As many corporate whistleblowers discover, doing the right thing isn’t always rewarded. Instead, telling the truth can be followed by retribution and career ruin. Ahead of their appearance at the World Congress of Accountants (WCOA), Wendy Addison, Sylvain Mansotte and Michael Woodford ask: How do we make it safe to speak up?
For most people who become whistleblowers, it is a life-changing experience. In the case of Wendy Addison, who will be sharing her story at the World Congress of Accountants (WCOA), this meant going from her dream job as CFO of a listed company in her native South Africa to homeless and begging on the streets of London.
“I was unemployed for 11 years and I was psychologically broken,” she says. “My only focus was on survival.”
From this low point, Addison embarked on a path of research in social science and neuroscience, ultimately forming a consultancy called SpeakOut SpeakUp, which not only addresses whistleblowing, but seeks to change organisational behaviour so that whistleblowing is no longer necessary.
“Now, my life is woven with such richness, in terms of the people I meet all over the world,” Addison says. “When I contrast that with the corporate ambitions I had when I was in my 30s, I can only celebrate where I have got to.”
Michael Woodford’s three-decade career in the UK for Japanese camera manufacturer Olympus culminated in his appointment as the company’s first non-Japanese chief executive in 2011. Only months later, he was dismissed in a dramatic boardroom showdown after blowing the whistle on a £1 billion fraud linked to the Japanese yakuza (organised crime syndicate).
It was Woodford’s last corporate role; now he devotes his time to philanthropy and a road safety charity in Asia.
“I thought I was going to be assassinated,” Woodford says. “It completely changed my world and I have no stomach for corporate life now. I am a lone wolf who has been thrown out of the pack and I don’t want to go back.”
Woodford also “bangs the drum” for better corporate behaviour and consults to major corporates around the world, in addition to a role as patron with European whistleblowing charity Public Concern at Work.
How much has changed?
Despite legislative progress in the UK through the Public Interest Disclosure Act 1998, Woodford is still cynical about the corporate world’s embrace of whistleblowing.
“If you are a high-paid director of a listed company, it is in your self-interest as much as anything to do the right thing,” he says. “You want your systems to be robust, so your company doesn’t commit acts where you can be held responsible for malfeasance. Who wants that?"
Closer to home, Sylvain Mansotte discovered a long-running fraud in the procurement area of construction giant Leighton Holdings only weeks after he joined in 2013.
Mansotte uncovered a A$20 million fake invoicing fraud, and his whistleblowing resulted in a 15-year jail sentence for former finance manager Damian O’Carrigan, who had used the proceeds to fund an extravagant lifestyle of overseas holidays, racehorses and mistresses.
“My entire world turned upside down,” Mansotte says. “I was the guy with the gun in his hand, and I knew if I pulled that trigger I could destroy the life of a family and a guy who had been at Leighton for 30 years and was six months from retirement.”
Wendy Addison, Sylvain Mansotte and Michael Woodford will be speaking at the World Congress of Accountants (WCOA), taking place from 5 to 8 November 2018 in Sydney. View the WCOA program and book your tickets.
Although he was promoted at Leighton, Mansotte left in 2015 to develop an online solution that has developed into Whispli, a secure and anonymous two-way communication solution used not just for corporate whistleblowing, but for reporting sexual harassment and bullying in schools and universities.
It is a product that came directly from Mansotte’s own whistleblowing experience. He was initially reluctant to approach any of his colleagues, and did not feel confdent speaking to the third-party organisation appointed by the company because it would compromise the anonymity he felt necessary.
His French accent, he believed, was a giveaway and would have the unwelcome consequence of identifying him. “I was blaming myself for uncovering something,” Mansotte says. “Do you go to a third party who knows nothing about you, and who is potentially going to go back to your organisation and tell them?
My fear was that the company would come back to me and say, ‘You went to that third party and that was wrong for you to talk about. Wrong! Here’s the door, see you later’.”
A safer way to blow the whistle
Users of Whispli can communicate anonymously and continuously with either designated areas in the organisation or with third parties. After initial contact, they can answer questions and provide more details and progress the issue, accessing Whispli from anywhere using a password and a case identification number.
“It creates one single source for the reporting of misconduct and wrongdoing,” Mansotte says. “Some clients have said they get four times as many reports using Whispli, so it’s definitely helping people come forward.”
After its adoption by hundreds of organisations around the world, such as Coca-Cola, Qantas, and Oxfam, Mansotte is leaving Australia for Boston [in the US] this year to continue to drive his business; one that he would never have had but for his whistleblowing experience.
“It’s been a massive turnaround in my life but it’s been a good one,” Mansotte says. “I’m one of the lucky ones.”
Those three whistleblowing cases all go back years, and in the duration there have been significant legislative and cultural shifts. In Australia and New Zealand, the first wide-ranging national research into whistleblowing – called “Whistling While They Work” – drew responses from 702 public, private sector and not-for-profit organisations.
