Current issues in Accounting

Whistleblowers: A Country’s Attempt on Fraud

ACCT 525 – Current Issues in Accounting – 60298

Phase II Final Paper

By: Santos, Lily; Hall, Johnalynn;

Kaur, Mandeep; Patton, Greysi; Fuente-Erice, Gina

August 28, 2020

A whistleblower is someone that exposes information perceived to be wrong or illegal with the intent to have those wrong doings corrected, but there is so much at stake when someone decides to step up and divulge internal secrets. The Whistleblower Protection Program, which is enforced by the Occupational Safety and Health Administration (OSHA), is meant to protect employees from retaliation of stepping forward and reporting violations. However, is everyone really protected when they come forward?

In 2007, there was a study that looked into 230 of disclosed fraud between 1996-2004, and it showed that 82% out of those cases ended up with the whistleblower being retaliated against. (High, 2007). That’s alarmingly high, especially since, here in the US we have laws in place to protect people coming forward. The negative consequences seem endless when it comes to whistleblowing. Its common knowledge that people can lose their jobs, lose relationships, have their mental state questioned or worse. We are familiar with Edward Snowden whose fame came from outing the NSA for the US spy program, or Chelsea/Bradley Manning who leaked classified information after seeing how wars were being ignored. These two whistleblowers are now considered traitors for exposing classified information, but how are they different from someone exposing a company’s internal secrets?

In the case of Wells Fargo and their unethical tactics of increasing their customer base on credit cards. There were two whistleblowers that stepped forward during this scandal that could have put a halt to the fraud earlier on. Both of the whistleblowers were fired and found it difficult to find other jobs in the industry merely on the fact that they too saw something that wasn’t right and decided to step forward. That wasn’t the only thing they had to endure, they had the tables turned on them and the system made it look like they were the incompetent ones. This is a case where the federal department appointed to protect them, failed to do so. The investigators at OSHA interviewed the bank directly and not the employees who bravely stepped forward. Their entire investigation was based on only one side of the story.

Being the first stop for those seeking protection under the Whistleblower Protection law, OSHA seems ill prepared to handle this task and therefore, giving a false sense of protection to those willing to step forward. This is a dangerous trend that could stop whistleblowing dead in its tracks. So why bother stepping forward if the risks are so great? Whistleblowing is what holds everyone accountable for their actions. It’s one of the most effective ways of fighting corruption and making sure that the bad guys aren’t rewarded. It’s the one way our society can keep in check and protect us all from wrong doings.

The purpose of this paper is to uncover some of the benefits of whistleblowing, as well as, some of the risks or consequences. It’s important that we step off the track of discouraging people to come forward and begin a stronger path towards making it safe for people to step forward and expose what needs fixing for the greater good Another one of the issues is the effectiveness of whistle blowing when it’s done internally and not through a third party, and when should either method be used. Also, is compensation for stepping forward ethical or is this the carrot for anyone willing to step forward and endure all of the risks involved in exposing fraud. What are governments doing for the future of whistleblowing and protecting those that just want to make it right?

The United States government always made the priority to shield whistleblower. The Continental Congress passed world’s initial whistle-blower protection law, just seven months after signing the Declaration of Independence. The first whistleblower was ten American sailors and marines who sought protection due to improper behavior by the continental navy’s most powerful man. Once they complained, the officers gathered and signed the petition to the Continental Congress in Feb 19, 1777 explaining the abuse by Esek Hopkins. They weren't awake to the consequence to travel against the foremost powerful man within the navy and they understood they may be called traitors for calling Esek Hopkins wrong. The continental protected the whistleblowers by suspending Hopkins on Gregorian calendar month a pair of, 1778 and alleviated of his command. The case was crammed against ten petitioners and 2 of them were in remission and captive. They appealed for facilitate, stating “what they did was the part of their duty”. The continental congress then passed the law to shield the men, and therefore the future whistleblowers. Also, continental congress paid the legal bills for the two of the petitioners that were jailed.

