Ethics and Firing David Shulkin

By Matt Kelly | April 3, 2018 |

We should never underestimate the Trump Administration’s ability to snatch defeat from the jaws of ethical victory. That certainly seems to be the case with last week’s firing of David Shulkin, now former secretary of Veterans Affairs. Compliance officers in the corporate realm should take note, so your CEO doesn’t shoot your ethics program in the foot the same way President Trump has treated the VA.

What happened? According to the VA’s inspector general, Shulkin’s staff fabricated a reason to bring Shulkin’s wife on an overseas trip last year that cost taxpayers at least $122,000. Shulkin had VA staff research personal vacation activities for him during the first half of his trip in Denmark. He accepted free Wimbledon tickets in violation of federal ethics rules during the second half of his trip in London. And we can only say this trip cost taxpayers “at least $122,000” because the VA has incomplete expense records and we don’t know the full cost.

Shulkin returned fired with a detailed rebuttal to that report. He had no idea his staff doctored emails to get his wife on a government trip, and had been ready all along to pay her fare. The VA staffer planning his personal itinerary had to do that, to arrange for Shulkin’s security detail and to coordinate the secretary’s personal time around his professional obligations. Shulkin tried to repay the cost of the Wimbledon tickets several times, which came from a personal friend of his wife. The VA’s problems with paperwork procedures are not new, and his staff were in charge of completing them anyway.

So we have dueling narratives about executive misconduct at the VA. Unto itself, that’s not news to the corporate compliance community. An executives screw up, investigators compile a report of alleged misconduct, and the executive under scrutiny says the report cherry-picks facts to paint a distorted picture. This is the circle of life for corporate compliance officers.

Enter the Politics

What should give compliance professionals pause is the broader context around Shulkin’s firing. He accuses political appointees at the VA of working to get him fired because Shulkin opposed their ambitions to privatize VA care. Trump’s inner circle planted several political loyalists around Shulkin, the ex-secretary said numerous times over recent months. As his opposition to privatizing VA care became more clear, so did their intention to oust Shulkin by any means necessary.

Including means like, say, an ethics scandal.

That’s my big concern about Shulkin’s firing: that Trump and his henchmen used the ethics scandal as a pretext to fire Shulkin for unrelated political purposes. As soon as an organization does that, it devalues the corporate ethics and compliance function.

Shulkin is an imperfect vehicle to make this argument. For example, he doesn’t dispute that his former chief of staff doctored an email so Shulkin’s wife could be cleared to travel to Europe at taxpayer expense. He insists that the friend who gave him free Wimbledon tickets — a former CEO of the Invictus Games, a sporting event for disabled veterans — doesn’t qualify as a conflict of interest under the letter of federal ethics law. His rebuttal reeks of technicalities, and that doesn’t convince many people..

What’s more, prominent voices in the compliance community called for Shulkin’s ouster for months. They point to former HHS Secretary Tom Price, fired last fall for racking up more than $1 million in travel costs. We have similar allegations of wasteful spending by Interior Secretary Ryan Zinke, Treasury Secretary Steve Mnuchin, EPA Administrator Scott Pruitt, and HUD Secretary Ben Carson. Shulkin should be no different, they say, simply because he was an Obama Administration holdover and somehow politically preferable to all the other wasteful knuckleheads Trump surrounds himself with.

 

 

I have enormous respect for Walter Shaub and Hui Chen, and at a theoretical level, they’re correct: Shulkin bungled the ethical leadership part of his role. At the least he should have been investigated (and was). Perhaps he did indeed deserve to be fired.

But we can’t ignore the very plausible scenario that the Trump Administration did the right thing (firing an errant executive) for the wrong reasons (to advance a political agenda).

The Uphill Battle for Ethics

Ethics and compliance officers fight for the respect of colleagues in their organization every day. That fight is tough. Plenty of times ethical infractions feel harmless (“What’s the big deal about taking along a spouse? It costs another $1,500 in a $4 trillion budget!”) even though those trivial incidents of misconduct weaken the corporate culture until something much larger goes wrong.

We fight hard to hold executives accountable for ethical conduct because being ethical is the right way to behave. And lack of accountability is still rampant in Corporate America, especially when senior executives are involved and it’s easy to concoct some privilege, excuse, or confidential settlement to make the problem go away.

This Shulkin business, however, is more akin to hollow accountability: punishment that essentially is meaningless, because it doesn’t spring from any underlying misconduct. That devalues the importance of holding people accountable — which, in turn, devalues the importance of ethics and compliance.

We may never know how politically motivated the investigation into Shulkin was. We do see the converse in EPA director Pruitt: ethical failures all over the place, but he remains in his job (so far) because he pursues Trump’s anti-EPA agenda with a dogged reliability.

Neither extreme is good. Both are threats to the gravity of corporate compliance that you should strive to prevent in your organization.

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