What Would You Do if You Discovered Illegal Activity at Your Company?

Don Tennant

Anyone who has read this blog with any regularity at all over the past year is very familiar with the case of Jay Palmer, the Infosys employee in Alabama who blew the whistle on rampant visa and tax fraud within the giant Indian IT services provider's U.S. operations. Readers have received extensive, behind-the scenes coverage not only of the illegal activity, but of the harassment and retaliation Palmer has suffered as a result of choosing that lonely path. Many of us who have become familiar with the case have likely asked ourselves the same question: What would I have done if I had been in Palmer's position and discovered illegal activity in my workplace?


I had a fascinating conversation on this topic last week with Dr. Michael Brodsky, a psychologist and medical director at Bridges to Recovery, a residential behavioral health facility in Southern California for adults with psychiatric disorders. Without mentioning the Palmer case or Infosys in any way, I explained to Dr. Brodsky that I have covered any number of cases of illegal or unethical corporate behavior over the years, including an ongoing whistleblower case, and that I was eager to get his advice from a psychologist's perspective on coping with the stress of discovering illegal or unethical behavior on the part of one's employer.


I asked Dr. Brodsky if he had any advice for workers in the trenches on coping with a situation in which their company has been shown to have acted unethically or illegally in some regard, and he said a lot depends on how the employee is generally disposed towards the company:

Some employees will feel a high degree of loyalty because the company has treated them well in the past; other employees will feel they were deceived, or the company is behaving in a way that they don't want to be associated with. Before they think about how to proceed in a situation where there is corporate malfeasance, employees have to decide for themselves, probably in the privacy in their own homes with their own thoughts, where their loyalty lies - whether they want or need to protect their own interests, or stand with their employer and try to be supportive. Of course, it's a lot trickier when there are questions about illegal activity by the corporation.

Suppose an employee is asked to do something that he knows is unethical or even illegal. Times are tough and nobody wants to lose his job, so how do you handle a situation like that when you otherwise love your job and you can't afford to lose it? Dr. Brodsky said you have to check with your conscience first:

Individual employees have different thermostats about what feels OK. In some professions, a little cheating is almost expected. So it depends on the specifics of the situation. If you really feel like you can't proceed, and you can find a nice way to politely say to your boss, "I'm not comfortable doing that," sometimes you have to do that and take the risk to your career. Probably in those situations, where you need to decline to do something that's unethical, less is more: It's better to say as little as possible about your reasons, and it's certainly better to avoid making pronouncements about what you think the morally correct thing to do is when you're saying "no" to your boss. If you're going to decline to do something your boss has asked you to do that sounds fishy or unethical, it's best to decline without offering an explanation.

How about a case in which I discover illegal activity in my company that has otherwise gone unreported? I don't want to risk losing my job by making an issue of it, but I certainly don't want to be party to the illegal activity. What's my most prudent course of action? Dr. Brodsky said that scenario arises surprisingly often at his facility, Bridges to Recovery:

We have corporate leaders of various kinds who are getting some help, some treatment from us, and more times than not they have to go through a little bit of soul-searching about whether they feel that the activity crosses the line. If it's illegal activity, your options include just refusing to participate; in some cases you can seek protection through the whistleblower laws. You might even - and this happens a lot more often than I realized before I was working here at Bridges to Recovery - people do have a conversation with a lawyer on their own, and consult their own attorney about what's required and what kind of jeopardy they might put themselves in if they participate. In my experience, people rarely regret doing the morally right thing, even if there's a short-term penalty in terms of their employment or how big a bonus they get. People rarely regret living up to their own conscience. The conscience can be a pretty harsh taskmaster, and when you don't do what your conscience wants you to do, sometimes you regret it for a long period of time.

I asked Dr. Brodsky if he's aware of any particular coping mechanism that's especially helpful in a situation where a whistleblower is vilified and ostracized by a company, rather than embraced for what he's bringing to light. His response shed some light for the rest of us on what Palmer is going through:

My honest answer has to be "no." It can be a very lonely road to be a whistleblower. And feeling the comfort of being in the right is sometimes cold comfort indeed, if ostracism follows. I think it's very tough, especially if there's a particular profession or industry that someone has devoted himself to, and he finds himself in the uncomfortable position of needing to stand up for something that goes against the ethos of the company or the whole industry.

