by Jesse Eisinger ProPublica, April 21, 2015, 9 a.m.
This story was co-produced with Marketplace.
The email that ruined Tony Menendez’s life arrived on a warm and sunny February afternoon in 2006. Menendez is, by nature, precise and logical, but his first instinct was somewhat irrational. He got up to close the door to his office, as if that might somehow keep the message from speeding across cyberspace. Then he sat down at his desk to puzzle out what had just happened.
The email was sent by Mark McCollum, Halliburton’s chief accounting officer, and a top-ranking executive at Halliburton, where Menendez worked. It was addressed to much of the accounting department. “The SEC has opened an inquiry into the allegations of Mr. Menendez,” it read. Everyone was to retain their documents until further notice.
Panic gripped Menendez. How could McCollum have learned he had been talking to the SEC? The substance of the email was true. After months of raising concerns inside the company, Menendez had filed a complaint with regulators and Halliburton’s audit committee that accused the giant oil services company of violating accounting rules. But those complaints were supposed to be kept strictly confidential. Did the agency violate that trust? Did a board member? Somebody had talked.
[drizzle]Ten minutes passed, maybe fifteen. Menendez finally could move. He got up, opened his office door carefully and looked out. The floor normally bustled at that hour in the mid-afternoon. It had cleared out. He turned around quickly, grabbed his computer and rushed out of the heavily secured Halliburton complex north of Sugarland, Texas.
Menendez drove around for hours. He doesn’t remember much about where he went or for how long. At some point, he called his wife.
“Ondy,” he cried out to her, frantic. “They outed me!”
As shocked as Menendez was, his wife had seen something like this coming. Tony was a perennial optimist, even naïve. He always thought the company would do the right thing and fix its accounting problem. More jaded, his wife was prepared for the worst. She’d even urged Tony to start secretly taping his bosses.
“Is anyone following you?” she asked. “Make sure.”
Menendez looked around, seeing only a blur of cars pass at the beginnings of evening rush hour. He didn’t think anyone was tailing him. Then again, how would he know? He needed a lawyer 2013 right now. Only months into the best job he’d ever had, he was in the most trouble of his professional career.
Menendez quickly googled “whistleblower” and “lawyer” on his phone and came up with Philip Hilder, the attorney who had represented the Enron whistleblower, Sherron Watkins. He placed the call and got through. Hilder heard Menendez out and then told him to listen carefully. Hilder instructed Menendez not to tell anyone, not even his wife. Too late for that, and he wouldn’t have kept it from Ondy anyway. They were partners.
“Ok. Then don’t talk on the phone anymore. Don’t talk in your office. Don’t talk in your house,” Hilder continued.
“How quickly can you come in to see me?”
I met Tony and Ondy Menendez this past winter, in a suburb less than an hour outside Detroit. Now 44, Menendez speaks earnestly and insistently, with the carefully chosen words one would expect from an accountant. His cheeks carry a tinge of pink and, at the slightest smile, his eyes are consumed by crow’s feet. He hid a bulky frame with a corduroy jacket over a black V-neck sweater.
They told me about their long and agonizing fight against a powerful corporation. It’s a story of what it takes to be a whistleblower in America 2013 and what it takes out of you.
Many whistleblowers come undone after they launch their fights. They have trouble keeping their jobs, their marriages, their sobriety. Even friends who are sympathetic often see them as pains in the ass. They are forever marked by a scarlet “W.” And while whistleblowers naturally start off more skeptical than the average, the experience pushes some into often justifiable paranoia. If you want to know why whistleblowers can seem a little crazy, it’s because anybody who is not a little bit crazy would back away from the ordeal of confronting a corporate behemoth or grinding government bureaucracy.
There’s nothing crazy about Menendez, however, beyond an optimism that persists even when the facts don’t warrant it. Throughout the whole struggle, he just knew that somehow, sometime, the world would come around to seeing he was right about Halliburton.
Menendez grew up in Houston, the son of a jovial construction worker with an eighth-grade education. His father had once operated several chicken restaurants and there was a story about almost getting Bob Hope to be a partner, but it never happened. His father had lost it all.
His mother was an insatiably curious, perpetual graduate student in education. The eighth of 11 kids, Menendez was the only college graduate. Ondy, who grew up in Claude, a small town in North Texas, also was the only one in her family to graduate college. Serious and cautious, she has sedate brown hair that goes just below her chin with fine streaks of gray and wears red lipstick. Only faint hints remain of the 16-year-old girl who drove her Trans Am too fast down North Texas country roads.
At the University of Houston, Menendez dreamed of a career as a scientist but those plans were derailed when his girlfriend became pregnant. He switched to accounting because he could get a job more easily, married his girlfriend and had a daughter. Eager to establish himself in a solid profession, Menendez took a job at Ernst & Young as an auditor, a job that required a great deal of travel. One day, Menendez was on a business trip a hundred miles from Houston, where they were living. He called home and, unusually, there was no answer. He returned home to discover that his wife had left and when he finally spoke to her a few weeks later, she told him she couldn’t be a mother right then. His daughter was only about a year and a half old. Menendez raised her by himself for the next year and a half. Eventually, his wife returned and they divorced.
Menendez worked various accounting jobs before landing an executive position at Halliburton in March 2005. The job came with a fancy title, Director of Technical Accounting Research and Training, and was the most responsibility he’d ever had. Only months earlier, Halliburton had settled with the SEC after a two-year accounting probe. In hiring him, Mark McCollum told Menendez that he should be his “Smokey the Bear,” helping Halliburton prevent accounting fires from flaring. Menendez was 34, and now remarried to Ondy. They had two young children. He felt his life was on course.
It didn’t last long. After just a few months on the job, Menendez began to worry that Halliburton was violating some of the most basic accounting rules.
A crucial issue in all forms of accounting is how and when a company can count a transaction as revenue. The rules provide a certain amount of flexibility, with companies allowed to “book” at least some of the revenue from a sale before the customer pays in full. Deciding in which quarter a particular sale falls can