Oh My Fraud

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Caleb Newquist: This is Oh My Fraud, a true crime podcast where the crime scene is a boardroom and the preferred weapon is a convoluted spreadsheet. I'm Caleb Newquist a

Greg Kyte: nd I'm Greg Kite. Uh, Caleb, [00:00:30] how would you feel about us kicking things off by reading a review? A a very timely one star review.

Caleb Newquist: Oh, wow. Um, so no chaser. Okay. Yeah, sure. I love a I love a timely one star review.

Greg Kyte: Awesome. Uh, this one comes from Apple Podcasts, from a listener whose screen name is Waka Waka. Waka waka.

Caleb Newquist: Uh, what? Like like Fozzie Bear Walker.

Greg Kyte: That's what it looks like to me. It looks like he's a big Muppet. He or she is a big Muppets fan. Uh, [00:01:00] waka waka Waka Waka says, quote, wish they'd leave their politics out. Loved right up until they opened up about politics. One star.

Caleb Newquist: Uh, yeah, it's it's kind of hard to tell if Waka Waka Waka Waka doesn't like our politics. Or maybe they're just generally sick of politics. Yeah. What do you think, Greg?

Greg Kyte: I think both are viable options because, uh, I don't like our politics, and I. And I'm generally sick of politics, [00:01:30] so. Right. Could could be either. But regardless, it's a great trigger warning for this episode because we're talking to a former Halliburton employee, and it's impossible to talk about Halliburton without talking about politics in some way, shape or form.

Caleb Newquist: So if you may be triggered by mild snowflake progressive political statements, then it might be better for you to skip this episode and instead go back and listen to episode 52, where we talk about money laundering and the Watergate scandal. [00:02:00] There's absolutely no politics in that episode at all. Zero. I think we think we got through that one without even mentioning the Republican Party. Um, if you hate our policy. So if you hate our politics, or even if you just hate politics in general, please leave us a rating in a review on your favorite podcast platform. Yes. And, uh, we'll also take this moment to mention that we do keynote addresses at events and conferences. And don't worry, we're professionals. We can work clean [00:02:30] and, uh, yeah, we can work clean. Yeah. No swears, full stop. Uh, we also we also do, uh, in-house training, if you've got that at your firm. If you want more info on pricing and availability, send us an email at oh My fraud@imaqtpie.com. Okay, so Greg, you tipped our hand a little bit. Yeah. Uh, this episode is an interview and it is with a former Halliburton [00:03:00] employee, uh, Halliburton, a former Halliburton employee that is kind of, uh, famously known as the accountant who beat Halliburton.

Caleb Newquist: And we'll that'll all, uh, that will all be explained in the conversation, but, uh, his name is Anthony J. Menendez. He goes by Tony. So that's that's what you'll hear us call him during the show. And, Greg, uh, this was a great interview. [00:03:30] I know you think it was a great interview, but I'll just I'll just prompt you by saying this was a great interview. I loved it. So, so fun because, uh, he was he was the interview. And, I mean, we've talked about that before. We this podcast, we made it because we love telling stories about frauds. And in this case, we get to hear the story of some fraud. Uh, but it's got some twists and turns, and it does not end the way that you think it'll end. Uh, but it's, it's it's a it's [00:04:00] very interesting, very engaging. And, uh, and, uh, Tony, Tony is a stand up guy. I mean, he is we we were impressed with that. But you'll see that when you when you listen to our interview with, uh, Tony Menendez. So, Tony, thanks for thanks for coming on.

Tony Menendez: That's my pleasure. I'm excited to do this.

Caleb Newquist: Yeah. Good, good. Uh, the way we usually start these things is we ask people to start at [00:04:30] the beginning, and, um. Yeah. Where you grew up, what your parents did, uh, whether you were bullied or not, uh, your early, your your your any early signs of, you know, accounting aptitude. Um, yeah. So let's let's start there.

Tony Menendez: Oh, jeez. Um, okay. Yeah, I, uh, I was born in Saint Louis. We moved to Houston, Texas when I was pretty young. Um, my dad had an eighth grade education as about as high as he got. And he said [00:05:00] he'd had a had a cheat to get through that or whatever. So he wasn't much of an academic. Um, but he was a hard worker. He had, uh, a bunch of restaurants for a while and ended up losing them because the guy he trusted with his finances or whatever. So there's some kind of story there. But anyhow, so then he had a small little construction company, and, uh, uh, and my mom, we moved to Houston. She loves school. Like she went to school her entire life. And, uh, she ended up getting her master's degree, and she worked at University of Houston. So, uh, I always had that, like, [00:05:30] she would take me on, um, excavation, you know, digs and Indian reservations, things like that, and really gave me passion for, like, reading and and so forth. But, uh, but I grew up.

Caleb Newquist: So was she. Was she an anthropologist then? Is that was that? No, she.

Tony Menendez: Just took she just.

Caleb Newquist: Was like a lifelong.

Tony Menendez: Student. She would just take all kinds of classes that she liked, and she just went to school forever. And one of the benefits of having she worked at the University of Houston and, uh, and so I all I knew growing up was I wanted to play baseball. Like that was always, I thought, just play baseball. And, [00:06:00] uh, uh, and when I realized, oh, I'm not gonna play baseball, I got to figure out, you know, what I'm going to do? And, uh, and, uh, at this time, I, uh, I was in college, and, um, and I had a, I had a girlfriend who got pregnant. So all of a sudden I was like, wow, I gotta I got a family to take care of. And I was waiting tables. Yeah, I was actually really, really terrible at that. So there was no real future in it, and and, uh, no, no.

Caleb Newquist: Real future in the food service. Not at all like area.

Tony Menendez: Yeah. I just could never remember. [00:06:30] I mean, I was just a mess. I'm just a mess. But I had already I was already in school and I started taking classes in anthropology, geology. So I really wanted to be a if I couldn't be a baseball player, I wanted to be like a geologist or a paleontologist. And, you know, and I like comic books growing up and, you know, and all this and, and, uh, but anyhow, uh, when that happened, I was like, well, I got to get a I got to find a job, you know, how am I going to get out? So I went down to career counseling and they had two lists. Right? [00:07:00] I said, and at the top was the most jobs, accounting major right. And most pay accounting. So I was like, I'll try that. Even though I had zero, absolutely zero interest in, uh, in business and not even nothing about accounting, like, we didn't grew up, we didn't know any professionals or nothing like that. Like, I didn't know accountants in my family. I was the first one to graduate college other than my mom, because she just did it for 50 years. Um, but anyhow, so, uh, I got into accounting and, uh, I was like, [00:07:30] I like this. I kind of like the logic of it. It kind of started to make sense to me. And then what really sold me on was, uh, it's a real profession. Like they instilled in me, like how important it is, right? You know, you're not just you're not just a professional, right? You you're part of a profession, and you're kind of upholding the integrity of the markets. And that stuff really kind of resonated with me as a kid that fell in love with the comic books and fantasy and just, you know, I always felt like, oh, I want to do something meaningful, right? So in some [00:08:00] ways I just kind of gravitate toward that. And, uh, turns out I was actually pretty good with it. And I get that.

Caleb Newquist: Too, because because it does seem like, uh, Captain America could have been an accountant. Really? Yeah. When you think about when you think about if the if the if the, uh, Tony Stark's, like, injections didn't take his dad's. Yeah. Injections didn't take. He might have he might have wound up as an internal audit or somewhere.

Tony Menendez: And that shield would have come in handy, uh, to, uh, for sure. Right?

Caleb Newquist: Right, right. Yeah.

Tony Menendez: Uh, so it's [00:08:30] a, you know, there's a lot of a lot of challenges associated with it, right? Uh, but that was kind of also part of it was like, oh, with great power comes great responsibility, right? The famous quote from, uh, Peter Parker's uncle and Uncle Ben and, yeah, I don't know, I just had this naivete about me all my life. And, um, but I did like accounting and and so after college, I went to work at Ernst and Young, and, and I was in the emerging growth markets and, and I really liked the work. Right. I, I loved, you know, going from client to client and having to get in there and identify, [00:09:00] well, what are the issues, what are the risks? What how do we respond? You know, just and just learning, you know, and I was in this group that was very, uh, very dynamic. And the entrepreneurship, uh, emerging growth type companies where the partners rolled up their sleeves and it was just it was just a great, like, environment. It really suited me. And, um.

Caleb Newquist: That was in the Houston office.

Tony Menendez: As in the Houston office. Yeah, yeah. And, uh, and then, uh, something happened in the profession with, uh, around the, you know, late 2000 with all [00:09:30] the frauds. Right? The Enron and Worldcom and Tyco and things you guys have probably covered. But it also it just had a seismic shift on the profession. And all of a sudden they passed Sarbanes-Oxley. And because we really did kind of go awry, you know, we had, uh, gone the pendulum had swung too far with the auditors playing too much of a advocate role, you know, in many ways. And, uh, yeah. So a reckoning was due, right. And, uh, and I think as a profession, I kind of also bought into [00:10:00] that, like the importance of Sarbanes-Oxley and what we're, you know, we had kind of gone astray. We needed right in the ship. And those were the messaging coming down from the firm. And but it also came with it a lot of other challenges in, in the profession, in the firm environment. Right. Because all of a sudden it was just massive amounts of work to do all this internal control testing. And so, uh, the group I was in, uh, the this group that I love to be in was actually kind of getting disbanded. Right? Because the firm's like, well, we we got to take care of these big clients, you know, we got to move away from smaller clients. And and so [00:10:30] we started being disbanded and all being put on large engagements. And all of a sudden I found myself kind of going, hmm, well, what do I want to do? I'm not really that excited about. I really like what I do. And and the thing is, and for me, like, I was always in the moment, like I was never one of those people that thought about my career five years, ten years down, right? I never I just, I was always just in the moment. Right. And, uh, very reactionary and, and in some ways immature in that way. Maybe too. Right. Uh, maybe I should have looked.

Caleb Newquist: More in.

Tony Menendez: More of a.

Caleb Newquist: Long. You were asked where do you when [00:11:00] you when you were asked, where do you see yourself in five years? You were like, I don't know, but today is cool. That's sort of the.

Tony Menendez: Yeah exactly.

Caleb Newquist: I just but I'm happy now. So is that does that count for anything. Yeah.

Tony Menendez: So I just so, you know, probably a little bit of a flaw professionally, but maybe just kind of goes with my whole personal or whatever. Uh, but anyhow, I, um, so then I got this strange call from, uh, from a company, from a recruiter, and he's like, uh, hey, you know, you come highly recommended. We've had several people [00:11:30] say you'd be perfect for this role. And and he told me about the role. I was like, wow, this is a this is a great role. It's a big, highly recognizable public client, international company rep. But he wouldn't give me the name of the company. Right. And the role was great. Right. You're going to step in and be the, you know, kind of the arbiter of the accounting, right? You're going to be in there making sure the company is doing the accounting right. Working with the auditors, you kind of basically a role that was born out of Sarbanes-Oxley. Right? Okay. Because recognizing the need that [00:12:00] public companies were relying too heavily on their auditors kind of created this, this niche need. Right? So firms had companies had to hire expertise internally. So when they have a accounting problem they don't turn to the auditors. They they go internally. So that was my role. Right. To really be that, that buffer and to fill that hole that we all recognize existed from Sarbanes-Oxley. And so anyhow.

