0:15

Pushkin. Ray

0:24

Dirks was an insurance company. Analyst

0:27

Equity Funding was an insurance company.

0:30

The year was nineteen seventy three. The

0:33

company's bosses were hosting Dirks to lunch

0:36

in their boardroom, high up in a

0:38

Los Angeles skyscraper, a

0:40

mundane everyday event. No,

0:44

the air in the boardroom was thick

0:47

with tension. Ray,

0:49

it's the twenty eighth floor. But

0:51

don't worry, the windows are locked. If

0:54

that was a joke, Ray Dirks wasn't

0:56

laughing. He had heard those rumors

0:58

about his hosts being linked to the

1:01

mafia. They'd have every

1:03

reason to be glad he fell out

1:05

of a window. Equity Funding's

1:07

bosses had been purple traiting one

1:09

of the biggest, most audacious

1:11

frauds in corporate history, and

1:14

Ray Dirks was onto them because

1:16

a few weeks earlier, the company

1:19

had made a fatal mistake. They'd

1:22

fired an employee who knew

1:24

all about the scam.

1:27

That employee was called Ron Seacrest,

1:30

and he was furious. He

1:32

decided to take revenge. But who

1:34

should he talk to. Seacrest

1:37

knew he had to choose carefully. The

1:40

fraud was so huge, so audacious.

1:42

He feared that nobody would believe him,

1:45

except perhaps for

1:48

one man, Ray

1:51

Dirk's analyzed insurance companies

1:53

and advised investors on choosing stock.

1:56

But Dirks wasn't your smooth, talking,

1:59

clean cut Wall Street type. Dirks

2:01

was tubby and disheveled, excitable,

2:03

cynical, and disarmingly candid.

2:06

He had a reputation for being unconventional

2:09

and the tenacious investigator. Dirk's

2:13

met Seacrist for lunch. Equity

2:16

funding would soon be in legal

2:18

trouble. But what's

2:21

odd is that so too would

2:23

raise Dirks the man

2:25

who would expose the fraud. His

2:28

fight to clear his own name would

2:30

go all the way to the Supreme

2:32

Court. I'm Tim

2:35

Harford, and you're listening to

2:37

cautionary tales. I'm

3:00

going to pose a moral dilemma. The

3:03

university professor approaches a student.

3:06

He wants to tell the student about a research project.

3:09

It's on the effects of extended

3:11

sensory deprivation, specifically

3:14

on how it affects brain functioning. He's

3:16

performed his experiment on a few participants

3:19

already that all panicked

3:21

and their cognition was temporarily impaired.

3:24

Some had hallucinations too,

3:26

even asked him to stop the experiment,

3:29

but he didn't. It was just too

3:31

interesting to see what would happen. The

3:34

professor explains that he needs to recruit

3:36

more participants so he can continue

3:38

his investigation, but he's worried

3:41

that the university's ethics committee isn't

3:43

going to approve his request, and

3:45

you might well think he's worried with

3:48

good reason. Now

3:50

put yourself in the shoes of the student

3:53

hearing this rather unnerving story.

3:56

The professor explains that the committee

3:58

can be swayed by testimonials

4:00

about the research, So could you

4:02

please do the professor a favor and

4:05

write a statement to convince other students

4:07

to take part. You'll need to sound

4:10

enthusiastic, be sure to use words

4:12

like exciting and superb. If

4:15

it goes well, he'll have more opportunities

4:17

in future. He might even be able to

4:19

pay you. Here's the dilemma.

4:23

Would you contact the university's

4:25

ethics committee to report the professor

4:28

he's offering you money for

4:30

a fake testimonial in support

4:32

of a project that's clearly unethical.

4:35

When researchers asked some students

4:37

in Amsterdam that hypothetical question,

4:40

nearly two thirds said yes,

4:42

absolutely. They would blow the whistle.

4:45

But then with a different set

4:47

of students, the researchers staged

4:50

this experiment for real. How

4:52

many actually blew the whistle? Not

4:55

two thirds, not even close.

