[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
ALLEGATIONS OF DISCRIMINATION
AND RETALIATION WITHIN THE
CONSUMER FINANCIAL PROTECTION
BUREAU, PART THREE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JUNE 18, 2014
__________
Printed for the use of the Committee on Financial Services
Serial No. 113-85
______
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91-149 PDF WASHINGTON : 2014
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California, Ranking
Chairman Member
SPENCER BACHUS, Alabama, Chairman CAROLYN B. MALONEY, New York
Emeritus NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York BRAD SHERMAN, California
EDWARD R. ROYCE, California GREGORY W. MEEKS, New York
FRANK D. LUCAS, Oklahoma MICHAEL E. CAPUANO, Massachusetts
SHELLEY MOORE CAPITO, West Virginia RUBEN HINOJOSA, Texas
SCOTT GARRETT, New Jersey WM. LACY CLAY, Missouri
RANDY NEUGEBAUER, Texas CAROLYN McCARTHY, New York
PATRICK T. McHENRY, North Carolina STEPHEN F. LYNCH, Massachusetts
JOHN CAMPBELL, California DAVID SCOTT, Georgia
MICHELE BACHMANN, Minnesota AL GREEN, Texas
KEVIN McCARTHY, California EMANUEL CLEAVER, Missouri
STEVAN PEARCE, New Mexico GWEN MOORE, Wisconsin
BILL POSEY, Florida KEITH ELLISON, Minnesota
MICHAEL G. FITZPATRICK, ED PERLMUTTER, Colorado
Pennsylvania JAMES A. HIMES, Connecticut
LYNN A. WESTMORELAND, Georgia GARY C. PETERS, Michigan
BLAINE LUETKEMEYER, Missouri JOHN C. CARNEY, Jr., Delaware
BILL HUIZENGA, Michigan TERRI A. SEWELL, Alabama
SEAN P. DUFFY, Wisconsin BILL FOSTER, Illinois
ROBERT HURT, Virginia DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois DENNY HECK, Washington
DENNIS A. ROSS, Florida STEVEN HORSFORD, Nevada
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania
LUKE MESSER, Indiana
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Oversight and Investigations
PATRICK T. McHENRY, North Carolina, Chairman
MICHAEL G. FITZPATRICK, AL GREEN, Texas, Ranking Member
Pennsylvania, Vice Chairman EMANUEL CLEAVER, Missouri
SPENCER BACHUS, Alabama KEITH ELLISON, Minnesota
PETER T. KING, New York CAROLYN B. MALONEY, New York
MICHELE BACHMANN, Minnesota JOHN K. DELANEY, Maryland
SEAN P. DUFFY, Wisconsin JOYCE BEATTY, Ohio
STEPHEN LEE FINCHER, Tennessee DENNY HECK, Washington
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
ANN WAGNER, Missouri STEVEN HORSFORD, Nevada
ANDY BARR, Kentucky
KEITH J. ROTHFUS, Pennsylvania
C O N T E N T S
----------
Page
Hearing held on:
June 18, 2014................................................ 1
Appendix:
June 18, 2014................................................ 39
WITNESSES
Wednesday, June 18, 2014
Naraghi, Ali, Examiner, Southeast Region, Division of
Supervision, Enforcement and Fair Lending, Consumer Financial
Protection Bureau.............................................. 7
Williams, Kevin A., former Quality Assurance Monitor, Office of
Consumer Response, Consumer Financial Protection Bureau........ 11
APPENDIX
Prepared statements:
Naraghi, Ali................................................. 40
Williams, Kevin A............................................ 45
Additional Material Submitted for the Record
McHenry, Hon. Patrick T.:
Letter from Akin Gump Strauss Hauer & Feld LLP, dated June
17, 2014................................................... 50
Article from the Washington Examiner entitled, ``CFPB
official wants to silence a whistleblower before he can
talk to Congress,'' by Richard Pollock, dated June 17, 2014 55
Green, Hon. Al:
``Objective and Approach for Offices of Inspector General
(OIG) Review of Office of Minority and Women Inclusion
(OMWI) Activities, Requested by Ranking Member and
Colleagues, House Financial Services Committee, on March
24, 2014,'' dated May 21, 2014............................. 58
ALLEGATIONS OF DISCRIMINATION
AND RETALIATION WITHIN THE
CONSUMER FINANCIAL PROTECTION
BUREAU, PART THREE
----------
Wednesday, June 18, 2014
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:05 p.m., in
room 2128, Rayburn House Office Building, Hon. Patrick T.
McHenry [chairman of the subcommittee] presiding.
Members present: Representatives McHenry, Fitzpatrick,
Duffy, Fincher, Hultgren, Wagner, Barr, Rothfus; Green,
Cleaver, Beatty, Kildee, and Horsford.
Ex officio present: Representative Hensarling.
Chairman McHenry. The subcommittee will come to order. The
title of today's hearing of the Oversight and Investigations
Subcommittee is, ``Allegations of Discrimination and
Retaliation Within the Consumer Financial Protection Bureau,
Part Three.''
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
The Chair now recognizes himself for 5 minutes for an
opening statement.
On Thursday, March 6, 2014, the American Banker published
an article titled, ``CFPB Staff Evaluations Show Sharp Racial
Disparities.'' It provided evidence that the Consumer Financial
Protection Bureau's (CFPB's) own managers have shown distinctly
different patterns in how they rate employees of different
races.
It is now apparent that the CFPB was aware of the racial
disparities and key metrics well before the March 6th American
Banker article. A study on diversity and inclusion commissioned
by the CFPB and conducted by the revered consulting firm,
Deloitte Consulting, was provided to the Bureau in September of
2013. That study noted sharp racial disparities in performance
ratings, pay, hiring, and other areas.
In addition to racial disparities in the CFPB's performance
reviews, the American Banker also reported that, ``CFPB's
management has been accused in several cases of favoring
Caucasian men and of creating a hostile work environment.'' The
article noted that CFPB employees had filed 115 official
grievances with the National Treasury Employees Union (NTEU),
which represents CFPB employees, and over 85 informal
complaints, most of which pertained to allegations of unequal
pay, and raised questions about the recent performance reviews.
This subcommittee held a hearing on April 2nd of this year,
which addressed allegations of discrimination and retaliation
at the CFPB. It featured the testimony of Angela Martin, a
current CFPB employee and a whistleblower, as well as Misty
Raucci, an investigator hired by the CFPB to examine Ms.
Martin's claims of retaliation.
On May 21st of this year, the subcommittee held a second
hearing on the topic of discrimination and retaliation within
the Bureau. Liza Strong, Lead of Employee Relations for the
CFPB, testified that the allegations of discrimination and
retaliation made by Ms. Martin and Ms. Raucci were not
consistent with her experience at the CFPB.
Ben Konop, an attorney within the CFPB's Enforcement
Division, and the Executive Vice President of the union chapter
representing CFPB employees, testified on CFPB's resistance to
addressing sharp racial disparities on its performance
management review ratings from the period of March 2014 through
May 6, 2014. And that is when the American Banker article was
published, that March 6th date. Mr. Konop also testified about
sharp racial disparities and pay in the Bureau.
Today's hearing will feature testimony from two
whistleblowers who both allege that they experienced
discrimination and retaliation at the Bureau. Both
whistleblowers will also testify regarding operational
deficiencies within their respective divisions at the CFPB.
Ali Naraghi currently serves as an examiner in the Division
of Supervision, Enforcement and Fair Lending at the CFPB. Mr.
Naraghi alleges that he has experienced both discrimination and
retaliation at the CFPB. Mr. Naraghi will also testify about
deficiencies in the bank examination process as well.
Kevin Williams is a former term employee of the CFPB's
Office of Consumer Response. Mr. Williams will testify on the
culture of discrimination and retaliation within the Office of
Consumer Response, as well as the mismanagement and
inexperience of leaders within the office. Mr. Williams will
also testify about serious problems with the CFPB's consumer
call center.
These problems include a significantly larger than expected
number of breaches of personally identifiable information
(PII), a lack of training for call center staff, and inadequate
CFPB oversight of its two call centers.
CFPB's funding--I believe and many believe--and structure
afford Congress an extremely limited ability to influence the
Bureau's operations and policies. And yet these allegations of
discrimination and retaliation at the CFPB underscore the
significant need for greater congressional oversight and much
better management.
I thank the witnesses for their bravery in coming forward,
and your willingness to come forward. I appreciate your
fortitude.
With that, I ask unanimous consent to include a letter in
the record, and I will give context to my colleagues.
Yesterday, the subcommittee received a letter from John Dowd,
legal counsel for Liza Strong, a high-ranking CFPB official who
previously testified before this body, asking that the
testimony of one of today's witnesses, a whistleblower, be
stricken from the committee's official record.
This letter is deeply troubling because it is apparently an
attempt to prevent certain testimony from coming before the
subcommittee and the American people. That is problematic. And
I would like to make it public.
It could be construed as an effort to intimidate other
witnesses at the Bureau as well who may wish to blow the
whistle to Congress. And it may interfere with the
congressional oversight that our subcommittee and other
committees are attempting to provide.
I ask unanimous consent that the letter, and a June 17th
Washington Examiner article reporting on that letter, be
entered into the record. And I would like to make clear that
this subcommittee intends to thoroughly investigate whether
this letter was an effort to, in any way, constrain this
investigation.
I ask unanimous consent to include those items in the
record.
Chairman McHenry. Without objection, it is so ordered. And
I would certainly welcome those who are testifying today, and
would be willing to include in the record of this day's
proceedings your or your attorney's responses to that.
At this point, we will recognize the ranking member of the
subcommittee, Mr. Green of Texas, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
I thank the staff for the very fine work it has done in
preparing for this hearing today. I also thank the witnesses
for appearing today. And I have several things that I would
like to note in terms of what I am committed to.
I am committed to getting to the bottom of the allegations
of discrimination. I believe that discrimination is abhorrent
and that it must be eradicated. And to this end, I pledge to do
all that I can to help eliminate invidious discrimination.
I have to also add, having been a judge for some number of
years, I have learned that until you hear both sides of a
story, you should not draw conclusions. I welcome your
testimony. But I cannot draw conclusions until I have heard
from other sides as well. I think that is a fair way to
proceed.
In fact, it is the American way to give all persons the
opportunity to be heard before conclusions are drawn. So, I am
committed to getting to the bottom of allegations of
discrimination.
I am also committed to protecting the institution, the
CFPB, the Consumer Financial Protection Bureau. And I believe
the witnesses are committed. And I shall make inquiry when
appropriate. But I believe you are committed to this as well.
I believe that the institution is absolutely necessary. It
is the cop on the beat. It is there to protect the consumer.
And as such, I liken any allegations of invidious
discrimination to concerns that may emanate from a police
department.
In a police department, you can have concerns raised about
discrimination and other issues as well. We have had some
raised in my city. But we didn't eliminate the police
department. We dealt with the issues. And they should be dealt
with. But you keep the department.
I see the CFPB as a department that may have some concerns
that have to be addressed. But we keep the department. And we
want to make sure that we keep it strengthened.
We don't want to eviscerate. We don't want to emasculate.
We want to make sure that we maintain a strong Consumer
Financial Protection Bureau.
And the third thing that I am committed to is a widening of
these investigations. The ranking member of the full Financial
Services Committee and I have so much as asked the Inspectors
General to look into allegations of discrimination, widen the
range and breadth of these allegations, and check to see if
there are other agencies that may be having similar
circumstances.
