Responding To A Whistleblower’s Complaint

Companies need to recognize the importance of responding effectively to a whistleblower complaint.  The Enron case, and many others after that, started with a whistleblower complaint which the company either ignored or bungled in its response.

I have repeatedly advised companies to develop a whistleblower triage strategy for assessing, responding to, and dealing with whistleblowers.  There are a number of ways to set up a protocol so long as there is some type of structure to respond to the employee concern.

Initially, a management committee should be established which includes, at a minimum, representatives from legal, compliance, internal audit, finance and human resources.  The committee should examine the following issues:

1. The level of seriousness of the alleged wrongdoing (e.g. foreign bribery, accounting fraud);
2. The level of detail in the allegation reflecting knowledge of specific operations in the company;
3. The background of the employee making the allegation;
4. The existence of a motive of the employee to fabricate or exaggerate a claim to promote, or in response to, personal motivations; and
5. Careful consideration of the accuracy of the employee’s claims notwithstanding a personal motivation to fabricate or lie.

If the person is identified, and the committee determines that further investigation is warranted, it is important to contact and meet with the whistleblower.   If the person is anonymous, and the charge is serious, the company should begin an informal inquiry into the matter.  At every stage, and in every contact, whether to an anonymous source or not, the company should reiterate its non-retaliation policy and commitment to that policy.  The more reassurance which can be provided, the better for the company’s relationship with the whistleblower.

After meeting with the whistleblower and reassuring the whistleblower of the company’s commitment, the company should interview people who may have knowledge of the matter.  A quick and intensive review of documents and records relating to the issues should be conducted.

Based on an expedited initial inquiry, the committee should make a decision whether to close the matter or proceed with an investigation, which could require hiring outside counsel.  If the complaint has no merit, or there is no indication of any truth to the allegations, the matter can be closed.  The audit committee

If the allegations are made by a senior officer with significant knowledge and authority, it is important to seek input from the CEO, the audit committee, and possibly the external auditor if the allegation relates to financial reporting.  All relevant parties should be consulted in the early stages of assessment.

In assessing whether to initiate a formal investigation, it is important to balance the disruption to the company’s operations against the likelihood of the claim’s veracity.  It is important to ensure that the investigation is being conducted for legitimate purposes, and not for internal political reasons.

If an investigation is initiated, it is critical that the investigators follow standard protocol for such investigations.  Otherwise, the whistleblower may claim that the investigation was conducted with an inherent bias against the whistleblower.