Blowing The Whistle Without Paying The Piper

in 1984, George Collier, a West Coast regional manager for MCA, noticed something funny going on at the entertainment company. Some executives were ordering big shipments of free record albums for recipients not entitled to them. Suspecting a possible kickback scheme, Collier notified his supervisors three times. Instead of thanks, he got fired, supposedly for not performing his job adequately, according to a wrongful-termination suit filed by Collier in Los Angeles County Superior Court.

Collier is not as famous as Ernest Fitzgerald, an Air Force employee who identified billions in cost overruns at Lockheed in 1968, or as the Morton Thiokol engineers who tried to stop the launch of the space shuttle Challenger. But Collier, too, is a classic whistle-blower. Unfortunately, MCA's response--firing him--also appeared to be classic. Following a recent preliminary ruling in Collier's favor by a California appellate court, MCA is appealing to the state Supreme Court.

OUTCASTS. In theory, most people agree that blowing the whistle takes courage, integrity, and conviction. But in practice, many "ethical dissenters" attest that they are treated like pariahs--if not fired outright--after fingering wrongdoing. When MIT scientist Margot O'Toole exposed fudged research data for a scientific article signed by Nobel laureate David Baltimore, she lost her job. It was only in April--five years later--that she was vindicated when Baltimore admitted that the research was flawed.

If you find yourself in the dicey position of witnessing a breach of ethics, a crime, or a health or safety threat in the workplace, you need to proceed carefully. Protection for federal workers who expose fraud or wrongdoing is fairly broad, but that's not the case for many private-sector workers. A misstep can leave you jobless and without legal recourse, and it can ruin your reputation.

The problem is that laws protecting whistle-blowers are extremely spotty. Certain environmental laws and workplace safety regulations have whistle-blower provisions. But many states are loath to interfere with "at will" work contracts. Maine will protect private-sector whistle-blowers only if they follow strictly described procedures. Mississippi and Georgia offer almost no protection, notes attorney Daniel Westman, author of Whistleblowing: The Law of Retaliatory Discharge ($47, BNA Books).

Protection means prohibiting an employer from firing or otherwise retaliating against you. Practically speaking, it means the right to sue for harassment or wrongful discharge. That's why you need to build a case to protect yourself even before you expose wrongdoing.

IN DUPLICATE. Lawyers who counsel whistle-blowers say you should immediately start documenting the problem and your response to it. First, try to verify your suspicions about what you think is wrong. Some accounting practices that are legal under new laws may look suspect to a nonaccountant. Before making accusations, you may need to obtain the confidential advice of an expert or attorney with knowledge of your field. "If you blow the whistle on something that's not illegal, you're really bare," and perhaps even vulnerable to defamation claims, says Cliff Palefsky, a San Francisco employment lawyer.

In that vein, it's important to collect evidence of a wrongdoing, preferably written documents. Whether or not such proof is available, keep a journal listing the date and details of the wrongdoing, as well as your own actions in alerting management or refusing to cooperate. Make sure you have at least two copies of all relevant documents--and store one of them away from the office.

Once you're convinced that you can't live or work with the knowledge of the wrongdoing, you'll face a thorny decision: Whom do you tell? First, check to see if your company has an official procedure, which may include an ombudsman's office that handles complaints. Otherwise, prepare a memo that details the suspected problem. If you trust your immediate supervisor, give him or her the "for your eyes only" memo. Don't be too impatient: Your supervisor may need to take time to document the problem, too, and carefully carry the problem up the corporate ladder.

GOOD FAITH. But if you suspect your supervisor of being in on the scam, you'll have to go up the ladder yourself. The board of directors is ultimately responsible for the company's behavior. You may have to send identical letters to each director outlining the problem if internal attempts don't work. If even that doesn't work, consider sending the letter to the corporation's legal counsel, since any lawyer who knowingly supports illegal activity faces disbarment.

