The Journalist and the Whistle Blower
April 24, 08Society has a problem with whistle blowers or, at least, with certain types of whistle blowing. In the diamond industry any kind of informers are frowned upon – and viewed as negative. Allow me an example to the contrary: in reference to certain possible misconduct, the head of an industry-service organization advised clients that if they have certain “new insights in this matter, they are urged to let us know, or, if they prefer, to send same to law enforcement officials.” But such suggestions run counter to prevailing industry norms or customs: you don’t inform on colleagues and, if you do, there is little chance your suggestions will be heeded.
De Beers faced a comparable problem a few years ago, when DTC Sightholders bitterly complained that “fellow Sightholders were making gross misrepresentation in their company profiles,” which led to some clients getting a far greater rough allocation than those who had been truthful. The phenomenon came under the heading of “creative accounting” or other suitable understatements. Based on profiles, some jewelers were supplied ten-fold of their annual turnovers.
As no Sightholder was willing to step forward and be specific about alleged wrongdoings by a colleague, De Beers brought in Kroll forensic accountants to check whether clients had been truthful in their written statements to the rough supplier. It had to spend millions of dollars on something many of their clients could have told them. Though De Beers takes pride in its “third party verification” program, sometimes it is conveniently overlooked that the avalanche of non-specific clients’ complaints were what brought in these external investigators in the first place.
The diamond business is what scholars call a “reputation-based exchange,” and its very functioning and sustained survival relies on effective mechanisms that enable the participants to have profound insights into the reputations of their trading partners.
The sustained mutual trust that characterizes the relationships among dealers allows the exchange of diamonds; it allows giving credit without substantial collateral; allows giving diamonds to third-party cutters, and it enables the trade participants to comfortably engage in executing verbal contracts. Worldwide -- the trust-based systems have proven themselves over time. Even when confronted with occasional wrongdoings – one tends to remain quiet. More than in any other business, the value of one’s (or one’s family) reputation has far-going economic implications. Doubts about the integrity of a person may, at times, reflect on an entire family. These are serious issues.
When an occasional cheat or crook is encountered, there is a strong reliance on settling the issues “within the diamond community.” However, there is almost a contradiction in terms: on the one hand, the diamond players want (and need) to know anything there is to know about the reputations of other trade participants, but on the other hand, trade (or ethnic or religious) customs and prohibitions make them unwilling to speak out against colleagues – and certainly not to third parties, such as law enforcement agencies. Here is where journalists come in.
In the diamond industry, the trade press (B2B) is fulfilling a key role in disclosing a wide range of issues and events, which, occasionally, may unwittingly impact on reputations of people. This puts a tremendous burden on the writers to double-check and triple-check the information published – it must be true and accurate. Mishaps occur – and some of the most miserable mishaps are in these rare situations when, intentionally, sources went to great length to provide misinformation for their own malicious reasons. There is a difference between a journalist’s trusted and long-term trade sources and “one-time” whistle blowers – with or without a hidden agenda. Investigative journalists face serious dilemmas when dealing with materials provided by whistle blowers – and this week I would like to share some of these predicaments. One must differentiate between internal whistle blowing (when an employee goes to his superiors) and external whistle blowing (where a worker brings his charges to a government agency or to the media.) As a journalist, my own experience is limited to the latter group.
There is also a difference between government and private-sector employees. Government employees divulging fraudulent or just unethical practices to regulatory agencies are generally seen as doing their duty as employees and as citizens. For employees of large public corporations, in the wake of the Enron, WorldCom and other similar scandals, there is new legislation that encourages and protects whistle blowers. But even there, people are reluctant to come forward.
In the diamond and jewelry business, most companies operate in the private sector, and the occasional whistle blowing is by employees on their employers. In many countries, including the U.S., the laws differentiate between the obligations of government employees to protect their country and fellow citizens, and private sector whistle blowing in non-publicly held companies. Whistle blowing is generally appreciated only if serious bodily harm to innocent people (caused by a faulty product or policy) can be prevented by going external. The textbooks say that a merchant that overcharges a customer is not guilty of an offense, and an employee informing on him is simply divulging confidential company materials – which is by itself, in most instances, an offense.
In most instances of whistle blowing, workers must make a moral judgment whether going public with (sometimes classified) company information, internal procedures, documents, etc. is justified or warranted, or whether it is merely an unnecessary breach of trust and loyalty to one’s place of work. Checking some of the academic literature and surveys on this issue reveals that generally private sector whistle blowing is perceived as “always morally prohibited.”
