Monday, September 1, 2008

Pension Governance: The Need To Protect Whistleblowers

This Labor Day, I am going to cover a topic that I believe is absolutely crucial to sound pension fund governance: the need to protect whistleblowers.

In researching this topic, I discovered an incredible Canadian organization called the Federal Accountability Initiative for Reform (FAIR).

FAIR's mission statement states the following:

FAIR ( Federal Accountability Initiative for Reform) promotes integrity and accountability within government by empowering employees to speak out without fear of reprisal when they encounter wrongdoing. Our aim is to support legislation and management practices that will provide effective protection for whistleblowers and hence occupational free speech in the workplace.

FAIR offers five key messages that concerned Canadians should understand about whistleblowing:

  1. There are serious problems of mismanagement and corruption within the Canadian public service
  2. Corruption and mismanagement strike at the heart of our prosperous, free and democratic way of life
  3. There is a compelling need for effective public sector reforms
  4. Whistleblowers play a vital role and need protection
  5. Focused public attention can force governments to do the right thing
On point number 3 above, FAIR elaborates:

Protecting whistleblowers and ensuring that their allegations are properly investigated is not a simple undertaking. The USA has, arguably, the most comprehensive whistleblowing legislation in the world, covering both public and private sectors, and considerable experience in its application. Yet parts of their system have been seriously undermined by the actions of a hostile administration so that few whistleblowers prevail.

Several other developed countries have also introduced meaningful whistleblower protection legislation. In contrast, Canada has performed little more than lip service.

The previous Liberal government that came to power on a platform of greater integrity and accountability, then refused to support whistleblower bills that were brought forward in Parliament, claiming there was 'no need' . Only in their final months and only when forced by public outrage did they work on a so-called 'whistleblower protection' bill.

The result – Bill C-11 – proved to be a Trojan Horse. Although MPs and Senators of all parties supported it, believing it to be a step forward, examination of the fine print reveals that this bill is not to protect whistleblowers, but to protect Ministers from whistleblowers.

The new Conservative government's campaign promises on whistleblower protection have been very clear and appropriate. These need to be translated into a properly designed bill.

More importantly, on point number 4 above, FAIR states:

Whistleblowers are usually portrayed in the media either as heroes or 'snitches'. But most are just ordinary people who only want to do their job properly. When asked to do something unethical or illegal, or to 'turn a blind eye', they refuse. This refusal is a risk in itself but if they try to get the wrongdoing stopped – perhaps by drawing the attention of senior management or the media – that's when they find themselves in serious trouble.

Whistleblowers almost always suffer vicious and carefully orchestrated reprisals from those in power. These ruthless acts usually ruin not only their careers but their personal lives and health as well.

Furthermore, most whistleblowers are never vindicated. Most never see the wrongdoing disclosed or the wrongdoers brought to justice. Most never receive any kind of acknowledgement or thanks and for most, the reprisals never stop – even after they have been crushed and silenced. In Canada there are virtually no mechanisms to protect whistleblowers from such ill treatment. In the current climate, it's very dangerous to be a whistleblower, so it is no surprise that many scandals have remained hidden for years, even decades.

In a recent press release, Whistleblower conference highlights flaws in Canadian law, FAIR's Executive Director, David Hutton, observed the following:

"Sadly, everything learned at this conference reinforces the view that Canada's whistleblower laws are merely a smokescreen, designed to give the impression that something good is being done while offering little assistance or protection to honest public servants who so badly need it."

"Our only national whistle-blower legislation - the Public Servants Disclosure Protection Act (PSDPA) - fails badly on virtually all counts: it has almost none of the features that American experience has shown to be essential. It should be no surprise then that the Canadian system has thus far been completely ineffective."

The article also states that:

During her first year of operation, with 21 staff and a budget of $6.5 million, the Public Service Integrity Commissioner has found not a single instance of wrongdoing in the Canadian federal public service.

No wonder so many public service employees are shying away from blowing the whistle on their employers.

As I have stated in previous posts, whistleblowing protection is the cornerstone of sound pension governance. I strongly believe that public pension funds need to seriously revamp their whistleblowing protection policies to ensure that employees who discover fraud and/or mismanagement will be encouraged to come forth and report any abuse of power.

Importantly, public pension funds do not have to wait for legislative initiatives to take these measures. By working with organizations such as FAIR, as well as with certified fraud examiners (CFEs) and government organizations such as Public Sector Integrity Canada, public pension funds can take proactive measures to ensure the integrity and soundness of their pension fund management.

Moreover, whistleblowing protection policies must be reviewed and updated on a timely basis and fully transparent to all stakeholders. Each and every case must be made public along with the findings of the appropriate government bodies that are responsible for reviewing the case.

This is exactly what the Canadian Human Rights Tribunal does to protect individuals from discrimination. All rulings are publicly available on their website and they are even sorted by ground of discrimination.

Most cases of fraud, mismanagement and gross negligence are brought forth by courageous individuals like Joanna Gualterri who exposed lavish extravagance in the purchase of accommodation abroad for staff in the Canadian Foreign Affairs:

The Inspector General and Auditor General of Canada later supported her allegations. Gualtieri claimed the Bureau seemed not to care, that her bosses harassed her for raising the concerns and that she was a given dead-end job after coming forward. Ms. Gualtieri continued to battle for other whistleblowers by founding FAIR (Federal Accountability Initiative for Reform) and by serving as a director for almost 10 years.

More recently, there were the 'RCMP five' who exposed the scandal in the RCMP Pension Fund:

The RCMP Pension Fund scandal finally came to light through the efforts of five people, who all struggled on courageously in the face of apparent attempts by RCMP top brass to block investigations. Denise Revine was the human resource director who first uncovered the suspicious transactions and compiled a massive file of evidence.

Her boss Chief Superintendent Fraser Macaulay tried to ensure that this evidence was properly investigated – and was removed from his position and given what he believed was a punitive secondment. Retired Staff-Sgt. Ron Lewis led persistent efforts to make someone in authority pay attention – first within the RCMP, then in outside agencies such as the Treasury Board and Auditor General, and finally to MPs and the media. Staff-Sgt. Steve Walker took part in the Ottawa Police Service's criminal investigation into the affair, and Staff-Sgt. Mike Frizzell was abruptly removed from the investigation as his inquiries got close to senior RCMP management.

In an unprecedented turn of events all five were given the RCMP’s most coveted award, the Commissioner’s Commendation, for outstanding service, and a Commons committee unanimously passed a motion that the five be publicly commended and that commendation be tabled in Parliament. Prior to this, no Canadian whistleblower had ever received formal thanks or recognition from the authorities.

Unfortunately, these courageous individuals are few and far in between. Whistleblowing protection laws and policies in Canada are grossly deficient. Nowhere is this more evident than in public pension funds.

Unless Canadian public pension funds take the necessary measures to significantly bolster their whistleblowing protection policies, it is my contention that they will remain vulnerable to fraud and/or mismanagement, exposing all stakeholders, including taxpayers, to significant losses.

Given the fragility of the global economy and financial system, weak whistleblowing policies at public pension funds expose serious deficiencies that need to be immediately addressed, not with empty lip service but with transparent and rigorous policies that actually encourage and protect whistleblowers to come forth and report abuse.

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