The Ethics Resource Center published an article by whistleblower advocate Jason Zuckerman titled The Financial Crisis: Whistleblowers Could Have Helped Avert It. Zuckerman states:
During the height of the subprime lending spree, a whistleblower retained me to represent him in a retaliation action stemming from his disclosure at a large subprime originator about a sales manager directing employees to increase the company’s subprime lending by forging federally-mandated subprime disclosure forms that inform borrowers of the disadvantages of subprime loans.
The subprime loans were more lucrative for the lender because they carried higher interest rates and therefore the company strongly encouraged its sales force to originate subprime loans.
When my client opposed this unlawful practice (forging federally-mandated disclosure forms), the sales manager withheld sales leads from my client, whose compensation consisted primarily of sales commissions, and engaged in various acts of retaliation designed to ensure that my client would fail.
I vividly recall that client warning me in 2005 that there was widespread fraud in the mortgage underwriting industry and also recall the company’s reaction to my client’s retaliation claim. They perceived it as an “affront” and kept pointing out that the company was in business to serve the public interest by making housing more affordable to low income workers.
Three years later, that company has suffered more than $1 billion in losses from subprime mortgages, and borrowers who would have fared well with non-subprime loans are unable to make the payments on high-interest subprime loans. As I read the news about an unprecedented credit crisis, mass layoffs, widespread foreclosures, and trillions of dollars of losses in retirement accounts, I wonder if the situation would not be as dire if companies and the government encouraged whistleblowing and took whistleblower disclosures seriously.”
Zuckerman then offers five tips for companies to encourage early disclosures of misconduct and to appropriately respond to employee concerns.
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