A University of Kansas professor, Richard T. De George, teaching business ethics, who himself takes exception to the very view he reports, says “the position that whistle blowing is mostly morally prohibited is held by both managers and employees. There is a strong tradition within American mores against ‘ratting’, or telling on others. There is ample evidence that when someone does blow the whistle on his or her company – even for moral reasons, and with positive results for the public – he or she is generally ostracized, not only by the management of the firm but also by fellow employees. The whistle-blower is perceived as a traitor, as someone who has damaged the firm – the working family – to which he or she belongs. In doing so, he or she has hurt and offended most of those within the firm.”
The Kansas professor adds that “rarely are whistle blowers honored as heroes by their fellow workers. A possible explanation might be that, by his action, the whistle blower has implied that fellow workers who did not blow the whistle are guilty of immorality, complicity in the wrongdoings, or cowardice. The whistle blower did what others were obliged to do – but failed to do. His or her presence is therefore a constant reminder of their moral failure.”
In the diamond and jewelry industry, some organizations have “whistle blowing” hotlines. In practice, these are the most silent phone lines in these businesses. To some of the ethnic groups making up the f
The Motivation behind the Whistle
When a whistle blower comes to a journalist, the latter must first ask: why is he/she telling me this? If there is no clear answer to that question, it is better not to use the materials.
In my 35-plus years in diamond-trade journalism, the instances of me getting information from a “whistle blower” (i.e. damaging information on a private company from someone within such company) are so few that I can count them on one hand. Most companies have media-astute management, extensive corporate media and investor relations, and are rather accessible to discuss even possibly negative developments.
Ex-employees are generally excellent sources of information – they are not whistle blowers, they rarely have hidden agendas, and, as journalists, it is easier to check their stories as they have less fear of their identity being discovered or of facing sanctions. Current employees, who are not authorized to dispense information but nevertheless volunteer all kinds of wrongdoings, must be viewed with great caution.
A classic example of whistle blowing in the diamond industry is in the case of Gordon Brown. Way back in the late 1970’s, Brown, a technical assistant to the mine manager of Namibia’s (then) fully De Beers-owned CDM mine, went public with the charge that De Beers was “over mining” ahead of Namibia’s independence.
“Over-mining” refers to a mining strategy where the richest profit
Brown’s charges led to the establishment (by South Africa’s apartheid regime) of a Commission of Inquiry (the Thirion Commission, headed by a South African Supreme Court Judge) that investigated corruption and maladministration in the South African colony. The allegations led to considerable strains between producer and host government, which, some say, may still linger somewhere today.
I was reminded of Brown a few weeks ago when a booklet was published detailing how, as a result of the whistle blowing and the “revenge” by his former employers and/or parties associated with the mining company, his life was ruined. He allegedly was first fired, thereafter framed and falsely accused of illicit diamond buying, jailed and what-not – his life story appears like a whole bag of misery all as the result of his whistle blowing. Now, 25 years after the Commission of Inquiry, the Scottish-born Brown is still searching for justice.
He has now hard evidence that witnesses who testified against him had lied under oath, that those who framed him are now willing to admit so openly – in short, he could be exonerated. The problem is: most people don’t care. Whistle blowers are still mostly perceived as outcasts, who brought their own downfall upon themselves. It’s unfair, it’s unjust, it’s regrettable – but that’s the way it is.
Brown’s whistle blowing failed to have the results he intended. Moreover, the well-publicized tragic results for him may have discouraged others to come forward. The 2008 booklet, co-authored by Brown, says he “felt it was his civic duty to tell truth
As a journalist, the issue of “motive” is central when offered information by a whistle blower. That was true then – that is true today.
A few weeks ago I was contacted by Erica (not her real name), who was fired from her job as a sales lady at one of the most prestigious jewelry houses in the world. I don’t want to repeat the essence of her charges, as we are still doing some independent checking – though she seems genuine and truthful. “I did not have a trusting relationship with any of the store supervisors, and I considered it [the wrongdoings] to be a potentially serious legal issue, so I took my concerns directly to company’s general counsel. …I was disappointed (to say the least) that the firm brushed off my concerns so easily. I was genuinely shocked that they refused to investigate or even have a second look at the diamonds I brought to their attention. Therefore, I decided to contact the FBI in January 2007.”
Says Erica: “The FBI agent I was put in contact with was very pleasant and seemed genuinely interested in my story. He assured me he would investigate.
