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Blowing the

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-
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
So some serious choices have to be
made here!!!!


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!!!!


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
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

But whos others ???

The employee then faces an important

1) One option is to bring the

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

2) Go outside the organization

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-
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.


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-
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
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

Becoming a whistle-Blower and taking

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

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
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
Wigand now runs a nonprofit foundation in South
Carolina devoted to educating children about
health issues, including tobacco use and alcohol
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
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.
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
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
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

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
Durand: Consequences of
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,
Durand: Settlement and
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
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
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.
Daniel Schorr, The Real Enron

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
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.
Some good links for more