We should not focus on the Consumer Financial Protection
Bureau to the exclusion of others. It can be a part of a
process, but not the end of a process. To this end, I pledge
and I am committed to widening the range of the investigation.
And finally, I want to say that this hearing today is
important to me. It is important to me for a multiplicity of
reasons. I shall cite but one.
In my lifetime, I have been discriminated against. I know
what it feels like to be discriminated against. I have seen
invidious discrimination.
I know what it smells like. I have had to go to the colored
water fountains that were such that no one would want to drink
the water. I know what it looks like. I have had the Klan burn
a cross related to some of my efforts. I know what it sounds
like. I have been called ugly names, names that I don't even
speak.
So I know what it is about. But I also know this: We have a
duty to be fair to all persons associated with any allegations.
So I pledge to do all that I can, which means to be fair to all
sides and not draw conclusions based upon what I hear from any
one side.
Mr. Chairman, in the interest of time and because votes
have been called, I will yield back my time.
Chairman McHenry. I thank the good judge.
With that, we will now recognize Mr. Hultgren for 2
minutes.
Mr. Hultgren. Thank you, Mr. Chairman.
There is something deeply wrong with the day-to-day
operations at the Bureau. We will hear allegations of rampant
favoritism, discrimination, cronyism, and mismanagement at the
CFPB alongside a culture of intimidation and retaliation that
make it difficult to address these problems. We will also hear
disturbing concerns about the efficiency and efficacy of the
CFPB's examination process, which are essential to the CFPB's
alleged mission to protect consumers.
Unfortunately, not only do CFPB employees feel helpless to
do anything about this, but there is also inexplicably no
meaningful accountability mechanisms in place that could help
fix these problems. The independent Inspector General for the
Federal Reserve and the CFPB is stretched thin overseeing
around 3,200 employees. The CFPB, one of the most unaccountable
agencies in our Nation's history, could certainly use its own
IG.
What is more, unlike the SEC and other regulatory agencies,
the CFPB is governed by one lone Director instead of a
bipartisan board. Not only that, Congress is hampered from
using its power of the purse to encourage much-needed changes.
The CFPB's champions hold that these features that make the
Bureau unaccountable are an asset because they help it function
smoothly without outside interference, and better serve
consumers. This hearing should put that myth to rest.
Consumers are not protected by unrestrained bureaucrats
unbound by the Constitution's structure. The founders knew
better than to create agencies unaccountable to the American
people. They knew as we do that government programs don't
function well without healthy oversight and accountability
features in place.
While we all want these disturbing allegations of
discrimination and incompetence to be addressed in a way that
vanquishes these problems for good, until the CFPB structure is
significantly altered, I am not holding my breath.
Thank you, Mr. Chairman. I yield back.
Chairman McHenry. I thank my colleague.
In the interest of Members' time we will, after Mr.
Cleaver's opening statement, recess and then return once we
have Members back. And then, we will hear the testimony.
Mr. Cleaver is recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman. I appreciate you
calling the hearing and dealing with this issue of
discrimination.
I think discrimination is regrettable. It is stupid. It is
heartless. And it is about as unseemly as a human being can
get.
Much of my adult life has been spent dealing with the
issue. I hate discrimination and all of its manifestations. I
think that we ought to shed light on discrimination in any of
the Federal agencies that report to this committee.
As I have done before, I will continue to say that the one
department that I think the whole world recognized as having
the most serious problems in the Federal Government on the
issue of discrimination was the Department of Agriculture. So
much so that the Federal courts awarded African-Americans,
Latinos, and Native Americans awards, financial awards because
the discrimination was so blatant.
And it went on for decades and decades that actually
started right there at the Department of Agriculture. Most of
that has been corrected with the Disparity Study. And
recommendations have been brought forth. And the Secretary has
tried to deal with them.
But not one hearing was held in the U.S. House of
Representative or the U.S. Senate to deal with an individual
case. It went to the courts. And the courts, after years, ruled
that discrimination in fact had occurred. And the money,
frankly, is still being disbursed even as we meet here today.
And so my caution, Mr. Chairman, is that we get bogged down
in doing something the Federal agencies and the committees of
the Congress were not equipped to do, and that is actually hold
a trial. I am going to depend on my longtime friend and
colleague who has a law degree and has been a judge. But I am
not equipped, I don't think.
I did get an ``A'' in political science, but I don't think
that has equipped me to deal with a trial-like situation and
then at the end say we did have discrimination or this has been
an act of discrimination. Because that means we are a jury.
So I am pleased to see the corrective actions that are
being taken. I think that your interest has probably caused the
department to become a lot more conscious of and sensitive
about anything that could be seen as discrimination. And so,
that has been good.
I caution you, members of the committee, that we don't end
up becoming the jury for discrimination cases in one Federal
agency.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Chairman McHenry. I appreciate my colleague's sentiments
and words.
We will recess, and once Members return, we will hear from
the witnesses. This committee is in recess.
[recess]
Chairman McHenry. The committee will come to order. We will
now recognize the distinguished panel before us.
I will first introduce Mr. Ali Naraghi. He is an examiner
for the Southeast Region in the Division of Supervision, Fair
Lending and Enforcement for the CFPB. He has worked as an
examiner at the CFPB since July 2011. Prior to joining the
CFPB, Mr. Naraghi served as a Supervisory Financial Analyst at
the Federal Reserve Board for 14 years.
Mr. Naraghi is a graduate of the American Bankers
Association Stonier Graduate School of Banking at Georgetown
University, and received a Masters of Business Administration
from Mississippi State University. Mr. Naraghi has also
received numerous awards during his tenure at the Federal
Reserve Board, including the Excellence Award for examination
of mortgage servicing.
Our second witness is Mr. Kevin Williams. Mr. Williams is a
former Quality Assurance Monitor for the Office of Consumer
Response for the CFPB. Mr. Williams was hired in March 2011 as
a term employee, and his service at the CFPB ended in February
of 2014. Mr. Williams was responsible for CFPB's contract call
centers, and ongoing maintenance of the quality assurance
program, including contract call center performance issues.
Prior to his hiring at the CFPB, Mr. Williams managed private
sector call service centers and performed operational analysis
for various consulting firms.
Mr. Williams is a graduate of Trinity University in
Deerfield, Illinois, and received a Masters of Business
Administration from the University of Phoenix. He also received
professional certification for contracting contact centers and
management.
The witnesses will each be recognized for 5 minutes. And as
this is the first time either of you has testified before the
committee, we ask that you please pull the microphone
uncomfortably close to you; they are directionally sensitive.
And so, if you speak a little more slowly, it will obviously be
more helpful.
We have a lighting system: green means go; yellow means go
faster; and red means stop.
First, we will recognize Mr. Naraghi for his opening
statement.
STATEMENT OF ALI NARAGHI, EXAMINER, SOUTHEAST REGION, DIVISION
OF SUPERVISION, ENFORCEMENT AND FAIR LENDING, CONSUMER
FINANCIAL PROTECTION BUREAU
Mr. Naraghi. Thank you, Mr. Chairman. My name is Ali
Naraghi, and I currently serve as an examiner in the Southeast
Region of the Supervision, Enforcement and Fair Lending
Division at the Consumer Financial Protection Bureau. Thank you
for allowing me this opportunity to share my experience at the
CFPB with you.
Ms. Angela Martin mentioned me in her testimony on April
2nd of this year. I am the naturalized U.S. citizen that Bureau
management referred to as an ``F'ing foreigner.'' I take great
pride in serving my country for 14 years with distinction at
the Federal Reserve Board of Governors, prior to joining the
Bureau 3 years ago at its inception. And I am proud of my
Persian heritage.
Like many others, I feel fortunate to have immigrated to
the United States, and love to serve my country. I do not
deserve to be referred to in derogatory terms by Bureau
management.
I hope by telling you my story it will further enlighten
the committee about the cultural intimidation and retaliation
at the Bureau, and how it makes it very difficult for employees
to raise concerns about mistreatment, mismanagement, and abuse
of authority.
Many managers, especially within the Southeast Region, are
withholding promotions of internal candidates while bringing
external candidates from their personal or other connections.
In short, favoritism and cronyism runs rampant at the Bureau.
My testimony is based specifically on my experience with
management of the Southeast Region and management in the Office
of Supervision at the headquarters at the Bureau, and is not a
reflection of my fellow examiners, who like me are highly
dedicated to serving the American consumers.
Our lead examiner for the first year of CFPB examination,
which was started in October of 2011, during those 5 months in
that assignment I raised concerns about not having a risk model
to show equitable assessment across institutions: inexperienced
exam managers, field managers, and the examiner in charge; the
examiner in charge being unduly influenced by the institution
being examined, allowing the institution to dictate what CFPB
examiners can and cannot do; inefficient use of Bureau
resources, for example, they flew in examiners from around the
country for weeks just to plan the examination and later to
conduct an exam when we had plenty of locally available
examiners who would have saved taxpayers up to 5 months' travel
expenses, an average expense of $2,000 per week per examiner.
I soon found that voicing a professional dissenting opinion
that is in any way at odds with Bureau management, even in the
smallest of ways, would result in retaliation, for example,
after suggesting to the Chief Human Capital Officer, Dennis
Slagter, that senior management should consider including
experienced staff from the Federal Reserve, the Office of the
Comptroller of the Currency, and the FDIC when strategizing
about large banks supervision program because CFPB's
supervision seemed too OTS-centric.
In response, Mr. Slagter stated, ``If you don't like it, go
back to the Federal Reserve Board.'' This is in direct
contradiction of CFPB's stated policy of welcoming feedback.
In addition, I have raised concerns to management and the
Office of Inspector General of the Federal Reserve about the
following issues: the Bureau has hired inexperienced managers
whose only qualification appears to be personal or other
connection to Bureau hiring officials; gross mismanagement that
wastes taxpayers' funds, for example, in the Southeast Region,
about 50 to 75 examiners were kept at their home essentially
without work for 8 months between approximately September 2011
through May of 2012. In my opinion, this was one of many
examples of wasting taxpayers' funds due to Supervision
management's incompetence.
Result-oriented examinations in which the Bureau at the
headquarters appears to have decided at the outset to find a
violation even if none are identified. I worked on examination
for 3 weeks reviewing 52 mortgage modification applications and
did not find any violations. The field manager told me that I
must not have done my job right because I had not identified
any violations. Others in my team were told to expand their
sample size if no violations were identified in the initial
sample. This is contrary to sampling procedures of the FFIEC
and prudential regulators. Furthermore, there is no
statistically sound rationale in conducting examinations in
this manner.
CFPB management imposes cumbersome and inefficient national
exam procedures for examinations, and doesn't give examiners or
the EICs any discretion in applying those positions. The exams
are very inefficient. They take at least 6 weeks on-site,
regardless of the size in assets and our footprint. Whereas
exams performed by other regulators take size, risk, and
complexity of institutions into consideration during the
planning and scoping phase of the examination, resulting in a
more efficient and cost-effective process.
The Enforcement Division joined the examiners and
occasionally mentioned plans to bring enforcement actions prior
to completion of exam work and of discovering a violation. I
did my best to work within the Bureau's management and
oversight instruction to address this issue. However, once
management had started to retaliate, and as they are being
subjected to disparate treatment, I filed an EEO complaint
against the Southeast Region's management.
I immediately became one of the targets of Regional
Director Jim Carley and Assistant Director of Supervision Paul
Sanford at the CFPB headquarters as a result of questioning
examination management and filing a formal case about abuse and
disparate treatment. They proceeded to make my professional,
and also I think, personal life a living hell by repeated
retaliation and creating a hostile work environment.
