Fraud Basics

Why do employees blow the whistle?

James Holzrichter believed he was doing the right thing when as an eager young analyst and systems auditor in the 1980s for an American aerospace and defense technology company, he innocently brought some problems of material acquisition and management to his supervisor.

Ultimately, Holzrichter discovered anomalies that led to a “qui tam” suit (under the U.S. False Claims Act) against his company for alleged fraud of overcharging the government and selling it defective equipment, and a 17½-year ordeal in which he’d lose his job, his health and his house. And someone attempted to harm him, his son and daughter. Yet, he didn’t quit. (See Vindication at a high price, Fraud Magazine, July/August 2015.)

Severity and gravity of situations

Holzrichter reported anomalies because his father’s advice, “When is it ever wrong to do the right thing?” was programmed into his life. According to researchers at Boston College and Northwestern University who’ve been studying whistleblowing since the 1980s, would-be whistleblowers base their decisions to report problems on two things: the severity and gravity of the situations. (See The psychology of whistleblowing, by James Dungan, Adam Waytz and Liane Young, Current Opinion in Psychology, Volume 6, December 2015.)

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