- Chartered accountants are ethically obliged to respond to any illegal or unethical activity they become aware of.
- New whistleblower legislation in Australia protects disclosures of tax-related misconduct, which is particularly relevant to accountants.
- Whistleblowers, however, are rarely rewarded for raising the alarm, so it’s prudent to seek legal advice.
By Ben Hurley
As liquidators, lawyers and the media were trawling through the ruins of one of South Africa’s biggest corporate disasters, accountant and single mother Wendy Addison was facing a personal nightmare.
As group treasurer of global health club operator LeisureNet, Addison had blown the whistle on irregular payments authorised by two senior executives who were using the company as their personal bank. It triggered the listed company’s collapse in 2000. A fraud investigation ultimately saw LeisureNet executives Peter Gardener and Rodney Mitchell convicted in 2007, then jailed in 2011 after a long court battle and their unsuccessful appeal.
As the ordeal played out, Addison lost her job and began to receive death threats. A mysterious ‘driver’ showed up at her son’s primary school to pick him up – a move she saw as an unambiguous threat. She moved to the UK with her son, and in February 2001 became international treasurer at Virgin Atlantic, which acquired LeisureNet. But within seven months she was dismissed for what she sees as spurious reasons.
Speaking to South African media at the time, Addison said, “I was called into a meeting [at Virgin] and told that I thought that my job was more important than the company. I was shattered.”
She was unable to find further work, which she puts down to being sacked from a respected British company and being a known whistleblower. The ordeal included a six-month period where she and her son begged for money on the streets and lived as squatters.
She describes the experience of exclusion and intimidation across international boundaries as causing a kind of “social death”.
Nearly 20 years later, Addison is in a much happier place. She eventually studied social psychology and the neuroscience of decision-making at Stanford University, and has her own consultancy SpeakOut SpeakUp, which specialises in promoting workplace openness.
“This requires courage. Courage from everyone, not just an occasional few who shoulder more than their fair share of the burden.”
Whistleblowing as a social good
Whistleblowers play an important role. They blew the whistle on banks’ manipulation of the London Interbank Offered Rate (LIBOR), and the concealment of billions of dollars of investment losses at Japanese company Olympus.
In Australia, Commonwealth Bank financial planner Jeff Morris and CommInsure’s former chief medical officer Dr Benjamin Koh reported unethical behaviour inside their organisation long before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry revealed widespread misconduct in the industry.
But whistleblowers are rarely rewarded.
Mary Inman, a partner at law firm Constantine Cannon’s London office, has been representing whistleblowers in the UK and US for two decades. She says stories of whistleblowers being made to feel like outcasts are common. Some employers trawl through past expense reports, performance reviews, attendance records and anything else they can find to dig up dirt that might discredit the employee or fuel counter-lawsuits, she says.
“One of the most common things I hear is the employee being told that he or she ‘is not being a team player’,” Inman says. “Once you become seen as that squeaky wheel, it’s like you are a pariah. People that had before been your teammates, working arm-in-arm with you, they start to distance themselves. It’s that isolation that I think people aren’t prepared for.”
“Once you become seen as that squeaky wheel, it’s like you are a pariah.”
A large proportion of Inman’s clients are accountants. This is due, in part, to the access accountants have to financial information and their expertise in reading it. But it is also partly due to the professional and ethical obligations that accountants commit to.
All accountants are bound by the Non-Compliance with Laws and Regulations (NOCLAR) standard, released in 2017 by the International Ethics Standards Board for Accountants and effective from the beginning of 2018. This requires them to respond to illegal or unethical activity that they become aware of. NOCLAR is also part of the chartered accountants’ Code of Ethics.
Karen McWilliams FCA, business reform leader at Chartered Accountants Australia and New Zealand, says: “The Code of Ethics recommends that members seek legal advice whenever they are in doubt about where they stand, and we would strongly encourage members to do so. Members could also discuss an ethical concern with a member of the CA Advisory Group.
“As a chartered accountant, you are bound by the Code of Ethics which incorporates NOCLAR,” she continues. “But in some circumstances members may need additional support and that’s where we recommend they seek legal advice.”
Can updated legislation shield whistleblowers?
In common usage, the term ‘whistleblower’ covers anyone standing up to report misconduct within an organisation. However, legally, the definition of a ‘protected disclosure’ that is shielded from retribution is more strict.
In Australia’s new whistleblower legislation, whistleblowers in the private sector must first make disclosures to a senior manager. Emergency disclosures can then be made to a member of parliament or a journalist, so long as a public interest test is met.
A wave of new legislation is seeking to address the need for whistleblower protection. In Australia and New Zealand, as well as in Europe and the UK, policymakers are enacting regulations that will make it safer and easier to speak up.
In Australia, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 is effective from 1 July 2019.
The legislation consolidates all existing corporate whistleblower protection within the Corporations Act, and creates equivalent whistleblower protections within the Taxation Administration Act to protect disclosures of tax-related misconduct – a development that will be particularly relevant to accountants.