Examples of retaliations include immediately after filing
an EEO complaint in May of 2012, management issued me a
reprimand letter for not attending a training class which I was
registered for by management without my knowledge. Removing me
from being an EIC and requiring me to attend training to serve
as an EIC as a requirement only for me and no other at my
grade. In fact, I haven't been assigned an EIC role since
filing my EEO case, despite it being a requirement in my
position description, the highest examiner grade for the
Bureau.
Reporting me absent without leave for an entire week for
requesting sick leave, despite having a doctor's note requiring
bed rest to avoid getting pneumonia due to severe bronchitis.
Accused of asking bank management to show me how to do my job,
when in fact I was trying to protect the integrity of the
Bureau by helping the field manager recover from asking
questions that demonstrated his incompetence and lack of
knowledge about mortgage banking.
Being wrongfully accused of--accused and written up for
falling asleep at a meeting with the institution's president.
The fact as reported by the EEO independent investigator that I
was awake and most active when was confirmed by several
colleagues and a CFPB enforcement attorney who were present.
However, Mr. Carley insisted that my field manager issue a
written warning threat of disciplinary action.
I was issued ``unsatisfactory,'' which is our lowest
performance evaluation rating, in 2012, when in fact at midyear
I was rated ``commendable.'' This was my punishment for raising
concerns about my manager during the last 3 months of the
evaluation period. And in February of 2014, my field manager
informed me that he knows I am well-qualified, but the order
that I cannot be an EIC came from above the Assistant Regional
Director level.
Like Ms. Martin, the retaliation against me continues to
this day. Like Ms. Martin, my story is a microcosm. And when
you look at me, you should see dozens and even scores of
employees instead of just me. The Labor Relations Office within
the Office of Human Capital is broken, and is more harmful than
helpful to employees who suffer discrimination or retaliation.
Because I was concerned about examiners who work with me as
well as my own treatment, I wrote an urgent email on July 26,
2012, asking the Deputy Human Capital Officer and Employee
Relations Lead, Ms. Liza Strong, for help. I pointed out the
mistreatment I was receiving as well as listing directives
provided to examiners by field manager Jerome Uberu, which
according to my experience was unprofessional, contrary to the
standard supervisory protocols, and possibly illegal.
It took from July 26, 2012, until October 18, 2012, nearly
3 months, for Ms. Strong to reply to me. Unlike her testimony
before you that she investigates all complaints, her response
was simply to add retaliation claims to my EEO complaint.
I was stunned that she did not show any interest or concern
regarding management's mistreatment of myself and my fellow
examiners, or at least potentially illegal directives. As a
matter of fact, not only did she not investigate my complaint,
she refused to be interviewed by the EEO investigator assigned
to my EEO case.
Pursuant to an announcement on CFPB's internal Internet
titled, ``CFPB Wants You to Blow the Whistle on Lawbreakers,''
I felt compelled to report my observations to the Inspector
General of the Federal Reserve Board.
I was promptly contacted by an IG staff member and as
instructed on July 25, 2012, sent an email detailing my
situation, as well as bullets enumerating what I thought to be
mismanagement by division senior management, waste of
government resources, favoritism in hiring practices, as well
as what I thought may be illegal labor practices. I was told
that the IG office will be in touch if necessary. However, no
one has contacted me since that date.
Furthermore, I attempted to engage my Regional Director,
Jim Carley, by sending him an email requesting time to discuss
an important matter. I never got a chance to discuss my
concerns with him. Mr. Carley never attempted to follow up with
me to ask what was so important.
One of my concerns at the time was that during examination,
the field manager, Mr. Uberu, was inappropriately telling
examiners to find issues against the supervised entity that did
not exist, but were solely based on his opinion that the
subject bank had issues. All affected examiners felt
uncomfortable with Mr. Uberu's approach at the time, but were
afraid to speak out for fear of retaliation.
After I pointed out Mr. Uberu's mistake, he wrote the worst
evaluation I have ever received in my professional career. The
evaluation intentionally misrepresented incidents and sometimes
even falsified the records of what took place in the Bureau of
Examination.
Management's mischaracterization has been proven wrong by
an independent investigator from the Internal Revenue Service
assigned to my EEO case. In that investigation, one of my
colleagues bravely testified that the field manager, Mr. Uberu,
``felt intimidated by Mr. Naraghi's experience and
credentials.'' My colleague further reported that, ``Mr.
Uberu's management style is one of intimidation and force.''
Unfortunately, Ms. Strong wholly ignored my complaint about
this manager. And now others have suffered and are continuing
to suffer under his mismanagement. Subsequent to my complaint
at least two other examiners have also reported their own
serious complaints about Mr. Uberu's boorish intimidation
tactics.
Ms. Strong's outright dismissal of my own legitimate
concerns of mismanagement has caused Mr. Uberu to become more
brazen in his intimidation and abuse of my fellow examiners. I
am deeply saddened with the realization that my colleagues'
hardship could have easily been avoided if the Bureau had acted
promptly and responsibly to the concerns of its employees.
Employee Relations Lead Liza Strong is failing to
adequately protect Bureau employees, and in fact causes us
further harm by holding herself out as point of contact for us
to address our concerns, when actually she is just another arm
of management and another example of the Bureau's management
abusing their power.
I appealed my manager's unfair evaluation of me, and all
CFPB management across other divisions who were supposed to
complete an independent review of my appeal circled the wagons.
As a result, in the most humiliating experience, Mr. Carley,
who himself has lesser to no experience in Federal mortgage
servicing laws, forced me to attend remedial mortgage servicing
training with the threat of being fired if I cannot pass the
exam.
My field manager expressly told me that I am untrainable.
By point of fact, I told my management and Labor Relations
staff that I have earned two bachelor's degrees, an MBA, and
graduated from ABA Stonier Graduate School of Banking. So,
CPFB's mischaracterization of me as untrainable is demonstrably
false.
When my fellow examiners found out that I may be appearing
as a witness here, many of them personally contacted me and
urged me to be certain to shed light on the unfair and
sometimes deceptive practices of supervision management.
Unfortunately, the Southeast Region examination program is run
by intimidation. And like a dictatorship, there are significant
consequences to disagreeing or disobeying the king.
Almost every examiner I know has pending or rejected
grievances. Management espouses collaboration and respect with
the staff and shows no respect with examiners. And there is no
accountability for their abusive power.
Contrary to Ms. Strong's testimony, legitimate concerns and
complaints filed by examiners are rejected outright without due
consideration. I believe that the Labor Relations Office,
headed by Ms. Strong, is a common denominator in the
mistreatment of examiners and other employees.
It seems like Labor Relations will side with management no
matter how egregious their actions may have been, which has
caused resentment and distrust amongst the employees. The lack
of prompt attention and resolution by the CFPB to legitimate
employee concerns causes problems to fester needlessly and
detracts from the ability to focus on the mission of helping
American consumers.
I believe that the root cause of the problems encountered
at the Bureau is management's lack of accountability. The only
consistent thing about CFPB management is its inconsistency.
It is my sincere hope that the Bureau will take immediate
steps to remedy these fundamental management issues and thereby
become more efficient in carrying out this vital mission for
our country.
Thank you.
[The prepared statement of Mr. Naraghi can be found on page
40 of the appendix.]
Chairman McHenry. Thank you.
Mr. Williams, you are now recognized to summarize your
opening statement.
STATEMENT OF KEVIN A. WILLIAMS, FORMER QUALITY ASSURANCE
MONITOR, OFFICE OF CONSUMER RESPONSE, CONSUMER FINANCIAL
PROTECTION BUREAU
Mr. Williams. Good afternoon, Mr. Chairman, and
subcommittee members. It is without any joy that I appear
before you today.
My name is Kevin A. Williams. In the fall of 2011, I
enthusiastically applied to help build and launch the Consumer
Financial Protection Bureau, the financial regulatory agency
that was dubbed a 21st Century organization. I served as the
CFPB Office of Consumer Response's first Quality Assurance
Monitor from July 2011 to February 2014.
The terms of my employment were a year-to-year term
contract. Understanding the provision of my contract, I made it
paramount that I will work hard and secure permanent employment
as soon as possible. At various times, I approached management
about my status, and in every term they lied. Whether I
inquired, or the National Treasury Employees Union inquired on
my behalf, we were both consistently lied to.
Sadly, instead of the positive, modern government agency I
expected, my experience at the CFPB was reminiscent of past
eras of injustice, cronyism, discrimination, and retaliation.
The events that transpired at the Bureau occurred because basic
measures were not in place to properly supervise its untested
management. In particular, the managers in the Office of
Consumer Response ran the unit as their own personal fiefdom,
unfettered by any oversight they inadvertently might receive.
The divisiveness and disharmony in CR, Consumer Response,
did not occur because of unruly employees, underperformers or
disenchanted team players. It occurred because Consumer
Response's unproven management team was not properly prepared
for the big job we face. No policies or procedures were
implemented to ensure that they abided by applicable laws and
followed accepted management practices.
I was the only member of the implementation team who was
not offered permanent employment or a promotion. Yet, some of
the people I worked with now lead Consumer Response. My
treatment was especially notable because I was a lone team
member who performed most of the quality assurance function for
the entire agency's contact centers.
My statement is not long enough to respond to all of the
aspersions that were directed at me. But I ask you to question
how a person responsible for your consumer interaction quality
assurance function for a new Federal agency could be excluded
from meetings, and branded as lazy and unproductive.
I am proud of my principles and my work. My best response
to any management disagreement of my job performance, Consumer
Response continuously touted the results I produced. Consumer
Response's management team continuously received bonuses based
in part on my work.
I worked on the quality assurance team supervised by two
Black women managers. One of my managers was a manager in name
only. For over 2 years, she did little more than discredit my
work, disparage my character, and downplay my achievements.
I was attacked, maligned, and humiliated on a daily basis.
For example, I was rated as an ``average'' employee despite
being either the primary or the only quality assurance monitor
for the entire agency's contact center vendor. I listened to
more calls, talked to more consumers, and made more
correspondence than anyone in the agency. And yet, I received
absolutely no credit for my work.
Make no mistake about it. It was clear I was treated this
way and allowed to be treated this way by my few Black managers
at the Bureau because of the ``plantation'' mentality that
exists there. If my managers had been White managers instead of
Black managers allowed to mistreat a Black male, every civil
rights organization in America would have protested my
treatment and the treatment of others in my unit.
I told Consumer Response's management team that the
scorecard used to evaluate consumer interaction with contacts
in personnel was ineffective. Consumer interactions were
randomly selected and evaluated either by myself primarily or
later, when the team expanded, by others. The scorecard was
ineffective because it was weighted so that the vendor was
never heavily penalized.
This had two results. One, it would appear that the vendor
was providing superb service because their score was in the
90s. Two, it would appear that Consumer Response was
effectively managing the contract even though it was not.
When I expressed a problem with the way the scoring was
weighted and the results utilized, my African-American
managers, a quality assurance manager and section chief, their
response was to inform the bosses that I was incapable of doing
anything, of even doing the basics. And this wasn't because I
was incorrect, but because she was offended that I,
notwithstanding that I am a Black male, questioned the scoring
methodology.
My Black managers, and thus the Bureau, treated me as a
pariah because as a Black male I was not qualified to question
the information provided by consultants, precisely and mainly
because most of them were young White men.