4:58

It wasn't even one in ten. The

5:01

take home message from this research seems

5:03

to be that we talk a big game about our moral

5:05

standards, but we fall short in

5:08

practice. But there's

5:10

another way of looking at it. Perhaps

5:13

when it really matters, we're

5:15

not cowards or hypocrites. Perhaps

5:18

we're wise, because story

5:21

after story tells us that whistleblowing

5:23

is often far more trouble than

5:26

it's worth. The

5:29

insurance analyst Ray Dirk's first

5:32

learned the scale of wrongdoing at Equity

5:34

Funding over lunch with disgruntled

5:36

ron Seacrest in New York. His

5:39

jaw was soon on the floor.

5:42

The details of the fraud are intricate,

5:45

you can read them in Dirks's book The Great

5:47

Wall Street Scandal, but they

5:49

boiled down to a simple and astonishing

5:52

fact. Roughly half

5:54

of Equity Funding's life insurance customers

5:58

were fictional. The company

6:00

simply invented people and put them

6:02

in their computer system. Then

6:04

they sold on the future income stream

6:07

from these fake policies to

6:09

a reinsurance company. It

6:11

didn't cross anyone's mind that the reinsurance

6:13

company to investigate if these policies

6:16

referred to real people, why

6:19

would it Selling

6:21

on the policies gave Equity Funding

6:24

cash today in return for

6:26

promises of payments tomorrow. When

6:28

tomorrow came, Equity covered its

6:30

bills by inventing yet more

6:33

customers and selling their policies

6:35

for more upfront payments. It

6:37

was a giant Ponzi scheme. Unlike

6:40

every other Ponzi scheme, it couldn't

6:42

go on forever, but

6:44

the bosses knew that, and they had a plan,

6:47

a clever one. Equity Funding

6:49

was a publicly traded company. By

6:51

mass producing fake customers, the

6:54

c suite suits made it look like the company

6:56

was growing quickly, and that made investors

6:59

excited. The company's share

7:01

price went up and up. The

7:03

bosses used Equity Funding shares to

7:05

buy stakes in other companies, genuine

7:08

companies with real customers. Just

7:11

think about it. The chutzpah is breathtaking.

7:19

Over lunch, Seacrist calmly

7:21

recounted what he had experienced working

7:24

at Equity Funding late

7:26

one afternoon. He had been asked by a colleague

7:28

to work late on a project, some

7:30

filing, special filing.

7:34

Several managers sat around in a conference

7:36

room inventing fake names and giving

7:38

them fake life insurance. Seacrist

7:41

was pressed into service. He

7:43

was bewildered. The others laughed at

7:45

his confusion. The new kid who didn't get

7:47

the joke. Ron Seacrist

7:50

told his story for four hours.

7:53

He left Ray Dirks with a dilemma.

7:56

Dirks, remember, was a well respected

7:58

analyst. People listened to him,

8:01

investors paid for his company's advice, and

8:03

some of his company's clients had shares

8:05

in equity funding, shares that would

8:08

be worth much less if what he'd

8:10

heard was true, perhaps even

8:12

worth nothing at all. His clients

8:15

deserved to know. But this

8:17

was just one man's story with no real

8:19

evidence. Should he really

8:21

pass on rumors? Perhaps not,

8:23

But how else could he investigate? Dirks

8:27

decided to confide in a few trusted

8:29

contacts. He got very different

8:31

responses. His contact

8:34

at the Boston Company told him they didn't really

8:36

believe the story, but better safe

8:38

than sorry. They decided to sell

8:40

all their shares. Another

8:43

gave him a warning, Ray,

8:46

you could ruin your reputation telling wild

8:48

stories. You need to confirm

8:51

this first, get on the

8:53

next plain to Los Angeles and confront

8:55

Stanley Goldblum in person. Stanley

8:58

Goldblum was the boss of equity

9:00

funding. He

9:03

was a towering weightlifting fanatic.

9:06

Not a man you want to cross.

9:09

But so it was that the chubby, bespectacled

9:11

Dirks found himself in a Los

9:13

Angeles hotel breakfast room

9:15

in his dated brown suit, gazing

9:18

nervously up at a thunder faced

9:20

Stanley Goldblum, neck muscles

9:23

rippling Stanley, how

9:25

are you not good? Our

9:27

share price has just gone down seventeen percent

9:29

on a single trade. Oh,

9:31

that'll be the Boston

9:33

company selling up. I had no idea they

9:35

owned so many ships.

