Published on March 15th, 2016 by Alan L. Sklover
“In a room where people unanimously maintain a conspiracy of silence,”
one word of truth sounds like a pistol shot.”
– Czeslaw Milosz
ACTUAL CASE HISTORY: John Slowik, the former Chief Compliance Officer of Olympus America, Inc., the largest distributor of endoscopes in the U.S., discovered that his employer was paying bribes to win new sales. When he reported this to his employer, he learned the meaning of the old saying, “Tell your boss the truth, and the truth shall set you free.” Simply put, first he was retaliated against and, soon after, he was fired.
Slowik had discovered that Olympus was obtaining sales by giving away free medical equipment, paying for luxury vacations for physicians and their families, making hundreds of thousands of dollars in cash payments to physicians masqueraded as educational grants, lavishly wining and dining physicians, and paying exorbitant consulting and speaker fees to physicians. And, just as you might imagine, many of these payments were paid by you and me by means of higher prices paid by Medicare and other publicly funded insurers.
Slowik retained legal counsel experienced in employment law, who understood the gravity of what Slowik had reported. Slowik then sued Olympus based on allegations that the company had violated a federal law known as the “False Claims Act,” and a second federal law known as the “Foreign Corrupt Practices Act.”
Slowik had worked for Olympus for 18 years, starting as a finance manager, and through a series of promotions, in February, 2009 was appointed Olympus’s first-ever Chief Compliance Officer. He had no healthcare compliance background, and had only one employee, who also had no compliance background.
After Slowik sought to eliminate these systematic illegal practices, (i) his complaints fell on deaf ears, (ii) he was told to back off and instead “work around the rules,” (iii) his duties were diminished, (iv) his reporting line was lowered to the Head of the Ethics Department, (v) his compensation was frozen, (vi) he was increasingly isolated from others, and (vii) he was evaluated as a poor performer. Finally, (vii) he was terminated for poor performance.
To resolve Slowik’s lawsuit against Olympus, which even resulted in federal criminal charges against the company, Olympus agreed to pay fines and penalties to the U.S. government of $646 million, out of which Slowik was awarded $51 million.
In addition to the required payments, in order to avoid criminal prosecution, Olympus also agreed to:
- Hire an experienced Chief Compliance Officer, who will be a member of senior management, and report directly to the Board of Directors;
- Make the Chief Compliance Officer position not subordinate in function or authority to the General Counsel;
- Expand the Compliance Department from one full-time position to 19, and fund it appropriately;
- Engage independent third parties to conduct risk assessment targeted to compliance risks;
- Implement an anonymous reporting hotline, and
- Begin compliance training for all employees.
What happened to Slowik was a truly classic example of the treatment afforded so many Compliance Officers who raise sensitive issues of non-compliance with rules, regulations and laws. Often, there is just too much concern in the minds and hearts of management for the financial consequences of “playing by the rules.” How ironic it is that Slowik was fired for poor performance; in the end, he did quite a good job improving Olympus’s compliance organization.
Slowik’s whistleblower complaint did a great service for Olympus. But did it have to be so expensive for Olympus and so damaging to its relations and reputation?
LESSON TO LEARN: What happened to Slowik vividly illustrates an important point for all Compliance Officers, and for all other employees, as well: there are more ways than are commonly thought of to achieve true compliance in the workplace. In addition to “internal efforts,” the many state and federal so-called “whistleblower” laws stand ready to assist.
Can a fired Compliance Officer make use of the many whistleblower laws? Sure. Can a Compliance Officer do so if he or she is still employed? That is a great question, from both legal and ethical perspectives. I believe the answer is surely “Yes,” because in the end, the shareholders’ interests are aligned with the corrective purpose of whistleblower laws, and surely out of alignment with those who act – supposedly on shareholders’ behalf – in violation of applicable laws and regulations. And, too, the larger societal interests are best served by enactment of rules, and the observance of those rules.
Do we need all these rules and regulations? Do we need all these whistleblower laws? Considering Olympus’s and John Slowik’s experiences, apparently we do. Surely, the Olympus story offers a cautionary tale to other endoscope manufacturers, and others, as well, who might be tempted to “throw a party” for physicians at the public expense.
WHAT YOU CAN DO: Keep in mind that efforts to gain company compliance with applicable laws and regulations are not limited to working internally. The many whistleblower laws and programs that exist do “have your back.” Here are seven thoughts to bear in mind:
1. Internal efforts, procedures and processes should always be pursued before seeking outside help. There is no question about it: before resorting to whistleblowing, all reasonable internal mechanisms available to you should be attempted before “going outside.” In fact, any whistleblowing effort you may make will likely be that much more credible, effective and successful if you have first exhausted all other avenues available to you. Internal efforts usually work, but not always, as can be seen in what John Slowik experienced.
2. That said, never expect Human Resources, Employee Relations, the Ethics Hotline, General Counsel, or the Office of the Ombudsman to (a) protect you, (b) keep confidential what you share with them, or (c) support you if you are retaliated against. One note about internal policies and procedures: keep your eyes wide open and your back to the wall.
Never, ever put your full trust and confidence in any person or procedure that assures you that your raising serious compliance issues will be kept confidential and from hurting you. It just does not happen. That includes supposedly confidential “ombuds–people” and Ethics Hotlines. Despite any assurances you might be given, they are NOT there primarily for your protection.
Do not forget for a moment, either, that General Counsel’s office is an advocate and protector of the company and its senior management, NOT tasked with fairness or law enforcement. This aspect of his, her or their job creates an almost built-in conflict of interest. You must keep that in mind.