Another example stems from the vendors being very concerned
about receiving high quality assurance scores so as not to get
penalized in Bureau contracting decisions. Thus, when we would
evaluate an agent more than once in this short amount of time,
the vendor would call and complain to my manager that we were
singling out an individual.
However, we would have no idea of certain functions about
the individual we would even evaluate. The way we selected
items to evaluate was typically random. Consequently, in
response, one of my former coworkers who is an African-American
male told the quality assurance manager it does not matter who
you evaluate because we are not looking at the interaction of
any particular agent.
The quality assurance manager did not agree with this
statement from the male African-American QA monitor. However,
she agreed with the same statement from a White male
consultant.
Another example how Black managers at the Bureau were
allowed to mistreat Black employees as part of misguidedly
defending the Bureau is when I did a presentation. I told the
QA manager and the section chief that the two-way scoring
system was out of line. I reported it to the QA manager, told
them that it was distorting Bureau assessments of vendor
performance. In response, my QA manager spoke to her superiors
about my performance.
The Bureau's leadership allowed my manager and section
chief to undermine me and even my career, but not allow me to
make the same insightful observation that the managers would
accept from White male consultants who patronized them by
cluing them in about the distorted evaluation system. This is
discrimination.
The frequency and duration of these occurrences created a
hostile work environment for all Blacks at the Bureau, whether
they were unwitting, manipulated Black managers or mistreated,
hard-working Black employees. It is just that we, the latter,
suffered the objective adverse consequences. Despite
establishing the quality assurance team, my efforts generally
were discounted.
The exception proven to this rule, however, was when
Consumer Response's managers themselves would be rated based on
the contact center being presented as being successful. In this
regard, while I was there the managers I reported to were rated
at the 4/5 level based on the center's success. Yet the person
doing the work, me, was rated as average, a 3.
This was a Bureau-wide problem confirmed by this result.
Since the managers were in fact being rewarded for
discriminating against me, they were believing they were
retaliating against a Black male whistleblower, since
criticisms like mine were apparently being reported to
overseers by unknown persons, leaving my managers to guess it
had to be me. That it was both discrimination and retaliation
became evident after a while through the intensity of it.
My few errors continued to be raised 2 or 3 years after
their occurrence. Yet the errors that my managers continued to
make every month, every week, or even daily were overlooked,
excused, and ignored by others for them to continue to perform
``field hand control functions.''
Unfortunately, I was a charter member in the intake unit,
which indeed came to be referred as ``the plantation.'' There,
I personally witnessed and was the victim of racial
discrimination by Black managers as well as others. The unit
was dubbed ``the plantation'' because when we started, the
majority of Black employees were assigned to intake, which was
basically data entry.
The one Caucasian man at the intake unit who demonstrated
an interest in software testing was offered a permanent detail
to another group which led to the creation of a new position
for him. Someone then remarked that this looked like a ``damn
plantation,'' and the nickname stuck.
Thereafter, one of my former coworkers went to Consumer
Response's management and asked why did they recruit him for an
investigator's position, but when he arrived he was given a
data entry job. Management responded by calling him into a room
to berate him, curse him out, and denigrate his character.
I witnessed this firsthand, Black managers denigrating a
Black worker for, in effect, complaining about the
discrimination. It deeply reinforced the plantation imagery.
In fact, the extent of the adherence to this imagery became
ludicrous. During plantation team meetings, management often
volunteered to feed the team. But one day one of my team
members remarked, this does not only look like a plantation,
but they keep feeding us greasy fried chicken and pizza. He
said if they are going to feed us, they should offer us some
healthy food at least once in a while.
I initially defended management until someone pointed out
that we were a unit comprised entirely of Black employees
standing around eating low-caste food, fried chicken, doing
low-caste grunt work, the key attribute of being low caste, not
receiving any respect.
In addition, we did not have any career path. There wasn't
a route we could take that would lead to a managerial position.
If you were a Black employee on the plantation you were either
a team lead or in the field. Not one team lead from my unit has
ever been promoted to management.
Rather than allow the plantation workers to compete for
vacant leadership positions, my managers hired two White males
to oversee us, one directly from the contact center vendor, the
other from Booz-Allen Hamilton, the consulting firm that has
been well-compensated by CFPB.
I want to make this clear. The issue is not about those
gentlemen's character. It is the process whereby they became
managers. It perpetuates the narrative of Consumer Response
Intake being the plantation.
The plantation is where Black women and White men oversee a
unit of Black employees who are never considered or groomed for
management, despite their competitive qualifications. Bureau
management excluded them from the outset as part of a strategy
of domination and completely deprived them of any meaningful
opportunity for advancement.
If one exhibits too much merit or insight, one gets beaten
down. The recognition of merit or insight, even when they are
in the Bureau's interest, remains reserved for a few others to
the injury of all of us depending on the Bureau to reform.
I am responding to your question today while under
subpoena. I am prepared to amplify upon the instances related
above and furnish additional testimony to the committee upon
its request.
[The prepared statement of Mr. Williams can be found on
page 45 of the appendix.]
Chairman McHenry. I thank you both for coming forward. And
I now recognize myself for 5 minutes for questions.
Mr. Naraghi and Mr. Williams, I will just ask you both a
couple of questions. Do you believe that you were discriminated
and retaliated against at the Consumer Financial Protection
Bureau?
Mr. Williams. Yes.
Mr. Naraghi. Yes.
Chairman McHenry. Do you have reason to believe that other
employees at the Bureau were discriminated against and
retaliated against?
Mr. Naraghi. Yes.
Mr. Williams. Yes, sir.
Chairman McHenry. To your knowledge, have any of your
managers been fired or received formal sanctions for
discriminating or retaliating against either of you?
Mr. Naraghi. None that I am aware of, sir.
Mr. Williams. No, sir.
Chairman McHenry. Do you believe that the Director has to
take action with managers and hold them responsible for
creating this culture of retaliation/discrimination?
Mr. Naraghi. Yes, I do.
Mr. Williams. Yes, sir.
Chairman McHenry. Do you believe the Director's continued
reluctance to do that, to remove managers for discrimination/
retaliation against you, has emboldened other managers to do
the very same thing that you experienced?
Mr. Naraghi. I believe so. As a matter of fact, when the
Director came out recently after Ms. Strong's testimony and
defended her as a public servant and said that she didn't
deserve to be treated that way by the committee, I saw that as
insult and I had a lot of my colleagues contact me and
encourage me to testify because they feel like nothing is going
to change. It is just being ``whitewashed'' is the reference--
Chairman McHenry. Thank you.
Mr. Williams?
Mr. Williams. Sir, managers were absolutely emboldened and
empowered by the lack of response from executive leadership at
CFPB. They did nothing. And the longer it takes for anyone to
respond, the worse it will become.
Chairman McHenry. Let me ask you, notwithstanding your
experiences of being discriminated against and retaliated
against, do you both still support the mission of the Consumer
Financial Protection Bureau?
Mr. Naraghi. Absolutely.
Chairman McHenry. Mr. Williams?
Mr. Williams. Absolutely, sir
Chairman McHenry. Okay. All right. I just want to make sure
that we have that on the record.
Mr. Naraghi, you outlined that you had some serious
concerns about the bank examination process. Just in short,
what would the most serious problems be?
Mr. Naraghi. The most serious as I see it, having had
experience at the Fed overseeing corporate governance, and at
the Federal Reserve Banks, as well as the large institutions,
is that you have managers being put in charge of areas that
they don't have expertise in. And that causes them to make
wrong decisions. It is inefficient and ineffective.
I can only speak about the Southeast Region. They have all
the way up on top somebody who does not understand supervision
banking at all. And then, he tends to hire folks who don't know
much either. He tends to hire folks from his past experience--
Chairman McHenry. Is it a lack of experience?
Mr. Naraghi. It is lack of experience, lack of--
Chairman McHenry. At that management level?
Mr. Naraghi. At management level, a lack of experience, as
well as a total insensitivity to basic labor laws or basic
interpersonal skills.
Chairman McHenry. Okay.
Mr. Williams, about the call centers, we had questions this
morning about personally identifiable information (PII) from
consumers who call in. And did you centers do that, take
personally identifiable information from consumers?
Mr. Williams. Absolutely, sir. They would take it in what
we could call a channel. A channel in the contact center world
means the ways that you can communicate with the contact
center.
If I call on the phone, that is one channel. If I send a
letter, that is another channel. If I send a fax, it is another
channel.
So when a consumer would submit a complaint through any of
the channels, it would have to contain PII so we could send it
off to the bank so the bank could review the complaint.
Chairman McHenry. Okay. Did consumers mistakenly receive
other consumers' PII?
Mr. Williams. It did happen, yes, sir.
Chairman McHenry. And did you see a high number of those
incidences relative to call volume and every--those channel
volumes?
Mr. Williams. What I saw, sir, was an abnormal number. It
wouldn't come consistently like we know there are 10 that are
going to come every week, no. It would come in spurts.
We might see three this week. We might see five. We might
not see any for a few weeks. But then, it would sprout up
again.
That is abnormal. You should not see that many in years.
You should never see that type because there should be security
measures and training in place to prevent this from happening.
Chairman McHenry. Thank you both for coming forward.
Mr. Cleaver is recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
Mr. Williams, you believe you have been discriminated
against.
Mr. Williams. Yes, sir.
Mr. Cleaver. On the basis of what?
Mr. Williams. Same-race discrimination primarily, sir.
Mr. Cleaver. On the basis of race.
Mr. Williams. Some race, some gender, sir, primarily. Would
you like me to expound, sir?
Mr. Cleaver. Especially the gender part.
Mr. Williams. Yes, sir. My quality assurance manager and
section chief seemed to have an issue with African-American
males. And it was an obvious issue that they had.
I can give you an example of at a certain point before I
left, sir, the work for the quality assurance was done
primarily by two African-American males, myself and another.
Both of us at the behest of my quality assurance manager were
placed on performance improvement plans. Both of us were
scrutinized and we received negative marks on our performance
review. This did not occur to the other gentleman who was not
African-American in our unit.
Mr. Cleaver. Okay. I get it.
Now, on Page 2 of your statement, I am a little confused:
``If my managers had been White instead of Black managers every
civil rights organization in America would have protested my
treatment.''
Mr. Williams. Yes, sir. Because they were Black women,
people don't seem to understand that discrimination can happen
inter-race. You don't have to be White to discriminate against
a Black person or vice versa. They discriminated against me,
and we are the same race, the same ethnic group.
Mr. Cleaver. So they were discriminating against you on the
basis of what?
Mr. Williams. Race. I would say race and gender. The reason
why--
Mr. Cleaver. You just--okay.
Yes. I did the commencement at law school. I am not a
lawyer. My commencement was really good, but my address--so I
don't--you know I don't--here is my--you are saying they
discriminated against you. These are Black men who
discriminated against you because you were Black.
Mr. Williams. Please--
Mr. Cleaver. Well, that is what you said. You said you had
Black managers. I asked if they discriminated against you and
you said yes. And I said why and you said race and gender.
Mr. Williams. Yes.
Mr. Cleaver. So the Black people didn't like you because
you were Black.
Mr. Williams. Yes, sir. They devalued our work. It is the
same thing that the Deloitte report alluded to. The same thing
the Defense Investigators Group alluded to. They devalued our
work. It wasn't treated the same.
Mr. Cleaver. Okay.
So this is to both of you. I am really confused. I have a
headache. But this is the reason we shouldn't be involved in
this. What would you like for Congress to do?
Mr. Williams. Are you asking me, sir?
Mr. Cleaver. Both of you.
