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Whistle Blower

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  • 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.
  • 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.
  • Full Text: http://www.aerospaceweb.org/question/investigations/q0122.shtml
  • 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?
  • 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.
  • 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.
  • 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
  • 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/
  • 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.

Whistle Blower Presentation Transcript

  • 1. Whistle Blower
  • 2.
    • Our lives begin to end the day we become
    • silent about things that matter."
    • Martin Luther King, Jr.
  • 3. Whistle-blowing 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. Types of Whistle blowing
    • Internal Whistle blowing
      • is made to someone within the organization.
    • Personal Whistle blowing
      • is blowing the whistle on the offender
      • here the charge is not against the organization or system but against one individual
    • External Whistle Blowing
      • For an external issue not directly affecting one as an individual
  • 5. When to Blow the 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
  • 6. How to Blow the 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.
  • 7. How to Blow the Whistle
    • Work through internal channels
        • Start with your immediate supervisor or follow the standard reporting procedure
    • Work through external channels
        • go public (biggest risk)
  • 8. Criteria for Justifiable Whistle Blowing
  • 9.
    • The firm through its product or policy will do serious and considerable harm to the public, whether in the person of the user of its product, an innocent bystander, or the general public.
    • Once an employee identifies a serious threat to the user of a product or to the general public, he or she should report it to his or her immediate superior and make his or her moral concern known.
    • Unless he or she does so, the act of Whistle blowing is not justifiable.
    Criteria for Justifiable Whistle Blowing
  • 10.
    • 3. If one's immediate superior does nothing effective about the concern or complaint, the employee should exhaust the internal procedures and possibilities within the firm
    • This usually will involve taking the matter up the managerial ladder, and if necessary and possible to the Board of Directors.
    Criteria for Justifiable Whistle Blowing
  • 11.
    • In addition
      • Whistleblower must have accessible documented evidence
      • that would convince a reasonable, impartial observer that one's view of the situation is correct,
      • and that the company's product or practice posses a serious and likely danger to the public or to the user of the product.
    Criteria for Justifiable Whistle Blowing
  • 12.
    • In addition
      • The employee must have good reason to believe that by going public the necessary changes will be brought about.
      • The chance of being successful must be worth the risk one takes and danger to which one is exposed.
    Criteria for Justifiable Whistle Blowing
  • 13.
    • But then why is it so difficult?
  • 14. Ethical Dilemma
    • The Mum 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
  • 15. Fear & Doubt
    • Will I be viewed as a “rat” who ratted out the company?
    • I will be resented by my colleagues
    • Stress could lead to resorting to drinking, self-destructive behaviour
    • If I lose this job, what will my family do?
    • What if “those” guys find out and harm me?
  • 16. Statistics
    • Polling Group:
        • 233 individuals polled, 40% responded
        • Average age: 47
        • Employed for 6.5 years at job
        • Almost all lost job
    Source: http://legacy.ncsu.edu/CSC379/lectures/wk16/lecture.html
    • 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
  • 17. 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.
  • 18. Case Study - Challenger
  • 19. Challenger: What Went 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
  • 20. Challenger: Major Players
    • 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
  • 21. Challenger: Timeline
    • July 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
  • 22. 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
  • 23. Challenger: Timeline
    • After 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
  • 24. Challenger: Timeline
      • 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
  • 25. Challenger: Timeline
    • Later 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
  • 26. Challenger: Questions
    • What 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?
  • 27. Case Study- Satyendra Dubey
    • The Golden Quadrilateral(Delhi, Mumbai, Kolkotta & Chennai)...
    • the end of the road for Satyendra Dubey.
  • 28. Case Study- Satyendra Dubey
    • A 31 year old IIT – Kanpur Civil Engineering graduate.
    • Employee of National Highways Authority of India.
    • Assigned Prime Minister’s pet project – The Golden Quadrilateral, to connect the four corners of India.
    • Was posted at Koderma, Jharkhand as project director he would be in charge of releasing funds for an extensive swathe of the under-construction highway.
  • 29. Findings in the Golden Quadrilateral Project
    • Sloppy project reports
    • Contracts awarded on basis of forged documents
    • Huge advances doled out to contractors
    • Rampant subletting to petty contractors who lacked the technical ability to work on this mega-project(Dubey discovered that the contracted firm, Larsen & Toubro, had been subcontracting the actual work to smaller low-technology groups, controlled by the local mafia).
    • Everyone from Govt. engineers to MNC construction companies to local thugs seemed involved in “LOOT OF PUBLIC MONEY”
  • 30.
    • Wrote a letter to his boss, NHAI Project Director SK Soni, and to Brig Satish Kapoor, engineer overlooking the supervision, there was no action.
    • Wrote a letter to the PM
    • Dubey also sent the same letter to the chairman of NHAI.
    • Mr. Dubey anticipated trouble and wrote a second letter, again requesting anonymity but was ignored.
    What did Dubey do?
  • 31. The Blind/ Deaf Effect
    • The PMO didn’t bother either to investigate
    • For in an act of murderous negligence, the PMO handed over both the letter and the sheet with Satyendra’s particulars to the Ministry of Road Transport and Highways.
    • At least eight officials scanned it before passing it on to the National Highway Authority of India.
  • 32.
    • In 2003, Dubey was found dead in Gaya…
    Whistle Blowing Murder
  • 33. Today…
    • Almost 50,000 citizens have signed a petition demanding action from the government
    • The media is closely monitoring the twists and turns taken by an increasingly bizarre investigation
    • As for the GQ project, Supreme Court is still investigating
  • 34. The Whistle Blower Resolution
    • The Ministry of Personnel, Public Grievances and Pensions notified a resolution, empowering the Central Vigilance Commissioner (CVC) to act on the complaints of whistle-blowers and to protect them.
    • Through the resolution, the government authorised the CVC to act as the `designated agency' to receive written complaints of
  • 35. Role of the CVC
    • The CVC has announced that it has the responsibility of keeping the identity of the complainant secret, even though it cannot stop the complainant himself from disclosing his identity or making the complaint public.
    • However, the complainant should comply to certain parameters:
      • The complaint should be in a closed/secured envelope;
      • The envelope should be superscribed "Complaint under The Public Interest Disclosure" and the complainant's name and address should not be written on the envelope, but in an attached letter along with the complaint;
  • 36. Role of CVC
      • The Commission will not entertain anonymous complaints;
      • The text of the complaint should be carefully drafted so as not to give any details or clue about the complainant's identity
      • Whistle-blowers are advised not to enter into any correspondence with the Commission seeking acknowledgement, which it will not issue, as a precaution; however, the Commission will get in touch with the complainant if any clarification is required.
      • The CVC, under the resolution, is also expected to ascertain from the complainant whether he or she was the person who made the complaint.
  • 37. But loopholes exist…
    • Resolution is silent on how the agency would find out if complaint is motivated
    • No clarity on what “appropriate” steps would be taken against such a complainant
  • 38.
    • Many individuals have exemplified Whistle Blowing…
  • 39. 2002: Year of the Whistleblower Cynthia Cooper WorldCom Coleen Rowley FBI Sherron Watkins Enron
  • 40. Sherron Watkins
    • Former Vice 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
  • 41. Coleen Rowley
    • FBI staff 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
  • 42. Cynthia Cooper
    • WorldCom’s Director 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
  • 43. But the question is…
    • Do you have the courage to blow the Whistle?