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The Whistle-Blower’s Guide To Doing What’s Right While Protecting Yourself

Published
January 1, 2012
Publication
Bottom Line Personal
Source
Stephen Kohn
Print
632

In November, shocking allegations emerged that Jerry Sandusky, a former defensive coordinator of the Penn State University football team, had sexually molested young boys whom he befriended through a charity he started. Sandusky’s alleged actions were not the only appalling part of the story. Also disturbing were the allegations that other Penn State coaches and employees knew of the crimes for years but failed to notify police.

According to the nonprofit Ethics Resource Center, about half of all American employees have witnessed a boss or colleague engage in illegal or unethical conduct in the workplace. That misconduct usually involves something like fraud, ignoring safety or environmental laws or underpaying taxes—not child abuse—but whatever the crime, employees who witness it are in a difficult position. They typically want to stop the misbehavior, but calling attention to misconduct can damage or even ruin the whistle-blower’s career or, in some cases, get him/her sued.

Though the decks are stacked against whistle-blowers, you still can do what’s right and protect yourself. Here’s what you need to know before you speak up about an ethical or legal lapse in your workplace…

THE DANGERS OF DOING RIGHT

Most whistle-blowers don’t set out to be whistle-blowers—they just come across potential problems that they want to warn others about. But not all bosses are grateful for these warnings. Some consider employees who call attention to ethical or legal lapses disloyal troublemakers—particularly if management is involved or if the situation would be expensive to correct.

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Other employers decide that the best solution is to bury the problem—which could include burying the career of the employee who called attention to it. The employer will dig up or fabricate a black mark on the work history of this well-meaning employee, then use that mark as an excuse for termination. That way, if the employee later reports the misconduct to the police, government regulators or the media, the allegations can be dismissed as coming from a disgruntled ex-employee with an axe to grind.

Example: When Enron employee Sherron Watkins sent a heads-up memo about accounting issues to her boss in 2001, her employer investigated whether Watkins could legally be fired. (She ended up resigning.)

Three recommendations if you’re thinking of blowing the whistle…

  • Be wary of employer ethics hot lines. Most large employers now have corporate compliance departments that maintain phone numbers specifically for employees to report ethical and legal concerns. But before dialing, try to find an organizational chart that shows to whom the corporate compliance department reports. If it reports to the board of directors or the company’s audit committee, the hot line likely is a safe way to voice concerns. But if it reports to the company’s general counsel or you cannot determine to whom it reports, beware. The general counsel’s goal likely will be to minimize the company’s legal and financial risks, not to do what’s right by you.
  • Consider making your report anonymously if you have doubts about how your employers will treat you when you call attention to an ethical lapse.

    Helpful: Under the Dodd-Frank Act, employees can file complaints concerning securities and commodities fraud anonymously and still qualify for large financial rewards. The procedures for anonymously blowing the whistle are spelled out in new regulations published by the Securities and Exchange Commission (SEC) and mandate that the whistle-blower obtain legal counsel to ensure that an anonymous claim is properly filed and that the whistle-blower is fully protected. Information: www.sec.gov/whistleblower

  • Consult with a lawyer experienced in whistle-blower law before calling your boss’s attention to workplace misconduct, not after your career has been harmed by coming forward. This attorney can help you understand the risks and offer guidance about using whistle-blower laws to minimize those risks. Paying for that attorney’s guidance beforehand is likely to be substantially cheaper than hiring an attorney to sue for wrongful termination later.

    Helpful: The nonprofit National Whistleblower Legal Defense and Education Fund can provide attorney referrals. (Go to www.WhistleBlowers.org, select “Services,” then “Attorney Referrals.”).

THE BEST WHISTLE-BLOWER LAWS

There are dozens of federal and state laws that protect the jobs of whistle-blowers and allow them to sue for back pay and legal fees if they are unfairly terminated. But each of these laws applies only in specific circumstances, and it’s easy for whistle-blowers to make missteps that deprive them of legal protection.

Example: A construction engineer discovers that his employer has used an inadequate grade of concrete to build a bridge. When his supervisor ignores his concerns, he speaks to the press. The company fires the engineer and sues him, arguing that its concrete mix is a trade secret that he had no right to disclose. Had this engineer consulted a lawyer, he would have been advised to voice his concerns to the Department of Justice rather than the press. This would have allowed him to take advantage of whistle-blower laws that could have shielded him from liability.

Some whistle-blower laws offer financial rewards to whistle-blowers—typically 10% to 30% of any money collected by the government in the form of fines or funds recovered from those who defrauded the government. Among the laws that offer rewards…

  • The False Claims Act covers fraud in federal procurement and contracting. Whistle-blower cases sometimes can be linked to the False Claims Act even when the federal government is not the primary victim as long as a federal government program is affected.

    Example: Whistle-blowers caught pharmaceutical company Eli Lilly using illegal marketing techniques to increase sales of Zyprexa, a drug used to treat schizophrenia and bipolar disorder. The case qualified under the False Claims Act because some patients obtained Zyprexa through the federal government programs Medicare and Medicaid. The whistle-blowers received nearly $79 million in rewards in 2009.

  • Section 406 of the Internal Revenue Code, enacted in 2006, covers major tax fraud and underpayment. It applies only if the underpayment is in excess of $2 million, among other restrictions. Whistle-blowers need not work for the guilty corporation or individual to qualify for rewards.

    Helpful: To report tax fraud, complete IRS Form 211, Application for Reward for Original Information (www.irs.gov).

  • Section 21F of the Securities Exchange Act covers stock fraud, attempts to rip off shareholders and other corporate misdeeds policed by the SEC.
  • Section 23 of the Commodity Exchange Act, enacted in 2010, covers illegal trading in commodities such as oil, minerals and agricultural products.

Many states have whistle-blower protection laws, but these typically offer less protection than comparable federal laws.

Exceptions: State whistle-blower protection laws are very strong in California and New Jersey.

GATHERING EVIDENCE

Whistle-blowers are more likely to be believed if they have evidence to back up their allegations. But gathering evidence can be a legal minefield. What you need to know…

  • Secretly recording conversations generally is legal under federal law as long as the person doing the recording is party to the conversation being recorded. Exceptions: Recording conversations without the knowledge and consent of all parties involved usually is illegal under state law in California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania and Washington. Ask a lawyer about the recording laws that pertain to your situation.
  • Copying or taking documents belonging to an employer in order to blow the whistle on illegal activities typically is legal as long as the whistle-blower has lawful access to those documents. It is illegal for would-be whistle-blowers to rifle through offices or files that they do not have permission to access in search of evidence.

Warning: Companies increasingly are suing whistle-blowers who copy or remove valuable documents, such as those that spell out trade secrets. These companies argue that because the documents have value, whistle-blowers who take them are guilty of theft. Courts usually side with whistle-blowers in these cases—particularly when the whistle-blower has good reason to believe that the documents will be destroyed if not removed. Still, when valuable information is involved, the safest policy for whistle-blowers is not to remove or copy the documents, but instead to determine precisely where these documents are located in the office, then provide government regulators with instructions on how to find them.