Caleb Newquist: Was that. Yeah. Was that specifically because I remember, you know, Sarbanes-Oxley, it was passed in 2002. [00:12:30] There was tons of brand new requirements. I felt like everybody was kind of freaking out about it, especially in industry, having to comply with it. It sounds like your experience in in public accounting at the, At Ernst and Young was that it was more like, oh, this is this is some it sounds like it was more embraced more quickly than maybe an industry, but industry, I felt like a lot of people were just going, how the hell do we do this? And so it sounds like your role was the answer to how the hell do we do this?

Tony Menendez: It [00:13:00] was it was part of a crafted solution that a lot of like minded, uh, companies came up with, and Halliburton being one of them. And it was. And I didn't know it was Halbert at the time. Again, like he kept withholding it from me, but also don't want me. I don't think I was just totally altruistic. I mean, that was the messaging coming from in the firm. But the firm was also like saw dollar signs, right? Yeah. I mean, this is, you know, now all of a sudden every big public company is going to have to revamp all their internal controls. We have to audit that stuff. So it was that was really the reason for breaking up the group because they're like, hey, we're going to we'll [00:13:30] make more money on all this stuff with internal controls that we didn't have to do before than we will on our engagement. So, uh, you know, it was it was just a balance that out. But I also I still I was like, he went to the company and so he's like, oh, how about I take you to lunch? You know, I'm taking lunch and talk a little bit more about it. And I'm like.

Caleb Newquist: Did you did you have any guesses is what the company was? No, I had no idea. You weren't you weren't trying to go. Hmm. Who could be a big international company with lots of exposure and and. Yeah. None.

Tony Menendez: Right.

Caleb Newquist: You were like going is it, is it, [00:14:00] is it gap Inc? Am I going to be making pants. No, I mean I.

Tony Menendez: Didn't because I was I. Yeah I didn't again that's probably me just in the moment not thinking. Right.

Caleb Newquist: That would have been, that would have been me the whole time. I was like trying to in your defense. In your defense, Tony, like recruiters. Have always been cagey, like they're super cagey about that stuff. So like, yeah, that's because I don't know, they just they don't want I don't. And my wife used to work in legal recruiting, same kind of thing where [00:14:30] depending on who the employer is, the employer may or may not be a deal breaker, like if it's super prominent and prestigious. People might get oh, but they might be. They might be underqualified. Or maybe it was some, you know, you know, lost progressive in Houston, Texas. And they hill here Halliburton they're like, nah I'm not I'm not working there you know. And so but anyway so the caginess that you're describing doesn't actually.

Tony Menendez: And it really does I probably should have been a little more skeptical. But I met with them. I was like a free [00:15:00] lunch and learn more about it. I did I did really like the position. And and he goes on and on. He's he's going on and on about the, the chief accounting officer that is in the role now and all the efforts they're making to make it this world class finance organization and so forth and so on, and really kind of sold me on the position. And finally he's like, all right, come on. Can you tell me now with the company? And he's like, oh, it's Halliburton. And that was me like, uh, thanks, but no thanks. Like, you got to understand, uh, where Halliburton [00:15:30] was at the time. I mean, their name was basically synonymous with synonymous with, uh, you know, corporate malfeasance or whatever, right? You understand, Dick Cheney was the vice president. They were under all kinds of investigations for the bribery FCPA and then the Iraq War. They had all those contracts. And in fact, there's a joke and I'll share it. It's it's the Jay Leno joke. Uh, they had said, uh, because this came out around that same time and it said, uh, Jay Leno and said, hey, you know, they caught, uh, Saddam Hussein the other day and [00:16:00] he had, uh, $750,000 in his in his pocket right when they captured him. And then he said, well, they were as Jay Leno said, he said, well, what they were trying to do was he wanted to buy three gallons of gas from Halliburton. So anyhow, it was kind of anonymous. Right.

Caleb Newquist: And at the same time, definitely, definitely baggage with Halliburton. I mean, even now, there's still just this whole. Yeah. So much.

Tony Menendez: Absolutely. So I also I didn't go and totally I was like, [00:16:30] no way. You know, you know, that's okay, I'm gonna stay away. But then he kept telling me about him and the things they're trying to do. And that's the key. They're trying to change their perception and turn it around. It's nothing like the media, so forth. And I said, all right, well, I'll give that chance, but let me give you some other other than the anecdotal Jay Jay Leno joke, uh, the Wall Street Journal each year would put out their public perceptions of public companies. Right. It's ranked the top 60 and the bottom 60 right near the top. Your Coca-Cola's and your you know, I don't know.

Caleb Newquist: And [00:17:00] your gap Inc. Yeah, yeah, yeah.

Tony Menendez: Whatever. Companies that really have great reputations and at the very bottom. So the bottom 60 uh, Halliburton was I think they were 58. Right.

Caleb Newquist: Wow.

Tony Menendez: 58, you know, 58.

Caleb Newquist: So 58 out of 60. So just below them was that whatever that company was that did all the, like, OxyContin? Oh, let me.

Tony Menendez: Tell you who it was. Enron, Worldcom and Tyco. Yeah. There you go.

Caleb Newquist: There you go.

Tony Menendez: No. According it, [00:17:30] those companies were all, uh, embroiled in fraud, scams and bankrupt. And their. Yeah, their executives are all in prison. And and right above that is the company that I'm, uh, considering to go work for. And, uh, and the thing is, I, uh, you know, I, um. I was very skeptical, but I said, look, I'll make the commitment. I'll meet this. You speak so highly of him. And I did. And and I met with the gentleman whose name was Martin McCollum. And and we were simpatico. And the role was the importance [00:18:00] of the role and what he was trying to do. And, and, uh, you know, his whole thing was he wanted to hire Smokey the Bear. Right. That was, you know, if you guys remember Smokey the Bear, the old iconic. Yeah, advertising campaign to prevent forest fires. And. Yeah, so I kind of got a kick out of that because that's what I need you to do is be here to prevent forest fires and and keep my name out of the Wall Street Journal. We got to be above reproach and blah, blah, blah. So anyhow, I, I really, uh, I really, uh, was sold, you know, when I met with [00:18:30] him and decided to take the job.

Caleb Newquist: And what year was this?

Tony Menendez: This was in 2005. Yeah, February 2005.

Caleb Newquist: So like, definitely at that point in time, like Halliburton is kind of like the chief boogeyman.

Tony Menendez: Oh yeah. Like, oh yeah.

Caleb Newquist: In political circles.

Tony Menendez: Oh for sure. So yeah, just right above Enron and Worldcom. Yeah, yeah, yeah. Uh, and uh, they were in the news every day, right?

Caleb Newquist: But if I, if I may just kind of like, set the stage for, like, [00:19:00] what the what butt Halliburton because I remember being, you know, a, a young, you know, and my politics haven't changed. But like, I remember being young and progressive and and reading about Halliburton and being like, oh, yeah, they're the bad guys, this and that, whatever. But what my conservative friends educated on me, educated me about very quickly was that Halliburton was in terms of like what they did, their businesses. Yeah, they were like the only game in town. Like certain things within the energy [00:19:30] industry. Halliburton had the best. They had the best people. They had the best engineers, they had the best geologists, they had the best, uh, business for like, energy services. And so that's why in a lot of cases, they were sought out. Yeah. To do a lot of these big jobs.

Tony Menendez: Oh very true. Like they have they have real skills and there's some very talented people. And over the years they've come up with a lot of really great, inventive ways to do things. And they're not the only game in town. There is Schlumberger and Baker Hughes and there's others. [00:20:00] But yeah, they're they're one of the premier oilfield service companies.

Caleb Newquist: And nobody's heard about those guys. They're nowhere near number 58 out of the bottom 60. Uh, companies with reputations. I want to know, before you took the job, were you like, I you know what? I want to take this job. But before I do it, I just want to go hunting with one of the executives. Did you. Did you say that that was that?

Tony Menendez: No. No, no. Okay. Yeah. Uh, but, uh, hunting skills. Um, [00:20:30] but but no, I didn't, uh, and of course, this was 2005, and he was already the vice president, so, uh. Okay. I never interacted with him, I didn't.

Caleb Newquist: Yeah. Gotcha. Gotcha. So you must have. So. So when you decided to take the job, I mean, you were jazzed. You were real excited to, like. Like, I mean, yeah.

Tony Menendez: Oh, yeah. I ran with the whole Smokey the Bear thing. Like, I use it in my initial meeting to folks. Hey, what we're here to do. And and even Mark would chime in at the big staff meeting, say, yeah, we have this new group and [00:21:00] we're going to elevate the technical competencies around here. And people are going to we're going to focus on training and development. And, you know, only only.

Caleb Newquist: You can prevent accelerated income revenue recognition. Is that.

Tony Menendez: Right? Right.

Caleb Newquist: Yeah. Yeah.

Tony Menendez: Yeah. So so I hit the ground running and uh, fascinating enough I mean, I get there and people are like, oh, wow, we got a new direction. Okay. Hey, by the way, I've been having worried about this thing and that thing, and people start bringing issues to me. And the first thing they brought to me was this joint [00:21:30] venture. They brought it to me and they said, hey, we're kind of concerned about the accounting here. And, and look at it and say, oh, well, you have every right to be. It looks something very, very sketchy going on here. And, uh, you won't get into too much of the accounting details, but I took it to my, my boss and he's like, yeah, this looks smells like fraud. And take it the other guy and and, um, we ended up writing it off. Right. Because we said, hey, it's worthless without getting too many details. And I said, okay, all right, good. That's a win. Like, it's a [00:22:00] win. Like, we we're doing what we're hired to do. We're cleaning up things and getting kudos. And next guy comes and says, hey, I got another one. You reminded me this other thing. I got another one that's very similar, right. Except for it's a little worse. It's twice as big, you know, and I'm like, all right. So we look at it, you know, and it needs to be written off. But this time the reaction to write it off is a little bit a little more pushback.

Tony Menendez: Right. Worse before it was like immediate write that off. It's just wrong. And then this time it was like, um, can we find a ways and, and I ultimately couldn't [00:22:30] find anyway. And uh, so we wrote it off. And unbeknownst to me, behind the scenes, there was getting a little less tolerance to these type of things. And, um, another one comes my way and look at it. I'm like, yeah, this one's a problem, too. This was like three for three. Like it was a strikeout right off the bat. And and I go to my, my, my boss right at the time he hired me one of his Smokey Bear and I'm like. Mark, uh, you know. Yeah, we just had the those two. I said we got this other joint venture air, and [00:23:00] he's like you, we're not looking at that joint venture air, and tells me just to stay away from it. And and I said, the only reason I'm looking at it is because the auditors asked me to look at it because they were concerned about it. So I'm not I didn't I'm not. He's like, you're not an auditor, right? Yeah. He's like, you're not an auditor. You're not supposed to be. You know, that's not your job. And I'm like, I'm just I thought I was doing my job, I didn't I didn't go and look for this. They brought it to me and.

Caleb Newquist: Listen, listen, Tony, your job is to look like we're concerned [00:23:30] about this, not to actually find shit. Okay? So just just, uh, just say a lot of accounting words and, uh, and Smokey the Bear and then. And then just go back to your office and play some Tetris, man. Yeah, it's like.

