Source: http://www.ethicsworld.org/ethicsandemployees/whistleblowinghotline.php
Timestamp: 2013-05-19 05:42:59
Document Index: 413363462

Matched Legal Cases: ['in fine', 'Art. 22', 'Art. 22', 'Art. 22', 'Art. 17', 'Art. 17', 'Art. 22', 'Art, 22', 'Art 24', 'Art. 12']

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US SEC Proposes Major Incentives for Whistleblowers Whistleblowers Feature in Increasing Numbers of US Corporate Cases Global Standard on Whistleblowing Programs Released Global Survey of Workplace Hotline Reports Shows Improvements in Key Industries Whistleblowing in the Australian Public Sector Europeans Reluctant to Blow the Whistle Most Hotline Reports Made Without Alerting Management Who Detects Corporate Fraud and Why? 18 Best Practice: EU on Whistleblowing New Whistleblower Documents in Guidant Case Whistleblowing in the Health Sector NBES on Whistleblowing * * * Enormous Changes Seem Likely in Incentives to Whistleblowers in US US Securities and Exchange Commission has unanimously voted to propose a whistleblower program to reward individuals who provide the agency with high-quality tips that lead to successful enforcement actions. The public is asked to comment on the proposed rules. The SEC’s decision stems from those parts of the recent US financial reform legislation (the Dodd-Frank Wall Street Reform and Consumer Protection Act) that the SEC states in its November 3, 2010 decision does map out a simple, straightforward procedure for would-be whistleblowers to provide critical information to the agency. The law established a whistleblower program that requires the Commission to pay an award to those who voluntarily provide the Commission with original information about a violation of the federal securities laws that leads to the successful enforcement of a covered judicial or administrative action, or a related action. Dodd-Frank also prohibits retaliation by employers against individuals that provide the Commission with information about potential securities violations. The SEC stated - Background:
Whistleblowers will receive a percentage of successful SEC actions that lead to fines of at least $1 million. The SEC stated that in this proposal, we have taken several steps to address Congress’s suggestion that the Commission’s whistleblower rules be clearly defined and user-friendly. First, to the extent possible, we have tried to adopt a plain English approach in writing the rules. Second, the SEC proposed Regulation 21F would provide a complete and self-contained set of rules relating to the whistleblower program. This means that in some places, we have proposed rules within the Regulation that largely restate key provisions of the statute. Although we recognize that this approach leads to some duplication between the statue and the rules, we believe that overall it will assist potential whistleblowers and add clarity, by providing in one place all the relevant provisions applicable to whistleblower claims.
In fashioning these proposed rules, the Commission has considered and weighed a number of potentially competing interests that are presented in implementing the statute. Among them was the potential for the monetary incentives provided to whistleblowers by Section 21F of the Exchange Act to reduce the effectiveness of a company’s existing compliance, legal, audit and similar internal processes for investigating and responding to potential violations of the federal securities laws. With this possible tension in mind, we have included provisions in the proposed rules intended not to discourage whistleblowers who work for companies that have robust compliance programs to first report the violation to appropriate company personnel, while at the same time preserving the whistleblower’s status as an original source of the information and eligibility for an award. At the same time, the proposed rules would not prohibit a whistleblower in a compliance function from reporting information to the Commission where the company did not provide the information to the Commission within a reasonable time or acted in bad faith. Another important policy issue raised by the statute is the potential for the monetary incentives provided by Section 21F to invite submissions from attorneys, independent auditors, and compliance personnel who may attempt to use information they obtain through their positions to make whistleblower claims. This exclusion focuses on those groups with established professional obligations that play a critical role in achieving compliance with the federal securities laws. Our proposed rules include certain exclusions for these professionals and others under the definition of “independent knowledge,” and we seek comment on whether the proposed exclusions are appropriate and whether they should be extended to other types of privileged communications or other types of professionals who frequently have access to confidential client information. Finally, we have attempted to maximize the submission of high-quality tips and to enhance the utility of the information reported to the Commission. More frequent reporting of high-quality information promotes greater deterrence by enhancing the efficiency and effectiveness of the Commission’s enforcement program. To achieve this goal, the proposed rules would impose certain procedural requirements designed to deter false submissions, including a requirement that the information be submitted under penalty of perjury, and requiring an anonymous whistleblower to be represented by counsel who must certify to the Commission that he or she has verified the whistleblower’s identity.
