Management gurus claim they were blindsided by toxic culture at Countrywide

Expert fired for raising concerns about doomed lender, she says

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Cynder Niemela

Todd Wawrychuk/Image Group LA

On her first day at Countrywide Financial Corp., Cynder Niemela gave a talk to a gathering of her new colleagues. Every company, she said, has its own culture. Each is a tribe with its own rituals and myths.

Niemela, a management guru who’d worked for Boeing and other big employers, told the group of executives that research showed it took 16 months for a worker to become fully part of a corporate “tribe.” That time would allow her, she added, to offer a fresh perspective on how things were done at Countrywide.

Afterwards, she recalls, one of her new colleagues introduced himself and, with a knowing smile, said, “I can’t wait to see if you’re here 16 months from now.”

She lasted 16 months, but not much longer.

Countrywide fired her, Niemela claimed, after she raised questions about fraud against customers and employee discontent with top management.

The last straw, she alleged in an arbitration claim, came after she complained that higher-ups had revised and distorted one of her PowerPoint presentations in an effort to obscure the company’s problems with employee dissatisfaction and turnover.

Niemela’s account of her struggles at Countrywide provides another perspective on the culture inside what was once the nation’s largest home lender.

Many other ex-employees who claimed they were mistreated by the company were mid- and low-level workers who worked deep inside Countrywide’s mortgage-lending machine. Niemela, by contrast, was a high-level tactician who dealt with the big picture of how Countrywide treated its employees and what that said about the company’s culture.

She was among a group of management experts brought in to help the company as it grew in a period of a few years from 11,000 employees to 55,000, with a goal of reaching 100,000 by 2010.

What they encountered was like nothing they’d seen before in corporate America, according to Niemela and three other former Countrywide management experts interviewed by iWatch News.

They found, they say, a toxic culture ruled by fear and top-down intimidation.

“Every organization has a culture, some more healthy than others,” Niemela says. “Countrywide had a very unhealthy culture.”

Niemela sued Countrywide in state court in Los Angeles in 2007, asking for reinstatement and lost pay. A judge later ordered the case into private arbitration.

Last week, Niemela and Bank of America, which bought Countrywide in 2008, reached a confidential settlement of her claims. All Niemela’s interviews with iWatch News took place before the settlement was reached.

As the case was being argued, Bank of America denied that Countrywide officials mistreated Niemela.

The bank’s lawyers hit hard against Niemela in legal documents, saying that “her interpretation of events is severely skewed.” The lawyers claimed that Niemela was fired after colleagues complained she’d “badmouthed the company” and that she was “angry, critical and difficult to work with.”

‘Not a dictator’

Former Countrywide chief executive Angelo Mozilo and other former company officials, meanwhile, have disputed allegations that senior management bullied employees.

“I always regarded myself as a CEO, not a dictator,” Mozilo testified earlier this year during a civil trial involving another Countrywide executive’s wrongful dismissal claim. “I think the jury will note that I'm a pretty frank person — straightforward, I say what I believe. But I'm also willing to listen.”

“Countrywide was about people,” Mozilo testified. “Obviously, without quality people you can't have a quality company.”

In the end, the jury in that case awarded Countrywide’s former chief leadership officer, Michael Winston, a $3.8 million verdict, upholding his claims that Mozilo and other senior officials had punished him for standing up against management misconduct.

Winston charged that he’d been retaliated against for reporting an environmental hazard that had sickened workers inside a Countrywide office complex, and for refusing to falsify a report about the lender’s corporate governance practices.

Winston says he and Niemela and other organizational change specialists clashed with a culture in which breaking the rules “was more than okay. It was incentivized.” Winston claims they were punished for speaking up about bad management practices, just as lower-level employees were harassed for reporting fraudulent lending practices.

Bank of America has appealed the jury’s decision. A spokeswoman said the verdict was “not supported by any evidence.”

‘We all know’

Niemela has worked more than 20 years as an executive coach and management consultant. She was featured in a 2000 Fortune article about executive coaches and, in 2001, published a book, “Leading High Impact Teams: The Coach Approach to Peak Performance.”

In 2005, Countrywide recruited Niemela away from Boeing, hiring her as a first vice president in the company’s human resources department.

She’d never worked in a financial company before. She got a first-hand lesson, she says, in how her new employer did business when she took out a Countrywide mortgage to purchase a new home and move her family from the San Francisco Bay area to Los Angeles.

When she sat down at the closing table, she says, she got a nasty surprise: She discovered the loan, among other unappealing features, carried a “pre-payment penalty,” meaning that she’d have to pay thousands of dollars extra if she tried to refinance within seven years. Even the worst subprime loans generally carried an early payment penalty of no longer than three years, say fair-lending advocates.

