He Told. He Suffered. Now He's a
Hero.
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Mark Jorgensen thought he was just being an honest guy, exposing fraud in the realestate funds he managed for the Prudential Insurance Company of America.
Then his world fell apart: The boss who had once been his friend abandoned him. His
circle of colleagues at work shunned him. Company lawyers accused him of breaking the
law. The once powerful and respected executive soon found himself hiding in the local
public library, embarrassed that he had been forbidden to return to the office and
hoping not to be seen by his neighbors. His long and successful career seemed to be
dwindling to a pathetic end.
Finally, in February, came the bitterest moment, the phone call from a middle manager
at Prudential telling him he had been dismissed.
How could it have happened? He and his wife, Billie, prayed and consulted the Bible.
That night, they lay in bed, unable to sleep. They talked about their finances, and
worried what would happen when their health benefits were cut off. They decided the
only way to survive financially would be to sell their home.
Overwhelmed, Billie Jorgensen held her husband and cried. It seemed they had been
defeated.
"That was the low point," Mr. Jorgensen said in a recent interview. "It was very, very
sad. All of our dreams and aspirations had just fallen apart."
Then, last month, salvation -- in the form of another phone call. But this time the caller
was the most powerful man at the financial-services giant, the chairman, Robert
Winters. He wanted a meeting with Mr. Jorgensen to convey some stunning news:
Prudential now believed him. Moreover, the company wanted to reinstate him and force
out the boss he had accused of falsely inflating the value of properties in the real-estate
funds.
The turnabout resulted from the persistence of the man, who, even when he felt the
most powerless, impressed some of Prudential's largest institutional investors with his
willingness to fight for his convictions. Faced with continuing questions from those
investors, Prudential shelved the results of an internal inquiry that found no
wrongdoing and commissioned a second investigation. The findings of the second
inquiry, filling hundreds of pages, could be summed up in four words: Mark Jorgensen
was right.
That realization put Prudential in an unusual position in corporate America -- siding
with a whistle-blower it had battled for months against one of its own top executives.
The decision, which will cost the company as much as $50 million to compensate
investors harmed by overvaluations, has transformed Mr. Jorgensen from a soft-spoken
man battling for professional survival to an industry hero.
Perhaps the most distressing lesson in Mr. Jorgensen's story is that even when a
company's top management encourages its employees to speak up about misdeeds, as
Prudential's did, whistle-blowers can be cut down by middle managers who may play
down the problem and even accuse the employee himself of improprieties in an attempt
at intimidation. Indeed, had Prudential not reversed itself, Mr. Jorgensen's life could
well have been destroyed.
Today, the future of Mr. Jorgensen, 53, looks bright. He rejected Prudential's job offer,
electing instead to move from New Jersey, where he worked, closer to his sons in the
West. The company paid him a sizable amount to settle his lawsuit, and he is now
considering his next career step.
As part of the settlement, the company stipulated that Mr. Jorgensen not discuss his
accusations or details of what happened to him at Prudential. But during his ordeal, Mr.
Jorgensen, on his lawyer's advice, kept detailed records, including memos, diaries and
other documents, describing everything that happened. Many of those records were
obtained by The New York Times before last month's settlement and are used here,
along with interviews with people involved in the case, to reconstruct this whistleblower's story. The Path to Prudential
Mark Jorgensen had made a decision -- the hurly-burly world of finance was not
rewarding enough. And so, in 1964, he walked away from his first job out of Lehigh
University, an analyst's position at Manufacturers Hanover Trust, to return to his true
love: clam-digging.
He dipped into his savings to buy a dredge boat -- already showing the kind of
independence and ability to risk his career that later played a role in his journey into
whistle-blowing.
His clam-digging business was a success. But in 1965 he became engaged to Billie
Danjczek and decided to return to Wall Street, for an easier life. "I was working about
100 hours a week in the clamming business," he said. "You can't raise a family like that."
He worked in mergers and acquisitions at Donaldson, Lufkin & Jenrette, then moved to
real-estate investments. Looking for new opportunities, the Jorgensens packed up their
two young sons for the cross-country car trip to San Diego. On the way they took a fancy
to Phoenix, stopped the car and moved in. Mr. Jorgensen took a job with a local
developer.
A few years later, when the developer closed its doors, Mr. Jorgensen called Prudential,
one of the biggest companies in the real-estate business. The call paid off. In June 1973
he joined Prudential's Phoenix office as a senior appraiser. Soon, he was promoted to
San Diego, then Los Angeles, and finally Houston, where he ran Prudential's Southern
developments.