Posted 26/11/2010 * * * Whistleblowers feature In Increasing Numbers of U.S. Corporate Cases
They are very different cases. What links them is the central role of whistle-blowing. In the one case, involving the U.S. pharmaceutical company, Pfizer, a U.S. federal jury awarded $1.37 million in damages to a former company scientist who was fired when she voiced safety concerns. In the other case, involving Exxon Mobil Corporation, the company will pay $32.2 million to the United States to resolve claims that some of its units knowingly underpaid royalties owed on natural gas, the Justice Department said.
With increasing frequency, whistleblower cases are featuring in the U.S. media. Whistleblower are being seen as crucial to a rising number of corporate investigations. For example, UBS, the major Swiss banking company, agreed to pay over $700 million in fines to settle allegations from U.S. official authorities related to tax evasion by U.S. citizens and this case stemmed from a former UBS executive walking into the U.S. department of Justice with his story.
The Pfizer case, as reported in The New York Times, the jury ruled that the company had violated laws protecting free speech and whistle-blowers by retaliating against its former employee, Ms. McClain, who worked for the company from 1996 through 2005.
Reuters reported meanwhile that the U.S. government alleged that Mobil Natural Gas Inc, Mobil Exploration & Producing U.S. Inc and affiliates underreported the value of natural gas taken from federal and American Indian leases between March 1, 1988 and Nov. 30, 1999. As a result, the Mobil entities paid lower royalties than they owed to the United States and to American Indian tribes, the government said. The Mobil entities became part of Exxon Mobil through a 1999 merger.
Interestingly, this case came about from a lawsuit filed by a private citizen on behalf of the United States under the whistleblower provisions of the federal False Claims Act. Various other energy companies have agreed to pay more than $200 million to settle their portions of the lawsuit. Reuters added, the estate of the now-deceased whistleblower, Harold Wright, will receive $975,000 from the Exxon Mobil settlement, the Justice Department said.
Posted 04/09/2010 * * *
Global Standard on Whistleblowing Programs Released The International Chambers of Commerce has issued the first global standard on the creation of whistleblowing programs. The guidelines take into account the different cultural and legal environments that have inhibited a universal standard in the past.
Economic fraud destroys shareholders’ value, threatens enterprises’ development, endangers employment opportunities and undermines good corporate governance, says the International Chambers of Commerce (ICC). Sound whistleblowing programs are an important preventative measure to help combat corrupt behavior in the workplace.
ICC has issued guidelines on whistleblowing, the first world business organization of its kind to establish a global standard for facilitating the setup of these programs. “Fraud remains one of the most problematic issues for business worldwide, no matter the country of operation, industry sector, or size,” said Francois Vincke, Chair of ICC’s Anti-Corruption Commission. “While whistleblowing programs are a highly effective way to flag fraud early on, many companies do not have these schemes in place due to cultural or legal differences. ICC’s guide is the first set of practical tools that takes these factors into account, no matter the jurisdiction.” According to a 2007 study by consultancy KPMG, 25% of the incidents of fraud uncovered among 360 incidents analyzed came to light thanks to a whistleblowing system put into place by companies. Nevertheless, internal fraud reporting systems are not widespread throughout the world. An Ernst & Young survey of 13 European countries in 2007 showed only 33% of the company respondents said they had a hot line for employees to report incidents of possible fraud. The ICC guidelines, aimed at helping companies establish and implement internal whistleblowing programs, are based on the broad experience and practice of ICC member companies across a wide range of sectors and jurisdictions. They are also inspired by a large number of international and national legal provisions.
The following is a full list of Guidelines set out by the ICC:
1. Enterprises are encouraged to establish, within their organization and as an integral part of their integrity programme, a whistleblowing system, commensurate with their size and resources.
2. Such whistleblowing system should aim to:
answer, in full confidentiality, all reasonable requests for advice and guidance on business conduct matters and ethical concerns raised by the employees of the enterprise and of its subsidiaries or affiliates and by any of the group’s agents, suppliers and customers; and to;
receive and handle, at the earliest stage possible, all reports made about any occurrence, whether established or soundly suspected, of a breach of applicable laws and regulations, the enterprise’s code of conduct or the ICC Combating Extortion and Bribery Rules of Conduct and Recommendations, which could seriously harm the enterprise or the group, if no remedial action is taken.
3. Enterprises should appoint high level personnel of undisputable repute and extensive work experience to be in charge of the management and administration of whistleblowing program. As part of these arrangements, an enterprise may designate a firm, external to the group, specialized in receiving and handling whistleblowing reports. Such firm should be independent.
4. It is up to each individual enterprise to define the kind of communication channels it wants to use for whistleblowing purposes: oral or written communication, telephone-based communication, computer-based communication or any other tool which it considers adequate. Enterprises should endeavor to use in these communication channels as many of the languages spoken in the different countries of operation as reasonably possible.
