Sunday 24 February 2019

Secrets and lies

Non-disclosure agreements have become a tool to control victims of abuse. How did gagging orders become a weapon of choice for the rich and powerful?

By Paul Caruana Galizia

The global MeToo movement was never really about sex. It was always about power – first to coerce, and then to silence.

Sitting in front of a bland mural with the words “equal rights” and “freedom of speech” written across it, a cross-party committee of British MPs met on March 28, 2018 to hear evidence on sexual harassment in the workplace. They called Mark Mansell, a partner at magic-circle law firm Allen & Overy, who drew up a contract that suppressed allegations of sexual harassment and attempted rape by his client Harvey Weinstein.

The allegations were made by Zelda Perkins, Weinstein’s assistant at Miramax from 1995 to 1998. She and Mansell both testified to the committee, but its most revealing work that day was its scrutiny of an area of law that made a market out of darkness: non-disclosure agreements (NDAs), employment contracts and settlement agreements that contain confidentiality provisions.

The MPs were, unusually, unanimous in their focus on what really mattered. This was not about Weinstein or Perkins. It was not even really about sexual harassment in the workplace. It was about the conflict between private contracts and the public interest, and the inequality of arms between the silencers and silenced.

Maria Miller MP, the committee chair, asked Mansell: “[Do] you regret having drawn up that document in that way?”

Almost two decades before events began to catch up with Weinstein, a week of high-intensity, closed-door legal negotiations played out between Mansell, acting for Weinstein and Miramax, and solicitors from Simons, Muirhead & Burton, acting for Perkins and another alleged victim who remains silent.

In one session, Perkins, who was 24 when the non-disclosure agreement was drawn up, told the committee: “We did a morning session, then went back at 5 o’clock in the afternoon and were kept there until 5 o’clock the following morning.” Weinstein was present in the room with his alleged victims on the day the agreement was signed.

The negotiations should not have happened at all; the case should have been investigated by the police. “If someone is assaulted then the crime is against the Crown not the individual,” Michael Burdis, a former Detective Chief Superintendent in the South Yorkshire Police, explains. “It isn’t the individual who makes the decision about the crime.”

Getty Images

Zelda Perkins attends the Women and Hollywood 10th Anniversary Awards at The May Fair Hotel in 2017.

The outcome of the negotiations was a settlement of £250,000 – around £420,000 in today’s money – in which Weinstein committed to undergoing therapy and Miramax committed to implementing a proper human resources complaints procedure. Weinstein’s lawyers turned down a request to give the money to a rape charity: “too much of a smoking gun”, Perkins tells me.

In exchange for the settlement, Perkins and the silent victim committed never to speak about the allegations; nor to make any disclosure even to a doctor or lawyer unless they too signed an NDA. Furthermore, Perkins says, “I wasn’t allowed to talk to anyone about the negotiation” itself. “Once we got through the whole process, I called my lawyer and asked, how am I meant to keep to the conditions?”

Perkins’ lawyer was reluctant to send her the NDA that she signed, as he could have been considered in breach of the agreement by sharing it. Perkins was not allowed any paperwork pertaining to the existence of the agreement. What we know about the NDA comes from a fragment that that Perkins submitted as evidence to the committee, 20 years after signing it. That fragment should worry us.

Written in “macho and posturing language”, in the words of one senior lawyer, there are provisions that seek to control Perkins’ behaviour indefinitely. One demands that she gives 48 hours’ notice to Mansell “before making any disclosure” if “any criminal legal process” transpires against Weinstein in relation to the incident and that she “will use all reasonable endeavours to limit the scope of the disclosure as far as possible” and agree to give “reasonable assistance” to Miramax “if it elects to contest such process”.

Silenced for 20 years, Perkins first broke her NDA in an interview with the Financial Times in October 2017 after seeing Weinstein lose his job at Miramax, the company he co-founded with his brother Bob in 1979, and after seeing dozens more women allege that Weinstein had harassed and assaulted them.

