The Center for Public Integrity

A federal judge has rejected a whistleblower claim by a former Bank of America Corp. computer guru who charged that he’d been fired for questioning the effectiveness of the bank’s new money laundering-detection technology.

Boris Galinsky, a senior vice president who had done much of the technical work on a major anti-money-laundering computer project, lost his job after complaining that management was pressuring him to cut corners and “develop crap.”

U.S. Administrative Law Judge Ralph Romano ruled against Galinsky last week in what was essentially a split decision that gave the win to Bank of America.

Romano concluded in his 20-page ruling that Galinsky’s internal whistleblowing complaints were “contributing factors” to his bad job reviews and termination.

But the bank had other good reasons to discipline and fire Galinsky, the judge found, because of his “propensity for rude behavior”and his violation of company policy by secretly taping conversations with managers.

Under whistleblower protections in 2002’s Sarbanes-Oxley corporate reform law, a company can avoid liability if it can show that it “would have taken the same unfavorable personnel action” even in the absence of a worker’s whistleblowing efforts.

In a statement, Bank of America told iWatch News it was “pleased that the Court agreed with the bank  in the Galinsky matter.” Bank of America said it thoroughly investigates employee complaints and that it doesn’t retaliate against workers who raise concerns.

One lie leads to another.

In the heady days of the Great American Mortgage Boom, loan salesmen lied to borrowers. Salesmen and other mortgage workers pushed the deals through by fabricating documents and forging signatures. Quality-control folks up the line ratified the lies by signing off on deals that they knew – or should have known – were tainted with fraud.

Capital markets executives misled investors about the quality of the borrowers and the loans. Investors lied to themselves – and sometimes their financial backers – about the kinds of toxic mortgage waste they were buying. Much later, it emerged that people working on behalf of some of the nation’s largest banks had perjured themselves by signing false affidavits that sped borrowers into foreclosure.

Rarely do lies simply go out in the world and stand on their own. To have staying power, they require a complex network of ancillary lies and human enablers (sometimes knowing, sometime unwitting) who create a web of falsehood. These tangled webs can drain families’ bank accounts, get people killed, cause great institutions to fall, even help crash an economy.

In his new book, Tangled Webs: How False Statements Are Undermining America, Pulitzer Prize-winning journalist James B. Stewart tells the story of four convicted dissemblers:  Martha Stewart, Scooter Libby, Bernie Madoff and Barry Bonds.  

State governments struggling to close yawning budget gaps are fighting to get billions of dollars from a landmark 1998 tobacco settlement that they  counted on to help fund everything from Medicaid to elder care programs.

Since 2006, R.J. Reynolds Tobacco Co., Lorillard Inc., and about 40 other cigarette makers that signed the settlement have withheld about $3.2 billion from the states. The companies claim the states failed to enforce a provision stopping small, rival cigarette companies that didn’t sign the settlement from undercutting them on prices.

That provision requires states to force non-settling cigarette companies — such as National Tobacco Co., Cheyenne International and Smokin Joes — to pay a portion of revenue into escrow accounts as a hedge against future litigation, and to level the playing field with the companies that did sign the settlement.

Philip Morris USA, far and away the largest tobacco company, has made the disputed payments to the states. But it says it is owed a refund of $1.3 billion plus interest, and will contest another $400,000 in payments made over the past two years.

All told, the tobacco companies are disputing about $5.2 billion in payments, according to the National Association of Attorneys General.

A hearing starting today before an arbitration panel in Chicago is the first step in determining whether the cigarette companies will release that money, or whether states must dig into empty coffers to repay billions of dollars more — a potential political and fiscal catastrophe.

Did states hold up their end of the deal?

The 1998 tobacco settlement ended years of litigation over whether companies had knowingly misled smokers about the dangers of cigarettes, resulting in tobacco-related health care costs for state-run Medicaid programs.

U.S. states have collected about $75 billion so far from a 1998 settlement with big tobacco companies to resolve litigation over escalating Medicaid costs for smoking-related health care.

But Stanford professor Jeremy Bulow calls the lucrative settlement a “bad deal” for many of the 46 states.

Under the settlement’s complicated distribution system, smokers in many states, including Georgia, Kentucky, North Carolina, and Virginia, are paying $100 million more for tobacco due to higher prices than the settlement returns to their state coffers. Many states would be better off if they had simply levied a new tax on the cigarette companies, Bulow said.

Other states get more than their smokers put in. In 2004, for example, California raked in $793 million from the settlement, but its smokers paid $509 million for their cigarettes. New York state also received $793 million that year, while its citizens paid $281 million.

What the states have done with the tobacco money is also controversial.

The Centers for Disease Control recommended that 30 percent of the revenue go to programs to prevent kids from smoking and to help smokers quit.

But cash-strapped states this year will spend just $517.9 million on anti-smoking programs, a 28 percent decline in the past three years, according to the Campaign for Tobacco Free Kids. Georgia, for example, will spend just $2 million of $369 million in revenue from tobacco taxes and settlement money on these programs.