It’s always dangerous to take whistleblower complaints at face value — many people who make claims of covert corporate malfeasance and government wrongdoing do so out of revenge (being fired) or to make money on the controversy their charges whip up.
They often have every incentive to exaggerate and, sometimes, outright lie. As a reporter covering these folks, I’ve seen the dark side of the whistleblower business far too much.
And yet, law enforcement would be dumb to ignore them, because they also are often right. Some of these people are downright strange, but as you meander through their various conspiracy theories and personality quirks, you realize that they’re onto something.
Before Jeffrey Wigand exposed the evils of Big Tobacco, CBS initially tried to kill the story, fearing lawsuits. Wigand, too, was a bit of an odd duck, but truth is always a defense in libel cases and Wigand’s allegations were bullet-proof — and his led to reforms.
Investor Harry Markopolos came across as a gadfly, so he was ignored by the Securities and Exchange Commission when he went to them with the goods on Bernie Madoff long before Bernie destroyed livelihoods and lives.
That’s why the feds need to take very seriously what is now being alleged by Peiter Zatko about former employer Twitter, maybe the world’s most popular social media company. If what he’s saying is true, what we might have here is a scandal approaching the Enron fiasco two decades ago.
In Zatko, we also might have one of those disgruntled former employees, which is essentially what Twitter is calling the former hacker who goes by the name “Mudge” (again, whistleblowers are an unconventional breed). Twitter hired Zatko in 2020 to improve the social media platform’s defenses after a series of significant hacks exposed holes in its infrastructure that left its user data open to bad actors and eventually a regulatory settlement where it promised to clean up its act.
‘Ethical hacker’
Zatko seemed perfect for the job. As an “ethical hacker,” he testified before Congress about the Internet’s inherent weaknesses. It could easily be compromised by people like him, essentially shutting down the economy and a lot more, he said. He worked for a security project affiliated with the Defense Department before going to Twitter, where he was fired for “poor performance and leadership” a little more than a year after he was hired, according to a statement the company gave to The Washington Post.
Twitter has not responded to numerous requests by me for comment, and has issued only a few obtuse statements on the matter, so it’s impossible for me to know exactly what those performance and leadership issues are. Zatko’s attorney didn’t respond to a phone call or email seeking comment.
But details of Zatko’s whistleblower complaint — copies of which have been submitted to Congress, the Justice Department, the Securities and Exchange Commission, etc., — have been making the rounds among top white-collar-crime attorneys.
The overwhelming consensus among the experts is that if any of what Zatko says is true, it’s a significant threat to the future of the company that serves as a global town square for politicians, revolutionaries and, yes, millions of trolls and bots using the platform for nefarious reasons.
Again these are big “ifs” but, like Markopolos, Zatko did provide 200 pages of detail about how Twitter failed to live up to a 2010 FTC settlement that forced the company to better secure customer data. Again, if that’s true, the government will seek a pound of flesh from Twitter for ignoring settlement terms.
Another charge by Zatko: Twitter undercounts the numbers of those fake accounts or bots on its platform to boost ad rates.
This is what Tesla founder Elon Musk is alleging in his attempt to renege on his initial $44 billion bid for the social media platform. Twitter sued Musk to enforce the lucrative deal terms, but here’s why Twitter’s problems go beyond Musk walking and negating a huge payday, white-collar lawyers say.
Twitter has long held that bots make up less than 5% of its “monetizable active daily users.” Again, Musk says this is hogwash, though he offers no evidence. But his claims are now bolstered by Zatko’s voluminous filing to the regulators, which states that his former boss, current Twitter CEO Parag Agrawal, failed to heed his warning about the issue in order to boost ad sales.
‘False’ disclosures
Again, lots of “ifs” here, and the details outlining exactly what evidence Zatko uses to make such a bold assertion have not been disclosed. But if there is good evidence the company is downplaying the number of bots, it could mean years of Twitter disclosures to investors and advertisers are false; aka securities fraud.
Chester Spatt, a former director of the SEC’s Office of Economic Analysis, lays out the potential impact on Twitter in an interview with Eleanor Terrett of Fox Business: “If claims are true, the SEC will open an investigation and could seek a bar to prevent executives from holding executive positions in the future.”
Maybe even worse, amid the legal fallout from class-action lawsuits, management upheaval, fines, penalties, etc., the “company will almost certainly be valued at least half of” the $44 billion Musk offered, Spatt said. It may not be the accounting fraud on the level of Enron that shook the markets and cratered what was then one of the biggest energy companies in the world, but Spatt and others say it could be close.
That’s why you need to take whistleblowers seriously.