The study, completed by Griffith University, Australian National University, University of Sydney and supported by 22 regulatory and professional organisations, including CPA Australia, found that while 90 per cent of organisations have mechanisms to respond to anonymous whistleblowing, only 16 per cent had any policy for ensuring adequate compensation for whistleblowers.
This is a major issue, given many whistleblowers experience reprisals and career disruption as a result of bringing wrongdoing to light, and then have to fight their case before the Fair Work Commission. The research also highlighted a disconnect between the workplace and the law.
While workplace policies encourage anonymous whistleblowing, Australia’s Corporations Act protects only whistleblowers that are willing to identify themselves.
How Australian law compares
The issue of anonymity is a critical one for many whistleblowers, and it is now addressed in new Australian legislation, the Treasury Laws Amendment (Whistleblowers) Bill, which aims to create a single whistleblower protection regime in the Corporations Act. The Australian whistleblowing legislation follows the model of the UK and other Commonwealth countries, such as Canada. It is very different from the US where there are two pieces of legislation: the False Claims Act that covers government contracts and was introduced to stop fraud against the Union Army during the Civil War, and more recent corporate legislation under the 2010 Dodd-Frank reforms, which followed the global financial crisis (GFC).
“My entire world went upside down.” Sylvain Mansotte, Leighton Holdings whistleblower
In the US, a cornerstone of the later legislation is a compensation scheme where whistleblowers are awarded a percentage of any fines imposed by the courts, usually set at between 10 and 30 per cent.
Under this legislation, administered by the Office of the Whistleblower operating under the Securities and Exchange Commission (SEC), US$252 million has been paid out to 53 whistleblowers in the last seven years. Whistleblowers can also remain anonymous and, according to US lawyer Mary Inman, there are several examples where a whistleblower has anonymously reported his or her employer, been awarded compensation, and is still working in the organisation.
The #METOO movement
Inman is a partner in US law firm Constantine Cannon, and has been representing whistleblowers for more than 20 years. In March 2018, Constantine Cannon announced that two of its clients would receive more than US$1.13 million for information they provided to the US Government in its criminal case against Takata, the now bankrupt maker of defective car airbags that caused the deaths of 22 people.
“I see that we are in an unprecedented moment with whistleblowing right now,” Inman says. “You look at the #MeToo movement on sexual harassment, and the grassroots movement of young activists against gun laws in the US, and I see whistleblowing in that context.”
Inman recently moved to London to head up her firm’s international whistleblower practice because the US laws are also accessible to citizens of other countries with information about US-listed companies. The SEC whistleblower program receives around 4000 submissions a year, including a significant percentage from outside the US; notably from the UK, Canada and Australia.
“I feel that the SEC is, in my estimation, the best whistleblower program and it’s the model that other programs should be aspiring to,” Inman says. “That is because it has the trifecta of protections. It has incentives, anonymity and it has protection against retaliation. Right now, it is the pinnacle.”
Inman says the SEC has also been “incredibly aggressive” in pursuing the legislation, and penalising companies that have been trying to “chill” whistleblowers from coming forward. Some employers, she says, will write clauses into severance agreements so that if people leave the organisation, they give up their right to a whistleblowing reward. Many of these employers have been fined by the SEC for trying to “work around the program”.
Rewarding those who speak up
Inman recognises that the major difference between US whistleblower laws and those in other countries, such as Australia, is the issue of compensation, but she believes the international tide is turning towards the US model.
“I know that Americans are seen as litigious and mercenary, and the fear is that you incentivise people for the wrong reasons,” she says. “In Australia and [other] Commonwealth countries, the idea is that you should blow the whistle because it’s the right thing to do, not because you need a financial incentive.
“However, I think people understand the reward is there less as a bounty and more as a safety net because of the repercussions that whistleblowers can suffer, such as being ‘blackballed’ or jeopardising their career.”
Most American whistleblowers try to fix the issue from within their organisation before going straight to the regulator, suggesting that the legislation is working as intended. "If people are so anxious to get the money they will skip and bypass internal reporting, but the data shows that fewer than 3 per cent of people do that,” Inman says. “Only when they are rebuffed by their employer do they then go ahead with the whistleblower program.”
The morality of receiving money
Woodford, however, does not agree with a compensation system, believing it “undermines the morality of the whistleblower model”. “I don’t think that it is right to become a lottery winner for being a whistleblower – it is distasteful and disproportionate and gives whistleblowing a bad name,” he insists.
“I think that whistleblowers should be protected and there should be a process of compensation if they have been wronged or damaged, but the law should look at each case as it stands.”
Mansotte is also against a US-style compensation system, arguing that it would do “a lot of damage” to the image of whistleblowers.
“It is sending the wrong message to everybody that, yes, you can retire early and win the lottery,” he says. “The danger is that people will just sniff around to find a rat they can expose and then retire.”
For another side of the argument, look no further than Addison’s story, which is an example of how financial ruin and the loss of a career besets many whistleblowers. Addison blew the whistle on her employer, Leisurenet, in 2000 after tipping off authorities to an elaborate fraud perpetrated by the company’s two founders and joint chief executives.
