Posted by Chris McClean on February 20, 2008
It has been a busy few weeks of news for whistleblowers. Earlier this month, former Merck sales manager H. Dean Steinke was awarded $68 million of the roughly $400 million recovered by states and federal agencies when the company settled a lawsuit he brought against it seven years ago. (This was part of a larger $671 million Merck paid to settle complaints of overcharging government health plans and offering inappropriate incentives to doctors to prescribe its products.)
While a number of whistleblowers have been lauded by the press over the years, Steinke’s $68 million presents the possibility of more tangible incentives to those aspiring to expose corporate crimes. Other recent, related news includes:
- Court extends SOX whistleblower protection. Last week, a US District Court judge in New York found that whistleblower protection under the Sarbanes-Oxley Act applies to employees outside the United States, helping empower virtual armies of international employees that may have something to report.
- Online whistleblower site is still alive after legal loss. Wikileaks.org, a site offering users the opportunity to disclose confidential corporate or government documents to discourage “unethical behavior,” was ordered last week by a Federal District Court judge to be removed from its domain name. Of course, the site’s IP address is still active, and its mirror sites continue to deliver the same content, encouraging individuals to post very sensitive, very damaging information.
From a risk management standpoint, companies should be concerned not only with the prospect of potentially colossal lawsuits initiated by whistleblowers, but also a likely increase in costs for investigations, legal fees, online monitoring, and other efforts to combat both legitimate and frivolous claims.
On the positive side, employees, customers, and partners who are willing to call attention to problems can be a tremendous resource for risk managers as an early warning system so they can address issues before they have any substantial impact. In fact, 34 of the top 100 companies on Fortune’s Global 500 list describe some form of anonymous hotline or whistleblower system as a key element of their Corporate Social Responsibility programs as a way to understand and respond to stakeholder concerns.