The tricky question of rewarding whistleblowers

No one should be worse off for blowing the whistle on misconduct and all whistleblowers should have greater access to compensation if they suffer a detriment as a result of their whistleblowing.

That was the view of Minister for Revenue and Financial Services, Kelly O’Dwyer, when addressing a University of Melbourne Whistleblowing seminar in Melbourne in June.

Her comments followed news that the Senate had delayed the reporting date of a Joint Parliamentary Committee on Corporations and Financial Services inquiry into whistleblower protections from 30 June to 17 August.

In her address, O’Dwyer noted that any individual who decided to expose corruption, illegality, or unethical behaviour within their organisation was embarking on a precarious and potentially harrowing path.

While the whistleblower story was brilliant material for Hollywood writers and movies, she said it could take years off someone’s life in the real world.

‘It can mean the loss of friends, colleagues, spouses, and careers. It can mean financial hardship, mental breakdown, drug and alcohol problems, and almost always isolation,’ she continued.

‘Look at the case of Jeff Morris — probably Australia’s best known recent whistleblower — who, as most of you would be aware, blew the whistle on misconduct in the Commonwealth Bank of Australia’s financial planning arm in 2008.

‘Exposing the bank’s misconduct has taken a serious toll on Morris. His anonymity was not protected, he was subject to death threats, he lost his job and in the end, he lost his whole family. This is absolutely unacceptable.’

O’Dwyer said the Turnbull government was determined to change our whistleblower laws to better protect people like Morris.

She noted that the Senate inquiry into whistleblower protections had invited views on the merits of introducing a US bounty-style reward system as an incentive for whistleblowers.

‘In the US, the Dodd-Frank Act and the False Claims Act make provision, in some cases, for rewards for whistleblowers, whose reports lead to the successful prosecution of a violation of securities laws or fraud on the government,’ she said.

‘Under this system, whistleblowers may receive a percentage of collected proceeds from a successful court action. For tax whistleblowers there are similar discretionary reward systems operating in the UK and Canada.’

O’Dwyer said her government was reviewing whether a reward system like this made sense for Australia.

‘On the one hand, introducing a reward system may encourage more whistleblowers to come forward. On the other, there are some associated risks,’ she said.

‘For example, individuals may only be willing to raise a concern when there is proof of a breach and certainty that a monetary reward will be available.

‘This may be counterproductive as it may deter people from coming forward at an earlier stage when it is unclear whether a breach of the law has occurred, and therefore whether they would be eligible for a reward. This could reduce the opportunity to detect malpractice early and prevent harm, which is the main policy reason for providing statutory protections to whistleblowers — to encourage them to come forward as early as possible.

‘It is also possible that a reward system could encourage greater levels of nuisance reporting to regulators, leading them to waste resources checking claims that lead nowhere.’

O’Dwyer noted the argument that if a reward system was structured properly, it may create a stronger inducement to report, than not having a reward scheme in place.

‘It could be argued, for instance, that the Australian Taxation Office would be better served in having the option of using incentives to encourage whistleblowing about wealthy individuals or big corporations engaged in large-scale tax evasion.’

O’Dwyer concluded: ‘For all these reasons — and more — the introduction of a rewards-based incentives system needs careful consideration and is being actively considered by the government.’

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