While in Houston, he grew close with an aggressive general manager who reported to
him, Charles Lightner. The two became fast friends and occasional hunting partners.
Mr. Jorgensen laughs when recalling the night in Monterrey, Mexico, when he and Mr.
Lightner hitchhiked in search of a nearby boxing match, only to decide once they were
picked up that they were being kidnapped. Instead, their Spanish simply had not been
very good, and their ride was taking them many miles to a wrestling match.
Mr. Jorgensen moved back to the West in 1984, leaving Prudential to run his own
consulting business. It was a big success: in 1987, he won the contract to manage the
real-estate portfolio of the California State Teachers Retirement System. By the early
1990's, with the children off to college, his life seemed settled.
Then, in 1992, Mr. Lightner called with a tempting offer: return to Prudential to manage
the prestigious funds that are part of the Prudential Property Investment Separate
Account, or Prisa. The funds had been managed for years by Mr. Lightner, who had been
promoted to be the next manager's boss.
Mr. Lightner lobbied the Jorgensens with frequent phone calls. He sent flowers to Mrs.
Jorgensen, along with a note begging her to let her husband take the job.
The efforts paid off. In May 1992 Mr. Jorgensen decided to return to Prudential. Unlike
his many earlier job changes, this would be a career move that would change his life.
The Discovery Inflated Appraisals Stun a Newcomer
TOURING about 160 of the Prisa properties, Mr. Jorgensen realized a shocking fact: the
appraisal values of some properties, were wildly inflated. Because those appraisals are
used to determine the values of the funds holding the properties, such inflation would
raise the cost of investing in the funds beyond their actual worth. And because
Prudential's fees for managing the funds were based on their value, the amount the
company was paid would be improperly increased.
In November 1992, Mr. Jorgensen told Mr. Lightner what he had learned: outside
appraisers hired by Prudential appeared to have improperly pushed property values too
high, which would prevent the funds from performing well as the real-estate values
actually did climb. The values, he said, should be lowered.
Mr. Lightner did not seem surprised by the news. Don't blame the appraisers, Mr.
Lightner said, because he was the person responsible for the value inflation. As
described in Mr. Jorgensen's lawsuit and his other legal papers, Mr. Lightner said that,
when he had taken over managing the funds in 1987, they were lagging other funds
badly and investors were pulling out their money.
So, the filings quote him as saying, he had appraisers inflate values so the funds would
look as if they were performing better and attract more investors. Moreover, the filings
say, Mr. Lightner indicated he was proud of doing it to help the funds.
Through a Prudential spokesman, Mr. Lightner has denied making those statements. In
the second report on Mr. Jorgensen's accusations, Mr. Lightner is quoted as saying that
he never engaged in any effort to pressure appraisers. The report concluded that while
some properties were being carried at improperly high values, potentially in violation of
Prudential's fiduciary duties, there had not been a scheme to defraud.
The meeting with Mr. Lightner shocked Mr. Jorgensen. He thought that carrying the
properties at improper values violated his fiduciary duties to investors. And it virtually
guaranteed that his unknowing investors would see poor performance in the years to
come unless values were inflated even further.
So Mr. Jorgensen began a quiet campaign for a lowering of the values of certain
properties, among them the New York Hilton.
His persistence began to fray his relationships at Prudential. Soon Mr. Lightner was
threatening to remove him from the Prisa funds.
Last June Mr. Jorgensen attended a company meeting with Mr. Winters, Prudential's
chairman. At the meeting, Mr. Winters was asked whether he worried that divisions
might cut corners to bolster profits.
Mr. Jorgensen later told Mr. Lightner the chairman's answer: those responsible would
be dismissed. Within a day, documents filed in Mr. Jorgensen's lawsuit say, Mr.
Lightner said he would lower the New York Hilton's value, although not by as much as
Mr. Jorgensen thought necessary.
Mr. Jorgensen then decided to tell the company about the overvaluations; he called the
legal department. On July 3 a company lawyer, Ray Giordano, interviewed Mr.
Jorgensen and picked up a report he prepared about the accusations. Now, Mr.
Jorgensen thought, everything would be fixed.
Still, when a friend advised Mr. Jorgensen to get a lawyer for his own safety, he listened.
He turned to Nancy Erika Smith, a New Jersey employment lawyer who in 1991 won an
age discrimination suit against I.B.M.
While Mr. Jorgensen protested that Prudential would do the right thing, Ms. Smith
thought he was in a bad position. She told him to keep detailed records of everything
that happened.