9:39

Who else did you talk to? These

9:43

rumors are preposterous, said

9:45

Goldblum, But he made an

9:47

offer. Come to the office, he said, talk

9:50

to whoever you want. Dirks

9:52

spent the morning being shuffled from meeting

9:54

to meeting. Over lunch on the twenty

9:57

eighth floor, Goldblum tried to

9:59

gauge how convincing his colleagues had been.

10:02

What do you think now? Well, do you guys certainly

10:04

seem to make a strong case. What are

10:06

you planning to do next? I

10:09

don't know. I'm going to go back to my hotel room and

10:12

think about it. Dirks

10:14

did just that. He sat

10:16

in his hotel room and thought. He

10:20

called a reporter at the Wall Street Journal.

10:22

Then he talked to more ex employees

10:25

of Equity Funding. He talked to more

10:27

investors. He talked to the Securities

10:29

and Exchange Commission, the industry regulator.

10:32

He talked to Equity Funding's auditor.

10:35

And he talked to the company's former

10:38

auditor who'd been taken off the job,

10:41

perhaps for starting to suspect too

10:43

much. That person

10:46

had an alarming question, where

10:49

are you staying? I met the Bebily

10:51

Wilshon. Oh yeah, how many people know you're

10:53

there? A lot of people? Okay,

10:55

If I were you, for your own personal safety,

10:58

I would move out right now. Dirks

11:01

wasn't about to take chances. He

11:04

walked blocked down the street to another

11:06

hotel and checked in

11:09

under a different name. Cautionary

11:16

tales will return shortly. Cheryl

11:24

Echard was a quality assurance

11:26

manager at the pharmaceutical company

11:28

Glaxo smith Kline. In

11:30

two thousand and two, she was sent to

11:32

check out some worrying reports about

11:34

a factory in Cedra, Puerto Rico.

11:38

She was shocked by what she found. Water

11:41

sources were contaminated, environments

11:44

weren't sterile. The factories

11:46

managers were cutting corners all over

11:48

the place. One

11:51

morning, the factory's director of manufacturing

11:53

pulled Cheryl Echard aside. He

11:56

wanted to know why she was showing up every

11:58

morning, obviously close to tears,

12:01

eyes swollen from crying. Could

12:04

she stop? It was making everyone feel awkward.

12:07

You know what I do cry? I cry at

12:09

night, I cry in the morning. And

12:12

what I don't understand is why I'm the only one.

12:15

Why are you crying? The

12:17

Cedro factory in Puerto Rico felt

12:20

like a nightmare to Echard. She

12:22

spent eight painstaking months

12:25

documenting all the problems there. She

12:27

wrote up a comprehensive report and sent it

12:29

to her bosses at Glaxo smith Kline. She

12:32

expected them to thank her and swiftly

12:34

put things right. Instead,

12:37

they made her redundant. Nothing

12:40

personal, they said, just downsizing. So

12:43

Cheryl Echard blew the whistle. She

12:46

went to the FDA, the Food and Drug Administration,

12:49

the US regulator. Armed

12:51

with Cheryl's information, the FDA raided

12:54

the factory in Cedra and seized millions

12:56

of dollars worth of substandard drugs.

13:00

Cheryl knew she had done the right thing, but

13:03

now she had another reason for crying

13:06

at night. You lose your friends because

13:09

your friends or people from work, it's

13:11

difficult to survive financially and

13:14

emotionally. That's

13:17

an all too typical experience

13:19

for whistleblowers. According to Kate Kenny,

13:22

a professor at the National University of Ireland

13:24

in Galway. Professor Kenny studied

13:26

what happened to dozens of whistleblowers. It's

13:29

common for them to be shunned by former friends.

13:31

They find it hard to get another job in the same industry,

13:34

and that can be true even when

13:36

whistleblowing is basically their job

13:38

description. Martin

13:45

Woods had worked for the British Police

13:47

for nearly two decades when he decided

13:50

to move into banking. Banks

13:52

employ anti money laundering officers

13:54

to look for suspicious transactions, and

13:57

when Woods started work for the London branch

13:59

of Wakovia, an American bank, it

14:01

didn't take him long to find some high

14:05

value deposits made in traveler's

14:07

checks with sequential numbers. Were

14:09

the customers really just innocent

14:12

tourists, It seemed unlikely.

