“Grudges” and Whistleblower Reprisal at a Development Agency

A high-level official at the U.S. International Development Finance Corporation (DFC) retaliated against a senior career employee after whistleblower disclosures were made that raised concerns about the official, according to a September 2023 DFC inspector general report of investigation that the Project On Government Oversight (POGO) obtained under the Freedom of Information Act. DFC has a mission of stimulating private investment in what it terms the “developing world” through U.S. taxpayer-funded loans and other means, in part to advance U.S. foreign policy goals.

The official faced ethics complaints, including a disclosure that she served on the investment committee of a private firm while working at DFC. The inspector general found the appearance of two conflicts of interest. 

Following the complaints, the agency put the whistleblower on administrative leave and proposed his termination, even after being warned against doing so by the inspector general, according to its report. Earlier this year, agency management posted a public response disputing its watchdog office’s finding of retaliation as “premature and prejudicial” and arguing that the whistleblower’s case shows that “DFC’s internal processes worked as intended.”

The case has broader significance since it involves the head of the agency. Chief Executive Officer Scott Nathan failed to stop what the inspector general ultimately said was the high-level official’s reprisal against a senior career employee, involvement which is previously unreported. 

The agency’s inspector general had repeatedly made verbal and written requests to Nathan to halt the actions against the employee because they could constitute illegal retaliation. 

In large part due to this case, the four co-chairs of the Congressional Labor Caucus sent Nathan a letter last December. “We are concerned about a pattern of prohibited retaliation against workers at the DFC,” wrote Democratic Representatives Donald Norcross (NJ), Debbie Dingell (MI), Steven Horsford (NV), and Mark Pocan (WI). A DFC source familiar with the matters told POGO only two reprisal cases have been confirmed by the inspector general, and that the officials accused of retaliating are no longer with the agency. However, DFC did not respond to a question from POGO regarding settlements with current or former employees involving reprisal claims. Agencies can settle claims absent official findings of misconduct.

And a concerning new data point became public last month when the nonprofit Partnership for Public Service released rankings showing that DFC saw a 16.9% drop in a score rating agency senior leaders for effective leadership. That’s the biggest decline out of all small, midsize, and large federal agencies from 2022 to 2023. (Five agency subcomponents did see bigger drops.) 

This score measures “the level of respect employees have for senior leaders, their satisfaction with the amount of information provided by management and perceptions about senior leaders’ honesty, integrity and ability to motivate the workforce,” according to the Partnership for Public Service.

The Partnership for Public Service’s scores are largely based on government employee survey responses, with 2023 scores using responses from spring and summer of 2023 — gathered after Nathan’s first full year in charge of DFC and months after the retaliatory acts occurred. 

DFC did not respond to a question about this score.

“A Three-Alarm Fire”

The name of the official who was found to have retaliated is redacted in the watchdog’s report, but the official is publicly described by both the inspector general and DFC as a “senior executive.” Through a review of archived web biographies of DFC’s executive employees, LinkedIn profiles, and other records, POGO was able to identify the official as Lauren Cochran, DFC’s then-vice president for equity and investment funds, who headed the agency’s efforts to buy stakes in companies that advance DFC’s mission. Some members of Congress view those efforts as critical to DFC’s ability to meet its statutory mandate. 

POGO identified Cochran as the official in several ways. For instance, the inspector general’s report says the senior executive had been featured in a biography page on a private investment company’s website that described her as also having a role at DFC. The website of the Blue Haven Initiative, a private investment firm, called Cochran a “senior advisor” at the firm while also describing her role at DFC, according to a bio page archived by the Internet Archive’s Wayback Machine. 

In a written response, Cochran’s attorney did not deny that Cochran is the former DFC executive. Cochran’s attorney and her law firm wrote that they “strongly disagree with many of the statements and conclusions” made by the inspector general’s office, including the retaliation finding, and “do not believe that it represents a fair account or findings.” 

Without acknowledging that Cochran is the executive in the inspector general report, Cochran’s attorney then goes on to describe actions by and perspectives of an unnamed “Senior Leader.” 

