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2007
The employee’s
duty to be a whistleblower
October 2007: People have a
tendency to resist getting involved in matters that do not affect
them directly. This tendency also permeates the workplace. Not many
employees are willing to report on the wrongdoing of their fellow
employees. Whatever the reasons, this makes it very difficult for
employers to eradicate illegal or dishonest practices in the
workplace.
Can an employer discipline an
employee for failing or refusing to disclose information about the
illegal activities of a colleague? On the one hand there is
legislation such as the Prevention & Combating of Corrupt
Activities Act, 12 of 2004, which provides, inter alia, that senior
members of management must report to the SAPS instances of theft,
fraud or corruption involving an amount in excess of R100 000.
Failure to do so constitutes a criminal offence. On the other hand,
the Protected Disclosures Act, 26 of 2000 provides protection
against victimisation for employees who disclose irregular or
criminal activities in terms of that Act. But do employees have a
general duty to ‘blow the whistle’ when they acquire information or
knowledge about the illegal or dishonest activities of colleagues?
(Read
more...)
2006
Blowing the whistle
JUNE 2006: For most businesses, fraud
represents a significant threat to the organizational coffers.
Nearly half of all companies worldwide have been victims of
economic crime in the past two years, costing them an average of US
$1.7 million, according to Pricewaterhouse-Coopers’ Global Economic
Crime Survey 2005.
Hotlines repeatedly have proven their ability
to detect and deter illegal behaviour. (Read
more...)
Best practises in Ethics
Hotlines
A framework for creating an effective
anonymous reporting program
Since the early 1980s, hotlines have proven to
be a valuable tool for fraud detection. This paper discusses techniques for
developing an effective ethics hotline program by examining three critical
stages: planning prior to launch, communicating to stakeholders about the
hotline and reacting to hotline tips. (Read
more...)
Blow the Whistle
In 2002, the Sarbanes-Oxley Act (SOX)
introduced provisions designed to protect employees or contractors
who reported suspected corporate financial wrongdoing. These
provisions were substantially different from previous federal and
state laws, which, at the time, focused mostly on issues related to
public health or workplace safety. However, the demise of several
major corporations as a result of fraud, and their subsequent
reverberations on the economy as a whole, brought the role of the
whistleblower front and center in the public eye. (Read
more...)
Whistle-blowers Never Win
JUNE 2007: Of nearly 1,000 complaints
filed under the whistle-blower provisions of the Sarbanes-Oxley Act
since July 2002, not one has ultimately resulted in the
whistle-blower making it past company appeals and winning the case.
(Read
more...)
Phoning It In
What's the best way for an employee
to blow the whistle on fraud or related infractions? The most
popular way seems to be via hotlines or similar reporting tools.
According to a joint report from the CSO Executive Council, an
organization of corporate and government security executives, and
The Network (a hotline provider), almost two-thirds of the nearly
200,000 reports it studied were made via hotlines without first
alerting anyone in management.
Few of those alerts prove to be false
alarms. (Read
more...)
How the Successes of the False Claims Act Have Inspired a Wave of
State Qui Tam Whistleblower Laws
To assist those who want to know more
details about the nation's primary whistleblower law, the False
Claims Act, as well as the wave of new state qui tam whistleblower
laws that mirror the False Claims Act, the whistleblower lawyer
blog attorneys are pleased to present this detailed article. A
version of this article by whistleblower lawyer blog author Michael
A. Sullivan has just been published in the October 2007 Georgia
Bar Journal, and is reprinted here in updated form with
permission of the Bar Journal. (Read
more...)
Europeans
reluctant to blow the whistle
AUGUST 2007: EUROPEAN WORKERS ARE
AFRAID TO BLOW THE WHIStle on unethical behavior, according to a
recent survey from Ernst & Young (E & Y). A Survey Into Fraud Risk
Mitigation in 13 European Countries reports that employees in
Europe find their employers' anti-fraud policies lacking. Many fear
reprisals, and the overall findings show personnel see a disconnect
between the perceived and real procedures on reporting
improprieties. E & Y polled 1,300 employees who work at
multinational companies. (Read
more...)
Whistleblowing and Good Governance
JUNE 2007 - The
Sarbanes-Oxley Act of 2002 (SOX) has forever changed corporate
governance for publicly held corporations. Recent data suggest that
the costs of compliance with the provisions of SOX can be very
significant. Because these mandated requirements apply almost
exclusively to publicly held corporations, some companies have
cited the high costs of SOX compliance as a rationale for going
private. After all, SOX was developed in response to high-profile
corporate scandals that included Enron, WorldCom, and Tyco, and was
not designed to address problems in other sectors. Unfortunately,
problems in corporate governance are not unique to public
corporations. (Read
more...)
