One lesson from this book’s cases is this: when it comes to corporate corruption newer employees are especially vulnerable. Should the corruption later become the subject of investigation, younger employees are also the most likely to be sacrificed.

Corporate corruption is certainly not limited to newer employees. In fact, it is almost always originated by executives higher in the chain of authority. However, younger employees are disadvantaged in terms of their place in the power structure—and they can more easily be pressured to follow instructions and threatened with consequences if they resist. Usually they lack the financial resources to contemplate job loss or the costs of litigation. Finally, they typically lack a support network within the company and the experience to consider how to resist corruption from inside the firm.

These points were driven home to me by the story of Helen Sharkey, a 28 year-old Dynegy CPA who ended up pleading guilty to a felony. The conviction stemmed from her involvement in a tax/accounting scheme dreamed up by her bosses. Ten years later, at Sherron Watkins’ invitation, I heard her recount the tale at a meeting of the Houston CPA society. Helen’s bosses, CFO Robert Doty and Assistant Controller Mike Mott, conceived the scheme advised by Citibank and Arthur Andersen. Helen was sent to New York to close the deal. A red flag went up when Mott told Helen not to copy him on the deal correspondence. Then, two banks refused to adhere to key legal/tax advice. Mott advised Helen to close the deal anyway. This she did. One year later, in the wake of Enron’s collapse, the U.S. Department of Justice investigated. Helen initially refused to cooperate, then relented. She pleaded guilty to one felony count, served 30 days jail time and is barred for life from public accounting. Mott, Doty and Dynegy CEO Chuck Watson were never prosecuted.

If this story sounds familiar, that is because you’ve encountered it before in these case studies. Goldman’s Fabrice Tourre’s experience was very similar, although Tourre made little effort to resist the demands being put upon him. He did, however, end up paying the price for Goldman’s securities law violations. Meanwhile, the “wise heads” on the Mortgage Credit Committee were never touched. Enron had its own share of young sacrificial lambs, headlined by Ben Glisan and Kristina Mordaunt. The young are indeed more vulnerable to getting in over their heads and then providing the easiest means by which the firm can satisfy prosecutors’ demands for guilty verdicts.

The other endangered group is mid-career employees with a strong moral compass. These employees are the most likely to produce individuals who resist corruption. Go through the cases. All the foremost resisters were mid-level employees with more than five years with the firm: e.g., Jordan Mintz, Vince Kaminski, Sherron Watkins, Eric Kolchinsky, Matthew Lee, Richard Bowen and Sherry Hunt. They had enough experience and status to figure they didn’t have to just “go along” with clearly unethical behavior. Whether they had enough tactical sense to resist successfully is, of course, a case-by-case story. In a majority of cases, they failed to stop the behavior and ended up exiting the firm. In several cases, the personal price was bigger.

Because of this checkered record, the work for the last 10 years has been to distill from their cases what might be labeled “best practice” lessons for resisting corporate corruption. Success here is defined as spotting ethically dangerous situations, avoiding the unethical conduct and not ruining your career. That combination is not always possible to achieve. Sometimes resisters have to make “the hard choice.” However, the purpose of this work, and this book, has been to broaden the range of options available to resisters. Many of the named resisters, Mintz, Kaminsky, Watkins, Kolchinsky and Bowen, partnered in this effort. Each came to class when their cases were discussed and undertook the not always pleasant task of considering “what I should have done differently.”

Here then are the key lessons from this work.

New employees are advised to research the ethical culture of their potential employer during the recruiting process. This is a basic precaution—know what you’re joining. Job seekers usually think it awkward to ask about dicey behavior during the recruiting process. However, some basic research is highly recommended and easy to do. Public companies must discuss major litigation, settlements and fines as “material events.” You can also look through their financial statements for unusual one-time events. Regulatory agencies like the DOJ and SEC publish details of behaviors that led to settlements or enforcement actions. Public media usually cover such episodes—the Citigroup “rap sheet” in the “Write to Rubin” case provides a good example.

If your potential employer has such a record, it is fair to explore what conditions lie in wait for a new employee. There are various ways to broach this topic during interviews. One is to ask how the firm is responding to its publicized difficulties. Many firms will be eager to explain why the future will be different. This will give you a chance to parse the quality of the response. Generally exploring the firm’s approach to regulatory or legal compliance, risk management, or financial control is another way to touch the subject without seeming accusatory. Both the content and the tone of the responses will offer clues as to whether the firm has real resolve to fix problems or is largely papering over the cracks. Such research may allow the screening out of more problematic places and at a minimum should equip you to enter the workplace forewarned.

