EXECUTIVE OFFICE OF THE GOVERNOR

Transcription

1 EXECUTIVE OFFICE OF THE GOVERNOR OFFICE OF THE CHIEF INSPECTOR GENERAL Citizens Property Insurance Corporation Review of the Decision to Disband the Office of Corporate Integrity CASE NUMBER MAY 13, 2013

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3 EXECUTIVE SUMMARY On October 11, 2012, Citizens Property Insurance Corporation (Citizens) 1 officials informed the four employees serving in its Office of Corporate Integrity (OCI) that their employment at Citizens would...cease as a result of position elimination. According to the notices given to the employees, the action became necessary due to a change in corporate direction on the functionality provided by the unit According to the former OCI employees who agreed to an interview, the decision by Citizens to eliminate their positions was a surprise and had not been discussed with them before the meeting on October 11, On October 16, 2012, the disbanding of the OCI was reported in The Miami Herald. That article tied the action to several other issues that had recently been raised at Citizens. 2 The next day, October 17, 2012, Citizens President Barry Gilway, in a letter to Governor Scott, commented on the issues raised in the article. In his letter, Mr. Gilway asserted that Citizens corporate integrity functions had not been eliminated, but rather these duties had been realigned under other business units, including the Office of Internal Audit, 3 the Ethics and Compliance Officer and the Employee Relations Unit. He also asserted that the change was in accordance with current corporate best practices and should strengthen and enhance Citizens corporate integrity and ethics policies and procedures. On November 19, 2012, Governor Scott requested the Chief Inspector General s Office 4 to conduct a review to determine whether any of the terminations of the employees serving in the OCI were retaliatory in nature. During the review period, December 2011 to December 2012, Citizens was an organization in leadership transition. This is illustrated by the following: There were three different Presidents during this period; The reporting structure for the OCI changed from reporting to the General Counsel to reporting to the President to, again, reporting to the General Counsel, and most recently, reporting to the Chief of Internal Audit; A long-time Chief of Internal Audit resigned and a new Chief of Internal Audit was hired; New policies and procedures relating to processing and investigating complaints were devised, drafted and implemented; 1 Citizens was created in statute effective July 1, 2002 to provide affordable property insurance to applicants who are in good faith entitled to procure insurance through the voluntary market but are unable to do so. 2 Citizens eliminates corporate integrity office, The Miami Herald, October 16, 2012, by Toluse Olorunnipa. 3 The Office of Internal Audit is established in Section 627, Florida Statutes. 4 Pursuant to Section 14.32(2)(k), Florida Statutes, the Chief Inspector General shall conduct special investigations and management reviews at the request of the Governor. i

4 The Vice President of Corporate Administration and the Director of Human Resources resigned. A consultant was engaged to assess the Human Resources Program, act as interim Director of Human Resources and find a permanent Director of Human Resources; and, Mr. Gilway and Mr. Joe Martins, Citizens Chief of Internal Audit, were new to Citizens. The decision to disband OCI occurred amidst these organizational transitions. In addition to the conditions cited above, there is a need to analyze: 1. The decision and action to disband OCI; and, 2. The justifications offered for the decision after the decision had been made. In interviews, Mr. Gilway, Mr. Martins, and other Citizens decision-makers denied that disbanding OCI was in retaliation for any acts or actions by OCI employees including the conduct of recent investigations involving some of Citizens senior managers. Mr. Gilway provided a statement to the Board of Directors (Board) after the elimination of the OCI positions that listed several justifications for the decision to disband the OCI. While Mr. Gilway asserted that the reasons were in response to what he considered intense and unfair media attention, the reasons cited performance issues that were not raised prior to disbanding OCI nor supported by other decision-makers involved in the decision. No evidence was found that the justifications presented to the Board by Mr. Gilway entered into the decision to disband OCI and Mr. Gilway asserted that the real reason for the decision was what he reported to Governor Scott in his letter of October 17, 2012, a change in corporate direction. Mr. Gilway acknowledged that his biggest error associated with the decision was one of timing because the OCI was disbanded shortly after the Chief Inspector General began an investigation of reported excessive travel and travel-related expenditures at Citizens. Finally, the four former employees of OCI were not covered individuals and the conduct of internal investigations is not a protected activity. 5 While the elimination of a position appears to be an adverse action, Citizens management presented a legitimate nondiscriminatory business reason for the elimination of the positions. While the former employees believed retaliation occurred, evidence to support their belief was not presented. Based solely on the evidence, the evidence did not support a conclusion that retaliation was the reason for the decision to disband OCI. 5 In its 2009 Crawford decision, the U.S. Supreme Court concluded that an employee who is interviewed as a possible witness to workplace discrimination or harassment is protected from later retaliation by the employer under Title VII. In Brush v. Sear Holding Corp. in April 2012, the Eleventh Circuit Court of Appeals refused to extend Crawford to protect a company investigator who objected to the way the employer was responding to an employee's sexual harassment claim. ii

5 At the time of this report, the Florida Legislature is creating, effective July 1, 2013, an independent office with a statutorily mandated investigative function and a prescribed reporting structure. iii

6 TABLE OF CONTENTS EXECUTIVE SUMMARY... i TABLE OF CONTENTS...iv INTRODUCTION... 1 BACKGROUND... 1 Statutory Authority... 1 Plan of Operation... 2 Citizens Organizational Chart... 3 PURPOSE, SCOPE AND METHODOLOGY... 4 Retaliation... 4 FINDINGS... 5 Florida Statutes Establish Citizens Office of Internal Auditor... 5 Reporting Structure of Employee Misconduct Investigations Varied Over Time... 6 Citizens Policy Number 102 Governs Internal Complaint Handling... 7 Relevant Complaints against Senior Managers... 8 Interviews ANALYSIS AND CONCLUSIONS RECOMMENDATION APPENDIX I TEAM APPENDIX 2 -- TIMELINE APPENDIX 3 -- PERSONS INTERVIEWED RESPONSE iv

