May 22, 2014

The Win-Win Of Whistleblower Hotlines And Compliance Programs

phoneBy the C|C Whistleblower Lawyer Team

And yet another survey demonstrating the importance of internal whistleblower hotlines and compliance programs.  This one by the Society of Corporate Compliance and Ethics (SCCE) and the Health Care Compliance Association (HCCA).  These two ethics and compliance groups reached out to their membership for a reality check on how their companies fared in encouraging whistleblowers to bring their complaints in-house.  What they found is that whistleblower hotlines and internal reporting programs are more popular than ever for those witnessing fraud or misconduct in the workplace.

Here are some of the survey’s key findings:

  • 37 percent of respondents reported an increase in the volume of whistleblower calls to the company helpline, while only 12 percent of respondents reported a decline.  This trend was more extreme for publicly traded companies with 56 percent reporting an increase in helpline calls, and 17 percent reporting the call volume had increased a great deal.
  • 58 percent of respondents reported an increase in the volume of whistleblower reports through all means, including helplines, direct reporting to supervisors or reporting to the company compliance group.  This figure rose to 66 percent for publicly traded companies.
  • Despite this increase in whistleblower activity, just 6 percent of respondents reported an increase in the number of qui tam lawsuits filed against the company.  This was roughly the same as the percent of respondents who reported a decrease in the number of these suits.

As promising as these findings are, the problem is that many companies, perhaps the majority of them, have yet to enact any kind of whistleblower compliance program.  Even worse, corporate retaliation against whistleblowers remains at record levels.  See The Stubborn Persistence of Whistleblower Retaliation.  A recent study by the Ethics Resource Center (ERC) found more than one in five employees who report corporate wrongdoing face some form of retaliation.  While this is basically the same whistleblower retaliation rate reported in 2011, it is a significant jump from the 15 percent rate the ERC found in 2009, and the 12 percent rate it found only two years before that.

As foreboding as these stubbornly high retaliation rates are for future whistleblowers, they should be equally disquieting for the companies that employ them.  That is because the absolute worst thing a company can do to fend off the potential exposure from those whistleblowers willing to step forward is to operate in a climate that discourages and punishes them for doing so.  As the ERC survey confirmed (yet again), the vast majority of whistleblowers — roughly 90 percent — have no interest in reporting to the government.  They strongly prefer to work within the company to expose and attempt to remedy the fraud.  It is only when they have been frustrated in this endeavor, or believe it would be a waste of time to try, that they feel compelled to bring their grievances to the government.

Which brings us back to the SCCE/HCCA survey of how popular whistleblower hotlines and compliance programs have become.  As difficult as it may be for some companies to grasp, providing employees with an internal channel to report wrongdoing and embracing a zero-tolerance policy for whistleblower retaliation, is the most effective approach to rooting out fraud.  Not to mention the best way to avoid getting dragged into a government investigation or qui tam lawsuit.

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If you would like more information or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please click here.

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