14:15

In fact, they were working for a drug

14:17

cartel. Drugs sell

14:19

on the streets for cash, but

14:21

it's hard to use big wads of banknotes

14:24

to buy things in the regular economy. The

14:26

cartels need to launder that money

14:28

into respectable looking entries. In

14:30

the books of the Global Financial System,

14:33

it turned out they'd laundered

14:36

over three hundred billion

14:38

dollars through a covire. They'd

14:40

used it to buy things like a McDonald Douglas

14:43

DC nine airplane, which was seized

14:45

on a Mexican runway carrying five

14:47

tons of cocaine. But when

14:50

Martin Woods started to report these

14:52

dodgy looking traveler's check transactions

14:55

were his boss is happy. No,

14:58

he says, they were not. Martin.

15:01

This is a disaster and it's all your fault.

15:03

Wait, what's my fault. I'm

15:05

not going to get my bonus this year

15:08

that were the boss explained. The

15:11

departments that make the money give scores

15:13

to the departments that provide support services.

15:16

Bonuses depend on the scores, and

15:18

the compliance department had topped

15:20

the scorecard for years. It

15:23

was getting stellar scores, it seems,

15:25

because it was giving the money making department

15:27

what it wanted, and what the moneymakers

15:30

wanted from compliance was

15:33

not asking too many questions. So

15:35

now that I've started to do a proper job, they're

15:37

giving the compliance department lower scores.

15:40

Exactly, mordn and their effects

15:43

my bonus. You see. The

15:46

bank was eventually fined, but

15:49

for Woods himself, working life

15:51

soon became intolerable. The

15:53

researcher Kate Kenney says whistleblowers

15:56

often find themselves being targeted

15:58

for the tiniest breaches of company

16:00

policy. When Woods went to the

16:02

hospital with a slipped disc or Coovia

16:05

said he hadn't called in sick in

16:07

the precise mannerified

16:09

in his employee's handbook. They

16:11

also told him off for helping the British

16:14

police to investigate a corrupt African

16:16

politician. That's a disciplinary

16:18

offense. Dollar accounts have nothing

16:20

to do with you. They're a US matter. The

16:22

police phoned me from Mauritius. It was mourning

16:25

in London. They needed help right then. The

16:27

US was still in bed fielding their car.

16:29

Was a disciplinary offense because

16:31

the police rang me up and I answered the phone.

16:34

Yes. The stress drove

16:36

Woods to the verge of breakdown. He

16:39

quit his job, sued Wakovia

16:41

and settled out of court. When

16:44

he applied for other jobs, he didn't

16:46

have much luck. When other

16:48

people see what happens to whistleblowers,

16:51

it naturally makes them more cautious.

16:55

Woods says he's often had conversations

16:58

like this, you're Martin Woods. Aren't

17:00

you well done? I really admire

17:02

what you did. Thank you. I'm

17:04

an antimoney laundering officer too. And

17:06

how does your bank react when you flag suspicious

17:09

activity? When I,

17:12

oh, don't do that. I like my job.

17:15

I want to keep it. Those

17:18

people didn't go into their anti money

17:20

laundering career intending to

17:22

turn a blind eye. Like the

17:24

students in the research experiment. They

17:26

probably thought they would blow the whistle, but

17:29

when faced with the choice for real, they

17:32

chose a quiet life. Lots

17:35

of employees at Equity Funding had

17:37

wrestled with that dilemma too. Remember,

17:40

Equity Funding had been making up fake

17:42

clients. Ray Dirk's estimated

17:45

that about a hundred of the company's employees

17:47

must have known or at least had their

17:49

suspicions. Yet only

17:51

Ron Seacrest had done anything

17:54

about it, and only because he had

17:56

been fired. Why didn't

17:58

the others blow the whistle? Some

18:00

felt they didn't know enough to be sure, Some

18:03

just wanted to keep drawing their paychecks.

18:06

Some were uncomfortable enough to quit the company,

18:09

but not to kick up a fuss. One

18:12

employee told Dirks that he had wrestled

18:14

with his conscience and eventually asked the

18:16

minister at his church for advice.