Weinstein’s lawyer, Paul Tweed, one of the world’s leading media lawyers, wrote to the Financial Times saying his client “categorically denies engaging in any non-consensual conduct or alleged threatening behavior and will seek the protection of the U.K. or Irish Courts if [the paper proceeds] with the broadcast of these allegations”. To date no court action has been taken.

In one sense, the tables turned that day in Parliament when the Women and Equalities Committee met. It was Mansell, brought out into the light, who was under scrutiny. Perkins sat behind him while he testified. “His neck was going redder, and redder, and redder,” she told me.

Allen & Overy’s global head of communications declined requests for comment sent to Mansell.

“I kind of felt sorry for him. The leading partner on my case didn’t turn up,” Perkins said about Razi Mireskandari of Simons, Muirhead & Burton. The firm sent a solicitor who joined it eight years after Perkins’ NDA was negotiated.

Simons, Muirhead & Burton advised Perkins, she told the committee, that she would be unwise to pursue this case through the courts due to “the disparity of power and wealth between Mr Weinstein and his company” and the women he had assaulted.

Perkins described her NDA as “basically illegal, immoral, and unethical” and she knows the problem is bigger than her case alone. “NDAs are a massive socio-cultural problem. There should be no system that protects poor behaviour.”

So why is that the system we have?

It’s odd that the party that appears to have more bargaining power – the person with the public interest claim, the victim, the witness – should emerge from negotiations with a deal that is inferior to the other party’s – a man, in this case, facing allegations that fit a historical pattern of behaviour. Stranger still is that even after signing the NDA neither Perkins nor her then colleague was informed by any lawyer that it was unenforceable because its purpose was to cover up an alleged illegal act and thus to obstruct justice.

If an NDA could do this, and if they really are a “massive socio-cultural problem” as Perkins says, then you have to wonder what else NDAs have been covering up.

This report is the first in our series on the use and abuse of non-disclosure agreements. We will next report on the scale of NDAs, how widely they are used across the public and private sectors, and then the legal ethics surrounding NDAs.

A system that protects poor behaviour

The worrying NDAs – like Perkins’ – are unenforceable because the activities they try to cover up are illegal and the conditions they impose are impossible to monitor, some lawyers say.

They are not just unenforceable but also “very, very extreme”, as Gareth Brahams, of the Lawyers’ Association, described Perkins’ NDA to the Women and Equalities Committee. According to him, Weinstein “was undoubtedly guilty” but using the case as a basis for reforming NDAs would lead to “very severe unintended consequences”. People only raise complaints if they believe a settlement is on offer, and a settlement is on offer only in exchange for an NDA, Brahams argued. In other words, there would be no complaints in the first place if NDAs did not exist.

Richard Moorhead, professor of law and professional ethics at University College London, thinks people exaggerate the extent to which it’s necessary to have an NDA as part of a settlement agreement. “If we were to abolish NDAs in employment cases there would still be very large numbers of settlements,” he says. Why? Because both parties “want to keep it quiet anyway”.

Either way, people’s understanding of the law around NDAs is generally poor. They are unaware of what NDAs can and should not do and, even if they know their NDAs are unenforceable, most keep quiet out of fear of reprisals. Powerful people with access to lawyers have learned that they can rely on this poor understanding of the law to routinely silence wrongdoing, “brushing issues under the carpet, corrupting the justice system, corporate culture, and public safety”, as Moorhead puts it.

A market for silence

A standard defence of the NDA is that it is still important where it originated: commercial law. Firms used NDAs to protect trade secrets from leaking out as far back as the 1950s. Most companies still use them in this way and you can see why. Their competitive advantage is intellectual property, making leaky employees or partners a business risk.

But how did the NDA mutate from a standard commercial agreement to a catch-all term for confidentiality agreements or provisions that suppress speech, wrongdoing and crime?

In the UK, the NDA started its migration from commercial to employment law from the 1980s onwards, becoming much more aggressive in its scope and much more popular in the mid-1990s.