“I was a little concerned when he told me that he himself had worked for [the jewelry house] for
Erica, having exhausted her options to get the perceived wrongdoing addressed through the appropriate internal and external channels, then contacted us. We are glad she did. When I asked her how the retailer reacted to an employee going to the FBI, Erica said “My local superiors were not aware of my actions. I brought the issue directly to the attention of the firm’s general counsel and board member. I was fired days after speaking with the FBI. The reason for my termination was ‘attendance’. The company maintains a strict attendance policy that they reserve the right to take action upon, or not. In other words, if they are looking for a reason to get rid of someone, chances are they can do it under the guise of "poor attendance or tardies."
After having lost her job, Erica didn’t give up. “Frustrated, I contacted the U.S. Attorneys office in NY,” she says. “I spoke with someone in intake and she informed me that there is nothing her office can do unless the FBI decides to prosecute. I have not heard anything since.”
As a journalist, my first reaction was, “why is she coming forward today?” If the FBI felt there was “no story” and her bosses felt there was “no story,” maybe there is no story? Or is the story “so big,” the interests involved so substantial, the players so powerful, that all involved decided it was more convenient to ignore a replaceable sales lady?
Informing in the Diamond Industry
Often, people looking in from “the outside” view the diamond industry as a closed guild, in which members are protecting each other. Keeping silent is also justified by a fear that the dirty linens may impact consumer confidence. That closed guild view is correct – but the act of protecting is not motivated by some ill-defined sense of what is “right or wrong,” rather because the very fabric of the relationships requires the maintenance of mutual trust. As already mentioned, ethnic considerations play a role here. Economically, the potential damage caused by bad publicity is perceived to outweigh the benefits of disclosure. That perception may often be wrong – but it is nevertheless there.
An academic study on the diamond industry in New York, which has a large component of religious observant Jews, notes that “working to ensure the accuracy of reputation information is the rigorous set of Jewish laws that strictly regulate the information one is permitted, prohibited, and required to disclose regarding another individual. One may not knowingly disseminate false and damaging information about others, and the rules require individuals to have compelling reasons for sharing information that, even if truthful, is damaging or unflattering to another. Jewish law does not, however, place excessive barriers to communicating reputation information that prevent a merchant from obtaining the information necessary to sustain his livelihood. To the contrary, Jewish law mandates the sharing of damaging yet truthful reputation information if such information would be of substantial use to the recipient, so long as it is not exaggerated, is shared only because it would aid the recipient, and is shared only to the degree necessary to assist the recipient,” says Professor Barak D. Richman of the Duke University School of Law in a 2006 study. Sharing “negative information” for no specific reason seems specifically prohibited.
Similar ethics can also be found in other cultural and religious groupings which dominate the diamond industry. These ethics – shared among players in the industry -- help filter communications (i.e. market talk) to increase their accuracy while, at the same time, deter the spread of misinformation and unnecessary information. This research finding is confirmed by my own experience. Sources in the diamond industry seldom give “wrong” information. When we write anecdotes or stories which have been confirmed by a number of different (preferably unrelated) sources, we consider the information accurate and printable. We’ll stand behind them.
Occasionally, when we give information that implies infringements of laws, we are being chastened that we should bring it to law enforcement. We have always refused to do that – and we repeat this in public. Journalists have a specific task and function in the industry. We get information from sources so that we can consider using these facts in articles. No other uses are intended – or would be condoned – by the source. Dissemination of certain negative information must always have a redeemable purpose – mostly to bring about change for the better. It is never just for the sake of information.
As a few recent whistle blowers haven’t yet seen their information in print, it is worthwhile to repeat a caveat made by Professor De George. “Because external whistle blowing [i.e. going to the media] involves disloyalty or disobedience at some level, we start by requiring that it be justified, rather than assuming it needs no justification. To distinguish the various levels of whistle blowing, listing condition that make it morally permissible and those that make it morally required is useful as a guide. In personal whistle blowing, there are many instances in which it is permitted but it rarely obligatory. Many people may prefer to change employers rather than blow the whistle, and this may be perfectly justifiable. In all cases, one must weight the harm done against the good to be achieved and the rights to be protected.”
The latter is something we as journalists keep in front of us at all times. This is true in general – but thousands of times more so in the diamond industry. And it applies to all sources of inside information, which may impact reputations. If we are always successful, I wouldn’t know. But we’ll never stop trying.