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ExxonMobil ordered to reinstate fired whistleblowers who alleged fraud

The Labor Department ordered the company to re-hire and provide back pay to two scientists who accused it of inflating projections

Scientist Lindsey Gulden has accused her former employer ExxonMobil of illegally firing her. (Adam Glanzman for The Washington Post)

When ExxonMobil announced unexpectedly bullish targets for pumping oil out of Texas and New Mexico in the spring of 2019, the news sparked confusion for two scientists at the company.

That confusion grew into alarm as the scientists began to suspect management planned to pin what they saw as a potentially fraudulent forecast on them.

Damian Burch and Lindsey Gulden would soon complain to ExxonMobil’s human resources investigators that Burch’s team was pressured to doctor data to make it look like the company was poised to generate billions of dollars more in oil than it was, according to interviews and the findings of a Labor Department investigation.

Burch said he was so unnerved at being directed to gin up a scientific outlook bolstering the company CEO’s misleading public statements that he named the file: “Please_do_not_turn_this_into_a_lie.xlsx.”

Eventually, the company acted on the concerns raised by the scientists, according to the federal investigation: It fired them.

“I had never seen anything like this before,” said Burch, who worked at the company for more than a decade and holds a doctorate in applied mathematics. “Management said to just override the experts so we can get to the number the CEO has already blasted to the public. We could not find any evidence to support it. The science did not support it. The data did not support it. Nothing supported it.”

Now, federal labor officials at the Occupational Safety and Health Administration have ordered the oil giant to reinstate the two and pay them hundreds of thousands of dollars in back pay and damages in a case that has implications extending beyond the careers of these computational scientists. Exxon officials say they plan to appeal the order before an administrative law judge.

“We reject all claims made by the former employees and will defend the company accordingly,” Exxon spokesman Casey Norton said in an email. “The terminations in late 2020 were unrelated to the ill-founded concerns raised by the employees in 2019.”

“As we have stated throughout, we welcome the opportunity to meet with OSHA to provide additional information or witness interviews, as necessary,” Norton wrote. Company officials said the scientists were not fired for blowing the whistle to federal agencies, but for violating company policies.

The company argues the scientists misunderstood the data and that Exxon was able to exceed targets they disputed. “The employees were neither qualified nor informed enough to offer an opinion, let alone a make a credible complaint,” Norton said.

The Labor Department’s action could become a springboard to a more expansive targeting of fossil fuel companies, which already are facing unprecedented pressure from regulators and shareholders to reveal more about their operations. Companies like ExxonMobil are being pushed to be more transparent not just about their earnings projections and oil reserves, but also their exposure and contribution to climate change as regulators pursue rules requiring extensive new reporting on company emissions and their impact.

“If they can defraud investors and the public about this and get away with it, how can they be trusted with anything related to something as important as confronting climate change?” asked Gulden, who also worked at ExxonMobil for more than a decade, after earning a doctorate in geoscience.

ExxonMobil sees things differently. The company has said in court filings and public statements that the scientists misunderstood the projections and that investors were never misled.

In a court filing earlier this year, the company produced a letter from the Securities and Exchange Commission that said the agency had no plans to take any action after investigating whistleblower claims that the company duped shareholders. The filing came as ExxonMobil defended itself in a shareholder lawsuit in which the plaintiffs, including the state of Rhode Island, interviewed a dozen former employees and contractors who echoed the concerns of the fired scientists. That complaint against Exxon was dismissed late last week by a judge who found the plaintiffs had not provided adequate evidence to show company executives intentionally defrauded investors. But the judge’s order also invited the plaintiffs to refile their complaint with more such evidence.

The company continues to argue it is hitting its drilling targets.

The Labor Department findings, however, suggest ExxonMobil’s problems may be far from over. It concluded that the company violated laws meant to protect whistleblowers. Its central finding was that ExxonMobil fired Burch and Gulden because it suspected they brought their concerns to the media. Under federal law, according to the department, employees may not be fired for leaking information that reveals potential fraud against shareholders.

Burch and Gulden “suffered financial hardship and mental anguish because [Exxon] illegally retaliated against them,” according to the Labor Department’s findings, which were released Thursday. “The terminations were devastating for Complainants, who are high level professionals, neither of whom had ever been terminated from a position.”

In addition to offering the scientists their job back, the department also directed Exxon to pay Gulden more than $385,000 and Burch more than $366,000 in back pay and damages.

The department rejected company arguments that it could legally take action against employees for discussing company business with the media without authorization.

