, fraud, mismanagement and other wrongdoing, whistleblowers have helped save billions of dollars in public funds while preventing emerging scandals and disasters from worsening. [7]

Perception and Protection[edit]

Perceptions of whistleblowers tend to vary. While sources such as Time have often praised whistleblowers for their actions, others have accused them of being traitors. [8][9] Since whistleblowers' broad spectrum of public perception deepens the riskiness of their actions, civil society has played a large role in protecting whistleblowers from public retaliation, legal liability, and cultural barriers. [10] In recent decades, many non-governmental organizations such as Transparency International, Government Accountability Project, Public Concern at Work, and the Open Democracy Advice Centre have arisen to inspire legislative protection for whistleblowers apropos their risks and publicize corruption across international workplaces. Efforts to improve and expand whistleblowing legislation have helped protect whistleblowers from their risks, while also easing detection of corruption and enhancing accountability in corporate and political environments. [7] Though the threshold for whistleblower protection is difficult to define, current principles regarding whistleblowing legislation suggest protection should be granted for disclosures made with a reasonable belief of wrongdoing at the time of disclosure. [7] Though these principles don’t always translate into legislation, they help direct the formulation of new and improvement of current legislation.

United States Legislation[edit]

Whistleblowing's history is deep. In 1863, the United States False Claims Act allowed citizens to sue on the government's behalf in cases of fraud and collect rewards for doing so. [10] This action is often known as qui tam, a writ originating in Roman times as a law enforcement mechanism. [11] Whistleblowing was modernly campaigned by Ralph Nader in the 1960s when he launched a movement to encourage scientists, engineers, and other professionals to "blow the whistle" on unethical principles by their employers. [12] Following his drive and tragedies like the Challenger disaster of 1986, many whistleblowing laws were passed such as the Whistleblower Protection Act of 1989, which protects government employees from management retaliation and is considered to be among the most important pieces of whistleblower legislation. [10] Scandals have also encouraged more recent legislation. In the 2002, the Enron and Worldcon scandals inspired the adoption of the Sarbanes-Oxley Act, which requires international corporations that are either owned in part by United States companies or traded on United States stock exchanges to adopt whistleblowing procedures. [10] Supporting such federal legislation, the National Conference of State Legislatures has adopted unique laws protecting whistleblowers for different states.[13]

BB&T[edit]

Organizational Culture[edit]

BB&T was part of the financial climate of the mid-to-late 2000s. The estate boom was in full swing, and there was pressure to approve loans without much investigation. According to attorneys of victims of the Village of Penland scheme, it is now hard to support the claim that banks involved conducted any due diligence investigations that the general public would expect. [14] BB&T has maintained that it was a victim of the scheme, citing their loss of $20 million. [15] These losses occurred after the scheme was revealed, however, and BB&T’s prior actions leave doubt regarding it’s innocence.

Though Stroupe first alerted her bosses in March, 2007, they dismissed her concerns. [16] She sought out other superiors in the company and even went to the Associated Press, but met with similar results. [16] Even if BB&T was not complicit with the scheme, its culture hindered it’s undoing and reaped the rewards in the meantime. Developer Tony Porter had promised investors returns as high as 10%, but instead of questioning that number, BB&T turned a blind eye. [17] If BB&T was indeed a victim, why were they not concerned by Stroupe’s reports of foul play? According to federal judge Stanley Tureck, BB&T actually aided the fraud. [3]

Repercussions[edit]

BB&T faced very few consequences after Stroupe revealed the Penland Village ponzi scheme. The court ruling ordered BB&T to pay Stroupe three years salary and rehire her, but they never actually brought Stroupe back to the company.[15] They merely placed her on the payroll without any responsibilities, claiming they had laid off all investigative staff in the region and her position therefore no longer existed. [17] BB&T stated that it intended to appeal the ruling, but after being granted several extensions for their briefing, allowed their appeal to be dismissed. [18] Stroupe returned to her previous job in law enforcement at the Cleveland County Sheriff’s Office. [3]

Several people faced trial and were sentenced because of the Penland Village scheme, including the developers Tony Porter, Frank Amelung, and John Foster. [14] No individual from BB&T was accused of any wrongdoing.

