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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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February 8, 2011

Whistleblowers: Paid Too Much?

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Posted by Derek

A former prosecutor says that the huge payouts in some recent whistleblowing cases in the drug industry have gotten out of hand. The law, says Michael Loucks, was never intended to reach up into these sorts of figures, and he's suggesting a cap of $2 million as a reasonable incentive.

I'm not sure if I agree with that or not. It's true that a New England Journal of Medicine report last year found that most pharma informants in such cases say that they were not motivated by the money involved:

Although the relators in this sample all ended up using the qui tam mechanism, only six specifically intended to do so. The others fell into the qui tam process after seeking lawyers for other reasons (e.g., unfair employment practices) or after being encouraged to file suit by family or friends. Every relator we interviewed stated that the financial bounty offered under the federal statute had not motivated their participation in the qui tam lawsuit. Reported motivations coalesced around four non–mutually exclusive themes: integrity, altruism or public safety, justice, and self-preservation.

And that seems believable. But what I'm thinking about is the motivation for the people who are promulgating the behavior that the whistles get blown on. These are not people for whom personal integrity is as strong a motivating factor (although self-preservation would certainly still rank high). Many of them, I'd venture to guess, are in fact people who would fear that others might be motivated mostly by a large payout. And if that's true, the publicity around the large whistleblower awards might help restrain them.

Why don't such people just take the money and run, themselves? Several reasons, I'd say, not least of which is the fact that they're generally quite implicated in the very behavior that the Department of Justice would like to prosecute. But another motivation for that sort of personality is the loss of status and position that such a decision would mean. I'm convinced that having power is a strong motivator for most people, and for some it's the primary one. Money is great, and the other benefits are great, too - but for many people, it's being the boss that is the sweetest part of the job (along with the prospect of working one's way up to being an even bigger boss, of course). Blowing the whistle means saying goodbye to that, irrevocably.

As an aside, people for whom personal power is the prime motivation do not tend to turn out well if they get their wish, to put it mildly. This is a good time to quote Lord Acton. I also recall Gore Vidal's essay "Robert Graves and the Twelve Caesars", pointing out what a depressing spectacle they tended to make once the experience of empire got through with them:

Yet what, finally, was the effect of absolute power on twelve representative men? Suetonius makes it quite plain: disastrous. Caligula was certifiably mad. Nero, who started well, became progressively irrational. Even the stern Tiberius's character became weakened. In fact, Tacitus, in covering the same period as Suetonius, observes: 'Even after his enormous experience of public affairs, Tiberius was ruined and transformed by the violent influence of absolute power.' Caligula gave the game away when he told a critic, 'Bear in mind that I can treat anyone exactly as I please.' And that cruelty which is innate in human beings, now give the opportunity to treat others as toys, flowered monstrously in the Caesars.

And there's always this:

The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. . .Power is not a means, it is an end.

It is, fortunately, a long way from Mr. O'Brien there (or Tiberius) to a typical hard-charging, rule-bending executive. But it's a difference of degree - not of kind.

Comments (12) + TrackBacks (0) | Category: Business and Markets | The Dark Side


1. wwjd on February 8, 2011 11:07 AM writes...

Without the huge payout, how would you convince the lawyers to represent the whistleblowers?

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2. NoDrugsNoJobs on February 8, 2011 11:12 AM writes...

Derek - I think you're justification for the unseemly whistleblower awards is too tangential to the stakes involved. In particular, you seem to readily dismiss the notion that the primary beneficiaries of these huge awards are not motivated by money (sure thing, isn't that what everybody says?) but those who are culpable in the bad actions will be motivated by the fact that they think that the whisteleblowers will blow the whistle because they mistakenly believe they are motivated by money when in fact they are not. As for me,Occam's razor says that if you put out a bunch of roach bait (money in this instant), the roaches will come. Look, if the people who are doing these awful actions are the problem, why not simply punish them rather than strip hundreds of millions (if not some billions) from the shareholders and 99.9% of other employees who are not engaged in the act. If the persons at the companies doing acts that are so egregious, why don't we simply prosecute them through the many criminal statutes that are already on the books? Won't going to jail scare the bejesus out of somebody enough - talk about losing power. I see no reason to burn down the village to save the village. its a sad state of affairs when the whistleblowers at a company become the highest paid employees of the company. Instead of focusing on our jobs, I guess we should all be focusing on catching somebody else not doing theirs. Thats kind of scary to me quite frankly. Our industry already has enough problems to deal without creating more....

