As almost everyone knows, Lance Armstrong spoke for the
first time about his performance enhancing drug (PED) use recently on Oprah. On
the first night he admitted for the first time that he used PEDs during his
seven wins at the Tour De France. The title of my colleague Doug Cornelius'
piece in Compliance Building
really said it all in his article "Lance
Armstrong - A Lying Liar Just Like Madoff". Cornelius said "What caught
my attention about the Armstrong interview was the window into the mind of a
pathological liar. Armstrong had been telling the lie over and over and over.
He lied to the public. He lied to the press. He lied to cancer survivors. He
lied under oath."
One of the areas which came up for me was how the people
who blew the whistle on Armstrong's use of PEDs before his admission were
treated and how Armstrong subsequently treated them. Armstrong admitted that he
was a 'bully' to those who said, hinted, or even implied that he had taken
PEDs. He attacked ex-teammates; wives of ex-teammates and even a masseur who
saw him take such substances. He put on an aggressive PR campaign for the better
part of the past decade, to which the wife of ex-Tour De France winner Greg
LeMond said "I can't describe to you the level of fear that he brings to a
While I would hope that most American and European
companies have moved past the situation where whistleblowers are ostracized or
worse threatened, one can certainly remember the GlaxoSmithKline (GSK)
whistleblower Cheryl Eckard. A 2010 article in the Guardian by Graeme Wearden,
whistleblower awarded $96m payout", he reported that Eckard was fired
by the company "after repeatedly complaining to GSK's management that some
drugs made at Cidra were being produced in a non-sterile environment, that the
factory's water system was contaminated with micro-organisms, and that other
medicines were being made in the wrong doses." She later was awarded $96MM as
her share of the settlement of a Federal Claims Act whistleblower lawsuit.
Eckard was quoted as saying, "It's difficult to survive this financially,
emotionally, you lose all your friends, because all your friends are people you
have at work. You really do have to understand that it's a very difficult
process but very well worth it."
More recently there was the example of NCR Corp., as
reported in the Wall Street Journal (WSJ) by Christopher M. Matthews and Samuel
Rubenfeld, in an article entitled "NCR
Investigates Alleged FCPA Violations", who stated that NCR spokesperson
Lou Casale said "While NCR has certain concerns about the veracity and accuracy
of the allegations, NCR takes allegations of this sort very seriously and
promptly began an internal investigation that is ongoing," regarding
whistleblowers claims of Foreign Corrupt Practices Act (FCPA) violations. In a
later WSJ article by Matthews, entitled "NCR
Discloses SEC Subpoena Related to Whistleblower", he reported
that NCR also said "NCR has certain concerns about the motivation of the
purported whistleblower and the accuracy of the allegations it received, some
of which appear to be untrue."
Lastly, is the situation of two whistleblowers from the
British company EADS. As reported by Carola Hoyos in a Financial Times (FT)
article, entitled "Emails
tell of fears over EADS payments", Hoyos told the story of two men who
notified company officials of allegations of bribery and corruption at the
company and who suffered for their actions. The first, Mike Paterson, the then
financial controller for an EADS subsidiary GPT, internally reported
"unexplained payments to the Cayman Island bank accounts for Simec
International and Duranton International, which totaled £11.5M between 2007 and
2009." Hoyos reported that Paterson was so marginalized in his job that he was
basically twiddling his thumbs all day at work.
The second whistleblower was Ian Foxley, a retired
British lieutenant-colonel, who had joined the company in the spring of 2010
stationed in Saudi Arabia, to oversee a £2M contract between the British
Ministry of Defence (MOD) and the Saudi Arabian National Guard. In December
2010, Foxley discovered some of the concerns which Mike Paterson had raised.
According to Hoyos, "The morning after he discovered Mr. Paterson's concerns he
assessed the emails that Mr. Paterson had told him he had written over the
previous three years." This led Foxley to flee Saudi Arabia with documents of
these suspicious payments, which he has turned over to the Institute of Chartered
Accountants and the UK Serious Fraud Office (SFO).