From that point on the whistleblowers were given additional powers within the 1970, Midst of the civil war. The rights were given to American citizens to act as a whistleblower under the “Lincoln Law”. This law was for the American citizens to file proceeding against corporations and people suspected of wrongdoing with the govt on behalf of federal. Reciprocally if the govt. won against the contractor, the whistle-blower was entitled to half the money. The false claims act of 1863 usually known as “Lincoln Law” remains in use nowadays.

There has been several Act that has been put in place or passed to protect whistleblower since 1777. In 1912 the Lloyd-La Follette act was passed in congress giving federal staff the rights to speak with members of congress. The bill was clearly to shield whistleblowers. This bill additionally gave the rights for the workers to affix unions. According to Lloyd-La Follette act manager that has been suspect of wrongdoing is prohibited from the payroll compensation.

In 1966 the freedom of information act came in place that provided the private citizens to request access to records or any information from the office unless it falls below the 9 exemptions that protects the non-public privacy, security, and enforcement. Civil Service Reform act of 1978 that solely protected the federal staff however the whistle-blower protection Act that was passed in 1989, protected the people that works privately corporations. This act was put in place to report any corruption or government unlawfulness. This act additionally protects the whistleblowers who may receive pay cuts, a replacement of worker. Per this act you simply cannot report of wrongdoing unless you proof, and provide proper documentation. You are required to present information that you observe was wrong and illegal. If you're found lying, you'll be subject to criminal charges as a result of it's a criminal offense. There are so many steps within this act for example if its job-related issues it must go to hierarchy of organization.

Another act that came into place after the 1989 whistleblower protection act was No FEAR Act of 2002. Under this act federal managers and supervisors square measure command responsible once participating in unlawful discrimination. It is fact that no company can work effectively where the employees has been discriminated. This act ensures that managers and supervisors have proper training within the diverse workforce. This act also ensures that the federal employees are notified of their rights under the federal antidiscrimination, whistleblower, and retaliation laws.

At last but not least Sarbanes Oxley whistleblower law took place in 2002 that protects corporate whistleblowers for providing information about any wrongdoing in the company such as relating to bank fraud, shareholder fraud, securities fraud, mail fraud and wire fraud. The SOX whistleblowing has been constructed broadly by the Department of Labor. The whistleblower protection provision of the SOX by law forbid a broad range of desire to revenge adverse employment actions for example discharging, suspending, threatening, harassing or discriminating against a whistleblower. Under this Act the employee must proves of unfavorable personnel actions, and prove of wrongdoing and proper documentations needed for proving that.

There have been many whistleblowers in American history that reported illegal activity or wrongdoing. In 1906 Upton Sinclair claimed conditions inside Chicago pig slaughterhouse thorough his novel. In 1966 Congressional aide James Boyd and Secretary Marjorie Carpenter expose documents from the office of Senator Thomas Dodd to show Dodd used more than $200,000 in unreported campaign funds for personal expenses. In 2013 Edward Snowden former federal contractor employee disclosed information regarding the NSA’s. All of the above-mentioned Acts were put in place to protect whistleblower.

A whistleblower is someone who announces fraud, corruption, or risks to public health and safety to a person in the position to amend the immorality. Any individual that release wrongdoing of public interest must be sheltered under the whistleblower laws and correctly investigate the information disclosed. Furthermore, whistleblowers have been attacked to the point where their identities have been compromised. Also, they experience harassment and segregation at work; to the extent of getting fired and even receive threats and jail sentences. Even though not every person gets protection after disclosing crucial details of illegal conduct; organization are fighting for the rights and protections of whistleblowers (Why We Need Whistleblower Protections, 2019).

