Whistleblowing

Outline

Summary 3

Introduction 4

History of 5

Shortcomings of 6

Persecution 7

Case Studies in the Medical Field 8

Quest Diagnostic, 2009 8

Pfizer Inc, 2009 10

Conclusion 11

References 12

Summary

as a concept involves reporting or bringing to the attention of thoseconcerned irregularities in the conduct of a person, persons, groupor organization in the execution of their mandate. This is usuallyapplicable to organizations or employers, but generally applicable toanyone. The action of whistlebrowing is mostly directed to an agency,authority, or person that is within the capacity to handle it such asan employer among other parties. The paper will explore the historyand mechanism of whistle blowing. This is with a specific target toits widespread application in the medical or healthcare sector,specifically the Pfizer Inc 2009 and the Quest Diagnostic, 2009,events. Traditionally, whistle blowing was referred by other termssuch as ‘snitches’, or ‘informers’.

Variouscountries, such as the United Kingdom, governments or regionalauthorities have incorporated whistle blowing protection in theirlaws (Johnson, 2003). One of the shortcomings of whistle blowing isimplementability and acceptability within the various countries. Thepractice may also damage reputations or productivity of organizationsor businesses unfairly where whistleblowers do not observe truth,objectivity and fair practice in their presentations of issuesrelating to the subject. Persecution is probably the most rampantdeterrent of whistleblowing activities worldwide. One popular fieldthat has experienced strong resistance from employers and otherpowerful stakeholders is the science and research sector. . Onefamous case of the whistleblower ramification in the financialservices sector was the one of Lehman Brothers in the yearsimmediately before its impending collapse in September 2009, when aninternal auditor and financial vice president, Mathew Lee, wassummarily laid off because his report concerning gross violations ofsafe financial practice by the company implicated high levelmanagement with fraud and gross negligence.

Inthe medical field, whistleblowing is clearly evident. This paper willlook at two major cases which include two firms which are QuestDiagnostic and Pfizer Inc. Both of these cases took place in 2009. INconclusion, it is clear that, whistle-blowing is a concept that isfinding wider popularity as governments and other bodies across theglobe shift towards better accountability and integrity in theirduties

Introduction

as a concept involves reporting or bringing to the attention of thoseconcerned irregularities in the conduct of a person, persons, groupor organization in the execution of their mandate, usually applicableto organizations or employers, but generally applicable to anyone.Whistle blowing in the literal sense is associated with sporting andis used to mark a foul move by one opponent. In the symbolic sense,it can apply to employees who reveal conspiracies in their workplaceor organizations.

Theaction is typically directed to an agency, authority, or person thatis within the capacity to handle it such as an employer, the public,lawyers, humanitarian agencies, or most commonly, the media. Themedia, of all other categories, has the most vocal and effectivepublicity, has least victimization, and is among the easiest and mostdiscrete to use, making it the most widely applied whistle blowingchannel (Johnson, 2003). This paper will explore the history andmechanism of whistle blowing, with a specific target to itswidespread application in the medical or healthcare sector,specifically the Pfizer Inc 2009 and the Quest Diagnostic, 2009,events.

Historyof

Traditionally,whistle blowing was referred by other terms such as ‘snitches’,or ‘informers’. Telling on someone was also commonly used todescribe employers engaging in malpractice. Most public and privateentities lacked formal channels of complaint, and integrity was notuniversally enforced within workplaces or public entities. In 1970,Ralph Nader popularized the phrase as a softer, more sociallyacceptable way of revealing workplace secrets involving fraud ormalpractice. Though the term was not commonly used until 1970, itsconcept had indeed long been embedded in the US laws through a 1778Congress decision to enact information revelation protection into itslaws. The decision was made after a case in which two informersworking for Continental Navy were sued by Esek Hopkins for revealingactions of gross misconduct within Continental Navy. Thus,Continental Congress not only resolved to protect the informers fromsevere implications, but proceeded to pass this protection into alaw.

