It is time for Australia to finally establish whistleblower protections similar to the US False Claims Act, says Dr Kim Sawyer.
WHEN I FIRST recognised that I was a whistleblower, I remember researching whistleblowing and its history. Among other references, in a book entitled The Synonym Finder, I found blowing the whistle was listed as a synonym for betrayal. Betrayal is an emotive word, and explains much of the stigma attached to whistleblowing and the reluctance to prescribe protections for whistleblowers.
In Australia, whistleblowers are untouchables. The real whistleblower does not betray the people; they betray only the private interests of those who subvert the public interest. But regrettably, in Australia, it is whistleblowers who have been betrayed; by regulators who have failed to regulate and by legislators who have failed to legislate. The public interest that whistleblowers have sought to protect has not protected them.
That is the pessimistic side of the whistleblowing story ― but there is another and more optimistic story reflected in recent opinion polls which show that more than 80 per cent of Australians believe in the protection of whistleblowers. Slowly, and often reluctantly, whistleblowers are being recognised for the job they are doing in transforming a culture of non-compliance into a culture of compliance. In this reflection, after twenty years of advocacy for whistleblowers, I provide some insights on whistleblowing in Australia.
In October 1992, as a Professor at RMIT, I wrote a memorandum requesting an inquiry into management practices in the Department in which I worked. That memorandum was supported by 15 colleagues; and that memorandum made me a whistleblower. Whistleblowing often begins with something surprisingly small – an email, a conversation, a memorandum – but never ends that way. Within two years, twelve of the sixteen who supported the memorandum had left the university; I and six others had been charged with serious misconduct; I initiated a legal process in the Supreme Court which lasted three years and was settled in my favour; and in 1994 I gave testimony at a Senate Committee inquiry into Public Interest Whistleblowing.
This year, it was twenty years since I wrote that memorandum and I was the only one who remembered. That is the nature of whistleblowing ― it becomes a very singular exercise. In my first submission to a Senate inquiry, I used the metaphor of cancer to describe whistleblowing. I stated:
The whistleblower identifies a cancer growing in a public institution, tries to remove it, and is attacked by it. But, unlike other cancers, there is no one beside the bed to give the medicine. The whistleblower is variously described as a crusader, a zealot, an obsessive. The whistleblower must at all times act honourably. The cancer can behave as it likes.
And, unfortunately, that has been the experience for most Australian whistleblowers.
Why has whistleblowing emerged and what makes Australia different? In 2004, I wrote a paper entitled Courage Without Mateship, which explored these questions.
While there are many antecedents, the term whistleblowing is often attributed to Ralph Nader who titled his 1972 book Whistleblowing: The Report of the Conference on Professional Responsibility. Though it is not always the case, whistleblowing is usually a workplace issue and a major question becomes whether Constitutional freedoms of speech apply in the workplace. It is the intersection between Constitutional and Labour Law which makes whistleblowing special.
In Courage Without Mateship, I attributed the rise of whistleblowing to a number of factors.
First, monetary values have replaced other values. Values that whistleblowers regard as important, such as truth and fairness, have been replaced by efficiency, minimisation of risk and, of course, the bottom line.
Secondly, more than most countries, Australia has experienced significant institutional change. Our universities, hospitals, banks, councils and bureaucracies are not the institutions of the 1970s. In some cases, public entities accountable to taxpayers have become publicly listed corporations accountable to shareholders. In other cases, not-for-profit public institutions are now run like for-profit corporations, with a top-down management structure operating with significant government subsidies. Whistleblowers in these institutions often reveal the private interests that have become embedded in the institution.
Thirdly, systems have become so complex that fraud is easier and auditing more difficult. Consistently, global surveys have shown that whistleblowers uncover more fraud than auditors and other regulators; in the US in the last three years, 80 per cent of the fraud against the government has been revealed by whistleblowers. Whistleblowing is, then, a new form of regulation.
But there are other factors which make whistleblowing special.
Our society is composed of social networks, no more so than in the workplace. Networks often depend on favour and fear for their existence, and it is favour and fear that whistleblowers expose. Australia is more networked than most countries. In Courage Without Mateship, I wrote of our culture of mateship which in its most benign form is simply friendship. But mateship is more than benign, often implying a joint monetary interest through the awarding of contracts, through appointments, and through protecting a mate when they stuff up.