The promise of European Union membership saw the UK move towards stronger labour rights through the 1960s, when protections like notice periods (1963) and severance pay (1965) became requirements in all contracts of employment. Still not enough, said Charles de Gaulle, who vetoed the UK’s second EU membership application in 1967 partly on the grounds that “working practices… made Britain incompatible with Europe”.

Then came the 1970 Equal Pay Act, which prohibited inequality between men and women in pay and working conditions in the run-up to EU accession in 1973. “The Act was considered so radical that industry was given five years to adapt,” Max Winthrop, chair of the Law Society’s Employment Law Committee, said. The Act was bolstered with the 1975 Sex Discrimination Act.

In prohibiting workplace discrimination, the two acts opened new areas of liability for employers. Employees could now sue their companies for discrimination. Employers reacted by using NDAs to make that liability harder to prove; to keep people silent about incidents which might show a pattern of wrongdoing and to keep them away from court. The EU’s Equal Treatment Directive arrived a year later, consolidating men’s and women’s equal treatment in employment.

Getty Images

Swedish MEP Linnéa Engström during a debate about combating sexual harassment and abuse in the EU at the European Parliament in Strasbourg.

But things really took off when Helen Marshall, a senior dietitian who worked for the Southampton Health Authority for 14 years, was fired in 1980 at the age of 62 on the grounds of being too old to do her job.

In 1986, Marshall claimed compensation under the Sex Discrimination Act, which capped awards at £6,250. An industrial tribunal found the award to be inadequate under the EU Equal Treatment Directive and calculated that Marshall’s loss was in fact £18,405. The government appealed to the House of Lords, at the time the UK’s final appeal court, arguing that the national cap should take precedence over the directive. The Lords referred the case to the European Court of Justice, which in 1993 ruled against the fixing of an upper limit on awards.

And so, from that point on, compensation claims in cases of discriminatory dismissal could reach far, far beyond five figures.

It was after Marshall’s case that employment rights started being taken more seriously, says Winthrop. “And so people entered into agreements to avoid litigation and potentially massive claims.” Better to pay an out-of-court settlement than the costs of litigation and a potentially larger claim. The times were also changing. “Businesses [were] becoming more aware of these issues” and feeling they needed to present a new kind of “corporate image to customers and shareholders”.

From the mid-1990s, Marshall says, “NDAs became much more robust, as the need to cover up became much more acute”. The groundwork was laid for the infamous 1998 Zelda Perkins-Harvey Weinstein NDA and its associated settlement.

But before Perkins came the tobacco-whistleblower Jeffrey Wigand in the US, where the NDA has a similar history. According to Steve Kohn, a lawyer and head of the National Whistleblower Center, the NDA became a tool to suppress evidence of wrongdoing with the rise of Title VII, a section of the 1964 Civil Rights Act.

Title VII prohibits workplace discrimination. Like the UK’s equal pay legislation it allowed employees to sue their companies for discrimination, opening up employers to liability.

As in the UK, employers turned to NDAs to silence complainants and witnesses, and things quickly snowballed. The result was what Kohn calls “overly broad” NDAs framed to make whistleblowing a violation of the NDA. And despite stronger whistleblowing protections in the US than the UK, “nobody wants to get sued by a large company, so you won’t blow the whistle. They accomplish their goal of hiding corruption.”

But back to Wigand.

“I just want to make one thing clear, OK? I am not like Stormy Daniels, OK? That’s a different kind of secrecy agreement; a clear and simple trade, OK?”

Talking to me on a carphone from New York, Wigand is of course referring to the NDA between adult film star Stormy Daniels and President Donald Trump. Michael Cohen, Trump’s lawyer, paid Daniels $130,000 in October 2016, a month before the presidential election, to block her from talking about an affair she allegedly had with Trump in 2006.

Wigand, who has a PhD in biochemistry, was vice-president of research and development at American tobacco company Brown & Williamson between 1989 and 1993. After 20 years working in healthcare he was drawn to Brown & Williamson with the promise that he’d be working on safer cigarettes, he says.

