CHAPTER 7 Blowing the Whistle Table of Contents Table of Contents.............................................................................................................................1 Chapter Summary............................................................................................................................2 Learning Outcomes..........................................................................................................................2 Frontline Focus................................................................................................................................3 Key Terms... .......................................................................................................... 16 Internet Exercises...........................................................................................................................19 1.Visit the Government Accountability Project (GAP) at www.whistleblower.org......................19 7-1
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1. If Ben decides to raise concerns about the product quality of the Benfield Voyagers, he will
become a whistle-blower. The difference between internal and external whistle-blowing isexplained on page 134. Which approach should Ben follow if he does decide to raise his
concerns?
Student answers may vary. The right thing for Ben to do if he decides to raise his concerns is
to take the issue to his immediate supervisors. After speaking through the chain of command
within his organization if Ben feels his concerns are not being addressed and that they are
true concerns for himself and for the community, Ben should consider switching to a form of
external whistle-blowing. By involving the media the issue of the quality of tires will bemade public and thus the community will have all of the information they need to make an
informed decision about what type of tire they wish to purchase.
2. The five conditions that must exist for whistle-blowing to be ethical are outlined on page
134. Has Rick given Ben enough information to be concerned about the Benfield Voyagers?
Rick, a knowledgeable experienced professional in the field, has given Ben information to
suggest an extreme cut in the quality of the tires which could lead to harming a member of
the public if the tires do not perform as they should, thus meeting the first condition of ethical
whistle-blowing. Ben needs to make sure when he decides to address the issue that he clearly
expresses why he feels this brand of tires could in fact be a dangerous choice for consumers.
If Ben’s boss John does not take immediate action, Ben should not run right to the press. Ben
should make sure he exhausts all efforts internally of trying to solve the issue. Ben may want
to get documented statements from other tire professionals who agree with Rick to ensure
that when he addresses the situation he has substantial evidence that the tires may not be of
decent quality. Finally, Ben must weigh the chances of succeeding and failing. He must
determine if exposing these tires as dangerous will benefit both the public and the company
or if he is misunderstanding the severity of the issue.
Student responses may vary. Ben needs to do some research to see if the Voyager tire is of
low enough quality to cause concern. If Ben does find that the tire could cause harm, he
should address his concerns with his immediate supervisor. Based on evidence, we canassume his supervisor will not agree, in which case Ben should continue up the corporate
ladder to address his concerns. If evidence shows that these tires are of a quality that could
become dangerous and the company refuses to act, Ben should then consider taking the next
step and alert the media.
Learning Outcome 1: Explain the Term Whistle-Blower and Distinguish Between Internal
and External Whistle-Blowing.
• The opening Frontline Focus case shows how a tire sales agent faces an ethical decision with
a new product his company is pushing to sell.
o The term whistle-blower refers to an employee who discovers corporate misconduct and
chooses to bring it to the attention of others.
o After an employee decides to become a whistle-blower, s/he must then assess what
channel of exposure s/he feels is most beneficial to solving the dilemma.
o Internal whistle-blowing is when an employee discovers corporate misconduct and
brings it to the attention of his or her supervisor, who then follows established procedures
to address the misconduct within the organization.
o External whistle-blowing is when an employee discovers corporate misconduct and
chooses to bring it to the attention of law-enforcement agencies and/or the media.
Learning Outcome 2: Understand the Different Motivations of a Whistle-Blower.
• Whistle-blowers have been said to give an invaluable service to their organization as well as
the general public.
o Discovering illegal activity before the media finds out could save a company millions of
o Discovering potential harm to consumers is an immeasurable benefit and thus one of the
reasons why the media holds whistle-blowers to a standard of honor and integrity. Many
believe whistle-blowing can be motivated by both appropriate and illegitimate reasons.
o
Whistle-blowing is considered ethical under five conditions:(1) When the company will cause serious harm to the public.
(2) When the employee identifies a serious threat of harm he or she should report it
and state his or her moral concern.
(3) When the employee’s immediate supervisor does not act the employee should
exhaust the internal procedures and chain of command.
(4) The employee must have documented evidence that is convincing that the
practice, product or policy seriously puts the public in danger.