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3. Vader on February 8, 2011 12:10 PM writes...

I dunno, Derek. If you're after power, it seems to me that there are more remunerative places to seek it than in the management chain of a pharm company.

I think most people like to think that what they're doing is inherently valuable. When a situation needing the whistle blown on it comes along, the temptation is to find some way to ignore it, because it threatens the self-image of the manager as a person doing something worthwhile in the world.

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4. lucullus on February 8, 2011 12:15 PM writes...

There is no way $2 million can start to compensate whistleblowers for the vexations, ostracism and humiliation that awaits them. Sadly, companies convicted in whistleblower lawsuits have shown they will do anything to make the $2m payoff economically unattractive if there was ever such a cap. The system works well as it is, leave it alone. Companies that dislike it should police themselves more effectively.

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5. Hap on February 8, 2011 1:00 PM writes...

I don't think the people who thought of whistleblower laws thought that the compensation for illegal activities would be quite so high, either, but I don't see as many complaints about that. The fines are usually (at best) less than the profits to be gained from the activity, and that doesn't even count the (less than one) probability that the people/companies doing the illegal activity will be caught.

If whistleblower penalties are cut, companies are making enough money that there is likely to be a financial incentive for employees to keep misdeeds quiet - it's much easier to pay employees enough that the benefits of whistleblowing are small relative to the compensations of illegal activity [not counting the (non-one) probablilty that whistleblowers will get anything, or the fact that if they do get anything, it is likely compensation for the career income that they are likely forgoing].

If you want companies doing bigger, badder things, lowering whistleblower penalties will help.

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6. darwin on February 8, 2011 1:01 PM writes...

The lure of whistleblowing pales in comparison to managerial greed and incompetence, which is in all likelihood, willfull and a corporate selection trait.

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7. barry on February 8, 2011 1:16 PM writes...

If that $2million dollar cap includes lawyers' costs, that would preclude any further wistleblower case ever going forwards; the company lawyers can always drag out the process and run up the costs if they know they can run the opponent out of the game. Even if it were only the part going to the wistleblower, we should remember that she/he is unlikely ever to work in the industry again.
I don't see any motive to cap wistleblower awards. They are part of the still-inadequate system to keep the industry on the strait and narrow in the face of grave temptations.

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8. MTK on February 8, 2011 2:18 PM writes...

I agree with the others that are against a cap on the whistleblowers' compensation.

I think the system is working fine.

If someone can name me an instance when a corporation got unfairly railroaded due to some whistleblower ratting them out, I'm all ears. Honestly, though, I don't recall anything like that happening.

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9. processchemist on February 8, 2011 2:31 PM writes...

I'd suggest more than Gore Vidal a basic approach to roman emperors lives, if not plain Svetonius or Plutarchus at least a little of Gibbons. Absolute power corrupts abosolutely, yes, *most of the times* (the Antonins century is a good example of absolute power well used).

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10. Brooks Moses on February 8, 2011 3:15 PM writes...

I think I'd like to challenge the idea that $2M is "high". As barry alludes to, one of the effects of being a whistleblower is that you're at significant risk of destroying your career. In a non-risky investment, a single payment of $2M wouldn't really replace the ongoing salary of a senior chemist or manager even if none of it were to go to taxes and legal fees. There's no "reward" there.

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11. Resveratrol Receptor on February 8, 2011 3:26 PM writes...

Nice Vidal excerpt, Derek. Does this analysis remind anyone else of their thesis advisor?

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12. health care forum on February 8, 2011 4:02 PM writes...

I truly loved reading your post. Thanks!

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