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Whistleblowing
- 1. Whistleblowing "Our livesbegin to end the day we become silent about things that matter." -Martin Luther King, Jr.
- 2. Overview What isWhistleblowing? When and how to blow the whistle Risks Statistics Ethical Dilemma Case Study: Challenger Disaster 2002: The Year of the Whistleblower
- 3. What is Whistleblowing?Whistleblowing is… 'raising concerns about misconduct within an organization or within an independent structure associated with it' (Nolan Committee on Standards in Public Life) 'bringing an activity to a sharp conclusion as if by the blast of a whistle' (Oxford English Dictionary) 'giving information (usually to the authorities) about illegal and underhand practices‘ (Chambers Dictionary)
- 4. When to Blowthe Whistle Knowledge of inappropriateness Making proprietary software available to public Back door/booby-trap in code Embezzlement or redirection of funds Bad claims Unrealistic date projection Advertising hype Knowledge of impending doom
- 5. What to thinkabout The “mom” test: “I’m going to be in this industry a long time. Will this damage my reputation with my boss, colleagues, future customers or employers?” The personal responsibility test: Weigh personal obligations to family and etc. that can only be met if you have an income. “Will harm avoided by greater than harm incurred?”
- 6. How to Blowthe Whistle Do it anonymously let the evidence speak for itself and protect yourself if possible Do it in a group charges have more weight and won’t seem like a personal vendetta. Present just the evidence leave interpretation of facts to others. Work through internal channels start with your immediate supervisor or follow the standard reporting procedure Work through external channels go public (biggest risk)
- 7. Risks of WhistleblowingWB rarely works out well for the whistleblower Viewed as a “rat” who ratted out the company Resented by coworkers Serious contemplation of job change or personal problematic activity (drinking, drugs, self-destructive behavior) Depends on the organization for a job, the job makes money, the family needs money to survive
- 8. Statistics Polling Group:233 individuals polled, 40% responded Average age: 47 Employed for 6.5 years at job Almost all lost job
- 9. Statistics Negative Effects:51% of gov’t employees lost their job 82% harassed by superiors 69% watched closely after blowing the whistle 63% lost job responsibilities 60% fired 10% attempted suicide Positive Effects: 20% felt their actions resulted in positive changes More than 50% (of responders) would do it again
- 10. Ethical Dilemma TheMum Effect --reluctance to blow the whistle Audit report may contradict the best judgment and vested interests of the powerful players backing a project; fear of reprisals The Deaf Effect --reluctance to hear the whistle “ I wrote lots of reports. I escalated things as much as I could, but in the end, they said, ‘We really appreciate your efforts, but thanks, but no thanks’” The Blind Effect --reluctance to see the need to blow the whistle Established audit functions do not operate effectively because they try to conceal the information from management
- 11. Case Study: Challenger January 28, 1986 Space Shuttle Challenger exploded 72 seconds into its flight, killing all 7 crew members. The flight received much media attention because a teacher, Christa McAuliffe, was on board.
- 12. Challenger: WhatWent Wrong Explosion caused by O-ring failure between segments of the booster rockets. Several employees of the manufacturer, Thiokol, had been aware of the O-ring deficiencies. No one listened to the engineers who knew about the problem
- 13. Challenger: MajorPlayers Roger Boisjoly, seal specialist at Thiokol Directed task force for a year to study the evidence that hot gases eroded O-rings Allan McDonald, manager of solid-rocket motor program Larry Mulloy, NASA official, manager of booster programs George Hardy, NASA official
- 14. Challenger: TimelineJuly 31, 1985 Boisioly wrote a memo saying, “it is my honest and very real fear that if we do not take immediate action to solve the problem [the company could] stand in jeopardy of losing a flight.” No conclusive evidence to back up memo
- 15. Challenger: Timeline January 27, 1986, the day before lift-off McDonald was worried about temperatures dropping to 22 degrees overnight. 14 engineers “fought like hell” to get permission to present to NASA All 14 Thiokol engineers recommended postponing the launch Mulloy and Hardy challenged the recommendation Mulloy: “When do you want me to launch, next April?” Hardy: recommendation “appalled” him Thiokol: Management reversed the recommendation for postponement What kind of dilemma was Thiokol forced into?