Upon joining, Wigand signed what he called “the traditional corporate agreement. You agree to not divulge trade secrets, proprietary technology.” The NDA Wigand signed was tied to his severance package and his healthcare, which helped cover his daughter’s chronic illness.

The promise of working on safer cigarettes evaporated within months of joining, when Wigand was asked to toe the company line: nicotine is not addictive and there is no scientific evidence to support the link between smoking and illness. As a scientist, he knew this to be untrue, but he was uneasy about breaking his NDA given it would mean losing his healthcare and severance.

One night his daughter asked him “Dad, how come your job kills people?” and it was this moment, Wigand claims, that pushed him the over edge. “I was being a participant in an egregious, amoral activity. Targeting children. Addicting children. For money.

Wigand began looking for another job. Brown & Williamson heard that he had discussed his salary expectations with another company, technically a violation of his NDA which opened him up to a lawsuit from his employer. But they were interested in Wigand’s silence not his money, so they used this technical violation to pressure him into signing a new NDA.

“The second NDA that I was coerced to sign without any consideration was to protect the company against what I call lawyer-crime fraud,” Wigand says, referring  to what he thinks is collusion between lawyers and their clients in covering up fraud. Coercion wasn’t just the threat of a lawsuit, but leverage, he says; “withholding my severance package and health benefits for my critically ill daughter”. Wigand signed, blocking his ability to talk about tobacco at all and compelling him to inform Brown & Williamson about people who asked him about tobacco and how he planned to reply to them.

Wigand began breaking his NDA in private, speaking to politicians, the Food and Drug Administration, and the Department of Justice, working his way up to speaking out publicly.

No secrecy agreement can prevent me disclosing to the public issues that are germane to public health and safety,” Wigand said.

Three years later, his story had been turned into the film, The Insider, which was nominated for seven Academy Awards. Jeffrey Wigand was played by Russell Crowe.

NDAs in the room

We tend to think that Wigand and Perkins’ cases are unusually high-profile incidents. But their cases are more than just passing insights into the extreme abuse of NDAs. They reveal how NDAs perpetuate issues – serial abuse against women and public health threats – that are of public interest.

Steven Kohn represents Howard Wilkinson, the whistleblower who exposed the largest money laundering case ever, involving $228.5bn of suspicious transfers over a number of years at Danske Bank. We learnt that Wilkinson was subject to an NDA when he was called to testify to the European and Danish parliaments but was prevented from doing so by his NDA.

Enough pressure was brought to bear on the bank for it to lift Wilkinson’s NDA, but shortly before this happened Kohn said, carefully, that “regarding an NDA, presuming Mr Wilkinson has one, without confirming it, he’s not allowed to talk about it”.

He then moved on to a general point: “NDAs silence you about being silenced so they allow major infractions to go on for several years.”

“Are so many people scared to expose wrongdoing or are they being threatened?”

Once you start looking, you find Kohn might be right: NDAs are at the heart of serious scandals.

Getty images

Horizontal natural gas drilling fracking started in Pennsylvania several years ago.

The Hallowich family

The Hallowich family – Chris, Stephanie and their two young children – lived on a farm in Mount Pleasant, Pennsylvania. The farm was adjacent to an industrial shale gas operation, which they claimed contaminated their water supply and made them ill.

“It’s ruined our lives,” Chris Hallowich told the National Geographic in October, 2010.

A few months earlier, the Hallowiches sued operators and the Pennsylvania Department of Environmental Protection for compensation for “health and environmental impacts” from “natural gas development operations”.

The filings show that they found a carcinogenic chemical – acrylonite – in their water supply, and called for the defendants to provide “a comprehensive listing of all chemicals used… in its fracking process” in addition to “[a]ny and all complaints of water or air contamination” in the vicinity and “[a]ny and all reports or investigations of equipments malfunctions or spills”.

The trial was held in August 2011, but by August 23, unbeknown to anyone outside the closed courtroom, the parties met for one last time to hammer out a settlement agreement in court.