5. A whistleblowing system, being part and parcel of the enterprises’ voluntary integrity programs, will only be successful if it is not over-regulated from the outside. Enterprises, however, should be aware that, in certain jurisdictions and cultural environments and because of data protection and labor law concerns, legal restrictions have been imposed on whistleblowing procedures, which they will have to comply with.
6. Each individual enterprise may decide, taking into account the applicable law of every country, in which a whistleblowing system will be put into place. In deciding to opt for an anonymous whistleblowing system, a company may take into account its cultural environment, as well as issues relating to the protection of privacy and the risk of unfair reporting. If an enterprise considers that reporting is made on a voluntary basis, its employees may opt to report a serious occurrence under any other internal or external procedure available.
7. All whistleblowers’ reports should be diligently acknowledged, recorded and screened. If there is abuse of the process, disciplinary action can be envisaged. As soon as reasonably possible, the main results of the due diligence examination should be appropriately communicated as feedback to the whistleblower. The person whose behavior has been reported, should also be informed of the main object of the ongoing procedure, thereby allowing this person to present objections.
8. All employees should be in a position to report serious occurrences without fear of retaliation or of discriminatory or disciplinary action. Therefore, the whistleblower’s employment, remuneration and career opportunities should be protected by the enterprise during a reasonable period of time.
Posted 7/21/08 Back To Top
Detailed analysis of the use of workplace hotlines provides a key set of benchmark data for corporations in 10 industries. The analysis has been published by the Security Executive Council, a U.S.-based international professional membership organization. This is the Council’s second Corporate Governance and Compliance Hotline Benchmarking Report. The analysis embraces more than 277,000 hotline incident reports from more than 650 organizations across all major industries over a five-year period. Rate data analyses across years are based on a four-year period from 2003-2006, as data volume for 2002 was too low for this type of analysis. Participants - or those who made reports - may be employees, former employees, vendors and the public. The data was masked to protect confidentiality.
This year’s survey covered the following industries: Agriculture, Forestry, and Fishing; Construction; Finance, Insurance, and Real Estate; Manufacturing; Mining; Public Administration; Retail Trade; Service Industries; Transportation, Communication, and Utilities; and Wholesale and Trade. The new study found that the retail trade had the highest rate of incident reports.
This benchmarking study was developed to help companies monitor their hotline systems and determine how well their awareness mechanisms work, said the Security Executive Council (formerly the CSO Executive Council). The goal is to help individual companies see how they stack up against others in their industries in terms of how many incident reports are logged, how employees are finding out about these hotlines, and the nature of the incidents reported. Therefore, the report includes in-depth analysis of each individual industry. However, some overall trends can also be observed.
Over the last five years that data was being collected, the numbers show smaller organizations are reporting fewer incidents, whereas mid-sized to large companies are reporting more incidents over time. In 2006, the retail trade industry had the highest incident rate reported (the rate is determined by how many incidents are reported for every 1000 employees), and the construction, mining, and service industries had the lowest rate of incident reports. The authors emphasize these numbers are not meant to point to any specific conclusions. They could mean the retail trade industry has better reporting mechanisms, it has a better awareness program, or it simply has a higher rate of employee misconduct. The organization encourages companies to investigate all possibilities.
It also highly stresses the importance of awareness programs. Over the past five years, the numbers show that most employees found out about their company’s hotline by a poster, followed by the Intranet and another employee. The survey also notes that 53 percent of the reports were made anonymously. A total of 65 percent of the incidents were serious enough to warrant investigation and 45 percent only required corrective action. The authors were surprised to find that those reporting incidents of corruption and fraud were the least likely to remain anonymous. Posted 11/27/07
Whistleblowing in the Australian Public Sector Lacks Robust Policies, Report Says
A study was recently conducted, called Whistling While They Work, on whistleblowing in Australian public sector agencies. With funding from the Australian Research Council and support from Griffith University in Australia, results were found to show that whistleblowers can blow the whistle without necessarily a fear of reprisal, but only if they do it inside the organization and carefully, have realistic expectations, and organize their own support.
Starting in 2005 and continuing to the present, over 7,000 public officials from 118 public agencies in Australia were surveyed.
Clear Legislation and Trust Drive Effective Whistleblowing
Some employees are hesitant to blow the whistle. Overall, 71.4 percent of respondents had directly observed at least one of a wide range of nominated examples of wrongdoing in their organization, and 61.1 percent rated at least one form of wrongdoing as at least “somewhat serious.” Surprisingly, 28.5 percent of respondents who observed wrongdoing they considered “very” or “extremely serious” did not report it.