Variouscountries, governments or regional authorities have incorporatedwhistle blowing protection in their laws (Wharf, 2013). The UnitedKingdom government website defines a whistle blower as a person whoreports suspected wrongdoing at work, in line with public interest.It further lists activities that qualify for consideration aselements for whistle blowing as those involving actions that are notright, involve someone neglecting their duties, or are illegal.Typically, workers report their employers when there is wrong doing,when someone is covering up activities not in line with the company’sethics, as well as activities that endanger the environment, engagerssomeone’s health or are downright criminal (OGL, 2014). Accordingto the human resource development and audit firm Deloitte, whistlebowing is an important aspect for reinforcing integrity andaccountability. In its development manuals, the firm has laid out acomprehensive whistle blowing guideline for use within the UK andSwitzerland for all its partners. Its guidelines are based on variouslaws and Acts of Parliament in the various UK statutes. These Actsinclude Financial Services and Markets Act 2000, Proceeds of CrimeAct 2002, Bribery Act 2010 and the Pension’s Act 2004 (Wharf,2013). Transparency International is an international human rightsorganization that is involved in promoting wellbeing of people acrossthe globe, advocating for fair and just treatment of every person byemployers and governments, as well as exposing activities of graveviolations of fundamental human rights across the globe.

Theorganization has a well structured whistle blowing channel laid outin its website. Any person, organization or social group can registerin the website and consequently channel issues to do with workplacecorruption, crime, fraud and other illegal engagements by companiesand governments. It has also published several documents on thetopic, including Whisteblowing:Legal Protections for Whistle blowers in the EU,a policy document which also includes reports on the existing levelsof protection for witnesses in all the 27 member states of the EU, aswell as steps that should be taken to enhance this program (Vaughn,2012).It has also published InternalPrinciples for Whistleblowers Protection,a document that lays out a common practice pathway in protectingwhistle blowers internationally (Wharf, 2013). The document,published in 2013, aims at retaliating the importance of protectingpersons who inform of malpractices, and the importance of havinggovernments reinforce this trend as a fundamental element in itsbasic laws (Wharf, 2013). This, the document observes, will aidgovernments in promoting integrity within all institutions in theirterritories.

Shortcomingsof

Aspopular as the action has become, whistleblowing also faces numerouschallenges in its implementability and acceptability within thevarious countries. The challenges with its implementability includepersecution of whistleblowers, victimization, stigmatization,retaliation and other general deterrent tactics employed by employersor the senior perpetrators of the negative actions within therespective organizations. On the other hand, the practice may alsodamage reputations or productivity of organizations or businessesunfairly where whistleblowers do not observe truth, objectivity andfair practice in their presentations of issues relating to thesubject.

Persecution

Thisis probably the most rampant deterrent of whistleblowing activitiesworldwide. The issue is especially very effective in small and mediumsize private businesses and organizations, as well as in all sizes ofcorporate entities in countries and jurisdictions where integrity inpublic corporations is not upheld through strong policies. Onepopular field that has experienced strong resistance from employersand other powerful stakeholders is the science and research sector.In the past few decades, scientists who have brought to the attentionof internal and external authorities negative underlying effects ofscientific innovations to the environment have faced stiff resistancefrom parties controlling the industries, including national andinternational bodies protecting the interests of the respectiveinnovations. One such field is that of development of clean energyand its adoption in large scale to replace traditional fossil fuelssuch as coal and crude oil.

Thegeneral underlying truth is that huge investment companies dealingwith exploration and refinement of crude oil control the largerpercentage of global energy today, while the newer entrantscontrolling the clean energy alternatives are relatively less strong.Thus, employees who have expert insight in the potentially negativelong term effects of use of current technologies are discouraged fromsharing this insight with persons within the organization, or evenoutside the organization. Methods to deter them range from milddeterrence through coercion by employers, to policy formulationsconcealing malpractice in employee codes of secrecy, to directthreats of being laid off in the event of disclosure (Wharf, 2013).One famous case of the whistleblower ramification in the financialservices sector was the one of Lehman Brothers in the yearsimmediately before its impending collapse in September 2009, when aninternal auditor and financial vice president, Mathew Lee, wassummarily laid off because his report concerning gross violations ofsafe financial practice by the company implicated high levelmanagement with fraud and gross negligence (Vaughn,2012).

