UNIVERSITÀ CARLO CATTANEO - LIUC FACOLTA’ DI GIURISPRUDENZA Corso di Laurea Magistrale in Giurisprudenza - classe 22/S WHISTLEBLOWING AT WORK: ETHICAL AND JURIDICAL ISSUES Relatore: Prof.ssa Claudia Rimoldi Correlatore: Prof. Mario Zanchetti Tesi di Laurea di: Giorgio Fraschini matr. 10045 Anno Accademico 2006-2007 A mamma e papà TABLE OF CONTENTS Introduction……………………………………………………………………………………..1 Chapter 1. Whistleblowing: a preliminary outlook………………………………………...…3 Chapter 2. Whistleblowing: an ethical approach..……………………………………….….11 Chapter 3. United States Legislation…………………………………………………………21 3.1 The Sarbanes-Oxley Act………………………………………………………………….…22 3.2 Whistleblowing before the SOX……………………………………………………………25 3.3 SOX complaints and investigations…………………………………………………………27 3.4 SOX discovery and hearings………………………………………………………………..29 3.5 SOX Appeals……………………………………………………………………………..…31 3.6 Proof of discrimination……………………………………………………………………...33 3.7 Protected Activities………………………………………………………………………....36 3.8 The “reasonable belief” standard…………………………………………………………....38 3.9 Adverse action……………………………………………………………………………....39 3.10 Damages…………………………………………………………………………………...40 3.11 Attorney fees and costs………………………………………………………………….....43 3.12 Settlement of SOX complaints…………………………………………………………….44 3.13 Attorneys as whistleblowers…………………………………………………………….....46 3.14 Audit Committees and Corporate Employee Concerns Programs………………………...48 3.15 Criminal Sanctions for Retaliation…………………………………………………….…..51 Chapter 4. United Kingdom legislation………………………………………………………53 4.1 Events leading to the Public Interest Disclosure Act……………………………………….54 4.2 Adoption of the “Public Interest Disclosure Act” in 1998………………………………….59 4.3 Characteristics of the Public Interest Disclosure Act…………………………………….....61 4.4 Content of the Public Interest Disclosure Act……………………………………………....63 4.5 Employers and workers preservation under the Public Interest Disclosure Act……………74 4.6 Effectiveness of the Public Interest Disclosure Act……………………………………...…76 Chapter 5. Whistleblowing in Italy and Europe……………………………………………..79 5.1 The legislative decree 231/2001 and the Data Protection Codes………………………...…86 5.2 Whistleblowing schemes in the European Union…………………………………………...87 5.3 European data protection laws……………………………………………………………....89 5.4 Balancing the conflicts between laws: the French case……………………………………..90 5.5 European opinion to conciliate SOX and E.U. Data Protection Law…………………….…92 5.6 Whistleblowing, an instrument to modernise labour law………………………………...…94 Chapter 6. Famous cases of whistleblowing………………………………………………...102 6.1 Whistleblowing at Enron: Sherron Watkins’ experience……………………………….....102 6.2 Jeffrey Wigand: A Whistleblower against tobacco industry……………………………....116 Chapter 7. Conclusions…………………………………………………………………...….129 Appendix…………………………………………………………………………………..…..A1 Bibliography………………………………………………………………………………….….I Introduction Whistleblowing is a quite recent phenomenon, connected to huge scandals, such as the Enron and the WorldCom in USA and the Robert Maxwell’s and several accidents in Great Britain. Every one who tries to light up a mistake or misconduct internally or outside the organisation he works for, is a whistleblower. As we will see, the decision to denounce incorrect behaviours involves ethical and psychological aspects, relationship with colleagues and top managers, families and, more generally, public opinion and social environment. This research’s aim is first to focus the differences concerning Whistleblowing in U.S.A. and Anglo-Saxon countries compared to Europe and Italy. Then some possible solutions in order to meet actual laws and a study concerning the new rules protecting whistleblowing are analysed. Particularly, the work is focused on corporate whistleblowers, on the decision to make disclosures over wrongdoing committed within the companies, especially by executives and top managers. Whistleblowing discipline is strictly connected to white collar crimes because employees of an organisation seem to be the first subjects suitable to point out any possible misconduct by executives. First chapter gives a preliminary outlook on the matter, describing the origin of the term “whistleblower”, the interests characterising the discipline and the different kinds of whistleblowing. Then there is a short analysis of the ethical problems involving the choice of a whistleblower to disclose or not the wrongdoing he incurs during the performance of his work, and particularly the personal dilemmas between intellectual honesty and the sense of loyalty toward own employer. In the following chapters, the third and the fourth, there is an analysis of whistleblowing legislation in U.S.A and in United Kingdom: in United States, particularly, there is an evaluation of