The level of trust in management, the degree to which the whistleblower may be penalized, and whether or not the report would be investigated play an important role in whether or not incidences are reported. The survey did show that there is little evidence to support a view of whisteblowers as disgruntled and embittered employees, driven to report by perverse personal characteristics. The decision to blow the whistle was most likely influenced by perceptions of the seriousness of the wrongdoing and belief that whistleblowing would serve some good purpose. Comprehensive Internal Policies Are Significant, But Most Need Work
The majority, 97.1 percent, of respondents reported wrongdoing internally in their agency in the first instance, the report said. A similar number of public interest whistleblowing, 90.3 percent, ended internally as well. Only 9.7 percent of whistleblowing involved an external agency or the media at any stage. The researchers suggest internal whistleblowing reflects strong trust in management, and it also increases the obligation on agencies to manage whistleblowing well, and to protect whistleblowers.
It is interesting to note that in case study agencies, 48 percent of caseholders and managers surveyed believed that employees who report wrongdoing often or always experience problems as a result; however, survey results show that in reality, only 22 percent of whistleblowers said they were treated badly by management and/or co-workers as a result of reporting wrongdoing. By contrast, 56 percent of those whose reports were investigated indicated the investigation resulted in improved outcomes. Most bad treatment, if any, tended to come from management in the form of intimidation, harassment, heavy scrutiny of work, ostracism, or unsafe or humiliating work.
Agencies Should Boost Whistleblower Protection Procedures In general, most managers had a high level of support for whistleblowing, the report said. However, 40 percent of managers still did not know if they and their staff were covered by whistleblowing legislation, and were more likely than non-managers to agree they needed more information and training about the legislation. The level of sophistication among agency whistleblowing legislation greatly varied. Agency internal disclosure procedures were typically weakest on procedures to do with support and protection of whistleblowers. A rather high percentage of agencies had no procedures to protect whistleblowers, 46 percent.
These survey results were taken from a draft report. In-depth analysis of the survey findings are available in .pdf form. The editor, AJ Brown, of Griffith University, encourages readers to send their comments on the draft. See the full draft report for more information. Posted 10/30/07
Back To Top * * * Europeans Reluctant to Blow the Whistle
Fraud and unethical behaviour are facts of corporate life. But with a new European survey finding employees still fearful of the consequences if they blow the whistle, it is clear that many large firms could be doing far more than they claim to be doing to combat the problem. The article about the survey was released by Management-Issues.com on June 4, 2007.
Ernst & Young interviewed 1,300 employees of multinational companies in eight Western European and five Central and Eastern European countries to explore their views on how anti-fraud measures were implemented in their organisations. The survey found there was almost total unanimity that whistleblower rights should be protected, but many employees fear reprisals, even loss of employment, if they do blow the whistle. Nine out of 10 staff believe companies should have a code of conduct to address fraud, bribery and corruption. Yet only half of Central and Eastern European respondents and two-thirds of Western European respondents have such a code or are aware of one. One in five said that fear of repercussions would prevent them from blowing the whistle if they did suspect a collegue was involved in unethical behavior. Employees are "crying out for their employers to provide clarity and encouragement for them to act positively in the interests of the company," said Ernst & Young's David Stulb. " Employees want strong codes of conduct and make high ethical demands on companies in return. Regrettably some employers are failing to persuade staff they feel the same."
The article notes there are huge variations across countries concerning willingness to report unethical behavior. Overall, French employees are the least likely to report suspicions of fraud, whereas British employees are the most willing.
Ultimately, the responsibility lies with the company. "Good education and awareness programs will help but in the final analysis it is how the company and its leadership behave that sets the standard for the whole organisation," Stulb said.
Posted 6/20/07 Back To Top * * * US Study Finds 2/3 of Hotline Reports Made Without Alerting Management A benchmarking report by CSO Executive Council, an international organization of corporate and government security executives, The Network, a US-based hotline provider, and the Association of Certified Fraud Examiners, an international anti-fraud training and education organization, shows that almost two-thirds of the 182,715 ethics reports studied were made via hotlines without first alerting anyone in management. The study is based on an analysis of reports from employees, former employees, vendors and the general public from 550 U.S. organizations across all industries over a four-year period (2002-2005). Among the study’s key findings: • Seriousness of Reports: For those reports where case outcome was provided, the majority of reports (65%) were serious enough to warrant an investigation and 46% resulted in corrective action taken. • Anonymity: 71% of participants do not notify management of an issue before making a report and 54% of reports were made anonymously.
