Report: FDIC failed to protect employees from misconduct

The FDIC failed to protect employees from sexual harassment, discrimination and other workplace misconduct, according to a third-party review released May 7. .The review was conducted by New York City-based law firm Cleary Gottlieb and overseen by a special committee of the FDIC board. The review included interviews with more than 500 current and former FDIC employees. The investigation followed a November Wall Street Journal report chronicling numerous allegations of sexual harassment and other workplace misconduct at the FDIC. .Numerous instances of workplace misconduct spanning back years were included in the Cleary Gottlieb report:.Employees from underrepresented groups were allegedly told they were only hired because of their group status to fill a quota. One employee reported fearing for her physical safety after a colleague who had been stalking her continued texting her after she reported him for sending text messages featuring partially naked women engaging in sexual acts. Women in one field office reported that it was routine for their male supervisor to describe their intimate physical appearances and his own sex life, while another woman examiner reported receiving a lewd picture from an FDIC senior examiner. She reported later being told she should stay away from him because he had a "reputation." .From 2015-23, none of the 92 harassment complaints received through the agency's anti-harassment program resulted in removal, reductions in grade or pay, or discipline more serious than suspension. Nearly 40 percent either did not report misconduct to avoid retaliation, or were unsure of how to report misconduct, according to the report. .Cleary Gottlieb partially attributed the lack of follow-up to "a risk-averse culture" too focused on the potential downsides of taking disciplinary action without sufficiently considering the institutional damage caused by years of not holding offenders accountable. ."We also find that a patriarchal, insular and risk-averse culture has contributed to the conditions that allowed for this workplace misconduct to occur and persist, and that a widespread fear of retaliation, as well as a lack of clarity and credibility around internal reporting channels, has led to an underreporting of workplace misconduct over the years," wrote Cleary Gottlieb Attorneys Joon H. Kim, Jennifer Kennedy Park and Abena Mainoo. .According to the November WSJ report, Chair Martin Gruenberg and his deputies were involved in decisions over allegations of discrimination, harassment and sexism in which the agency didn't heavily punish employees accused of misconduct. Gruenberg was also accused of having an explosive temper. .FDIC employees reported "deeply unsettling exchanges" with Gruenberg in the Cleary Gottlieb report, during which he was described as being "extremely harsh, aggressive and upset, particularly when being delivered bad news or conveyed views with which he disagrees." .Cleary Gottlieb did not call Gruenberg to resign, though the law firm acknowledged his lengthy tenure at the FDIC could complicate work to improve the culture. "While we do not find Chair Gruenberg's conduct to be a root cause of the sexual harassment and discrimination in the agency or the long-standing workplace culture issues identified in our review, we do recognize that, as a number of FDIC employees put it in talking about Chair Gruenberg, culture 'starts at the top'," according to the law firm..Following the release of the report, Gruenberg apologized to employees who experienced sexual harassment or other misconduct, acknowledged his own leadership shortcomings, and promised to implement the recommendations. .Cleary Gottlieb advised the FDIC to hire a third-party expert to help implement cultural changes, and have an independently run hotline to ensure all complaints are heard. The FDIC was also advised to conduct culture surveys and hold leadership accountable for adhering to its values and code of workplace conduct. ."Today's report establishes the urgent imperative of a culture transformation at the FDIC led by those with the leadership capacity to effectuate that change," said Special Committee Co-Chair Jonathan McKernan, who is also an FDIC director. "The report marks an important first step towards healing, repair and sustainable change at the FDIC. Fostering an environment that promotes a safe, respectful and inclusive workplace is fundamental to achieving the agency's mission.".It remains unclear whether Gruenberg, an appointee of President Joe Biden, will resign. Several members of Congress, including House Financial Services Committee Chair Patrick McHenry (R-N.C.) have already called for his resignation. ."The independent report released today details his inexcusable behavior and makes clear that new leadership is needed at the FDIC," McHenry said last week. "This report confirms the toxic workplace culture at the FDIC — which starts at the top — has led to entrenched and widespread misconduct at the agency. The FDIC must be held to the same standards of conduct it imposes on the entities it regulates. .On May 7, Sen. Bill Foster (D-Ill.) became the first member of his party to call on Gruenberg to resign. "I am appalled and deeply disturbed by the details of the widespread sexual harassment and discrimination at the FDIC outlined in the report released today, and I commend the brave individuals who came forward to shed light on these abuses," he wrote on X, formerly known as Twitter. "Sweeping changes must be made to mend the toxic work environment that has run rampant for far too long, and that starts with a change of leadership. It is time for Chair Gruenberg to resign."