Whistle blowing 101 contd.

Why whistleblowing is thankfully becoming a risk worth taking

The 61 year-old did not buy a winning ticket. Instead, he’s one of four former employees of GlaxoSmithKline whose evidence earlier this month helped the US Department of Justice (DoJ) impose a record $3bn fine on Britain’s biggest drugmaker, for mis-marketing medicines to patients in America. The father of four has lived the past 10 years as a whistleblower.

“To tell you the truth, it’s still emotionally draining,” Thorpe told The Daily Telegraph. “I’m trying to look ahead.” It is understandable that such a long legal battle should still frame life for one of the first sales representatives that Glaxo hired when it pushed into the US in 1978. On July 3, Glaxo admitted publicly to practices that Thorpe, who worked for the company in the mid-western city of Denver for more than 20 years, first complained of to his managers in 2001.

Psychiatrists were allegedly whisked away by Glaxo representatives for luxury weekends in Hawaii, Puerto Rico and Bermuda, where golf, deep sea diving and snorkelling were on offer to entice them to prescribe the company’s drugs to patients for whom they had not been officially approved by the US Food and Drug Administration.

The $3bn fine the DoJ hit Glaxo with was announced just a week after Barclays agreed to pay $450m to settle allegations it had sought to manipulate Libor, one of the world’s key interest rates. Despite the bank’s much smaller penalty, it is no surprise that Barclays’ wrongdoing created the far bigger furore. The bank’s senior management have gone. Regulators on both sides of the Atlantic, but particularly in Britain, appeared to have played down concerns about the potential fixing of Libor when it was first brought to their attention more than four years ago.

According to emails released by the New York Federal Reserve, it was conversations with traders that made officials aware that banks may have been understating their borrowing costs when Libor was set. The narrative with Glaxo is far simpler. Thorpe, along with fellow whistleblower Blair Hamrick, who also worked as a salesman for Glaxo, took their concerns about the mis-marketing of the drugs to managers but were ignored. Both were eventually forced out of the company.

In 2003, the pair filed a lawsuit under the False Claims Act, a statute stretching back to the Civil War that allows individuals to take steps to recover losses that have been incurred on behalf of the US government. The government, one of America’s biggest buyers of medicine, later joined the suit, bringing with it the investigatory muscle of the DoJ. Under the False Claims Act, whistleblowers can receive between 15pc and 25pc of the total of any settlement.

Glaxo’s chief executive Sir Andrew Witty this week apologised again for the practices brought to light by the investigation, adding: “We’re determined this is never going to happen again.”

Although high-profile, the Glaxo settlement is only the latest in an increasing number of prosecutions in the US started on whistleblowers’ evidence. The number of prosecutions reached 417 last year compared with 231 in 2008. Stephen Kohn, director of the National Whistleblowers Centre, says they are increasing because the law provides a meaningful incentive for an employee who suspects wrongdoing to take the degree of risk required to point it out.

“A traditional legal remedy for a whistleblower has been backpay and reinstatement at work,” says Kohn. “It doesn’t work because they are never welcomed back and their careers are stunted. The law provides an incentive for employees to take a risk and offers the whistleblower a significant chance to get compensation.”

Last summer, the Securities and Exchange Commission, America’s top financial regulator, added fresh incentives by allowing potential whistleblowers to bypass their employers’ own internal compliance systems if they do not trust them.

It caused a barrage of complaints that it will leave companies’ expensive internal compliance departments redundant and encourages lawyers to pursue tenuous cases in pursuit of hefty fees. They are risks, but the priority should be to encourage whistleblowing.

And the combination of risk and reward appears to have the potential to help uncover wrongdoing in the battered banking industry.

What is clearer, though, is that life as a whistleblower is hard. Thorpe says he was rejected for 20 jobs since he left Glaxo and has run up debts of $700,000. Though he is poised for a handsome pay-off, he did not know the outcome when his case started almost a decade ago.

http://www.telegraph.co.uk/finance/newsbysector/pharmaceuticalsandchemicals/9431096/Why-whistleblowing-is-thankfully-becoming-a-risk-worth-taking.html