Within days, Mr. Jorgensen's confidence in the company was eroding. On July 20, Tom
Biolsi, Prudential's chief compliance officer, called him in to discuss the accusations. But
the meeting quickly focused on Mr. Jorgensen's behavior. If Mr. Jorgensen thought
property values were inflated, how could he have signed the funds' 1992 annual report,
Mr. Biolsi asked, according to Mr. Jorgensen's lawsuit. By doing that, he said, Mr.
Jorgensen was just as guilty of overvaluation as anybody.
In a statement, Mr. Biolsi said he had realized Mr. Jorgensen's accusations raised
"serious questions about Prisa," and recommended the hiring of independent lawyers to
investigate. Afterward, he had no contact with Mr. Jorgensen. The Reaction A
Counterattack By Colleagues
MR. JORGENSEN grew afraid to make a move that might raise suspicion. Days later,
when the funds' second-quarter report landed on his desk for his signature, he agonized
over what to do. He called Prudential's legal department, which, he said later, declined
to give him advice. Mr. Lightner insisted he sign, telling him that otherwise he was not
doing his job, according to the lawsuit. Mr. Jorgensen refused, and the report went out
unsigned.
On July 29, Mr. Jorgensen spoke with Norman Cardinali, valuation manager for
Prudential, who was soon to retire. Any doubts he had about whether something
improper had happened in the appraisals vanished in that conversation.
After hearing Mr. Jorgensen tell what Mr. Lightner had said about inflating values, Mr.
Cardinali spoke up. "It wasn't Chuck's fault solely, it wasn't my fault solely," he is quoted
as saying in Mr. Jorgensen's documents. "It wasn't the appraiser. We just worked in
sync and we perceived an opportunity and we went ahead and we did it."
In an interview, Mr. Cardinali said he had never worked in such a way with Mr.
Lightner, simply because the two men were distant and rarely spoke, and because he
was not part of the department's inner circle. "I refuse to believe that I implied to
Jorgensen that there was some devious planning on our part," he said.
According to the documents, Mr. Cardinali described pressure being applied to
appraisers to increase valuations, saying how executives "harassed" the New York
Hilton's appraiser when she was valuing the hotel. "We only had to do it in a handful of
properties and with a handful of appraisers," the documents quote Mr. Cardinali as
saying.
In an interview, Mr. Cardinali said: "Nobody ever used leverage on anybody. I would not
tolerate any kind of intimidation and harassment." He added of the appraiser for the
Hilton, "if I used the word harassment, it was certainly inappropriate."
The report from the second investigation into Mr. Jorgensen's accusations said that the
appraiser for the Hilton stated that the values she assigned to the hotel reflected her
own views and were not the result of pressure from Prudential.
The afternoon after his meeting with Mr. Cardinali, Mr. Jorgensen met with lawyers
from Howery & Simon, a Washington law firm that had represented a Pentagon whistleblower in the 1980's and that Prudential had hired to investigate his accusations. But
the fund manager quickly came to believe that the lawyers might play down his
concerns. One lawyer, William Wallace 3d, said he saw nothing wrong with overvaluing
properties, and had done that himself when applying for a mortgage, Mr. Jorgensen's
lawsuit says.
In an interview, Mr. Wallace said that Mr. Jorgensen misinterpreted his comments and
that he had not condoned the overvaluing of properties. Rather, he said, he asked Mr.
Jorgensen whether it would be improper for the lawyer to accompany an appraiser
examining his home to insure that everything was accounted for. He said Mr. Jorgensen
replied yes. "We fundamentally disagreed with that," Mr. Wallace said.
As the meeting drew to a close, the lawyers did express concern about one thing -- what
Mr. Jorgensen was doing. Late in the meeting, he alleged, they said he had violated
Federal disclosure laws in a meeting with a client the previous day by telling of his
concerns about overvaluation -- an accusation he denied. Mr. Jorgensen stood up and
said that if the company was going to investigate him, he wanted his lawyer there.
Soon Prudential was aggressively pursuing accusations of wrongdoing against Mr.
Jorgensen. Lawyers began interviewing his subordinates, trying to find out whether he
had told clients about the overvaluations.
At 10:30 P.M. on July 29, the telephone rang at the Jorgensen house. On the line was Al
Toennis, a Prudential lawyer. He had a harsh message for Mr. Jorgensen: Prudential
knew he had violated disclosure rules. And now it was deciding whether to turn him in
to the Securities and Exchange Commission.
Mr. Jorgensen denied wrongdoing. The S.E.C. was not called.
But the signs were clear that his career was falling apart. On July 30, Mr. Giordano, the
Prudential lawyer investigating Mr. Jorgensen's accusations against his boss, slipped
into the fund manager's office. The lawyer's unmistakable message: Start looking for a
new job.