She had no choice but to sign the papers, she says, because her relocation package required that she use a Countrywide loan to buy her house. If she didn’t, she stood to lose some $50,000 in relocation money.

She did complain to an executive in the company’s risk-management unit. He listened to her story, she says, and then said nonchalantly, “Yes, we all know. We screw our employees.”

‘Mozilo was God’

While Niemela was beginning to wonder about how things were done at Countrywide, other management gurus were growing more concerned about how the company was managed.

One of them was Dave Sullivan, an executive vice president and co-author of a book on bad management, “Why Leaders Fail.” Sullivan told iWatch News that Countrywide was “definitely the most top-down company I’ve ever seen. Mozilo was God. Whatever he said went.”

Another management specialist, Sharon Doyle, likened many Countywide executives to “bullies in the schoolyard.”

Doyle says these executives saw the management experts as “very dangerous. We were enlightening people. Ideas are very powerful things, and they didn’t want anything to change.”

The main organizing principle at the company, Doyle says, was “rule by fear and manipulation.”

As Niemela immersed herself in the culture and talked to her colleagues, she says, some executives were frank about how things were run, telling her: “Angelo makes every decision. We really are not empowered to make decisions. Angelo signs every expense report. He micro-manages us.”

Many employees, Niemela adds, had been infuriated by a 2005 New York Times profile of Mozilo in which the CEO suggested that the size of workers’ cubicles didn’t matter, because “whether it's smaller or larger, they adapt, like fish to a fish tank.”

‘A reckoning’

By 2005, Countrywide’s “voluntary turnover” rate had reached 31 percent, meaning that almost one in three employees chose to leave the company that year. Within its mortgage sales force, turnover was 45 percent.

Niemela spent months working to design a survey aimed at figuring out why the company’s turnover rate was so high.

She was surprised by what she found, she says.

She’d done surveys at many companies, she says, and had never seen the level of dissatisfaction with top executives that the survey of roughly 40,000 Countrywide workers showed. The employee satisfaction levels for a few unit presidents and other big executives were mired in the 30 percent to 40 percent range, Niemela says.

Mozilo and his senior executive team got a 58 percent approval rate, according to a Power Point presentation put together by Niemela summarizing her findings. At the best-run companies, Niemela says, similar surveys generally show an 80 percent to 85 percent approval rate for senior management, “certainly never less than 70 percent.”

Along with their answers to the survey questions, some employees used the survey’s comments section to complain about unethical practices.

“There is so much fraud being committed between loan brokering, document alteration, overstating borrower's length of employment and actual income,” one employee wrote. No one was being held accountable, the worker said, because the company continued to “look the other way.”

Another employee who raised concerns about improper lending pronounced that “there will be a reckoning. … think of the cigarette industry — they know it's a slow poison but they sell them anyway.” He raised the specter of “superfunds to undo the damage.”

After reading many similar comments, Niemela says, she urged Countrywide executives to open a full-scale investigation of fraud within the company. The investigation never happened, she says. “They just shut the whole thing down. They didn’t want to hear that.”

She got the same reaction, she says, from one top official when she passed on concerns about how low-level employees were being treated by managers.

In the Loan Administration Department’s call center, Niemela says, “most people felt they were treated like animals,” with every minute of their time closely monitored by managers.

When she raised these complaints with a high-level executive who oversaw the unit, Niemela says, he told her: “I don’t really care what people think if they’re not VP level. Let’s move on.”

‘Sham investigation’

Niemela drafted a lengthy presentation spelling out the results of the survey and her findings that top management was driving worker turnover.

Before it was submitted to senior executives, Niemela says, it was revised by a high-level HR official.

In legal papers, Niemela claimed that the revision was more than an edit; the presentation was altered and cut down in a way that “concealed the survey findings that ineffective executives were the cause of the high turnover.”

Nowhere in the revised version, Niemela said in an interview with iWatch News, was the word “turnover” used.

After she complained about the changes in the survey results, she alleged in her legal claim, Countrywide officials trumped up a “sham investigation” against her, asserting that she had spoken derogatively about a colleague and had caused “upheaval” in her department.

All the interviews in the investigation were done in a single day, and Niemela wasn’t given a chance to defend herself, Niemela alleged.

Soon after, in May 2007, she was fired.

Bank of America’s lawyers maintained that Niemela had given “several different versions” of when she first raised the issue about the changes in the presentation.

The bank’s lawyers said Niemela’s only concern was that the revised presentation “somehow painted a picture that was too rosy. Nothing more.” That wasn’t enough, they argued, to show bank officials had violated any laws.

Niemela wasn’t surprised, she says, in late 2007 and early 2008 as she saw news reports about growing loan defaults and financial reversals at Countrywide. She had expected something like this to happen, she says.

The survey results, the comments about fraud and the reactions from top executives — all these had been warning signs, she says, that Countrywide Financial was doomed.