Recently, GlaxoSmithKline agreed to pay $750 million to resolve criminal and civil charges brought by the Department of Justice (DOJ). The case centered on the sale of contaminated products which were manufactured at a factory located in Puerto Rico. As a result of the settlement, the whistleblower-former employee who provided information to the DOJ stands to be paid $96 million. In terms of costs, the corporation paid a significant price for poor manufacturing procedures in not only the settlement amount but a drop in stock prices and possibly the confidence of patients and the government. Similarly, the DOJ paid a king’s ransom to a fact witness with credible information. Everyone paid a premium for information that was valuable. One thing is certain, the price of that information should have been substantially less at the time it was first provided. How much and who should pay?
Consider this factual scenario: an employee is aware of wrongdoing at his employer’s factory. The employee remembers from his orientation that his company has an ombudsperson that handles this type of thing. Indeed, he remembers that the company may pay a “reward” for this type of information. The ombudsperson, has a duty to investigate all potential claims of fraud, misconduct, et al. The ombudsperson gets a call from the employee stating there is a problem at the factory. The employee is not a whistle-blower, but merely an honest employee that is following the company’s protocol. The employee knows that the ombudsperson will take his concerns to management or, if the employee is management, to the Chief Ethics and Compliance Officer. He also understands that he will not lose his job by reporting another employee’s misconduct. Rather, the employee knows that reporting is a condition of employment. The company’s compliance-reporting program is set in motion.
A thorough and coordinated investigation is conducted by in-house counsel, outside counsel and forensic experts. As a result, the factory resolves the problem. The General Counsel reviews the investigation report findings, reports to the Board and a decision is made whether or not there is a need to contact the DOJ. The company has spent some time and money investigating the information. A small cost in comparison to the potential fines.
Let’s assume the company wants to self-report to the DOJ. The company resolves the matter with the DOJ by reimbursing the government and implementing better quality control procedures at the factory. The information has resulted in a great outcome for both the company and the government. The government pays nothing and is compensated fully for its losses.
The company is grateful not to be on the front page of the Wall Street Journal for its manufacturing problem. All the company has to do is pay the employee. The employee is rewarded with a merit bonus and raise for the valuable information. The satisfied employee is commended and paid fairly.
There is no need for the company or the DOJ to pay a bounty for credible information.
We will discuss the Dodd-Frank Act in the near future which provides even more bounty to have employees go straight to the DOJ.
Comment from The Sidebar
To learn more history on the HMS Bounty click here.
Photograph from http://www.watersportalmanak.nl/files/Image/Bounty.jpg