The existing Australian protected disclosure laws have been criticised for protecting only current employees or contractors, and tightly prescribing to whom the disclosures can be made.
The new regime expands protection to former employees and family members, and broadens the list of parties to the disclosure, including the Australian Federal Police, Australian Prudential Regulation Authority and, in some cases, journalists.
It protects anonymity and punishes those who disclose a whistleblower’s identity without consent. It removes the need for whistleblowers to prove they are acting in ‘good faith’. Instead, they need only have objectively reasonable grounds to suspect misconduct is occurring.
The new law makes allegations of retaliation against whistleblowers much more easily admissible in court and expands compensation rights if it occurs. It also better protects against whistleblowers being counter-sued and having an award of costs against them.
It mandates that public companies and large private companies have a whistleblower policy that explains the protections available, the process for handling disclosures, and facilitates anonymous reporting.
But this host of new protections for private sector whistleblowers will not help public sector workers such as former Australian Taxation Office (ATO) employee Richard Boyle.
At the time of writing, Boyle was charged with 66 offences and facing 161 years in prison – a term comparable to that of serial killer Ivan Milat – for speaking to the media about the ATO’s alleged use of aggressive debt collection tactics against small businesses. His case will be a significant test of the relatively new Public Interest Disclosure Act 2013.
In New Zealand – one of the first countries in the world to introduce legislation to protect whistleblowers – the Protected Disclosures Act 2000 is under review. Existing legislation was criticised for failing to protect staff at the Ministry of Transport when they raised concerns about manager Joanne Harrison, who was convicted of fraud in February 2017 for stealing nearly NZ$720,000 from the department.
The period for public engagement on how the Act could be improved ended in December 2018 and, at the time of writing, final policy proposals were expected back to Cabinet shortly.
Creating a culture of openness
But regulation is only one piece of the puzzle. Arguably more important is a cultural shift away from the organisational pack culture that marginalises people who ‘dob in their mates’, and it’s a shift that will be fostered by clearer workplace policies.
This was a key finding of the Whistling While They Work project led by Griffith University’s Centre for Governance & Public Policy. Touted as the largest dataset ever collected for understanding whistleblowers in organisations, it draws on the experiences of 17,778 individuals across 46 organisations in Australia and New Zealand.
It found 81.6% of whistleblowers faced repercussions. But it was only a minority (albeit a large one) of 42.1% that reported being treated badly by colleagues and/or management.
“A majority of ‘reprisals’ are more like collateral damage reprisals – the simple psychological strain it puts on people,” says Michael Macauley from the Victoria University of Wellington, New Zealand, who was part of the research team. Structured and proactive risk assessment, which assessed the risk to the organisation and the person reporting at the time of the complaint, overwhelmingly led to better outcomes for the whistleblower and the organisation.
“Support like that is really crucial, and that’s probably going to be far more effective than whatever changes to whatever law we can make,” Macauley says.
The Whistling While They Work study found that most organisations acknowledged the need for openness. But Addison warns the problem, in practice, is that too many organisations take a “box-ticking” approach.
“They enact a whistleblower ‘hotline’ and think the job is done,” she says.To foster a genuine culture of openness, business leaders need the humility to acknowledge that they don’t have all the answers, and are open to hearing about the mistakes that have or are being made, Addison says.
“This requires courage,” she says. “Courage from everyone, not just an occasional few who shoulder more than their fair share of the burden.”
Should whistleblowers be compensated?
Currently, neither Australia nor New Zealand authorities offer monetary rewards to whistleblowers. However, in the US, the Securities and Exchange Commission (SEC) and other government agencies co-opt whistleblowers as prime witnesses for government investigations and reward them with 10 to 30% of any penalty imposed (where sanctions exceed US$1 million).
Since the SEC whistleblower program’s inception in 2012, more than US$370 million has been awarded in remedies to 61 individuals, with the largest being US$50 million shared between two whistleblowers in March 2018.
Inman says that while the incoming Australian legislation is “a quantum leap forward”, its lack of financial rewards is a major omission.
“At least in the UK, and I assume in Australia, there is a perception that people blow the whistle because it’s the right thing to do – so they don’t need a financial incentive,” Inman says.
“But the discussion needs to consider that the people who are blowing the whistle in the financial services industry often make close to seven figures, and they may never work in their industry again.”
Ethical Codes and Standards for CA ANZ membersFind out more
CA ANZ professional and ethical support
Australia: Call CA ANZ Professional Standards on (02) 9290 5627. New Zealand: Call CA ANZ Member Care on 0800 4 69422.Find out more
CA Advisory Group
The CA Advisory Group provides free counselling and support for chartered accountants facing ethical dilemmas or weighing career decisions. All discussions are strictly confidential. Call 1300 137 322 (Australia) or 0800 4 69422 (New Zealand).Find out more