(5) The employee must have valid reasons to believe that revealing the wrongdoing to
the public will result in changed necessary to remedy the situation.
o Whistle-blowing can be considered unethical if the employee is motivated by financial
gain or media attention, or if they carry a vendetta against the company. In this case the
legitimacy of their whistle-blowing must be questioned.
o A qui tam lawsuit is a lawsuit brought on behalf of the federal government by a
whistleblower under the Federal Civil False Claims Act, also known as Lincoln’s Law. Qui tam is an abbreviation for a longer Latin phrase that establishes the whistle-
blower as a deputized petitioner for the government in the case.
The Federal Civil False Claims Act was enacted during the Civil War in 1863 to
protect the government against fraudulent defense contractors.
The act was strengthened in 1986 to make it easier and safer for whistle-blowers
to come forward.
o While internal-whistle blowing is hard to track, external whistle-blowing has become a
20th century phenomenon. The term started in 1963 and reached a peak in 2002.
14. Should that employee be given any reassurances of protection for making the tough decision
to come forward?
Yes, as it is stated in SOX, retaliation against whistle-blowers is prohibited and thecompany’s policies should stress this along with extreme confidentiality.
15. Do you think a hotline that guarantees the anonymity of the caller will encourage more
employees to come forward?
Student answers may vary. An anonymous hotline would allow for those who are
uncomfortable coming forward to do so. However, this may also encourage those who have
personal vendettas to cause unnecessary investigations as well.
16. Does your company have a whistle-blower hotline? How did you find out that there is (or
isn’t) one?
Student answers may vary. Most likely, students will not be working in a company that has a
whistle-blower hotline, but many will upon graduation. If a hotline exists, the company will
NOTE: some questions allow for a number of different answers. Below are some suggestions.
1. You work for a meatpacking company. You have discovered credible evidence that your
company’s delivery drivers have been stealing cuts of meat and replacing them with ice toensure that the delivery meets the stated weight on the delivery invoice. The company has 12
drivers and, as far as you can tell, they are all in on this scheme. Your company has a well-
advertised whistle-blower hotline. What do you do?
Student responses will vary. If you do not have substantial evidence you should report the
situation to the hotline so that they may do an investigation. If you do have evidence and feel
comfortable doing so you may want to take the evidence to your direct manager.
2. What would you do if your company did not have a whistle-blowing policy?
Student responses will vary. The right thing to do would be to take the information to your
direct supervisor. You must make sure you have evidence and are not just going on rumors or
suspicions.
3. You later discover that one of the drivers was not a part of the scheme but was fired anyway
when the information was made public. What do you do?
Student responses will vary. You may want to report what you know to a supervisor to try
and help the driver get their job back. This is why it is important to know all of the facts
before making accusations.
4. Should the driver get his job back? Why or why not?
Student responses will vary. It will be hard to prove the driver was not involved. It will also
be hard to prove if he was aware of the scheme and turned a blind eye or if he was unaware
c. There are now two whistle-blowing Web sites separated by only one letter. Summarize
their differences and propose which one offers the greatest assistance to a potential
whistle-blower.
Students’ responses will vary.
Team Exercises
1. Guilt by Omission.
Divide into two groups and prepare arguments for and against the following behavior:
You work for a large retail clothing company that spends a large amount of its advertising
budget emphasizing that its clothes are “Made in America.” You discover that only 15 percent of its garments are actually “made” in America. The other 85 percent are actually
either cut from patterns overseas and assembled here in the United States, or cut and
assembled overseas and imported as completed garments. Your hometown depends on this
clothing company as the largest local employer. Several of your friends and family work at
the local garment assembly factory. Should you go public with this information?
Student responses will vary. It is not okay to use false advertisement. This goes deeper into
deciding whether the statement “made in America” insinuates that 100% of their products aremade in America. However, this also addresses the question of who is affected by this
decision. If this hometown depends on this company and several friends and family members
work there, these people may be out of a job if the whistle is blown.
2. “Tortious Interference.”
Divide into two groups and prepare arguments for and against the following behavior:
In the case of Dr. Jeffrey Wigand and the Brown & Williamson Tobacco Company, the CBS
Broadcasting Company chose not to air Dr. Wigand’s 60 Minutes interview with Mike
Wallace under threat of legal action for “tortious interference” between B&W and Dr.
Wigand. There were suspicions that CBS was more concerned about avoiding any potential
legal action that could derail its pending sale to the Westinghouse Corporation. Was CBS
behaving ethically in putting the welfare of its stakeholders in the Westinghouse deal ahead
of its obligation to support Dr. Wigand?
Student responses will vary. A corporation should never act in a way that would negativelyaffect their shareholders. However, some may feel that CBS should not have agreed to
support Dr. Wigand and then backed off the case.
