Blowing the

Whistle
 Major Topics

- What is Whistle-Blowing ?
- Internal and External Whistle-Blowing ?
- The Ethics of Whistle-Blowing.
- When is Whistle-Blowing Ethical ?
- When is Whistle-Blowing Unethical ?
- The Duty to respond.
- Addressing the needs of Whistle-Blowers.
- Whistle Blowing as a last resort.
 What is Whistle-Blowing ?

When an employee discovers evidence of

malpractice or misconduct in an organization,
he or she faces an ethical dilemma.

Employee must consider the rightness of his

or her action in raising concerns about this
misconduct and the extent to which such
actions will benefit both the organization and
the public good.
So some serious choices have to be made
here!!!!
First,

The employee can choose to let it slide or

turn a blind eye.

Such choice is directly related to the corporate

culture under which the organization operates.
So some serious choices have to be made
here!!!!
Second,

If an employees personal value system prompts

him or her to speak out on the misconduct, the
employee immediately takes on the role of a
Whistle-Blower
 Corporate Culture & Whistle Blowing

- An open and trusting culture would encourage

employees to speak out for the greater good of
the company and fellow employees.

- A closed and autocratic culture, on the other

hand, would lead employees to believe that it
would be wiser not to draw attention to
themselves, to simply keep their mouth shut.
 So what is Whistle-Blowing?

Whistle-Blowing: An employee who discovers

corporate misconduct and chooses to bring it to
the attention of others.

But whos others ???

The employee then faces an important choice,

1) One option is to bring the misconduct to the

attention of manager or supervisor.
(Internal Whistle-Blower)

2) Go outside the organization (law/media).

(External Whistle-Blower)
Internal and External Whistle-Blowers
Internal Whistle-Blowers:
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.

External Whistle-Blowers:
An employee discovering corporate misconduct
and choosing to bring it to the attention of law
enforcement agencies and/or the media.
 The Ethics of Whistle-Blowing
Whistle-Blowers provide an invaluable service to their
organizations and the general public.

Helps organization,
The discovery of illegal activities before the situation is
revealed in the media could potentially save organizations
millions of dollars in fines and lost revenue from the
inevitable damage to their corporation reputations.
Helps general public,

The discovery of potential harm to consumers (from pollution

or product-safety issues) offers immeasurable benefit to the
general public.
 Different perspectives of Whistle-Blowers
Media: applaud them as models of honor and integrity.

General perception: Whistle-Blowers are brave men and

women putting their careers and personal lives at risk to
do the right thing.

Some argue: that such action is not brave at all, they are
actions motivated by money or by personal egos, they
challenge the policies and practices of their employers.

Others criticized them as informers, sneaks, spies who

have in some way breached the trust and loyalty they
owe to their employers.
 When is Whistle-Blowing Ethical?
Whistle-Blowing is appropriate-ethical-under
five conditions:
1) When the company, through a product or
decision, will cause serious and considerable
harm to the public, or break existing law, 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 employees 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

the organization practice, product, or policy seriously
threatens and puts in danger the public or product
users.

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 is Whistle-Blowing Unethical?

If there is evidence that the employee is

motivated by the opportunity;
1) for financial gain.
2) Media attention.
3) The employee is carrying out an individual
vendetta against the company.

Then the legitimacy of the act of Whistle-

Blowing must be questioned.
 The Duty to Respond
Whether you believe whistle-Blowers to be heroes, or you
take the opposing view that they are breaking the oath of
loyalty to their employer.

The choice for an employer is to ignore them and face

public embarrassment and lose reputation.

Or

To create an internal system that allows Whistle-Blowers to

be heard and responded to before the issue escalates to an
external Whistle-Blowing case. (responding to them means
addressing their concerns, and not firing them )
 Addressing the Needs of Whistle-Blowers

All employers would be wise to put the following

mechanisms in place:

1) A well-defined process to document how such

complaints are handled-a nominated contact person,
clearly identified authority to respond to the
complaints.
2) An Employee hotline to file such complaints.
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-Blower Hotline

A telephone line by which employees can leave

messages to alert a company of suspected
misconduct without revealing their identity.