Tony Menendez: Smoke screen and says Smokey the Bear, because the words that came out of his mouth shortly after that was, look, you're not an auditor. And he said, uh, I said, well, look, we're just correcting past mistakes. Like, for example, fiber spar. He's he's like fiber spar. And we tell you what you just destroyed, I think it was $15 [00:24:00] million or whatever. He said we had a right fiber spar off. He's like, you just destroyed $15 million worth of shareholder value. But getting that camera. And I was stunned. I'm like, what are you talking about? He said, you know, we don't just I said we had to get it right. And he said, we just don't take hits around here, right? We gotta fight taking hits. Right? And that hit was $15 million wiped out shareholder value. And I said, look, I'm just doing my job. He's like, no, I expect people to fight [00:24:30] taking hits. And if they don't, you know, I'd fire them. Right. So on no certain terms like stop looking at joint ventures, stop. You know, go back and like, like you suggested. And, uh, so that's when things started to kind of I started having my regrets about taking the role.

Caleb Newquist: And how long, how long had you been there at this point? This all happened really fast, right?

Tony Menendez: Super fast. Um, those two conversations were, let's say, let's say all that happened around, you know, may late by the time late May. So two months in. Right. [00:25:00]

Caleb Newquist: Three days because day one was the little write up was a little bit bigger days was the was the hey, shut the fuck up right off.

Tony Menendez: Right. Essentially, yeah. It happened super fast and and and unfortunately at the time I right around right around the time he was also telling me to stay away from the, uh, joint ventures, that I'm not an auditor and so forth. And then that's when, uh, I said, hey, well, we got a bigger problem than I'm concerned about. Um, that came to my attention how they're recognizing revenue on bill and hold. Mhm. [00:25:30] And that's when things started to really take a turn for the worse. And at first she's like, look I don't care. Just rely what was going on last year I don't want you looking at it. And I said well this isn't a past thing. This they're asking me to approve a current contract to recognize revenue. And that's kind of my job, right? I'm not being an auditor. I can give them guidance on this contract. And what I'm telling you is I can't get I can't tell them they can recognize revenue because they don't meet any of the billing criteria. And he's like, well, how [00:26:00] much is that contract? And I said, I don't I think it's this, this quarter. They're saying they it's 3 to $5 million and they might miss their targets if they don't recognize it. He's like, oh shit, I don't care about 3 or $5 million. Here's what I want you to do. You can work on that one contract and that one contract only then I don't want you dealing with this anymore. Don't go looking in the past. Just accept what they've done and. And at that point I was like, okay, alarm bells going off. Because the thing is, that was one contract and which was really a representative of all their contracts, [00:26:30] right? This wasn't an isolated contract. The issue was right. And I even told him, I said, I'm not worried about this one contract. I'm worried about what it does to all of our contracts, because I'm told this is what they do all over the globe, right? Yeah. And.

Caleb Newquist: And and before we get too deep, can can I just I want to make sure that I, that I understand and and buy the whole bill and hold situation. And hopefully that's also a good way to make sure that the listeners also understand the issue that we're up against here. So so the way the way [00:27:00] I've read just this, this problem that you had at Halliburton, it was kind of like if someone's like building a home, like getting like you're you're building a new home. So you get a contract with a contractor, um, and you know exactly how much you're going to pay them. They know exactly how much you're going to. They're going to get paid for building this, this home. But according to the accounting standards, they can't just recognize all that revenue. As soon as the ink's dry in the contract they have, they they have to revenue [00:27:30] recognize the revenue over time depending on how much of the job is completed over time. And then they can recognize part of the revenue there. And if there, there's some, you know, in terms of are they receiving cash on it, how far are they along? And ultimately the idea is, is really you don't get to recognize all the revenue until the product is shipped. Is that is that similar to what we're dealing with at Halliburton?

Tony Menendez: I mean, a similar let me change it up a little bit. Let's say, uh, you won't recognize revenue till you deliver the home. Right? Okay. [00:28:00] So let's say you've got a contract to build a home, you know, $10 million, $2 million home or whatever. And and essentially what you do is you go out and acquire all the lumber and nails and, and you put them in your warehouse, you let them sit there. And essentially what they're doing is recognizing revenue when that happens. Okay. Right. They're not. And and so the thing here is the home.

Caleb Newquist: Got all the pieces. We got all the pieces of the house. So we're good right. Yes. We just got to.

Tony Menendez: Put them together for you and test it and make sure everything's whatever. We just have to do that part. [00:28:30] Not a big deal. Uh, okay. And so. And the thing is, unlike a home, right? You. So you buy a home, you know, you want it built, right? So it's kind of like you're going to start construction right away. Whereas the issue with these guys is they they just know there's, there's oil and gas out in the Gulf of Mexico. Right. Okay. They haven't found it yet. Right. So they just know they've got a plan to go out in the Gulf of Mexico or wherever and search for it. And so you got to have all these pieces [00:29:00] of the home ready for whenever. Hey, all of a sudden we found it. Right? And then you're going to build the home to the specs necessary to make that drill right. It's not like I'm not building a standardized home, like I gotta I gotta construct the equipment and the tools necessary for that depth of that. Well, right. The temperature, the pressure, the, you know, all the other complicated engineering things that go into it. So if you really step back and this is this is why it's such a, such a the key [00:29:30] difference here is because what their business really is, is they go and provide all those services, right? Yes. They, they have this equipment and stuff that they have to manufacture and put together because they're the ones that have to use that stuff in the wells. Right? The larger oil companies, they don't get dirty. You ever seen the um, uh, horizon movie where they had the huge mass of whatever. The guy's getting all grimy so that those are Halliburton guys, the the Exxon's and the Shell's. They're back here going, hey, my job is to find the well, I'm paying [00:30:00] you guys to get it out of there, pump it out all that, right?

Caleb Newquist: Do the dirty work. So the real literal, the real work they do.

Tony Menendez: Is that right? Providing the oilfield services so the customer doesn't care about, you know, having all the components and all the junk over here. They care about this. Right? So. Right. So so that's kind of the thing.

Caleb Newquist: Um, yeah. And and then and also the and the problem like I guess the motivation for Halliburton again, this is just this is me just spelling it out. The motivation for Halliburton [00:30:30] of what you want to there's they're they're motivated to recognize the revenue earlier rather than later because you've got because the you know, if you're a publicly traded company like Halliburton is you've got these market analysts who are giving their projections and saying, hey, Halliburton should make this much money this year. And so they're trying to go, hey, if we can recognize this revenue early, it's going to help us meet market expectations, which is going to keep our share prices higher. Back to your point, about the $15 million, right, or the write off destroyed $15 million worth of shareholder value. [00:31:00] So that's sort of the motivation to keep things light, maybe of how things got to where they were. Yes. With Halliburton.

Tony Menendez: Yeah. So this is this is a key distinction, uh, the policy as that by doing it that way, it gives them total control over the timing of the revenue. There you go. Right. Because this is the thing they I mean, they're the ones let's say they're manufacturing the piece of. Equipment and their revenue recognition is when it leaves the manufacturing facility and goes to a warehouse. Right. And so they have total control over when that happens. Because [00:31:30] like I'm saying, these contracts are maybe, you know, six months, nine months, a year, two years whatever out. Right. So in terms of when it goes to the warehouses, it's irrelevant. Right. And it's totally in control of the company. And again, it's completely irrelevant from the standpoint of those guys because they don't really care about it. Right.

Caleb Newquist: So so if there's a quarter or a year where you've already met hit market expectations, then you go, okay, we don't have to worry about that now. We'll hang on to that for later, but if you're not quite there, then you might accelerate. [00:32:00] You might like you said, just move stuff from here to this warehouse where it's still from Halliburton to Halliburton. Then you go, now we can recognize the revenue because we need it now. Yeah, that's sort of it's a it's income smoothing is really absolutely income smoothing income management. Absolutely.

Tony Menendez: And and thing is I wasn't alone on this. Like the guy that was, uh, there before me and he was in a different role. His name was J.R. salt. He was the controller over the ESG, which is the energy business. And and he's the one that came to [00:32:30] me and said, hey, I've got real concerns about what's going on here. And so in addition to the little arrangement, I said, I said they also do services where they'll they'll use all these chemicals, right, called barite and other things. And they got to use these chemicals to go down the well and uh, and yeah, the contracts are they're gonna recognize revenue as soon as the bags go to the, the warehouse. Okay. But who determines how many bags you need? Well, Halliburton does, and the contract is. Oh, yeah, the customer [00:33:00] doesn't care because you only get charged for the bags used. Right. So any so Halbert can, at the end of the quarter, go. Oh, let's ship an extra bags. We need the revenue. And the customer doesn't care because if you don't use them, they're going to get it charged back. Oh, and so he was actually walking around this big warehouse in Kazakhstan. And this is when I first got there. He's telling me a story. He's like, yeah, I was in cars walking through the warehouse and I'm looking around and the guy's like, what are these bags? Wall to wall bags of barite, right? And he's like, don't worry about that.

Tony Menendez: We already recognize all the revenue. [00:33:30] And Jared was like, wait a minute. Okay, what about Bill and hole? And the guy's like, what's that like? Yeah. Yeah, right. Like no one knows what it is. And uh, right. Anyhow, there's one of the reasons he brought it to me and, uh, he was saying, I'm worried people are using this to manipulate the timing to meet their budgets, and that's exactly what it is. So. So that was the motivation that led to that bad policy in the first place. Right. Um, the real fraud in my mind occurred when they knew it was [00:34:00] wrong, and they went through great lengths to cover it up. Does that make sense? Yeah. So I can understand screwing up and getting a bad policy in place. But after I raised the issue and brought it, they're like, yeah, this is wrong. We're going to stop doing it. And, you know, we're going to get within the lines of what's appropriate. These are all things. I was assured we were going to fix it. Right. It was. In fact, it was on my birthday in 2005. We had a big conference call when the chief accounting officer and Jared stood in front of the room saying, we're not going to do Bill and hold anymore. We're [00:34:30] going to fix it this quarter and so forth and so on.

Caleb Newquist: So, so yeah, I just want to stop us before we get too far. Is it so how did you kind of like formalize kind of your concerns. Like what? And when it came to the revenue recognition issue and then how did it get to like this meeting that you were just describing?

Tony Menendez: Oh, because I, I drafted the memo, right. I drafted a memo saying, hey, here's what we're doing, and this is what we should be doing. And I laid out all the underlying facts, circumstances, contracts, you know, just [00:35:00] and we spent months because we had to get this right. And so that was kind of the the impetus here. So at this time, I also I had already established a relationship because my job was working with the auditors, and I had a good relationship with the commander on the account, and I brought it to his attention. He's like, yeah, this is a big freaking deal. This is how they do, recognizing revenue all across the globe. And and so and I had warned him about my, my conversation with my boss. And we both said, oh, that's a tone at the top problem. Yeah. Let's keep it. Because the plan [00:35:30] was I would just issue my memo, right. And and then they would have to deal with it. Right. Because again he said deal with this one contract. So I had an arrangement with the auditor to say, hey, I'm going to issue this one contract. Just like he said, I'm very careful, I'm going to do all the work, but you guys are going to be on this distribution eventually, and you're going to have to say, well, wait a minute.

Tony Menendez: Does this call into question? I think obviously it does. So that was like a plan that we had, uh, had agreed to. And uh, strangest thing I right before I was about to send [00:36:00] my memo, my memo out. Right. I took it to him that day and I said, hey, John, will you, uh, review my memo? Right. I just want to before I send it out, you know, and he's like, oh, I'd be happy to you. Right? So he takes it, goes back to his auditor office, comes back a little while later, I don't know how long he's like, oh, this is the he said, Tony, this is a great mom. This might be one of the best movies I've ever seen. I have no comments like it's really, really good. And I'm like, oh well, thanks. You know? And I'm like, that's reassuring. I'm glad. And and [00:36:30] then the weirdest thing happened. And then he goes, hold on a second, right? Then he abruptly turns around, leaves my office, goes back to his office and comes back with, uh, he comes back with something as he and I print out and, uh, he kind of he's like, oh, I, I think you need to you should see this or whatever.