Cochran’s attorney also provided details regarding that “Senior Leader” that line up with Cochran, such as when she departed the agency. In an email to POGO, Cochran’s attorney wrote “the Senior Leader left DFC in February 2023.” Cochran left the agency in February 2023, according to her LinkedIn profile and a government financial disclosure report. Archived DFC webpages from January 28, 2023, and March 25, 2023, show only one agency executive removed from the agency’s senior leadership page between those two dates: Lauren Cochran. 

The publication Devex first reported on the reprisal finding last November, based on an online summary by the inspector general. POGO is identifying Cochran and reporting numerous other details for the first time.

Cochran was also one of many DFC hires from the private sector whom the agency’s ethics officials have struggled to oversee for potential conflicts of interest.

“The volume of agency growth and new hires has increased significantly and placed strain on the Ethics Program,” according to DFC’s response to a March 2023 Office of Government Ethics (OGE) review. “DFC constantly endeavors to have the reviews done in the requisite time but the increased agency size and the individual circumstances of filers present challenges.” The Office of Government Ethics reported earlier this year that, of the records it reviewed, DFC was not timely in certifying 83% of its top officials’ financial disclosure reports during 2022 and not timely in certifying 68% of those reports in 2023, which is previously unreported.

“For OGE to put in their program review that the ethics office is ‘under strain’ is kind of the equivalent of pulling the alarm on a three-alarm fire,” said Don Fox, a former acting head and former general counsel of the Office of Government Ethics. “They need help, and lots of it.”

Even the singular case of DFC CEO Scott Nathan potentially poses ethics challenges due to his extensive financial holdings and relationships. He’s a former top executive at a hedge fund known for buying debt from distressed foreign nations, and one of the wealthiest Biden appointees, with a net worth in the hundreds of millions of dollars with widespread investments. Nathan’s financial disclosure report includes some 25 pages detailing his positions outside of government, assets, transactions, liabilities, and other financial details. In contrast, “the average report might include two or three pages of information on private financial interests and activities,” according to a State Department watchdog report from 2013.

A DFC official told POGO that “the CEO’s financial holdings are reviewed on a per-transaction basis in order to screen for and address potential conflicts of interest.” He added that “DFC’s Ethics Office works to ensure leadership and staff, including the CEO, fully follow all ethics guidelines.”

But Cochran’s connection to industry posed ethics concerns that apparently alarmed some staff. And after someone took their concerns to the agency’s inspector general, Cochran retaliated against an employee, according to the inspector general.

POGO reached the employee whom Cochran targeted. He declined to comment but confirmed he was the staffer whose name is redacted in the inspector general report. A senior career employee with over 15 years of service at DFC and its predecessor agency, he returned to DFC after investigators found merit in his reprisal claims. He asked that neither his name nor his title be published, for fear of continuing retaliation. The employee’s attorney declined to comment.

In response to detailed queries from POGO, DFC also declined to comment on personnel matters. However, the agency document responding to the inspector general’s report disagrees with many of the report’s findings. 

Despite DFC’s complaints, the agency wrote, “we also value the work and role of the Office of Inspector General” and that “it is DFC’s policy to strictly prohibit reprisal for whistleblowing activity and it takes allegations of reprisal very seriously.”

“Appearance of a Conflict of Interest”

In March 2022, someone disclosed to the agency’s inspector general that Cochran “was also working for a private investment company,” according to the watchdog’s investigative report. 

Indeed, for some seven months, according to a government financial disclosure report and her LinkedIn profile, Cochran worked at DFC as the vice president of its office of equity and investment funds while she also worked as an investment committee member at the Blue Haven Initiative. Before coming to DFC, her Blue Haven work focused in large part on investments in sub-Saharan Africa — a major aim of DFC. Blue Haven Initiative’s website says climate change investments are a focal point of the firm, a priority that also overlaps with that of the DFC. 

Cochran’s LinkedIn profile says her role at the DFC entailed managing a “team investing directly into companies and venture capital, growth, late stage, and credit funds” and that she “allocated $1B during first year including $300M+ to climate-linked transactions, overseeing” a $3 billion portfolio. 

