Bounty-style rewards for people who report corrupt conduct and enhanced protections against employer reprisals are among the sweeping changes proposed to Australia’s whistleblower laws. But do they go far enough? By DENISE CULLEN
The submission to a recent parliamentary inquiry by former Commonwealth Bank employee Jeff Morris made for harrowing reading. Eleven heavily redacted pages recounted the day in 2008 when Morris first blew the whistle on dodgy practices within the bank’s financial planning arm, through to the devastating aftermath of his disclosures, involving smear campaigns, cover ups, and psychological turmoil.
But the most chilling moment? “(Credible threats) of shooting made me wonder if I had put my family at risk of being collateral damage,” he explains. “I came home to an empty house one night. My wife had left with my (young) children … (She) was opposed to me blowing the whistle from the beginning. Her refrain was that they would destroy me … Many times over the years she asked me why I was doing all this for people we didn’t know.”
For Morris, like so many other whistleblowers, the answer was: Because it’s the right thing to do.
A high price to pay
Disclosures by Morris led to multiple positive outcomes, many of which are still unfolding. Among them were the banning of several rogue financial planners from practice, the payment of more than $50 million in compensation to victims of poor financial advice, and the establishment of a Senate Inquiry into the Australian Securities and Investments Commission (ASIC).
Morris acknowledges that most whistleblowers “never have the satisfaction of this sort of vindication”. However, it’s hard to overlook the steep personal and professional price he’s paid.
Principal Lawyer at McDonald Murholme, Andrew Jewell, says that whistleblowers often fight the good fight alone. “If an employee exposes wrongdoing by raising concerns in an appropriate forum, and is fired as a result, it’s then up to the individual to run a Federal Court action to enforce protections available to them under existing legislation,” he explains. “They’re going up against a well-resourced opponent. If the whistleblower doesn’t have the resources to see it through, the protections are toothless.”
Released in September this year ((** 2017 **)) the Whistleblower Protections report by the Parliamentary Joint Committee on Corporations and Financial Services highlighted the crucial role whistleblowers play in promoting integrity and accountability, while deterring and exposing misconduct, fraud and corruption.
Significantly, however, it identified that current legislation failed to protect whistleblowers from reprisals, which might include anything from demotion or job loss, to verbal harassment or, as Morris experienced, death threats. The report highlighted legislative inconsistencies across states and sectors, and a lack of mechanisms by which whistleblowers could seek redress for harm. It further noted that complaints were usually poorly investigated, and perpetrators of misconduct rarely held to account.
Alex Grayson, Principal of Maurice Blackburn Lawyers, applauds the proposed strengthening of whistleblower protections. “A major barrier (to disclosure) at the moment is people’s fear they won’t be protected,” she explains. “I’ve had a lot of people come to me, and have something very valid to (disclose), but they’re frightened of losing their employment.” The report recommended broadening the provisions for anonymous disclosures and confidentiality, and for the imposition of sanctions for reprisals.
She said that recommendations to broaden the definitions of both whistleblowers and reportable wrongdoing, and to increase the number of internal and external reporting channels, also represented important steps forward. “I’ve spoken to whistleblowers who haven’t been able to access protections because they had inadvertently disclosed to the wrong person, or missed one of the procedural requirements of current legislation,” she says.
Currently, for instance, the Public Interest Disclosure Act 2013 provides minimal protection for disclosures made to anyone other than an “authorised (principal) officer” of an agency, while the Fair Work (Registered Organisations) Act 2009 and Corporations Act 2001 provide none.
“Ideally, protections would extend to the same disclosures made publicly or to third parties such as the media, or labour unions, in some circumstances,” Grayson says. But is this enough? Grayson believes there is scope to expand these provisions even further. “It’s not clear whether disclosures made to legal counsel are intended to be protected, and that’s something I’d like to see,” she explains. “It’s not clear whether that’s part of the proposal, and that’s an area of concern.”
Bounty hunters
One of the report’s more well-publicised and controversial recommendations relates to the introduction of bounty systems which already exist in places like the US and Canada to financially reward people for stepping up and speaking out.