Tony Menendez: And I'm looking at it. And his big KPMG logo across the top, and it says, uh, 2005 oil and gas conference, current topics and so forth. And I'm like, what is this? He says, oh, well, [00:37:00] you actually go to page eight or whatever, and I go to page eight. And what is it? Is it it's an article in this KPMG publication to the world of the industry. It says Bill and hold transactions in the oil field service sector by by uh, John Christopher. Right. And I'm looking at it it's, it's and it basically it mirrored my memo like it just said it was it, it outlined all the gap and what they should be doing and why you don't recognize revenue, what companies should be doing and why they shouldn't be [00:37:30] recognized revenue in this specific exact situation. I was just stunned, like, why are you giving me this now? And and this is what really got me. Uh, he said I forgot about it. Oh, and and I'm sitting here going, huh? We've been talking about this for months. My team and I have been researching this for months. You know, to put this memo together, you could have saved us a ton of time. And I don't understand that.

Caleb Newquist: He had an intern draft that article and actually [00:38:00] read it.

Tony Menendez: Well, well, so let me tell you. So I really was stunned. I said, you have to explain this to me. And he said, well, uh, the thing is, you know, leading up to this conference, the national office wanted to publish this, and they reached out to us to come up with something on revenue recognition. And he said, we did. He said he and, uh, Grant, the partner at the time, worked together, and they drafted this issue on revenue recognition industry and sent it to national office. But he said national office just trashed the whole thing. They just rewrote [00:38:30] the whole thing. But they left his name on it. Oh.

Caleb Newquist: Oh, geez. Okay.

Tony Menendez: Okay. But and then I'm like, okay, fine. But did you even read it? Like, did you not realize that none of this was being done? And. Right. Uh, and, and then he just was despondent and, uh, we knew that things were about to get even more serious at that point.

Caleb Newquist: So how did they. So so I'm assuming you're you're very you're very, uh, blatant foreshadowing. Did things get worse [00:39:00] from then and and how did they get worse?

Tony Menendez: Yeah. So immediately I after issuing the memo, I got called into my, my boss's office, um, and, uh, the chief accounting officer, and he read me the riot act on the politics of Halliburton and the risks of putting things in email. And he basically said, okay, well, we've had a lot of discussions about it. Your conclusion is appropriate. Your memo is very good. But the problem is you you sent it, you know, and he's like, you used email. [00:39:30] He's like, don't you understand? Email will get you in trouble, right? Anything you put in email is damaging. And these are his words, you know, and and that you need to be incredibly circumspect, you know, in your position, especially your position. You know, don't put things in writing. So you're going to have to, you know, pick up the phone and take light notes and stuff. And he went on to say, yeah, even myself. This morning I had this issue and I started documenting the email. I'm like, oh, I can't send that, you know? So he's like, you know. So there was that educational part of it. [00:40:00] Right.

Caleb Newquist: Well, and another and another educational part of it is that the word circumspect means careful to consider everything that might. I'm too dumb to know what that word means.

Tony Menendez: Yeah. Look it up.

Caleb Newquist: Yeah. Caleb. Caleb. He's he's our he's our thesaurus. Me? Not so much. So careful to consider everything that might happen. Okay, so before we send an email, just just go. Is there any way that this could come back to bite me in the ass? That's basically what he's. Yeah. Bite the company in the ass, I guess is what he's saying.

Tony Menendez: And so then he went on for a long time and wrote about [00:40:30] the politics, and he was obviously very frustrated that the memo was out because, look, he's like, because your memo is out there now we're gonna have to fix this, you know? And he told me we were going to fix it. And and so at least I got some comfort in that, even though I knew pretty, it was pretty apparent that my days were numbered at that point, you know, because he was very much ready. Yeah. Yeah. Uh, but he told me.

Caleb Newquist: The memo was your was your long terme resignation letter is what it was your inadvertent.

Tony Menendez: Well, I [00:41:00] didn't want to resign 18 months notice.

Caleb Newquist: Yeah.

Tony Menendez: Uh, but, uh, I had a feeling he was not going to be happy with it because, uh, as I might have said earlier, I mean, he went to great lengths to tell me that I wasn't an auditor. Stop. Stop looking at past things. And when I raised this issue with him, he told me to stay out of it. Just do what you know, stick with whatever was done in the past. And and so I really fully anticipated that he wasn't going to be happy with me. But at that point, what was more important [00:41:30] to me was to get this right, uh, you know, to kind of to force their hand, if you will, to kind of almost fix it. Right. Uh, I thought that was more important to me than my, my career or future at that company at that point. Uh, but I did leave that room thinking they were going to fix it. And, uh, it wasn't shortly thereafter that we, uh, was actually on my birthday when they, you know, uh, my boss, the chief accounting officer, and, uh, the vice president of the entire accounting [00:42:00] for the, uh, ESG group, we had the staff meeting and they announced thereby that they're going to fix the fix the bill and hold.

Tony Menendez: We're no longer going to do it. Throw away that flowchart you guys were using and, and, uh, and so at that point I felt like. I was almost persona non grata in the point, but at the same time I felt like, okay, yes, it's moving in the right direction, you know? Um, but then when they went out there to see how big the. The problem was, um, then they realized [00:42:30] a correction would require restating the financial statements and announcing to the public that they had this massive problem. And and I guess that was a bridge too far, uh, for them. And, uh, and then that gets me to my, my meeting with, uh, the, uh, the senior manager again later on after, you know, another month or so goes by. Yeah. And he tells me, yeah, we're we have a meeting tonight and we're going to, uh, discuss with them the restatement. And, you know, because we can't [00:43:00] audit this stuff and it's obviously not right. And, and, uh, I said, oh, well, good. You know, so I had still hanging around. They had formerly fired me yet, but I was still there and. Okay. And I took that as still a positive thing and.

Tony Menendez: Right. But in the next morning he comes into my office. His eyes are bloodshot. He's very distraught and upset. And obviously something happened, and and, uh, he stood there for a moment and finally just said, I, he he said, I can't believe I was at that meeting last night. I said, what happened at the meeting? He said, no. He [00:43:30] said, uh, I shouldn't have been there, you know, I shouldn't have been there. I wish I wasn't there and and finally got around to telling me. He said it was just a negotiation. He said it was a negotiation. They just negotiated the issue away. They're not going to fix it. No one's going to. No one's going to fix this. And so anyhow, if we kind of flash forward a little while to the company, um, uh. The company goes ahead and covers up the covers up the accounting problem. They don't fix it right. And I [00:44:00] eventually take my concerns to the SEC. Okay, alright. And the SEC, I sat with him, met with him and, and uh, my first, my first meeting with them, it was, uh, very enlightening. Right. I was there many hours, several hours. Right. Going through everything and, and the enforcement.

Caleb Newquist: With an attorney or just or.

Tony Menendez: Just. So is this by myself? Okay. I'm an attorney. Right? That was.

Caleb Newquist: Okay. Yeah.

Tony Menendez: Yeah. I mean.

Caleb Newquist: Which which makes sense. How do you how do you get an appointment with the SEC? Is there, uh, just contact the front [00:44:30] desk.

Tony Menendez: What's that? I just sent them an email, and, uh, interesting enough, they probably get thousands of emails. Uh, but they got mine. And within, I don't know, was it 24 hours or whatever? They reached out and said, okay, well, we would like to fly you to Dallas to meet with us.

Caleb Newquist: There you go. So the SEC gets in, they take care of the problem. Halliburton changes what they're doing, and the world goes on just beautifully awesome. Well, it's been great talking to you, Tony. Um, how can people.

Tony Menendez: I wish [00:45:00] I wish that was I believe that's how it was going to happen. Right. And, uh, so so I take them up on their offer, I fly to I fly to Fort Worth, and I go on a Saturday because I'm really freaking nervous that someone at Halliburton might catch wind or or know someone might find out. So this is something I wanted. Absolutely zero. Nobody to know I was I was doing right. Uh, this was this was a completely unique, unexpected [00:45:30] experience for me. And, uh, right. And I can imagine how I was feeling. And I get there and and they're very receptive. They're like the attorney and the forensic accountant that we spent the day with. They were like, yeah, this is yeah, this is fraud. This is what we this is the type of cases bill and hold. It wasn't complex whatever. And and I just told him everything. And then and then towards the end, uh, the attorney kind of wise me up a little bit. I at the time, I actually didn't appreciate I didn't understand what he was telling me, but he was like, you know, just so you know, [00:46:00] uh, by the way, um.

Tony Menendez: You know, we're not going to be able to do a formal investigation, right? We're not going to be able to subpoena witnesses, uh, or subpoena documents. Really. We cannot do an investigation even though we feel like this is something we want to pursue. Uh, but we can't unless we get approval from the commissioners. Okay? And I was like, okay, you know, I didn't I don't know why he was really telling me that at the time. But of course, later on it would click because what he was saying was [00:46:30] the commissioners are political appointees, right. And it's made up of, uh, two Republicans and two Democrats. And then the chairman is the presidential appointment. Right. And if we know who was the president at the time, it was George Bush, and Dick Cheney was his vice president, and they had appoint a guy by the name of Chris Cox. And so I think he was flagging them to me, that we're probably not going to be able to look into this. Right?

Caleb Newquist: He was he was hoping you'd connect the dots where it's like, yeah, our commissioner has to [00:47:00] be okay with it. And you'd be like, oh, right. The guy, the guy who has lunch with Dick Cheney all the time. Okay. Yeah. Gotcha. I'm on there.

Tony Menendez: And then the guy said one other thing to me that really kind of shook me. He said, uh, he said, uh, what do you think? Mcclellan in my boss. What do you think McClellan is going to say when he's when he finds out this 35 was a 35 year old was in here, you know, sharing this information with us. He said that I was like. And I just was floored. I was like, what? Uh, no, I [00:47:30] hope he never finds out. And I'm like, are you guys going to tell him? I mean, I thought I studied this, you guys were. And he's like, no, no, no, no, we're not going to we won't. But uh, you know, I'm like, okay, uh, fine.

Caleb Newquist: And so hypothetical, I'm just wondering like, would you shit your pants or would it just be more of a more of a close call kind of situation? Yeah, yeah, yeah.

Tony Menendez: So, uh, uh, so, uh, so I leave there thinking, oh, yeah, you know, he's going to do their job and everything and, uh, and, [00:48:00] uh, but it takes time, right? Uh, I go back to work every day. I'm sitting here by the phone waiting for the checking the Google News, you know, waiting for the story to drop, waiting for this to happen. And, yeah, just kept going on and on and on, you know, and then and then finally, uh, the company issues their, their annual financial statements where they issued their, uh, earnings release, which locked them in, right, publicly filed the financial statements. And the very night, the very next day that that happened, the SEC contacted them and said, hey, by [00:48:30] the way, we're open up an informal investigation into these topics, okay. And, uh, and the only reason I knew it at the time was because I happened to be staying at the printer, and I heard the audit partner, his office was just right next two doors down from mine, and I heard him on the phone because his door was open. He's like, oh, we need to get on the phone with McCullum right away. This SEC investigating revenue recognition and this, that and the other and really get on the same page before we contact you. And I just heard all that and I just went, [00:49:00] oh, shit. You know, like, okay, it's happening. Uh, and then I, I catch wind that he's like, well, we need to give him a call and I'll get on the same page before we get back to the audit committee and stuff.