• Types of Violations: The majority of reports received pertain to personnel management incidents (51%). Beyond the personnel management category, company/professional code violations (16%), employment law violation (11%) and corruption and fraud (10%) are the most commonly reported incidents regardless of industry. • Corruption, Fraud and Anonymity: Participants reporting corruption and fraud incidents were less likely to remain anonymous than any other incident category. They remained anonymous only 36% of the time.
• Hotline Awareness: The largest percentage of participants (39%) acknowledged awareness of a hotline through a poster or sign. • Incidence of Reports in Small vs. Large Organizations: An overall average of 14.9 incidents are reported per 1,000 employees. However, smaller organizations (those with less than 5,000 employees) receive an average of 21.8 incidents reported per 1,000 employees. In contrast, organizations with an employee count between 10,000 and 19,999 receive an average of 13.6 incidents reported per 1,000 employees. Those organizations with more than 50,000 employees receive an average of 14.3 incidents reported per 1,000 employees. For the full report and methodolgy click here. Posted 2/27/07
Back to Top * * * Who Detects Corporate Fraud and Why?
New Study Shows Limits of Sarbanes-Oxley in Encouraging Fraud Detection
What external control mechanisms are most effective in detecting corporate fraud? To address this question, authors Alexander Dyck of the University of Toronto’s School of Management, Luigi Zingales of the National Bureau of Economic Research, and Adair Morse of the University of Michigan’s School of Business studied all reported cases of corporate fraud in the U.S. (over 230) in companies with more than 750 million dollars in assets between 1996 and 2004. In their paper Who Blows the Whistle on Corporate Fraud? for the National Bureau of Economic Research, a New York-based economic research organization, the authors find that fraud detection does not rely on one single mechanism, but on a wide range of often improbable actors. Their findings include: On who detects fraud at companies
Only 6% of the frauds are revealed by the U.S. Securities and Exchange Commission, which regulates U.S. publicly-traded companies, and 14% by corporate auditors. More important monitors are media (14%), industry regulators (16%), and employees (19%). On Sarbanes-Oxley’s effects on whistleblowing
From 1996 until Sarbox's enactment, employees made up 21 percent of fraud detectors. Since then, that number has dropped to 16 percent. Before the Sarbanes Oxley Act of 2002 (which sets requirements for corporate internal control mechanisms) only 35% of the cases were discovered by actors with an explicit mandate. After the Sarbanes Oxley Act, the performance of mandated actors improved, but still account for only slightly more than 50% of the cases.
On employee disincentives to blow the whistle According to the authors, “In no case is the tension between access to information and lack of incentives to reveal fraud more intense than for employees.”
Employees face significant disincentives to engage in whistleblowing: in 82% percent of cases with named employees, the whistle-blower "alleged that they were fired, quit under duress, or had significantly altered responsibilities as a result of bringing the fraud to light."
On the use of monetary incentives for whistleblowing
Monetary incentives for detection in frauds against the government influence detection without increasing frivolous suits, suggesting gains from extending such incentives to corporate fraud more generally.
For the full paper and methodology visit NBER's website.
Posted 2/22/07 Back to Top * * * 18 Best Practices: The EU on Effective Whistleblowing Policies A recent report by RCC Risk Communications Concepts for the European Parliament entitled, "Whistleblowing Rules: Best Practice; Assessment and Revision of Rules Existing in EU Institutions" examines the history, context, and the strengths and weaknesses of current whistleblowing approaches of EU Institutions. Then, drawing upon its study of whistleblowing policies in both EU and non-EU states, the report presents a benchmark list of 18 "Best Practices,", which it measures against existing EU policies. While the benchmark was published for the purpose of EU reform, the 18 practices are an excellent tool for measuring and improving the effectiveness of whistleblowing policies in other institutions and companies. Benchmark of 18 Best Practices for Whistleblowing Policy
For the full report follow this link. See below chart for an explanation of the benchmark Element
1) Framework and Awareness
Awareness of the benefits of risk communication
fostered, within a framework of
mutual responsibilities, clearly defined in
proprietary Value Statements and/or
Codes of Conduct plus a definition of
(limited) duties to disclose. Staff Regulations,
for Commissioners 2/5
Whistleblowing is treated as a disciplinary
issue and danger. Value System
could be more pronounced and shows
little integration of Whistleblowing and
harassment issues. 2) Scope of Personal Coverage
Everyone who can possibly be a source of
(internal) risk information. Relevant risk
information from outside sources is also
welcome. Protection according to
exposure. Art. 22a, 1, 1a,
Ombudsman 3/5
Officials covered by policy, not other
servants, not former staff or applicants;
Free Phone and Ombudsman for contractors,
suppliers, citizens etc. 3) Subject Matter
All risk relevant issues covered. Personal
responsibility to judge what sort of information
relevant to organisation and/or
public interest. Article 22a 3/5
Only, if detrimental to interests of
Communities – not clear whether interests
of General Public covered, too
many conditions. 4) Implementation
Clear steps and procedures. Too many
conditions and important risk information
will be lost. Art. 22 a, 22 b 2/5
Limited recipients not clearly defined;
OLAF has to be involved, even where
issue has no financial relevance. 5) Internal/External
Preferably internally. Where that seems
unreasonable or effective, also outside
disclosures Art. 22 a, 22 b 2/5
The emphasis on a limited number of internal
addresses is clear; external
recipients immediately lead back to
OLAF. 6) Confidentiality
Confidentiality to protect legitimate interests.