"You unleashed forces that couldn't be controlled," Mr. Giordano was quoted as saying
in Mr. Jorgensen's documents about the meeting. Even if the investigation proved the
accusations against Mr. Lightner, "all that means is that Chuck's got a big problem.
Doesn't mean you don't too."
Mr. Jorgensen again said he had done nothing wrong. If only, he said, he could talk to
the chairman, the company would see he was right.
Mr. Giordano scoffed. Did Mr. Jorgensen think the head of such a huge company would
throw open his doors, thank him for his honesty and, on Mr. Jorgensen's word, dismiss
Mr. Lightner? "Do you really think companies work like that?" Mr. Giordano is quoted
in the documents as saying.
At the least, the lawyer said, Mr. Jorgensen would have to take a paid leave during the
investigation. Mr. Giordano declined to comment.
Within days, Mr. Jorgensen received a memo. "Prudential Realty Group and human
resources are in agreement with you to place you on a paid leave of absence," it read.
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Mr. Jorgensen was crestfallen. He had never agreed to any such thing. The Shame As
World Collapses A Couple Prays
WITHOUT his work, Mr. Jorgensen was lost. He felt useless hanging around the house
in Madison, N.J. His wife suggested they go on a trip, but he refused, saying that he was
sure Prudential would want to talk to him and that he would soon return to the office.
But few colleagues from Prudential wanted anything to do with him. "Company friends
just disappeared," he said in an interview.
Restless at his house, Mr. Jorgensen spent days at the Madison public library. Even
there, he felt compelled to hide from his neighbors, embarrassed that he was not at
work. "If I saw someone I knew, I would sneak around the books so I wouldn't have to
confront them," he said. "I didn't want people seeing me and saying, 'How come you're
not at work like everybody else?' "
Weeks passed, and Mr. Jorgensen's worries grew. The stress was straining his marriage,
and the couple, devout Catholics, turned to prayer. The events perplexed his father, a
longtime executive, who, while never doubting his son, thought there had to be a
misunderstanding.
In August, Mr. Jorgensen received a telephone call from William Therrien, a vice
president of human resources at Prudential. The investigation was over, and no
evidence of wrongdoing had been found. Mr. Jorgensen could return to Prudential, but
no longer as a manager of the Prisa funds. The change, he was told, was part of a
division reorganization.
In late September, Mr. Jorgensen returned to Prudential. His new office was on the
fourth floor, far from the managing directors of his division. No one reported to him
anymore. His former secretary told him that she had been advised to take another job at
the company because Mr. Jorgensen would not be returning.
He was assigned to a feasibility study on some real-estate projects, with one caveat: he
was not permitted to contact anyone outside Prudential to gather information.
Inside the company, he was ostracized. Few talked to him, or went near him. In one
large meeting, executives stood against the wall of a conference room rather than sit in
the chairs on either side of him.
The Jorgensens decided to sue. But in that decision, they realized Mr. Jorgensen's
income could well disappear. Mrs. Jorgensen began planning to start work again as a
dietician. They tried to cut expenses. They abandoned plans for their annual Christmas
trip. Accepted to the local country club, they passed on the opportunity. They went so far
as to stop buying paper napkins because it was cheaper to wash the cloth ones. Mrs.
Jorgensen said then that she would know their ordeal was over when she saw paper
napkins on the table again.
Mr. Jorgensen's lawsuit, filed in November, contended Prudential had retaliated against
him for his whistle-blowing.
In comments to reporters at the time, Prudential executives said that Mr. Jorgensen's
accusations had been investigated and no supporting evidence found. This, the
executives said, was simply the case of a bitter employee upset about a reorganization.
The Court Fight A Judge's Advice: Fire the Man
JUDGE Dickison R. Debevoise of Federal District Court in Newark was livid. He did not
like seeing confidential company records filed publicly in his court. So when Mr.
Jorgensen's lawyer filed the report Mr. Jorgensen had prepared in July to back up his
accusations, Judge Debevoise had a suggestion for Prudential: Fire him.
"For him to go out and spread this to the world is highly offensive," Judge Debevoise
said at a hearing this past February. "I think this is grounds for firing him on the spot."
Within hours, Prudential agreed. The phone call from Prudential to Mr. Jorgensen's
home came that afternoon. As the couple listened on a speakerphone, a human
resources executive told him he had been dismissed for unethical conduct in filing the
confidential records.