Tony Menendez: So I started feeling like, you know, okay, well, maybe I should reach out to the audit committee, right. Because, um, and then that was something my wife absolutely did not want me to do, right? She's like, you can't trust anybody. And, and, uh, and so originally, that's why I didn't go to the audit committee. I went to [00:49:30] the SEC first. Right, right. I was like, she's like, no way. You're not going to trust these guys. They're probably being on it. And and uh, nonetheless, once, uh, the SEC, once that came about, I was like, the audit committee's locked in. They have to fix this. So I felt comfortable sending them an email. Okay. Followed, because I told you earlier that Sarbanes-Oxley requires public companies to have these confidential reporting lines. Yeah, yeah. So I said by law, they have to protect my confidentiality and they have to do something with this. And [00:50:00] I got the SEC looking over their shoulder like, you know, I don't have nothing to lose. And I sent it, I sent an email and the next thing I have to send it, I go into my wife and told her and she just freaking blew up. Like, you're an idiot. Like, I can't believe you told me you weren't going to do that. You're going to regret it. And I'm like, no, no, they're going to fix it. No. You'll see, you know? And, um, no, no, she was absolutely right. I go into office next day.

Caleb Newquist: Which is ridiculous because the audit committee was [00:50:30] also a requirement that was set up by Sarbanes-Oxley specifically to be an independent part of the board of directors. That would be their sole job is to make sure that the that the auditors are doing their job right, and that and that, you know, things like this don't happen. And so the whole, the whole point of the audit committee is for you to be able to do exactly what you did. Absolutely. I mean, but it's like you said, it's still pretty fresh in the, you know, in the in the timeline of Sarbanes-Oxley. And probably Halliburton [00:51:00] wasn't the only company that hadn't gotten it right yet. But also your your wife's, uh, you know, her her premonition that it wasn't set up correctly clearly was true.

Tony Menendez: Well, yeah. So, so so I go back into the office, uh, and, uh, and, and I'm sitting there, you know, later that afternoon. So I'm doing my computer rings, I got an email, and they're big as life in the email says SEC investigation. You know, to everybody in the organization, the SEC is investigating [00:51:30] the allegations of, you know, Anthony Menendez, your coworker, and, you know, get ready to preserve documents and evidence. And, you know, we're on you know, yeah, stuff's about to happen.

Caleb Newquist: And so you walk out of your office, there's people like with crowbars, like slapping them against the palm of their hand, just waiting for you to for you to use the printer again.

Tony Menendez: Oh, yeah. Exactly. No, I, uh, it was actually I was freaking floored. I was like, how is this possible? You know, and I was in my office, I, [00:52:00] you know, and it was I got up and I shut the door. I just sat there like, Holy shit. What? You know, thinking the worst. Like what? Yeah. And, uh, and finally I just started grabbing all my stuff, you know, and, and, uh, I just got out, walked out the door. And the funny thing is, when I opened, it was funny, I guess. But when I opened the door, dead silence. There was no one on the floor normally muscling and and I was like, this can't be good. Like. And I'm walking around and nobody, I mean, just. And I just make my way out of the building, get [00:52:30] in my truck. And, you know, I just spend the whole day just driving up and down I-10, like, freaking out, like, what am I doing? What am I, you know, and because.

Caleb Newquist: Because Halliburton I mean, again, this is me from the bleachers. It seems like Halliburton has an entire division that, like, specializes in shallow grave, like, problem solving. Yeah, kind of situation. I mean, I mean, like legit. Was that how how concerned were you like because because again, I mean, I it's were you at all concerned [00:53:00] for your physical safety at all?

Tony Menendez: Oh, well, I mean, sure, I mean, I didn't, you know, I've seen enough movies to know, you know, stuff can happen. Okay. But it was it was fleeting. Like, I really at first I was so floored by it. And I was worried about it, especially once I talked to my attorney. Once I got an attorney, he's like, you need to assume you're being followed. You need to assume your phones are tapped. You're everything's bugged. And don't talk to anybody like he was. Really. Yeah. You know, and [00:53:30] I started thinking, wow, I didn't do anything wrong. Like, you're, you know, and he's just like, you just be prepared. You know, these companies will go to great lengths and and so all that had me for a while and, and, uh, and I'd worry about, you know, worry about that and worry about the safety, my safety or my family's. And finally, I just said, fuck it. I'm not going to live like this. I'm not going to be afraid of these guys. I did nothing wrong. I can't help, you know, if if that in the event that something like that happened, screw it. I've done what I've done and I'm gonna. I'm gonna live with [00:54:00] it, and I'm just. But I'm not going to live my life being afraid. I'm not. So. I'm not.

Caleb Newquist: So you. So the email goes out. Yeah. You're you're from that day forward. You're persona non grata. Yeah. At Halliburton and so so then then what happens next.

Tony Menendez: Oh yeah. So for example like uh, I mean the my job I work every day with the auditors like that was my job and everybody else and, and all of a sudden, uh, the auditors basically flat out [00:54:30] told the company, and this is strange, that they would not they would not communicate with me in any way. They would not attend any meetings if I was going to be in the meeting and I would not. They one auditor said, came by and it said, you know, I came a step foot in your office and, you know, they're all like, I'm not supposed to be talking to you. But, you know, I mean, it was it was very, very, very strange. And then everybody else just ignored me. Everything dried up. Like I started getting uninvited to meetings. And, I mean, it just became obvious. [00:55:00] And, uh, and so the finally.

Caleb Newquist: Sitting in the cafeteria all by yourself at a table with your tray of food and your carton of milk, I remember, I remember fifth grade, I know.

Tony Menendez: Yeah, yeah. This was that on steroids? I guess it was just, uh, it was very unsettling. And, uh, and then finally I was like, this is on a this is this isn't this is not right. Like, you know, I want to cooperate. I want to help the audit committee and, you know, help the SEC, but I shouldn't have to frickin. [00:55:30] Come to this office every day and be subjected to this. Like not have a job or nothing.

Caleb Newquist: Be ostracized.

Tony Menendez: Yeah. So, um, so my attorney ended up talking to Halliburton and they said, oh, we just you go on administrative leave and and so my job was I go to my attorney's office every day, like, that's what I did to pretend I had I still had a job. I go to his office and I'd work in his attic, and I would, uh, but I but I was working like I was preparing for my case. I spent every waking moment studying Sarbanes [00:56:00] Oxley, studying SEC. I mean, just, I mean, I was burying myself in making a documented timeline of everything that happened and every I was just gearing up for when the SEC came calling. I would say, oh, you know, here it is. You know, I had boxes of documents. I had my computer. I mean, I was just. I was just working my ass off trying to get ready for, uh, what I, what I was thinking was going to come. Come to come to play out. Yeah. Um, and.

Caleb Newquist: So and so the SEC, they [00:56:30] I mean, again, they did they came and they cleaned everything up, and you got to get out of your attorney's, uh, attic and go back to work. And there was a parade for you, and everybody apologized, and there was a cake, and, uh. Right.

Tony Menendez: No, it didn't work out the way I. In my mind, I thought all that stuff was going to happen. You know, I was naive like that, but, uh. What, uh, what instead, what happened was the SEC just abdicated the responsibility. They didn't do an investigation. They just turned around and said, hey, Halliburton, investigate yourself. [00:57:00]

Caleb Newquist: Uh oh.

Tony Menendez: Oh, yeah. Yeah.

Caleb Newquist: Because that because that works. That that always works out right. It's always think. Yeah, yeah. It always works out great.

Tony Menendez: So, so they just said you you guys investigate yourself. Tell us how it goes and Halliburton how it goes. Yeah, yeah. Halliburton hired, uh, white shoe, white shoe law firm from, uh, Washington, D.C., and they, uh.

Caleb Newquist: Hey, hey, Colombian drug cartel. It's the DEA here. We were just. If you if you just send some people around to see if you got any drugs on your premises, and then just let us know if [00:57:30] you do. Yeah, that'd be great. That'd be.

Tony Menendez: Great. Yeah, that's funny, but, uh, they, uh uh, so. Yeah. So they didn't they didn't never did an investigation. They never interviewed anybody. They never looked at documents. They never they never even talked to me again. They let the so the audit, the Halliburton Audit Committee hired these attorneys that came in and and then after six or 7 or 8 months or whatever it was, gave the ring, ring the SEC and said, hey, there's nothing here. And they're like, okay, thanks for doing the work. Boom. And then that was it. They I [00:58:00] really thought, that's.

Caleb Newquist: Where this story was going to turn. I thought this I thought this internal investigation like that's where it was going to turn. But no, no.

Tony Menendez: No unfortunately not.

Caleb Newquist: And the SEC never contacted you. And you're like, what the hell am I supposed to do with all these bankers boxes of notes and timelines and and Sarbanes-Oxley, uh, research that I've been doing. So you just lit him on fire in a parking lot and.

Tony Menendez: Absolutely. Well, no, not not quite, uh, but, uh, so I, uh, I mean, obviously, immediately my attorney called. What kind of investigation is this? You know, you didn't do an [00:58:30] investigation. You didn't even bother talking to our client. You're the whistleblower. You you didn't do anything. And and they just kind of kept kept, uh, mum about it, they admitted. And then finally, like, oh, yeah, well, we'll meet with him. And by that time I'm like, are you are you serious? And, uh, you know, this was many months later and, um, so I so eventually I did meet with him again. I had a second I had a follow up with them. And this was very interesting because going into it, remember, you had asked if I had an attorney the first time and I didn't. I mean, [00:59:00] I was like, what do I got? I'm doing the right thing here. I don't need an attorney. I don't have money for that shit anyhow. And so this time I'm like, there's no way in hell I trust you guys. I'm not going to meet with you guys, right? Without an attorney, right? Yeah. And I got to find the right one. And so I found a guy by the name of Wayne Secor, and he was a. And this guy was perfect for the job. He actually ran the SEC Fort Worth office for, like, 15 years. He was the [00:59:30] the guy who oversaw the all the investigations and, and, uh, so forth, this process and and are.

Caleb Newquist: You sorry to interrupt, but are you still technically employed by Halliburton at this point?

Tony Menendez: No, at this point, I had resigned. Okay. Yeah, I had resigned. Uh, they had, uh, yeah. They, uh, the so what had happened was the Halliburton said, oh, well, uh, now that the SEC is not going to do an investigation and the Department of Labor doesn't think you have a case or whatever, and you can come back to work now. [01:00:00] And I'm like, no, no, thanks. Pass. Yeah. So so I resigned and, uh, okay.

Caleb Newquist: I thought, see, I, I thought you, I thought you did like, have this indefinite, like, uh, administrative leave. Still pulling in a paycheck, like, like the guy on Fight club who, who who just worked that out, and then you're like, cool. I'll just be. If you need me, I'll be in my attorney's attic. No, I was I.

Tony Menendez: Did beat myself up, though. Like, I maybe not physically, but emotionally. [01:00:30] I was that dude. Yeah.

