Many complex cases of business fraud can go on for several years before a verdict is rendered and appealed or a settlement is reached. An employee whose identity has been disclosed and who has been unofficially blacklisted may not see any reward money for several years. Enron is one of the most infamous examples of corporate fraud in U.
Sherron Watkins, an officer of the company, discovered the fraud and first went to her boss and mentor, founder and chairperson Ken Lay, to report the suspected accounting and financial irregularities.
She was ignored more than once and eventually went to the press with her story. Because she did not go directly to the SEC, Watkins received no whistleblower protection.
The Sarbanes-Oxley Act was not passed until after the Enron scandal. Watkins talks openly about the risk of being an honest employee, something employees should consider when evaluating what they owe their company, the public, and themselves. We did feel like we were on a battleship, and things were not going well, and the captain had just taken a helicopter home.
The fall of was just the bleakest time in my life, because everything I thought was secure was no longer secure. Visit the National Whistleblower Center website and learn more about some of the individuals discussed in this chapter who became whistleblowers. Watch this video about one of the most famous whistleblowers, Sherron Watkins, former vice president of Enron to learn more. Sometimes employees, including managers, face an ethical dilemma that they seek to address from within rather than becoming a whistleblower.
The risk is that they may be ignored or that their speaking up will be held against them. However, companies should want and expect employees to step forward and report wrongdoing to their superiors, and they should support that decision, not punish it. Sallie Krawcheck, a financial industry executive, was not a whistleblower in either the classical or the legal sense.
She went to her boss with her discovery of wrongdoing at work, which means she had no legal protection under whistleblower statutes. Read her story in the following box. The team at Merrill had made a mistake by managing the fund in a way that assumed a higher risk than was acceptable to its investors, and the fund ended up losing much of its value.
According to Krawcheck, she had two options. Option two was to bail out the investors by pouring money into the fund to increase its value. Krawcheck had already been burned once by trying to be ethical. Rather than supporting her decision, however, CitiGroup terminated her, in large part for making the ethical decision rather than the profitable one. Now she was in the same predicament with a new company. Should Krawcheck risk her job again by choosing the ethical act, or should she make a purely financial decision and tell the k investors they would have to take the loss?
Krawcheck began talking to people inside and outside the company to see what they thought. Most told her to just keep her head down and do nothing. He agreed to back her up and put company money into the depleted stable-value funds to prop them up. Krawcheck opted to be honest and ethical by helping the small investors and felt good about it.
But the story does not really have a happy ending. However, speaking out did come at a cost. Suppose you are a supervising engineer at a small defense contractor of about one hundred employees. Your firm had barely been breaking even, but the recent award of a federal contract has dramatically turned the situation around.
Midway through the new project, though, you realize that the principal partners in your firm have been overcharging the Department of Defense for services provided and components purchased. You discovered this accidentally, and it would be difficult for anyone else to find it out.
You take this information to one of the principals, whom you know well and respect. He tells you apologetically that the overcharges became necessary when the firm seriously underestimated total project costs in its bid on the contract. If the overcharges do not continue, the firm will again be perilously close to bankruptcy. You know the firm has long struggled to remain financially viable. Furthermore, you have great confidence in the quality of the work your team is providing the government.
Finally, you feel a special kinship with nearly all the employees and particularly with the founding partners, so you are loath to take your evidence to the government. What are you going to do? Will you swallow your discomfort because making the overcharges public may very well put your job and those of one hundred friends and colleagues at risk?
Or would you decide that fraud is never permissible, even if its disclosure comes at the cost of the survivability of the firm and the friendships you have within it? Explain your reasoning. Employees should understand that there are limits to what can be posted about their employer online, just as there are limits to what they can say in the workplace, and that the First Amendment generally does not protect such speech.
Whistleblowers are protected, and sometimes rewarded, for their willingness to come forward, but they can still face a hostile environment in some situations. If you know or strongly suspect something is occurring at work that is unethical or illegal, and you feel that you must speak up, the law can provide protection. But what happens if a disclosure made by a whistleblower turns out to be incorrect?
Dismissal for whistleblowing is automatically unfair. To make a qualifying disclosure , you must reasonably believe that the disclosure is in the public interest and that malpractice has happened, is happening or is going to happen at work.
The wrongdoing you disclose must be about something that affects others, for example the general public. If the disclosure is of a personal nature, such as a bullying complaint, it will not count as whistleblowing. There is no legal requirement for employers to have a whistleblowing policy, but it is recommended and considered good practice. In an ideal world, a whistleblower should be aware of who they need to speak to about a whistleblowing disclosure, and what will happen when they make a disclosure.
A whistleblower can request to be kept anonymous but this makes it harder for the employer to provide feedback about the complaint. It may also make it harder for the employee to claim protection from dismissal, should the need arise. Ideally, when a whistleblowing complaint is raised, there should be a fair and thorough investigation. If appropriate, the whistleblower will be kept informed of the outcome of the investigation. If, following a proper investigation, it is established there was no wrongdoing, the whistleblower can be informed and the matter can end there.
It is important to bear in mind that a worker only has to have a reasonable belief that wrongdoing has happened. They do not have to provide proof and will still be protected from victimisation and dismissal, even if it turns out they are mistaken. A couple of things could happen in the event a whistleblowing allegation is found to be incorrect. By coming forward with information, you help to make sure we live in a society where cheating does not become the pathway to success.
The government recognizes that whistleblowers are acting courageously to do what is right, and so the law includes generous financial rewards for whistleblowers who provide information leading to a recovery.
It is the case that an employee who brings a whistleblowing claim or otherwise provides information to the government can face retaliation from an employer and may have difficulty in getting hired in related fields going forward.
But many types of whistleblowing claims may be brought confidentially, at least initially, and employers are prevented from engaging in certain retaliatory practices. And while your earnings from a given field may be put in jeopardy, the potential financial rewards can outweigh the losses.
As a whistleblower, you may have only partial visibility into potential wrongdoing and you may not be completely clear on the applicable law for the situation.
Again, however, many whistleblowing claims can initially be brought confidentially, and your employer may never knew a claim was brought if it does not go anywhere. Furthermore, you can speak with a whistleblower attorney completely confidentially to determine whether there is enough substance for your claim to go forward.
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