- 16. Challenger: TheExplosion O-rings partially failed on ignition (picture) Melted metal sealed the gap Hit a wind shear, causing the booster to flex and the seal to dislodge Loss of cabin pressure Flames led to explosion
- 17. Challenger: TimelineAfter the explosion McDonald Went public Demoted by management Public outcry and Congressional investigation led to a reversal of that decision and a promotion instead Became spokesman for Thiokol and new rocket boosters Boisjoly “ I hope and pray that I have not risked my job and family security by being honest in my conviction” Never worked on a shuttle again because it was too painful Wondered if there was more he could have done, even though the record shows he minced no words Reassigned by management with altered responsibilities Took leave of absence, a year later went on disability
- 18. Challenger: TimelineLater Repercussions Boisjoly sued Thiokol for $1 billion in personal suit Dismissed because Thiokol’s actions were ruled not to have been designed to cause him distress Biosjoly sued Thiokol for $2 billion under False Claims Act Filed on premise that Thiokol falsely certified safety and knew that the rockets they supplied to NASA were defective Dismissed in 1988: Judge ruled that decision to launch was not a false claim, but an engineering judgment with which other engineers disagreed, and that NASA also knew the facts behind the allegations, and was not deceived
- 19. Challenger: QuestionsWhat effects did Boisjoly and McDonald face when they blew the whistle? Why did NASA not listen to the engineers? Why did Thiokol to reverse its decision even though they knew it was incorrect? Would you have blown the whistle differently than Boisjoly and McDonald? If so, how? Did McDonald go public at the right time?
- 20. 2002: Yearof the Whistleblower Cynthia Cooper WorldCom Coleen Rowley FBI Sherron Watkins Enron
- 21. Sherron Watkins FormerVice President of Enron Corporation Alerted then-CEO Ken Lay in August 2001 to accounting irregularities within the company Warned that Enron 'might implode in a wave of accounting scandals.' Testified before Congressional Committees from the House and Senate investigating Enron's demise. Lauded in the press for her courageous actions, but left her job at Enron after a few months when she wasn't given much to do
- 22. Coleen Rowley FBIstaff attorney Wrote 13-page memo to FBI Director about pre-9/11 intelligence in May 2002 Testified for the Senate Judiciary Committee Concerned the FBI was becoming more bureaucratic and micromanaged Helped government focus on better intelligence management Fanny Pack
- 23. Cynthia Cooper WorldCom’sDirector of Internal Audit Her team discovered $3 billion in questionable expenses Met with 4 executives to track down and explain the undocumented expenses Disclosed findings, WorldCom stock frozen, corporate credit rating went from B+ to CCC- Remained as VP of Internal Audit, not promoted, no gratitude, resented by employees
Editor's Notes
- #4 http://www.cipd.co.uk/subjects/empreltns/whistleblw/whistle.htm
- #5 Knowledge of Inappropriateness: When you know something is going on that should not happen. Bad claims: When you know that incorrect details have been given about the project. For example, if you know that your project is not on schedule and your co-worker is advertising that it is ahead of schedule with no problems, that would be a bad claim. Or another example, if the marketing team for a product says the product has been safety-tested for 2700 hours with no problems and then you discover that the tests excluded important parts of the product. Knowledge of Impending Doom: When you know the project is doomed for failure and can prove it, yet no one else realizes it yet.
- #6 What to think about before you blow the whistle…these are some of the issues that you will be up against should you ever have to blow the whistle.
- #9 http://legacy.ncsu.edu/CSC379/lectures/wk16/lecture.html A survey of whistleblowers was taken by Donald R. Soeken , a whistleblower himself. Out of 233 individuals polled, about 40% responded. Their average age was 47. They had been employed at their jobs for an average of 6.5 years before blowing the whistle. Almost all of those in private industry lost their jobs. Fifty-one percent of government employees lost their jobs. Eighty-two percent said they'd been harassed by superiors, and 69% said they were watched closely. Sixty-three percent reported losing some job responsibilities, and 60% said they were fired after launching their complaints. Almost 10% had attempted suicide. Only 20% felt that their actions resulted in positive changes in their workplace. But more than half of them said they would do it again.