So the question bears repeating: What would you have done?

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Mar 28, 2012 4:27 PM R. Lawson R. Lawson  says:

I guess it depends on the company you work for.  If you trust your company and your management, go through proper channels.

Infosys on the other hand will punish you for doing the right thing - even after their own legal counsel advised Jay to come forward.  He gave them an opportunity to resolve this issue internally, and they retaliated.

So if I worked for Infosys I would go straight to law enforcement and file an anonymous complaint.

"Suppose an employee is asked to do something that he knows is unethical or even illegal. "

The advice was to check your conscience.  Perhaps you should do that if it is only in the unethical category.  If it falls into the illegal category, I would check the law books and decide if whatever crime you are asked to do is worth the possible time in prison that could come with it.  It all boils down to risk.

If you ask me to go 70mph is a 65mph zone so a shipment arrives on time, I may break that law and risk a citation.  If you ask me to break into Jay's house and gather dirt on him - I just may help but I'll be wearing a wire and asking you to speak more clearly from time to time because my allegiance just changed. 

I've heard about Infosys doing this type of stuff in India to their employees where they can get away with it, so one must wonder how far they are willing to go here.  Apparently they are willing to bench whistle-blowers and publicly libel them.  How much further will they go?

Mar 29, 2012 10:50 AM George Alexander George Alexander  says:

I think I'm a generally passive person unless something affects my comfort zone. The following seem to affect my comfort zone:

1. Anyone being directly harmed?

2. Am I being harmed?

3. Are you being asked to break the law or indulge in unethical actions?

4. How large scale is the unethical/unlawful activity?

In Palmer's case, it seems no one is being directly harmed, I'm not harmed but #3 and #4 are in the affirmative. I've never been in these situations but I think I would have annonymously reported the issue with whatever evidence I have covering my tracks to the whistle blower department. The problem with not being annoymous is that you will become a witness and when you are a witness, even if you are telling the truth but can't prove it or are discredited, all the legal hassles come with it - in this country, you could get filed with a lawsuit of defamation and what not. I'm just not upto the headache. Forget the Palmer incident. Even the recent cases where the US government or NSA filing lawsuits against whistle blowers is case in point. None of these power blocks respect whistle blowing when it affects them.

One thing I won't do at all is to do something that would have  someone else get harmed, or break the law or ignore a large scale violation of the law especially if I'm in the middle of that kind of an environment. I don't mind slowly changing my job if that happens too. I won't do anything that hurts my moral yard stick. I've had to go through that very few times and politely refused or made up an excuse to avoid going deeper in such situations.

The one time where I did see action being taken was through my manager from a previous company.  He was an associate VP and had reported on another VP who was sexually harrasing a junior  coworker (sending her sexually suggestive text messages and indulging in such talk against her wishes). The lady felt helpless and eventually broke down to my manager. My manager had a very good reputaiton of having a standard of moral charecter and integrity so many junior folks were a lot freer with him. He immediately reported the VP and the company took action and fired him. In another time, the CIO was asking my manager to give lower appraisal ratings to his subordinates but he refused because he insisted that they went up and beyond in their work leading to lot of benefits for the company. In short, he stood for his employees and wouldn't compromise on revenue. I know if I noticed anything happening while I reported to him, I would be really free to bring up any violations through him. Infact, I had a lot of boldness to push back on certain things from other senior folks like VPs and directors when I felt they were trying to push the limits inch by inch. My boss told me to always do the right thing and he would cover me if any one pressured our team from the top. Infact, later at the end of that incident, he told the CIO that some of them were not treating us right.

I think at the end of the day, it depends on the moral charecter of the people involved in the higher echelons of the company. In most cases, only they have the power to push for corrections whenever a violation happens.

In Palmer's case, I think some people in the top ignored it and later thought they could cover it up.

Mar 30, 2012 6:02 PM Bill Taylor Bill Taylor  says:

Read "Organisations behaving badly: A greek tragedy of Corporate Pathology" by Australian author Leon Gettler. It is very insightful on this very topic.

