WHISTLEBLOWER : SAINT OR SINNERS ?

PUTRI ROUDINA MAS’UD 041411331084AMALIA KUSUMA DEWI 041411331246PAMBUDI PRATAMA PUTRA A 041411331211

Accounting English Class 2014

GROUP 2

CASE SUMMARY

Whistle blowers are individuals who report unethical practices by their employer to outsiders

• Whistle blowers are often lauded for their courage and integrity

• Many people do not report illegal activity since they fear to face “unemployment” and “ ridicule from the company”

• Whistle blower law adopted in 1986- pays informants as much as 30% of legal fines-settlements often exceed $ 100 million!!

• Employees encouraged to quickly report wrongdoings instead of trying to rectify internally

• In 1995, Douglas Durand, the Vice President of TAP Pharmaceuticals- suspected that TAP was engaged in illegal activities

• Durand believed that: a) TAP was working with doctors to bill Medicare for the

free drugs- a practice against the federal lawb) TAP paid a 2% fee to individual doctors to cover

“administrative costs”- a kickback in Durand’s opinion

• Durand decided to blow the whistle- contacted with attorney Elizabeth Ainsile- started to keep noted and collect company documents as evidence-while his lawyer attempted to get the federal govt. involved

• February 1996- Durand received $ 35,000 and left the company

• 3 months later, his lawyer filed suits against TAP• More that 500 boxes of documents were collected,

containing evidences against TAP• TAP fought the lawsuit which was finally settled in April

2001- Durand’s take was a cool $126 million!• TAP’s troubles were yet to come-prosecutors filed

further criminal charges against the company- “ To send a very strong signal to the pharmaceutical industry”

• As the trial progressed- flaws in Durand’s story began to appear :

a) The kickbacks that Durand claimed TAP paid to doctors never occurred

b) The company never overcharged Medicarec) TAP never bribed the doctors• Finally- in July 2002, TAP was cleared of the

charges- but not before incurring $ 1 billion in legal fees

• Supporters of whistle blowing say “ Having informants report on company wrong doing is the best way to prevent illegal activity

• Opponents say “ It is a means to extort large financial gains from companies”

QUESTIONS

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QUESTION 1Do you believe that whistle-blowing is good for organizations and its members, or is it, as David Stetler believes, often a means to extort financial gains from companies?

• Whistle blowing is definitely good for the organization as in new corporate world organizations are not only liable to shareholders but also to all other stakeholders concerned with the companies

• Whistle blower will not only protect rights of all stakeholders but would also protect rights of minority shareholders so that management can not involve in activities not authorized by all stakeholders.

• Moreover, Whistle-blowing is an ethical dilemma, it may be good and it may be bad for the organization and its members.

• If the organization is indeed practicing unethical activities then it would not benefit from whistle-blowing as it exposes the unethical practices and then it would affect their credibility and the organization’s competitiveness in the market as well as being incriminated in legal proceedings and the like

• It may also be bad for the members of the organization since it would likely contribute to the loss of confidence in the organization

• it may also be good for the organization especially if the unethical practices had been committed by a few of the members of the organization . It gives the organization the opportunity to right the wrongdoing of its members and salvage its reputation and its market value .

• Not all whistle-blowers are ethically and morally upright, this is evident especially if the whistle-blower stood to gain much from spilling the beans.

• In this case of Douglas Duran, a former VP of sales for TAP, it was the good ethics and his intuition that had to make him decide, act and correct the wrongdoing of the organization while using the precise process of decision-making and choose to go through the court system to punish the organization for what they have been doing to the insurance company.

• One of the best ways to prevent illegal activity in an organization is by having informants within the organization that would report on the company’s wrongdoing.

• Some whistle-blowers tend to look for incriminating evidence, so that even if there is nothing unethical or illegal about the organization’s activities, he/she may make false assumptions in order to incriminate the company/organization.

QUESTION 2

How might self-fulfilling prophecy affect a whistle-blower’s search

for incriminating evidence against a company?

• The concept of self-fulfilling prophecy says that when we believe in something as being the truth, then we generally perceive all other things to fulfill what we believe.

• If a whistle-blower believes that the organization is engaging in unethical practices, then his /her search for evidences to support such claims would be geared towards supporting the belief of unethical behavior.

• This means, that even ordinary business transactions could be construed as being unethical even if it is not.

• Also , the whistle-blower might force other people to support his /her claims and interpret the evens in the company in terms of the unethical behavior he /she believes to be occurring in the company .

QUESTION 3When frivolous lawsuits occur, how might these cases affect future whistle-blowers who have a valid legal claim against their company?

  Would they be more or less likely to come forward?  

How might their claims be evaluated?  

What should companies and the government do to prevent frivolous lawsuits?

• Frivolous lawsuits are a waste of time and money, it disrupts the operation of the organization and it only breeds contempt , insecurity and loss of faith in thecompany .

• As such, it would also show that the whistle-blower actually was just digging up dirt for the sake of digging and not really having any concrete claims. This would influence how whistle-blowers could be perceived by the organization and the members of the company even if the whistle-blower has alegitimate cause.

• When frivolous lawsuits occur, it prevents possible whistle-blowers by havingtrying to report anything by being discouraged in investing the time and effort tofollow through with their claims because they will feel that they are wasting timeand that people will not take them seriously.

• In this case, if employees provided strong evidence, acted ethically and have an open case against an organization, the authorities will evaluate their claim, but inthe case in which a whistle-blower acts unethically and does not providesufficient evidence, and has a weak case, the authorities most likely will notevaluate their claim.

QUESTION 4

Do you believe that employees of a company have an ethical obligation to first attempt to report wrong-doing to members of the company itself, or should they go straight to the authorities when they suspect illegal activity?  

What are some advantages and disadvantages of both actions?

Most companies and organizations are set up upon an organizational tree systemand ranks of hierocracy, so it depends on where in the organization the wrongwas made, in order to figure out whether the wrongdoing should be reported tothe members of the organization of to the authorities.

If it is the case of a larger company and the wrong was made in a lower level, I believe the reporting should be made to a member in a higher level, but in thecase that the wrongdoing continues or it is done by members in the higher levels,the reporting should be made to the authorities.