November 16, 2010
Bakke established that Grinsteinner was accountable to the CEO for administrative functions like paychecks and to the Board audit committee for audit reports. She said the reason for board oversight is to ensure the CEO and management cannot have undue influence over the auditor function. She said that she would take information that would relate to certain departments back to those departments, that, for example, if there were an issue she had discovered that was related to the HR department, she could take it there. Bakke noted that the internal audit charter did not say she could go back to the department but rather to the CEO or audit committee board chair.
Bakke asked if she went into Armstrong's office suspecting fraud. She said not fraud like taking money out of a cash drawer, but rather misuse of resources, and that after her search she did have concerns about fraud. She said that because she had been on a business trip the day after the searach, she did not have a chance to take her concerns to the board audit chair or the CEO. Bakke pointed out that she was in the office for 3 days and had an opportunity to reveal that information, but she said she was still contemplating what steps she should take as she was questioning whether she was working for an organization where the internal audit function was broken and whether she should resign. She said that by the time she returned from Las Vegas she no longer thought it necessary to report the journal to the internal audit chair as it had already been given to law enforcement. She said she had given the journal to Long because it seemed to be an HR issue and that he supervised records retention. She said it was her judgment as an auditor that it was appropriate to give the journal to Long.
Bakke asked whether it was part of Armstrong's duties to route media information to the employees. Grinsteinner said the issue was that Armstrong was providing information to Steve Cates and that the finance department was complaining to her that he wasn't billing Cates for those requests. She said it was her responsibility to make sure Armstrong was following the State Auditor recommendations. Bakke asked whether she knew that legal would be involved in open records requests, couldn't she have informed them. She said she could have gone to the legal department, but she didn't trust them. Bakke asked whether she was aware of violations of open records requests. She said you don't know if there are violations until you look, and that she never got a chance to finish that audit.
As to whether she had ever received permission from the board audit chair to do the audit, she said no, that she was charged with following up on the State Auditor recommendations and that her boss Evan Mandigo was comfortable with her looking through whatever she needed to. Bakke asked whether Mandigo told her it was ok to go through Armstrong's office in the dead of night with a flashlight. She disagreed with that characterization. She also said that an independent third party had investigated her search to see whether she had committed ethics violations, and had concluded Grinsteinner had done nothing wrong.
She said that she did want her search to be secret because she was concerned that records could disappear or be altered. She said she could find something, or she could find nothing, but she had to look. If she found nothing, it was better to keep it secret, as there could be no aspersions falsely cast. She said she could have gone directly to Armstrong, but then she would have been at his mercy of him giving her only what he wanted her to see.
Bakke asked whether Mandigo as audit chair wasn't just talking to Armstrong just in case the media got involved. She said that Mandigo took the information to Board Chair Indvik and that it was Indvik that brought the information back to Armstrong. Bakke asked whether it was improper for the board chair to go to the communications director regarding something that might hit the media. She said that did not think that was what was happening.
Bakke asked about the chain of command and how Grinsteinner had told Long and Peltz she'd be going into Armstrong's office. She replied, "Say management is involved in fraud, do I take it through the chain of command? If you believe the board itself is not following it's charter, there's a different situation in play. The independent audit department has to be independent. If you have information on fraud, am I supposed to take that to the board chair when I know that the board chair is willing to call the CEO and say, 'oh we got a bad report regarding you, here it is.'"
Bakke turned to the Institute of Internal Auditors code of ethics. Under the heading of objectivity, Bakke said she was not objective because she found it distasteful that a Republican right wing newspaper was disseminated to WSI employees. She said that she was objective, but felt that was not proper conduct within a state agency.
Bakke asked whether she thought going into Armstrong's desk and taking his personal items was correct. She replied that what she took was a business record, and it was her job to do so.
Grinsteinner testified that BCI's Quinn called her with questions and she did not tell him about suspicions of illegality even though there was a comment that bothered her. She was contemplating asking a private attorney if there were violations of law, but never got a chance because law enforcement had already been given the journal, and so she felt why bother at that point.
Bakke then turned to the code of ethics issue of confidentiality, which meant she was not to give information to people not authorized to see it. Bakke established she did not get authorization from the internal audit chair to give the journal to Long, but she said it was not relevant because she believed it was an HR issue. Bakke established that Grinsteinner had not read the journal when she handed it to Long and so she had no idea whether it did involve HR issues. She replied that Bakke was splitting hairs and that she saw no reason not to give the journal to Long because she trusted him.