Once inside the firm, new employees should seek out a network of ethical supporters. Get to know individuals within key watchdog functions, i.e., Controllers, Audit, and Law. Find those with a moral compass and the willingness to face a challenge. These will be people you can turn to should a corrupt situation land on your doorstep. For starters, they can give you critical advice. Is the proposed action illegal or unethical under company policy? Have there been similar cases, and if so, how were they handled? Can you rely on the standard means of reporting unethical behavior? These are just a few of the questions that become urgent when difficulty arises, and you will need the best possible answers to chart a forward course.

If normal recourse channels are blocked, your network contacts can provide a means to get information up the management chain. Often this can be done anonymously. This can allow key facts to get to senior managers without having to go through the bosses who are architecting the unethical conduct. They can also advise whether standard control procedures, such as reporting misconduct to Audit or a “hotline,” are still functioning.

In the direst of cases, network contacts can help you weigh the choice of whether to report outside the firm and help devise the best channels and recipients for such action. There also is the not inconsiderable value of not being alone under such stressful circumstances. Clear thinking is more possible when one has trusted sounding boards and advisers.

The help of network supporters is most effective when there is a “Controls Champion” high up in the firm. Then, the resister’s best option is to get incontrovertible evidence of unethical conduct to this champion via a safe channel. It is not uncommon to encounter firms with both ethical challenges and a senior controls champion. Indeed, companies whose corrupt behavior has recently been publicly exposed often sport controls champions brought on to “right the ship.” At other times this champion may be a newly promoted executive who doesn’t want scandal to occur on his/her watch; it may be a new Board member who takes Audit or Finance issues seriously. Rich Kinder was an example of the former when he took over as Enron’s COO after the Oil Trading scandal. Robert Willumstad was such a Director at AIG.

The toughest cases will be those where several layers of supervisors are complicit in corrupt actions, and watchdogs like Audit have been marginalized. Such was Enron’s situation after 1996. Eric Kolchinsky, Matthew Lee and Richard Bowen faced similar circumstances at Moody’s, Lehman Brothers and Citigroup respectively. By the time Fabrice Tourre built the Abacus deal, Goldman had become so desensitized to conflict of interest that it scarcely could identify “reputational risk” when staring it in the face.

In these situations, internal resisters still have a couple of options. The first is to convince senior managers that the corruption fruits are not worth the exposure risk. When arguing that “it’s not worth the risk,” it often takes both external pressure and internal agitation to bring down a corrupt power broker. Jordan Mintz took this approach at Enron. Mintz attacked Fastow’s conduct from several directions. The net effect of the fuss he kicked up was to convince Skilling that Fastow’s deals were no longer good for the stock price. Skilling then kiboshed new deals, and forced Fastow to stop acting as an LJM principal. Mintz was aided in his efforts by Enron’s declining stock price and mounting publicity about dodgy accounting.

An especially useful option for junior employees is to fix problematic deals technically. Unethical behavior is often motivated by the desire to secure a shortcut to some outcome. It is the shortcut that poses the problem. Many of the cases display this story line, e.g., Enron’s Chewco case, where the firm conceded cash collateralized equity certificates to get Barclays’ to do the deal. When this came to light, the accounting treatment failed, forcing a major, ill-timed restatement. What if Enron had forced a showdown with Barclays’ instead—as in “back off the cash collateral or we’ll replace you with another bank?” Instead, Glisan and Fastow opted to close on Barclays’ terms and hope the details never came to light. It proved a costly mistake.

Corrupt senior managers often make this mistake. Encouraged by what they sense to be weak controls and compliant watchdogs, they push legal, accounting and tax boundaries more and more out of shape. Eventual exposure then astounds them. Almost certainly, Charles Prince and Gary Crittenden never expected Citigroup’s SIVs and Subprime accounting to come crashing down on their heads. CEO Dick Fuld and CFO Erin Callan likely felt the same about Lehman’s use of Repo 105. When senior management is operating in this fashion, the question becomes how can deal architects insist on achieving detailed terms that protect the firm and themselves?

There are two forms of this situation. In the first, the deal has yet to be finalized. Indeed, it is being held up because certain parties are balking at terms which tax, law or accounting say are required to make the deal “work.” In this type of situation, the tactical option for the resister is to redirect the firm’s pressure onto the party creating the technical problem. This was the case in the Chewco deal. Ben Glisan could have done this by motivating Fastow to turn his guns on Barclays. Fabrice Tourre could have treated the Abacus 2007-AC1 deal similarly by pushing back on the terms and limited disclosure demanded by John Paulson. Tourre could have done this by causing Goldman’s Mortgage Credit Committee to demand disclosable deal terms from Paulson.