The Hallowiches received $750,000 from the sale of their land – originally bought for $20,000 no more than five years earlier – in exchange for abstaining, along with their two minor children, a seven-year old daughter and 10-year old son, from ever again speaking about fracking in general and in the Marcellus Shale, a deposit that stretches across eastern North America.

People were left wondering what happened in that courtroom on August 23.

Two local newspapers – the Pittsburgh Post-Gazette and the Observer-Reporter – filed a petition to unseal the records on September 13, 2011, but it wasn’t until March 2013 that the presiding judge ordered that the settlement agreement and court transcripts be released.

Stephanie Hallowich at one point says in the transcript: “We have agreed to this because we needed to get the children out of there for their health and safety.” She then asks her lawyer whether it’s possible that minors are also be subjected to the gag order as part of the settlement. “How – I guess that concerns me that we need to keep them safe, but –”

The judge then intervenes, asking the family’s lawyer to address the trailing question. The lawyer: “I, frankly, Your Honor, as an attorney, to be honest with you, I don’t know if that’s possible that you can give up the First Amendments rights of a child.”

The First Amendment to the United States Constitution guarantees freedom of speech.

Getty Images

Products from Dow Coming’s silicone gel breast implants, Ford and GM’s pickup truck fuel tanks, Upjohn’s sleeping pill Halcion, Pfizer’s Bjork-Shiley heart valves, and McNeil Pharmaceutical’s painkiller Zomax are all alleged to have had their defects hidden by NDAs.

The UK gambling giant Ladbrokes recently paid off the victims of a gambling addict who stole from them, using an NDA to stop the case being reported to regulators. Relying on anonymous sources who feared speaking up due to their confidentiality agreements, The New York Times reported that Kremlin disinformation on Facebook was covered up by the company’s management. In a number of the 300 or so sexual abuse lawsuits brought against the Catholic Church up to 2003, when sexual abuse was reported with increasing frequency, NDAs were used to silence victims.

“Widespread and totally destructive” is how Kohn described NDAs, but beyond major cases it’s difficult to establish how many NDAs are actually out there or how routinely they’re used.

Reforming NDAs

Legislative change has been slow, perhaps because the size of the problem is hard to measure. But a number of cases have triggered a legislative response.

In the US about 20 states have now passed sunshine-in-litigation statues – as in, letting in sunshine, the best disinfectant – that prevent courts enforcing NDAs relevant to public health or safety. A further four states – Washington, Texas, Arkansas, and Louisiana – have laws limiting confidentiality settlements, but their impact is being weakened by a failure to enforce them fully in the courts.

A wider legislative push has so far failed. A Federal Sunshine in Litigation Act was proposed in 2009, 2011, 2014, and 2015, but never passed. In February 2017, it was again put before Congress.

When the Act was first proposed in 2009, the American Bar Association opposed it, arguing that existing US laws already provide protection for disclosures in cases of public health and safety. Steven Kohn agrees that US whistleblower laws are stronger than European protections, saying of NDAs that “in the US, they’ve essentially been banned” and that sanctions are imposed on firms that use them improperly.

Meanwhile, in the UK, protections for people who make public interest disclosures remain less clear. NDAs are regulated by statute in two ways. First, according to the 1996 Employment Rights Act, NDAs are only valid and enforceable if an employee has received independent legal advice before signing.

Second, according to the 1998 Public Interest Disclosure Act, an NDA can’t stop someone who’s signed, even though they’ve settled, from making a protected disclosure. A worker making such a disclosure is protected from dismissal and victimisation provided the disclosure when it meets certain conditions under the Act – for instance by exposing criminal offences, public safety issues, or the concealment of either.

Perkins’ NDA – dated October 23, 1998 – was signed shortly after the Public Interest Disclosure Act received Royal assent but months before it came into force on July 2, 1999.

The Act allows employees to both reach a settlement with their employer and still make a protected disclosure. There is now no NDA that, even as part of such a settlement, can stop them from making disclosures in the public interest. So what’s the issue?