Mr. Naraghi. I think that--
Mr. Cleaver. That we have the capacity and power to do.
Mr. Naraghi. Yes, sir. In my opinion, given the way that I
have observed the Southeast Region management as being
unaccountable for, I think that at the examiner level they
could still use some supervision and basically some sort of
repercussion. Because right now each division--each Regional
Director runs it like a fiefdom without any recourse for the
examiners.
Mr. Cleaver. So you want Congress to do what?
Mr. Naraghi. To provide some sort of an oversight or
something. Put in place some sort of accountability, if you
will, for middle management and top management of CFPB so such
things don't come to the level of explosion that you are seeing
most of me and my colleagues are having to come to Congress to
seek justice.
Mr. Cleaver. But does not the EEOC provide that legal
opportunity for redress?
Mr. Naraghi. Here is the thing, sir. I filed the EEO case,
okay. And it took them a year-and-a-half to do the
investigation.
Mr. Cleaver. Then, that is Congress' fault because we are
not funding EEOC adequately to reduce the caseload. You are
absolutely right. It is that way all over the country.
So you are saying you want Congress to approve more money--
Mr. Naraghi. No.
Mr. Cleaver. --for the EEOC?
Mr. Naraghi. I am saying, for example, Ms. Liza Strong runs
that office without any limits, without anybody overseeing her.
What she says goes. And that is--
Mr. Cleaver. I hate to cut you off. So what you want us to
do is to get all the people who said they have been
discriminated against and bring them before this committee and
then do some kind of congressional something that I don't know
about?
Mr. Naraghi. No, sir. That is not what I am suggesting.
Mr. Cleaver. My time has run out. Thank you.
Chairman McHenry. I am willing to let that--
Mr. Cleaver. I just want somebody to tell me very precisely
what you want Congress to do.
Mr. Naraghi. I think that CFPB management needs to have
some sort of oversight in order to--and what do I mean by that?
I mean that there should be some sort of accountability for the
management of the CFPB. Because right now, when I complain
about a Director, he goes up to his boss. And there is no
accountability. I have appealed the case unrelated to EEO,
unrelated to what I am here, what I have testified about, since
Christmas of last year.
Chairman McHenry. Okay.
Mr. Naraghi. It has been pending. There is no recourse--
Chairman McHenry. Mr. Williams, we will give you an
opportunity to answer the same question if you wish.
Mr. Williams. I would like Congress to come in because you
have the ability to level the playing field through your power.
Disparate treatment, we talk about the disparate impact at CFPB
about banks and their impact upon consumers. You are having
Federal employees experience disparate impact.
Congress can authorize an investigation by an investigator
that is unrelated to the CFPB, an independent to come in that
has oversight authority. That is an option.
Chairman McHenry. Okay.
We will now go to Mr. Fincher of Tennessee.
Mr. Fincher. Thank you. Thank you, Mr. Chairman.
And just to respond to the gentleman from Missouri, I think
the budget is unlimited. I don't--well, we don't have authority
in this committee over the budget. So, I don't think it is the
money issue that is the reason why they can't--
Chairman McHenry. If the gentleman will suspend.
And just to address this, internally, the Office of Human
Capital has resources to deal with this matter. And if it is
not dealt with internally at the Bureau, my understanding of
the operation of the law is that you can then have a hearing
adjudicated in a formal EEOC process for remedy if the Bureau
doesn't handle it internally.
So the question of internally, that capacity is unlimited.
The question is that budget. And Mr. Cleaver is indeed correct
on that. But Mr. Fincher is also indeed correct. Internally,
they have an enormous capacity to do this.
Mr. Green, if you wish to--
Mr. Green. I would only add, Mr. Chairman, that--
Chairman McHenry. And I just ask unanimous consent that
this does not affect Mr. Fincher's time.
Mr. Fincher. Thank you.
Mr. Green. I would agree that it should not impact his
time. But I would also agree that Mr. Cleaver's statement was
with reference to the EEOC itself and its budgetary concerns,
which are without the purview of the CFPB.
Chairman McHenry. Yes. And I appreciate that. And I would
agree with my colleagues that the budget needs to be remedied
to deal with that capacity.
I would ask unanimous consent to--
Mr. Green. Mr. Chairman, if I may, would the gentleman
yield? If you are agreeing with your colleagues, you are not
agreeing with the colleagues on this side, for the most part.
When you said you agree with your colleagues that budget should
be remedied, are you talking about the EEOC budget?
Chairman McHenry. Both the CFPB and the EEOC process, but
in very different ways.
Mr. Green. With reference to the EEOC, we are in agreement.
Chairman McHenry. Thank you.
I ask unanimous consent to return Mr. Fincher to 5 full
minutes for his questioning. And I appreciate the witnesses'
indulgence on that.
Mr. Fincher. Thank you, Mr. Chairman. I appreciate my
colleagues from that side of the aisle responding.
Mr. Naraghi, after filing your EEO complaint in May 2012,
you went through what you describe in your testimony as a
living hell. You also describe in your testimony that the
retaliation against you by CFPB managers has continued. Can you
describe what has occurred to you since 2012?
Mr. Naraghi. Since 2014 or--I am not sure I understand
since what date?
Mr. Fincher. Since 2012.
Mr. Naraghi. Yes. Besides what I enumerated, basically I
was blackballed. The assignments that they were giving me are
basically not utilizing my years of experience and expertise.
Minor things like almost I would say childish: cancelling a
vacation that was already approved when my wife and kids had to
go on vacation without me because they basically took back my
approved vacation; being accused of falling asleep in a meeting
when that wasn't the fact. The worse thing is giving me--
Mr. Fincher. So you put in for a vacation but you were not
allowed to take the vacation?
Mr. Naraghi. Yes, sir.
Mr. Fincher. Wow.
Mr. Naraghi. They approved it. My manager approved it. But
it was right at the time where I mentioned Mr. Uberu had
problems with me. And as a result of that, one of my
punishments was they rejected--they said we need you at the
exam.
And yet, this is what is funny. They criticized my work on
the exam. And I said if you are not happy with my work, because
remember I was chastised for not filing an issue after looking
at those, but yet you have canceled my vacation. And they said
that is beyond your pay grade decision. You do what we tell
you.
If they had the retaliation and retribution I am talking
about is little, big. However they can come at you, they will.
That is why I don't want to--what the biggest retaliation,
sir, was when I was right when a colleague at the time said
that he was worried about me having a heart attack because of
the mistreatment I was getting from these gentlemen.
And then getting all 1s that means you can barely--you are
alive. Basically, 1s means you--and you have to remember. Look
at me for 14 years at the Federal Reserve. I have done cash
overs. I have performed well. And all of a sudden I come to the
CFPB and the first 6 months I am commendable. Then--
Mr. Fincher. The job before this job, where did you work
before?
Mr. Naraghi. I worked at the Federal Reserve Board in
Washington, D.C.
Mr. Fincher. And before that?
Mr. Naraghi. Before that, I worked at Mayor International
as a national accountant.
Mr. Fincher. Have you ever been treated this way in any job
ever in your life?
Mr. Naraghi. No, sir. And I lived in Mississippi for 5
years.
Mr. Fincher. Okay--
Mr. Naraghi. No, I have encountered, like the gentleman
said, I have encountered racism, being called horrible names.
It has never been, never, ever like this kind of--and
especially because you expect not only is the government
entity, you are working with professionals. You expect more,
more than this kind of childish, boorish behavior, in my
opinion.
Mr. Fincher. Thank you.
Mr. Williams, do you think there is a path out of the
intake division for employees who work there?
Mr. Williams. After your last hearing, there is now.
Initially, no. I wrote the training program. One of my
contracts as a contract officer representative, I got with a
vendor and I was responsible for the training for two to three
divisions of the entire agency.
I had that vendor contract. I designed a training program
with our training coordinator, presented it to a few section
chiefs, and it was flat out rejected.
I explained to them how a person in intake could have been
trained to go over to investigations. They have the building
experience. They have been at the agency. So you don't have to
orientate them to the mission. They are there.
So if you were not one of the section chief's favorites, if
she did not care for you, you were not getting out of intake.
They made sure if they did not like you--if you were one of
their favorites, they would find you a detail. They would do
something special.
Suddenly, that detail is going to become a permanent job.
And guess who is the greatest candidate, you. This is how they
would operate.
Mr. Fincher. My time is almost expired. But we all are
Members of Congress. The buck stops with us and representing
our districts.
Whether we like it or not, Mr. Cordray is head of this
agency. And there are some accountability problems here. And
hopefully, we will get to the bottom of it. I appreciate you
both coming in.
I yield back.
Chairman McHenry. The gentleman from Nevada, Mr. Horsford,
is recognized for 5 minutes.
Mr. Horsford. Thank you very much, Mr. Chairman.
And I want to say in the outset, I know this is a hearing
that we have had on this issue now several times. And I think
it is important for us to state at the outset that an unfair
discriminatory workplace for any individual, regardless of
their background, race, gender, or sexual orientation should
not be tolerated, period. Whether it is at the CFPB or any
Federal agency or private agency it is not part of what we
expect in the workplace in the 21st Century.
I have listened to your testimony and the testimony of
individuals who have come before this subcommittee, and I
continue to be troubled by the allegations of discrimination.
And I want to be able to hear from you about those concerns and
your suggestions for what should be changed.
I also want to say that I think we need to focus on how we
address these issues from a systemic point of view. That
sometimes hearing the testimony of, in this case two
individuals, and then to make decisions about an entire agency,
I think is problematic. But since you are here, I do want to
hear your suggestions.
So, Mr. Naraghi--
Mr. Naraghi. Naraghi.
Mr. Horsford. Naraghi. Thank you. And Mr. Williams, after
listening to your testimony throughout this hearing and reading
your full written testimony, beyond the issues that you have
already raised, what specific suggestions or changes do you
have that would help improve the work culture of the Bureau?
Mr. Naraghi. I would suggest there has to be some sort of
mechanism. If this subcommittee had not formed this I would
have no recourse because I genuinely as a naturalized U.S.
citizen and as somebody, who like any other person, loves his
country and obeys the law, I followed all the rules.
I asked the Human Capital Officer at the CFPB to let me
know what I can do. I went through the protocol. At every turn
I was turned down, sir. And I filed an EEO case and I am
waiting. If this hadn't happened, I probably would be looking
for another job--
Mr. Horsford. If what hadn't happened?
Mr. Naraghi. This subcommittee had not formed this--
Mr. Horsford. But what do you expect out of this
subcommittee? Because I haven't heard anything from--
Mr. Naraghi. All I am trying to do--
Mr. Horsford. --the other side on what they plan to do.
Other than hearing your testimony and hearing the allegations.
That doesn't fix the problem that the employees of the Bureau
are facing. So what is it that you want to come from this
process?
Mr. Naraghi. I, as I am here to speak for myself. I am
hoping by bringing this to your attention, to the Nation's
attention and CFPB senior management's attention that they
seriously try to fix it because everybody that I have come
across, everybody I have had the honor to work for loves their
job. They want to help consumers. Nobody--and this is
interfering. This mismanagement--
Mr. Horsford. Okay. Mr. Williams?
Mr. Naraghi. --that we are suffering is interfering with
that.
Mr. Williams. As stated, sir, I appreciate the question.
There should be an independent investigator coming from this
committee. Congress has the ability to assign to leverage the
playing field. You have the ability of oversight and to
eliminate the disparate impact that employees are facing.