The Jorgensens were enraged. How could Prudential dismiss her husband for simply
trying to do the right thing, Mrs. Jorgensen shouted at the phone. The call soon ended,
and the Jorgensens felt defeated.
But unknown to them, pressure had been building for months at Prudential because of
Mr. Jorgensen's accusations. After he had filed his lawsuit, angry investors demanded to
know how a respected manager could make such serious accusations. Prudential
assured them that an investigation had found no basis for the charges. When the
pressure continued, another investigation, to be conducted by outside lawyers and
accountants, was commissioned.
Then the stakes grew. In February, the month Mr. Jorgensen was dismissed, Federal
prosecutors subpoenaed Prudential for information about the funds. Mr. Jorgensen was
subpoenaed as well, and testified before prosecutors. Commenting on that investigation,
Prudential said it has no knowledge of a continuing criminal inquiry involving the funds.
The Apology For Rare Courage, Prudential's Praise
THE first sign to the Jorgensens that something good was finally happening came at 2 in
the afternoon on April 27, when the telephone rang. Mrs. Jorgensen answered and
heard an unfamiliar voice say: "Hello Billie. Is Mark there?" She asked who it was, and
the caller replied, "Bob Winters."
Mrs. Jorgensen called to her husband. The chairman of Prudential Insurance was on the
phone.
Mr. Winters asked Mr. Jorgensen to come to his office the next day. He agreed, on the
condition that his lawyer be present.
The following morning Mr. Jorgensen and his lawyer arrived at Mr. Winters's office in
Prudential's headquarters in Newark. Over the next few minutes, Mr. Jorgensen could
not believe what he was hearing. Mr. Winters said a second investigation had been
completed, and it had found that a large percentage of Prisa properties had been
overvalued. Investors were being told at that moment, he said, and would be
compensated. And Prudential had asked for the resignation of Mr. Lightner and one of
Mr. Jorgensen's subordinates.
Then Mr. Winters praised Mr. Jorgensen for his courage, saying the company would
never have found the overvaluations had he not been so persistent. The company was
proud of him, and wanted him to return.
Mr. Jorgensen sat almost in shock, unable to respond. Finally, Mr. Winters asked him
how he was feeling.
With that, the emotions built over the last year poured out of Mr. Jorgensen, as he
recounted his trials. When no one believed him. When he was threatened. When he was
avoided. When his wife cried.
For a moment, the room was silent. Then, softly, Mr. Winters apologized. "Even when
you win a jury case, they don't come over and apologize," Ms. Smith, the lawyer, said
later. "It was really something."
Prudential settled Mr. Jorgensen's lawsuit that afternoon. From the company offices,
Mr. Jorgensen called his wife, his father and his two sons. It was over, he told them.
Prudential realized he was right.
Hundreds of phone calls flooded Mr. Jorgensen's home. Industry executives, aware he
had declined the offer to return to Prudential, approached him about job opportunities.
The time had come, the Jorgensens decided, to celebrate. So the next day, they drove to
the grocery store. And there they bought a brand new package of paper napkins.
A correction was made on
June 5, 1994
:
An article last Sunday about Mark Jorgensen, the former executive at the Prudential
Insurance Company who reported overvaluations of properties in some of Prudential's
real estate funds, misspelled the given name of the judge assigned to Mr. Jorgensen's
lawsuit. He is Dickinson R.
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Mark Jorgensen, a former executive at Prudential Insurance, discovered
overvaluations in certain real estate funds managed by the company.
Despite facing threats and disbelief from colleagues and superiors,
Jorgensen persisted in his efforts to expose the truth.
Jorgensen meticulously documented his claims, including memos,
diaries, and other evidence, with the guidance of his legal counsel.
Prudential's internal investigation initially found no wrongdoing, leading
to increased isolation and hostility towards Jorgensen within the
company.
Under pressure from investors and external parties, Prudential
conducted a second, more thorough investigation, which substantiated
Jorgensen's claims.
The investigation revealed significant overvaluations in Prudential's real
estate funds, leading to compensation for affected investors and the
removal of executives responsible for the malpractice, including
Jorgensen's superior, Charles Lightner.
Prudential's chairman, Robert Winters, acknowledged Jorgensen's
courage and integrity, personally apologizing for the company's
previous treatment and expressing pride in Jorgensen's dedication to
ethical standards.
Despite the acknowledgment and an offer to return to his position,
Jorgensen chose not to rejoin Prudential, becoming a symbol of
corporate integrity and ethical responsibility in the business world.
This episode underscored the crucial role of whistleblowers in
maintaining transparency and integrity within organizations, leading to
reforms and increased awareness of ethical standards in corporate
practices.