Most of the attention on BB&T in the aftermath of the ruling was directed towards its other interests and its CEO, Kelly King. The director of N.C. Policy Watch, Rob Schofield expressed concern that the ruling would damage BB&T’s other business components. [15]

Several banks sued individual investors to recover their loans, and some have settled. Many of those affected, however, are in financial ruin because of the scheme. [16] Investors were left with monthly payments as high as $9,000 on land that is worth a small fraction of what they paid for. [17]

Conclusions[edit]

Whistleblower Protection[edit]

There are 18 different acts which protect whistleblowers within the Unites States. [19] The Sarbanes Oxley Act (SOX) is the primary protection act which defends individuals who report financial fraud with “strong and unprecedented anti-retatliation protection for corporate employees.” This act has been unsuccessful in protecting whistleblowers, however, yielding a win rate of 3.6% in initial trials and 6.5% in appeals. [20] The case of Amy Stroupe and BB&T shows that federal reporting of misconduct can be successful under the Sarbanes-Oxley Act, but this result is rare. Other whistleblowing cases such as Nicholas P. Tides & Matthew C. Neumann v. The Boeing Company resulted in failure using SOX. The motion failed because the court ruled that “leaks to the media are not protected” under Sarbanes-Oxley Act. [21]

The purpose for excluding media leaks from protection is to protect confidentiality of corporate financial records. [22] Multiple issues arise, though, from prohibiting reports to the media. First, reporting misconduct internally or to federal authorities is less effective because of pressure from agencies. The U.S. Merit Systems Protection Board found that “agencies have the power to influence employees’ decisions about reporting wrongdoing” and around one-third of people who realized misconduct received pressure to not report. [23] Second, reporting of fraud through federal agencies is inherently a much slower and labor intensive process than simply providing information to media outlets. Lastly, a conflict of interest is present for federal agencies that are obligated to protect whistleblowers who harm corporations, even though these agencies receive money from corporations through lobbying. BB&T and Boeing each have given millions of dollars annually to the U.S. government through lobbying. [24] [25] The pressures and problems with financial fraud reporting support the need for inclusion of media leaks in whistleblower protection laws, particularly under the Sarbanes-Oxley Act.

Professionalism[edit]

The case of Amy Stroupe and BB&T provides multiple possible characteristics that define professional ethics. Stroupe willingly defied her superiors within her company by reporting internal financial fraud. She chose to risk her job to maintain her integrity through reporting the truth, even under pressure to keep quiet. After she realized this risk through her termination, she continued the fight against BB&T in court and won. Her courage to defy, not only in her initial reporting but also in her legal pursuits, is potentially a strong characteristic of professionals in any field. Stroupe’s willingness to risk her job also shows courage, and is another potential characteristic of professionalism.

Her victory has set an example for others showing that those that defy their employers to maintain their integrity can still ultimately achieve success. Stroupe stated following her victory in court against BB&T that she has “a lot more courage and confidence” and that “the experience has made [her] as determined as ever to report the truth.” [3] Stroupe’s experience supports the conclusion that professional actions inspire further professional actions, especially if these actions reward the actor. This lesson, if true, motivates the rewarding of professional actions in general. In the case of Amy Stroupe, this lesson validates the argument that whistleblower protections should be improved so that other professionals can be protected just as Stroupe was.

References[edit]

  1. Baker, M. (2010). Amy Stroupe: BB&T whistleblower vindicated by court ruling, to be rehired. Huffington Post. Retrieved from http://www.huffingtonpost.com/2010/04/02/amy-stroupe-bbt-whistlebl_n_523563.html
  2. a b c d Hudson, M. (2010). When whistle-blowers fight back. The Investigative Fund. Retrieved from http://www.theinvestigativefund.org/investigations/economiccrisis/1314/when_whistle-blowers_fight_back
  3. a b c d e f g h Carozza, D. (2010). Sentinel wins vindication: An interview with Amy Stroupe, CFE, 2010 ACFE sentinel award recipient. Fraud Magazine. Retrieved from http://www.fraud-magazine.com/article.aspx?id=4294968657
  4. a b c d e f g h i Stroupe v. BB&T. No. 07CUS2801. Cleveland County Superior Court. 6 December 2007. Retrieved from http://www.scribd.com/doc/3344601/Amy-Stroupe-v-BBT
  5. Galindo, D. (2012). Ruling in BB&T case likely to take months Fraud Magazine. Retrieved from http://www.journalnow.com/news/local/ruling-in-bb-t-case-likely-to-take-months/article_80092f03-8fc1-56cb-b8e9-5dd42e52fbe6.html?mode=jqm
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  7. a b c Transparency International. (2013). International principles for whistleblower legislation: Best practices for laws to protect whistleblowers and support whistleblowing in the public interest. Retrieved from http://www.transparency.org/whatwedo/pub/international_principles_for_whistleblower_legislation
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