For a Whistle-Blower hotline to work, trust

must be established between employees and
their employer.
 Whistle-Blowing as a Last Resort

The fact that an employee is left with no option

but to go public with information should be
seen as an evidence that the organization has
failed to address the situation internally.

Becoming a whistle-Blower and taking your

story public should be seen as the last resort
rather that the first.
 Conclusion

Whether the motivation to speak out and reveal

the questionable behavior comes from a personal
ethical decision or the potential for a substantial
financial windfall will probably never be completely
verified, but the threat of losing your job or
becoming alienated from colleagues by speaking
out against your employer must be diminished by
the knowledge that some financial security will
likely result. Whether the choice is based on ethical
or financial considerations, the key point is that
you had better be very sure of your facts and your
evidence had better be irrefutable before crossing
that line.
 Whistleblowers: Examples
Jeffrey Wigand, The Insider
Karen Silkwood, Silkwood
FDA Whistleblowers
Doug Durand of TAP pharmaceuticals
Time Magazines 2002 Persons of the Year
 The Insider
Jeffrey Wigand, vice president for tobacco research and
development at Brown & Williamson: Wigand became the
whistle-blower on Big Tobacco, telling how the industry
minimized tobacco's health and safety issues. His story was
told in the movie The Insider. The tale gets nasty. Wigand was
fired in 1993. His former employer publicized unsubstantiated
allegations of shoplifting and domestic abuse from his past.
He went on to assist the U.S. Food and Drug Administration in
its investigation of the tobacco industry.
Wigand now runs a nonprofit foundation in South Carolina
devoted to educating children about health issues, including
tobacco use and alcohol consumption.
 Karen Silkwood, Silkwood
Karen Silkwood was a chemical technician at the Kerr-McGee's plutonium fuels
production plant in Crescent, Oklahoma, and a member of the Oil, Chemical, and
Atomic Workers' Union in the early 70s.
On November 5, 1974, Silkwood performed a routine self-check and found almost
40 times the legal limit for plutonium contamination. She was decontaminated at
the plant and sent home with a testing kit to collect urine and feces for further
analysis. Oddly, though there was plutonium on the exterior surfaces (the ones she
touched) of the gloves she had been using, the gloves did not have any holes. This
suggests the contamination did not come from inside the glovebox, but from some
other source. The next morning, as she headed to a union negotiation meeting,
she again tested positive for plutonium. This was surprising because she had only
performed paperwork duties that morning. She was given a more aggressive
decontamination.
Karen Silkwood died on November 13, 1974 in a fatal one-car crash. The
circumstances of her death have been the subject of great speculation. Since then,
her story has achieved worldwide fame as the subject of many books, magazine
and newspaper articles, and even a major motion picture.
 FDA whistleblowers: Robert Misbin
Robert Misbin, medical officer, Food and Drug
Administration: The scientist blew the whistle on the
dangers of the diabetes drug Rezulin. He resigned
from the FDA in the fall of 2000, complaining that
politics and bureaucratic concerns had replaced
sound medical judgment in approving drugs. At
issue: that drug maker Warner-Lambert Inc. had
pressured the FDA to approve Rezulin, despite a
number of patient deaths from liver failure. Rezulin
was recalled in 2000, the same year that Warner-
Lambert was acquired by Pfizer.
 FDA whistleblowers: Vioxx
Critics describe the rise and fall of Vioxx as a cautionary tale of masterful public relations,
aggressive marketing and ineffective regulation. "The FDA didn't do anything," says Eric
Topol, chief of cardiovascular medicine at the Cleveland Clinic. "They were passive here."
Sen. Chuck Grassley, R-Iowa, says the FDA was worse than passive. Investigators for the
Senate Finance Committee, which Grassley chairs, met Thursday with FDA researcher David
Graham, lead scientist on a study presented in August at a medical meeting in France.
The study, an analysis of a database of 1.4 million Kaiser Permanente members, found that
those who took Vioxx were more likely to suffer a heart attack or sudden cardiac death than
those who took Celebrex, Vioxx's main rival. Based on their findings, Graham and his
collaborators linked Vioxx to more than 27,000 heart attacks or sudden cardiac deaths
nationwide from the time it came on the market in 1999 through 2003.
Graham told the finance committee investigators that the FDA was trying to block publication
of his findings, Grassley said in a statement. "Dr. Graham described an environment where he
was 'ostracized,' 'subjected to veiled threats' and 'intimidation,' " Grassley said. Graham gave
Grassley copies of e-mail that appear to support his claims that his superiors suggested
watering down his conclusions.
Rep. Tom Davis (R-VA) wrote: "In light of Merck's withdrawal of Vioxx ... and other recent
news stories examining FDA's review of the safety and efficacy of antidepressant drug use by
children, I am concerned whether FDA has been sufficiently aggressive in monitoring drug
safety.