Inthe following judicial inquiry into the factors leading to thecollapse of the organization, the retaliation against Mathew Lee wasrevealed – for the first time for most viewers who were not evenaware of Lee’s existence, leave alone his suffering as an employeeof Leyman Brothers. In the year immediately before the company’scollapse, most middle and top level management staff in the companyraked in millions of dollars in bonuses, but Mathew Lee wasdeliberately excluded from the benefits, under the recommendation ofthe company’s human resource department, allegedly on the groundsthat he had failed to follow reporting and grievance handlingprotocol as laid out in the company’s code of regulations (Vaughn,2012).The company in question had been dealing with the sale of toxicfinancial derivatives to unsuspecting customers, even when top levelmanagement knew of the potential dangers involved, but stillproceeded to award themselves anticipatory bonuses every time a salewas made, even before its maturity period had been achieved.

CaseStudies in the Medical FieldQuestDiagnostic, 2009

QuestDiagnostics is a public limited company based in the US thatspecializes in clinical laboratory services. The company has branchesand subsidiaries in Mexico, UK and Brazil. Its year 2013 financialreport had revenue of $7.35 billion dollars and an operating incomeof $1.5 billion. The company has more than 40,000 employees, and isbased in New York. The company has a very well praised standing inthe international medical sector, having been listed in the FortuneMagazine’s list of the world’s most admired companies since 2008.Yet, it went down in history as paying one of the highest court finesas a result of a 2009 fraud case in which it paid $302 million,equivalent to 20% of its 2012 operating income.

Thecompany’s first fraud case settlement was done in April 2009. Inthe case, the company was convicted of selling and supplying faultmedical test kits to unsuspecting users. This was the largest suchfee to be paid by a medical company as a result of whistleblowerinvolvement. The fraud had happened over a lengthy period culminatingin a 2006 inquiry that laid out details of the fraud. NicholsInstitute Diagnostics, a subsidiary of Quest, had been involved inthe manufacture, sale and distribution of diagnostic test kitsthroughout the country to unsuspecting laboratories till year 2006.The subsidiary, NID, pleaded guilty on 15thApril 2009 before the New York East District courts, and a pressrelease was issued by the US Department of Justice the same daydetailing the nature of settlement and the amounts to be paid by thedefendant to the state (U.S. Food and Drug Administration, 2014). Thecompany further agreed to a $262 million fine as penalty for FalseClaims Act violation in the NID manufacture Advantage Intact Assayswhich were also wrongly presented. This went down as the largestfines to ever be paid by a single medical laboratory company for lawviolations in the US. The

Whistle-blowerin this case was Chris Riedel, the managing director of HunterLaboratories, Campbell California, who filed the allegation. In hisreport, Riedel also mentioned that the unfair practice by Quest wasgiving them an advantage over other service providers, therebypushing companies like Hunters Laboratories out of Market. In thesame year, the US department of justice initiated a 3 yearinvestigation that ended in the 2009 fines against QuestDiagonostics. California Attorney General Kamala Harris pointed outthat the Quest case was a stern warning to others that his office waswatching.

Thecase above represents a whistle-blower success in pushing the stateto act in the public interest, but also one in which the informingperson has an interest. Riedel, being a direct beneficiary of medicallaboratory services in the California state, was losing business toQuest. Though this case was genuine, it also presents the picture ofhow other cases might be twisted by conspiratorial whistle-blowers toeliminated business competition.

