April 30, 2015

Whistleblower Spotlight — Halliburton Whistleblower Tony Menendez

Photo Credit: Tim Galloway/ProPublica

By the C|C Whistleblower Lawyer Team

This week’s “Whistleblower Spotlight” features Tony Menendez, the former accounting executive at Halliburton who the company publicly “outed” after he complained to the SEC about what he saw as the company’s multi-billion dollar accounting transgressions.  An in-depth profile of Menendez published last week by ProPublica and Marketplace provides tremendous insight into what motivated Menendez to stand up against this corporate behemoth.  It also sheds light on the difficult journey so many whistleblowers are willing to take because “this was wrong and that was all that mattered.”

Menendez joined the accounting department of Halliburton in March 2005 after serving as an auditor for Ernst & Young and various accounting stints at other companies.  Mark McCollum, Halliburton’s chief accounting officer and the one who hired Menendez, apparently told him to serve as his “Smokey the Bear,” helping the company prevent accounting fires from flaring.  That is just what Menendez tried to do.  And after only a few months on the job, Menendez uncovered what he believed to be some serious accounting violations relating to how Halliburton was booking its revenues.  Top Halliburton executives, including McCollum, apparently agreed with Menendez’ concerns.  So did some outside experts.  But the company was unwilling to change its ways.

So in November 2005, Menendez brought his accounting concerns to the SEC.  Unfortunately for Menendez, he continued to seek change within the company by reaching out to the audit committee of Halliburton’s board of directors.  While that committee is supposed to maintain confidentiality over these types of internal complaints, it shared Menendez’s rumblings with a broader internal audience.  When the SEC came knocking shortly thereafter, it was obvious to the company it was Menendez who was behind the SEC’s investigation.  And in a series of company emails that forever changed Menendez’s world, he was “outed” as an SEC whistleblower.  “The SEC has opened an inquiry into the allegations of Mr. Menendez,” wrote McCollum to at least 15 of Menendez’s colleagues.  It followed a similar note circulated by the company’s general counsel to the chief financial officer and other top executives.

It was all downhill from there.  The company apparently stripped Menendez of most of his responsibilities, he was barred from most meetings, and worst of all, he was treated as an outcast at work.  Even his friends who wanted to remain loyal to him would not risk being seen with him.  Matters only got worse when the SEC decided not to bring any enforcement action against Halliburton.  He felt no choice but to leave the company.  And that is when his even more difficult whistleblower journey began.

In May 2006, he filed a whistleblower retaliation claim against Halliburton under the Sarbanes-Oxley Act.  The Department of Labor’s Occupational Safety and Health Administration (OSHA), the agency tasked with adjudicating these types of complaints, rejected Menendez’s claim.  He lost before the administrative law judge too.  Not backing down, Menendez spent the next three years fighting Halliburton on appeal.  In September 2011, he got his first win with the administrative appeals panel overturning the administrative judge’s original dismissal.  Then it was Halliburton’s turn to appeal, taking it to the Fifth Circuit which in a November 2014 ruling upheld Menendez’s victory.  It was official, Menendez was formally vindicated.  The Court ruled that Halliburton’s public outing of Menendez as a whistleblower and the “environment of ostracism” which directly and “obvious[ly]” followed violated the whistleblower retaliation provisions of Sarbanes-Oxley.  See Fifth Circuit Rules Disclosing Identity of Whistleblower Illegal Whistleblower Retaliation Under SOX.

According to Jesse Eisinger, who wrote the ProPublica profile of Menendez, “[i]f you want to know why whistleblowers can seem a little crazy, it’s because anybody who is not a little crazy would back away from the ordeal of confronting a corporate behemoth” like Menendez did.  But after spending some time with Menendez, Eisinger came to understand “[t]here’s nothing crazy about Menendez [] beyond an optimism that persists even when the facts don’t warrant it.  Throughout the whole struggle, he just knew that somehow, sometime, the world would come around to seeing he was right about Halliburton.”

And with his Fifth Circuit triumph, Menendez has landed firmly on his feet, currently serving as an accounting executive for General Motors, apparently overseeing how the company recognizes its hundreds of billions of dollars of revenue.  This was the same task that led to his whistleblower battle with Halliburton.  Ironically, it was this very scuffle that made him so attractive to GM.  As Nick Cypress explains, the GM chief accounting executive and controller who hired Menendez, “I was moved by it.  It takes a lot of courage to stand tall like that and I needed that in the work we were doing.  I needed people with high integrity who would work hard who I could trust.”  All is well that ends well for this brave and determined whistleblower.

*     *     *

If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please click here.

Leave a Reply

Your email address will not be published.