Bill Black: Why Whistleblowers’ Disclosures Need Protection Under the Law

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives

James Stewart has written a column about Roger Ailes’ alleged sexual predation on female Fox News personnel over the course of many years.  He entitled it “Secrecy of Settlements at Fox News Hid Bad Behavior.”  Ailes was the CEO of Fox News.  I write to show how two concepts Stewart did not employ would aid the analysis and to suggest a fundamental change in the law that would make the world a far better place.

The two concepts I add to Stewart’s analysis are “control fraud” and whistleblowing.  Stewart’s column applies as its sole lens sexual harassment.  That is the obvious lens to employ and it is helpful.  By supplementing this lens, however, we can provide additional useful insights and frame generalized policies of broader applicability.

The concepts of “control fraud” and whistleblowing are related and also have obvious application to the Ailes case if you are familiar with the concepts.  The many women who risked their careers to blow the whistle on Ailes were classic whistleblowers.  Stewart, sensibly, quotes the University of Michigan Law School professor who was instrumental in creating a civil remedy for sexual harassment.

Victims of sexual harassment can see what happens to other victims who came forward. “It’s career suicide to come forward,” said Professor MacKinnon. “You’re roadkill. Women know this, yet some come forward. That’s what courage looks like.”

The people, overwhelmingly women, who bring complaints of sexual harassment in the workplace are whistleblowers.  As a co-founder of Bank Whistleblowers United (BWU) I can vouch professionally and personally that it takes “courage” to blow the whistle.  The sexual harassment context can call for the particularly great courage among whistleblowers because blowing the whistle will provide highly personal information about the victim and inevitably leads to “slut shaming” abuse and trolls.

MacKinnon also rightly emphasizes the inherent role of the harasser’s power over the harassed.

“A lot of men have gotten away with sexual harassment with absolutely no consequences,” said Catharine A. MacKinnon, a professor of law at the University of Michigan and Harvard Law School who pioneered sexual harassment lawsuits. No matter what companies say, she added, “the real rule is that the more powerful a man is, the more he gets away with.”

But what explains the extent of the power differential in employment?  The article quotes a different professor who offers an explanation that isn’t wrong, but ignores what should be obvious, particularly because the setting is the Ailes case.

Jon Bauer, a professor of law at the University of Connecticut who has written extensively about workplace discrimination, also says the issue goes well beyond Fox News. “Employees are rewarded for shielding powerful people in the organization,” he said. “That’s the culture in many workplace settings.”

“Control fraud” is a term and a theory that explains why the consequences of fraud are vastly more severe when the person who controls a seemingly legitimate entity uses it as a “weapon” to defraud.  Sexual harassment is a fraud+ crime.  The fraud is the deceitful statements by your boss that you were hired for your skills and would be advanced in the organization on the basis of the quality of your work.  But sexual harassment is a broader crime that includes extortion.  Like fraud, sexual harassment is an intentional wrong.  For the sake of brevity, I will discuss for-profit firms, but the same logic applies to non-profits and government entities.

Control fraud theory explains why the combination of the seeming legitimacy of the firm and the unique power of the persons controlling the entity (I’ll use the term “CEO” for brevity) combine to create an environment in which the CEO can cause enormous harm.  Bauer begins to get at that in his use of these key words: “rewarded,” “shielding,” “powerful,” and “culture.”  What Bauer is describing are all important elements of how a CEO creates a criminogenic environment to optimize the use of the firm as a weapon.  Ailes is alleged to have shaped such a criminogenic environment through the power to hire, fire, promote, compensate, and give or deny prominent air time.  The goal according to public reports was not simply to reward other bosses for “shielding” Ailes, but to coerce younger women to have sex with Ailes, and not to go public with their complaints even if he was unable to successfully coerce them to have sex or he lost interest in them.

CEOs are the dominant creators of a firm’s “culture.”  If, like me, you have had the misfortune of being forced to attend firm ethics presentations, you will have heard the same useless speechifying by business ethics “experts.”  The expert will pronounce that the “tone at the top” of the firm is absolutely critical.  The CEO will tell everyone how much he wants a world-class culture of ethics.

Talk by CEOs is cheap.  CEOs establish the real tone at the top through their financial incentive systems and who they promote and make wealthy.  If the CEO is honest, the incentive system and the personnel decisions will show that the most ethical, competent people are rewarded.  If the opposite is true, then all the speeches by the CEO and the corporate “ethics statements” are simply part of crafting the criminogenic environment.  The lawyers will help the CEO send out a barrage of self-serving praise for ethics in order to make it appear that the corrupt officers that the CEO has hired and promoted and incentivized to cheat were “rogues” acting in violation of the CEO’s orders.  This is a subtler form of “shielding” the CEO from accountability.