PfizerInc, 2009

Similarto the Quest Diagnostics whistle-blower case, the Pfizer Company alsoexperienced a whistle-blower episode in the same year. Pfizer Inc isa US multinational company specializing in drug manufacturing andassociated research and is the world’s largest research-based drugmanufacturer. Headquartered in New York, the company had operatingrevenue of $51 billion in 2013, as well as an income of $15 billion.It has more than 78,000 employees and more than 7 subsidiaries spreadover various countries (Phillips &amp Cohen LLP,2013).

In2003, John Kopchinski, an employee in Pfizer, filed a suit againsthis employer for market irregularities spanning more than 12 separatedrugs. The major drug in question was Bextra, which the companymarketed for use in illegal terms, as well as inappropriate dosages.A former war veteran, the whistle-blower stated that his principlesand believes were to protect people at all costs, and his immediateformer employer, aiming to increase profits, was endangering thelives of people through sales of illegal medicine in illegal dosages.The case ‘Qui Tam’ was filed in Florida by John, alongside otherwhistle blowers who were also compensated at the close.

On2ndSeptember, 2009, the courts found subsidiaries of Pfizer guilty oflabeling falsehoods, as well as failure to observe rules set by theFederal Drug Administration (FDA) procedures, in marketing Bextra andother pain killers which were not only misrepresented and illegallydescribed, but overpriced as well. The fine was $2.3 billion, thebiggest of its type so far in the industry. In the fines, Pfizer waspaying $502 for settling civil charges, as well as $1.3 billion forcriminal liabilities due to the off-labelling crime

Forthe suit, John Kopchinski was rewarded $51.5 million for his role inrevealing the misconduct by the federal government, which was a hugesum considering that his savings for the period were only $400,000,which he admitted were almost depleted by the end of the suit. Thus,the high amount paid by the government was a good incentive toencourage other whistle-blowers, especially in activities of suchgrave consequences in areas of public interest, to volunteerinformation without fear of victimization or job loss.

ThePfizer case is different from the Quest case since John Kopchinskiwas an employee of Pfizer, and therefore stood the greater risk inagreeing to blow the whistle (Phillips &amp Cohen LLP,2013).Not only was his job at stake, but had no guarantee of governmentcompensation after the closure of the case. However, his bravery anddetermination to do what was right despite the potentially negativeoutcomes for him financially helped to save lives and encourage theethical practice of genuine and objective whistle-blowing in thecorporate world, a lesson for others in similar situations to takethe initiative.

Conclusion

Whistle-blowingis a concept that is finding wider popularity as governments andother bodies across the globe shift towards better accountability andintegrity in their duties. While the concept is still relativelyunderdeveloped in smaller workplaces and in countries where goodgovernance is not observed, it is likely to find better applicabilityin the future, as globalization is forcing more countries, regionsand employers to open up to better governance and observance of humanrights. The two cases of Pfizer and Quest show two sides of thewhistle-blower concept, and reveal potential outcomes ofwhistle-blowing. The concept is mainly done in the public interest,but may also be manipulated to suit private interests. Thus,whistleblowing should be embraced with proper checks to ensureobjectivity.

References

Johnson,R. (2003). :When it Works–and why.Lynne Rienner Publishers. OGL (2014). .Available at https://www.gov.uk/whistleblowing/overview

Phillips&amp Cohen LLP(2014). Bextrawhistleblower case leads to record-setting Pfizer settlement.Availableathttp://www.phillipsandcohen.com/2009/Bextra-whistleblower-case-leads-to-record-setting-Pfizer-settlement.shtml

U.S.Food and Drug Administration (2014). QuestSubsidiary, Nichols Institute Diagnostics, Pleads Guilty to FelonyMisbranding. Availableat

http://www.fda.gov/ICECI/CriminalInvestigations/ucm261942.htm

Vaughn,R. (2012). TheSuccesses and Failures of Whistleblower Laws.Edward Elgar Publishing

Wharf,C (2013). policy.Available at

http://www.deloitte.com/assets/dcom-unitedkingdom/local%20assets/documents/about%20deloitte/uk-about-whistleblowing-policy.pdf