In the fight for transparency and accountability, whistleblowers play an indispensable role. Progressively, policymakers, media outlets, and many kinds of civil society organizations acknowledge the merit whistleblowers deliver and the need to protect them. Unfortunately, regardless of the increasing attempts in many jurisdictions, whistleblowers still panic retaliation and fear about whether their distress will be addressed. The executive director of the Whistleblowing International Network, Anna Myers, mentioned that whistleblowing is progressively perceived as an “antidote to secrecy imposed by governments on the grounds of national security, and by the private sector on the basis of their economic interest” (Why We Need Whistleblower Protections, 2019). It is necessary for everyone to understand the importance of protecting those who take the risk of reporting any wrongdoings to save a company or the government from a fraud or illegal activity.

In the last decades, regulations protecting whistleblowers have proceeded globally; numerous countries acknowledge the role of whistleblowers in helping lessen fraud and raising honesty. However, the line between who should be protected frequently vary depending on the corporations involved, and the nation’s legal system. Moreover, the formal intention to defend whistleblowing is influenced by the political domain along with the cultural point of view on the principles of a whistleblower. However, everything depends on the whistleblower’s authority. For instance, in the United States of America, the federal laws protecting whistleblowers have been in place since 1978; and in 2010 all organizations registered on the U.S. Stock Exchange were subjected to rules regulations authorizing recompense for anonymous communication and forbidding whistleblower reprisal under the Dodd Frank Act (Why We Need Whistleblower Protections, 2019).

Fraud cost a lot of money to corporations, and the best way to avoid it is to have an eye from the inside. Besides, whistleblowers most of the time use their skills and point of view to explain how they can perceive fraud through federal programs. The information they share is important because it helps organization to create rules to help reduce the gap of illegal actions. Moreover, whistleblowers help to see the corruption from another point of view, which prevent scam from going unnoticed. When a person chooses to disclose an illegal action, they are executing a public service for the company and the government, because we all pay the price of a fraud (Hagens Berman, 2016)

There have been many whistleblowers in American history that reported illegal activity or wrongdoing. In 1906 Upton Sinclair claimed conditions inside Chicago pig slaughterhouse thorough his novel. In 1966 Congressional aide James Boyd and Secretary Marjorie Carpenter expose documents from the office of Senator Thomas Dodd to show Dodd used more than $200,000 in unreported campaign funds for personal expenses. In 2013 Edward Snowden former federal contractor employee disclosed information regarding the NSA’s. All of the above-mentioned Acts were put in place to protect whistleblower.

The future of whistleblowers is currently in a crucial state of bully and victim. A very important piece of a of country’s government, whistleblowers are struggling to fight the good fight due to the lack of support via the government and entities involved. Benefiting a country’s economy and people, these individuals ensure accuracy and report flaws regarding fraud and abuse in the financial community. Although the battle will be a long and tough one, whistleblowers will eventually make enough noise for their good to be recognized and to be taken seriously, despite even a country’s leader ridicule. Whistleblowers are on the rise one step at a time, now having their own day dedicated to them. Future ideas of how a government could assist in the whistleblowing efforts are to create new and revised laws to protect whistleblowers, higher participation in whistleblower organizations such as POGO, and producing jobs and proper training.

Despite the WPA of 1989 and WPRA 2019 being enacted to protect and direct employees who disclose illegal acts, waste, and corruption, the future of whistleblowing requires new laws being created to encourage and protect as well as continued revisions to current laws and regulations. Unfortunately, whistleblowers face a multitude of issues ranging from legal action to social judgement, not excluding the threat of termination. Current laws call for whistleblowers to be protected from retaliation by the employer but does not specify how to keep the information from stopping another company from hiring the whistleblower due to social judgement. This could hinder a whistleblower to progress in their field of choice. Ideas of laws that could be created or revised into one of the multiple protection laws for whistleblowers include anonymity laws to protect identity if needed as scandals get dangerous. Cases like Enron are taken an extreme example where there were lethal threats to basically anyone who had knowledge and decided to play “hero.” Taking it as far as federal protection, if needed.

One benefit that could be reaped from higher protection for whistleblowers would be higher participation in specified organization such as POGO. Due to the amount of negativity with less rewards reaped; people are less likely to blow the whistle. There is power behind numbers and if someone feels they are protected with an army on their side, they would be far more willing to participate and create new organization. With this, hopes would be new ideas could be formed ultimately changing societies perspective on whistleblowing.