7 INTRODUCTION On October 11, 2012, Citizens Property Insurance Corporation (Citizens) 6 officials informed the four employees in Citizens Office of Corporate Integrity (OCI) that their positions were being eliminated. Shortly thereafter, media around the State raised questions about this decision and suggested that the OCI had been disbanded in retaliation for OCI staff investigating misconduct on the part of senior staff that made Citizens look bad. The decision to disband the OCI came shortly after the Governor asked the Chief Inspector General (CIG) to examine reports of excessive travel and travel-related expenditures. 7 In an October 17, 2012, letter to Governor Scott, Citizens President, Barry Gilway, commented on the issues raised in the article. In his letter, Mr. Gilway asserted that Citizens corporate integrity functions had not been eliminated, but rather had been realigned under other business units, including the Office of Internal Audit, 8 the Ethics and Compliance Officer and the Employee Relations Unit. He also asserted that the change was in accordance with current corporate best practices and should strengthen and enhance Citizens corporate integrity and ethics policies and procedures. In a letter dated November 19, 2012, Governor Scott requested the CIG 9 to conduct a review to determine whether any of the terminations of OCI staff were retaliatory in nature. Statutory Authority BACKGROUND In accordance with Section (6), Florida Statutes (F.S.), Citizens was created effective July 1, 2002, by the Florida Legislature as a government entity. As outlined in statute, Citizens is the state s last resort insurer, and insures hundreds of thousands of homes, businesses, and condominiums whose owners otherwise might not be able to find coverage. By statute, Citizens is to provide affordable property insurance to applicants who are in good faith entitled to procure insurance through the voluntary market but are unable to 6 Citizens was created in statute effective July 1, 2002 to provide affordable property insurance to applicants who are in good faith entitled to procure insurance through the voluntary market but are unable to do so. 7 In a letter dated September 4, 2012, Governor Rick Scott notified Citizens President Barry Gilway that he was requesting CIG Melinda Miguel to conduct a review of travel expenditures at Citizens. On February 14, 2013, the Office of the Chief Inspector General issued Report Number The Office of Internal Audit is established in Section 627, Florida Statutes. 9 Pursuant to Section 14.32(2)(k), Florida Statutes, the Chief Inspector General shall conduct special investigations and management reviews at the request of the Governor. 1

8 do so. Additionally, according to Section (6)(a)1., F.S., the Legislature intends that: affordable property insurance be provided and that it continue to be provided, as long as necessary, through Citizens Property Insurance Corporation [Citizens], a government entity that is an integral part of the state, and that is not a private insurance company. To that end, the corporation [Citizens] shall strive to increase the availability of affordable property insurance in this state, while achieving efficiencies and economies, and while providing service to policyholders, applicants, and agents which is no less than the quality generally provided in the voluntary market, for the achievement of the foregoing public purposes. Because it is essential for this government entity to have the maximum financial resources to pay claims following a catastrophic hurricane, it is the intent of the Legislature that the corporation [Citizens] continue to be an integral part of the state and that the income of the corporation [Citizens] be exempt from federal income taxation and that interest on the debt obligations issued by the corporation [Citizens] be exempt from federal income taxation. 10 Plan of Operation Section (6), F.S., states that Citizens shall operate pursuant to a plan of operation approved by order of the Financial Services Commission 11 and specifies what should be included in the Plan of Operation. Citizens current Plan of Operation, effective date August 1, 2002, and as amended July 28, 2009, indicates that Citizens is governed by a Board of Governors [Board] consisting of eight individuals responsible for administering the plan. The Governor, the Chief Financial Officer, the President of the Senate and the Speaker of the House each appoint two members of the Board, and at least one of the two members must have demonstrated expertise in insurance. The Chief Financial Officer designates one of the appointees as Chair of the Board. In accordance with statute and the Plan of Operation, Citizens President and Senior Managers 12 shall be engaged by and serve at the pleasure of the Board. The President is subject to confirmation by the Senate and is responsible for employing additional staff as the corporation [Citizens] may require, subject to review and concurrence by the Board. The Plan of Operation specifies that the Chair of the Board is responsible for supervising, reviewing the performance, and establishing annually the compensation of 10 During our review, we noted a Certificate of Exemption from state taxes issued by the Florida Department of Revenue for Citizens based on a state government exemption category. 11 In accordance with Section , F.S., the Financial Services Commission is comprised of the Governor, the Attorney General, the Chief Financial Officer, and the Commissioner of Agriculture. 12 According to Citizens Plan of Operation, Senior Manager of the Corporation means a person who serves as an officer of Citizens including the President, one or more Senior Vice Presidents, one or more Vice Presidents, the Chief Financial Officer, the General Counsel, and any other person designated and engaged by the Board as an officer. 2

9 the President. The Plan of Operation, lists among other things, the duties and responsibilities of the President to include in pertinent part: (4) Hire the staff of the Corporation [Citizens], subject to the review and concurrence by the Board through approval of the budget or other process; and retain independent contractors and other vendors, as necessary, to carry out the business of the Corporation [Citizens] as set forth in the Statute and this Plan, subject to any directives, guidelines or procedures as may be adopted by the Board. (6) Consistent with the Statute and this Plan, locate and employ or retain individuals or entities to provide administrative or professional services to effectuate the Plan and provide services for the operation of the Corporation's [Citizens ] business, subject to any directions, guidelines or procedures as may be adopted by the Executive Committee. (7) Promulgate and administer policies and procedures for the rendering of services to the Corporation [Citizens] by staff, providers, vendors and Agents of the Corporation [Citizens], including policies for employees regarding conflicts of interest, dual employment, and post-employment restrictions, and report the status of operations of such individuals or entities to the Board on a regular basis. Any breach of conflict of interest, dual employment, post-employment or other ethics policies by employees or members of the Board shall be reported by the Executive Director [President] to the Chair of the Board immediately upon discovery. If such breach constitutes potential criminal or fraudulent activity, the full circumstances shall also be reported in accordance with the Statute and other applicable law. Citizens Organizational Chart Citizens organizational chart as of September 19, 2012, shows that the President and the Chief of Internal Audit report directly to the Board. The following Senior Managers within Citizens report to the President: Chief Insurance Officer General Counsel and Chief Legal Officer Vice President of Enterprise Planning and Project Portfolio Chief Financial Officer Chief Administration Officer Chief Information Officer 3