http://www.usatoday.com/news/health/2004-10-12-vioxx-cover_x.htm
 Doug Durand of TAP
As vice-president for sales at TAP Pharmaceutical Products Inc. in Lake Forest, Ill.
Doug Durand listened in disbelief to a conference call among his sales staff: They
were openly discussing how to bribe urologists. Worried about a competing drug
coming to market, they wanted to give a 2% "administration fee" up front to any
doctor who agreed to prescribe TAP's new prostate cancer drug, Lupron. When
one of Durand's regional managers fretted about getting caught, another quipped:
"How do you think Doug would look in stripes?" Durand didn't say a word. "That
conversation scared the heck out of me," he recalls. "I felt very vulnerable."
It wasn't just the 2% kickback scheme that got TAP in trouble. For years, TAP sales
reps had encouraged doctors to charge government medical programs full price for
Lupron they received at a discount or gratis. Doing so helped TAP establish Lupron
as the prostrate treatment of choice, bringing in annual sales of $800 million,
about a quarter of the company's revenues.
The government calculates that TAP bilked federal and state medical programs out
of $145 million throughout the 1990s. To get some sense of just how big TAP's fine
is, consider that it's nearly nine times what Merrill Lynch & Co. (MER ) agreed to
pay in May after the New York Attorney General accused its analysts of issuing
misleading investment research. The only penalty that comes close is the $750
million that hospital chain HCA Inc. (HCA ) paid two years ago to settle criminal and
civil charges of Medicare-billing fraud.
 Doug Durand of TAP
The company had a numbers-driven culture; top reps could earn $50,000
annual bonuses. They lavishly courted doctors with discounts, gifts, and
trips. On his first day, Durand was stunned to learn that the company had
no in-house counsel. At TAP, "legal counsel was considered a sales-
prevention department," he says.

Regarding the sale of Lupron to doctors, "There was no science, no

discussion of the drug," he says. Just how little science would be used to
promote the drug, Durand quickly learned. In Long Beach, Calif., he visited
a urologist who had received a big-screen TV from a TAP rep. Turns out
TAP had offered every urologist in the country (there are 10,000) a TV, as
well as computers, fax machines, and golf vacations. Durand says his angry
demands for information about other giveaways were ignored.
 Doug Durand: Secret Documentation

