He is Michael J. Lutz, an accounting specialist who raised his hand in early 2013 when he was at Radian Group, the giant mortgage insurer. At the time, Radian was still weathering the subprime crisis; it had insured loads of soured mortgages, and Mr. Lutz believed the company was lowballing the amount it might have to pay in claims on the loans.
Mr. Lutz, 31, worked at Radian’s headquarters in Philadelphia verifying that the company’s internal accounting controls were effective. This task is also known as Sarbanes-Oxley testing, named for the Enron-era legislation that bolstered the penalties for accounting fraud.
Radian was required to set aside reserves against potential losses on bad loans, and Mr. Lutz reckoned that his employer was materially understating those amounts. The company was looking to raise capital through a stock offering, and the lower the reserves, the better the company’s earnings would appear.
When Mr. Lutz voiced his concerns to his superiors, he said he was told to stand down.
“I felt like I was on an island,” Mr. Lutz told me in a phone interview. “This big-insurance-company-versus-this-little-guy is a very lonely and difficult situation to be in. But I felt I had no other choice. I was doing my job and doing what was right.”
After an investigation of Mr. Lutz’s allegations, Radian concluded that he was wrong: Its reserves had been appropriate.