10 Chart 1: Citizens Organizational Chart as of September 19, 2012 Board of Governors Chief of Internal Audit President/CEO/Executive Director Chief Insurance Officer General Counsel and Chief Legal Officer Chief Information Officer Chief Administration Officer Chief Financial Officer Vice President Enterprise Planning and Project Portfolio Vice President of Claims Vice President of Underwriting Vice President of Information Technology Strategy and Architecture Vice President of Corporate Administration PURPOSE, SCOPE AND METHODOLOGY Based on the Governor s request to determine whether any of the terminations of OCI staff were retaliatory in nature, the CIG performed the following activities: Interviewed selected current and former Citizens employees who played a substantive role in the decision to disband the OCI; Interviewed former OCI employees who agreed to an interview; Analyzed documents and records that related to the operation of OCI, employee performance, and anything relevant to the disbanding of the OCI; 13 and, Interviewed Citizens outside counsel. 14 The period of interest for this review was December 1, 2011, through December 31, Retaliation In employment situations, retaliation occurs when an employer takes an adverse action against a covered individual because the individual engaged in a protected activity. The 13 The data collected and reviewed totaled more than 2 gigabytes or the equivalent of about 135,000 pages of data if all of the data was in text format. 14 This required Citizens to waive attorney client privilege. 4

11 terms adverse action, covered individual, and protected activity are generally defined with reference to Federal law. Adverse Action is an action to try to keep someone from opposing a discriminatory practice and can include employment actions such as a change in working conditions, termination, refusal to hire or denial of promotion. It does not include petty slights or annoyances or justified negative comments about performance. Covered Individuals are people who have made formal complaints, participated in the investigation of formal complaints, taken other action to oppose unlawful employment practices, or requested workplace accommodations related to religious beliefs or covered disabilities. Protected Activity includes actions taken to oppose unlawful discrimination. In general, there must be a causal connection between the protected activity and the adverse employment action to establish retaliation. A defense to retaliation is there was a legitimate, nondiscriminatory reason for the employment action. FINDINGS Florida Statutes Establish Citizens Office of Internal Auditor Section (6)(i)1., F.S., established an Office of Internal Auditor (OIA) within Citizens to: Provide a central point for coordination of and responsibility for activities that promote accountability, integrity, and efficiency to the policyholders and to the taxpayers of this state; Provide direction for, supervise, conduct, and coordinate audits, investigations, and management reviews relating to the programs and operations of the corporation; Conduct, supervise, or coordinate other activities carried out or financed by the corporation for the purpose of promoting efficiency in the administration of, or preventing and detecting fraud, abuse, and mismanagement in, its programs and operations; Submit final audit reports, reviews, or investigative reports to the Board, the executive director, the members of the Financial Services Commission, and the President of the Senate and the Speaker of the House of Representatives; Keep the Board informed concerning fraud, abuses, and internal control deficiencies relating to programs and operations administered or financed by Citizens, recommend corrective action, and report on the progress made in implementing corrective action; 5

12 Report expeditiously to the Department of Law Enforcement or other law enforcement agencies, as appropriate, whenever the internal auditor has reasonable grounds to believe there has been a violation of criminal law; and, Report on or before February 15, in an annual report evaluating the effectiveness of the internal controls of Citizens and provide recommendations for corrective action, if necessary, and summarize the audits, reviews, and investigations conducted by the office during the preceding fiscal year. The statute specifies that the internal auditor is as follows: Selected without regard to political affiliation; Appointed by the Board; Generally supervised by the Board; and, Not subject to supervision by any Citizens employee. Based on statute, Citizens provides administrative staff and support to the OIA. Reporting Structure of Employee Misconduct Investigations Varied Over Time In June 2008, Citizens established an Office of Corporate Compliance (OCC) reporting to the Vice President of Corporate Administration. The OCC, later titled Office of Corporate Integrity (OCI), is not defined in Florida Statutes or Citizens Plan of Operation. Based on Citizens Policy Number 102, effective September 21, 2009, the OCC was assigned responsibility for investigating complaints of employee misconduct. Citizens Policy Number 102 also assigned the responsibility for Citizens internal complaint handling process to Citizens Employee Relations Unit. Citizens Employee Relations Unit, part of Human Resources, reported to the Vice President of Corporate Administration. In 2010, the OCC was renamed to OCI and reported to the General Counsel rather than the Vice President of Corporate Administration. The General Counsel reported directly to the President. On January 26, 2012, Citizens President at that time directed the OCI to report directly to him. He also directed that the responsibility for overseeing Citizens internal complaint handling process be reassigned from the Employee Relations Unit to the OCI. Citizens appointed an interim President on March 12, 2012, and on March 28, 2012, the interim President directed OCI be reassigned to the General Counsel. On June 13, 2012, Mr. Barry Gilway was appointed President and effective July 23, 2012, he directed OCI to report to the OIA. The OIA reports directly to the Audit Committee of Citizens Board. 6

13 Citizens Policy Number 102 Governs Internal Complaint Handling Citizens Policy Number 102 was created in April 2008 to set the policy for complaint handling at Citizens. The policy directed that complaints be forwarded to one of four units in Citizens. At the time of its creation, the policy specified that complaints would not be investigated by or shared with any person outside the unit to which the complaint was forwarded. The four units that received complaints were as follows: Consumer Services Department was assigned responsibility for consumer complaints; 15 OIA was assigned responsibility for providing direction, supervision, conduct, and coordination of audits, investigations, and management reviews relating to Citizens programs and operations; 16 Special Investigations Unit was assigned as the central point for complaints of possible fraudulent claims by policyholders or persons making insurance-related claims; 17 and, Employee Relations Unit was designated to receive employee relations complaints. The Vice President of Citizens Corporate Administration was responsible for administration of Citizens Policy Number 102. The policy was revised in December 2008, September 2009 and October The September 2009 revision showed that the OCC (later the OCI), was established to examine or investigate complaints of employee misconduct. This is the policy that was in force until OCI was disbanded. Under this revision, if the allegations were against a member of Citizens senior management, outside counsel or an outside third party conducted the investigation or assisted with the investigation. On October 17, 2012, shortly after the disbanding of OCI, Citizens Policy Number 102 was revised so that the responsibility for administration of complaint handling was moved from the Vice President of Corporate Administration to the Ethics and Compliance Officer who reports to the General Counsel. Following receipt of a complaint, the Chief of Internal Audit, the Ethics and Compliance Officer and the head of the impacted business unit review the complaint and decide whether additional investigation is required and who will be assigned to investigate the complaint. 15 Section (6)(k)2., F.S., states that Citizens shall establish a unit or division responsible for receiving and responding to consumer complaints, which unit or division is the sole responsibility of a senior manager of Citizens. 16 Created in accordance with Section (6)(i)1., F.S. 17 Section (6)(k)1., F.S., states Citizens shall establish and maintain a unit or division to investigate possible fraudulent claims by insureds or by persons making claims for services or repairs against policies held by insureds; or it may contract with others to investigate possible fraudulent claims for services or repairs against policies held by Citizens pursuant to Section , F.S. 7