Opponents flagged bounties’ potential to encourage frivolous or vexatious reporting, or to create conflicts of interest which might subsequently weaken prosecution cases in court. Others argued that incentives would undermine the cultivation of civic-minded culture, in which individuals recognised their duty to speak out.
In his submission, for example, The Ethics Centre’s Dr Simon Longstaff said regulators’ focus should be less about splashing the cash, and more on remedying the circumstances which lead to whistleblowers suffering detriment in the first place. “The solution … is to provide adequate protections for individuals who have exhausted the internal mechanisms for raising their concerns,” he says.
However, proponents of bounty systems say they would encourage whistleblowers to come forward with valuable tips which would otherwise be difficult to obtain. The existence of bounties may also motivate companies to improve internal whistleblower reporting systems, and to deal more proactively with illegal behaviour.
Jewell points out that the proposed bounty system is less vulnerable to exploitation because rewards would only be paid for high value information which leads to successful enforcement action. “It’s doubtful whether the introduction of financial incentives will lead to people coming forward for improper purposes,” he says. “You don’t just get $10,000 for complaining about your boss.”
The establishment of an independent Whistleblower Protection Authority, which would support and advocate for employees who put their jobs on the line by blowing the whistle, was another recommendation emerging from the report. Designed as a “one stop shop” covering both the public and private sectors, the new authority would assess whistleblowing allegations, conduct investigations into reprisals, and refer cases to the Australian Federal Police.
The recommendation to introduce a “replacement wage” has thus far received little attention, but Jewell believes it may turn out to be the most transformative in the lives of sacked whistleblowers. The wage paid would be commensurate to the whistleblower’s current salary, and would need to be paid back following the resolution of any compensation or adverse action claim.
Grayson agrees. “It’s important, because someone can suddenly find themselves out of work, and having to litigate to try to address that wrong … They’re then having to incur legal costs, from a base of not having an income.”
Scandal after scandal
The first of 75 submissions to the parliamentary inquiry into whistleblower protections came from a hospital employee, claiming to have been forced out of a job after flagging widespread infection control breaches and associated patient safety concerns. Ignored, harassed, and denied equipment essential to his job, the worker claims management then “tried to paint me as mentally unstable to tarnish (my credibility)” before being locked out of the workplace altogether.
This story has a disturbingly familiar ring. Given the sheer number of such scandals which have unfolded at all levels of the private, public and not-for-profit sectors in recent years, we’re no longer surprised by the details. Yet it’s important to recognise that not all cases of whistleblowing are characterised by a David-and-Goliath style battle between an employee and a corporate behemoth.
According to David Morgan, who honed his forensic investigation skills at London’s Metropolitan Police, and now heads PKF Forensic and Risk Services, more and more companies are setting up outsourced services through which employees may report internal wrongdoing. Some, he admits, signed up in a cynical exercise in compliance. However, CEOs are increasingly using such services to sniff out rotten eggs, and drive expected behaviours in the workforce.
According to the Association of Certified Fraud Examiners’ 2016 Global Fraud Survey, internal tip-offs were the most common detection method, accounting for 39.1% of cases.
“It is people – an organisation’s employees, customers, and contractors – who think, ‘That’s not quite right’, and blow the whistle,” says Morgan. “In one case, a new CEO was tackling systemic corruption head-on … When employees could see changes starting to happen, reporting increased, whereas in the past, the workforce lacked confidence that anything would be done about it.”
Lawyers estimate that the introduction of new legislation is at least a couple of years away – and there’s no guarantee that all recommendations will be implemented. In the meantime, many more whistleblowers will struggle to preserve their professional reputations and careers.
“I’m involved in one case in which the dismissal took place in March this year,” Jewell explains. “(As of September) we haven’t yet gotten to the first mediation, and the case will probably run to hearing in 18 months’ time. There’s been some reputational damage to our client, which is making it hard for him to get another job. So if, in 18 months, he gets a win, how much will he get back? And will it have been worth it?”
This story was published in the November 2017 issue of the Law Society Journal. Read online.