The corporatisation of mateship is one of the most profound principles of Australia. When a whistleblower blows the whistle they offend a mate; and possibly the network of mates to which the mate belongs. The whistleblower typically turns to others and then encounters a problem; the bystander problem. The bystander is the risk minimizer who minimizes risk by refusing to become involved. In an anonymous society, this has become an important strategy for survival. The bystanders include other employees who don’t want to be targeted, the hierarchy in the institution who will not stop bullying and retaliation, and the regulator who will not expose wrongdoing for fear of damaging the reputation of the institution. The whistleblower then becomes the outsider, the crusader and the target that they never wanted to be.
In Australia, the legislative response to whistleblowing has been the response of a bystander. Governments of all persuasions have hoped that the problem would go away. Politicians know that whistleblowers should be protected, but appear not want to get involved; there are after all reputational risks for them. Uniform and comprehensive Federal whistleblowing legislation has been promised by both sides of politics at every election since 1996 (six elections in all), but never enacted. For whistleblowers, it has been twenty unfulfilled years.
Although various state based laws emerged in the early 1990s, it was the 1994 Senate Select Committee Report on Public Interest Whistleblowing that became the benchmark for whistleblowers. The Committee listened to and made recommendations for whistleblowers. They received more than 100 submissions, many of whom were whistleblowers who identified systemic problems and regulatory failure.
My own whistleblowing experience taught me that regulatory failure is the main problem for the whistleblower; in all I approached regulators more than ten times over the years, and received ten non-responses. And that was the common experience for whistleblowers in the systemic failures of Enron, WorldCom, HIH, and more recently AWB and Securency.
The 1994 Senate Select Committee listened to and learnt from case histories of regulatory failure. They learnt that the main question in whistleblowing remains Who Regulates the Regulators. The Committee recommended that a new agency, a Public Interest Disclosure Agency (PIDA), be created and rejected the proposition that an existing agency continue as the principal agency for receiving and investigating disclosures. The Committee cited three reasons for their decision: first, that immediate action needed to be taken about whistleblowing; secondly, that an independent agency needed to be created to gain the trust and confidence of whistleblowers; and thirdly, that the existing agencies and procedures were not operating to the satisfaction of whistleblowers.
Nothing has changed since 1994. Australia needs a Public Interest Disclosure Agency to be established and it is now eighteen years overdue.
The Committee also recommended that a Board be established to oversee the PIDA with independent directors; that the PIDA would collect data and start an education program on whistleblowing; that a toll-free line should be established for whistleblowing disclosures; that a tort of victimization be legislated for whistleblower protection; and that special provisions be for the education, health and banking sectors be instituted.
The 1994 Senate Select Committee, an all-party committee, made 39 recommendations. None have been implemented ― at great cost to whistleblowers and non-whistleblowers alike.
There have been three Federal parliamentary inquiries into whistleblowing, the 1994 inquiry, a 1995 Senate Committee inquiry into unresolved cases, and the 2008 inquiry of the Legal and Constitutional Affairs Committee of the House of Representatives chaired by Mark Dreyfus. The Dreyfus Report recommended a Public Interest Disclosure Bill, and the repeal of whistleblower provisions in the Public Service and Parliamentary Service Acts of 1999. For whistleblowers, the Dreyfus report represented progress, but a significant retreat from the benchmark report of the 1994 Senate Committee. However, limiting as they were, the recommendations of the Dreyfus report have never been implemented.
For whistleblowers, there were four principal limitations with the Dreyfus Report.
The main problem was the recommendation that the Commonwealth Ombudsman be the authorised authority for receiving and investigating public disclosures. This was a recommendation for the status quo and not for a new order. For the reasons cited by the Senate Committee in 1994, whistleblowers have repeatedly called for the establishment of a Public Interest Disclosure Agency. And this remains our principal legislative objective.
The second limitation of the Dreyfus Report was that the protections for whistleblowers were very weak, if prescribed at all. They included immunity from criminal liability, from liability for civil penalties, from civil actions such as defamation and breach of confidence, and from administrative sanction ― but no effective protection for retaliation of the many forms which occur in the workplace. These protections should be contrasted with the protections prescribed in the US False Claims Act, which include:
Any employee who is discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against in the terms and conditions of employment by their employer because of a False Claims action shall be entitled to all relief necessary, which includes reinstatement with the same seniority status such employee would have had without the discrimination, twice the amount of back pay and compensation for any special damages sustained including litigation costs and attorneys’ fees. Secondly, whistleblowers are entitled to 15-25% of the fraud recovered.
The US has a longer whistleblowing history and a better appreciation of the need to prescribe penalties for retaliation.
