5 July 2012

Is whistleblowing more about bounty hunting than the pursuit of ethical business?

In the US, to encourage the reporting of corrupt practices, the Securities and Exchange Commission has implemented a regime where informants can receive a percentage of the penalty resulting from successful enforcement action. Its informant fund has a published scale starting with a minimum payout of $100,000 where a settlement is worth more than $1 million.

The scheme was enacted in the False Claims Act during the Civil War to help reduce fraud and profiteering in procurement contracts. The Act has a new lease of life.

It was in the news this week when four former employees of GlaxoSmithKline who provided evidence used in an action against their employer, received US$250 million from a record settlement for false promotions.

Glaxo, Britain’s biggest drug maker, agreed to pay a US$3 bn fine after admitting fraudulently promoting medicines in the US. The marketing included providing luxury Caribbean holidays to doctors who prescribed those drugs.

Some benefit may have come from the ten years of negotiating the settlement. A Glaxo spokesman said: “In the last four years we have fundamentally changed procedures. We now encourage employees to seek help and discuss their concerns about ethical issues or suspected cases of misconduct.”  By contrast, British banks that promoted their ethical traditions have been uncovered as somewhat less than they claim to be.  Glaxo only got around to developing its integrity programme after its corrupt practices were exposed.

The retired lawyer whose advocacy about unlawful rating by Kaipara District Council and spending of $80 million in breach of statutory powers, may be disappointed there is no similar informant fund in New Zealand. The media reports that for a number of years information about unlawful practices that he referred to the council and to the Auditor General were ignored.  An OAG inquiry announced in March relates more to the precipitating Mangawhai waste water scheme than the underpinning rating issues.

The Auditor General is specified in the Protected Disclosures Act as an appropriate authority to whom a protected disclosure can be made –not that many employees working in agencies subject to the Protected Disclosures Act would be aware of that.  The statutory duty of each agency to publish its disclosures policy and regularly republish it, is seldom complied with.

But then again, protected disclosures though few and far between are often more related to a personal grievance than remedying serious wrongdoing.


http://oag.govt.nz/media/201 2/inquiry-mangawhai-wastewater-scheme