In large part, it’s about language and framing. NDAs will often contain robust, posturing provisions and threatening language. Georgina Halford-Hall, who runs the charity Whistleblowers UK, says that in the NDAs she’s seen the “language and provisions are what can only be described as obscene”.

They often suggest, Halford-Hall says, that disclosures should be passed on to the offending organisation first and then limited even as part of legal processes. Their reference to the Public Interest Disclosure Act is usually brief, and the Act is itself comparatively weak and seemingly contradictory to the NDAs’ confidentiality provisions.

Andrew Pepper-Parsons, head of policy at whistleblower charity Protect, says that government needs to “punch up the wording of the Public Disclosure Act”. People’s perception of the law, he says, is “very low” and they still feel “gagged” and “victimised”.

The victims

Most complainants have not fallen victim to headline-grabbing moguls like Harvey Weinstein, and so will not draw the attention of newspapers or parliamentarians. Jess Phillips MP says that a considerable number of harassment cases are actually from “18-year olds, working in shops or supermarkets, harassed by their managers” and “who are happy to settle for some money”. A lot are maternity discrimination cases: “pregnant women are very easy to buy”, Phillips sighs.

The Women and Equalities Committee’s July 2018 report recommends standardising confidentiality provisions – in plain English and in terms of what disclosures are protected; sanctions for lawyers who misuse NDAs; and making it an offence for employers to draw up confidentiality provisions that limit protected disclosures.

Miller’s committee has contributed some much needed scrutiny, but when we met at the end of October she seemed ready to shift focus, revealing her plans to launch “another report that engages non-lawyers on NDAs”.

Launched the next month, the committee’s new inquiry is into the wider use of NDAs in cases where any form of harassment or other discrimination – not just sexual – is alleged. This time, Phillips told me, the “committee will go even further”.

For all their failings, NDAs provide victims with a means to protect themselves against issues in their work culture and in the justice system. For victims, the process of reporting wrongdoing and going through the courts is often too gruelling, too exposing, and too unpredictable to take on. They are singled out as troublemakers, ostracised and bullied. It is easier to sign an NDA instead.

When I ask Phillips what she thinks most victims really want, she gives me an isn’t-it-obvious look, and then says “justice”.

Denying victims access to NDAs in this context asks them to carry an additional burden: to deal with their suffering in public rather than private. That burden is real and shouldn’t be discounted by those campaigning for the immediate annulment of all NDAs.

But using NDAs as a substitute for a failing justice system, or as sticking-plasters for workplaces that punish whistleblowers, delays real and meaningful reform. The beneficiaries of that delay are nearly always men and corporations that are wealthy and powerful.

NDAs are symptomatic of deeper issues, written across that bland mural behind the MPs on the day Perkins and Mansell testified: “freedom of speech” and, perhaps most of all, “equal rights”.

Further reading

  • The Women and Equalities Committee report Sexual harassment in the workplace covers the misuse of NDAs in chapter four and is available for download from the Parliament publications website. The witness statements are also available.
  • The whistleblowing charity Protect provides a comprehensive guide to the UK Public Interest Disclosure Act on its website. The charity also provides case studies.
  • Steve Kohn, the lawyer who represents Danske Bank whistleblower Howard Wilkinson and runs the National Whistleblower Center, has written a book that guides potential whistleblowers through the US legal context.
  • You can watch a video clip of tobacco whistleblower Jeffrey Wigand’s interview with CBS 60 Minutes here. The Rolling Stone reviewed The Insider, the Michael Mann film about Wigand’s story.

 

Lead image: Taylor Swift, Este Haim, Jaime King and Lorde with Harvey Weinstein. Photograph by Jeff Vespa/Getty Images.

Correction: February 25, 2019

An earlier version of this article misstated that Harvey Weinstein was present in the room with his alleged victims while negotiating their non-disclosure agreement and that Zelda Perkins first received a copy of the NDA when testifying to parliament. Weinstein was only present in the room when the NDA was signed and Perkins first received a copy of the NDA in 1998.