During roughly seven months — when Cochran was a government official obligated to put taxpayer interests first — her LinkedIn profile says she also served “as voting member of committee that oversees key decisions regarding Blue Haven’s portfolio including asset allocation, manager selection and removal and other strategic investment considerations.” 

This arrangement, the inspector general learned, was allowed to continue “with knowledge and concurrence of DFC ethics officials.” The inspector general “did not find any evidence” that Cochran actually took action to benefit companies she owned a stake in “while employed by DFC.” A financial disclosure report says the Blue Haven investment committee she sat on was “domestically focused” and she was paid $18,750 for her work. Even so, the inspector general said Cochran’s dual roles “created the appearance of a conflict of interest.”  

POGO has encountered no accusation that the Blue Haven Initiative engaged in any wrongdoing associated with DFC. Blue Haven did not respond to multiple emailed requests for comment.

In response to a request for comment, Cochran’s attorney provided extensive remarks defending the actions of the unnamed DFC “Senior Leader.”

“DFC approved the Senior Leader’s temporary continued employment with his/her former employer as she transitioned from that position to his/her new position at DFC. This arrangement was approved by DFC to accommodate DFC’s need for an immediate start date after they recruited the Senior Leader,” wrote Cochran’s attorney. “During the transition period, there were no transactions that involved the interests of both DFC and the former employer; however, the Senior Leader proactively recused him/herself from several transactions throughout his/her employment with DFC that could even create a question of the propriety regarding his/her participation.”

DFC wouldn’t discuss the details of Cochran’s case because it involves individual personnel matters, but the agency told POGO that “executives onboarding at DFC interact with the DFC Ethics Office pertaining to employment and other financial interests” and that “advice provided on these matters is consistent with applicable federal ethics rules and regulations.”

Fox, the former acting head of the Office of Government Ethics, told POGO, “I was really surprised” DFC allowed Cochran to hold an outside position “that seems to deal directly with investment and finance when that was her government job.”

“It’s not apparent what the compelling interest was to allow her to continue the employment relationship with Blue Haven in any capacity or for any period of time after she took the position with DFC,” Fox said. 

Fox told POGO that Cochran’s case “does make you wonder what they would disapprove,” referring to DFC’s knowledge of Cochran’s role at the Blue Haven Initiative while she worked at DFC.

It’s “not uncommon” for agencies to “go beyond the standard executive branch-wide regulations with additional restrictions narrowly tailored to an agency’s mission,” Fox said. But he said at DFC the “only supplemental reg they have is just this one that says side employment must be approved, but there’s no standard” for what isn’t allowed. Fox contrasted DFC’s rule with the Securities and Exchange Commission, “which has very, very detailed guidance on what a person cannot do in addition to being employed at the SEC,” he said.

At the SEC, “you can’t have anything to do with securities, period,” Fox said. The situation at DFC “makes me wonder what wouldn’t pass muster if they said this outside employment was OK,” he said.

The IG report states that Cochran ended her “association with the company” and her LinkedIn profile shows her role at Blue Haven ended in April 2022. She wrote to a DFC ethics official on April 15, 2022, announcing her resignation from the Blue Haven investment committee that same day. She wrote that she had “no financial interests” related to the advice she provided in that role. 

A DFC spokesperson told POGO the agency’s current leadership hasn’t allowed and will not allow other DFC employees to have similar outside employment arrangements as Cochran had.

“Attitude Issues”

According to the IG report, the disclosure that prompted its investigation was made in March 2022 — a month before Cochran ended her association with Blue Haven. The individual who filed that disclosure hasn’t been identified, but the person is not the senior career employee who the IG would later find Cochran had retaliated against. 

Even so, shortly after the inspector general presented its report on Cochran’s outside employment to agency management, the senior employee told the IG that Cochran was trying to “trick” him into “admitting” he was the whistleblower. Soon after, Cochran issued the senior career employee a “letter of concern” regarding “alleged behavior and attitude issues,” as the inspector general put it.

Following this, according to the investigative report, the senior career employee eventually would go on to blow the whistle on Cochran in October and November 2022 regarding a different set of alleged ethics violations, as well as other problems. 

The whistleblower reported to the inspector general that Cochran had appeared to advocate on behalf of a deal that would benefit a company managed by someone who was a “close personal contact” (despite being formally recused from deals involving the company), and that she had engaged in improper hiring practices. 