3. A New Approach to Freshness.
Divide into two groups and prepare arguments for and against the following behavior:
You work in the meat department of store #2795 of a large retail grocery chain. The
company recently announced a change in the meat-handling protocols from the primary
supplier. Starting in January 2009, the meat will be gassed with carbon monoxide before
packaging. This retains a brighter color for the meat and delays the discoloration that
usually occurs as the meat begins to spoil. You understand from the memo that there will be
no information on the product label to indicate this protocol change and that the company
has no plans to notify customers of this new process. Should you speak out about the
procedure?
Student responses will vary. This would depend on the health effects of the carbon
monoxide. If doing so might cause people to buy meat that will go bad earlier, or if the gas
itself will harm consumers, you should speak out about the procedure.
4. California Organic.
Divide into two groups and prepare arguments for and against the following behavior:
You work in the accounting department of a family-owned mushroom grower based in
California that sells premium organic mushrooms to local restaurants and high-end retail
grocery stores. The company’s product range includes both fresh and dried mushrooms.
Your organic certification allows you to charge top-dollar for your product, but you notice
from invoices that operating costs are increasing significantly without any increase in
revenues. The market won’t absorb a price increase, so the company has to absorb the
higher costs and accept lower profits. One day you notice invoices for the purchase of dried
mushrooms from a Japanese supplier. The dried mushrooms are not listed as being organic,
but they are apparently being added to your company’s dried mushrooms, which are labeled
organic and California-grown. Should you speak out about this?
Student responses will vary. This is a prime case of false advertising. The company cannot
claim their mushrooms are organic and California-raised if they are imported from Japan.
Thinking Critically – Exercise 7.1
Questionable Motives
1. Birkenfeld is adamant that his prison sentence is unfair when compared to the fact that no
one else (Olenicoff, UBS bankers) went to jail. Does he have a point?
Students’ responses will vary. Birkenfeld withheld pertinent data related to Olenicoff’s
business dealings. He did not disclose the nature of his relationship with Olenicoff to the
United States Justice Department.
2. Why did UBS elect to settle with the U.S. Government?
Students’ responses will vary. UBS did not want to lose its access to a large market and it
wanted to remain a global banking entity. UBS also sought the intervention of the Swiss
Government to help its case.
3. Given that there was an immunity agreement in place, what did the Justice Department gain
from prosecuting Birkenfeld?
Students’ responses will vary. Students should recall that Birkenfeld was charged with
helping Olenicoff by referring him to a UBS specialist in the creation of offshore ‘shell’
corporations designed to hide the true ownership of UBS accounts. The Justice Department
charged Birkenfeld with conspiracy to commit tax fraud.
4. Critics are concerned that Birkenfeld’s prison sentence will discourage other tax whistle- blowers from coming forward. Is that a valid concern? Why or why not?
Students’ responses will vary. It is a valid concern; however, Birkenfeld was not honest with
the Justice Department because he withheld pertinent information about the case.
1. Critics have argued that WikiLeaks is now attacking secrecy on all fronts, with no concern
for the consequences of the information posted on its site. Do those actions align with the
ethical principles of whistle-blowing?
Students’ responses will vary based on their perception of the case. In some responses, the
students should agree that the actions align with the ethical principles of whistle blowing. On
the other hand, some students will argue that its’ actions does not align with the ethical
principles of whistle-blowing.
2. Does WikiLeaks have an obligation to censor postings to protect innocent individuals who
may be harmed by making the information public? Should the site take steps to verify the
accuracy of the posted documents?
Students’ responses will vary. Some students may argue that it does have an obligation to
censor postings to protect individuals, and other students may argue that it would ruin the
purpose of the Web site. If anyone can post anything on the Web site, there is no telling what
could end up on it. How would anyone know if the data is really accurate?
3. Would fulfilling the vision of a “wiki” community (with editors and fact checkers) reduce the
criticism directed at the site? Why or why not?
Students’ responses will vary. Some students may feel that editors and fact checkers would
reduce the criticism directed at the site. Other students may feel that the editors and fact
checkers would reduce the effectiveness and the apparent “hands-off editorial policy” at the
site.
4. Does the decision to withhold 15,000 documents in a “harm minimization process” indicatethat WikiLeaks is developing some sense of the potential consequences of its actions? Why
or why not?
Students’ responses will vary based on their perceptions of the case.