Whistle blowers represent both a threat and an opportunity for compliance officers. The obvious threat for compliance officers is that an employee who has identified an area of non-compliance within the company chooses to report the issue to an external regulator, the ramifications of which may include heavy penalties for the company. New whistle blower legislation in the US has made this option far more attractive for US employees, who could potentially receive around 30% of the recoveries that result from their cooperation.
Avoiding falling prey to an employee whistle blower can depend on how effectively companies deal with internal complaints lodged by employees. If or when an employee makes an internal complaint, compliance officers should be swift to act on and deal with employee concerns. Carl Ayers, Chief in Editor for IA Watch, highlights the need for compliance officers to respond quickly and effectively to internal complaints, saying if the issue is not dealt with appropriately, the employee may feel obliged to involve external regulators to resolve the issue, which can be time consuming and expensive, potentially opening the company to a full audit. Check out the article here.
In July 2012, US authorities charged British pharmaceutical giant GlaxoSmithKline with marketing drugs for unauthorised uses and cheating the government’s Medicaid program. GSK pleaded guilty to the charges and as a result were fined a total of US$3 billion. This case is a significant example of the potential ramifications of ignoring an employee’s internal complaint. Senior GSK executives failed to act on repeated warnings from employees, forcing employees to report compliance issues to US regulators which led to massive fines and extreme brand damage.
Greg Thorpe, a sales representative for GSK, reported his concerns to management over what appeared to be a corporate culture focusing more on commercial gains at the expense of patient safety and ethics. Rather than take note of internal feedback, GSK management warned Mr Thorpe against criticising lavish incentives for doctors and nurses who promoted a number of products, which he believed was ‘buying the business through bribery’. Mr Thorpe then raised his concerns with GSK’s global head of compliance and chief operating officer, to no effect. He was later forced out of GSK and never given the full benefits negotiated in his departure package.
Because GSK dragged their feet, and refused to resolve the issues raised by Mr Thorpe, Mr Thorpe felt compelled to report the problem to US authorities. In line with US whistle blower policy, Mr Thorpe will be eligible to share between 15-30% of $1 billion for his role as whistle blower.
Check out the full article here.
What’s the lesson for compliance officers to learn from this?
When internal compliance issues are raised, compliance officers should be all over it! Don’t put the issue on the back burner, particularly if the issue is serious enough to get the regulators involved. Put practices in place that will assist you to deal with whistle blowers effectively. Internal whistle blower hotlines are one way companies can provide a line of communication from employees to compliance officers. By dealing with issues swiftly, compliance officers can reduce the likelihood of regulator intrusions.