Finally, to the extent consistent with compliance ethics, use email and other written means of reporting, objecting to and seeking to remedy compliance problems, so as to create a written record of your good faith attempts to do your job.
Feel you’ve been retaliated against? Use our “Model Memo Objecting to Retaliation on the Job” to stop it, remedy it, and have it reversed. “What to Say, and How to Say It,™ just [click here.] Delivered by Email – Instantly!
3. My own view is that whistleblower laws are like surgery: it can help you, but should be considered as a last resort, only. There are many internal ways to bring Compliance issues to your employer, its senior-most management, and even its Board of Directors. There are, as well, many ways that the difficult personal and career-related issues Compliance professionals face in the course of their work can be “navigated” and negotiated to successful conclusion, including (a) correction of the circumstance of compliance concern, (b) restoration of lost responsibilities, compensation or visibility, or even, perhaps, (c) an orderly, dignified, non-damaging “transition out,” in which the timing, terms and tone of departure are of mutual benefit.
That said, if terminated unjustly, as was Mr. Slowik, there is little to lose, and much to gain, by filing a whistleblower complaint with applicable government agencies, regulators, and law enforcement authorities. Mr. Slowik did so, to his considerable gain.
4. Do not underestimate the number of “whistleblower” laws available to you. There are many state and federal “whistleblower” protection laws. Just a few of the U.S. federal whistleblower laws include:
- Asbestos Hazard Emergency Response Act (“AHERA”)
- Clean Air Act (“CAA”)
- Comprehensive Environmental Response Act (“Superfund Act”)
- Consumer Financial Protection Act (“CFPA”)
- Consumer Product Safety Act (“CPSA”)
- Department of Defense Authorization Act (“DDAA”)
- Dodd-Frank Wall Street Reform Act (“Dodd-Frank”)
- Energy Reorganization Act (“ERA”)
- FDA Food Safety Modernization Act (“FDA Modernization Act.”)
- Federal Railroad Safety Act (“FRSA”)
- IRS Whistleblower Programs
- International Safe Container Act (“ISCA”)
- Pipeline Safety Improvement Act (“PSIA”)
- Sarbanes- Oxley Act (“SOX”)
- Seaman’s Protection Act (“SPA”)
- Whistleblower Protection Act (“WPA”)
These are just representative examples. Many others exist.
5. Bear in mind the distinction between “objecting to retaliation” and “whistleblowing.” Sometimes people seem to interchangeably use “objecting to retaliation” and “whistleblowing.” The former usually denotes the internal process of standing up for yourself, and the latter usually denotes the use of external agencies to correct the underlying conditions or improper practices.
Some laws, agencies and authorities do stand ready to protect employees (relating to retaliation) as well as the public (relating to correction of conditions or ending improper practices.) Some focus on one or the other. The list above relate to both.
6. Can an employed Compliance Officer file a “whistleblower” complaint? The answer to this question is fairly simple to express, but not entirely easy to “digest.” First, there is no question that the whistleblower laws draw no distinction between those who are presently employed and those who are not; an employed or unemployed person can file a whistleblower complaint.
Second, the decision whether to resort to outside authorities to report non-compliance is a highly personal one, and very much dependent on the circumstances. For example, if the non-compliance with law or regulation results in tax evasion, that, in my view, is quite different than if it results in children being poisoned by an adulterated medicine or lead in their drinking water.
Third, those who are still employed, and facing pressure, “pushback,” retaliation and similar roadblocks to the performance of their compliance-related duties are likely to have more paths to pursue available to them, internally, and with less associated risk of career damage. In addition, whistle-blowing efforts can at times take years to conclude, not weeks or months.
Suffice it to say that you can file a whistleblower complaint with a governmental or regulatory agency if still employed, but the decision to do so requires more careful consideration of many factors.
In certain situations, it might be wise to “convert” yourself from a “present employee” into a “former employee before filing a whistleblower complaint. To do so, you can use a helpful concept we invented called an “involuntary resignation.” You might want to read one of our most popular blog posts entitled “Involuntary Resignation: Standing Up, Not Giving Up – to an Intolerable Situation at Work.” To do so, just [click here.]
Considering resigning? Consider our “Involuntary Resignation,” which preserves your rights to severance, unemployment and other advantages. We offer a “Model Involuntary Resignation Letter” for your adaptation and use. To get your copy – Delivered Instantly by Email – just [click here.] “What to Say and How to Say It”™
7. Considering filing a whistleblower complaint? Consult with an experienced employment attorney, not your “family lawyer.” Whether you are actively seeking to file a whistleblower complaint, or merely interested in what that entails, you would be wise to direct you inquiries to legal counsel with significant experience in this field.
To locate identify such attorneys, do not believe all you read on websites and the internet, as many lawyers claim extensive experience without basis in fact. There are few “experts” while many claim to be so.
You should never expect to have to pay a truly qualified, experienced attorney to assist you in the whistleblower process. Instead, the best usually work on a purely “contingency” basis, meaning that they are paid only if you receive a reward for your efforts, as Mr. Slowik did.
P.S.: We are familiar with those attorneys considered the best Whistleblower Counsel throughout the U.S. We can introduce you, without charge. Feel free to email to Vanessa@ExecutiveLaw.com, or call 212.757.5000, seven days a week.
SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. For those engaged in compliance efforts, you have more to consider, and more at stake, in your daily efforts.
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*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.
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