18:19

You'll should think of your family, You

18:21

mean, I should keep on working

18:23

for this company for now, but look for another

18:26

job when you find one, leave.

18:28

Should I report on what I know? You'll

18:31

should think of your family. A

18:33

handful of employees did try to report

18:35

their suspicions to various regulatory

18:37

bodies, but it seems the regulators

18:40

never took them seriously. And that's

18:42

not surprising because the claims about

18:44

the fake insurance policies were so

18:46

mind boggling. It would be like somebody

18:49

coming to an analyst who follows automobile

18:51

companies and saying, Chrysler

18:53

doesn't put engines in their automobiles. They

18:56

use big rubber bounds. I

18:58

would have thrown the guy out of my offers

19:00

if he'd come to see me and tell me that it

19:04

was precisely because he expected

19:06

that kind of brush off from the authorities

19:09

that Ron Seacrest had decided

19:11

to approach. Ray Dirks Seacrest

19:14

had a strategy. The more that

19:16

Dirks poked around, he thought,

19:18

the more equity funding shareholders

19:20

would start to hear the allegations.

19:23

Some would get cold feet and sell, and

19:26

if the share price started to create the

19:28

regulators would surely have to investigate.

19:31

And that's more or less what happened. But

19:34

if the sec was grateful to Dirks,

19:37

it shows a strange way of showing it.

19:40

It formally reprimanded him

19:42

for insider trading. Cautionary

19:49

tales will return shortly. Where

20:02

does our moral sense come from?

20:04

Why do we instinctively feel that some

20:06

things are right and others are wrong?

20:10

The psychologists Jonathan Hate

20:12

and Craig Joseph proposed a theory,

20:14

moral foundations theory. They

20:17

think we can trace our moral instincts

20:19

to a few basic foundations,

20:21

such as fairness, loyalty, and

20:24

preventing harm. The whistleblower's

20:27

dilemma arises when loyalty

20:29

comes into conflict with some other

20:31

moral value. Remember

20:33

what Cheryl Eckard said about blowing the whistle

20:36

on the substandard pharmaceutical factory.

20:39

You lose your friends because your friends

20:41

are people from work. The whistleblower's

20:43

dilemma is familiar to everyone

20:46

who's ever been a child. Tattletale

20:48

or snitch is the worst of playground

20:51

insults. Martin Woods had

20:53

trouble finding another job after he left

20:55

Bokovia. He thinks you can

20:57

draw a line straight from the playground

20:59

to our treatment of whistleblowers in

21:02

the world of work. As children,

21:04

we're told don't tell tales, and

21:06

we tell our kids don't tell tales.

21:09

Why do we do that. We have an anxiety

21:11

around their social grouping and their social

21:13

acceptance. But we're telling them

21:15

not to light people who tell tales

21:18

the whistleblower. But there must

21:20

be something else going on, because we admire

21:22

whistleblowers too. We root

21:24

for Martin Woods and Cheryl Eckard, not

21:27

the bonus chasing boss or the cost conscious

21:29

factory director. We cheer on

21:31

Ray Dirks. Though I

21:34

must confess I've stacked the deck.

21:36

I deliberately chose to tell the stories

21:38

of whistleblowers who are easy to warm

21:40

to. I could easily have picked some more difficult

21:43

characters, more awkward or

21:45

prickly or priggish.

21:48

When do we praise a whistleblower for doing

21:50

what's right? And when do we worry that someone

21:53

who snitched on others might

21:55

also snitch on us. It

21:57

surely comes down to how serious

21:59

we think the transgression was that they blew

22:02

the whistle on. Suppose

22:04

you were interviewing a candidate for a job and

22:06

you heard they'd called the police on their

22:08

former boss because he was extremely

22:11

drunk after an office party and insisting

22:13

on driving himself home. I'd

22:15

think more of them for doing that. That's

22:17

surely a case where preventing harm trump's

22:20

loyalty to the boss. But suppose

22:23

the job candidate had called the police on

22:25

their former boss because he'd jumped

22:27

a red light on a deserted road when

22:29

late for a meeting. That's someone I might

22:31

not want on my team. And

22:34

what if the whistleblowing case is hard

22:36

to understand as many are

22:39

would I take a chance on employing the whistleblower

22:41

if I had some other suitable candidate.

