NORTHWESTERN UNIVERSITY Kellogg PRM assessing School of Managementg ADAM \"-931.er AND VASEIA KILEBARDA 5214255 Through the Eyes of a Whistle-Blower: How Sherry Hunt Spoke Up About Citibank's Mortgage Fraud On March 22, 20] ], Sherry Hunt, vice president and chief undenariter at Citilvlortgage, raced down the endless rows of cubicles until she reached her oice and closed the door behind her. Her hands were shaking, her heart pounding. Moments before, Jeffery Polkinghornean executive three levels above herhad requested an impromptu meeting with Hunt and her colleague in a conference room. His face had reddened as he raised his voice and pointed at her. If the mortgage defect rate reported by Hunt and her quality control unit did not fall substantially and immediately, he said, menacingly, " 'lt' 3 your asses on the line. "1 As she struggled to regain her composure, Hunt considered her options. She knew the defects she was nding were legitimate and some even indicated fraud. They put Citi at serious risk, and she could not sign OH on reports that obscured the facts. However, the nancial crisis had hit the mortgage industry hard and there were no available jobs for someone with her qualications. She fell heavily into a chair and put her head in her hands. She felt both scared and angry that she was being asked to idge reports. What was she going to do? Sherryr Hunt Sherry Hunt was raised in rural Michigan. The reserved and warm mother of two sons, she worked hard, prided herself on following the rules, and built a long, successful career in the mortgagel business. She began her career as a mortgage processer at a small bank in Alaska and later returned home to the deest, moving from state to state as she worked her way up the corporate ladder at some of the top banks in the United States. All the while, however, Hunt j .Mon'gnge.' Residential mortgages are loans made to individuals or large real estate purchases for which they cannot pay the full value up front. Through a predetermined number of payments, the borrower [the home buyer) repays the loan plus interest to the lender (the bank). One key element of a mortgage is the fact that the home buyer must pledge his or her home to the bank as collateral in case the home buyer defaults on paying the mortgage. [fthe home buyer does not make his or her mortgage payments, the bank can evict the home's tenants, sell the home, and use the income from the sale to repay the mortgage debt @2014 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Adam Wa31z and Vasilia Kilibarda. Cases are developed solely as the basis for class discussion Cases are not intended to serve as endorsements, sources of primary data, or illustrations of e'ec'live or ineffective management. To order copies or request permission to reproduce materials, call 841.491 5-1-09 or email cases@kellogg.northwestern. edu No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet or transmitted in any form or by any meanselectronic, mechanical photocopying, recording. or otherwisewithout the permission ofKellogg Case Publishing. Winner of the 2014 competition for Dutstanding Case on AnhComiption, supported by the Principles for Responsible Mann gent Education (PRIME), an initiative of the United Nations Global Comact, which seeks to inspire and chanqion responsible management education, research, and thought leadership globally. nn nn'n llnn-I 'rnln' nnnr