the recent whistleblowing legislation included in the Sarbanes-Oxley Act referred 1 to corporate employees (in fact, in the American system, whistleblowing is largely diffused and exist also other legislations providing protection for governmental employees). Great Britain’s Public Interest Disclosure Act, indeed, is particularly interesting because it is a complete legislation covering all the aspects on the discipline. In continental Europe whistleblowing is much less developed as there is not a specific legislation. However some European issues, with both legal and cultural problems obstructing a complete whistleblowing increasing in the European Union, are enounced: as a matter of fact contrasting laws are present in E.U. and a different attitude towards these issues is peculiar of our society. Finally, in the sixth chapter, the experiences of Sherron Watkins and Jeffrey Wigand, two of the most famous whistleblowers in the world, are mentioned. By these events some of the issues described in the previous pages find their application in the practical and real life, and it’s given a concrete profile for the characteristics of the matter. 2 1. Whistleblowing: a preliminary outlook Whistleblowing has not an official meaning, probably because there is not a common and shared knowledge on the matter so that, in each country, jurists and economists have a different vision of the problem and different perspectives about its application. The word whistleblower comes from the practices of English bobbies who were blowing their whistle when noticing somebody committing a crime, making law enforcers, and public in general, alert. This is the origin of the word and for this reason it refers to an activity that must be intended in a positive way and not as a sort of betrayal and disloyalty toward the company or the organisation which whistleblowers belong to. The expression “blowing the whistle” refers also to the action of a football referee when he stops the match because a foul has been committed. The expression developed in the last years and now is perceived somehow in a positive way and somehow in a negative one. One thing is sure and widely accepted: there are situations where someone raises his voice to point out something, should it be a concern or a complaint, but he is unwisely ignored and the inertia to these alarms is often causing accidents that otherwise could be avoidable. A huge example is the explosion of shuttle Challenger1 in 1986, just 13 seconds after the taking off: the accident caused the death of the seven members of the crew. Millions of people around the world were watching the launch on television when the tragedy happened; a tragedy that could be prevented and should be avoided. The senior scientist Roger Boisjoly, an engineer working for Morton Thiokol, the manufacturer of the solid rocket boosters of the Shuttle, warned the space program agency about a fault in the designs of the project even the night before the launch, but his message, such as many others by whistleblowers, was tragically ignored. However in the last years things have changed both from a cultural and a legal point of view, 1 It made its first flight back in 1983, and made another 9 flights until its tenth mission on January 28, 1986 when it disintegrated just after the launch. 3 because people are recognising the fact that, everywhere, who discovers a corruption, a fraud or other illegal and dangerous harm, can contribute to keep a safer environment, should he be able to refer to some authority what he knows. It’s not longer acceptable the climate of silence and of secrecy that in the past allowed companies and organisations to work with no control so that they could damage and endanger lives. The voice of the honest workers was largely overarched by executives’ pressures that gave employees the only chance to be silent. The real challenge is to create an alternative to silence which could allow to separate the message from the messenger, an alternative still difficult at present because of all the contrasting interests and the ingrained habits and attitudes. Whistleblowing issues concern each worker or person and all the organisations; every company and public body can risk that something goes wrong: a poisoned food, polluted air or water, some unsafe means of transport or an incompetent doctor are just a few examples of the risks that could rise from the daily activity of any organisations. Who are the first to discover these hazardous situations, besides who usually work in or for the organisations? The problem is that the employees, who are in the best position to remove or reduce the risks, are also the ones who can lose more from whistleblowing. To solve this problem the first step should be taken by the organisations