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UK Bodies move to protect whistleblowers
12 May 2008
The UK has for some time sought inspiration from the US justice system when looking for new ways in which to target criminal behaviour. The US system has embraced the use of “accomplice evidence” and, in particular, offered protection to whistleblowers. The UK’s prosecutors and regulators want the most effective tools to locate and deal with criminal behaviour. The use of whistleblowers is one such tool.
The Financial Services Authority has now joined the bandwagon having seen the success enjoyed by the Office of Fair Trading, and the government has announced plans to give immunity to City whistleblowers who raise the alarm over market abuse.
The FSA points to its own statistics when arguing for such tools. It says unusual price movements occur before 25 per cent of price sensitive announcements to the stock market. This, it maintains, points to “insider dealing”. The recent market turmoil involving false rumours of difficulties at HBOS also indicates attempted market manipulation.
The strengths of using a whistleblower are that those on the “inside” will often have the ability to provide the detailed evidence needed by the prosecutor or regulator. Without such information they may not even know such activity has actually occurred in the first place. Who better to provide the information than those caught up in the activity itself or those who witness such activity first-hand. The mechanics of the “whistleblowing” system should afford the first category protection from prosecution or penalty and the second category with protection from unfair dismissal.
In the US, the Sarbanes-Oxley Act 2002 enhanced the rights of whistleblowers and such rights will be further enhanced by the enactment of The Consumer Product Safety Commission Act this year, which is intended to protect “industrial whistleblowers” following a string of dangerous products being removed from sale in the US.
The Serious Organised Crime and Police Act 2006 (Socpa) first introduced “immunity” provisions for whistleblowers in the UK. Socpa allowed specified prosecution agencies, such as the Serious Fraud Office, the Crown Prosecution Service, Revenue & Customs and the Serious and Organised Crime Agency, powers by which to offer immunity certificates to those who provide information and evidence on others. These powers have only been used sparingly and have had little impact on prosecutions to date. However, other UK regulatory bodies have seen the benefits of whistleblowers in their own investigations and have begun providing both immunity and rewards for those providing valuable information.
The OFT has begun a scheme by which it provides rewards of up to £100,00 (€127,00, $195,00) for those who come forward with information that will break-up cartel activity.
The OFT offered immunity to Virgin Airways when it blew the whistle on its own collusion with British Airways in price fixing fuel surcharges for long-haul passenger flights and its cargo business. BA was heavily fined for its conduct by the OFT while Virgin escaped any penalty as it was the whistleblower. The OFT is also now criminally investigating several employees at BA for their involvement in the price fixing.
The FSA hopes the new powers will encourage whistleblowers to come forward and provide the information it needs to tackle such market abuse. It hopes to emulate the success of the OFT.
While those involved in criminal wrongdoing in their organisations may benefit from immunity from prosecution, employees who disclose the fact they have witnessed the wrongdoing or have genuine and reasonably held concerns about it are themselves protected from unfair dismissal and victimisation under UK whistleblowing legislation – the Public Interest Disclosure Act 1998. The proposed new FSA powers will not affect these rights. No minimum service is required for an employee to benefit from the employment protection, and compensation is unlimited. Damages can, therefore, be substantial.
However, the whistleblower must make their disclosure in good faith for employment protection to apply, and with due care as to its accuracy. The employment laws were specifically introduced to encourage genuine whistleblowers to come forward and expose matters of public concern without fear of reprisals. Employees should take particular care when making the disclosure to a person who is not their employer; since more stringent conditions then apply. Employees who make disclosures on a whim or with bad motive risk summary dismissal.
If the person raising the alarm is also involved in the wrongdoing, these proposals offer a route to escaping criminal prosecution by means of a plea bargain. However, this is rather different from the employment position. In order to be protected by the unfair dismissal provisions of the whistleblowing legislation, the dismissal must be due to the disclosure itself, rather than the underlying wrongdoing.
Neill Blundell is a partner and Harriet Bowtell a solicitor at Russell Jones & Walker