Convincing compromised supervisors to fix deal problems is a tactical challenge in and of itself. Here a key ingredient is written advice from outside advisors who must sign off on the deal. These parties are not always the firmest of supports. However, the chances improve of getting them to commit unwelcome advice to print if they know it will be used as part of an effort to fix the deal. Allowing advisors to lodge tough advice in a “draft opinion” sometimes strengthens their resolve. So too does outlining for the lawyers your plan to pressure the outside party into respecting the technical advice. Finally, the “advisory team,” e.g., tax, law and accounting, can sometimes be welded into a coalition supporting a hard line on deal terms. The outside accountants can be especially useful here, as these face serious liability for poor advice, and consequently are more easily persuaded to speak up.

The second case concerns a type of deal which has been concluded before, but where the volume of transactions or the latest terms raise questions about whether the deal remains on the “right side of the line.” Examples here include Enron’s LJM deals, corrupted versions of earlier Special Purpose Entity transactions, and Citigroup’s continued sales of subprime mortgage securities to Fannie Mae, Freddie Mac and Ginnie Mae.

These are especially hard situations to fix from inside the firm. For one thing, senior management has often signed off on the early versions and is reluctant to consider that this action was ill-advised. Another thing, the outside advisors have often signed off on the latest versions of the deal. This gives both corrupt agents and senior management the rationale that the deal has been appropriately vetted. In this situation resisters quickly discover they are isolated with no internal path to act on their concerns.

This set of circumstances narrows the resister’s tactical options. If the management chain is fully compromised, as it was at Enron, the inside whistleblowing option becomes taking evidence of corruption to carefully chosen Board members. The “how to do this” problem here is formidable. Corrupt firms often have co-opted Boards who themselves will feel threatened by suddenly having to confront evidence of wrongdoing.

Much of the work of the past nine years has been devoted to addressing this challenge. Thanks to the willingness of Sherron Watkins and others to reconsider their course of action, a valuable tactical approach has been developed. The first step is for the resister to retain his/her own legal counsel.

The primary purpose for contracting counsel is to use them as a channel to get evidence of corruption to the Board. Counsel can contact Board members individually or as a group as the circumstances warrant. Counsel can keep the source of the evidence anonymous until there is a good reason to do otherwise. Counsel can also remind Board members of their fiduciary responsibility and their personal liability for failing to act on reported fraud or illegal activity. The fact that counsel can implicitly or explicitly threaten that the next step will be to report the activity to the authorities can provide a powerful inducement for supine Boards to spring into action. Counsel can also make clear that any subsequent “witch hunt for the leaker” will simply force disclosure to relevant authorities. In these ways, an attorney helps solve the employee’s problems of how to pass evidence of corruption above the management chain without suffering immediate retaliation.

A second step is to build a group of resisters ready to speak to the Board about the corrupt activities. Management often is able to discredit individual resisters as malcontents or otherwise unreliable. A group of resisters supported by documentary evidence is much harder to dismiss. Sherron Watkins came to believe that this should have been her tactical approach rather than going as a lone individual to Ken Lay. Sherron cited other cases, such as one at Sunbeam, where a group of employees caused the Board to investigate and then fire the CEO.

You will note the role of documentary evidence in these resistance tactics. Documentation is critical if a “my word against yours” situation is to be avoided. They are also important because compromised executives are not above destroying evidence or altering the record. Finally, once alerted the Board is almost certain to launch its own investigation. Documentation gives the investigators a place to start and a trail to follow. The quicker this vindicates the resister(s), the sooner they will experience relief and protection.

This means that employees need to keep a full paper trail if they believe a transaction may be problematic. Corrupt executives can be skillful in keeping their names off incriminating documents. Such was exactly the situation encountered by Helen Sharkey. These circumstances call for the resister to make every effort to document who is driving the deal and deciding key technical issues. The best way to do this is via e-mails describing issues and asking for advice. If one’s boss has warned against sending such communications, prompt outside advisers to send the questions and bcc you instead. Keep early copies of draft opinions as well. These often describe what terms the deal needs to achieve in clearer terms than do final opinions.

To avoid having this record compromised once resistance has been mounted, keep copies on flash drives in a non-office location. Transfer these files to your attorney as soon as one has been retained.

These measures cover the tactical options most often available to internal resisters. What remains is the option of becoming an external whistleblower. This is a separate subject and will be treated in full in the book’s last Essay. For now it is important to state that the circumstances facing external whistleblowers have become much more favorable since 2001. Whereas once external whistleblowers faced severe retaliation, enjoyed little legal protection and had no personal upside, all of this has changed for the better. The external whistleblower’s lot is still not an easy one. They may still face termination and may wait years, possibly forever, for the authorities to act. Still, the chances for effective action and personal protection have markedly improved.

The resister’s tactical choices thus have never been better, and the calculus around whether to fight from within the firm or take the case outside has never been such a close call.