Caleb Newquist: Oh, gotcha, gotcha. Just beating the shit out of yourself. Yeah, yeah, I have that type of personality, too, I get it. Okay, so you resigned from Halliburton. You're taking a new meeting with the SEC. You. You're lawyered up this time. Yeah. And so how does that meeting go?

Tony Menendez: That meetings goes just. Well, I, uh, so, you know, myself, Wayne and another attorney with his office, his name was Corey. And, uh, uh, we we we spent, you know, a couple [01:01:00] days going through all my boxes, looking at the evidence because the idea and Wayne, you know, he was being very, uh, uh, like the enforcement guy used to be, right? He was very probing and wanting to see stuff. Right. And and so the idea was take you guys with me, you're going to protect me, but try to encourage these guys to actually do something with the case, right? Yeah. And so we we were totally prepared. We get there and we brought some documents and stuff and, and uh, so going into it, Wayne was like, man, I [01:01:30] wish I had this case when I was there. Like, this is what, you know, this is what you kind of like, you hope for, you know, and you're in these kind of roles and anyhow and then we get there and, and and I'm like. Okay. You know, it was first of all, it was just two young staffers, right? So it was obviously strange. They were way at the far end of the table. And, and then we got going and they're asking me and they're just nodding their head listening or whatever. And then finally I'm like, um, did they did they tell you how big the number [01:02:00] was? No, they just told us it was immaterial. Did they give you any any information? No, they didn't give us any information, did I? I said, did they tell you about what they call plans? I started raises, no, we never heard about any of that stuff. I'm like, oh well here's documents. You know, here's here's evidence right here. And I try to push to them like, no, no, it's not necessary. You know, kind of push it back to me.

Caleb Newquist: Oh geez.

Tony Menendez: And I'm and I'm and that happened like several times. I'm like, what do you mean? I got recordings of meetings where they're saying, yeah, the accounting is wrong. They're going to [01:02:30] fix it here. Do you want that? No, no, no, we we don't need to take anything or whatever. And, and this went on for a while and it was just very disappointing. And then finally wanes like, you know, Tony, can you step out in the hall? I want to talk to these guys. Right. And, uh, I'm like, sure. You know, I go out in the hall 15 minutes later, Wayne and his, uh, attorney with his firm come back out, and he's just, like, shaking his head. He said I. I don't know what to tell you, but, um. I guess I just got to tell you, he said. [01:03:00] As long as Dick Cheney's the vice president, United States, there's no way in hell they're going to touch this case. I don't they don't. It doesn't matter what information you have, what you have to say. What? Nothing. He said. It just doesn't matter. I don't know what to tell you. I just sometimes that's the way it is. And I was just freaking. Wow. Yeah. You know.

Caleb Newquist: Floored. Yeah.

Tony Menendez: And, uh, at that point, I'm like, I can't do anything more about the accounting, but what I can do is fight for my rights as a whistleblower. [01:03:30] Right? Because they violated my rights. And and the Sarbanes-Oxley was supposed to be the promised land. You know, it was supposed to protect people like me for doing my job. And that's all I was doing was doing my job. Yeah, yeah, yeah. And I want to I want to.

Caleb Newquist: I want to ask you about one thing before we get into the, uh, to to the.

Caleb Newquist: Next phase of the case, but, um, you just mentioned it briefly, but at some point. You did record conversations that you had with your boss about, oh, sure. [01:04:00] About the circumstances around your case. Yeah. And I don't think we had mentioned that before, but I mean, just can you talk about that a little bit?

Tony Menendez: Oh, yeah. That was that was not an easy thing to do. And I wasn't at the time of it. I was very nervous and I didn't really, uh, wasn't really something I really wanted to do. Um, but things were, were deadly serious. And I had a very strong suspicion that they were going to commit fraud and cover it up, and I was going to get fired. And and so my wife was like, you know, we need protection. [01:04:30] You can't, you know, they can't, you know, if they fire you tomorrow, they could blame this all on you, you know, and. Right. And, um, and so really, I just did it out of kind of self-preservation, you know, and so I recorded the a few meetings with them and really it was and you hear on there, right there, you know, this is where they're going on about the politics and so forth, but emails and, but but clearly saying you're counting the answer was right. We agree with you. We're going to fix it. Right. So the evidence [01:05:00] that's really what I wanted to have in my back pocket and the. Yeah. And the truth is I had hoped to never disclose the fact that I had those to anyone ever. Like I had hoped. That was just right. Break in case of emergency. Worst case scenario, right? I didn't even tell my attorneys I had them until very, very late in the process. When it was at this point I was so desperate. I said, I even kind of threw it out there to the attorneys. I mean, the SEC, I said, I got recordings of these meetings. Do you want that? And they're like, uh, [01:05:30] no, better not, you know, so I so I ended up, uh, all those documents, everything I had, I used it my, my Sarbanes-Oxley trial. Right. So that was used as evidence, uh, at my trial. Um.

Caleb Newquist: Okay. So so tell us about that trial. Is that the. Is that the whistleblower trial? Yeah. Okay.

Caleb Newquist: And I just want to be sure that's the next thing that happens. Right. So you have this after after that second meeting with the SEC and it's clear that nothing's going to happen. Right.

Caleb Newquist: So then so then that's just gone. That's just done. [01:06:00] The counting.

Tony Menendez: Part's done.

Caleb Newquist: Yeah. So there's no in terms of in terms of legal, you know, legally convicted fraud that never happens. That's just dropped and it's gone. And Halliburton is still bill and holding today likely.

Tony Menendez: Oh yeah. That's my okay suspect completely. Yeah. Gotcha I think so.

Caleb Newquist: Um allegedly we'll say alleged. Do we have to say allegedly? I don't know if we have to say probably.

Tony Menendez: Okay. Let's say allegedly. But I mean, in my mind it's synonymous with, yeah, they freaking committed fraud. Like, I, [01:06:30] uh, but, uh, okay.

Caleb Newquist: So but that's done. So your hopes of an actual, like, fraud investigation is, is gone. But but, um, uh, but but you're pursuing your, your whistleblower rights because like you said before, that's it's it's a, it's a crime to retaliate against a whistleblower. So now you're in court with Dick Cheney and he goes to jail because of this. So I forgot.

Tony Menendez: No no no no no no no no no no. He did not. No one no one went to jail. [01:07:00] And Dick Cheney I never I never met him or anything, but um, but uh, so, so what happened was in the accounting doesn't go away really, because as part of my whistleblower case, I had to part of my to be successful. I had to prove that I, that I reasonably believed I provided materially the company was materially presenting false information. That was a fraud. Right. So I had to that was a big part of my case. So I had to prove in court of law they were committing fraud, or at least my belief was reasonable enough that they were committing fraud, that the courts would believe [01:07:30] it. Right. That was an element in my case. And so I pushed it at, at every, every aspect I could. Um, so we get them in their depositions and it's like, okay, well, what guidance did you use to to say your accounting is okay? Well, you know, we don't can't there's none. Are you aware of any other companies doing it the way you're doing it? No, there's none of that.

Caleb Newquist: And so that was that was Halliburton's people saying yeah.

Tony Menendez: Yes. Yeah. There's there's.

Caleb Newquist: No support.

Tony Menendez: On the record. No support for, [01:08:00] for for what they're doing. Right. It's just um, just the way they're doing it. And uh, and so, you know, all that stuff is there. But at this point, again, the SEC is already they've already said, forget that a long time ago. Right. So this goes on for years. Right. So yeah. So, um, um, so yeah. So it goes on. We have a trial and this is all very important. Uh, we have a trial. We thought we'd just kick their ass. To be honest, I did, like, every [01:08:30] day. I was like, we're kicking their ass. Like, you know, I'm going to win this thing. Yeah. And, uh, my my attorney was always putting on a good case, but you never know what he's saying. He's trying to temper my. Yeah. And, uh, about a year later, after the trial, we get the decision from the judge and loser like it's a just a he dismisses my case and he.

Caleb Newquist: Dismisses.

Tony Menendez: It. He dismisses. It, then you dismisses it in such a way that's just unbelievably damaging [01:09:00] to not just my, my, myself, but in the law itself. Everything that Sarbanes-Oxley was designed to do. Yeah, yeah, yeah. Um, for, for, for example, um, he, he reached the conclusion that, uh. Yeah, sure. You know, there was some retaliation they retaliated against, you know, you had some adverse actions. You were isolated. These things happened to you. I'm not going to deny it. However, the reason they happened to you wasn't because you blew the whistle. It's because you were an agent of the SEC. Oh, [01:09:30] you were an agent of the SEC who was actively investigating them? Think about that. Legally? Factually? Was I an agent of the SEC? Did I work for the SEC? I wish the I wish the SEC was doing an investigation.

Caleb Newquist: They were not. Yeah. In fact.

Tony Menendez: One. And so the judge went to just extreme lengths to try to support Halliburton.

Caleb Newquist: Because basically what he's saying is he's just that that would kick the legs out of out of any whistleblower [01:10:00] protection at all is saying as soon as you as soon as you blow the whistle, then you are now an agent of the company investigating it. So then, so then and so of course, bad things are going to happen. Absolutely. Not as a whistleblower, but as a sec mook, you're gonna get you're gonna get, you know, you're gonna be treated shitty. And it's like, oh, yeah. So that's basically, yeah, take the teeth out of the the entire loft. That was.

Tony Menendez: The case. Absolutely. And but he, he, he says that's not enough. I don't want [01:10:30] to I don't want to do just that amount of damage. I want to do more damage. So what he ended up saying was that, hey, the fact that I because what happened, you know, I blew the whistle and what happened? My email, I sent it to the audit committee, but it was intercepted by Halliburton legal department. And so instead of just sending it to the audit committee, they sent it to, you know, the CFO and investor relations. You just got blown out, right? So they did they did not protect my identity. And as a result of that, because once everybody knows you're the whistleblower, that's how you know, you can't. Thing is, [01:11:00] you can't retaliate against someone if you don't know they're a whistleblower. Like, you know what I'm saying? You can't use.

Caleb Newquist: That. Yeah, of.

Tony Menendez: Course it's really in the company's best interest to not know who did it. But anyhow, uh, so.

Caleb Newquist: This so this judge wanted, wanted to see, like, a knife stuck in your tire through a note that said, we did this because you're a whistleblower. And then he would have been like, okay, now you got retaliated against. You're a whistleblower. And it's not.

Tony Menendez: Meant to be a hard standard to me. Like that's one of the easier elements of a whistleblower case is just. And usually it can be just temporal proximity, [01:11:30] like, hey, I went to the SEC here, you found out about it here. And this happened, you know, this happened like, you know. Yeah. Does it it's not meant to be tough, but he he went he went well beyond that. Uh, and he said well. Um. The that's just not retaliation, he said. It's not retaliation because, you know, in fact, because he said, uh, because Halliburton thought they were doing you a favor. He said that was testimony. My boss, the one who outed [01:12:00] me. Yeah. At the trial, he said that. Well, you know, uh, my attorney had asked me. He said, do you regret doing that? He said, well, I don't know if regrets the thing, but I'm looking back. I probably shouldn't have done it or whatever. And and then Halbert, you know, asked him and he's like, well, I thought I was doing him a favor. He's like, I truly. When I said I thought I was doing him a favor, I thought he'd want to know that this investigation, you know what I'm saying?

Caleb Newquist: You were getting, like, because you'd be getting the credit.

Tony Menendez: Yeah, exactly.

Caleb Newquist: This guy? Yeah. This guy? [01:12:30] Yeah. He's making all our lives miserable. Let's all let's all give him a round of applause and then a parade and a cake. Right.