The journey of the two scientists from longtime employees to whistleblowers is a cautionary tale for an oil industry facing stepped-up legal and regulatory pressures as it struggles to transition into the new energy economy. The disclosure rules the SEC is advancing around corporate exposure to climate change will bring new scrutiny to how companies like ExxonMobil manage and manipulate their data.

The SEC proposed a landmark climate disclosure rule. Here’s what to know.

The company was already under the microscope over allegedly false statements. It is a defendant in 20 lawsuits filed by states, cities and counties alleging that it lied to shareholders and the public for decades about its climate science, concealing internal findings that the continued use of fossil fuels could have catastrophic consequences. While the company prevailed in a suit filed by New York, judges in other large cases have rejected ExxonMobil’s efforts to have them dismissed.

ExxonMobil is also a target of an ongoing House Oversight Committee investigation into allegations oil companies used the tobacco industry playbook to mislead the public and shareholders about the risks of their product. A member of the committee, Rep. Mark Desaulnier (D-Calif.), called Burch and Gulden “heroes” and said he plans to call for a House investigation into their firing by Exxon.

The Labor Department investigation says the two scientists first became unnerved in April 2019, after the company announced in a financial disclosure that it was revising its estimate for oil it could pump from the Permian Basin in Texas and New Mexico up to more than 1 million barrels per day by 2024. The forecast immediately struck Burch and Gulden as flawed, according to the government findings.

All the data the scientists had reviewed concluded that drilling times could not be sped up anywhere near quickly enough to meet the company’s target. The two told investigators that they objected to a manager’s direction that Burch’s team baked “learning curve” assumptions into its projections, which tweaked the forecasting formula to assume dramatically increased drilling speeds over five years.

Gulden said in an interview there was not any empirical evidence that supported the aggressive projection. The Labor Department’s investigation concluded that the scientists believed Exxon “was artificially inflating its oil production capacity to improve [Exxon’s] public filings.”

The day managers presented the inflated projections at an internal company meeting, Gulden went to the human resources department at ExxonMobil to report, according to the Labor Department findings, “what she believed to be potential securities fraud surrounding the learning curve model and what was reported to the public.”

“I still believed in the integrity of the company and that it would police itself,” Gulden said.

Burch stepped forward with his concerns a few weeks later, writing in an email to the human resources department: “they asked us to turn any knobs we could in our modeling to get the forecast’s [Net Present Value] up, and they didn’t care whether or not those new assumptions were realistic (they weren’t).”

The scientists said company officials were receptive. “We were told by H.R., ‘Yep, this is definitely bad, and we will definitely take care of it,’ ” Burch said. But months passed and nothing happened. Until late August of 2020, when the Wall Street Journal reached out to ExxonMobil asking about the company’s projections in the Permian Basin.

At that point, the company, according to the Labor Department findings, began to target the scientists. It fired Gulden, and it put Burch through what the former employee described as a harrowing inquisition that concluded with firing by the end of 2020.

Burch said he was repeatedly interrogated about where he emailed company information. The company told government investigators that suspicions the two gave proprietary documents to the Journal drove the firings.

Gulden declined to say whether she talked to a reporter, while Burch said the closest he got to the media was sharing a text he received from the Wall Street Journal with ExxonMobil management. “After the guy contacted me, I thought about talking to him. But I chickened out and ended up reporting it to the ExxonMobil PR office,” Burch said.

It didn’t matter either way. The Labor Department said it is illegal to fire employees suspected of bringing concerns of fraud to the news media. ExxonMobil, the department’s report said, “has failed to provide clear and convincing evidence” that the scientists were fired for reasons other than talking to journalists and blowing the whistle.

Experts in securities law said in interviews that the firings are certain to draw notice from the SEC. While the commission opted not to act on allegations the company defrauded shareholders, alleged illegal retaliation against employees is a separate issue. The SEC, which declined to comment, takes a hard line against such corporate behavior.

“They are being handed on a silver platter evidence of significant violations,” said Steve Kohn, an attorney for the scientists, who plan to file a complaint at the commission demanding tough penalties for ExxonMobil and the managers who orchestrated the firings.

The entire episode has been tough on the careers of the scientists, who lost jobs paying in the mid-$200,000s. “If the biggest oil company in the world fires you for cause, your career in oil and gas is over,” said Burch, who now works for a minerals exploration company tied to the electric vehicle industry.

But they say the company needs to go beyond just offering their jobs back and change the way it operates.

“This kind of thing will continue to happen until there are consequences for the people who lack ethics,” Gulden said. “I just felt a responsibility to stand up and point out what went wrong here with the hope that other systems work and bring people to account.”