14 Relevant Complaints against Senior Managers CPIC Complaint about Mismanagement On March 21, 2012, members of the Board received an anonymous complaint regarding Mismanagement of the Purchasing Department at Citizens Property Insurance by Chief Susanne Murphy [Chief of Administration]. In accordance with Citizens Policy Number 102 in effect at that time, 18 the complaint was routed to the OIA 19 and was assigned case number CPIC In general, the allegations were as follows: 1. Chief of Administration, Susanne Murphy, violated Citizens Purchasing Policy; 2. Purchases were not presented to the Board as statutorily required; and, 3. Other vague concerns about management and investigations relating to the Chief of Administration and two of her direct reports. The OIA completed an investigation into these allegations and issued a report dated June 22, 2012, which concluded: As a result, our work focused upon available documentary evidence and observation without conducting extensive interviews with management and staff and our results on some of the allegations were therefore inconclusive. In addition, the majority of the claims made in the letter were found to have no evidence that supports or confirms the allegations. OIA did make some observations and recommends that Citizens Management take proactive measures. CPIC Complaint about Mishandling Investigations and Discipline On March 30, 2012, Citizens received an additional anonymous complaint through its Tell Citizens Program 20 that alleged that the General Counsel, Chief of Administration, and members of the Human Resources and Legal Departments: mishandled investigations, discipline, and Citizens funds and that External law firms are hired to investigate select allegations. The paid firms are given direction and limitations on who and what to investigate and how to report. The information provided and reported is misrepresented as the true [sic]. The reports are false. When they are 18 According to Citizens Policy Number 102, all complaints of fraud, abuse, mismanagement, internal control deficiencies, and Code of Ethics/Conflict of Interest Policy violations were to be forwarded to the OIA. 19 The OCI reported directly to the President on this date and they were not involved in investigating this complaint. 20 Tell Citizens Reporting Program includes a toll-free hotline ( ) and a website ( designed to receive complaints. The hotline and website are operated by an external vendor that does not trace telephone calls or web reports. The Tell Citizens hotline and website are available twenty-four (24) hours a day. 8

15 afraid they can t protect certain employees or are afraid an employee will report these mishandlings, they pay them $$$$$ to keep this quiet and ask them to resign. This is all keep [sic] hush hush and is not reported as statute requires. This complaint was routed to OIA and, at the direction and consent of Citizens former Interim President and Audit Committee Chairperson, OIA requested the assistance of OCI to investigate the allegations on April 5, Just prior to this request, OCI reported to the President. However, as of March 28, 2012, the OCI and its four employees were reassigned to report to the General Counsel, who was one of the subjects of the allegations in the March 30, 2012, complaint. On July 19, 2012, OCI issued an interim report regarding their initial assessment of the allegations contained in the March 30, 2012, complaint. This document was 73 pages in length and included 164 exhibits. In compiling the report, OCI did not conduct any interviews, access any personnel files, or examine any computers held by persons of interest. In summary, the report was an analysis of existing documents, current and historical organizational documents, Citizens s and instant message archives and other historical records believed necessary to understand the background information gathered to this point. This report provided background on Citizens internal complaint handling (of which the OCI was a party of and now assigned to investigate), Citizens Determination Committee 22 (of which the General Counsel, the Vice President of Corporate Operations, 23 the Director of Human Resources and others were members), Citizens policy regarding severance and settlement payments to separated employees and recited the results and summaries of investigations conducted at Citizens of employees and former employees over the period of by varying units (OIA, OCI, or outside counsel). Joe Martins, Chief of Internal Audit, was appointed on June 11, 2012, and Barry Gilway, President, was appointed on June 13, The interim report prepared by OCI was submitted to Mr. Martins and Mr. Gilway and concluded: this review disclosed documents supporting in part, the complainant s allegations involved activities by certain Citizens officers and management. To resolve this complaint beyond the document review addressed in this report however, other investigative steps including the 21 Citizens Policy Number 102 in effect at this time showed that the OCI was established to examine or investigate complaints of employee misconduct. This is the policy that was in force until OCI was disbanded. Under this policy, if the allegations were against a member of Citizens senior management, outside counsel or an outside third party conducted the investigation or assisted with the investigation. 22 This unit was established by Susanne Murphy. 23 Susanne Murphy s position title was changed effective May 31, 2011, to Chief Administration Officer. 9

