OCTOBER 1997 · VOLUME 18 · NUMBER 10

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T H E    F R O N T

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Reddy Kilowatt: On Probation

When lawyers for Archers Daniel Midland were negotiating a criminal plea agreement with the Justice Department last year, they insisted that the company not be subject to any probationary order. The Justice Department agreed.

And a probationary order governing Consolidated Edison of New York shows why there is such fierce opposition -- once a probation officer or special court appointed monitor gets involved with the company's business, the internal scrutiny by an outsider can be intense.

In October 1994, Con Ed pled guilty to felony charges, including failure to report the amount of asbestos released by a steam pipe explosion in New York City in 1980.

For four days following the explosion, the company did not report to federal officials that 200 pounds of asbestos were released by the blast.

Immediately following the explosion, which killed three people and injured 24 others, the company assured residents that asbestos had not been released in amounts that would make it unsafe to return to their residences.

In sentencing Con Ed for its 1994 felonies, the judge said that he was disturbed by "the sense that there were people at Con Edison ... who clearly knew and who should have been jumping up and down saying, 'there is asbestos there, we know it.' It was obvious that they didn't say it because they were intimidated from saying it, because they didn't think that was the corporate culture." The judge put Con Ed on probation.

As a condition of the probation, Con Ed submitted to oversight by a court-appointed monitor, Mitchell Bernard.

Bernard was given the power to review all of Con Ed's programs designed to ensure compliance with the law. Employees were told that if they knew of any law violation, they should contact Bernard. The court required Con Ed to post Bernard's phone number at all of its facilities.

The court instructed Bernard to investigate the calls and report violations to law enforcement authorities. The court also told Bernard to report back every four months about the nature of Con Ed's law violations.

A CALL FOR INTRINSIC CHANGE

In October 1995, Bernard issued his first report. The New York Times ran a long article about the report. Since then, Bernard has written five more reports. None of those reports have garnered any significant publicity.

Bernard declined to comment on the reports. In his first report, Bernard told the story of a Con Ed chemist who contacted Bernard to report allegations of unlawful environmental pollution and retaliation against him for having raised his concerns.

In his first report, Bernard said that the company culture of discouraging employee vigilance in reporting non-compliance with the law had persisted, and the company was "still disregarding the court's order."

Bernard said that from January 1995 through September 1995, the company had received 66 notices of violations from federal and state regulatory authorities. Bernard's first report was 53 pages long.

By February 1996, Bernard had mellowed a bit on the company. His second report, issued that month, found that while Con Ed made "discernible progress" during the previous four months, "ongoing problems [persist], particularly relating to the handling of oil spills and asbestos."

In his third report, Bernard detailed "a conscious decision to violate applicable regulations to suit operational needs." He also found many instances of "failure to correct known problems."

Bernard concluded the third report by noting that while Con Ed was "expending a great deal of effort to develop and implement an effective program," the company's effort "exceeds its effect."

"It is time for intrinsic change to take root in a large company," he wrote. "The company is practiced at preparing notebooks and devising programs. But the core of compliance, the value or ethic that holds the program together, is hard to instill, especially in a company that has placed such emphasis on, as one employee put it, 'making the megawatt.'"

PERNICIOUS LOYALTY

By October 1996, and report number four, Bernard was frustrated with the company. He led the report with a "loyalty document" he had uncovered. It was authored by a manager in the transportation department of Con Ed. The loyalty document expressed those very sentiments that Bernard was hoping to overcome within the company. Titled "Loyalty," it read:

If you work for a man

In heaven's name work for him,

Speak well of him,

and stand by the institution he
represents.

Remember

An ounce of loyalty is worth
a pound of cleverness.

If you must growl,

condemn and eternally find fault,

resign your position

and when you are on the outside,

damn to your heart's content.

But as long as you are part of the institution

do not condemn it.

If you do,

the first high wind that comes along

You will be uprooted

And blown away

And probably never know the reason

Why.

Bernard said he met with the manager who distributed the document. "He is a proud man with 48 years in the company," Bernard reported. "His family has over 200 years in Con Edison. He genuinely loves the company, and believes that no employee should complain about it, especially to an outsider."

The manager wrote the document after a fellow employee reported wrongdoing that the manager allegedly engaged in. The manager said the allegations against him were "inflated."

In his fifth report in February 1997, Bernard goes into detail about an incident involving the handling of lead.

In his sixth report, released in June 1997, Bernard reports on a troubling incident of a Con Ed gas supervisor. The supervisor, working for the midnight shift, shuffled through a desk drawer for a stapler. He came across a thermostat containing mercury. He knew the thermostat should be stored in a drum designated for such waste. He packaged the thermostat, filled out the necessary paperwork and placed it in the appropriate storage drum.

Believing he had not completed the form completely, he e-mailed his direct supervisor -- a manager -- telling him the story of the thermostat.

Upon receiving the e-mail, the manager was perturbed. "We will probably read about this in the next monitor's report," he predicted.

When the gas supervisor reported to work the next day, he found a shovel on his desk. "It had a tag bearing his name," Bernard wrote. The gas supervisor took the shovel to mean "bury him," and felt harassed.

Bernard reported that "during my recent travels through the company, an unsettling number of employees continued to express a fear of reprisals if they report unwelcome news."

"While the fear is especially intense at the lower end of the company hierarchy, it is not confined to this group," he reported. "Managers a rung or two below the officer level have expressed a fear of speaking up. Many employees said their fears will intensify once the probation ends."

"Retaliation occurs in an atmosphere that permits it," Bernard concluded. "I believe the chairman of the company was sincere when he told the court that 'intimidation and mistreatment in any way of anyone who reports an environmental problem will not be tolerated.'"

"Until that message is fully translated into vigilance at the local level, however, retaliation will continue to occur," Bernard wrote. Bernard said that he had come across six whistleblowers whose inquiries through the court-created hotline resulted in the most unflattering findings or significant discipline.

Bernard said that one of those six was an ostracized mechanic. On a tour of the company, he came across the mechanic, who was "eating lunch by himself in a truck."

"Nearby, the rest of the workers ate in the communal lunchroom," he reported. "Few of them talk to him. It was a sad, telling tableau."

-- Russell Mokhiber