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From Banking and Finance Law Daily, May 22, 2014

CFPB refutes discrimination, retaliation charges in subcommittee testimony

By Katalina M. Bianco, J.D.

The House Financial Services Oversight and Investigations Subcommittee held a hearing on May 21 to examine allegations of employee discrimination and retaliatory actions at the Consumer Financial Protection Bureau. Two bureau officials and a member of the CFPB’s employee union were subpoenaed by the subcommittee to testify on the charges.

Subcommittee members voted 20-1 to issue subpoenas to Stacey Bach, Assistant Director of the CFPB’s Office of Equal Employment Opportunity, Liza Strong, Director of Employee Relations at the CFPB, and Ben Konop, Executive Vice President of Chapter 335 of the National Treasury Employees Union (NTEU). Strong and Konop appeared at the hearing, but Bach requested her testimony be postponed due to a medical condition, according to a statement by the House Financial Services Committee.

Factors leading to hearing. The hearing stems from an American Banker article, dated March 6, 2014, that alleged differences in bureau employee evaluations based on race. The article charges that, according to internal CFPB documents, white employees were more likely to receive the top grade in performance evaluations than minorities. The subcommittee held a hearing on April 2 to examine the allegations raised in the article. The CFPB declined to appear at the hearing in which the CFPB whistleblower, bureau employee Angela Martin, testified that she has been the subject of discrimination at the bureau since May 2012, and the subject of “severe retaliation” since December 2012. An investigator hired by the CFPB to assess the charges, Misty Raucci, testified that she found the charges to be legitimate.

According to the subcommittee, CFPB Director Richard Cordray did not allow Bach and Strong to testify at the April 2 hearing, and Konop was not allowed to testify by the union. All three were subpoenaed by the subcommittee to appear.

The Financial Services Committee states in its hearing memorandum, that the current hearing is a continuation of the subcommittee’s investigation into the allegations,

Strong testimony. At the May 21 hearing, Strong testified that while she is proud of the CFPB’s mission to make markets for consumer financial products and services safe and functional, she is “deeply troubled” by the allegations of racial disparities at the bureau.

Strong explained that the performance review information that is at the root of the allegations was compiled by the CFPB at the request of NTEU. She said her job was to facilitate responses to NTEU requests for information but not to collect or evaluate the information. Her role, she stated, was not to assess past performance review processes but is limited to helping negotiate the CFPB’s collective bargaining agreement with the union going forward. The NTEU has presented a plan for the performance review process, and the CFPB has accepted that plan, Strong told the subcommittee. A working group has been assembled to ensure that the process is “fair and effective.”

Strong’s office is handling “numerous” employee grievances that involve a variety of issues, “with a relatively small number alleging any sort of discrimination.” Grievances, including those of whistleblower Martin, are taken seriously, she said. After a “thorough investigation,” her office did not find evidence to corroborate Martin’s allegations but did take “proactive steps” to address Martin’s concerns. These steps included providing a coach for Martin’s co-worker, the subject of her grievance, recommending that roles and responsibilities be clarified, and encouraging mediation for Martin and her co-worker. Martin declined mediation, Strong said, although her co-worker agreed to participate.

Two of Martin’s reports “raised serious concerns” about Martin’s management style, Strong testified. The subjects of the reports complained of abuse that led to their temporary assignment to another supervisor.

As to Martin’s charges of retaliation by her manager at the bureau, Strong stated that the bureau took the complaint seriously and hired an independent, outside investigator, Defense Investigators Group (DIG), to look into the charges. She said that she received from DIG and Raucci “an incomplete work product that did not meet the goals set forth in DIG’s own statement of work.” Further, Raucci’s investigation “did not meet even minimal standards.” Strong said Raucci did not obtain signed statements from the people she interviewed, did not provide Martin’s supervisor with an opportunity to respond to the allegations, and failed to provide sufficient documentation to support her conclusions. Strong testified that the president of DIG “conceded that her work was unacceptable’ and failed to address the allegations she was investigating. A second report was “no better than the first one.”

Strong told the subcommittee that she has since “kept an open-door policy” as to Martin, and the bureau, including Strong, has attempted to accommodate Martin’s demands. Martin was paid a monetary settlement, and on two separate occasions, the CFPB “essentially created positions for her, in two different divisions, at the same pay and grade.”

Finally, Strong admitted to being surprised to hear at the April 2 hearing that she had attempted to influence DIG’s conclusions. “Had I wanted to pre-determine the outcome of the investigation, I would not have outsourced it,” Strong said.

Konop testifies. Konop, an enforcement attorney with the bureau who helped organize the union chapter for bureau employees and acts as interim executive vice president of that chapter, testified at the May 21 hearing that although he has witnessed many accomplishments by unionized workers at the bureau, he also has witnessed the CFPB “struggle, at times, to live up to the mission, ideals, and achievements of the CFPB” especially in terms of the performance management review (PMR).

Konop said that the 2013 performance ratings “showed marked disparities for minority employees.” In response to the ratings, Konop said that the chapter called on CFPB management to make changes to the PMR system, but management was unresponsive. Collective bargaining negotiations led nowhere as bureau officials defended the PMR, he testified.

The union executive said that the chapter pursued approximately 15 pay equity grievances, alleging that women and minority employees were being underpaid when compared to similarly situated white male colleagues. “To date, the Bureau has denied each of these grievances at all stages,” he told the subcommittee.

Konop acknowledged that during the last several weeks, “there does appear to be recognition by management that we ought to be doing better as a Bureau.” He noted that a tentative agreement on a new PMR system had been reached that,” in large part, accepts the union’s proposal and scraps the system that yielded the disparities.” Additionally, Cordray issued “an important directive” that acknowledges “there were broad-based disparities in the way performance ratings were assigned across our employee base in both 2012 and 2013.” Konop testified that Cordray agreed with the union’s findings that there was a “broad-based, statistically significant disparit[y] in many areas, including race/ethnicity, age, [and] bargaining unit membership eligibility…”

Konop concluded by stating that “it appears that the Bureau has made a solid first step in the process of holding itself accountable.”

Waters statement. Rep. Maxine Waters (D-Calif), Ranking Member of the Financial Services Committee, acknowledged the seriousness of the allegations levied against the CFPB, but expressed her “sincere hope” that Republicans commit to addressing similar issues at all federal financial regulators “with the same due diligence as you have at CFPB.”

Companies: American Banker; Defense Investigators Group; National Treasury Employees Union.

MainStory: TopStory CFPB

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