Whistleblower identity protected
against harassment. Art. 17 2/5
Unclear, what protection Art. 17 would
provide to a whistleblower. 7) Anonymity
Anonymous sources should be admitted
and equally protected, encouraging whistleblowers
to seek more effective communication.
Electronic protection a compromise. OLAF
Free Phone 3/5
No explicit provision, OLAF Free Phone
might be open to staff, protection
unclear, technical solution in planning
stage 8) Time Scale
Reasonable statutes of limitation, e.g. one
year after consequential damage first
realised. Art. 22 a 2/5
“Without delay” is very strict and means
whistleblower has burden of proof, this
could preclude protection.
9) Protections
No retaliation or harassment against
anyone under any circumstances. Harassment
as well as reporting rumours or
distorted facts as serious misconduct. Art, 22 a, 22
b, 24, 12 a 1/5
Harassment formally illegal; sanctions
against harassment unheard of.
Unclear whether Art 24 protects
against colleagues, other protection
nearly impossible to acquire. 10) Right to Refuse
Permit right to refuse participation in illegal
activities with same protection as for
Whistleblowing. Article 21a 3/5 Reasonable right to refuse exists, protecttion
as problematic as for whistleblowers. 11) Sanctioning System
Sanctions for blocking information channels.
Sanctions for harassment of whistleblowers.
Cases of Whistleblowing should
be positively reflected in the staff report. Art. 12 a, 22a,
Harassment is misconduct, however
rules on Whistleblowing so narrow, that
much harassment could appear as
appropriate “disciplining.” 12) Burden of Proof
A sliding scale of the burden of proof,
both in regard to the quality of proof and
the amount of material, analogous to UK
PIDA. Prima facie proof in case of
harassment, the shift. Implicit 1/5
Burden of proof seems almost totally
on whistleblowers’ side, since hurdle
for dutiful reporting high and explicit
protection only against activities of
Institution itself. 13) Management Follow-Up
Transparent rules on what will happen
once disclosure has been made. Generally
information about substance of this process. OLAF
OLAF handbook quite clear, time scale
surprising; unclear how other services
have to react. 14) Whistleblower Participation
Whistleblower acknowledged as active
contributor in the follow-up procedure. OLAF 1/5
Report has to include all evidence, no
provisions for further input or dialogue 15) Independent Review Independent review system, whether
observed behaviour constitutes harassment
and whether related to Whistleblowing.
Access to the court system, preferably
with independent out-of-court dispute
resolution options (mediation) as a less
interruptive intermediate alternative. Ombudsman,
European Civil
Service Tribunal,
CFI 3/5
Formally the judicial review is intact,
until recently, though resource intensive,
hearings were not appreciated as
adequately providing justice. Only
review of matters of law after Civil Service
Tribunal decision; as yet, no experience
with this panel; settlement is to
be promoted; third party mediation
should be institutionalised. 16) Support
Impartial advice for the prospective
whistleblower. OLAF
OLAF is focussed on prospective investigations,
not on whistleblower concerns.