Unless your attorney gives you the go-ahead, do not use the media to air your grievance. Reporters love a juicy tale of malfeasance, but in some states, going to the press before making a good-faith effort to tell your employer may ruin your chances of winning a wrongful-termination case.

For tips on blowing the whistle anonymously and hiring a lawyer, and for other resources for ethical dissenters, call the independent, nonprofit Government Accountability Project in Washington (202 347-0460). GAP publishes an informative booklet, Courage Without Martyrdom, for which it asks a $10 donation. The book tells potential dissenters to ask themselves some hard questions. For example, are you sure your motivations for exposing a wrongdoing are not based on sour grapes, revenge, or public attention? If they are, your company can exploit that in battling your allegations.

If you end up filing a wrongful-termination suit, chances are you'll settle before going to court. "A David-vs.-Goliath scenario in front of a jury is potentially explosive for a company," says Westman. Indeed, in July, 1990, a jury in California awarded a former employee of the drug company Syntex $17.5 million in compensatory and punitive damages in a wrongful-termination suit regarding a product safety issue. A judge subsequently reduced the award to $3.56 million. Syntex is appealing.

If your state disallows punitive damages, your award from a court victory could be limited to back pay, attorney's fees, and reinstatement. But settling carries its own set of tough decisions: A settlement offer may include a nondisclosure clause. A company can't prohibit you from revealing illegal activity to law-enforcement officials. But if you are blowing the whistle on a safety or ethical issue, will you swallow your principles and help the company keep the wrongdoing quiet?

Sometimes there are other rewards. The Cavallo Foundation in Cambridge, Mass., annually makes several $10,000 awards to employees or government workers who show "moral courage" in exposing unsafe or illegal activities. And so-called false-claims legislation passed in Congress and by California has added a new twist: Citizens are entitled to awards for blowing the whistle and bringing suit against contractors who defraud the government. California will give a successful whistle-blower up to 25% of the money saved.

But whistle-blowing is no ticket to fame and fortune. Many employers will not fire you outright for identifying wrongdoing, but you may be shunted to an unpleasant job or told your position has been phased out. Or your employers may say you're being fired for incompetence or claim that you are allowing personal feelings or ambitions to cloud your judgment.

'SO ALONE.' Anne Livengood, a 51-year-old medical office worker, knows the embarrassment that can follow blowing the whistle. In a wrongful-termination suit she has filed, Livengood alleges she was fired from a physical therapy clinic in Fremont, Calif., after she notified management that its accounting system billed insurance companies for undelivered services. "You feel so alone and intimidated," says Livengood, who, after her dismissal, claims she was escorted out of the building by the company accountant. Eric Schiffer, CEO of the clinic, says he will countersue for alleged theft of documents and for libel.

In late May, Congress is expected to consider GAP-sponsored legislation that would extend whistle-blower protection to private-sector employees. But even if it passes, remember that laws can only help protect your job. They won't lessen the arduous and even devastating emotional toll that blowing the whistle can exact.


-- Make sure your allegation is correct. Something may look fishy but be allowable under a technicality you don't understand

-- ...Keep careful records. Document what you've observed--and your attempts to rectify the problem or alert a supervisor. Keep copies outside the office

-- ...Research whether your state provides protection for whistle-blowers. It may require that you follow special procedures

-- ...Be realistic about your future. Talk to your family and make sure you're prepared for a worst-case scenario, which can include loss of job, severe financial burdens, and blacklisting in your field. Even if you're not fired, you may be treated with suspicion by colleagues and management


-- Assume a federal or state law will protect you as the "good guy." Legal protection for private-sector workers is often inadequate and varies widely state to state. Most federal protection covers only government workers

-- ...Run to the media. You may be giving up certain rights or risking a defamation suit. Check with an attorney before contacting any reporters

--...Expect a windfall if you're fired. Although some states allow punitive damages, you may be eligible only for back pay and reinstatement--in a place where you probably don't want to work anyway


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