To protect his good name and, as he puts it, to "cover his

rear," Durand began gathering the inside dope on TAP and
feeding Durand began to secretly document TAP's abuses. For
two months, he sneaked papers home to copy, staying up for
hours to type explanatory notes. Durand mailed his binder to
one of the country's leading federal prosecutors. It was the
first step in what would become a six-year quest to expose
massive fraud at the company. Durand's 200 pages of
information were so damning that TAP pleaded guilty to
conspiring with doctors to cheat the government.
 Durand: Consequences of WB
The prosecutor urged Durand to sue TAP under the federal whistle-blower program, which allows an
insider to file a civil complaint alleging fraud against the government. Typically, the informant then meets
with government attorneys; if they decide to proceed, the investigation is conducted in secret. Companies
learn of it as the government issues subpoenas, but executives aren't supposed to know who blew the
whistle. Usually, the company will negotiate a settlement to avoid a trial, as TAP did. If not, insiders can
testify secretly against their employers.
It wasn't easy for Durand to decide to file a suit. "I didn't even know about the law when I first approached
Ainslie," he says. "I wanted to leave a trail showing I was on the side of the government, not working to
cover up fraud. The idea of suing as a whistle-blower intimidated me. Nobody likes a whistle-blower. I
thought it could end my career." Indeed, whistle-blowers live for years as double agents with no guarantee
that their personal risk will result in a trial, let alone a victory. "I asked myself all the time, is it worth taking
Liz and the kids through this?" says Durand. "In the end, I always found myself believing that it was the
right thing to do."
After filing the suit, Durand left TAP for Astra Merck in February, 1996, but wasn't supposed to tell his new
employers about the case. For the next four years, the government conducted its own investigation into
Durand's allegations, which included grilling him about the documents he had collected. It was an
overwhelming experience at first. "I was put in a conference room in Philadelphia with all kinds of
different federal agents," he says. "I didn't calm down until the end, when everyone started greeting my
attorney as an old friend. It was then I knew that I was in good hands." Because the government often
asked Durand to testify on just a day's notice, he had to scramble to make excuses to take off. He almost
blew his cover early on when he ran into a group of Astra Merck executives in the Chicago airport; they
thought he was vacationing in Orlando. "It was wrenching, terrible," recalls Durand. "I never knew if
someone would discover me as a whistle-blower. And the government was always cryptic--inching along."
Nor is Durand's ordeal over. He still has to testify in the trials of the six TAP execs, five of whom used to
work for him. Durand doesn't worry too much about TAP, though he does "feel sorry" for those indicted.
His wife doesn't: "Doug banged his head against the wall, and nobody would listen," she says. "They knew
what they were doing."
 Durand: Settlement and Effects
After negotiating a settlement for two years, federal prosecutors
announced a record $875 million fine against the company. For his efforts,
Durand won an unprecedented award of $77 million, or 14% of the
settlement, as allowed under the federal whistle-blower statute.
Durand's suit may well be the first of several that challenge potentially
fraudulent practices in the drug industry. Schering-Plough Corp. (SGP ),
Merck-Medco Managed Care LLC (MRK ), the pharmacy-benefit
management unit of Merck, and others have received subpoenas from the
U.S. Attorney in Philadelphia. That investigation may focus on whether
drugmakers gave discounts or kickbacks on certain drugs to companies
such as Merck-Medco while charging higher prices to the government. All
those involved say they are cooperating with the inquiry. And Merck-
Medco says its actions were legal. "Thanks to Durand and other whistle-
blowers, there's a revolution coming in how drug companies set pricing, "
says James Moorman, president of public interest group Taxpayers Against
Fraud in Washington.

http://www.businessweek.com/magazine/content/02_25/b3788094.htm
 The Whistleblowers:
Time Magazines 2002 Persons of the Year

Cynthia Cooper
of Worldcom

Coleen Rowley
of the FBI

Sherron Watkins
of Enron
 Cynthia Cooper of WorldCom
Cynthia Cooper was Vice-president of MCI internal audit.
During a 2002 audit, Cooper discovered that some of
WorldCom's financial practices were shady. The company had
been classifying operating costs as capital expenditures,
thereby inflating its profits. She took her findings to the audit
committee of WorldCom's board. Within days, the board fired
WorldCom's high-flying CFO, Scott Sullivan, and revealed that
the company had overstated its profits by what ultimately
proved to be $11 billion. It was the biggest fraud in U.S.
corporate history. WorldCom declared bankruptcy in July
2002, after its stock's value had declined by $180 billion and
its founder, Bernard Ebbers, had left the company.
 Coleen Crowley of the FBI
Coleen Rowley was chief counsel of the FBI's Minneapolis field
office. In a 13-page memo, she outlined how FBI headquarters
thwarted agents' attempts to investigate Zacarais Moussaoui,
the alleged 20th hijacker. The bombshell memo led bureau
chief Robert Mueller to reorganize the agency. Rowley testified
before the Senate Judiciary Committee about the FBI
bureaucracy that frustrates agents' attempts at innovative
investigation and mires them in paperwork.

