As we mentioned earlier, tips from whistleblowers are how most frauds are discovered. But it’s not easy to make that decision. Harry Markopolos blew the whistle on the Bernard Madoff’s multi-billion dollar Ponzi scheme. But his pleas were ignored by government regulators, and he was ridiculed by others for bringing forth such an outlandish charge against a respected member of the financial community. Despite his protests, no one would take him seriously. He was also in fear for his personal safety for challenging such a prominent figure. But despite it all, he stood strong and was eventually vindicated. But it was a very hard journey. That’s why it is important that employers and others understand that the choice to come forward should not be based on the hope of a reward, but on the belief that he or she is doing the right thing. Not surprisingly, most tips come from employees within the organization. But note that according to the ACFE’s Report to the Nations, a number of tips come from customers, vendors, and even competitors. That’s why it’s important to broadcast your reporting program to everyone the company does business with. The more people who know of the program, the more likely you are to gather useful information. When developing a reporting mechanism for whistleblowers, it’s important to take into consideration the following factors: First, the person must feel safe in reporting the conduct and that confidentiality will be preserved as much as possible. Next, it must be available not only to everyone inside the company, but it must also be publicized outside the company. Anyone with knowledge of wrongdoing should be able to report it, regardless of whom they work for. The individual should be able to report any type of inappropriate behavior. This can include harassment, workplace violations, or any other type of misconduct. Each call must be taken seriously. If the organization takes the report, it owes it to the caller to conduct as thorough an investigation as possible. If allowed by law, the individual should be able to remain anonymous. People are more likely to report wrongdoing if they can remain anonymous. Many people obviously fear retaliation. The organization must ensure that there is no retaliation against whistleblowers. Not only is such conduct potentially illegal, it will end any hope of receiving future reports. There are four things that are critically important to include in an overall fraud policy. First, you should explain what fraud is and what is included within that definition. For example, many people may not consider accepting gifts from vendors to be a form of fraud. The fraud policy is a good place to explain company policies and lay out what is expected from employees. Second, the fraud policy should provide examples of behaviors that could be red flags of fraud. Things such as unexplained wealth, reluctance to allow anyone to help with certain job duties or to take vacation days, and secretive behavior such as blocking access to documents or files. Next, you should explain in clear terms what to do if the individual suspects fraud. It should be emphasized that individuals do not have to report to their supervisors and that they can remain anonymous. It must also be stressed that the company will not tolerate any retaliation for making reports. And finally, you should stress that the policy will be enforced. People must know that the company takes the policy seriously, it is important to the company leaders that fraud not be tolerated, and assurance that the offenders will be punished. Thank you for your interest in this week’s topic, whistle blowing. We began by looking at the importance of the whistle-blower. We then moved to a discussion of one of the largest frauds in US history, WorldCom, and some of the company’s key employees. The WorldCom fraud was brought the board of directors’ and ultimately to the publics attention, by a whistle blower, Cynthia Cooper, WorldCom's VP of Internal Audit. We looked at some of the details involved in Ms. Cooper’s investigation, and the timing of the fall of WorldCom. We also looked at the outcome of the investigation, related to several employees. As always, you can find more information on this week’s topics on the West Virginia University and Association of Certified Fraud Examiner websites.
