Lynne Curry: Whistle-blowing has rewards, risks

ManagementOctober 7, 2012 

In the largest federal payout in U.S. history, the Internal Revenue Service paid a $104 million whistle-blower award to a former investment banker who cooperated with investigators looking into tax evasion by the employee and his investment bank employer. The former employee pled guilty to helping a client evade taxes, spent three years in prison and blew the whistle on his employer.

In another landmark case, when salesperson Jeanne Byrne blew the whistle on her employer for submitting fraudulent Medicare claims for unnecessary blood tests, she received $9 million of the $119 million the government won from her former employer.

Awards like these remind employees they can profit from warning regulatory agencies of employer deceit.

The IRS's award comes from its Whistleblower Office, which can award 15 to 30 percent of the total proceeds the IRS recovers if it acts on information from tips received by individuals when the IRS recovers more than $2 million in back taxes, penalties and interest.

The recent IRS award comes on the heels of other 2012 awards to whistle-blowers under federal statutes such as the False Claims Act and the Dodd-Frank Act. Additionally, the House of Representatives may pass HR6406, which would extend whistle-blower protections to non-federal government contractors and subcontractors who disclose information about misuse of federal funds, and HR 6409, which would prohibit retaliation against private sector employees who disclose information they believe is evidence of gross mismanagement, waste or abuse of authority of government funds; violate agency contracts or create a substantial public health or safety danger when using government funds. Employers who retaliate against whistle-blowers may ultimately pay the employee 10 times the amount of all lost wages and other damages.

Alaska's whistle-blower law additionally protects public sector employees who report violations of law or unsafe or defective products made by their employer as well as employees who refuse to commit perjury on behalf of their employer. Alaska's Safe Employment Act protects all employees who bring workplace safety concerns to the attention of their employer or governmental agencies and provides "double back pay and attorney's fees" if employees prove they were "discharged, demoted, suspended, threatened, harassed or discriminated against" because they protested an employer's unlawful acts.

Employers desiring to get ahead of the power curve need to implement complaint procedures that protect the rights of whistle-blowers and prevent inappropriate complainant conduct from alleged whistle- blowers who make false allegations.

Wise employers:

• Listen to whistle-blowers and focus on the issues, and not the whistle-blower's personality. A complainant may act unreasonably, out of anger or frustration, but this doesn't alter the truth they speak. Fairly investigate complaints.

• Explain the complainant's right, the rights of the accused, witnesses and the company since complainants often possess unreasonable expectations about how their complaint will be handled and the expected outcome.

• Keep the whistle-blower informed of the investigation progress.

• Clearly communicate the company's decision and the reasoning behind it. If the company dismisses a complaint, explain the reasons clearly, professionally and empathetically.

• Never retaliate against the complaining employee or allow him to be ostracized.

As an employee, don't let these large dollar rewards blind you to risks. Do you really see a pattern of intentional falsification, or are you misinterpreting a series of mistakes or justified charges? In Farnam v. Christa Ministries, employee Farnam alleged her employer committed illegal acts. When an investigation found no evidence of illegal activity, Christa Ministries fired her. Although Farnam sued under the state's whistle-blower statute, the court ruled the statute didn't protect employees fired for work performance problems.

Finally, while some whistle-blowers win huge money awards, others lose their jobs and permanently damage their careers. As an example, a San Francisco tax accounting firm fired a controller who accused them of embezzling more than $70 million in client money. Although clients later found millions of dollars of payroll taxes deposited with the firm had never been forwarded to the IRS, the controller was jobless for years.

 

Dr. Lynne Curry is a management/employee trainer and owner of the consulting firm The Growth Company Inc. Send your questions to her at thegrowthcompany.com.

 

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