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06-03-13 Another Wall Street Whistleblower Gets Reamed

06-03-13 Another Wall Street Whistleblower Gets Reamed

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Published by William J Greenberg
great many people around the county were rightfully shocked and horrified by the recent excellent and hard-hitting PBS documentary, The Untouchables, which looked at the problem of high-ranking Wall Street crooks going unpunished in the wake of the financial crisis. The PBS piece certainly rattled some cages, particularly in Washington, in a way that few media efforts succeed in doing. (Scroll to the end of this post to watch the full documentary.)
Now, two very interesting and upsetting footnotes to that groundbreaking documentary have emerged in the last weeks.
The first involves one of the people interviewed for the story, a former high-ranking executive from Countrywide financial who turned whistleblower named Michael Winston. You can see Michael's segment of The Untouchables at around the 4:20 mark of the piece.
great many people around the county were rightfully shocked and horrified by the recent excellent and hard-hitting PBS documentary, The Untouchables, which looked at the problem of high-ranking Wall Street crooks going unpunished in the wake of the financial crisis. The PBS piece certainly rattled some cages, particularly in Washington, in a way that few media efforts succeed in doing. (Scroll to the end of this post to watch the full documentary.)
Now, two very interesting and upsetting footnotes to that groundbreaking documentary have emerged in the last weeks.
The first involves one of the people interviewed for the story, a former high-ranking executive from Countrywide financial who turned whistleblower named Michael Winston. You can see Michael's segment of The Untouchables at around the 4:20 mark of the piece.

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Published by: William J Greenberg on Mar 14, 2013
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04/02/2013

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Matt Taibbi. (photo: Current TV)
Another Wall Street Whistleblower GetsReamed
By Matt Taibbi, Rolling Stone
06 March 13
 great many people around the county were rightfully shocked and horrified by therecent excellent and hard-hitting PBS documentary,
The Untouchables
, which lookedat the problem of high-ranking Wall Street crooks going unpunished in the wake of the financial crisis. The PBS piece certainly rattled some cages, particularly inWashington, in a way that few media efforts succeed in doing. (Scroll to the end of this post to watch the full documentary.) Now, two very interesting and upsetting footnotes to that groundbreakingdocumentary have emerged in the last weeks.The first involves one of the people interviewed for the story, a former high-rankingexecutive from Countrywide financial who turned whistleblower named MichaelWinston. You can see Michael's segment of 
The Untouchables
at around the 4:20mark of the piece.
 Link to The Untouchables
 
The story Winston told during the documentary is essentially an eyewitness accountof the beginning of the financial crisis.When I spoke to him last week, Winston was still as amazed and repulsed by what hesaw at Angelo Mozilo's crooked subprime mortgage company as he was when heworked there. Winston, who had worked for years at high-level positions atcompanies like Motorola and Lockheed before joining Countrywide in the 2000s,described a moment in his first months at the company, when he rolled into the parking lot at the company headquarters."There was a guy there, a well-dressed guy, standing next to a car that had a vanity plate," he said. "And the plate read, 'FUND'EM.'"Winston, curious, asked the guy what the plate meant. The man laughed and said,"That's Angelo Mozilo's growth strategy for 2006." Here's how Winstondescribed therest of the storyto PBS – i.e. what happened when he asked the man to elaborate:"What if the person doesn't have a job?""Fund 'em," the – the guy said.And I said, "What if he has no income?""Fund 'em.""What if he has no assets?" And he said, "Fund 'em."Later on, Winston would hear that the company's unofficial policy was that if a loanapplicant could "fog a mirror," he would be given a loan.This kind of information is absolutely crucial to understanding what caused thesubprime crisis. There are people out there still willing to argue that the governmentsomehow "forced the banks to lend" to unworthy applicants. In reality, it wasunscrupulous companies like Countrywide that were cranking out loans en masse,knowing that these loans would be unloaded down the line, first to banks and then tosucker investors like pension funds and foreign trade unions, almost as soon as theywere created.Winston was a witness to all of this. Eventually, he would be asked by the firm to present false information to the Moody's ratings agency, which was about to giveCountrywide a negative rating because of some trouble the company was having inworking a smooth succession from one set of company leaders to another.When Winston refused, he was essentially stripped of his normal responsibilities andhad his corporate budget slashed. When Bank of America took over the company,
 
Winston's job was terminated. He sued, and in one of the few positive outcomes for any white-collar whistleblower anywhere in the post-financial-crisis universe, won a$3.8 million wrongful termination suit against Bank of America last February.Well, just weeks after the PBS documentary aired, the Court of Appeals in the state of California suddenly took an interest in Winston's case. Normally, a court of appealscan only overturn a jury verdict in a case like this if there is a legal error. It's notsupposed to relitigate the factual evidence.Yet this is exactly what happened: The court decided that the evidence that Winstonwas wrongfully terminated was insufficient, and then from there determined that the"legal error" in the original Winston suit against Bank of America and Countrywidewas that the judge in the case failed to throw out the jury's verdict:
 In short, having scoured the record for evidence supporting the jury's verdict on theissue of causation, we have found none. It follows that the trial court erred in denying defendants' motion for judgment notwithstanding the verdict.
"I was flabbergasted," Winston says now. "Think of all the hard work the jury did, and[the court] overturns it just like that."While it's impossible to say just exactly what a fair financial award should be for a person who reports bad corporate activity to the public, it's certainly true that whenthese whistleblower suits end in failure, it has a chilling effect on other peoplethinking about coming forward. Not many people are willing to risk their jobs if theythink it will cost them every last dime in the end. This is just one more example of how hard it is for whistleblowers to come out even, even if they win jury trials.That decision came down on February 19th, and is the first of the two interesting post-
Untouchables
footnotes.The other involves some of the comments made by the head of the JusticeDepartment's Criminal Division, Lanny Breuer, who said (as he has on other occasions, including after the recent non-prosecutions of HSBC and UBS for major scandals) that his Justice Department has to weigh the financial consequences of  bringing prosecutions. Quoting from the PBS show, Breuer explained:
 But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring acase against institution A, and as a result of bringing that case, there's some hugeeconomic effect - if it creates a ripple effect so that suddenly, counterparties and other 

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