Independent advice should be made available. 17) Staff Buy-In
Risk communication system needs staff
confidence. EU System of
Joint Committes,
etc. 2/5
Codes of Conduct, Rules on Ethics and
Rules on Risk Communication should
be set up with the widest possible involvement
of stakeholders. 18) Credibility
Tone from the top and message in the
rules support Whistleblowing and the
practice in the organisation. Commission
and Practice 3/5
General tone certainly very positive; the
impression of the statements has been
impaired by delayed and incomplete
implementation, stance of middle management
unclear. TOTAL 39/90 = 43% Explanation of Benchmark
The Benchmark and criteria have been adopted from the Study and take particular regard to the situation of the EU Communities. The issue of the study is certainly not a matter of statistics. However, since all criteria are essential, a performance of
- less than 50% on an overall average, or
- less than 2/5 on more than one element raises serious doubt about the effectiveness of the system, even where parts were outstanding. Currently the EU Staff Regulations reach an overall average of 43 % – on the first glance not so far from an acceptable 50 % - however with three elements at only 1/5 points. The situation has to be rated as clearly below minimum standards, if one considers that the rules fail (2/5 points or less) on two thirds of the criteria. That means, on two thirds of the criteria current rules and practice are clearly below what has to be expected as against the benchmark. Only 6 out of 18 criteria are clearly in the acceptable region, none is outstanding. In order to improve,
- first, all marks of 1/5 need to be addressed. These are clearly unacceptable but also relatively easy to bring in regions of acceptability;
- next all marks of 2/5 should be addressed. These need to be improved to an overall “pass” (equal or better than 3/5);
- from time to time it will be easy and obvious to make improvements on other points as well. With this strategy and understanding the complexities of changing the Staff Regulations, an overall “pass” should be achievable within one year (by 2007). The necessary cultural improvements can be expected to a certain extent even throughout that first year, because the process will have to be taken very seriously. Beyond that it will take much longer to build up a host of positive experiences for all, which in turn will influence the underlying culture. An overall mark of at least 66 % (~50% improvement) should be aimed for and seems achievable within 3 years. Better marks than 75% will only be possible once there is trust in safe internal risk communication. Trust needs repeated positive experiences and time to build up. Along this ambitious schedule this can be possible within 5 years. Back to Top * * * Whistleblower Reveals Ethical Dilemmas at Medical Supply Company, Guidant Corporation
UPDATE, June 7, 2006: The New York Times reported that newly released company records show that Guidant Corporation drafted a detailed letter in January 2005 to physicians disclosing the electrical flaws in its defibrillators and its intention to pull back devices not yet implanted into patients. The letters, however, were not sent and the defibrillators continued to be implanted. These records challenge Guidant executives defense last year of their decision not to tell doctors about significant device defects, citing concerns that doing so could have exposed patients to risks from unnecessary device replacement. UPDATE, April 27, 2006: The New York Times reported that the Heart Rythm Society, which represents implant device specialists, called for sweeping changes in how the medical device industry and government oversee implanted heart devices. It stongly urged companies to use outside experts to help them decide when to issue alerts about potential product safety problems, recommended ways of collecting product performance data, and proposed methods for standardizing how doctors and patients are made aware of problems. Newly released court documents are shedding light on a case that raises questions about the ethical obligations that medical supply companies have to their customers – doctors, and, by extension, their patients. The company has now responded publicly, but behind today’s headlines is a story that raises critical ethical business issues. Guidant Corporation, a leading manufacturer of heart defibrillators, has cautioned doctors to check the voltage on certain implantable defibrillators after the company received reports of defective devices. This is the latest development in a case that was featured in a March 10, 2006, U.S. Senate Judiciary Committee hearing on potential new legislation that would prohibit corporate executives from intentionally distributing defective products. In a press release on March 13, 2006, Guidant announced that it is voluntarily advising physicians about important product information regarding CONTAK RENEWAL 3 RF and RENEWAL 4 RF devices. Guidant said it has apprised the United States Food and Drug Administration (FDA) of this action and the FDA may classify this communication action as a recall. Guidant said physicians should use this information to decide how best to treat their patients. This is a key issue highlighted by earlier Guidant events: On March 8, 2006, the New York Times reported that a Guidant consultant, Dr. Richard N. Fogoros, had told the company that he believed it had an ethical responsibility to inform doctors of the defects found in one of the life-saving heart defibrillators the company manufactures. His concerns related to a different problem with the defibrillators than the the one addressed on March 13 by Guidant, but his warnings, just like today’s announcement, go to the heart of the question of how early a medical supply company should warn doctors when there is evidence of a product defect.