16 review of personnel files and interviews of those named and involved, are needed. After the Director of OCI, T.W. Smart, briefed Mr. Martins and Mr. Gilway, Mr. Gilway authorized OIA, with the assistance of OCI, to investigate the allegations and conduct interviews of senior staff, review personnel files and clone hard drives or other data storage devices. However, three of the persons to be interviewed objected to being interviewed by the OCI staff because these persons considered OCI staff to have a bias against them. 24 For this reason, and because Citizens Policy Number 102 provided that investigations of allegations against senior staff be conducted by outside counsel, 25 OCI staff did not participate in the interviews of Susanne Murphy, Chief of Administration; Dan Sumner, General Counsel; or J.D. Lester, then Director of Human Resources; and Mr. Martins, Mr. Fox, and Mr. Mark Connolly, an attorney with Shumaker, Loop & Kendrick, LLP, engaged by the OIA, interviewed these senior staff members. The final report on the investigation into allegations received on March 30, 2012, was written by Mr. Martins and is dated August 31, The report concluded that the investigation did not substantiate the three allegations of mismanagement raised by the anonymous complaint. However, information gathered confirmed inconsistency of treatment in: the management of complaints reported, investigations completed and resulting disciplinary actions. Based on the investigation, Citizens management, in response to the report, agreed to: Interviews Develop procedures and processes to assure complaints are handled appropriately; Develop and implement a formal discipline policy and procedure; and, Develop and implement a formal severance pay policy and procedure. Megan Walker, former Analyst, OCI, Citizens Ms. Walker declined to be interview. Melanie Yopp, 26 former Investigator, OCI, Citizens Ms. Yopp said that she began work at Citizens in late February She said that she had done nothing at Citizens that would result in retaliation. Ms. Yopp said she believed retaliation occurred but she had no evidence to support her belief. However, she said 24 The General Counsel put his concerns in writing. Ms. Murphy and Ms. Lester verbally expressed their concerns to Mr. Martins. 25 Citizens Policy Number 102 dated September 21, 2009, provided that, in the event a complaint is received against a senior manager, as defined in the Citizens Plan of Operation, any resulting investigation will be conducted by, or assisted by, an external third party. 26 Ms. Yopp s confidentiality agreement is dated February 27,

17 that Selisa Daniel, former OCI Senior Investigator, produced a 73-plus page report after Citizens received an anonymous complaint in March Ms. Yopp said that on October 11, 2012, a meeting was scheduled to discuss performance reports and that prior to that meeting, she was not aware that OCI was going to be eliminated. She said that they met in the conference room at the appointed time and Ms. Gena Buonamici, Director of Human Resources and Mr. Thom Burke, the interim Director of Human Resources, joined the meeting. She explained that she knew then that something else was going on. She said all four of the employees of OCI were told that their jobs were eliminated. She said the reason she was provided for their terminations was that Citizens was going in a different direction. Ms. Yopp said she believed that T.W. Smart, former OCI Director, had no idea that OCI was going to be disbanded prior to that meeting. She said that it was about a week before the meeting when she started feeling uneasy because they were not receiving any new complaints to review. She said that Ms. Daniel also told her that Citizens would not pay for any continuing professional education for Ms. Daniel that Ms. Daniel believed she needed. Selisa Daniel, 27 former Senior Investigator, OCI, Citizens Ms. Daniel said that she began working at Citizens in November She said that when Mr. Smart, her supervisor, was hired in late 2011, the OCI reported to Mr. Dan Sumner, Citizens General Counsel, but shortly after Mr. Smart was hired, OCI was realigned to report to the President. She said that then President Scott Wallace resigned two or three weeks later and Mr. Tom Grady became President. She said it was at about that same time, Ms. Joyce Bellows, Chief of Internal Audit, resigned and Mr. John Fox was appointed as the acting Chief of Internal Audit. Ms. Daniel said that during March 2012, a number of complaints were received. She said that one of the complaints was dated March 21, 2012, and was addressed to Carlos Lacasa, Chairman of the Board. She said that this was an anonymous two page letter that was sent to the OIA in accordance with Citizens Policy Number 102. She said that the report on this complaint was dated June 22, 2012, and was issued by OIA. She said that this report was titled Mismanagement of Purchasing and Human Resources Functions. She said that another complaint was received on March 30, 2012, regarding the mishandling of investigations, discipline, and Citizens funds and became CPIC She explained that the final report was issued by Mr. 27 Ms. Daniel s confidentiality agreement was dated February 12, Ms. Daniel said that Citizens uses IntegriLink software by Global Compliance to receive complaints. She explained that this software relies on key words and other filters to decide where a complaint should be directed for resolution. She said that OCI has access to determine the status of complaints received by most organizational elements. She said that the software also assigns a case number that will be CPIC-(year)-(month)-(sequence during the month) and offered the following example: a case opened in March 2012 would be numbered CPIC x. 11

18 Martins, Chief of Internal Audit, on August 31, Ms. Daniel said she believes that this was the assignment at the heart of the alleged retaliation. Ms. Daniel said that, during this investigation, she and Mr. Smart conducted interviews of Ms. Buonamici, Director of Human Resources, and Mr. Casteel, Assistant General Counsel. Ms. Daniel said that she also conducted interviews of other senior officials. However, the interviews of Mr. Sumner, Ms. Murphy and Ms. Lester were conducted by Mr. Martins, Mr. John Fox and Mr. Mark Connolly. Ms. Daniel said that this was done because Mr. Sumner had objected to being interviewed by OCI because he believed they were biased. 29 Ms. Daniel said that she was not really surprised by the disbanding of the OCI. She said that in the last few weeks before the OCI was disbanded there were no new cases being assigned to OCI and they were being pushed to close open cases. Additionally, Ms. Daniel said that her requests for upcoming training were rejected. She said that she believed these were indicators that change was coming. She said that she believed the causes for the changes were retaliatory in nature although she had no specific evidence. Ms. Daniel said that on October 11, 2012, the OCI staff met with Mr. Martins in their office suite. She said that she recalled that someone knocked on the door and Ms. Buonamici and Mr. Burk entered and told the staff that their positions were eliminated and that they were terminated. Ms. Daniel said she believed that the staff was dismissed and OCI dissolved because of the 73 page report they prepared. She said that she thought that the report was an embarrassment to Citizens. T.W. Smart, former 30 Director of Corporate Integrity, OCI, Citizens Mr. Smart stated that he began employment at Citizens on December 2, Mr. Smart initially said that he did not wish to participate in an interview. Mr. Smart said he believed that the decision to disband OCI had an element of retaliation although he had no evidence. Mr. Smart said that in January 2012, he met with Mr. Scott Wallace, then President of Citizens 31 and following the meeting, Mr. Wallace directed that OCI report to the President and complaints be directed to OCI for investigation. Mr. Smart said that President Wallace resigned effective April 6, 2012, and Mr. Tom Grady was appointed as the interim President on March 12, He said that President Grady moved OCI back under Mr. Sumner sometime in late March or early April 2012, before the changes recommended by President Wallace could take effect. 29 Citizens Policy Number 102 also requires that investigations of senior officials be conducted by outside counsel. 30 Mr. Smart s confidentiality agreement is dated December 2, Mr. Smart said that his supervisor Mr. Daniel Sumner was not invited to this meeting and was upset. He said that he believes that this damaged his relationship with Mr. Sumner. 12

