MGT 321

Prepared forMr. ASEF HASSAN

Lecturer, School of Business North South University

Prepared by:Name IDMasud Imam 101 0828 030Md Tanvir Hassan 092 0574 530Nafees Imtiaz 102 0009 030Safayet Bin Taiyab 091 0875 030

MGT 321

WHISTLE BLOWERS: SAINTS

OR SINNERS

WHISTLE BLOWERS: SAINTS OR SINNERS

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

Summary of the CaseWhistle 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”

Summary

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

Summary

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”

Summary

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

Summary

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”

Q&A

Q.1) Do 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?

A.1) The effects of whistle blowing have both pros and cons for the organization and its members and therefore can go both ways :

Companies can become alert and can take necessary precautions for the long run

Members of the organizations will be notified about the wrongdoing of the company- it may help employees who are strong proponents of ethics to consider whether or not to continue with the company

From an ethical point of view- whistle blowing should be carried out individuals should report unethical practices

The whistle blowing law adapted in 1986 encourages whistle blowers to come forward

The employees deserve to have a workforce that is working within ethical and legal means

Providing the employees an anonymous avenue to bring the actions without having retaliation is good for the company as well as the workforce.

However it may extort large financial gains(supporting David Stetler’s analogy ):

The law adopted in 1986 pays informants as much as 30 % of legal fines- the large sum of money may attract and create lusts among the employees towards whistle blowing merely based on doubts. ( reference to the case- Durand’s take was $126 million!!)

Companies incur huge legal expenses in settlements of cases ( reference to the case- TAP incurred over $ 1 billion in legal fees, although not being responsible for the allegations)

Q&A

Q.2) How might self-fulfilling prophecy affect a whistle-blower’s search for incriminating evidence against a company?

A-2) Self-fulfilling prophecy is a situation in which one person inaccurately perceives a second person and the resulting expectations cause the second person to behave in ways consistent with the original perception

Effect of self-fulfilling prophecy on the whistle blower: Whistleblower is a person who has already leaked information

about the company rather than settling it internally- therefore the person is already under the lime light of the company- so chances are very high that he will be fired

Under such circumstances the employee will try to make the most out of it by incriminating further evidence against the company in support of his claim

The lump sum amount of money received by whistle blowers also encourages them to gather more evidence against the company

Q&A

Q.3) When 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?

A-3) Effect on future whistle blowers: More like to discourage them due to fear of unemployment or

harassment Company may file a counter lawsuit against the whistle blower Whistle blowing may vary from person to person and the level of

confidence of individuals If the person has solid evidence of illegal activities against the

company – most likely to come forward and file a suit

Evaluation of the whistle blowers’ claimFuture claims are likely to be more carefully scrutinized

and evaluated and perhaps with a bit of favour for the company against whom the lawsuit occurred

Recommendations for company and governmentKeeping a transparent and updated communication

method with employees- so that they are less likely to file a claim

Encouragement of ethical work environment by the company’s management

Govt. legislation that protects the company from frivolous lawsuits

Q&A

Q.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? A-4) If the employee believes that there is a wrong doing going on, they

need to step back and look at that situation as a whole and see what type of wrong doing is it.  

If the company is doing something absolutely illegal, authorities should be consulted.  

If the employee thinks that it is something that can be handled from within such as a conflict of personalities, the employee should go to the management level that handles that area.

Advantages and disadvantages of reporting to the company

AdvantagesThe entire problem can be solved internally Saves significant costs of the companyReputation and goodwill are protectedEmployees which could have been lost are

retained, productivity is maintained and the company bottom line is protected from inverse effects

DisadvantagesNegative impact can result on employee such as

harassment, ridicule and peer pressureCould result in cuts in the compensation received

by the personCould be fired and would not get the chance to

gather further evidence against the company to support the claim

The illegal activity of the company is by no way internalized and still continues

Advantages and disadvantages of reporting to the authority

Advantages Immediate actions can be taken by the authority and

the claim can be investigated If illegal activity did actually take place-the

responsible people could be brought under law which is good for the society as a whole

It increases public awareness and makes companies susceptible to such action to rectify their intentions and actions

DisadvantagesIf the company is actually free from the allegations-

it is disastrous for the company in terms of cost and reputation for no legitimate reason

The whistle blower becomes the ultimate loser by losing his job and by not receiving any money for being the informant

Conclusion

As a group, our perception is :Whistle blowing is a strong means to deter

corporate wrongdoing However, if the right is abused, whistle

blowers can become as unethical as the companies that they are blowing the whistle on

Thank You!!!

Any Questions???