The inspector general would eventually conclude that Cochran created yet another “appearance of a conflict of interest” because she discussed the deal that would benefit the company with DFC staff and “appeared to advocate for it.” [Emphasis in original]

“Given the sensitivity in Congress and among stakeholders regarding conflicts of interest, any actions by a senior DFC official that create even the appearance of a conflict of interest should be of concern to DFC management,” the inspector general wrote.

Cochran’s attorney told POGO that “the accused individual (the ‘Senior Leader’) took pains to disclose potential conflicts, seek approval (or disapproval) and guidance from DFC where there were questions, and proactively over-recused him/herself from transactions or discussions that could create questions of propriety.”

The watchdog also found an “appearance of impropriety” when Cochran sought to waive the security clearance requirement without any documented justification for a person she wanted to hire, and it found that the agency circumvented civil service rules when it used a contract to bring that person on. 

According to the inspector general report, the Office of Personnel Management was concerned that a contract was used as a workaround, “seemingly to downgrade clearance requirements” associated with the federal government position for which the person originally was considered. The person had been unable to obtain an interim security clearance due at least in part to a “significant financial interest in a foreign country,” according to a DFC email. According to notes from an official interview, Cochran told the inspector general she “did not recall” receiving “any warnings from DFC’s Ethics Officer with respect to hiring” the person, who was eventually granted a lower-level security clearance as a contractor, according to DFC.

The contract for the person — described as a “senior consultant” to DFC’s office of equity and investment funds — is worth up to $1.1 million over a three-year period from August 2022 to September 2025, according to federal contracting data. The data shows the current amount awarded for the contract stands at $736,730, and an agency source told POGO this amount does not just cover the person’s pay but also includes travel expenses as well as health and other benefits. 

There was another issue, too. The inspector general report found that DFC improperly brought the individual on as a contractor when they were actually serving as “a de facto government employee.” Instead of truly serving as an “outside consultant,” the person has “made decisions to move forward on investments,” and has been “deeply involved in the substantive, day-to-day work” in a “senior decision-making role,” the watchdog wrote. 

POGO is unaware of any accusations that the individual has engaged in misconduct, and the individual did not respond to multiple requests for comment.

DFC’s public response disagreed that there was enough evidence demonstrating that the contractor “served in a senior decision-making role and as a de-facto employee.”

The agency also took issue with the watchdog’s ethics findings. “DFC management is concerned about the potential chilling effect on staff of OIG’s conclusion that an appearance of a conflict of interest existed,” DFC wrote. The agency explained that the inspector general’s findings could send the wrong signal to staff because Cochran had voluntarily recused herself from dealing with the company managed by a “close personal contact” — and that she was not required to recuse.

Fox, the federal ethics expert, told POGO that DFC “kind of acknowledged the factual predicate, which is this is a close personal relationship, but then turned around and said, ‘yeah, but it’s not a covered relationship,’ which makes no sense.”

“By definition, close personal contact relations are covered relationships,” Fox said, which federal ethics rules require scrutiny over to protect the appearance of government impartiality and an agency’s reputation.

“Condescending and Dismissive”

In November 2022, Cochran would give the senior career employee a “poor performance rating,” according to the inspector general report, which was a sharp plummet from the high scores he had received for years, agency insiders told POGO. 

The investigative report makes it clear that Cochran’s actions against the senior career employee continued.

By December 2022, the agency’s human resources office had told the senior career employee that management would soon act against him. He again contacted the inspector general’s office. DFC Inspector General Tony Zakel then met with the agency’s CEO, Scott Nathan, briefing him “on concerns that taking action against the whistleblower could constitute retaliation.” Zakel asked Nathan to halt any action against the senior career employee. Nathan responded that Zakel should relay his request to DFC’s Office of General Counsel.

An attorney working for Zakel wrote to DFC’s Office of General Counsel requesting DFC hold off on any action until the inspector general office had a chance to finish its investigation. “We consider the employee to be a whistleblower,” the inspector general attorney wrote. “Thus, any adverse personnel action could be deemed an act of illegal whistleblower retaliation.”

