Former Mattel Employee’s Battle Shows Whistle-Blowers Walking a Fine Line

Late last year, just as 2002 was about to be anointed the “Year of the Whistleblower” by Time magazine, a state judge in Los Angeles booted Christine Casey’s lawsuit out of his courtroom.

Casey’s claim was that she had been forced from her financial analysis job at Mattel Inc.’s El Segundo headquarters for trying to advise top management about how they might acquire accurate information about consumer demand for Barbies and other toys. The idea was to keep them from having to make continual embarrassing public admissions that their roseate financial projections were falling short.

When it came to the dissemination of discouraging facts, Mattel evidently followed a policy of “don’t ask, don’t tell.”

As Casey related it, her proposal led to her being summarily deprived of meaningful work, relocated to an office surrounded by vacant cubicles and subjected to dirty looks, cold shoulders and screaming fits from various supervisors.

After she quit in 1999, she sued Mattel on grounds she had been harassed out of her job, which falls under a legal doctrine known as “constructive termination.” Instead, Judge Richard Hubbell found that in essence she hadn’t been harassed badly enough; the way he put it was that her conditions were not “unusually aggravated.”

What’s more, he found that Casey hadn’t registered “complaints” about company practices, but rather had made “proposals” about how to do things better. The former might have given her some protection from retaliation under a public-interest standard, but the latter course left her on her own.

Casey’s experience sheds some light on what whistle-blowers face at major corporations, especially when their employers are not coming under the same public scrutiny as an Enron or a WorldCom, where two of Time’s Persons of the Year were employed.

“If I had to do this again, I’d never do it,” Casey told me from her Westside condo, where she spends her days marshaling the documentation needed for her forthcoming appeal.

Casey, now 41, joined Mattel in 1994, the year she received her MBA from USC. Her assignment was to develop a database for toy sourcing -- determining what toys should be made at which of the company’s worldwide factories, and on what schedule. The task involved assembling details about manufacturing costs, plant capacities and market demand. Casey says she soon learned that Mattel employees were under pressure to conjure optimistic order numbers, especially for Barbie, the company’s signature product, because that was what the brass were expecting to hear.

The way Casey describes things, the systematic manipulation of production and order statistics was an open secret at Mattel. One internal memo filed in court described how the marketing division overstated demand “in order to tie to figures expected by senior management.”

In a bid to improve the process, Casey had produced charts showing how projections were routinely inflated at the beginning of the toy manufacturing year and steadily shrank, sometimes by 25%, as the months went by and reality forced itself upon the keepers of the numbers.

To the extent that these figures were being fed into the quarterly projections broadcast by then-Chief Executive Jill Barad, she maintained, they were misleading the investment community.

So Casey proposed the establishment of a new information department, with herself as its chief. She pressed her idea on executives several steps above her own pay grade, including Mattel President Ned Mansour, who met briefly with her and, according to internal memos, deep-sixed her idea.

After that, she contends, she was rendered persona non grata in her own department. A few months later Casey says, she received her first negative performance evaluation, along with a variety of other mistreatments, both petty and grand.

Feeling the pressure of intimidation, she resigned and filed suit.

In its pretrial maneuverings, Mattel tried to denigrate Casey as an employee consumed with ambition (a psychological profile that could, of course, fit most any career type at any major corporation), as well as a little bit unbalanced and a whole lot ignorant.

“She’s a true believer and she’s not troubled with the facts,” John Quinn, the company’s outside counsel in the case, told me this week.

Quinn notes that Casey was not fired, but quit. And now, he says, she is trying to hold Mattel up. “How can we reform a system so employers don’t have to spend thousands of dollars in attorney fees so they can get a case thrown out of court that’s ridiculous?” he asks.

As for the wobbly demand figures that set her on her crusade, Quinn says Casey simply misunderstood the function of an informal internal system aimed at scheduling factory time. He contends that these calculations never fed into Mattel’s official financial forecasts, as Casey believed.

Yet there is one thing beyond dispute: The years 1998 to 2000 did, in fact, feature regular appearances by Barad giving this or that reason why Mattel’s profit had fallen short of projections by tens of millions of dollars, or disappeared entirely. The company missed its revenue prediction at one point by $500 million.

Sales of Barbie were deteriorating badly, yet Barad consistently predicted sunny skies ahead. Casey recalls hearing Barad in 1999 project Barbie sales growth of 7% to 10% for the year ahead, although numbers already in the system showed demand heading south like Canada geese. “I kept thinking, ‘Where is she getting her information?’ ”

Mattel’s position is that all of this is ancient history. Barad, who was ushered off in 2000 with a $40-million severance package, is a receding memory. “We have a new management team,” says a Mattel spokesman, “and a different style of doing business.”

In the end, Casey’s view of Mattel ended up benefiting others, though not herself. She provided information to Bill Lerach, the corporate gadfly attorney from San Diego.

He folded her material into a lawsuit charging Mattel brass with having deliberately concealed fraud and other problems with their $3.6-billion acquisition of Learning Co., a disastrous 1999 venture into software publishing.

Lerach being more publicity-savvy than Casey, not to mention better-funded, Mattel settled out of court for $122 million (most to be paid by its insurers) and a vague commitment to upgrade its “corporate governance.”

Casey, meanwhile, is trying to draw some lessons from her experience.

She has learned that there’s a fine line between getting hailed as a valiant seeker of truth and belittled as a compulsively ambitious striver. It’s often determined by whether the people you criticize remain in their positions long enough to strike back.

Just like Sherron Watkins, who flagged Enron’s phony accounting to its chairman, Kenneth Lay, Casey brought what she considered to be a systemic abuse to the attention of higher-ups at her company and proposed a fix. Unlike Watkins, her company remained a going concern instead of a smoking ruin, so her memos got released via court-ordered discovery in an obscure adversarial proceeding rather than on TV by a congressional committee eager to bathe them in a righteous glow.

She also has concluded that though middle-level corporate employees are the ones who detect abuses first, it’s futile to expect them to put their careers at risk by openly saying what they know -- no matter what a magazine cover may suggest.

Unfortunately, says Casey, “the best legal advice is to keep your mouth shut.”

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Michael Hiltzik can be reached at golden.state@ latimes.com.