Bull Bear Report Mar 17 2010

Whistleblowing: How to Do It and When to Avoid It

By julie steinberg

You may be emboldened by the thought of being the heroic whistleblower who exposes corporate shenanigans, but before crying foul on your employers, you should be prepared for the consequences.

That's what March 2010 has indicated, anyway. No longer the month of lions and lambs, these thirty days should hereafter officially be known as Whistleblower's Month, now that Harry Markopolos, the famed Madoff whistleblower, has company at the top.

In the wake of last week's revelations of massive accounting fraud at Lehman Brothers, there emerged one man who sounded the alarm: Matthew Lee, a former senior vice president with the firm. When Lee, a former Ernst & Young principal, went to Lehman management to complain about shady accounting practices, he was dismissed just a few weeks after.

Lee's experience is instructive. You may want to do your job by reporting corporate malfeasance, but with that bravery often comes unsavory consequences, like, in Lee's case, getting fired. Just because Sherron Watkins, the former Enron VP who told all and then started her own consulting firm, ended up happily ever after, it doesn't mean you will. In fact, whistleblowing pretty much spells career suicide, experts say.

The case of Bradley Birkenfeld, a former midlevel exec at UBS, underscores that reality. Birkenfeld e-mailed his bosses at UBS in 2005 after realizing he was helping the Swiss government shield American tax evaders from the U.S. government. He cooperated with authorities and began funneling them all sorts of internal documents to help bolster his case. In the face of these documents, UBS entered a plea agreement and agreed to release names of the guilty.

And what was Birkenfeld given in return? Jail time. He was found guilty of fraud and sentenced to four years in prison.

Potential whistleblowers might be afraid to speak out in light of Birkenfeld's punishment, a phenomenon known as the "chilling effect." According to Nick Corcodilos, a headhunter who publishes the website asktheheadhunter.com, companies are the cause of that problem. Without a culture of transparency and with the knowledge that stepping out may end one's career, Corcodilos thinks the change has to start on the company's side. And, when it comes to interviewing candidates who once blew the whistles on a former employer, companies need to give them a chance.

"If companies want to act with integrity, they need to tell HR, 'we don't need to run scared,'" he said. "The company should step back and ask itself, 'are we hiding, or should we monitor ourselves more effectively?'"

After the Madoff scandal in 2008, The SEC started advocating for a national whistleblowing program to be established by Congress, and FINRA followed suit by opening up its own whistleblowing office.

Still, waiting for corporate America to catch up to such an enlightened view of its own malfeasance may take a while. Corcodilos recommends thinking very carefully about making the decision to follow in Lee's footsteps, no matter how tempting.

If the situation is egregious enough for you to go ahead, you have to be prepared to lose your job. Having a contingency plan -- like a job in the works with another company -- is a good way to ensure you're not completely in the lurch if your company isn't as understanding as you would like, according to Corcodilos.

If you don't have another job lined up and you're interviewing at other places after being dismissed for whistleblowing, you should address the experience head-on in the interview.

"You need to deal with it like any other obvious question or concern," Corcodilos said. "Say, 'I did my job; blowing the whistle was part of my job,' and move on. You need to shift the agenda away from that toward how you can help their company succeed."

If you're also facing serious reprisals from the company you turned in, the Government Accountability Project, a non-profit devoted to whistleblowers, may be able to help.

The group helps represent people who have blown the whistle and gives them legal counsel, GAP president Louis Clark said. If a whistleblower is terminated, the group can try to get their job back, and can also advise on getting law enforcement involved.

It's important to keep in mind that most whistleblowers will not end up with a book deal or their own consulting company. But if you're sure that the situation needs to be addressed, there are ways to mitigate career fallout.

Write to Julie Steinberg




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