Rowley is still employed at the FBI, but is the victim of backlash

from her peers and associates. To this day, she is afraid of being
fired - or worse.
 Sherron Watkins of Enron
Sherron Watkins was vice president, Enron Corp. An
accountant, she tried to warn Enron chairman Ken Lay in a six-
page memo that the financial partnerships set up by the huge
Houston energy company would prove disastrous and
potentially destroy Enron. After meeting with Lay, Watkins
says Lay assured her "that he would look into my concerns."
But Lay only asked Vinson & Elkins, Enron's outside law firm,
to investigate. Nothing happened. Enron declared bankruptcy.
Since she lived in Texas where whistleblowers are not
protected by law. She was demoted 33 floors from her
mahogany executive suite to a "skanky office" with a rickety
metal desk and a pile of make-work projects. Then she quit.

See: Enron: The Smartest Guys in the Room

 What REALLY Happened
Enron is the largest company in US history to go bankrupt.
Company officials used secret investments and tricky math to make Enron
appear stronger than it was. This made the stock price skyrocket.
The insiders (Lay, Skilling, top executives), who knew the real picture, sold their
stock when the price was high and made millions of dollars.
When word got out that Enron was not as successful as it claimed, the value of
the company fell.
Almost overnight, thousands of Enron employees were out of work and
thousands of people who invested in Enron lost millions of dollars-- some even
lost their life savings. Thousands of investors lost worthless stock.
There were global financial repercussions as well.
The collapse has made many Americans lose confidence in the stock market. If
such a "successful" company abuses the trust of investors, what's to say other
companies aren't doing the same thing?
There are also questions about whether Enron's donations to President Bush
and other politicians influenced energy policy in the U.S.

http://www.pbs.org/newshour/extra/features/jan-june02/enron.html
 Daniel Schorr, The Real Enron Scandal
The real Enron scandal lies not in the nervous contacts with cabinet members when the giant corporation was
sliding down the tube, but in its ability to manipulate a government awash in campaign contributions in the days
when the company was flying high.
That President Bush called CEO Kenneth Lay "Kenny Boy" was not a scandal. What was a scandal was that Enron
profited from a climate of regulatory laxity that it helped to dictate. Mr. Lay and other Enron executives met
several times last year with Vice President Dick Cheney, who was heading the president's energy task force. Mr.
Cheney is still stonewalling congressional efforts to find out what happened in those meetings.
But the task force recommendations for "reforming" the utility regulation law to provide "greater regulatory
certainty" (read: deregulation) could have been written by Enron. Enron helped create what some called a
regulatory "black hole."
The Bush White House was deeply penetrated by a company that became the nation's seventh-biggest
corporation not by making energy but by making deals. Economic counselor Lawrence Lindsey had been a paid
adviser. Political strategist Karl Rove had been a big investor. Republican national chairman Mark Racicot had been
a paid lobbyist. Lay himself had been on an early list of possible cabinet appointments.
So much influence did Enron wield with the Bush administration that Lay could tell Curtis Herbert Jr., chairman of
the Federal Energy Regulatory Commission, that he would be reappointed if he changed his views on electricity
regulation. Mr. Herbert didn't, and he wasn't.
Congress was not left untainted. More than two-thirds of the Senate and 40 percent of the House benefited - if
that's the word - from Enron money, some of which is now being returned by embarrassed lawmakers of both
parties.
The $5.8 million in campaign donations from Enron sources since 1989 appear to have been a good investment.
The tax rebate provision of the House-passed economic stimulus package alone would give Enron $254 million.
The consequences of Enron's penetration of the United States government remain to be investigated by anyone
left in government who doesn't have to recuse himself. Some day we may know whether Enron would have been
able to bilk employees, investors, and a nation, were it not for that regulatory black hole that it bought for itself.
Enron is not unique in the annals of lobbyist interests prevailing over the public interest. From contracts for
unneeded weapons to a banana trade war, the decisions tend to come out in favor of the big contributors. What
makes the Enron story different is the drama of the huge implosion in full view of thousands of victimized
employees and investors.

http://www.csmonitor.com/2002/0118/p11s03-cods.html
 Some good links for more info
http://www.wanttoknow.info/021222time.per
sonofyear
http://www.opinionjournal.com/weekend/hot
topic/?id=110007924
http://www.caslon.com.au/whistlecasesnote.
htm
http://www.forbes.com/forbes/2005/0314/09
0.html