1. The boss doesn’t want to get rid of his secretary, even though she has made some very costly mistakes. The boss simply keeps whitewashing the situation, pretending that her errors are insignificant.
2. The doctor told Susan’s parents the truth about their daughter’s condition. He felt it wouldn’t be fair to whitewash the seriousness of Susan’s illness.

The expression originates from the paint-like substance called whitewash, made from lime and water, which is used to paint houses and fences cheaply.