Memos from Dr. Fogoros challenge Guidant’s decision not to publicize flaws on the basis that it believed patients would face a greater risk from replacement surgery than they did from the units themselves. It appeared that Guidant did not go public because it did not believe it had a sufficient number of cases of defects. Dr. Fogoros argued in memos back on May 18, 2005, that while Guidant’s decision was statistically defensible, the company had violated a “sacred obligation” that it had to doctors by interjecting its medical judgment for theirs. “Neither the doctor nor the patient consider themselves to have signed up to have Guidant dictate any treatment plans,” he reasoned. Furthermore, he wrote, the situation presented Guidant with a clear conflict of interest, which would predispose it to divulge product malfunctions only when “absolutely necessary.” Dr. Fogoros, according to the report in The New York Times, added that “[The conflict] is obvious for all to see….This means that when a tragedy occurs our decisions will be viewed in the harshest light possible, without any objective consideration of the statistical niceties supporting our actions.” Dr. Fogoros stressed in his memo that while he believes Guidant’s products to be extremely dependable, he worried that the company’s use of numbers to defend its choices under circumstances which involve people’s lives would generate “bitter derision towards our protests that we were only acting with the patients best interests at heart.” Complicating the situation was the fact that the company was at the time negotiating a merger with the Johnson and Johnson Company. Dr. Fogoros suggested in his memo that the company could profit from revealing the defects by simultaneously announcing a marketing program for a new product that would enable doctors to monitor the progress and effectiveness of Guidant devices. However, despite Dr. Fogoros’s urgings, it was not until November, six months later, that Guidant began to disclose some of the risks related to the defibrillators. The memos were written just after Guidant informed a Minneapolis physician, Dr. Barry J. Maron, of a defect in its defibrillators, which could cause it to short circuit and malfunction (defibrillators use electricity to interrupt potentially lethal heart rhythms, and are usually replaced every five years). The company informed Dr. Maron of the problem after one of his patients died as a result of a dysfunctional Guidant defibrillator, one of seven patient deaths tied to the devices. Dr. Maron urged the company to warn doctors of the product’s potential risks, which it had known about for three years. When the company failed to do so, Dr. Maron and a colleague, Dr. Robert G. Hauser, notified other physicians and contacted the New York Times, which ran an article in late May 2005 about the defibrillators. Since the article, Guidant has recalled over 10,000 implantable heart devices and is under inspection by the Justice Department and the Food and Drug Administration. Guidant has responded to criticism by insisting that its decisions are motivated solely by the concern for patients well-being (October 20, 2005 Guidant Press Release) and by creating an independent panel of experts to propose guidelines for physician communications (August 29, 2005 Guidant Press Release).
Back to Top * * * Health and Governance Many cases of alleged malfeasance in the health sector come to light as a result of the courage of whistleblowers. The Global Corruption Report 2006, to be published by Transparency International on February 1, 2006, highlights numerous instances of massive corruption and unethical activities in the health area across the globe – time and again these cases would not have been discovered had it not been for whistleblowers. The latest example was reported on January 24, 2006: Suit Accuses Medtronic of Bribing Doctors UPI reported from Memphis in the United States that a whistleblower lawsuit accuses Medtronic (a leading U.S. manufacturer of healthcare products) of paying doctors thousands of dollars in consulting fees to get them to use its spinal implants. In court papers, lawyers say that one Wisconsin surgeon received $400,000 for a consulting contract that required eight days of work, while another, in Virginia, was paid almost $700,000 in the first nine months of 2005. UPI noted a story in the New York Times that reported that Jacqueline Kay Poteet, a former manager of travel services for Medtronic, filed the lawsuit in Memphis. Her job included making travel arrangements for doctors who traveled to conferences on Medtronic's dime. UPI reported that if the Minneapolis-based company settles with the Justice Department, Poteet, who left her job because of disability in 2003, will get a percentage of the settlement. The Justice Department has not yet formally intervened in the lawsuit, although the Times said it has offered Medtronic a $40 million settlement. A company spokesman said that consulting arrangements with doctors are critical to improving its product. Back to Top * * * The NBES on Whistleblowing 2005 National Business Ethics Survey: How Employees Perceive Ethics at Work in the United States (NBES)
Ethics Resource Center (www.ethics.org)
A section of the 2005 National Business Ethics Survey highlights the serious problems that now exist with regard to whistleblowing.
Outcomes for Whistleblowers
The NBES asked employees who reported misconduct what personal consequences they faced after they reported what they had seen.
Findings: Of employees who reported misconduct, 48% received positive feedback, while 52% did not. Of employees who reported misconduct, 22% experienced retaliation, while 78% did not. The analysis by the NBES found that most striking is the fact that misconduct is widespread. More than half of all employees witness an act of misconduct each year (52% of respondents), and more than 36% of those who see it also witnesses at least two or more incidents.
One possibility that this finding suggests is that an act of misconduct does not always take place in isolation. If misconduct happens within employees' circle of associations, at least one-third of the time some form of misconduct is likely to happen again in the course of their work. Fifteen percent of employees who feel pressure to compromise the standards of their organization say this pressure is inflicted by their coworkers, and 94% of employees who feel pressure say that they have observed at least one type of misconduct. Back to Top * * * Sign up for news from EthicsWorld