In January 2023, Nathan and DFC’s Office of General Counsel chose to not comply with the inspector general’s request: DFC notified the senior career employee that he was being put on administrative leave and that they had proposed he be fired. Even though requests from DFC’s inspector general warned that the actions against the career employee could be retaliatory, DFC said it had not “detected” any “evidence of retaliation.” 

Inspector General Zakel then wrote to Nathan again asking him to hold off on any actions against the employee. Yet DFC did not reverse placing the whistleblower on administrative leave or rescind its termination proposal in January 2023, according to the report and sources, who say he was immediately cut off from all access to email, other agency systems, colleagues, and clients — and banned from the building. He “was treated like a violent criminal,” one source said.

During this time, the senior employee began looking for new employment. In February 2023, the inspector general’s office reached out to the U.S. Office of Special Counsel (OSC), the main federal agency responsible for protecting whistleblowers. The inspector general’s office agreed to stand down and let OSC take the lead in investigating the retaliation allegations, while the inspector general focused on other misconduct claims. 

In an interview with OSC, Cochran “admitted” that the senior career employee had sought jobs in her “professional circles” and that she “would continue to prevent” him “from obtaining such employment,” according to the inspector general report, which quoted an OSC document. 

Cochran’s attorney told POGO that “the Senior Leader denies that she worked to prevent the career employee from becoming employed at any time and denies stating that she did or would ‘continue’ to do so.” An OSC spokesperson told POGO that “OSC’s investigation of alleged whistleblower retaliation at the U.S. International Development Finance Corporation continues.” He declined to comment on the criticisms of its investigation by Cochran’s attorney. (Disclosure: The author formerly worked at OSC more than seven years ago.)

The attorney said the “Senior Leader never had the opportunity to review or respond to the full allegations or alleged evidence,” even while refusing to acknowledge that Cochran was the senior executive in the inspector general report. Cochran’s attorney wrote to POGO that more witnesses should have been interviewed during the inspector general and the Office of Special Counsel investigations. Their accounts, she said, would have disproven misconduct claims.

“All work-related decisions, including personnel decisions, were made for non-retaliatory, legitimate reasons, well-supported by documentary evidence,” wrote Cochran’s attorney. Yet in DFC’s publicly posted response to the inspector general report, it says it “did not sustain” the proposal to fire the career employee when a separate agency official examined it.

Cochran’s attorney also told POGO that some DFC career employees “nurtured unfounded grievances,” “were resistant to change,” and “felt slighted by DFC’s decision not to formally or informally promote from within and/or feared that their jobs were in jeopardy.” 

However, according to the inspector general report, OSC had found Cochran had even “angered or scared” employees whom she had even “viewed as supporters.” The inspector general report cites witnesses who described Cochran as “condescending and dismissive with explosive anger, often expressed publicly, and as someone who bears grudges.” [Emphasis in original]

Cochran’s attorney said the DFC Office of Inspector General and OSC “investigations were flawed” and “relied on unverified and false hearsay.”

DFC criticizes the inspector general’s report as well. The agency’s complaint that the inspector general’s conclusion was “premature” is partly because the inspector general incorporated OSC’s “preliminary findings” into its report. The agency says other material should have been included in the inspector general report, such as a request for clarification sent to the watchdog from Nathan in late January 2023 (DFC redacted the details of this request). A spokesperson for the inspector general declined to comment.

As for the staff involved in the complaint, the senior career employee returned to the agency in mid-2023, after OSC found evidence he had been retaliated against and had pressed DFC to bring him back. Since the senior career employee’s abrupt removal from duty and recent return have been widely noticed, the fallout from the case continues inside the agency. Insiders say it has contributed to fear of agency leaders. From 2022 to 2023, a federal survey on employee morale shows a 10% drop in the number of DFC respondents who say they can report wrongdoing without fear of reprisal.

While the federal government relies on whistleblowers to raise alarms when they see waste, fraud, or abuse inside their agencies, whistleblower reprisal can send the wrong signal to those who consider speaking up. That means there may be people who do not raise concerns, possibly because they’ve seen what happens if you do. 

“Not everyone fights,” one source said.