Whistleblower: Compliance Officer’s Friend or Foe?

Kreller Group

Written by Tom Engelhart & Danyal Solomon

It seems that nearly every day, we read of another high-profile whistleblower case in the media. At first glance, this would appear to be a result of successful and effective ethics and compliance programs. While this may seem to be the case, the havoc wreaked upon organizations as a result of whistleblower claims is often devastating. Stock values decline, shareholder lawsuits proliferate; as a result, internal and external business operations end up in complete disarray. The weight of negative media attention, compounded by predatory actions of competing firms, often puts companies at risk on many levels.

Portions of the Dodd-Frank Act, along with the Department of Justice, openly plead for whistleblowers through the media to come forward in the many industries. This has created a feeding frenzy for the employees that may be aware of anti-competitive, corrupt or illegal business practices within, or relative to, their organizations. We say “relative to” because many times, there exists a loosely-connected international component relative to a third-party engagement that ensnares the company in a whistleblower claim.

Oftentimes, these situations are presented due to ineffective or superficial due diligence relative to international third-party engagements. An effective corporate compliance program requires effective compliance solutions. Compliance monitoring and third-party certifications can reduce the risk of rogue activity by one of these third-parties. In many cases, an instance of whistleblowing could have been avoided by engaging a strong external third-party due diligence program. Compliance officers worldwide cringe at the possibility of tomorrow’s headline involving a whistleblower claim from within their company. Today’s ineffective compliance program is tomorrow’s whistleblower headline.

So, how can the compliance officer mitigate the risk of a whistleblower?

  1. Create a culture of effective internal reporting standards that delivers effective channels for employees to report concerns.
  2. Properly vet potentially risky relationships with sufficient due diligence in order to reduce the likelihood of graft or other improper conduct.
  3. Encourage a cooperative approach to ethical business conduct between third parties, employees, and compliance practitioners. Adherence to these simple steps creates a synergy of conduct and ethical intentions throughout the organizations and into tertiary relationships across the globe.

Tom Engelhart

Tom Englehart was a co-founder of Kreller Group in 1988 and is currently a director. Prior to his position at Kreller, Engelhart was an executive with Dun & Bradstreet working in their Credit, Finance, Marketing, M&A and credit investigation and analysis units. Engelhart specializes in consultation with Fortune 100 companies in the areas of FCPA, Due Diligence Investigations, Fraud, Money Laundering, Joint Ventures, M&A, International Information Systems Management, Credit Investigation & Analysis.  He is a graduate of Miami University of Ohio. Engelhart is a featured speaker for Marcus Evans FCPA conferences and the Institute of Internal Auditors (IIA) and is also a member of the American Society of Industrial Security (ASIS).

Danyal Solomon
Danyal Solomon is a global due diligence consultant for Kreller Group. Prior to his tenure at Kreller, Solomon was a business analyst for Microsoft and worked in Constituent Services for the United States Congress. He advises multinational Fortune 100 companies in the areas of FCPA Compliance Program Construction, Third Party and Serial Litigations Investigations, Anti-Corruption, Anti-Money Laundering and M&A Due Diligence. Solomon received his B.A. in Middle Eastern Languages & Cultures/International Relations from Columbia University. He is currently pursuing a Juris Doctor at Salmon P. Chase College of Law. Solomon is fluent in Arabic.

About The Kreller Group

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