JUNE 2007: South Africa: No one likes
a tattle-tale. They are nosy and obnoxious and in general just
cause trouble for unsuspecting and innocent people. Some people may
think that the Protected Disclosures Act ("the PDA")1 provides
protection for tattle-tales.
This is however not true. The PDA
only provides protection for those who honestly wish to expose
criminal and other irregular conduct in the workplace. In other
words, the PDA protects the brave of heart. I term them the brave
of heart because they are likely to fall out of favour with their
employers if they blow the whistle on criminal and other irregular
behaviour, and may thus be subjected to disciplinary action and
other occupational detriments. (Read
more...)
Sarbanes-Oxley changes sources of whistleblowing
APRIL 2007: ALTHOUGH THE U.S.
Sarbanes-Oxley Act of 2002 created provisions to encourage fraud
reporting, a new report--Who Blows the Whistle on Corporate
Fraud?--has determined that those measures may not be working as
intended. According to the National Bureau of Economic Research (NBER),
a U.S.-based nonprofit research organization, the percentage of
fraud cases reported by employees has dropped since Sarbanes-Oxley
was enacted, while the percentage detected by audit firms has
increased four-fold. (Read
more...)
Study: Sarbox Curbs Fraud Whistleblowing
FEBRUARY 2007: Contrary to its intentions, the Sarbanes-Oxley Act has
discouraged employees from coming forward and blowing the whistle
on corporate fraud, a new study find.
Despite the 2002 law's whistleblower protection provision,
employees have been less likely to come forward with fraud
concerns, according to the National Bureau of Economic Research, a
non-profit research organization. From 1996 until Sarbox's
enactment, employees made up 21 percent of fraud detectors. Since
then, that number has dropped to 16 percent. (Read
more...)
Who Blows the
Whistle on Corporate Fraud?
FEBRUARY 2007: What external
control mechanisms are most effective in detecting corporate fraud?
To address this question we study in depth all reported cases of
corporate fraud in companies with more than 750 million dollars in
assets between 1996 and 2004. We find that fraud detection does not
rely on one single mechanism, but on a wide range of, often
improbable, actors. (Read
more...)
2006
Communicating wrongdoing: new research considers the internal
auditor's unique responsibility to be a whistleblower in certain
situations
DECEMBER 2006: When internal auditors
have information about potential wrongdoing and cannot rely on the
internal system to address the issue (e.g., if participants in the
governance process are allegedly involved), they face a conundrum
to work inside--despite the potential limitation--or to go outside
to report the problem. IIA Practice Advisory 2440-3, Communicating
Sensitive Information Within and Outside the Chain of Command,
states that, before deciding to report outside the organization,
the chief audit executive (CAE) should. (Read
more...)
Whistleblowing: The Devil Is in the Details
JULY 2006 -
A whistleblower is generally defined as an employee who discloses
potentially damaging information about their employer to an
authority figure, such as their boss, the media, or a government
official.
Employees
who have sought to “blow the whistle” on their employer’s unethical
or illegal activities have discovered just how difficult
whistleblowing really is. Cynthia Cooper, the former vice-president
of internal audit at WorldCom, can tell you. In a room so silent
you could hear a pin drop, I sat with hundreds of other accounting
professionals as she spoke of her experience following her decision
to go public with information on the WorldCom fraud. Her decision
involved many conflicting emotions that pitted personal and
organizational loyalties against what she knew to be “the right
thing to do.” She even followed all the conventional wisdom and
made every attempt to resolve the problematic issues through
available internal procedures prior to going public. (Read
more...)
Whistleblower in business – heroes or traitors?
APRIL 2006: Whistleblowers are people who go
public on fraud or misconduct. They perform a valuable and essential public
service, and much corruption and misconduct may never be exposed without
them.
There are many reported examples of employees
who report breaches of the law by their firm and who are then subjected to
retaliation, dismissal and worse. For example, former Enron Vice President
Sherron Watkins, who warned Enron management of elaborate accounting hoaxes
to inflate profits, was sidelined.
The law has mixed feelings towards
whistleblowers, and treats them either as heroes or as traitors. The legal
system may admire their moral courage in going public, or the legal system
may not be happy with what seems like disloyalty in revealing inside
information. (Read
more...)
2005
The Dark Side of
Whistleblowing
March 2005: The government makes
whistleblowers filthy rich for ferreting out fraud on the job.
Douglas Durand is the paragon of a
corporate whistleblower. Shortly after stepping in as vice
president of sales at TAP Pharmaceutical Products in early 1995, he
began to suspect the company was conspiring with doctors to
overcharge the federal government's Medicare program by tens of
millions of dollars. But instead of trying to fix the problem, he
spent seven months gathering evidence of supposed fraud. Then he
quit in 1996 and filed a secret lawsuit against TAP. One motive: If
he could prove the company was dirty, he would share a nice chunk
of any money TAP paid back to the feds. (Read
more...)
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