19 Mr. Smart stated that in late March or early April 2012, the interim Chief of OIA, Mr. Fox, asked for OCI s assistance in investigating an anonymous complaint. He said that Ms. Daniel was assigned as case agent and began the investigation to gather background information. He stated that, at that time, Ms. Daniel never interviewed any subject or potential witness but she had gathered documentation and reviewed files. He said it was this background work that resulted in the 73 page report dated July 19, Mr. Smart said he briefed Mr. Gilway on this investigation sometime after he was appointed in mid-june. Mr. Smart said that he was told by Mr. Gilway that OCI would report to Mr. Martins. He said that interviews were needed and a decision to review hard drives from certain computers was necessary to complete this investigation. Mr. Smart said that Mr. Gilway and Mr. Martins authorized the interviews of subjects and the confiscation of the hard drives. Mr. Smart said that he never received a performance evaluation or any comments about his performance while he was at Citizens. Tom Burke, former interim Director of Human Resources, Citizens Mr. Burke confirmed that he provided advice to Mr. Gilway and Mr. Martins about the disbanding of the OCI. He said that he advised that all members of OCI should be treated the same and that he recommended that the cleanest way was to abolish the positions and prepare new descriptions for the tasks that Mr. Martins wished to have done. Dan Sumner, General Counsel, Citizens Mr. Sumner stated that Mr. Martins informed him of the decision to disband OCI, but Mr. Sumner said he that he did not offer any advice because the legislation that established the OIA stated that the Chief of Internal Audit is not subject to supervision by any employee of Citizens. Mr. Sumner said he did not want to take any action or offer any advice that might be interpreted as impeding the Chief of Internal Audit. For this reason, he accepted the information relayed to him by Mr. Martins, but offered no advice. Joe Martins, Chief of Internal Audit, Citizens According to Mr. Martins, Citizens officials informed the four employees in the OCI that their positions were being eliminated on October 11, During his interview, Mr. Martins denied that the reason for disbanding OCI was retaliation for OCI staff s involvement in either of the above investigations. According to Mr. Martins, after he joined Citizens in June 2012, he was immediately faced with a very large internal investigation regarding an anonymous complaint dated March 30, 2012, that was being conducted by the OCI on behalf of the OIA. He said he read the 73-plus page preliminary report that had been prepared by Ms. Daniel. He said that there had 13

20 been no witness or subject interviews but the interim report contained lots of data and process information including information regarding prior investigations. In looking at the March 30, 2012, complaint and the preliminary investigative report, he said it was clear that his first priority was to work with the OCI to bring this investigation to closure. On July 23, 2012, the OCI was made a part of the OIA. Mr. Martins said he had the opportunity to assess the role of audit in Citizens, where the OCI fit into that structure and how the OIA could best serve the organization going forward. According to Mr. Martins, his assessment was based upon his past experience in South Africa and Chicago while employed by Zurich Insurance. He said that his assessment went above and beyond OCI and focused on OIA s position in the organization. Mr. Martins said that his report concluded that OCI focused on investigating complaints reported to OCI by various organizational units including the Hotline and that OCI was not proactively seeking issues to investigate. He considered their investigations reactive and did not support development of a proactive enterprise wide fraud risk analysis and fraud response plan. He said he believed the majority of the OCI s workload, while relatively large, focused on investigating issues, which, in his opinion and experience, were usually more effectively handled by line management. 32 Mr. Martins said that based on his review, the complaint handling process was changed and no new assignments were given to OCI. He said that all new complaints are reviewed by OIA and Human Resources and given to management for action. He said that since this change, line managers have complimented him on the change. He said that although skilled in investigations, it was clear from interviews with the OCI staff that their exposure to the development of an enterprise wide fraud risk analysis and fraud response plan was limited and they had no exposure to the implementation of proactive fraud management processes. Mr. Martins said that the positions in OCI were eliminated and new positions designed for forensic accountants were developed. He said that the change was going to cost more because Citizens not only wanted staff with investigative skills, but also staff with a very strong financial background to help with the proactive investigation of fraud in the organization. According to Mr. Martins, the decision to disband the OCI was his decision. However, he said that he sought advice and counsel from others in Citizens including Mr. Gilway. Mr. Martins said that the purpose of his discussions with Mr. Gilway, Mr. Burke and Mr. Lynch was to gather advice and counsel, but not to seek approval. He said that he was advised to treat all of the employees in OCI alike and that his decision to eliminate their positions accomplished this. Mr. Martins stated that he did not have any performance problems with the members of OCI. He said that if he had performance concerns, he 32 Mr. Martins provided a listing of all complaints received through IntegriLink. IntegriLink is Citizens internal status tracking system for complaints. This listing confirmed that a majority of the matters listed were complaints of employee misconduct which is what the office was created to do. 14