What does the response of any of these three companies
say about the way that it treats whistleblowers? Is it significantly different
from the bullying Armstrong admitted he engaged in during his campaign to stop
anyone who claimed that he was doping? While I doubt that companies will ever
come to embrace whistleblowers, the US Department of Justice's (DOJ's) recent
FCPA Guidance stated that "An effective compliance program should include a
mechanism for an organization's employees and others to report suspected or
actual misconduct or violations of the company's policies on a confidential
basis and without fear of retaliation." However, by marginalizing, attacking or
even making a whistleblower fear for their life, such actions can drive a
whistleblower to go the DOJ, Securities and Exchange Commission (SEC) or SFO.
The Guidance recognized that "Assistance and information from a whistleblower
who knows of possible securities law violations can be among the most powerful
weapons in the law enforcement arsenal."
So what is the compliance professional to make of the
Armstrong confession and how can it be used for a compliance program? A recent
White Paper, entitled "Blowing the Whistle
on Workplace Misconduct", released by the Ethics Resource Center (ERC)
detailed several findings that the ERC had determined through surveys,
interviews and dialogues. One of the key findings in this White Paper was that
that a culture of ethics within a company does matter. Such a culture should
start with a strong commitment to ethics at the top, however it is also clear
that this message must be reinforced throughout all levels of management, and
that employees must understand that their company has the expectation that
ethical standards are vital in the business' day-to-day operations. If
employees have this understanding, they are more likely to conduct themselves
with integrity and report misconduct by others when they believe senior
management has a genuine and long-term commitment to ethical behavior.
Additionally, those employees who report misconduct are often motivated by the
belief that their reports will be properly investigated. Conversely, most employees
are less concerned with the particular outcome than in knowing that their
report was seriously considered.
This is the 'Fair Process Doctrine'. This Doctrine
generally recognizes that there are fair procedures, not arbitrary ones, in a
process involving rights. Considerable research has shown that people are more
willing to accept negative, unfavorable, and non-preferred outcomes when they
are arrived at by processes and procedures that are perceived as fair. Adhering
to the Fair Process Doctrine in two areas of your Compliance Program is
critical for you, as a compliance specialist or for your Compliance Department,
to have credibility with the rest of the workforce.
In this area is that of internal company investigations,
if your employees do not believe that the investigation is fair and impartial,
then it is not fair and impartial. Furthermore, those involved must have
confidence that any internal investigation is treated seriously and
objectively. One of the key reasons that employees will go outside of a
company's internal hotline process is because they do not believe that the
process will be fair.
This fairness has several components. One would be the
use of outside counsel, rather than in-house counsel, to handle the
investigation. Moreover, if company uses a regular firm, it may be that other
outside counsel should be brought in, particularly if regular outside counsel
has created or implemented key components which are being investigated.
Further, if the company's regular outside counsel has a large amount of
business with the company, then that law firm may have a very vested interest
in maintaining the status quo. Lastly, the investigation may require a level of
specialization which in-house or regular outside counsel does not possess.
Phrasing it in another way, Mike Volkov, writing in his
blog Corruption, Crime and
Compliance, in an article entitled "How
to Prevent Whistleblower Complaints", had these suggestions: (1) Listen
to the Whistleblower - In dealing with a whistleblower, it is critical to
listen to the whistleblowers concerns. (2) Do Not Overpromise - At the
conclusion of an initial meeting with a whistleblower, the company
representative should inform the whistleblower that the company will review the
allegations, conduct a "preliminary" investigation and report back to the
whistleblower during, or at the conclusion of, any investigation. (3) Conduct a
Fair Investigation - Depending on the nature of the allegations, a follow up
inquiry should be conducted. The steps taken in the investigation should be
I would add that after your investigation is complete,
the Fair Process Doctrine demands that any discipline must not only be
administered fairly but it must be administered uniformly across the company
for the violation of any compliance policy. Simply put if you are going to fire
employees in South America for lying on their expense reports, you have to fire
them in North America for the same offense. It cannot matter that the North
American employee is a friend of yours or worse yet a 'high producer'. Failure
to administer discipline uniformly will destroy any vestige of credibility that
you may have developed.
Lance Armstrong has and will continue to provide the
ethics and compliance practitioner with many lessons. You can use his treatment
of whistleblowers as an opportunity to review how your company treats such persons
who make notifications of unethical or illegal conduct. With the increasing
number of financial incentives available to persons to blow the whistle to
government agencies, such as the SEC under the Dodd-Frank Act, it also makes
very good business sense to do so.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2013
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