So that is my suggestion, an investigator. Someone without
connection to the agency to come in, not the Office of Minority
and Women Inclusion (OMWI), but someone from the outside to
come in and look at what has happened. Take the report
seriously.
You shouldn't have to come back here every couple of months
and hear the same story from a neverending--from a cavalcade of
current or former employees.
Mr. Horsford. And that is part of my concern, quite
honestly, is at what point, Mr. Chairman, do we intend to
actually propose recommended steps based on the testimony that
we have heard from witnesses? It is not doing them any good to
continue to have hearings where we just hear the allegations
and aren't acting to address it.
I, for one, and I know the ranking member and other members
on this committee want to get to the point where we are fixing
this. Not just for the CFPB, but for any agency where
discrimination exists. And so, can I ask that of you and the
full committee as to when we will get to that point in the
process?
Chairman McHenry. Just as a subcommittee chair, and I
appreciate the gentleman yielding in the spirit he is asking
the question, I have not drawn any conclusions yet. I want to
get to the bottom of what this is, if it is truly a structural
problem.
That is why my questions this morning to Mr. Cordray were
about what actions he has taken on the people whose
subordinates have been awarded a settlement for the manager's
discrimination. Yet that manager still receives high marks,
promotions, and bonuses. That is problematic.
And so, I have gone into this with an open mind. And I
certainly appreciate my colleagues on this committee coming
with the same sentiment. I haven't come to the conclusion yet.
But I do think that accountability is a measure.
And to Mr. Williams' point when he said that--you said that
after the last hearing, there was a change. Apparently, the
agency is listening. I don't know to what degree.
And I am sorry to take up so much of your time, but--
Mr. Horsford. No. I appreciate it, Mr. Chairman. I guess
beyond having hearings though, that to me is not really
addressing the problem.
We have the report. The issues were exposed. The ranking
member told you from day one that discrimination exists. So
what are we going to do to fix this?
Chairman McHenry. And I would be happy to work with the
gentleman on solutions.
Mr. Horsford. Thank you, Mr. Chairman.
Chairman McHenry. I certainly appreciate it.
We will now go to Mrs. Wagner, the gentlelady from
Missouri, for 5 minutes.
Mrs. Wagner. Thank you, Mr. Chairman. I appreciate it. And
I certainly thank our witnesses for their bravery in coming
forward and testifying.
I would also remind this subcommittee that we did have a
CFPB markup just last week. And I had the pleasure of speaking
on behalf of the Stivers bill that asked and called for--it
passed out of full committee--an independent IG that is outside
of the purview of the Fed. I think that is one of many things
that we can be looking at. But that actually is something that
passed out of this committee, and I hope it will make it to the
full Floor.
I have to tell you, one of the most stunning things that I
have seen, and I have just read through this letter from the
attorney of Ms. Liza Strong, who is again the Lead of Employee
Relations for the CFPB. And she has sought to strike and bar
the opening statements of employees, specifically Mr. Naraghi.
I have to tell you the arrogance, hubris, the doubling down
of humiliation and retaliation is absolutely unconscionable. We
do need reforms. We do need transparency. We do need
accountability, oversight, power of the purse, all of the
above.
I will get to my questions here.
Mr. Williams, you state in your testimony that you were the
Quality Assurance Monitor at the Office of Consumer Response.
In that role, you found problems with certain aspects of the
program that were ineffective or inadequate or flawed. Did you
ever raise these problems with anyone at the CFPB?
Mr. Williams. Absolutely, ma'am. I raised them on numerous
occasions.
Mrs. Wagner. Did you ever raise these problems to the
CFPB's Inspector General?
Mr. Williams. No, ma'am.
Mrs. Wagner. Did you ever get the sense that your managers
at the CFPB thought that you had complained to the CFPB's IG?
Mr. Williams. Yes, ma'am. They misidentified me as a
whistleblower.
Mrs. Wagner. What made you think that?
Mr. Williams. One, the intensity of the scrutiny I faced,
and in a confidential manner it was revealed to me that I was
misidentified as the whistleblower.
Mrs. Wagner. How did your managers find out that an
employee had complained to the CFPB's Inspector General?
Mr. Williams. Someone in the IG's office--somehow this got
leaked out to CFPB management. It was leaked out to not just
executive leadership, but especially to Consumer Response.
Mrs. Wagner. From the IG's office, Mr. Williams?
Mr. Williams. It had to be, yes, ma'am.
Mrs. Wagner. Do you believe that your managers retaliated
against you for being a whistleblower even though you were not?
Mr. Williams. Yes, ma'am, every day they could.
Mrs. Wagner. And why is that?
Mr. Williams. Because they were bullies, plain and simple.
I don't have any big words for it. They were bullies.
They were untrained. None of us were prepared for the
enormity of the--me included. None of us were prepared to
launch a Federal investigation under these circumstances and
put together a major contact center. I, at least, knew we
weren't prepared.
Mrs. Wagner. Let me ask a question here. Has the CFPB hired
any new African-American managers to work in the Office of
Consumer Response?
Mr. Williams. No, ma'am.
Mrs. Wagner. Is there any fathomable explanation for why
the CFPB has failed to recruit new African-American managers in
the Office of Consumer Response?
Mr. Williams. The current administration there, ma'am, is
the answer. When you change the current administration, it
might change the climate. But they have infused--there are so
many of their cronies in Consumer Response that you are still
going to have the roots of that there.
So you have to change the whole scheme. And that might get
some results.
Mrs. Wagner. Thank you, Mr. Williams.
Mr. Naraghi, is it true that you shared your concerns about
the favoritism and the mismanagement with the CFPB's Inspector
General in 2012?
Mr. Naraghi. Yes, ma'am.
Mrs. Wagner. How did the CFPB's Inspector General react to
your concern?
Mr. Naraghi. In my initial call, I was pleasantly
surprised. I was immediately contacted. And they saw to get
my--not only about my mistreatment, which they recommended for
me to seek EEO help, but they asked me to let them know. And
the main reason I called them is because I was concerned about
my responsibility as a government employee to report any misuse
of funds.
And after I sent them the email enumerating what I thought
were wrongdoings, I never heard back from them.
Mrs. Wagner. You never heard back--
Mr. Naraghi. No, ma'am.
Mrs. Wagner. --from the IG?
Has the CFPB's Inspector General in any way been helpful to
you in increasing transparency or accountability for
mismanagement to CFPB?
Mr. Naraghi. Not that has been apparent to me.
Mrs. Wagner. I thank you, Mr. Chairman. I will yield back.
Chairman McHenry. I appreciate the gentlelady yielding
back. We will now recognize the vice chairman of the
subcommittee, Mr. Fitzpatrick of Pennsylvania.
Mr. Fitzpatrick. I thank the chairman. And I also thank Mr.
Naraghi and Mr. Williams for your courage in coming forward to
this committee like Angela Martin and other employees before
you. It takes a great amount of fortitude and courage to come
to the committee to make the statements you have made.
We understand that there are several employees back at the
Bureau, dozens if not more, who for a variety of reasons don't
feel capable to come forward and give their statements. We have
seen some anonymous statements. But you are giving them a voice
as well and that is also an important role that you are playing
and service that you are giving to the Bureau and to your
fellow employees.
Mr. Naraghi, you indicated in your written statement that
you found that voicing professional dissenting opinion would
ultimately in many cases result in retaliation. You give a
number of examples.
For instance, one was when you were pointing out
inefficient use of Bureau resources, the wasting of Federal tax
dollars. You talked about it in terms of sending reviewers or
inspectors to cities where there were qualified individuals
already there, and significant travel expense and things along
those lines. And I am sure there are many examples.
Did you guys at the Bureau ever engage in video
teleconferencing to try to save dollars?
Mr. Naraghi. No. You have to remember the exam group that I
belong to that is in a part under supervision has hardly
besides their--the senior management of the area, we work out
of our homes. Seventy percent to 80 percent of the time we are
on travel, so which means we are at the institution site.
And no, to the--they may use it at the headquarters, but I
am not aware of it.
Mr. Fitzpatrick. You never used video teleconferencing in
order to save the Bureau dollars? And you are suggesting that
you actually pointed out wasteful use of Bureau resources and
were retaliated against for doing so?
Mr. Naraghi. That is true.
Mr. Fitzpatrick. Now, we were interrupted a little bit by
some votes on the Floor. So I didn't see your entire opening
statement. But I understand that there was a cultural slur that
you referred to in your opening statement. What was that?
Mr. Naraghi. ``F'ing foreigner'' is how my field manager
used to refer to me. It wasn't in my presence. And it was at
the huddle.
Each region has three huddles, what they call it. Three
times a year they get all the examiners together. And in this
particular one they had hired some new examiner that my manager
did not know, had not met. And on the elevator this new
examiner heard him refer to me in those terms.
Mr. Fitzpatrick. What did the CFPB relations, employee
relations and the Equal Employment Opportunity office, what did
they do when you brought that to their attention?
Mr. Naraghi. I talked to Liza Strong and she said oh,
absolutely we don't tolerate that. But, like the gentleman
said, there are always two sides. I was promised there would be
investigation. I never heard back from them.
I brought that to the investigator's attention and she is
the one who actually made a note of it. And management in their
interview by the investigator said oh, we don't know what he is
talking about, basically denial.
But I did find out last night, late last night the
president of our union called me and he said that they have
actually started an examination or investigation into that just
now.
Mr. Fitzpatrick. So it sounds like you brought it to their
attention on multiple occasions. When we review
inappropriateness, we are looking for a timely response and an
appropriate response. You are saying just last night you were
advised that they will now look into it?
Mr. Naraghi. That they have just started the investigation,
yes, sir.
Mr. Fitzpatrick. Mr. Williams, is racial discrimination
within the Office of Consumer Response widespread, in your
view?
Mr. Williams. It is concentrated in one area that I can
attest to. I would imagine that it exists. But I can tell you
that it is concentrated in one area.
Mr. Fitzpatrick. Did you witness favoritism in hiring at
the CFPB?
Mr. Williams. Absolutely. Yes, sir.
Mr. Fitzpatrick. Can you describe it to us?
Mr. Williams. So I am your friend, and I need a job. Well,
lo and behold, out of the millions or thousands of people who
may apply, we are going to pick you. Then, after you are there
6 to 8 months, you need a promotion. So if it is not on the org
chart, I will create it.
So then, I have brought you on. You don't have any tenure.
The agency is only 3 years old. Now, I have hired you. I am
going to give you six figures. And now I am going to reward you
with a team lead position that you are just not qualified for,
but don't worry about it because I will deflect any criticism.
Mr. Fitzpatrick. My time has expired. Thank you, Mr.
Williams.
Chairman McHenry. I appreciate that. Thank you, Mr. Vice
Chairman.
Mr. Hultgren of Illinois is recognized.
Mr. Hultgren. Thank you, Mr. Chairman. And I thank you both
so much for being here.
First, I want to ask Mr. Naraghi a couple of questions.
What happened after you filed your first formal EEO complaint?
Mr. Naraghi. Immediately afterwards, I was issued a
reprimand letter.
Mr. Hultgren. Did you construe the letter of reprimand that
you received shortly after filing your EEO complaint as an act
of retaliation?
Mr. Naraghi. I believe so.
Mr. Hultgren. Have you experienced any additional instances
of retaliation?
Mr. Naraghi. Absolutely.
Mr. Hultgren. Can you tell me about that?
Mr. Naraghi. Absolutely. I have a huge list. I think the
committee wouldn't have enough time. But I can give you a few
examples.