22:44

It's easy to see why whistleblowers

22:46

might struggle to find employment. Remember

22:53

the students in Amsterdam and the experiment

22:56

with the unethical researcher. When

22:58

given a hypothetical scenario, most

23:01

said they'd blow the whistle When

23:03

actually put in that position, hardly

23:05

anyone did we get cold

23:08

feet because we worry about making trouble

23:10

for ourselves or for our families.

23:13

We don't want to be a tattletale. But

23:15

this is a problem because if we

23:17

want to find out when organizations are

23:19

doing things wrong, we need employees

23:22

to be brave enough to raise the whistle to

23:24

their lips. The economist

23:26

luigi's Engalas and his colleagues studied

23:29

all alleged cases of fraud

23:32

in big US companies over

23:34

an eight year period. There were over

23:36

two hundred of them, including Enron

23:38

and WorldCom. They

23:40

wanted to find out who brought those frauds

23:42

to light, and despite the risks,

23:45

it turns out that employees were

23:47

surprisingly important. They

23:50

revealed as many of the cases as

23:52

the company auditors and the

23:54

regulators put together.

23:58

It makes sense employees

24:00

are the ones who have the inside track

24:02

on corporate malfeasance, and we

24:04

want them to come forward when they have concerns.

24:07

So how could we change the incentives

24:10

around whistleblowing. One

24:12

answer, say some researchers, is

24:14

to work with the grain of our deep

24:17

rooted instinct to be loyal. Leaders

24:19

can choose to create a culture in which

24:21

whistleblowing is seen as being loyal

24:23

to the company, not disloyal

24:26

to your immediate colleagues. There

24:28

is another obvious way to incentivize

24:30

people money. Martin

24:33

Woods, remember was a policeman before he worked

24:36

for banks. He was used

24:38

to paying for tip offs. If we bought

24:40

information on where the drugs are, why

24:43

are we not buying information on where the financial

24:45

crime is. Why are we not buying information

24:47

about where the tax evasion is. Why

24:50

is that so different? Those are

24:52

good questions. In fact, sometimes

24:55

we do pay cash rewards to whistleblowers,

24:58

and the evidence suggests that those rewards

25:00

work. According to the economist luigi's

25:03

Engalis and his big study of alleged

25:05

corporate fraud, in some of those

25:07

cases there the chance of

25:09

a payoff for information, and employees

25:12

were three times more likely to

25:14

blow the whistle. But

25:17

few countries have made concerted efforts

25:19

to reward whistleblowers. South

25:21

Korea is one that has Its

25:24

government pays millions of dollars

25:26

a year in rewards for tipoffs about

25:28

everything from tax dodges to unsaved

25:30

food to unlicensed medical products.

25:33

It seems to work. In

25:36

other countries, the rewards tend to be patchea.

25:39

They exist in some sectors and not

25:41

in others, and that largely

25:43

comes down to historical luck. The

25:46

US, for instance, has a law called the False

25:48

Claims Act. It dates back to the Civil

25:51

War, and it rewards people for saving

25:53

the government money by alerting them

25:55

to suppliers who rip them off. So

25:58

if you work for a company that just happens

26:00

to sell to the government, then you might get

26:02

a reward for blowing the whistle. What

26:04

kind of companies sell to the government. Pharmaceutical

26:07

companies are wanting example, think

26:10

of Medicare. The government buys lots

26:12

of drugs, and if some of those drugs

26:14

were made in a factory in Cedra Puerto

26:17

Rico, say in a non sterile

26:19

environment with contaminated

26:21

water, well, the government might

26:23

reward you for letting them know about that.

26:28

Seven years after Glaxo Smith Klein

26:30

made Cheryl Echard redundant, the

26:32

US federal government find the

26:34

company and gave Cheryl Echard

26:37

the share she was due under the

26:39

False Claims Act ninety

26:41

six million dollars. Martin

26:47

Woods wasn't quite so lucky. Just

26:50

two years after he blew the whistle on Wakovia,

26:53

the US introduced new laws

26:55

to reward whistleblowers in the financial

26:58

sector. Only he'd blown the

27:00

whistle, then he'd have got

27:02

twelve million dollars. But

27:05

Wood says he has no regrets. Now

27:08

call me conceited, but I like

27:10

me. I like what I stand for. I

27:12

like my profile, my brand, and

27:14

most of all, my integrity.