- #10 NOTE: The effects listed are purely from this one study. The statistic that more than 50% would do it again is refuted in an article that says the majority would NOT do it again: “Whistle-blowers don't have an easy time. Almost all say they would not do it again. If they aren't fired, they're cornered: isolated and made irrelevant. Eventually many suffer from alcoholism or depression.” (http://foi.missouri.edu/whistleblowing/whistle2002/persons.html)
- #12 Full Text: http://www.aerospaceweb.org/question/investigations/q0122.shtml
- #16 Thiokol’s Dilemma: * Customer Relations: Do I please the government/customer and gloss over a hypothetical emergency, or do I pay attention to the engineers and spend more time and money to fix what could be a huge problem? * Media Relations: What will Thiokol look like in the news as a company? Will we be given a bad rap if we put off an important launch in order to fix things? What happens if a disaster ensues? * Company Relations: What will happen to the relationship between management and engineers? What happens if management is wrong and engineers are right? * How do I balance these three issues? Ultimately where are my priorities?
- #17 http://www.aerospaceweb.org/question/investigations/q0122.shtml Note: The red circles and arrows are detailing the O-rings as the shuttle lifted off. As time passed, you can see them explode and produce some black exhaust.
- #20 Answers may differ, but here’s some to get discussion started. See slide 17. McDonald went public, was demoted, and then reinstated and became spokesperson. Boisjoly never worked on shuttles again and eventually filed for disability. NASA was pressured by time, publicity, and the media. The launch was in the media a lot because of the teacher on board, and NASA is always needing positive press. Delaying a launch impacts the public opinion of NASA and can affect the budget. Peer pressure. Approval of others. Wanting to have a successful launch on time. Could have gone through channels, could have gone public immediately before talking to NASA and Thiokol management, etc. Who knows if the shuttle would have launched if McDonald took his concerns public before the launch date. After the fact usually only produces lawsuits and possibly a change in actions/policies for the future.
- #21 http://foi.missouri.edu/whistleblowing/whistle2002/persons.html This is where three women of ordinary demeanor but exceptional guts and sense come into the picture. TIME magazine named Sherron, along with two others, Coleen Rowley of the FBI and Cynthia Cooper of WorldCom, as their 2002 Persons of the Year, for being "people who did right just by doing their jobs rightly." These women were for the 12 months just ending what New York City fire fighters were in 2001: heroes at the scene, anointed by circumstance. They were people who did right just by doing their jobs rightly—which means ferociously, with eyes open and with the bravery the rest of us always hope we have and may never know if we do. Their lives may not have been at stake, but Watkins, Rowley and Cooper put pretty much everything else on the line. Their jobs, their health, their privacy, their sanity—they risked all of them to bring us badly needed word of trouble inside crucial institutions. Democratic capitalism requires that people trust in the integrity of public and private institutions alike. As whistle-blowers, these three became fail-safe systems that did not fail. For believing—really believing—that the truth is one thing that must not be moved off the books, and for stepping in to make sure that it wasn't, they have been chosen by TIME as its Persons of the Year for 2002. Sherron Watkins is the Enron vice president who wrote a letter to chairman Kenneth Lay in the summer of 2001 warning him that the company's methods of accounting were improper. In January, when a congressional subcommittee investigating Enron's collapse released that letter, Watkins became a reluctant public figure, and the Year of the Whistle-Blower began. Coleen Rowley is the FBI staff attorney who caused a sensation in May with a memo to FBI Director Robert Mueller about how the bureau brushed off pleas from her Minneapolis, Minn., field office that Zacarias Moussaoui, who is now indicted as a Sept. 11 co-conspirator, was a man who must be investigated. One month later Cynthia Cooper exploded the bubble that was WorldCom when she informed its board that the company had covered up $3.8 billion in losses through the prestidigitations of phony bookkeeping.
