Employee whistleblowing continues to rise and has uncovered major fraud cases such as Enron, Pfizer and WorldCom. A Dallasnews.com article “Whistleblowers Find More Corporate Fraud Than Regulators” reported that in the healthcare field, 41 per cent of fraud cases are uncovered by employees deciding to blow the whistle. But while many companies encourage their employees to report cases of fraud that they discover in the workplace, employees who step up to the plate often end up losing their jobs and facing retaliation. Many whistleblowers who have been asked if they would do it again say no.
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The Rise of the Whistleblower
“On occasion, employees can gain from whistleblowing. When employees can bring a qui tam suit that the company has defrauded the government, whistleblowers stand to win big time: on average our sample of successful qui tam whistleblowers collect $46.7 million.”
On the other end of the spectrum, the decision to blow the whistle may have more to do with ethics than monetary gain:
“For many employee whistleblowers the more important benefit is avoiding the potential legal liability which arises from being involved in a fraud. These types of employee whistleblowers face significant costs. In 45% of the cases, the whistle-blower doesn’t identify themselves individually to avoid the penalties associated with bringing bad news to light. In 82% of cases with named employees, the individual alleges that they were fired, quit under duress, or had significantly altered responsibilities as a result of bringing the fraud to light. “
Implications for Your Business
The best whistleblower protection comes from company policies and practices once fraud has been uncovered and the whistle has been blown. There are many grey areas surrounding whistleblower protection laws based on the nature of the fraud detected, the industry in which the employee works and the state in which the fraud was detected.
When considering whistleblower protection, it’s important to consider the negative publicity companies suffer when they develop a reputation for mistreating whistleblowers who try to protect the public and the investors. A swift and fair investigation should follow any revelation of fraud.
Business Intelligence at Work discusses the importance of internal investigations and their impact on a whistleblower case:
“Whether your firm is publicly – or privately – held, a well-run internal investigation designed to produce credible results can turn a potential corporate crisis into a valuable opportunity to enhance a company’s reputation. The credibility of the result of the investigation depends in large measure on the credibility of the process used, including 1) the process used in-house by HR, 2) that used by outside counsel and/or investigators, and 3) in-house HR’s coordination of both internal and external processes.”
As an employer or a member of your company’s human resource or audit committee, the way a whistleblower situation is handled greatly impacts the image of your company. Many businesses claim that they encourage their employees to report fraud, but then don’t stand behind their employees when they actually do come forward with a fraud.
Solutions for Employers
Anonymous reporting systems make it easier for your investigation team to look into these claims and stop fraud from continuing. Many cases that get public attention do so because the fraud schemes had been taking place for a number of years without being reported. Early detection and reporting of fraud allow many businesses under investigation to salvage their reputation.
Make anonymous reporting of fraud accessible and possible for your employees. Address the issue of reporting fraud in the workplace in your company’s ethics and compliance policy. Outline the steps for anonymous reporting. Include hotline or ombudsman contact information and reassure employees that confidentiality will be upheld to the highest degree possible.
Look into investigation systems such as i-Sight Software and ethics hotline which sends alerts when a new complaint is received and can automatically trigger a new case. Having a hotline and case management system in place allows your company to respond to allegations quickly and tracks repeat offenders.