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A Bank Whistleblower's Perspective

forbes.com | October 16, 2016

By Brian Penny

According to Will Atkinson’s report at the Whistleblower Support Fund, the SEC recently awarded a Monsanto whistleblower $22,437,800 under Dodd Frank. The number is used to highlight the successes of whistleblowing, ironically being released during the buzz of Snowden, Oliver Stone’s biopic of the NSA whistleblower currently exiled in Russia.

As Hollywood’s elite and other powerful liberals appeal for Obama to pardon Snowden upon his departure from office, Chelsea Manning sits in a military prison fresh off a hunger strike used to finally obtain her necessary medical treatment.

While the conversation is finally starting to shift toward the important differences between Snowden and Manning, I can’t stop thinking about my own path as a whistleblower and how I avoided becoming either one of them while learning the pitfalls of Dodd Frank and financial reform.

Whistleblower Found Dead

In March 2011, I worked with Anonymous to orchestrate a leak of Bank of America emails that hinted at fraud in the force-placed insurance industry. I had no idea that day how long of an uphill battle I was about to face. Growing up in a multi-generational military family, I was raised with a belief in the ideals of the United States of America.

Obama says Snowden should have blown the whistle the proper way. Arguably, he did, although the case for Manning is much murkier. Both Snowden and myself benefited from seeing how Wikileaks, Assange and Manning handled their leak. From January to March 2011, I did everything I could to blow the whistle “the right way,” but I trusted neither the media nor the government.

Surely Dodd Frank would help me, but the problem ran much deeper. The only regulator I knew was the SEC, and they didn’t seem interested, even though an agent from the Department of the Treasury attempted to contact me after the leak. The problem was even though I worked for a subsidiary of two banks (Countrywide and Bank of America), my company was actually an insurance company.

That a lender owns an insurance company was the root of the conflict of interest (and separating them didn’t make things better), and I worked at the operational hub for over a dozen mortgage and auto lenders. Unfortunately, since I worked for an insurance company, there’s no federal regulation. I had to turn to my Arizona attorney general, at the time Tom Horne.

Meanwhile, I started researching whistleblowing more extensively. I wanted to know everything about what I turned my life into, and I stayed glued to the stories of Wikileaks, Assange, Greenwald, Snowden, Manning, Anonymous and everyone else involved.

The first lesson I learned that has stuck with me every minute since is the top autofill suggestion when I typed whistleblower into Chrome: “Whistleblower found dead.”

The Reality Of Whistleblowing

My 2011 meeting with the Arizona AG was essentially buried, and in the spring of 2012, I worked with Ben Lawsky and Joy Feigenbaum to explain force-placed insurance, REO and how everything works prior to their questioning of industry executives from Balboa, BofA, CHL, Chase, Assurant and more. Their investigation led to a $14 million fine in the state of New York.

Still unsatisfied, I did everything I could to directly strengthen Regulations X and Z during the Consumer Financial Protection Bureau’s (CFPB) review of the Real Estate Settlement Procedures Act in 2012. These rules were proudly rolled out by the CFPB in August 2016, but are missing many of the real escrow and force-placed insurance protections I recommended.

In August 2013, after working to contact class-action and qui tam lawyers around the country and explaining force-placed insurance to many of them (including Kirby McInerney and more), I spoke directly with investigators and attorneys for the Federal Housing Finance Agency (FHFA) after it vetoed proposed loan servicing rules from Fannie Mae.

I explained to a room full of leaders exactly what needs to be done in order to curb massive systemic mortgage (and any other collateral loan) and insurance fraud.

I illustrated why insurance companies and lenders need to be adversarial for the good of the borrower. I explained how homes destroyed in Hurricane Katrina hadn’t been fixed as of my departure in 2011 because of this fraud. I wouldn’t be surprised to hear contractors still haven’t been paid more than five years later.

When the FHFA’s investigator general announced they should sue the banks over force-placed insurance in 2014, I thought maybe this would finally be my whistleblower victory. More than $1 billion was determined to have been falsely charged to Fannie and Freddie from 2009-2014 alone, and I had reported it happening from at least 2005-2011, and as far back as possibly 1994.

According to either Dodd Frank’s SEC whistleblowing program or qui tam laws that predate the useless 2010 bank fraud Band-Aid, I should get at least 10% of damages recovered, but that never happened. Instead, what I got was a few months in jail.

A Tale Of Tent City

Not every whistleblowing story is as high profile as Snowden or even Manning’s. Not every whistleblower makes it to the public. Many are killed on the spot for announcing their intention or being caught in the act.

Even more are cut off from others financially, mentally and emotionally, as Dr. Katharina Weghmann found in her 2014 doctoral dissertation, “Discerning Moral Acts of Courage in the Financial Sector: An Inquiry Into the Whistleblowing Experience.”

Although I was able to learn from Manning and other high-profile whistleblowers, I still couldn’t escape my fate as a whistleblower. It certainly wasn’t a million dollars.

Instead, in October 2014 I woke up to find my website destroyed and all backlinks earned through my contributions to publications like Huffington Post, Main Street, Fast Company and more were gone. I had been sued for defamation by my former banking executive in regards to using his name in my leak with Anonymous.

I was found in contempt of a default judgement for a case I wasn’t even aware of, and his high-priced Scottsdale lawyers had me jailed multiple times for a month at a time for refusing to delete legitimate news articles.

I may not have gone to long-term prison or been exiled from my country, but I was cut off like every other whistleblower. Even though I did everything “the right way,” as Obama put it, I’ve now struggled to survive for nearly six years blacklisted from the industry I used to work in. I earn a living now as a freelance writer and have proven myself successful despite the stigma, but even I can’t deny the reality.

Whistleblowing isn’t easy. It’s a stigmatizing and drawn-out incident that quickly becomes an invisible war raging within your own head. Sticking to that path isn’t easy, and those who earn multimillion-dollar payouts are the Michael Jordans of it. You’re unlikely to ever see that payout.

I make a modest living doing what I love these days, and I don’t regret one minute of my whistleblowing experience. I didn’t do it for the money—I did it for a change that still hasn’t happened, despite six years of work. And I’m going to continue doing it because I know it’s the right thing to do.

Although the SEC never helped me become a multi-millionaire, and I’ll never have a movie made about my life, I’m proud of what I’m accomplishing. Everything in life has risk and reward, and the rewards aren’t always financial.

On my deathbed, I’ll proudly look back and know that I stood for something bigger than me and created real change in this world.

My name is Brian Penny. I’m a whistleblower. And you should be one too.

 

 

 

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