The third limitation of the Dreyfus Report was that it ignored that most whistleblowing problems in Australia are occurring where private and public funds are combined and there is maximum discretion. In universities, in hospitals and in semi-government authorities, whistleblowing is a major issue; this was recognized by the 1994 Senate Committee and by the 2001 Senate Committee Report into Universities which recommended the establishment of a Higher Education Ombudsman. That recommendation was never implemented.
The final limitation of the Dreyfus report was its rejection of a False Claims Act. The False Claims Act is a law in the US which combines whistleblowing into an anti-corruption framework. It is the most effective whistleblowing legislation in the world. It is an Act which incentivises integrity, where whistleblowers are compensated for the risks they take in blowing the whistle. And it is Act that could readily be adopted in Australia.
The Dreyfus Committee showed a lack of understanding of whistleblowing, consistent with the lack of understanding by politicians of all persuasions over the last twenty years. Whistleblowers have had their political advocates: Senator Christobel Chamarette in the early 1990s; Senator Jocelyn Newman, who chaired the 1994 Senate Committee; Senator Shayne Murphy, who chaired the 1995 Senate Committee; Senator Andrew Murray; Mark Dreyfus; and Andrew Wilkie ― to name a few. But none have provided the continuous advocacy for the rights of whistleblowers provided by Republican Senator Charles Grassley in the US Senate, or Howard Berman, a Democrat from California who co-sponsored the False Claims Act amendments of 1986.
Our politicians simply don’t get it about corruption. They do not recognise it for the problem it is ― as the single most important macroeconomic problem, requiring an integrated approach, which includes the protection of whistleblowers. We cannot simply be passive signatories to international anti-corruption conventions. We require a set of active measures as recommended by the OECD and other international bodies. Such active measures would include anti-bribery legislation akin to the 2009 UK legislation and an equivalent of the US Foreign Corrupt Practices Act. Only with a portfolio of measures can we transform a culture of non-compliance into a culture of compliance.
The False Claims Act would be the best place to start.
The US False Claims Act (FCA) enables individuals to litigate on behalf of the government to prosecute fraudulent claims against the government. The individuals who provide the information necessary to prosecute the case are whistleblowers and their law suits are called qui tam actions. The FCA is a whistleblowing Act, which both prosecutes fraud and compensates whistleblowers. The history of the FCA has shown that, as individuals are compensated more, so more fraudulent claims are prosecuted. Incentives have been shown to work. The FCA was an old law which was strengthened in 1986 to better compensate whistleblowers.
Since the 1986 amendments, qui tam actions have accounted for two-thirds of US government fraud recovered, in total more than $30 billion. The False Claims Act is also the principal deterrent against fraud. An estimate commissioned by the Taxpayers Against Fraud Center in Washington suggests that the amendments of 1986 have deterred more than a hundred billion dollars of fraud. Qui tam actions are cost efficient; in the health sector, the US government is recovering $15 for every $1 invested in false claims investigations and prosecutions. The False Claims Act has been so successful that it has been adopted by 29 US states, by the Internal Revenue Service to prosecute tax fraud, by the Securities Exchange Commission and the Commodities and Futures Exchanges to prosecute securities fraud.
In a recent paper Lincoln’s Law: An Analysis of an Australian False Claims Act, I proposed an Australian False Claims Act, where a complainant could disclose information in camera to a court and submit a written disclosure of their information to a government regulator. If the regulator intervenes and the action is successful, the whistleblower is entitled to a maximum of 15 per cent of the proceeds of the action. If the regulator declines to intervene, the whistleblower may pursue the action on behalf of the government and, if successful, is entitled to a maximum of 25% of the proceeds of the action. Whistleblowers would also be given protection analogous to that provided by the US False Claims Act. Under assumptions based on US evidence, I estimated an Australian False Claims Act to yield cumulative fraud recovery over the next decade averaging more than $1 billion, and cumulative deterrence averaging more than $10 billion. This would be a significant start for Australia in its fight against corruption.
The establishment of a Public Interest Disclosure Agency and an Australian False Claims Act should be the highest priorities for any government that is committed to protecting whistleblowers and to fighting corruption. These twin priorities are consistent with the principles of an ideal whistleblowing law espoused by Vaughin, Devine, and Henderson in a paper in the George Washington International Law Review, where they emphasised that whistleblowing legislation should focus on the information disclosed and not the whistleblower and that there should be compensation for disclosures.
In reflecting on whistleblowing over the last twenty years, I see a story of sacrifice.
Many whistleblowers have sacrificed their livelihoods and, in some cases, their lives for a public interest that has not protected them. The Australian whistleblowing story is one of political promises not kept, recommendations not implemented, and bystanders who do not want to be involved. It’s time for a change.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
