IST. 125 Ch. 7

Whistle-Blower Hotline

A telephone line by which employees can leave messages to alert a company of suspected misconduct without revealing their identity

External Whistle-Blowing

An employee discovering corporate misconduct and choosing to bring it to the attention of law enforcement agencies and/or the media

The fact remains, are employees becoming increasingly willing to respond to any questionable behavior they observe in the workplace?

YESSSSS

Given this new legal environment surrounding whistle-blowers, all employers would be wise to put the following mechanisms in place:

1. A well-defines process to document how such complaints are handled—a nominated contact person, clearly identified authority to respond to the complaints, firm assurances of confidentiality, and non retaliation against the employee. 2. An employee hotline to file such complaints, again with firm assurances of confidentiality and non retaliation to the employee 3. A prompt and thorough investigation of all complaints 4. A detailed report of all investigations, documenting all corporate officers involved and all action taken.

Whistle-Blowing is appropriate—ethical—under 5 conditions:

1. When the company, through a product or decision, will cause serious and considerable harm to the public (as consumers or bystanders) or break existing laws, the employee should report the organization. 2. When the employee identifies a serious threat of harm, he or she should report it and state his or her moral concern. 3. When the employee's immediate supervisor does not act, the employee should exhaust the internal procedures and chain of command to the board of directors 4. The employee must have documented evidence that is convincing to a reasonable, impartial observer that his or her view of the situation is accurate, and the evidence that the firm's practice, product, or policy seriously threatens and puts in danger the public or product user 5. The employee must have valid reasons to believe that revealing the wrongdoing to the public will result in the changes necessary to remedy the situation. The chance of succeeding must be equal to the risk and danger the employee takes to blow the whistle.

When did one of the first instances of the use of the term whistle-blower occur? & what happened?

1963 When Otto Otopeka was dismissed from the U.S. State Department after giving classified documents on security risks to chief counsel of the Senate Subcommittee on Internal Security

Since 1986, how many —qui tam— lawsuits have been filed?

2,400 Recovering over $2 Billion for the government and enriching whistle-blowers by more than $350 Million

Internal Whistle-Blowing

An employee discovering corporate misconduct and bringing it to the attention of his or her supervisor, who then follows established procedures to address the misconduct within the organization

Whistle-Blower

An employee who discovers corporate misconduct and chooses to bring it to the attention of others

When is Whistle-Blowing Unethical?

If there is evidence that the employee is motivated by the opportunity for financial gain or media attention or that employee is carrying out an individual vendetta against the company, then the legitimacy of the act of whistle-blowing must be questioned

Whistle-Blowers are often severely criticized as:

Informers, "Sneaks", "spies", or "squealers" who have in some way breached the trust and loyalty they owe to their employers

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Introduced a new reward program for whistle-blowers who report securities law violations to the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). The legislation stipulates that if more than $1 Million is collected, the whistle-blower is entitled to between 10-30 % of the monies collected, in addition to a clear entitlement to job and confidentiality protection.

The lawsuits brought under the Federal Civil False Claims Act, are referred to as:

Qui Tam, which is an abbreviation for a longer Latin phrase that establishes the whistle-blower as a deputized petitioner for the government in the case

The Whistle-Blower Protection Act of 1989

The act imposed specific performance deadlines in processing whistle-blower complaints and guaranteed the anonymity of the whistle-blower unless revealing the name would prevent criminal activity or protect public safety. The act also required prompt payment of any portion of the settlement to which the whistle-blower would be entitled, even if the case were still working its way through the appeals process. Only applied to federal employees, until the Sarbanes Oxley Act of 2002 did Congress take an integrated approach to the matter of whistle-blowing by both prohibiting retaliation against whistle-blowers and encouraging the act of whistle-blowing itself.

The SEC's new Office of the Whistleblower

Was created in August 2011 and received 2,700 tips in its 1st year

Federal Civil False Claims Act

aka "Lincoln's Law" Whistle-blowers (referred time as "realtors") who expose fraudulent behavior against the government are entitled to between 10-30 % of the amount recovered Originally enacted during the Civil War in 1863 to protect the government against fraudulent defense contractors, the act was strengthened as recently as 1986 to make it easier and safer for whistle-blowers to come forward

Public awareness of whistle-blowers reached a peak in 2002 when TIME magazine awarded its PERSON OF THE YEAR award to three women "of ordinary demeanor but exceptional guys and sense" :

• Sherron Watkins—the VP at ENRON Corp., who, in the Summer of 2001, wrote 2 key emails warning Enron Chairman Ken Lay that it was only a matter of time before the company's creative "accounting treatment" would be discovered and bring the entire organization down • Coleen Rowley— an FBI staff attorney, who rose to public prominence in May 2002 when she made public a memo to Director Robert Mueller about the frustration and dismissive behavior she faced from the FBI when her Minneapolis, Minnesota, field office argued for the investigation of a suspected terrorist, Zacarias Moussaoui, who was later indicted as a co-conspirator in the September 11, 2011, attacks • Cynthia Cooper—whose internal auditing team first uncovered questionable accounting practices at WorldCom. Her team's initial estimates placed the discrepancy at $3.8 Billion; the final balance was nearer to $11 Billion