Even when the victim, knowing it would destroy her career, persisted in bringing complaints for sexual harassment against Ailes, he shaped an environment at Fox News that was so criminogenic that it prevented the complaints from becoming public for over a decade.  Like Soviet military doctrine, the CEO’s lawyers build “defense in depth” to protect the CEO from any personal accountability for sexual harassment.  The goal is to make any victim of sexual harassment face the equivalent of attacking Kursk.  The lines of defense Ailes used include:

  • Requiring the employee to sign a confidentiality agreement
  • Requiring the employee to sign an agreement waiving any right to sue, limiting any claim to arbitration, and making that arbitration secret (arbiters are also typically more hostile to claimants than are courts)
  • Requiring the employee not to disparage the firm and its officers and employees
  • Using the resources of Fox News to investigate and intimidate victims and reporters who might make their story public
  • Smearing the victim through Fox News’ PR and legal staffs
  • Allowing Ailes, secretly, to use millions of dollars in funds from Fox News to settle complaints of sexual harassment brought by the most committed victims – in return for non-disclosure agreements that would hide the “pattern and practice” of sexual harassment by Ailes
  • Creating situations in which victims still with Fox News either had to praise Ailes to on-air reporters and interviewers or, effectively, destroy their careers. Those statements by the victims could then be used to portray the victims as liars if they later made public Ailes’ sexual harassment
  • Ailes creation of a culture at Fox News of fear and enrichment that meant that most colleagues were hostile to the victims and would provide support for Ailes and attacks on victims
  • The payment of enormous sums from the firm to Ailes when, after an extensive pattern of sexual harassment, he eventually left. A firm is supposed to “claw back” past compensation from its CEO in such circumstances, not give him a $40 million reward.

I will conclude the discussion of Ailes with an important warning.  Ailes is only out of power because the Murdochs are dominant owners and, reportedly, Rupert Murdoch’s sons were fed up with Ailes and hired a law firm to find the pattern and practice of Ailes’ sexual harassment.  In a typical large corporation with no real control block, Ailes would still be in power.  Rupert was reported as still valuing Ailes.  Rupert placed two of Ailes’ top cronies in charge of Fox News.  At best, these two cronies were stonily indifferent to Ailes’ pattern of sexual harassment.

As with financial whistleblowers, the employees who blow the whistle on sexual harassment are the firm’s best employees.  They have proven their courage in the hottest of crucibles.  If the Murdochs had actually wanted to change the criminogenic environment that Ailes crafted in order to create the pervasively corrupt culture at Fox News they would have taken one or more of Ailes’ victims and promoted them to senior leadership positions at the firm.  That would have credibly signaled the intent to end Fox News’ corrupt culture.  Instead, the Murdochs did the opposite.  Talk is cheap.  The Murdoch’s actions show that they want Fox News to remain a cultural cesspool.

Policies We Need Now to Protect Whistleblowers and the Public

The broader policies that should come out of this discussion apply to all forms of whistleblowing.  The United States should forbid and declare void as against public policy any contractual requirement by an entity:

  1. That an individual be forced to give up his/her right to sue and limited to an arbiter
  2. That an individual keep confidential any misconduct by the entity, its customers, or their employees and officers

It should be the policy of the United States courts to encourage and defend the disclosure of misconduct by employees and to punish criminally and through a major fine any effort by a corporation’s officers to prevent that disclosure.  This would not repeal laws against libel, slander, and perjury.  The courts should be forbidden to engage in prior restraint through issuing protective orders or injunctions preventing customers, employees, and shareholders from publicly blowing the whistle on misconduct.

Any firm that engages in retaliation against a whistleblower should be subject to criminal penalties and the removal and prohibition of its senior officers from serving as senior officers for a period of five-to-ten years depending on the culpability of the senior officers in that retaliation.

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    1. Chris Williams

      Yes, mate, Ailes is a monster who used his power to have ultimate control over other human beings, those with less power.

      The man is scum and his spot in the hereafter won’t be pleasant. They forget this you see, until it matters…

      Religion does quite well out of these sort of situations – rich scum dying – even though it is a dud deal.

      Jeez, Bill gets to some real issues, eh?