Another regulation that could assist in the protection and encouragement for whistleblowers would be the thought to have a whistleblower or experienced whistleblower partner with auditors. Auditors are known to have the most insight on a company since they are the ones who review all internal controls and statements. Not only would this create a regulation or law, this could potentially create a minor job market. Not the specific title of “Whistleblower” but possibly a third party “Reassurance Monitor.” It is believed that if you have someone watching you, you are less to commit a crime. This would be the case with the predicted partnership. An auditor is less likely to cover lies with the whistleblower there and the whistleblower is less likely to take the fall for two individuals.

No matter the laws, regulations, jobs added, nothing would be effective unless the laws in place continue to be revised to stay current. As multiple countries adopt and consider adopting international standards to encourage simplicity, accountability, and uniformity worldwide, whistleblower regulations should be included as well. This would ultimately be in the public’s best interest as it would build trust, promote growth and long-term financial stability globally with the lessened fear of fraud.

Whistleblowers are individuals who reveal corruption abuse wastage of public funds fraud or dangers of public health and safety to the necessary authority who are capable of correcting the injustices (National Whistleblower Center 2020). Whistleblowers generally work in the company where the crimes are likely to happen. However, not all people support whistleblowers because of their actions, although being the right thing to do. This is because it might result in severe consequences for people involved in the crimes. With that said whistleblowers are continuing to face many risks compared to before since corruption and injustices keep on rising in the present world, making people want to eliminate the whistleblowers to prevent any consequences. This conclusion includes some risks that an informer faces in his line of duty present time.

Firstly, an informer faces the risk of employer revenge (McMillan, M CGA 2012). This is because for a person thinking to snitch on their boss is a critical factor because the boss might find out and will take actions against the whistleblower. Although there are rules and regulations which are put in place to protect the person most of the time they are not helpful which means that the person will face challenges created by the boss in the organization (Marsh, 2017). Some might be fired, which will be devastating especially to the persons who have families to cater for.

Additionally, the person is likely to be blacklisted in many industries and organization because of his doings. This will affect the person`s life since it will be difficult for him or her to employed since everybody knows that you are a snitch (Fulcrum Inquiry 2020). Even the clean companies will hesitate to hire the person although they have nothing to hide. This is because they cannot trust the character and conduct of the person. The person will suffer much since his living standards will be affected because he cannot afford the life he was living earlier when he was employed (Open Society Foundation, 2019).

Thirdly, although whistleblowers are trying to correct wrongdoing, most of the time they are also affected by the legal processes and find themselves in the wrong side of the authority since they were taking part in the crime (Edwards, 2013). In some situations, individuals are charged, which also makes them hesitant sometimes while testifying against an organization or an employer.

Following the law is more advantageous compared to whistleblowing an organization which is a risky move by an individual. To begin with, if a snitch follows the law, he will be able to avoid many risks such as legal consequences. By following the law, he will be able to prove that he did not participate in any illegal business that the organization was doing, which will make it easier to testify against the organization. The whistleblower will also avoid punishments such as imprisonment or fines due to the participation of illegal business compared to the snitch who works without following the law. Through the law, the snitch will also be protected efficiently because the laws protecting him or her will be enforced fully and followed strictly compared to the one who works without following the law. Following the law is essential since some whistleblowers provide false or biased information which affects the life and career of many people in a given organization.

Finally, it is essential to increase awareness on existing protections to whistleblowers maybe through education or seminars which will encourage more people to speak out since they will be sure that the law protects them. Creating awareness will also help shape the organizations which engage in these activities such as corruption since they will be afraid because the informers inside the organization will be protected. The informers will also gain confidence in doing their job since the law protects them, and the employers cannot do anything to harm them in any way. The authority should also find other ways to protect the whistleblowers, such as creating new jobs for them for the individuals to carter for their families if they have one and also maintain their living standards. This is because most of the people end fired from their respective organizations.

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