What is Your Magic Number? Creation, Implementation and Administration of a Hotline

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For the Astros, it is not this season’s ignominious record of 107 losses, which they achieved yesterday with a season ending loss to the Chicago Cubs, but the magic number of 186; which is the number of days until the Astros open the 2013 season and the next time they will be tied for first place in the American League (AL) West Division.

For the compliance practitioner, the same might be asked of your company’s hotline. However apocryphal the story might be it is too good to pass up so here we go: When, in final negotiations with a company to resolve a Foreign Corrupt Practices Act (FCPA) violation, the Department of Justice (DOJ) attorney asked for the phone number of the company’s hotline. Counsel representing the company dutifully provided the number and the DOJ attorney called the hotline only to find it was “not a working number.” Oops.

I thought about the above story in the context of the maxim that not all hotlines are created, or more importantly, administered equally. In an article entitled “Hotline Report Reveals Compliance Concerns” author Karen Kroll looked at the “2012 Corporate Governance and Compliance Hotline Benchmarking Report” and found what she termed “troubling findings”, which are that not only are instances of fraud increasing but that retaliation against whistleblowers is increasing as well. Kroll noted that “despite greater protection for whistleblowers in the Dodd-Frank Act, calls concerning potential retaliation against an employee who has made an inquiry through a hotline increased to 2.9 percent of overall incidents, up from just 2.1 percent in 2010.” But as bad as these figures are they seem to only presage Kroll’s penultimate conclusion, which is that internal reporting will slowly wither away with the protections offered by whistleblowers under the Dodd-Frank Act and the attendant bounties that can be paid to a whistleblower in the event a violation is uncovered and an enforcement action results in a fine or penalty paid to the US government.

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