02/18/2014 // Justice News Flash: Featured Column // Kathleen Scanlan // (press release)
Over the years, numerous psychological studies have shown that bystanders are less likely to intervene in emergency situations when other people are present. This behavioral tendency was famously coined the Bystander Effect by psychologists in the 1960s, and it has since been ascribed to numerous crimes where a victim was witnessed by numerous people who tragically failed to intervene and help.
The public is always outraged upon news of such failings by bystanders, and yet the behavior continues.
Researchers have found that the likelihood of a person aiding someone in distress drops as the size of the group of witnesses increases. This is known as Diffusion of Responsibility.
“People tend to assume that someone else will provide the necessary help, especially when there are many others around who could possibly do so,” said the Heroic Imagination Project, a nonprofit founded by renowned Stanford University psychologist Philip Zimbardo that seeks to discourage the Bystander Effect by promoting “everyday heroism.”
The question of why someone steps forward to help – or not, is applicable in cases of large-scale fraud. Before the financial meltdown of 2008, for example, surely there were hundreds, if not thousands, of people working in the financial industry who witnessed (or knew of) fraudulent practices but failed to alert authorities.
The same goes with massive health care fraud – there are always people in these corporations that know it is happening. Sometimes these schemes involve billions of dollars in fraudulent payments by the government, are years in the works and involve countless possible witnesses including doctors, nurses, pharmacists, sales representatives among others. Yet, as with the financial crisis, most do not step forward to expose fraud.
In a recent report, the risk management company, Kroll, called on companies to implement programs to encourage whistleblowing from the inside.
Because, Kroll said, “fraud remains an inside job, but so does its discovery.”
“Undiscovered and unreported fraud, however minor, is an infection with the potential to grow into a life-threatening corporate disease…” the report said.
Obviously, corporations recognizing fraud as a disease is a good thing. Risk management companies developing internal whistleblower programs is also a net positive. However, these programs still don’t get at the root problem of diffusion of responsibility. In contrast, Abraham Lincoln and the Civil War era Congress figured out a way to incentivize people to come forward to expose fraud one hundred years before psychologists called it the Bystander Effect. It’s the federal False Claims Act originally passed in 1863. As amended a whistleblower will be awarded 15-30% of whatever the government recovers for their efforts in exposing a fraud on the government. The law also provides significant protections against retaliation. Providing these incentives is an acknowledgement of the risk and effort it takes to step away from the pack and come forward. One hundred and fifty years later the False Claims Act has proven to be the government’s most effective tool in combatting fraud in large part because it found a way to overcome the Bystander Effect.
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