      1. pretzelattack

        well, for those of us who don’t believe in a hereafter, it’s kinda too little too late, but better late than never.

    2. allan

      Another great piece from Prof. Black.
      I am not a lawyer, but why aren’t the mandatory, secret arbitration clauses
      in employment contracts used to hide wrong-doing, whether financial fraud or sexual harassment,
      null and void under the Shock the Conscience test?

      1. John Zelnicker

        Because the consciences that need to be shocked by this are non-existent in the sociopaths that insist on these clauses and the judges who uphold them.

  1. Pokeybear

    Could this apparently “legal” concept of forcing as condition of employment

    “1. That an individual be forced to give up his/her right to sue and limited to an arbiter
    2. That an individual keep confidential any misconduct by the entity, its customers, or their employees and officers”

    be interpreted as a indication of the corporation’s status under the Constitution is not similar to that of the citizen but superior.

    Could it also be as a substantive defense for a criminal charge of conspiracy, etc…

  2. RUKidding

    I doubt that anything much will change at Fox. The Murdochs don’t really care as long as its a cash cow. The Murdoch sons aren’t that interested in supporting women’s rights in the workplace. As indicated, they don’t like Aisles (don’t know why), and they found a way to get around Dad and got him kicked to the curb.

    It’s an interesting post and raises many good issues. Unfortunately, I don’t see much changing in corporate culture. I think inroads in these types of issues have been made in smaller organizations, but this kind of behavior is so prevelant and “accepted” in big corporations that we have a long way to go.

    Aisles was a flash in the pan and his untimely demise from his job was based mainly on the fact that the Murdoch sons wanted him out. They don’t care if he sexually abused women. It was just corporate politics, sad to say.

    1. Steve Gunderson

      Aisles built FoxNEWS into what it is today. The fact that so many of the talent had escape clauses in their contracts in the event Aisles was removed will tell you that.

  3. different clue

    Sometimes it takes a movement of millions of people several-to-many decades of work and pressure to force good ideas and good practices into law.

    One wonders whether the millions for Bernie could devote a fraction of their political-engagement time-and-money budgets to supporting a Support The Whistleblowers Organization which could assure economic survival viability for career-suiciding whistleblowers. That would allow other people who are merely considering whether or not to blow the whistle to see that career suicide whistleblowing need not mean survival-suicide poverty and legal helplessness in the face of legal aggression from the whistle-blowed-upon. Such an organized movement visibly supporting and economically viable-izing career-homicided whistleblowers could allow more and more whistleblowers to emerge, blow the whistle and not starve. Such visible success would attract more support as visible success does. And the more support would allow the Whistleblowers Support Movement to support even more whistleblowers, attracting even more support to support even more whistleblowers.

    At some point, the Whistleblower Support Movement would have enough people and revenue streams and power to carry the battle to the heart of the enemy and launch attack after attack after attack against the Criminal Protection Laws referrenced by Professor Black . . . until those Laws are
    repealed and all rules based upon them are abolished throughout the Criminal Bussiness and Industry Community.

  4. Norb

    The natural way of change centers around time. Change in social conditions is brought about through force, or in rare occasions through the power of reason, although force seems to be the driving factor. The great leveler is eventual death. Like the great adage, “debts that can’t be paid, won’t be paid”, the notion that ,”all things must end” is the underlying principle guiding all of life. The meaning of Time is what elites obfuscate to achieve their self interested goals. The great irony is that in order to appreciate the mystery of time, requires detachment form ones immediate circumstances, something the working poor lack. Struggling 24/7 in order to survive, or lost in the many forms of escape to dull the pain of an oppressive social order.

    Professor Black’s message about crimogenic environments cannot be stressed enough, for here lies the crux of the matter. It is the choice to support evil and predatory practices or dedication to life affirming work and effort. The true evil of our time is that so many with money and resources, the top 20%, choose to support destructive activities perpetrated by the very few. Only by propaganda can the situation hope to persist, and why Fox News will carry on as before.

    You don’t change Fox News, you turn it off. As for sociopathic criminals, you don’t vote them into public office, at the very least you avoid their company and at best put them in a treatment facility or prison. However, seeing them as criminals is a prerequisite to change. Obama is correct in that respect, perception is a main factor in influencing agency. The propaganda war will never end.

    Building movements supporting life and rejecting the crimogenic viewpoint to social order is what is before us.
    It will take time, but at least the path is becoming clearer.

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