The biggest retaliation is I was given a bad grade for an
exam where I was doing my job, in other words, telling my
inexperienced manager that what he was telling the institution
was wrong, in a polite, professional manner. That was when they
cancelled my vacation, wrote a bad evaluation for me, and gave
me all 1s despite my work being satisfactory.
And they also denied me a raise. So, I had started in 2011,
and I didn't get a raise until 2013. And that affects not only
obviously my pay, but any opportunity because it took me a year
to prove them wrong. And it took me seeking a different
manager.
One of the practices--it may be true across the CFPB but I
can only speak to us, the Southeast Region--is if anybody makes
a complaint about racism or discrimination, they put them under
a minority manager thinking that--they did that to me. The
gentleman who had made a reference to me as a ``F'ing
foreigner,'' I had to call Ms. Strong 3 or 4 times, and send
several emails seeking to have another manager who could be
unbiased.
After a few months, they assigned me to an African-American
manager, in their mind thinking well, the African-American
manager cannot be biased because he is a person of color. Do
you know what I am saying? I think they may be under some sort
of a misunderstanding that like he was saying, colored people
do discriminate against colored people as well.
Mr. Hultgren. Mr. Williams, can you elaborate on how other
African-Americans have faced racial discrimination within the
Office of Consumer Response?
Mr. Williams. Well, the assignments. In Consumer Response,
and specifically in intake, if you were not someone that they
favored, your work is not only going to be intensely
scrutinized, they are going to send you constant emails about
the rate of work that you are producing. Why didn't you finish
this? Do you see how many you have? And they would do that
constantly.
I can speak from my experience--my quality assurance
manager and section chief were waiting until 5 o'clock, and
they would have a write up or something. Or in one instance
they created a policy that probably doesn't exist, and wrote me
up. I took it to Liza Strong, gave her the document, and said
that we don't even think this policy ever existed. She said,
okay. It was really nice, a pleasure, but she did absolutely
nothing.
I took it to her personally, called her on the phone, said
here are the documents, Liza Strong. Can you show me where this
policy exists? They have never done it. I even showed her that
if this policy exists, the vendor is doing the same thing. So
you are going to tell me that your vendor is violating the same
policy? They have never answered that. So those are examples.
Mr. Hultgren. My time is going by quickly, so I want to ask
you just a couple more questions to both of you.
Do you believe that the CFPB is hypocritical in how it
addresses its internal discrimination? If so, why do you
believe this?
Mr. Williams. Absolutely, sir, because I am the only person
who has ever been punished. They didn't renew my contract. The
rest of them have all been promoted and have gotten raises. I
am the one who had to go out and seek other employment.
Mr. Naraghi. I am aware of--not to myself because I came
from the Federal Reserve and competitively took my position--
colleagues who were brought over on contract whether from the
OCC or other agencies. These are people of color, different
nationality, origin. And CFPB management has refused to make
them permanent employees, even though I have had the privilege
of working with them and they are very capable examiners.
However, there are White examiners who have been made into
permanent employees. So even though I wasn't subject to it, I
am aware of it, and I have seen folks like that.
Mr. Hultgren. My time has expired. I yield back, Mr.
Chairman.
Thank you both.
Chairman McHenry. I thank my colleague. We will now go to
Mr. Duffy of Wisconsin.
Mr. Duffy. Thank you, Mr. Chairman.
Listen, I first want to thank the panel for their testimony
today. I know it is not easy to stand up and walk forward and
be the voice for many in your organization, in the Bureau who
don't feel they can stand up and tell these stories. And I
think everyone on this committee has bipartisan recognition of
how difficult it is to actually come forward because the light
shines that much brighter on you when you do it. And so, I
thank you for your courage in coming forward.
In that regard, has it been a pleasurable experience coming
forward and testifying before Congress for the both of you? Mr.
Naraghi?
Mr. Naraghi. It has. To me, it is like a huge weight has
been lifted off my shoulder. I was beginning to doubt myself
because every complaint or everything I brought to management's
attention has been just denied like it is a figment of my
imagination. And I am seeing that people listen, and say, no,
you are right to have taken it that way.
I feel like a huge weight has been lifted off my shoulders.
So, it has been pleasurable.
Mr. Duffy. Good.
Mr. Naraghi. Thank you.
Mr. Duffy. Mr. Williams?
Mr. Williams. No, sir. The only thing I wanted to do was
work.
Mr. Duffy. That is right.
Mr. Williams. They took my job that I started that unit.
No, this isn't pleasurable, I am getting scrutinized. This is
on the internet. I don't want to be here. Who in their right
mind wants to come up here? No, I don't want to be here.
Mr. Duffy. And that is what I actually thought the answer
would be, and not a weight being lifted off. It is not
pleasurable. It is difficult to come forward and to expose what
is going on. And again, Mr. Williams, I am grateful for your
willingness to step forward.
When you were telling your stories about the racism, the
language that I won't even repeat, it was being used against
the both of you. Did you see a lot of people rally to your aid,
step up and say, it is 2014, listen, at this new agency, that
is not acceptable. We are going to stand by you. We are going
to fight for you and we are going to root this out.
Mr. Naraghi. I speak about my own. It was a colleague who
saw or overheard what happened and was disturbed by it. And he
since then has actually quit the Bureau. He was already unhappy
for sitting at home. Once he heard this, it was kind of a last
nail in the coffin for him.
And as far as other folks, they are afraid to speak up. It
is a really sick environment that we work in. So folks, I don't
expect them--the only one that I referred to in my testimony,
brave because he was brave because management knew who he was.
He even gave me authority to use his name in appealing my
evaluation. He is truly my hero and he is truly a straight
shooter.
Mr. Duffy. Thank you.
Mr. Williams?
Mr. Williams. Every member of management from the chief
operating officer down to Liza Strong lied to me and the
National Treasury Employees Union. Employees wanted to rally
openly, but they know that there is a retaliatory environment.
I was the only one that CFPB Consumer Response management could
retaliate against because they refused to make me a permanent
employee.
So there is a different hurdle. There is no hurdle to
retaliate against me. Every member of leadership lied to me or
the union directly. So they did nothing for me.
Mr. Duffy. I say this with some reservation. To the ranking
member's comments about making sure we do a full investigation,
I agree with that. And to his comments of his experience of
racism, I can't imagine the pain. And we had a culture that did
behave and still does behave that way.
But I imagine when someone has two drinking fountains,
there is no investigation. When you see it, you know it, and
that is racism. When we hear the language that has been used,
when we read the investigations that have been put together
from the outside looking in, yes, we can investigate a little
bit more. But I am telling you what. If it walks like a duck
and it quacks like a duck, I am telling you it is a duck.
And so I promise that this committee will continue to
expose what has happened. I know we are going to have a
bipartisan buy-in to make sure that we root it out, and you
both can have a work environment that is consistent with the
skills and mission and drive that you bring to consumer
protection. I promise you that.
I yield back.
Chairman McHenry. The Chair now recognizes Mr. Rothfus from
Pennsylvania for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman. And let me echo the
sentiment of my colleagues in commending you for the fortitude
to come here today to tell your story.
Mr. Naraghi, in your prepared testimony you addressed the
issue of the risk model that CFPB uses in its supervisory
program. Could you explain what a risk model is and why it is
significant in bank exams?
Mr. Naraghi. A risk model is--essentially you should think
of it in a basic term--is a measuring stick that you use
against all institutions. It is a model that you assess what
are the critical functions of a given institution and what are
the tolerance levels of that. It is basically defined therefore
you are going to an institution.
When you don't have a risk model we go through a--
institution A versus institution B. And let's say we find 10
issues in A and only 5 in B, and we rate A higher than B. There
is nothing to back up whether or not you have been subjective
or objective in determining it.
However, if there is a measuring stick that you hold
against both institutions, then you have done a fair job and
your question can be--your assessment can be reviewed and
confirmed by folks who may not be experts in that area. But
they can see that you treated both of them fairly.
Mr. Rothfus. So in your tenure at CFPB, have you had to
conduct exams without a risk model in place?
Mr. Naraghi. Yes, sir.
Mr. Rothfus. When did the CFPB ultimately adopt a risk
model?
Mr. Naraghi. They issued a--for mortgage servicing, they
issued a manual. I believe it was in the first part of 2012. I
am not sure about the day. And then later on, by the end of
2012, we got a comprehensive examination manual, which they are
having also serve as a risk model.
Mr. Rothfus. And that was by the end of 2012, you said?
Mr. Naraghi. Yes. The most recent one was reissued because
of the new regulations at the beginning of this year. But we
have had one since 2012.
Mr. Rothfus. How did you evaluate banks without having a
risk model?
Mr. Naraghi. I relied--basically, we had nothing to go by.
And as far as my assignment was concerned, I led the
examination of mortgage servicing. But I based basically my
directive the staff or examiners that I was working with to go
through what I recall from proper examination techniques from
the Fed. Because I have about 20 years of experience in
conducting examinations.
Mr. Rothfus. Do you have any concerns regarding the CFPB's
2012 supervision manual? For example, does this model align
with actual exam practices?
Mr. Naraghi. There are a lot of problems to be worked out.
In my opinion, what they have done is they had lawyers write
advisory information, which is the information the bank or
financial institution or nonbank provides us, and then we got
the manual. They don't tie in. They are not in parallel. So,
there are a lot of issues.
And the manual was written, again, by attorneys. It is not
what we normally do in a supervisory entity because it doesn't
give enough. It just says ask for such and such information and
review.
It doesn't tell the examiner, especially because more than
half of the examiners at the CFPB are inexperienced folks. They
have expertise in the industry, but this is their first time
doing examinations. I think it is critical for them to know
what you are assessing and how do you go about assessing that
particular function.
Mr. Rothfus. Mr. Williams, during your time at CFPB, how
did CFPB define a breach of personally identifiable
information?
Mr. Williams. We would file a PII breach. You could find
them a couple of different ways. One, during a quality
assurance evaluation of one of the monitors, we might find
them. The other way, if the vendor self-reported or if the
consumer contacted, as they did some vendors, I think.
Some consumers contacted the New York Times at one point
concerning three breaches. But those are the three typical ways
you find them.
Mr. Rothfus. How often did breaches of PII occur at the
CFPB call center?
Mr. Williams. It occurred frequently but there wasn't a
pattern. You would see it might happen, as I stated earlier, it
might happen 3 times and then you don't see it for a while.
Then all of a sudden, you see it again.
Mr. Rothfus. In your opinion, was the number of PII
breaches and incidents high, low or about normal for a call
center?
Mr. Williams. It was high.
Mr. Rothfus. In your view, would there be fewer incidents
in breaches of PII if the Office of Consumer Response had more
experienced managers?
Mr. Williams. Absolutely.
Mr. Rothfus. Thank you. Thank you, gentlemen.
I yield back.
Mr. Fitzpatrick [presiding]. The Chair now recognizes the
ranking member of the subcommittee, Mr. Green.
Mr. Green. Thank you, Mr. Chairman. And I must say, if I
may in passing, that you look good in that seat.
If I may, Mr. Williams, I make notes and I go back through
my notes to provide some degree of clarity. So let's start with
a statement that you made, only to provide clarity, Mr.
Williams, I assure you. You indicated that while under subpoena
today, you were making certain statements.
And to provide clarity, I want to make sure you understand,
and I believe you do, that you are under subpoena today because
you requested a subpoena. The committee would have allowed you
to come without subpoena. But it was at your request that we
issued a subpoena. Are you aware of this?
Mr. Williams. I am aware of that.
Mr. Green. Okay. Let me go to my next point.