21 would have addressed those problems directly with the employee. He said that the OCI, as instituted, did not fit in his vision of where he wanted the OIA to go. Based on information provided by Mr. Martins, he presented the new organizational structure to Citizens Audit Committee on November 16, 2012, for approval. Mr. Martins presentation included the reasons for the change, the budget impact, and a discussion of the investigation related to mishandling of investigations, discipline and Citizens funds. Citizens Audit Committee accepted the report and approved the organizational change and budget request it contained. Mr. Martins said that he had accepted the position with Citizens in June He said that he had no prior experience in Florida government. He said that after he had made his decision to disband OCI he discussed the decision with Mr. Sumner and received no advice to the contrary. Barry Gilway, President, Citizens Mr. Gilway said that upon his arrival at Citizens, the management atmosphere was toxic. He said that upon assuming the role of President he was uncomfortable with the fact that the OCI reported directly to the President or to one of the President s direct reports - the General Counsel. He said he believed this was inappropriate and made a decision to move the OCI under the OIA because he believed this was an organizational unit with more independence and reported to the Board s Audit Committee. Mr. Gilway pointed out that when he was briefed on the March 30, 2012, complaint and interim report prepared by the OCI, he authorized OIA with the assistance of OCI to investigate the allegations and conduct interviews of senior staff, review personnel files and clone hard drives or other data storage devices. According to Mr. Gilway, the briefing he received was very disturbing and, because he was relatively new to Citizens, he engaged outside counsel, Gloria Fletcher, Gloria W. Fletcher, P.A., to advise him with respect to this investigation. According to Mr. Gilway, after his authorization, the investigative team conducted interviews of senior officials, reviewed personnel files and examined the data stored on computers. Mr. Gilway said that three of the more senior staff to be interviewed objected to being interviewed by the OCI staff because these persons considered OCI staff to have a bias against them. 33 For this reason, and because the existing policy provided that investigations of allegations against senior staff should be conducted by outside counsel, 34 OCI staff did not participate in the interviews of Ms. Murphy, Mr. Sumner or Ms. Lester. Mr. Gilway said that Mr. Martins, Mr. Fox, and Mr. Connolly interviewed these senior staff members. 33 The General Counsel put his concerns in writing. Ms. Murphy and Ms. Lester verbally expressed their concerns to the Chief of Internal Audit. 34 Citizens Policy Number 102 dated September 21, 2009, provided that, in the event a complaint is received against a senior manager, as defined in the Citizens Plan of Operation, any resulting investigation will be conducted by, or assisted by, an external third party. 15

22 Mr. Gilway denied that the reason for disbanding OCI was retaliation related to either of the investigations described earlier or related to any other action. He said that he explained the decision to disband the OCI to Governor Scott in a letter dated October 17, 2012, and in a presentation to the Board on November 27, Mr. Gilway, in reporting to the Board in November 2012, listed a number of problems with OCI as reasons for the decision to disband OCI. However, during his interview, he stated that these were justifications for the decision that were developed after the fact and were a defensive response to what he considered unfair press coverage. The justifications he cited during the Board meeting included: Mismanagement of case loads; Unnecessary expansion of investigations; Investigations focused more on personal grievances than potential organizational misconduct; OCI used inappropriate investigatory methods and tactics that may have exposed Citizens to legal liabilities and possible lawsuits; Factual inaccuracies in investigative reports; No proactive or preventive capabilities of the staff; No forensic credentials of the staff; Long lag times in completing investigations; and, No sense of urgency in facilitating investigations. According to Mr. Gilway, the final investigative report on the March 30, 2012, complaint identified areas where improvements were needed. The final report clearly highlighted these areas and identified the corrective actions needed to ensure they were not repeated. He said he believed the report adequately addressed the allegations with recommendations to ensure proper corrective actions. On November 27, 2012, Mr. Gilway made a presentation to Citizens Board to explore staff changes in general and to discuss the OCI change specifically. Mr. Gilway developed talking points for the presentation. In developing the talking points, he said that he received input from some of Citizens senior managers who had been witnesses or subjects in OCI investigations. His presentation asserted that the OCI staff had performance problems. Mr. Gilway admitted that the performance concerns cited in his presentation to the Board were justifications developed after the action to disband OCI had been taken and were a defensive response to the negative press coverage. He acknowledged that these performance problems were never discussed with the former members of OCI. Mr. Gilway stated that the justifications offered to the Board, were not the reasons for the decision to disband OCI. He said that the decision was made because OCI, as instituted, did not fit in the vision that he and Mr. Martins had of where they wanted the OIA to go. Mr. Gilway stated that, in hindsight, Citizens mistake was one of timing in light of the ongoing Chief Inspector General investigation of travel and other related 16

23 expenses. He said that he believed that he did not adequately consider how this change would be perceived or that the two matters would be tied together by the press and others outside Citizens. Mr. Lynch, Board Member and Chair of the Audit Committee, Citizens Mr. Lynch confirmed that he had been kept informed by Mr. Martins and Mr. Gilway regarding the decision to disband OCI and that he sensed no element of retaliation in the decision. ANALYSIS AND CONCLUSIONS During the review period, December 2011 to December 2012, Citizens was an organization in leadership transition. This is illustrated by the following: There were three different Presidents during this period; The reporting structure for the OCI changed from reporting to the General Counsel to reporting to the President to, again, reporting to the General Counsel, and most recently, reporting to the Chief of Internal Audit; A long-time Chief of Internal Audit resigned and a new Chief of Internal Audit was hired; New policies and procedures relating to processing and investigating complaints were devised, drafted and implemented; The Vice President of Corporate Administration and the Director of Human Resources resigned. A consultant was engaged to assess the Human Resources Program, act as interim Director of Human Resources and find a permanent Director of Human Resources; and, Mr. Gilway and Mr. Martins were new to Citizens. The decision to disband OCI occurred amidst these organizational transitions. In addition to the conditions cited above, there is a need to analyze: 1. The decision and action to disband OCI; and, 2. The justifications offered for the decision after the decision had been made. Based on Citizens Policy Number 102, OCI had the responsibility to investigate employee misconduct complaints that were directed to it by Citizens managers, but Citizens did not have a statutorily prescribed process for independently handling investigations of misconduct by its employees and senior managers. As such, the function was passed between multiple units and its reporting structure was changed to various tiers within the organization. Further, OCI was not authorized to independently decide which cases to investigate and, by policy, could not investigate senior managers. However, OCI had recently been requested by OIA to provide investigative assistance 17