Caleb Newquist: So now the parade in the cake.

Tony Menendez: Yeah, right. Meanwhile, no one, no one talked to him, and he put people to investigate me, like whether or not I was, did anything or any violated any, you know, whatever. You know.

Caleb Newquist: Of course.

Tony Menendez: Yeah. And in and in fact, he even testified at the trial that, you know, he would fire someone for going the SEC. Think about that. Yes.

Caleb Newquist: So that's he that's [01:13:00] not whistleblower retaliation. Is that retaliation. No.

Tony Menendez: No not at all. Yeah. He said he said yeah. If I would have known I'd fire someone for giving information to the SEC. So yeah. So yeah. So somehow the judge was able to discount all that and go, you know what, I just don't feel like that's retaliation. So not only would, would, uh, company be able to simply, um, you know, uh uh, uh, isolate the whistleblower and retaliate, do these things to them under [01:13:30] the notion that they're an SEC agent or whatever. They're a rat. Right? Right. Or, you know, on top of that, they don't even have to protect the confidentiality of their complaint. Yeah, right. But that's not a requirement really. Presumably, like when Congress went through all that effort to put that in there. They didn't really they didn't really mean it. Right. So. Right.

Caleb Newquist: Yeah. Right. And just kidding.

Caleb Newquist: Just kidding. Guys, you can ignore this law here. Yeah.

Caleb Newquist: And according to the the case that set precedent snitches v stitches. You clearly can't do what you're doing.

Tony Menendez: Yeah. Exactly. Okay, so [01:14:00] so this gets us to the next step here. I mean, I get that ruling and I'm just going through it, like, meticulous, like, this is bullshit. I was angry. Yeah. This is how do you say this? You know, and. Yeah. And I was gearing up like, we're gonna for the appeal, you know, and, uh, and I had a great attorney at the trial. Like, Joe was fantastic. He was, um, just liked out. Right. And, um, so the next Monday, I got my write up, my handout, my markings, everything. I go to meet with him, like, all right, what are we gonna do? Let's [01:14:30] let's get this appeal going. He just screwed up and. Okay. And, uh, and then that's when we had a, you know, he's like, well, let's step back. You know, he said, uh, he's like, he's like, you know, uh, I hate to say it, but it's kind of it's the end of the road. He said. No one, you know, he said, we put on a good case. We put on a good fight. I thought we obviously we should have won. The ruling was bunk. But the fact is, on appeal, there's no way, like he said, because not only are you going to have to, you have to [01:15:00] you have to defeat Halpern kind of in that process, but also the judge. Right? Oh, you're right. Right. So the appeals courts are always going to put a bunch of deference to the judge. And so it's just like, you know, it's just not worth it at this point. And, uh, I was left with nothing left to lose. And I'm like, can I just do this myself? Right? And he's like, well, yeah, if anybody can do it, you can. Yeah. Screw it. You know, I'll, uh, I'll do this myself. And so I, I.

Caleb Newquist: Mean, come on, if Charles Manson can defend himself in court, [01:15:30] then you you can.

Tony Menendez: Yeah. Yeah, exactly. So, so so I just, uh. So I started doing it. I just threw myself into it. I pulled on everything I could, started writing, drafting, you know, and getting prepared to file this appeal. I filed the appeal and had to go back and forth with Halliburton for over a couple of years as this thing played out. You know, I filed my brief, they filed theirs, and go back and forth and this entire process over a few years and, and, uh, uh, and then it was finally. So [01:16:00] if you think about that conversation with Joe was in 2007, and it wasn't until September 2011 that after all my appeal efforts, that's when I got kind of my first victory, right? It wasn't a complete it wasn't a full blown victory. Right. Because the appeals court sided with me. They said, hey, yeah.

Caleb Newquist: So you represented yourself on the appeal. Yeah. And they sided with you. You're the first. Okay. So you're saying you're the first non-crazy person to represent themselves in a court of law? I [01:16:30] wouldn't go that far.

Tony Menendez: I might be crazy, but.

Caleb Newquist: Okay, okay. You're right. Right. In some respects. And then also you and then and you actually you were actually you they sided with you. You you won to but you but with a how did you not win.

Tony Menendez: With a caveat. So what they.

Caleb Newquist: Did was they said, all.

Tony Menendez: Right, well they, they, they, they, they affirmed it, reversed it and remanded it. Okay. So let me explain. So they affirmed it. Right, saying that I did engage in protected activity. That's one element of the case. Right. So okay. [01:17:00] So they say yeah you engage in protected activity. That means you blew the whistle. We agree with that. We agree with the lower court judge. And then they um they reversed the judge on retaliation. They said no reasonable chief accounting officer would think outing the whistleblower be welcomed and so forth, so forth and so forth. And they said, no, obviously this guy was retaliated against. Right.

Caleb Newquist: Good, good.

Tony Menendez: So then he sent it back to the judge because he said, well, since you didn't find that he was retaliated against. Right. And we do [01:17:30] now, you you have to rule on whether or not Halliburton can defend itself from that retaliation. Like, can Halliburton put up an argument? Can they make a defense that what they did to you wasn't retaliation, right? So had to go back to him. And then on top of that, the court said, well, um. And while you're there, if you rule that they did retaliate, you had to find a damage award for Menendez, right? Because he didn't do that in the first time. So that's how it went back. Okay. And uh, so it goes back to the lower court again. And of [01:18:00] course, he's going to just see the writing on the wall and rule my favor. Right.

Caleb Newquist: Okay. Yeah. Yeah. No no oh no no no, I was playing.

Tony Menendez: The role of you there for a moment.

Caleb Newquist: Oh, yeah. My line. You took my line. The page out of Craig's.

Caleb Newquist: Book right there.

Caleb Newquist: Okay.

Tony Menendez: Um, so, no, of course he didn't. Of course.

Caleb Newquist: He. Well played, Mr. Menendez. Well played.

Tony Menendez: Of course he took the opportunity to to stretch everything in Halliburton's favor. And he said, well, you know what? Um, Halliburton. Yeah, they had [01:18:30] a legitimate defense, right? He said they proved by clear and convincing evidence that they had a legitimate business reason for outing Mr. Menendez and everything that followed. And what was that? What did he hang his defense of his argument on? Well, one that again, that that according to the my boss, he didn't mean to hurt me like he was trying to help me. And then two, they had to tell everybody it was me because how how else could they ensure that everyone is going to obtain their documents? Right. [01:19:00] So they were telling the organization, hey, the SEC is doing an investigation. You got to retain all your documents. And so their argument was, well, if they didn't know that I blew the whistle, that I was the person that blew the whistle, they wouldn't retain all their documents. Think about how asinine that is.

Caleb Newquist: That's very asinine. Don't you think that just just.

Tony Menendez: The SEC inquiry alone and the SEC don't you don't need to know. Yeah. The whistleblower. Yeah. Right. Yeah.

Caleb Newquist: No, that's so, so because they're like, we'll keep all of our documents. But I don't know if this stuff from Menendez's [01:19:30] stuff I need to keep. No, no, no. When they say keep all of your documents, I mean, that's a weird or.

Tony Menendez: Wait a minute, I'm not keeping my documents. I didn't even tell me who the whistleblowers. Maybe if they told me who blew the whistle, I'd keep my documents. Right? Right. So I need to know who it is before I start keeping documents.

Caleb Newquist: All bullshit.

Tony Menendez: Yeah. Total bullshit. And so. And I think at this point, the lower court judge, you realized this isn't going to survive on appeal, right? So then he did something extraordinary. He said, well. So that's my one ruling, is that Halbert [01:20:00] had a legitimate defense and I dismiss his case again. But in the alternative, like to save everybody time, I'll go ahead and entertain the idea that he was retaliated against. Right. Just because if you guys don't agree with me, I come back here again. So in the alternative, yeah, I'll entertain that. He was retaliated against and then so then the next thing he had to do was find damages. How much was he going to. Award me for the suffering, pain and suffering or whatever, right? Yeah. Yeah, yeah. And, uh, and he said, I want to award the guy $1,000 [01:20:30] and, uh, Christ. And then he made his reason for that, and, and, uh, and and he said, well, the reason I think $1,000 is because that's all he asked for, right? So I'll get back to that. He said he only asked for 1000, so that must be the only damages. The guy has $1,000.

Caleb Newquist: Okay.

Tony Menendez: But assuming that the court was probably going to overrule him again, he said, but if you don't like the $1,000, I'd give him a 30,000. Right? Okay, so choose your own adventure appeals court. [01:21:00] Like what do you want to do? Right? Okay. So it goes back to them. So okay this is important because uh, so it goes back to the appeals court. Appeals court once again dismisses him and finds in my favor and says, now it's now we're done here. It was retaliation. And they said, give him $30,000, okay. Right. And, uh.

Caleb Newquist: Which which feels like chump change even there. I mean, a thousand bucks very much feels like chump change. That feels like a that feels offensive. Yeah. $30,000. Only feel doesn't [01:21:30] feel offensive when you compare it to $1,000.

Tony Menendez: That's right.

Tony Menendez: But this is important because, uh, um, why was it $1,000? And because that's all I asked for. Because throughout this whole thing, Halbert would use anything against me, right? So if I was to say, oh, I want a bunch of money, they would just say, look, he's a he's a greedy son of a bitch. He just wants he's just doing this for the money and, uh, so forth and so on, and and so I wanted to just nip that in the bud. I mean, yeah, I could use the money or whatever. I didn't have a [01:22:00] bunch of money, but, uh, but I didn't want it to be about money. And, um, and so that's why I only asked for a thousand and, uh, so anyhow. So we think it's over, right? Think I won? Yeah.

Caleb Newquist: And it is. Right. And then you take your $30,000 and you pay half of it to your attorney because it's on contingency, then you have to pay taxes on the other fifth. So you're left with $10,000. What do you what do you do, uh, get cheese on your Whopper. I don't know what what somebody does with 10,000 bucks.

Tony Menendez: Yeah, no, I couldn't do anything with it [01:22:30] yet. Uh, because, uh, they appealed to the Fifth Circuit Court of Appeals.

Caleb Newquist: Okay.

Tony Menendez: You know, Albert and Albert did. Yeah.

Caleb Newquist: They over 30,000 bucks, I guess.

Tony Menendez: 30,000 bucks. Yeah. And, uh. And I can only imagine how much money they had to spend on on. Oh, jeez, ten years. They had some of the probably most expensive attorneys in this area of the law that they could buy, but but anyhow, um, so we, uh, so they appeal. [01:23:00] And of course, a Fifth Circuit is notoriously conservative. Right. Very business friendly. And so. Okay. Um, but we still felt confident because we had a, we seemed like a rock solid case, like it's, you know, you can see it. And, uh, so eventually, a few years later, I guess, you know, now we're into 2000, late 2014, right? Because if you think about time, this all started in early 2005, February 2005. Now we're in 2014. And the Fifth Circuit Court of Appeals rules in my favor. And [01:23:30] they say, yeah, we we, uh, yeah, he was retaliated against and and they kind of at that point, they kind of it was codified as law like. So it did set precedent, uh, from there. Good. Um, and it has and because of all that it did, has had a positive effect on the law in a couple of key respects. Um, uh, one of them has effectively lowered the bar on what's retaliation. Right. Because before before my case, retaliation was had to be very specific. You know, they had to fire [01:24:00] you, demote you like some very tangible thing, right? Yeah.