You indicated something about organizations that would be
assisting you if certain circumstances existed with reference
to the complexion of supervisors. Do you have proof today of
contact prior to being subpoenaed, let's start with that as our
asset point. Do you have proof of contact prior to being
subpoenaed of contacting civil rights organizations?
Mr. Williams. Yes, sir.
Mr. Green. Do you have that proof with you today?
Mr. Williams. I can look at my phone and show you the
records. I could probably--
Mr. Green. No, no. You can do this for me. Just tell me
what organizations did you contact?
Mr. Williams. My family and I, we reached out to
Congresswoman Waters' office--
Mr. Green. Do this for me, organizations, civil rights
organizations. For example, did you contact the NAACP?
Mr. Williams. We contacted Reverend Al Sharpton's Action
Network. We talked to people--because I am from Chicago, we
talked to people from Operation PUSH.
Mr. Green. Did you do that personally?
Mr. Williams. Personally, and other people on my behalf.
Mr. Green. Just tell me about what you did personally if
you would, please.
Mr. Williams. Yes.
Mr. Green. Personally, you contacted the NAACP?
Mr. Williams. I didn't contact the NAACP.
Mr. Green. You did not?
Mr. Williams. No, sir.
Mr. Green. Personally, did you contact the National Action
Network?
Mr. Williams. Yes.
Mr. Green. Okay. And personally, did you contact some other
organization that you can call to my attention now?
Mr. Williams. Yes.
Mr. Green. Okay. If you would, please?
Mr. Williams. Back home, I contacted Operation PUSH.
Mr. Green. PUSH?
Mr. Williams. Yes.
Mr. Green. Okay. And any others?
Mr. Williams. My family--
Mr. Green. You personally, only what you did personally.
Mr. Williams. No, sir.
Mr. Green. Okay. And I have a reason for asking it this way
in terms of personal contact.
Now let's talk about this. You are both fair-minded people
and you want to make sure that you are treated fairly. But you
also want to make sure that others are treated fairly as well.
Is this a fair statement that you want to make sure others are
treated fairly as well?
Mr. Williams. Sure.
Mr. Green. Let's talk about some of the others. One of you
having been a bank examiner, I will just use banks as a part of
this question.
If we find that banks have employees who are expressing
similar concerns, would you want us to hold ex parte hearings
with reference to these employees? For fear that you may not
understand the term ex parte, just let me ask you, would you
want us to hold hearings similar to these hearings with bank
employees if they were experiencing similar circumstances?
Mr. Williams, would you want us to hold hearings with
banks? Or is this just for the CFPB that you want these things
done? So would you want us to do a similar thing? If you were
working at a bank and you had similar circumstances, and
Congress has oversight of banks, would you want us to do this,
Mr. Williams? Would you want us to hold similar hearings?
Mr. Williams. I would want you to do what is prudent, yes,
sir.
Mr. Green. All right. You would want me to hold these
hearings. Is that right?
Mr. Williams. Yes, sir.
Mr. Green. Okay. And Mr. Naraghi, would you want us to do
the same thing? Or is this only for the CFPB, Mr. Naraghi?
Mr. Naraghi. No.
Mr. Green. Would you want us to do a similar thing with
banks?
Mr. Naraghi. Here is what I would say about that.
Mr. Green. No, you will say yes or no for this one, please.
Would you want us to do the same thing if banks were
discriminating invidiously against people?
Mr. Naraghi. In my capacity as a bank examiner or just as
a--
Mr. Green. No. Would you want Congress to call in to give
those persons at banks to come before this committee and
testify? Would you want us to give them the opportunity to do
so?
Mr. Naraghi. Do you want my personal opinion or my opinion
as a bank examiner?
Mr. Green. Yes. I am asking you for your personal opinion.
Would you want this to happen? Or is it only for the CFPB?
Mr. Naraghi. No. If possible, yes.
Mr. Green. You would. All right.
Would you want--you said level the playing field, Mr.
Williams. Would you want us to level the playing field with
banks? If we find that banks have an unlevel playing field,
would you want this committee to do what it can--
Mr. Williams. Absolutely.
Mr. Green. --to level it?
Mr. Williams. Yes.
Mr. Green. All right. Let's move on.
Would you want us to use disparate impact as a theory with
banks? You indicated that we are using it today. Would you want
us to use the same theory with banks?
Mr. Williams. Absolutely.
Mr. Green. Would you want us to have persons who are
working at banks who may be hearing what we are saying today by
and through television or some other means of hearing these
proceedings, would you want them to contact us, just as you
were able to contact us?
Mr. Williams. Yes.
Mr. Green. Would you want them to contact us and say, my
bank is discriminating against me?
Mr. Williams. Yes.
Mr. Green. And should we hear from these witnesses just as
we are hearing from you without the benefit of hearing from the
other side? If a person says, I have been discriminated
against, do you want us to hear from them just like I am
hearing from you today, same way, no change?
Mr. Williams. Yes.
Mr. Green. Thank you.
Sir, Mr. Naraghi? Mr. Naraghi, you hesitated on some
important questions. Are you here for the CFPB only? Or do you
want to see people who are being discriminated against
regardless of the venue have an opportunity to be heard?
Mr. Naraghi. Sir, the reason I hesitate is it is beyond my
knowledge or--
Mr. Green. I am not asking you about what you know about
banks. I am asking you that if you were working at a bank and
experiencing these same circumstances, would you want the
chance to sit in this chamber today--
Mr. Naraghi. If possible, yes, sir.
Mr. Green. Okay.
Finally, you said to change the administration, Mr.
Williams. If a bank had similar circumstances, would you want
the administration at the bank changed? I am using your exact
language. You said--
Mr. Williams. Yes.
Mr. Green. --change it.
You agree, Mr. Naraghi? Are you only here for the CFPB, Mr.
Naraghi?
Mr. Naraghi. Yes--
Mr. Green. Do you want to see other people--
Mr. Naraghi. --I am here for the--
Mr. Green. --who are discriminated against to have the same
opportunity? Are you here to eviscerate and emasculate the
CFPB?
Mr. Naraghi. I am not.
Mr. Green. Would you want to see banks treated the same
way?
Mr. Naraghi. Absolutely. I think they are because of our
laws.
Mr. Green. All right. Finally, I would like to submit for
the record the request that the ranking member and I, along
with other members of the subcommittee, have made to all seven
of the Inspectors General with reference to investigating
complaints of discrimination. This would include the CFPB.
I would also, Mr. Chairman, ask that we include for the
record a document titled, ``Objective and Approach for Offices
of Inspector General (OIG) Review of Office of Minority and
Women Inclusion (OMWI) Activities. And it goes on to indicate,
``Requested by Ranking Member and Colleagues, House Financial
Services Committee, on March 24, 2014.''
And it indicates, Mr. Chairman, that the Inspectors General
will be looking into allegations of discrimination, employee
satisfaction results, hiring, and promotions, and goes on to
indicate that the final evaluation will be presented by late
November 2014. If there are no objections, I would like to
submit these for the record.
Mr. Fitzpatrick. Without objection, they will be made a
part of the record.
Mr. Green. Thank you, Mr. Chairman. I will yield back.
Mr. Fitzpatrick. The Chair recognizes Mr. Barr for 5
minutes.
Mr. Barr. Thank you, Mr. Chairman. And thank you to the
witnesses for your testimony here today.
In reference to the ranking member's line of questioning
just concluded, Mr. Naraghi, I am just curious. In your time as
an examiner at the Bureau, did you ever uncover or discover any
of the kind of discrimination that you personally experienced
at the Bureau?
Mr. Naraghi. No, sir.
Mr. Barr. You testified that results-oriented examinations
in which these exams were decided or the results of those exams
were decided at the outset for the purpose of finding a
violation even if none were identified, and that the field
manager told you that you must not have done your job right
because you did not identify any violations. Is that correct?
Mr. Naraghi. Yes, sir.
Mr. Barr. Is that a common part of the culture at the
Bureau?
Mr. Naraghi. I cannot speak to that about the Bureau. You
have to remember I represent--I am an examiner in the Southeast
Region. I have had that happen to me on at least two occasions,
which even one of them should not happen.
Mr. Barr. So in other words, you are telling me that at the
Bureau, in your capacity as an examiner, management basically
told you that you didn't do your job if you found no violations
with the regulated entity?
Mr. Naraghi. Some. Remember, I said we have a lot of
inexperienced managers. And the Director of my region keeps
hiring his cronies. So yes, that I have seen.
Mr. Barr. Okay.
And Mr. Naraghi, you also testified that individuals in
your team were told to expand their sample size if no
violations were identified in their initial sample. And you
made the point that there is no statistically sound rationale
for conducting examinations in this manner. Can you explain
that a little bit more? Can you amplify that a little bit more?
Mr. Naraghi. Absolutely. Their standard examination
protocol calls for you to determine a sample size as
statistically based on what is the total population of that
area you are examining, the transaction you are examining, and
you come up with a number. And you randomly select that. The
reason is for it to withstand the scrutiny both by the bank or
institution management as well as in a court of law or anything
that we are treating everybody fairly, unbiasedly.
When the only time you extend your sample, as the
examination protocols call for, is if you find enough errors,
or basically violations, violation of law, violation of their
own protocols. That is when you expand your sample.
Mr. Barr. Mr. Naraghi, this sounds kind of like it is a
fishing expedition. You take a statistically accurate sample,
and no violations are found. There must be something wrong
because all the banks are doing the right thing. That is the
attitude of the Bureau.
Mr. Naraghi. Actually, it is funny you say a fishing
expedition because that was my point of argument with the
enforcement attorney who was wanting to expand the sample. I
said I don't want--and this is brand new agency. I don't want
us to appear like we are on a fishing expedition.
Mr. Barr. And then finally, in your testimony, I think the
most striking observation that you made about the Bureau in
which you worked, that lawyers from the Enforcement Division,
they come into these--they come in and they mention plans to
bring enforcement actions before the completion of the exam
work and before discovering a violation.
So it seems to me that the justice system in our country is
totally disregarded by this Bureau in the sense that there is a
presumption that everybody in the private sector is doing
something wrong. It can't be right if there are no violations.
And so, we are going to enforce before we even discover that
there is a violation.
Mr. Naraghi. Yes. And that is why it bothered me, and the
occasion that happened to me I documented by sending my
management an email indicating so.
Mr. Barr. Do you think that this is a fair-minded approach
to enforcing consumer protection laws in the United States?
Mr. Naraghi. Absolutely not.
Mr. Barr. Let me just ask you one more question or two more
questions. I don't have much more time, but do you believe that
the exams that are conducted at the CFPB are aligned with
industry standards of auditing? Why or why not?
Mr. Naraghi. No. Because depending on who is conducting the
exam, who is the member of management, it could be aligned. And
the ones who are inexperienced or don't have it are not.
I want to emphasize this. There are a lot of good examiners
in our system at CFPB and a lot of hard work goes on. What I
have seen is basically incompetent management that is causing
these issues that I bring to your attention.
Mr. Barr. Mr. Naraghi, I appreciate your testimony here
today. And I think you have really elucidated some underlying
problems with this agency. I appreciate your testimony.
I yield back.
Mr. Naraghi. Thank you.
Mr. Fitzpatrick. There are no further questions this
afternoon, so we would like to thank the witnesses for their
time and for their testimony.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
Without objection, this hearing is adjourned.
[Whereupon, at 4:17 p.m., the hearing was adjourned.]
A P P E N D I X
June 18, 2014
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