24 during an investigation into allegations against a few senior managers including the General Counsel who was in their chain of command at various times during the review period. The current President directed that the OCI report to the OIA and the Chief of Internal Audit analyzed this office and made recommendations to the Board about the mission of this office and the type of staff that he desired. The Chief of Internal Audit was the decision maker who concluded that the OCI, as constituted, did not fit in his vision for the OIA. His decision followed discussions with the President and Chair of the Board s Audit Committee. Following the decision to disband the OCI, the press coverage was largely negative. Between the date the decision was reported and the date of the report to the Board, Citizens President developed additional justifications that he believed would strengthen Citizens position in the public debate about the decision to disband the office. However, we found no evidence that these justifications entered into the decision or were discussed with former employees of OCI. Neither the Chief of Internal Audit nor the General Counsel, both of whom have supervised the OCI staff at some point in the last two years, told us that they were dissatisfied with the performance of OCI staff. Finally, the four former employees of OCI were not covered individuals and the conduct of internal investigations is not a protected activity. 35 While the elimination of a position appears to be an adverse action, Citizens management presented a legitimate nondiscriminatory business reason for the elimination of the positions. While the former employees believed retaliation occurred, evidence to support their belief was not presented. Based solely on the evidence, the evidence did not support a conclusion that retaliation was the reason for the decision to disband OCI. 35 In its 2009 Crawford decision, the U.S. Supreme Court concluded that an employee who is interviewed as a possible witness to workplace discrimination or harassment is protected from later retaliation by the employer under Title VII. In Brush v. Sear Holding Corp. in April 2012, the Eleventh Circuit Court of Appeals refused to extend Crawford to protect a company investigator who objected to the way the employer was responding to an employee's sexual harassment claim. 18

25 RECOMMENDATION The statutory authority of the OIA requires it to provide a central point of coordination for coordination of and responsibility for activities that promote accountability, integrity, and efficiency to the policyholders and taxpayers of the state and to provide direction for, supervise, conduct, and coordinate audits, investigations, and management reviews relating to the programs and operations of the corporation. Citizens Policy Number 102 appears to divide the complaint handling decision-making among a number of organizational elements and over time, may have subordinated the independent handling of complaints. While this may not violate the statute that creates the OIA, it has subjected complaint handling and investigation to a number of different perspectives. Citizens is a unique government entity. As such, its operations encompass activities that require an independent officer to serve as a central point to coordinate and promote accountability, integrity, and efficiency. The receipt and handling of complaints is an integral part of this responsibility. To be effective, this officer must have the authority to investigate matters it deems appropriate or for cause and the ability to report to stakeholders outside Citizens to ensure transparency and accountability to those they serve. Based on professional standards and to ensure that this office is not subordinated to other organizational units, this position should report to the highest rank at Citizens with the power to implement corrective actions in response to recommendations for improvement. Currently, there is no statutory directive for Citizens to have such a position. Meeting this requirement will require a tailored solution that requires legislative action. At the time of this report, the Florida Legislature is creating, effective July 1, 2013, an independent office with a statutorily mandated investigative function and a prescribed reporting structure. 19

26 APPENDIX I TEAM Melinda M. Miguel, Chief Inspector General, Executive Office of the Governor Dawn E. Case, Deputy Chief Inspector General, Executive Office of the Governor Marvin Doyal, Inspector General, Florida Agency for Persons with Disabilities Sharon Doredant, Inspector General, Florida Department of Revenue Chris Hirst, Inspector General, Florida Department of Children and Families 20

27 APPENDIX 2 -- TIMELINE DATE EVENT 6/1/2008 The Office of Corporate Compliance (OCC) is established. It reports to the Vice President of Corporate Administration. 6/1/2010 The Office of Corporate Compliance name is changed to the Office of Corporate Integrity (OCI). The OCI is to report to the General Counsel rather than the Vice President of Corporate Administration. 1/26/2012 Citizens President directs that OCI report directly to the President. He also directs that OCI assume responsibility for complaint intake, assignment and handling from the Employee Relations Unit. 3/12/12 An Interim President is named for Citizens. 3/21/2012 Citizens receives an anonymous complaint about improper purchasing practices. 3/28/12 Citizens President directs the OCI to report to the General Counsel. 3/30/2012 Citizens receives an anonymous complaint that alleges mishandling of investigations, discipline and funds. 6/11/2012 A new Chief of Internal Audit is selected by Citizens Board. 6/13/12 A new President is named for Citizens. 6/22/2012 Report on Mismanagement of Purchasing and Human Resources Functions is issued by the Office of Internal Audit (OIA). The report addresses the March 21, 2012 anonymous complaint to the Board. 7/19/2012 OCI issues Report of Investigation CPIC This is a 73 page report with 164 exhibits. 7/23/2012 Citizens President directs that OCI report to Office of Internal Audit (OIA). The Chief of Internal Audit reports to the Audit Committee of the Board of Directors. 8/31/2012 Investigative report on mishandling of investigations, discipline and Citizens funds is issued by the Office of Internal Audit. This addresses the March 30, 2012 complaint. 8/24/2012 The Director of Human Resources resigns from Citizens. 8/29/2012 The Chief Administration Officer resigns. 10/11/2012 Staff members of OCI are notified that their positions have been eliminated. 10/16/2012 The Miami Herald posts an article entitled Citizens eliminates corporate integrity office. 10/17/2012 Citizens Corporate Policy Number 102 is revised. This change assigns responsibility for intake of complaints to the Ethics and Compliance Officer, who reports to the General Counsel. 10/17/2012 Citizens President defends the decision to disband OCI in a letter to the Governor. 11/16/2012 The Chief of Internal Audit provided a status report on the Office of Internal Audit including a detailed discussion of the dissolution of the OCI to Citizens Audit Committee. 11/19/2012 The Governor asks the Chief Inspector General to review the terminations to determine whether any of the terminations were retaliatory in nature. 11/27/2012 Citizens President gives a detailed presentation on the decision to do away with the OCI to Citizens Board. 21

28 APPENDIX 3 -- PERSONS INTERVIEWED Name Position at Citizens Property Insurance Corporation Gena Buonamici Citizens Director of Human Resources Thom Burke Former Interim Senior Director of Human Capital Management Michael Connolly Outside Counsel, Shumaker, Loop & Kendrick, LLP Selisa Daniel Former employee, OCI Gloria Fletcher Outside Counsel, Gloria W. Fletcher, PA Barry Gilway Citizens President Tom Lynch Audit Committee Chair, Citizens Board Joe Martins Chief of Internal Audit, Office of Internal Audit Dan Sumner Citizens General Counsel John Wortman Audit Committee Member, Citizens Board Melanie Yopp Former employee, OCI 22

29 RESPONSE 23

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31 Executive Office of the Governor Office of the Chief Inspector General The Capitol, Room 2103 Tallahassee, Florida Office Phone Number (850) Fax Number (850) Whistle-blower s Hotline