Tony Menendez: Not give you the job or something like that. So any of these other things that they could really the myriad of unlimited amount of things they could do to someone to, you know, uh, in retaliation didn't cover. So but it did so changed that. And then the other thing it changed was it, it, it provided for non compensatory damages, which was a contention that everyone always thought, oh, the only money you can get is get your job back. Or if you were fired you know. So it [01:24:30] has to be kind of along the same lines. Yeah. Right. And so that's why um, so all that was kind of uh, changed from, from my case. And, and that's one of the things I'm most proud of. Um, yeah, I should, uh, I can't I'd be remiss if I didn't tell you, uh, what my chances were to actually prevailing. Because when Sarbanes-Oxley was first introduced, I had said how legal scholars and academics and news media and everybody praised [01:25:00] it as the promised land. Right? This will help prevent another Enron and catastrophe and whistleblowers. Life's going to get a lot easier and so forth. Um, let me give you some statistics. Because the law was passed in 2002 and by December 3rd, 2011. There were 1237 employees who filed whistleblower cases. 1237 who.

Caleb Newquist: Filed cases?

Tony Menendez: Of those, yeah. That filed Sarbanes-Oxley [01:25:30] cases. Guess out of that number. How many of one?

Caleb Newquist: One. And it was you. We got you on our podcast. Hell yeah.

Tony Menendez: It was 23. But think about.

Caleb Newquist: Still pretty pretty close. There's only 22 other Holy crap. That's ridiculous.

Tony Menendez: Isn't it? It's just yeah, absolutely. Absolutely sad.

Caleb Newquist: Um, yeah. Like what? What is that? I mean, I'm no accountant, but that's like less than 1.5%.

Tony Menendez: It's pretty small.

Caleb Newquist: Yeah. Yeah, less than 2%.

Tony Menendez: Yeah. So I think what we were what what what what we were [01:26:00] seeing was just a rampant kind of almost disregard for what Sox was trying to achieve. Yeah. Um, you know, and so and the funny thing is or not, that was not funny, I guess. Just stop saying that. But, um, the law was well written, right? The law never. No one rewrote the law between the time it started and the time I won. It's just you had different people interpreting and adjudicating the cases, right? So you had an administration and a series of judges that, I [01:26:30] mean, really just probably would easily side with, uh, you know, business over employees. And there's just no way someone could tell me that 23 out of, you know, 1300 people are just nut jobs, right? Right. I mean, yeah, it's probably a it's a little higher than that. Yeah. So not Tony Jobs in that.

Caleb Newquist: So in the aftermath of all this. So I mean you landed on your feet. It took a long time. Yeah. But you landed on your feet. Right. You ended up [01:27:00] you ended up a General Motors for a while. Yeah. Like when when did that happen? And can you just kind of briefly kind of talk about how you I don't know. Yeah. The aftermath of all, can you just talk about that a little bit.

Tony Menendez: Yeah. So, um, um, so when I, so when I resigned from, from Halliburton, I didn't know what I was going to do, right? I didn't I didn't have any luck getting a regular job. Um, you know, I applied in the whistleblower thing would almost always come up and and finally I said, I gotta I [01:27:30] gotta retool here. I gotta find out. I have this skill set, I have talents, I have experience, you know, and and so I search around and I saw on the, uh, ACF Search Association Certified Fraud Examiner. So let me give this stuff a try, you know, and, uh, I sat, took that exam, passed it, and then I looked for opportunities and, and I unfortunately, I landed some, some really good ones. I became a forensic litigation expert. I worked with some nice, really good law firms out of the here in the Southern California that would handle, [01:28:00] uh, shareholder, uh, class action and derivative cases involving accounting fraud and accounting malpractice, um, and our securities violations. And, and I just love the work. And on top of that, I was doing, uh, a lot of, uh, I, I would travel the globe teaching us GAAP and SEC reporting and stuff like that. So there was a couple of years I was really thriving.

Tony Menendez: Like it was a really I mean, in terms of, uh, I seem to be getting past some of the stuff, but in the background, my case always [01:28:30] lingered. But then we had the the Great Recession in 2008, which really kind of upended everything. Like all of a sudden, uh, uh, everything changed like, um, so all the, all my for the next entire year out, all my, uh, training opportunities were just canceled, right? Companies were cutting back, saying, you know, you gotta cut back on costs. And the law firms I was doing the work force started cutting back, too, because, I mean, again, we didn't. No one knew. Were we ever coming out of this? We're just going to get worse, right? So right. And [01:29:00] all of a sudden I found myself with very little. To do little opportunity or our savings was dwindling. And, uh, and I'm like, shit, I got to get a I get a real job. And, uh, but who was hiring during the Great Recession? Right. And, uh, and there was one company that was was hiring by the name of General Motors. Right. So this was in 2009. And and so, uh, I applied and got an interview and, [01:29:30] uh. So you have to understand, uh, this is the one company in the country whose future was probably as uncertain as mine, right, right.

Tony Menendez: They had just filed bankruptcy. Yeah. Their future was, you know, the whole idea was, are they going to come out of this? What was going to happen? And and so they were really ramping up, hiring people to kind of help try to make it out of that, you know, recreate, uh, reconstitute themselves or whatever, you know, get out of bankruptcy, file an IPO. And, uh, and so, of course, we lived in Texas, and, [01:30:00] uh, this would require a move to Michigan. And so when I, I went to my interview at the chief accounting officer there. And, uh, you know, because any time I interviewed before, as soon as I brought up Halliburton, the door was shut, like, so I was like, I'm not. We got to be up front here. Uh, yeah. You know who you're interviewing and what I've been through, and, and I shared my experience with, with Nick Cyprus, and he. And he just ate it up like he's like that. That's that's commendable. That's, you know, that's [01:30:30] that's good stuff. And he's like, that's the kind of that's the kind of person I need around here, you know, for what we're doing. And, and he, you know, hired me and, uh. Yeah.

Caleb Newquist: And because he wanted to make sure that that General Motors was using correct accounting principles. And then when you showed him that they weren't, then he said, hey, screw you, sit in your office. That's not what we hired you for. We just want you to be a pretty face and make it look like we care about this. Uh, and and that's the value that you bring to organizations.

Tony Menendez: Typically, typically.

Tony Menendez: But this was, uh, this [01:31:00] was a little different because, uh, you know, they had gone into bankruptcy. We were coming out fresh. Okay. So it was a fresh start, right? There was like, okay, there were no skeletons in the closet here, right? It was like, let's get new policies, let's file an IPO. Let's, uh, it was a very, very, very forward looking. Right. So he didn't. Okay. He had every, every, every interest from his perspective had to be let's just make sure everything is right. It can be like, I want, you know, I want this to be totally above reproach. So I happen to be the really good for that at that time and good. And, uh, so anyhow, [01:31:30] I took the job and, uh, it was, it was a great experience and, uh. And I guess I stayed there. And then finally, like in late 2015 or sometime in 2015 when the story broke, um, about my winning my case and stuff, the ProPublica article. And, uh, then everything kind of changed. All of a sudden I started getting all these opportunities to speak at universities and nice and, um, um, you know, organizations and, you know, and going around to speak at [01:32:00] these universities, it just so it was very rewarding, like, so one place I came to, I came out here to LMU, uh, it was one of the first places I went to, like, they invited me out here as part of this distinguished speaker series.

Tony Menendez: And, um, I came out here, I was like, wow, this is Shangri-La. This is beautiful. And as I shared my experience, you know, at various settings or whatever, the students just ate it up. And I was like, this is great. Like this. Could this be a job? Like people? This is a job for people. Like, this is where you go to work every day. And and [01:32:30] so it just got me thinking, you know, I want to do this. And in the back of my mind, I kind of always wanted to be a professor. I'm not gonna I'm not gonna lie. I always thought that would be really cool, but I didn't know it was ever possible. Yeah. Make your mom, I said. All right, I'm leaving General Motors. I just said, all right, I'm done here. I left General Motors. I went back and got, uh, graduate school, got my graduate degree. I ran over here to LMU. I asked Larry, CalPERS, uh, if you'd be a reference for me. And he said more than that, would you want to come here? And I was like, oh, absolutely. [01:33:00] Like I, you know, that'd be too perfect. And so here I am now. So now I'm, uh, I'm a professor. I share my experience with the students here, and I still speak various places or whatever to other schools and stuff, and it's just a it's the best job I've ever had. Like, it's very rewarding. Uh, awesome.

Caleb Newquist: Awesome. And your and your big message is, uh, if you are looking for the hardest way to earn $30,000, follow in my footsteps. Uh, and that's that's really the the message. Um, [01:33:30] we want to. Tony, thank you so much. Uh, for for coming for being on the podcast, for sharing this this, like, um, this amazing story and not just an amazing story, but one that really goes a different direction from this because usually we we we usually do cases of frauds that get, uh, like where people get convicted and go to jail and stuff. So this is such a different look at it. And also from the insider's look. So thank you so much for giving us and giving our listeners that perspective. We appreciate [01:34:00] it a ton. If somebody wants to reach out to you, uh, where's where's a good place for them to to find you LinkedIn.

Tony Menendez: Um, I'm on LinkedIn. That's probably the best way. Yeah, not the most active LinkedIn person, but it is very accessible.

Caleb Newquist: But no, like I'm asking what's your physical address? Because there's some Halliburton goons that I think are actually. Oh, yeah. Uh, what?

Tony Menendez: Uh, yeah.

Caleb Newquist: It's it's 14. Okay. I'll just say it's 14, 18 West Western Street. It's a weird address. [01:34:30] Uh, in in Los Angeles, you can find the zip code online. Um. Thank you. Thanks again, man, for coming. We appreciate it. Thank you so, so much. All right.

Caleb Newquist: Thanks, Tony.

Tony Menendez: Take care. Bye bye.

Caleb Newquist: Well, that's it for this episode. And remember, accountants can't prevent forest fires. But we can record the depletion of timberlands according to generally accepted accounting principles.

Caleb Newquist: And also, remember, accelerating revenue recognition isn't even close [01:35:00] to the worst thing that Halliburton has done.

Caleb Newquist: And, uh, just as a, as a, uh, just to remind the listeners, uh, if you but please keep your eye out for Tony's book that's going to be dropping sometime in the future called a Pyrrhic victory. So, uh, keep your eyes out for that. And, uh, you know, help, help. He didn't he didn't get much money, uh, from the courts for blowing the whistle. Maybe he'll make a couple bucks off his book deal. If you want to drop us a line, send us an email at. Oh, my [01:35:30] fraud at earmark. Cpcomm and, Caleb, where can people find you out there on the internet?

Caleb Newquist: You can find me on LinkedIn. Backslash. Not a backslash. It's a slash. Slash. It's a slash of some kind. Yeah. Caleb Newquist there's some slash. There's some slash purists out there. I know you're listening, Greg. You also are on the LinkedIn, are you not?

Caleb Newquist: I am, yeah. Uh, look, for me, I'm the the bald guy with the beard and glasses, uh, named Greg Kyte, CPA.

Caleb Newquist: Oh, my fraud is written by Greg Kyte [01:36:00] and myself. Our producer is Zach Franc. Rate review and subscribe to the show wherever you listen to podcasts. If you listen on your mark, get some free CPE. If you listen to CPE, you bet! Join us next time for more average swindlers and scams from stories that will make you say.

Caleb Newquist: Oh my fraud!