Under deontology, however, choices are morally required, forbidden or permitted. For Danny, the dilemma is that the two choices he has identified are both forbidden by law. The third option - to be an internal whistleblower - is permitted. Indeed, it is morally required, because it is part of his duty to the taxpayers. Even if he were to suffer adverse consequences (i.e. If there was no whistleblower protection) he would still be obligated to blow the whistle on the fraud internally, such that national security would also be preserved.
5) the most ethical decision is to go above or around his supervisors through official or unofficial channels.
He should be a whistleblower, but his duty to national security demands that he not go through Cross for this. He may face sanction from his superiors, but he has protection under the law as a result of his obligation to identify such frauds.
6) There are possible arguments against this. One I that under consequentialist thinking, the consequences of a breach in national security are likely far worse than the consequences of the fraud, so therefore Danny should not blow the whistle in any form, since the consequences would be best, on balance, for all stakeholders combined. Another potential argument is that Danny only has a duty to do the best within the confines of his job. The limits to his duty to the taxpayers are...
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