Mar 30, 2012 7:01 PM Gregory Pinkowski Gregory Pinkowski  says:

case 1: I was an employee at a small company.  I knew their employment contract was illegal, especially for several Russian workers.  I was frustrated with the company's penny-pinching ways and how it affected employees.  I asked for clarification, and the company had to start tracking hours and paying overtime (California law) or pay more.  Management's resentment was long-lived.  They kept me long enough to make it not look like retribution, then put me into the next round of layoffs.  In retrosepct, I probably would not have asked for clarification in writing but discussed it verbally.  But I knew it was strong-arm tactics to force their hand in writing, and I hoped they would increase the base pay to something fair.  Instead they just limited hours and brought in more people, with everyone paid less.

case 2: I was a contractor thru a 3rd firm.  Married manager had a married girlfriend who used to be the computer tape librarian.  Since the installation of virtual tape he had an emplty tape room with a combination-lock safe-vault door and his girlfirend's desk inside.  He spent an hour in there every day, and she slept in there the rest of the time.  I didn't really care, and as a contractor my loyalty is bought and paid for, and is to him and not the company.  But then he had a software product with a use counter, and wanted me to reset the counter.  This was clearly illegal violation of the license.  I told him that the contracting company had me bonded and that I could not do anything to jeopardize that bond.  So he had me document how to reset the use counter and found someone else who would do it.  But in the end, I walked in on him and his girlfriend in the tape vault, and his girlfriend was mortified.  So once he felt I had too much on him, he called the contracting company and told them to send somebody fresh.

So, in the end, these situations will hurt you.  The best you can do is look for an ethical enviroment with as few such complications as possible.  And have broad enough skills to move and preserve your integrity and career.

Apr 13, 2012 5:39 PM CIOs, Infosys, Wipro, Tata, Cognizant and .. CIOs, Infosys, Wipro, Tata, Cognizant and ..  says:

We all know that these Indian companies haven't respected our laws. It is time to make them accountable and our judicial system needs to serve them the biggest fine in the history of America. America needs to ban them for doing business in America and they need to arrest those who have forged documents. They are the biggest threat to America and they have implemented a discriminational model in the USA. The metaphor is that American people invite them for dinner and they will take American's houses. Indians hire and promote Indians and it is becoming a mafia. They have became well organized and followed the same blueprint. Do we know if the Indian government and several Indian greedy business people are involved in this scheme?

The biggest blame should go to  American companies and to the politicians who get bribes from the Chamber of Commerce. It is time to put the house in order

Apr 24, 2012 6:36 PM Carol M Carol M  says:

I  find remarkable that Dr. Brodsky can comment on any type of business practices, as a former patient he did not follow the Hippa laws in the state of California. His medication management was careless and dangerous. He revealed confidential informaiton. Ignored a request for medical records and crossed the line ethically in psychotheapy.

It appears that Brodsky has done well for himself, however, he wreaked havoc on my life. And I feared retailation while under his care and did not report him to the California Medical Board.

Feb 27, 2013 8:47 PM jja jja  says:
When you work at a company that is involved in illegal activity, they will try to work you in by making you do something that is slightly illegal and does not seem largely criminal at the time. Once you are involved, you can't easily report them and that small crime will begin to snowball into larger and larger crimes. If someone else reports the company, you will be a barrier between the authorities and the execs...they have no loyalty to you. My former company (around 200 employees) was involved in data theft and source code theft as well as fraud. I kept my nose clean, gathered information that showed the top level execs were involved and submitted it to the legal departments of the fortune 500 companies that they had stolen from. I cannot stress enough that no matter what, an employee should not engage in even the tiniest illegal activity as they may be ruining their lives. Simply having knowledge of the activities and not reporting it causes you to be an accessory. Going through all of this will probably be one of the most difficult and nerve wracking things you will ever have to do but hopefully you can protect yourself and your family from those who would ruin you. Reply
Apr 22, 2014 6:58 PM SmDean SmDean  says:
I am a bookkeeper for a company that on more than one occasion,have received cash for a transaction and they have not reported it. I am concerned that if an audit should happen I will be the the fall guy - as I am the bookkeeper. I have mentioned to this on many occasions to the owners and to no avail. the joke is that I would look good in orange. I have worked for this company for 15 years and it still continues. I don't wish to be involved with this any longer. I am unsure if I should quit this job and if I would be able to apply for unemployment while looking for another job. what are your suggestions? Reply

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