- #22 Sources: http://www.icmtalent.com/lect/images/watkinss.jpg http://www.icmtalent.com/lect/profiles/50094.html Sherron Watkins is the Enron vice president who wrote a letter to chairman Kenneth Lay in the summer of 2001 warning him that the company's methods of accounting were improper. In January, when a congressional subcommittee investigating Enron's collapse released that letter, Watkins became a reluctant public figure, and the Year of the Whistle-Blower began. Enron (22 August 2002) * In 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries. * Enron’s success turned out to have involved an elaborate scam. * Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts. * As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in December. * More than six months after a criminal inquiry was announced, the guilty parties had still not been brought to justice. * Source: http://news.bbc.co.uk/1/hi/business/1780075.stm
- #23 Coleen Rowley is the FBI staff attorney who caused a sensation in May with a memo to FBI Director Robert Mueller about how the bureau brushed off pleas from her Minneapolis, Minn., field office that Zacarias Moussaoui, who is now indicted as a Sept. 11 co-conspirator, was a man who must be investigated. http://archives.cnn.com/2002/ALLPOLITICS/06/06/terror.lapses/
- #24 One month later Cynthia Cooper exploded the bubble that was WorldCom when she informed its board that the company had covered up $3.8 billion in losses through the prestidigitations of phony bookkeeping. During an audit in May 2002, Cooper discovered that some of WorldCom's financial practices were suspect. The company, then based in Clinton, Miss., had been classifying operating costs as capital expenditures, thereby inflating its profits. She took her findings to the audit committee of WorldCom's board in June 2002. Within days, the board fired its CFO, Scott Sullivan, and revealed to the investing public—and government regulators—that the company had overstated its profits by what ultimately proved to be $11 billion. It was the biggest corporate fraud in U.S. history. Excerpts from Accounting Fraud at WorldCom , Harvard Business School Case Study 9-104-071 On July 21, 2002, WorldCom Group, a telecommunications company with more than $30 billion in revenues, $104 billion in assets, and 60,000 employees, filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code. Between 1999 and 2002, WorldCom had overstated its pretax income by at least $7 billion, a deliberate miscalculation that was, at the time, the largest in history. The company subsequently wrote down about $82 billion (more than 75%) of its reported assets. WorldCom’s stock, once valued at $180 billion, became nearly worthless. Seventeen thousand employees lost their jobs; many left the company with worthless retirement accounts. The company’s bankruptcy also jeopardized service to WorldCom’s 20 million retail customers and on government contracts affecting 80 million Social Security beneficiaries, air traffic control for the federal Aviation Association, network management for the Department of Defense, and long-distance services for both houses of congress and the General Accounting Office. Cooper’s internal audit team, by the beginning of June 2002, had discovered $3 billion in questionable expenses, including $500 million in undocumented computer expenses. On June 11, Cooper met with Sullivan (CFO), who asked her to delay the capital expenditure audit until after the third quarter. Cooper refused. On June 17, Cooper and Glyn Smith, a manager on her team, went to Vinson’s office and asked her to explain several questionable capital expense accounting entries that Internal Audit had found. Vinson admitted that she had made many of the entries but did not have any support for them. Cooper immediately went to Yates’s office, several feet away, and asked him for an explanation. Yates denied knowledge of the entries and referred Cooper to Myers, who acknowledged the entries and admitted that no accounting standards existed to support them. Myers allegedly said the entries should not have been made, but that once it was started, it was hard to stop. On June 20, Cooper and her internal audit team met in Washington, DC with the audit committee and disclosed their findings of inappropriate capitalized expenses. When Sullivan could not provide an adequate explanation of these transactions, the board told Sullivan and Myers to resign immediately or they would be fired. Myers resigned. Sullivan did not and was promptly fired. On June 25, 2002, WorldCom announced that its profits had been inflated by $3.8 billion over the previous five quarters. Nasdaq immediately halted trading of WorldCom’s stock. Standard and Poor’s lowered its long-term corporate credit rating on WorldCom bonds from B+ to CCC-. On June 26, the SEC initiated a civil suit of fraud against WorldCom. Attorneys in the US Justice Department launched criminal investigations into the actions of Bernie Ebbers, Scott Sullivan, David Myers, Buford Yates, Betty Vinson, and Troy Normand. Cynthia Cooper remained as WorldCom’s vice president of Internal Audit and was named by Time magazine, in December 2002, as one of its “Persons of the Year”. She was not promoted, and no senior company executive had ever personally thanked her. Several employees resented Cooper, believing that her revelation of accounting irregularities had led to WorldCom’s bankruptcy.