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From Banking and Finance Law Daily, April 3, 2014

Whistleblower testifies on “severe retaliation” by CFPB

By Katalina M. Bianco, J.D.

The House Financial Services Subcommittee on Oversight and Investigations held a hearing to examine allegations of discrimination and retaliation at the Consumer Financial Protection Bureau. Allegations that bureau managers engaged in racial and gender discrimination against employees, creating a hostile work environment, stemmed from a March 6 article in the American Banker. Financial Services Committee Chairman Jeb Hensarling (R-Texas) said the charges made in the article raised concerns in committee members.

Committee staff received corroborating information from a CFPB employee who alleged that she has experienced gender discrimination and retaliation for filing an Equal Employment Opportunity complaint with the CFPB’s Human Capital Office, according to a committee memorandum on the hearing. The CFPB retained an outside investigator to examine the whistleblower’s claims. The investigator confirmed the whistleblower’s claims of retaliation, according to the committee. Both the whistleblower and the investigator who examined her claims testified at the hearing.

Bureau non-appearance. The bureau declined to testify at the hearing. The subcommittee had requested that two bureau officials appear as witnesses at the hearing: M. Stacey Bach, CFPB assistant director of the bureau’s office of equal opportunity employment; and Liza Strong, director of employee relations.

A bureau spokesman, Sam Gilford, said the CFPB offered to have Bach and Strong brief the subcommittee and respond to questions in a non-public forum so as to protect the privacy and due process rights of bureau employees. Gilford also said that the CFPB offered to have the Assistant Director of the Office of Minority and Women Inclusion, testify at a public hearing about the bureau’s policies and procedures. Both offers were declined by the subcommittee.

Whistleblower testimony. Angela Martin, the whistleblower, is a Senior Enforcement Attorney in the Office of Enforcement at the CFPB. She formerly served as a civil attorney with the Army and later went into private practice. Martin testified that she has been a victim of bureau discrimination since May 2012, and has been the subject of “severe retaliation” since December 2012. “My colleagues likewise have suffered and are suffering at the hands of inexperienced, unaccountable managers,” Martin said.

Martin joined the bureau in 2011, with, she testified, “high hopes of enforcing federal consumer financial laws on a national level.” The whistleblower told the subcommittee that the “mismanagement and abuse of authority have precluded me from doing my part to carry out the Bureau’s important mission. Indeed, today marks the 400th day that I have been isolated and prevented from performing any meaningful work.”

In December 2012, Martin filed a complaint of discrimination and retaliation, and said that she “immediately suffered further retaliation for doing so.” Martin testified that, after learning of the complaint, her supervisor, Assistant Director of Consumer Response Scott Pluta, threatened to bring counterclaims should she continue with her claim. “Immediately, he took steps to isolate me, diminish my job duties and set me up to fail by holding me accountable for work while at the same time preventing me from being involved in the preparation of that work,” she testified.

On Feb. 21, 2013, Martin filed a formal complaint of discrimination and retaliation against the bureau. She testified that the CFPB acknowledged receipt of the complaint on Feb. 25, and on February 26, her supervisor informed her that as of that day, her subordinates would report to him rather than to her. She was relieved from all job duties, according to her testimony. She said that her supervisor told her he had acted with the approval of the CFPB’s Human Capital and the Legal Division.

According to a transcript of the testimony released by the Financial Services Committee, on the evening of August 7, Martin received a phone call from CFPB Director Richard Cordray about the complaint she had filed. Martin said that “because we were so small, we have an ability to speak to the director and approach him. He is very approachable and kind.”

The whistleblower testified in response to Hensarling’s questioning, that Cordray said she had “to tell my attorneys to back down.” Martin said Cordray told her that he was trying to secure her a position in Enforcement. She testified that on August 8, after she thought the matter was settled, “Cordray and somebody else gave that position to somebody else and that is what the fight is about now currently with the Bureau that I don’t have a position.”

Martin told the subcommittee that in the summer of 2013, the bureau hired an outside independent agency to investigate her claims of retaliation. “To my knowledge” the bureau received preliminary findings in September 2013, and a final report in December. “The Bureau summarily denied my requests for access under both the Freedom of Information Act and the Privacy Act,” she said.

“My individual story is a microcosm of the larger story of what happens to individuals within the Bureau when they step forward with complaints of wrongdoing,” Martin said.

Statement of investigator. Misty Raucci, former investigator for the Defense Investigators Group, the firm hired by the bureau to investigate Martin’s claims, testified at the hearing that the investigation took six months to complete because as the process started, “I became a veritable hotline for employees at CFPB, who called to discuss their own maltreatment at the Bureau.”

Raucci said her investigation found that Martin’s supervisor, Scott Pluta, retaliated against Martin after she filed her complaint. “In concert with at least three facilitators, Mr. Pluta effectively removed Ms. Martin from her position as Chief Counsel of Consumer Response, and saw her relegated to a lesser position in another office.” She said that Pluta responded that he removed Martin because he doubted her ability to perform her duties. However, Raucci noted, his criticisms occurred after she filed the complaint.

Pluta unilaterally determined that Ms. Martin deserved a demotion and did not utilize due process in demoting her, Raucci testified. The supervisor instituted a mid-year performance review stating Martin’s work was unacceptable. “Despite her prior positive reviews, he neglected to place her on a Performance Improvement Plan (PIP), which would have allowed an opportunity to identify and correct her stated deficiencies,” she said.

Within one week of the filing of Martin’s claim, two of her subordinates lodged complaints against her. Pluta “stated conclusively in his negative review of Ms. Martin that she had retaliated against the subordinates although their claims had yet to be investigated, much less substantiated,” Raucci told the subcommittee.

Raucci said she found that “the general environment in Consumer Response is one of exclusion, retaliation, discrimination, nepotism, demoralization, devaluation, and other offensive working conditions which constitute a toxic workplace for many of its employees.” Even as her firm completed the investigation, Raucci said, the retaliation against Martin continued and that Pluta “had not even bothered to conceal it” by that point.

Waters’ statement. Reps. Maxine Waters (D-Calif) and Al Green (D-Texas) expressed serious concern over the testimony of the witnesses and stressed the need for senior bureau officials to appear before the Financial Services Committee and testify. Waters and Green issued a formal, written request to Hensarling and McHenry for a hearing with senior management the CFPB, to allow members a more appropriate forum to evaluate and discuss the CFPB’s personnel policies and practices.

In her opening statement, Waters said, “I want nothing but swift justice for Ms. Martin.” She told the subcommittee that she wants to focus on solutions. “I want to know how serious this problem is so we can identify ways to correct it. I’m not interested in scoring political points on an issue as important as discrimination and retaliation. The record of the Democratic Party on matters such as this is unequivocal.”

Directing her comments to Hensarling, Waters said that she was concerned about bringing in a witness that has a pending grievance before the bureau. “This may very well undercut our ability to accomplish” the hearing’s objective of investigating allegations of discrimination. “We are concerned that because you have chosen to politicize this process, senior officials at CFPB have declined to appear before this Committee today.”

“The nature of this hearing has changed—from our goal to assist any and all employees who have been subject to discriminatory practices at CFPB—or any other agency. That’s why we have asked the Inspector General to take a hard look at what’s happening at these agencies—not only to help the party here before us—but to help the others who may have fallen victim to discriminatory practices as well,” Waters said.

MainStory: TopStory CFPB CrimesOffenses

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