27:17

Woods now works as a consultant, and

27:20

he discovered why he'd initially found

27:22

it so hard to get his foot in the door with

27:24

a new employer. He was on a

27:26

database at the Financial Conduct

27:28

Authority, a British regulator. Banks

27:31

could check the database for information

27:33

on potential employees. Woods

27:36

was flagged as non routine.

27:40

But why might a regulator seemingly

27:43

want to make life difficult for a

27:45

whistleblower. Woods

27:47

had his suspicions, when

27:49

you blow the whistle on a bank indirectly,

27:51

you're also blowing the whistle on regulatory

27:53

failure. This was certainly the

27:56

case as well with insurance analyst

27:58

Ray Dirts. When the investigation

28:00

into equity funding had run its course,

28:03

twenty two people faced criminal

28:05

charges. Six went

28:07

to jail, including the fanatical weightlifter

28:10

Stanley Goldlum.

28:13

But everyone knew the SEC would

28:15

never have uncovered the fraud at equity

28:17

Funding on its own. A

28:19

lone, idiosyncratic sleuth had

28:22

shown them up. Yes, but

28:25

said the SEC. Dirks

28:27

had talked through the allegations with clients

28:30

who owned shares in equity funding, and

28:33

some of those clients had then sold their

28:35

shares. Couldn't you say that was

28:37

inside of trading? Dirks

28:40

was furious at being reprimanded

28:43

by the SEC. He

28:45

took them to court and

28:47

lost. He appealed,

28:50

and after ten years, got his day

28:53

in front of the Supreme Court. The

28:57

SEC is a government body and before

28:59

it can argue in front of the Supreme Court,

29:02

it needs the approval of the United States

29:04

Solicitor General. There was

29:06

just one problem. United States Solicitor

29:08

General loved what

29:10

Ray Dirks had done, so he

29:13

gave the SEC permission to argue their case,

29:16

but added a PostScript telling the judges

29:19

he disagreed with it. Dirks

29:22

won his case, but the

29:24

happy endings are exceptions. When

29:27

the economist Luigi's and Galis asked whistleblowers

29:30

if they'd do it all again, most

29:32

said no, it wasn't worth

29:34

the stress. Like the students

29:36

in Amsterdam, most of us

29:39

would like to think would blow the whistle. But

29:41

if we want people to have the courage to

29:43

follow through we need to celebrate,

29:46

protect and reward those

29:49

who blow the whistle key.

30:02

Sources for this episode include The

30:04

Great Wall Street Scandal by

30:07

Ray Dirks and Leonard Gross, Kate

30:09

Kenny's book Whistleblowing, and

30:11

Martin Woods's interview on KYC

30:14

three sixty. For a full list

30:16

of references, see Tim Harford dot

30:18

com. Cautionary

30:21

Tales is written by me Tim

30:23

Harford with Andrew Wright. It's

30:25

produced by Ryan Dilley and Marilyn

30:27

Rust. The sound design and original

30:30

music are the work of Pascal Wise.

30:33

Julia Barton edited the scripts.

30:36

Starring in this series of Cautionary

30:38

Tales are Helena Bonham, Carter

30:40

and Geoffrey Wright, alongside

30:43

Nazar Alderazzi, Ed Gochen,

30:45

Melanie Gutteridge, Rachel Hanshaw,

30:49

Cognor Holbrook, Smith, Reg

30:51

Lockett, Siam Unrowe and

30:53

Rufus Wright. The show would

30:55

not have been possible without the work of Mia

30:58

La Belle, Jacob Weisberg, Hell

31:00

Fame, John Schnarz, Carlie

31:03

mcgliori, Eric Sandler, Emily

31:05

Rostock, Maggie Taylor, Daniella

31:08

Lakhan, and Maya Kanig. Cautionary

31:11

Tales is a production of Pushkin

31:13

Industries. If you like the show, please

31:16

remember to share, rate, and

31:18

review.