Although the investigation began swiftly and prompted the collapse of the company, it wasn’t until 2007 that the perpetrators were sentenced, and they only went to jail in 2011. Meanwhile, in 2001 Addison fled South Africa in fear for her life and obtained a job as treasurer at the Virgin Group in London.
Her past followed her, however, as Virgin entered into negotiations with Leisurenet to buy its assets. In the midst of this process Addison was fired, without explanation, six months into her new UK-based job.
“I was marched off the premises like a criminal, and had no rights to challenge this under UK laws,” she says. “The Leisurenet enquiry had just got going in South Africa when Virgin was negotiating, so I was collateral damage to the negotiations because Virgin wanted to do business with the two people I had blown the whistle on.”
Finding another job in finance in the UK proved impossible as recruiters became wary of putting her name forward because she had been let go by Virgin after only six months. One told her that he had googled her and seen that she had been treasurer of a company that was in liquidation, “which didn’t look so good”.
Another said that his recruitment firm did not want to compromise its relationships with clients by putting her forward. “The outcome for me was horrendous,” Addison says. “I ended up squatting and begging on the streets, with my 12-year-old son.”
After reinventing her career with her SpeakOut SpeakUp consultancy, Addison has a different perspective on whistleblowing and what advocacy can achieve. “The world has shifted in the last 12 to 18 months, and I see whistleblowers in South Africa speaking out on social media, which is incredibly brave,” she says. “Now it is about empowering people to have courageous conversations, and to speak up before things start moving down that slippery slope.
“Whistleblowers are outliers, and I understand why they have been treated the way they have been, but we now are finding another way which educates people that while loyalty to the company is a good value to have, sometimes in certain contexts you have to put fairness above it.”
Addison started work at the company which became Leisurenet in 1993, and soon observed “small ethical lapses” that over time evolved into illegality.
“I spoke out in 2000, but by then it was far too late,” she says. “By that time the misconduct had been entrenched as business-as-normal, and it is difficult to blow the whistle on something that is the norm.”
Tougher legislation, she says, is only one part of the required response. The ideal is one where employees feel able to speak up to organisations which, in turn, listen and take action before aberrant behaviour escalates, without retribution and “shooting the messenger”.
In that world, whistleblowers won’t need their #MeToo moment, but we’re not there yet.
New laws for Australia
The Australian Treasury Laws Amendment (Whistleblowers) Bill came into effect on 1 July 2018. It was introduced into Federal Parliament in December 2017 with the aim of creating a single protection regime, and it updates Australia’s frst whistleblower legislation, under the Corporations Act, which dates back to 2004.
Under the new legislation:
- Protection is extended to former officers, employees and suppliers, as well as associates of the entity and family members of employees.
- Public companies and large private companies are required to have a whistleblower policy or face a financial fine.
- Disclosures can be anonymous and immunities can be extended to whistleblowers.
- Fines of up to A$1 million can be imposed on corporations and up to A$200,000 on individuals who breach a whistleblower’s anonymity or who threaten or victimise a whistleblower.
- Whistleblowers will be able to make protected disclosures to journalists and politicians if they have already made a disclosure to a “whistleblower disclosee” (which might be ASIC, APRA, the AFP, the ATO, or someone in the organisation authorised to receive disclosures, such as an auditor, actuary, director, or senior manager) and if there is a risk of serious harm if information is not acted on immediately. To qualify for protection under this provision, however, they will frst have to inform a (relevant) regulator or enforcement body.
- Whistleblowers will have the right to seek compensation for reprisals. Courts will be required to preserve and protect a whistleblower’s identity, unless it is in the interest of justice to do otherwise.
Access more information about the Bill, and how it impacts accountants in particular.
What should a whistleblower policy include?
For whistleblowing to be effective in ending wrongdoing and protecting the whistleblower, it has to be viewed not as betrayal or disloyalty to an organisation, but as a service to society.
Here are four points any organisation should consider when creating or revising a whistleblower policy.
Organisations should have robust internal whistleblowing processes, involving third parties retained specifically for this purpose. Employees must feel that they can come forward and report any suspected wrongdoing without fear of retribution or retaliation. If the organisation is unresponsive or the process is unsatisfactory, whistleblowers must then have a clear channel for reporting wrongdoing to regulators or law enforcement.
The US system allows for anonymous reporting, as does the new Australian legislation. Many potential whistleblowers remain silent for fear of being identified. The Whispli solution allows for anonymous two-way communication between whistleblowers and investigators.
Many whistleblowers have lost their jobs and careers because of speaking out. Anonymity is one protection, but in cases where the whistleblower is identified, they must be guaranteed freedom from retribution and punishment. In some jurisdictions, the onus is on the whistleblower to pursue justice through labour laws. This is not best practice.
This is the most controversial issue in whistleblowing. In the US under the Dodd-Frank Wall Street Reform and Consumer Protection Act, whistleblowers receive a reward of up to 30 per cent of fines levied. While proponents of the US approach claim it is world’s best practice, other jurisdictions such as Australia have yet to go down the same path of compensation formulas.
Accountants reporting tax issues may be protected under whistleblower laws