Thursday, December 11, 2008

Whistleblowers in China Sent to Mental Hospital

A number of whistleblowers in one province of China were sent to a mental hospital to keep them quiet, according to a recent New York Times article, citing the Beijing News.

The N.Y. Times reported:

[P]ublic security officials in the city of Xintai in Shandong
Province were said to have been institutionalizing residents who persist in
their personal campaigns to expose corruption or the unfair seizure of their
property. Some people said they were committed for up to two years, and several
of those interviewed said they were forcibly medicated. . . . [M]ost inmates
were released after they agreed to give up their causes.

Retaliation Common: Unfortunately, retaliation against whistleblowers is a common phenomenon. In the United States, whistleblowers are frequently fired or demoted. According to one study of hundreds of whistleblowers, almost 70% of those who reported wrongdoing internally were terminated, while more than 80 % of those who reported wrongdoing to outside entities were terminated. Recent examples of retaliation against whistleblowers in the U.S. include, for example, a TJ Maxx employee fired for reporting on data security problems, a federal prosecutor demoted after reporting that his supervisor mishandled classified material, retaliation against federal air marshals who reported misconduct by other marshals, an FAA employee demoted for reporting safety violations, and my own client who was fired and blacklisted for refusing to participate in and reporting an antitrust conspiracy.

Potential Solutions: While there are some laws in place designed to protect whistleblowers from retaliation, reporting wrongdoing is still a risky proposition, and potential whistleblowers must seriously consider the potential costs and benefits. Some laws, like the False Claims Act, are designed to provide positive incentives to whistleblowers who report fraud against the federal government. Between 1996 and 2005, whistleblowers helped the government recover $9.3 billion under the False Claims Act for health-care related fraud, of which the whistleblowers received over $1 billion.

While affirmative whistleblower incentives in the United States are limited to fraud against the government, some countries offer broader incentives, such as offering whistleblowers a percentage of any criminal antitrust fines imposed.

Although one (inappropriate) government response to whistleblowers is putting them in a mental hospital, I advocate the government providing affirmative rewards to encourage whistleblowers to come forward despite the risk of termination or other forms of retaliation.

Related Posts: Incentives & Disincentives for Insiders to Expose Unlawful Cartels; Kotchen & Low LLP Sues Packaged Ice Manufacturers on Behalf of Former Party Time Ice Executive Martin McNulty; Considerations for Individuals Who Refuse to Participate in Illegal Business Practices.


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