Prime Time Crime
Canadian Corporate Counsel Association 2004 Annual Meeting, Winnipeg, August 16, 2004
Remarks by Joanna Gualtieri, Director, Federal Accountability Initiative for Reform
Should I Tell When It Hurts:
Conflict And Conscience In WHISTLEBLOWING
By Joanna Gualtieri
It is a pleasure to participate in your 2004 annual conference “Mapping the New Frontier” and I am truly honoured to speak amongst such distinguished guests and panelists.
I want to say, that apart from being inspired by the privilege to be here, I am struck by the visionary leadership of your organization for reaching beyond conventional discussion zones of regulatory change and governance rules. Though whistleblowing has become a “hot” topic, most reports remain superficial and sensationalistic. I could not therefore be more grateful to John Scott and Effie Triantafilopoulos for this opportunity to give a voice to whistleblowers – those employees whose crime is that of “committing the truth”.
I want also to acknowledge the panoply of new prescriptive measures confronting today’s corporate counsel. “Up the ladder” reporting, and the legal/ethical debate relating to “noisy withdrawal” and lawyers as whistleblowers, are central issues. They are not, however, the focus of my discussion as I would, in fact, benefit from your expertise. Rather, I have a simpler task of illuminating the trials and triumphs of conscientious resisters and their indispensable contributions to ethical and accountable public and corporate life.
History of Whistleblowing
The history of whistleblowing recalls a 20th century America faced with profound challenges including the Vietnam War, Watergate and the civil rights movement. Although fascinating, the American experience holds also two fundamental lessons for business leaders.
First, it demonstrates that once whistleblowers found their voice, there was no turning back. Their stories encapsulated perennial dialectic conflict such as “team player” versus heroic individualist, and employer loyalty versus fiduciary duty to the public good. As compelling vignettes of human sacrifice and glory, they shaped public opinion and political policy.
The enactment of the Sarbanes-Oxley Act is indeed a reflection of public influence creating a sea change in ground rules for responsible leadership. Likewise in Canada, Government recalcitrance towards whistleblower protection quickly evaporated on account of the Radwanski and Sponsorship Scandals. In February 2003, during debate of C-201, the Whistleblowers Human Rights Act, a non-partisan initiative of FAIR and Gurmant Grewal, MP, the Government refused to endorse whistleblower’s protection. Just one year later, reeling from the scandals, the Government “suddenly” believed that protection was a good thing.
Second, in a globally integrated world, only the shortsighted would ignore Washington’s tougher rules including whistleblower rights. At the very least, an invigorated SEC and the extra-territorial reach of the Sarbanes-Oxley to Canadian companies that trade on US stock exchanges means corporate leaders ignore the US jurisprudence at their own risk. Just ask Jean-Marie Messier of France’s Vivendi.
Simply put, whistleblowers are employees who exercise free speech rights to challenge institutional abuses of power or illegality that betray the public trust. Their disclosures may be made internally or externally, either through the chain of command or outside that chain, and though attempts have been made to categorize these “truth-tellers”, they cross all educational, gender, ethnic, and religious lines. Studies have shown that they tend to be the most diligent and that they do not situationalize their morality.
In the 60s, public concerns regarding nuclear facilities, dangerous drugs and toxic waste resulted in government regulation of industry and laws to protect workers who reported violations. As a result, employees who witnessed wrongdoing and who historically felt that their only option was to remain silent or quit started to speak out, and the “public interest” defense emerged to successfully challenge the “at-will” doctrine of employment.
But the power of “truth-tellers” is most cogently illustrated in three seminal events: the Pentagon Papers, Watergate, and the Challenger Explosion.
As the Pentagon faced mounting casualties in Vietnam, it decided to undertake a major review of the US involvement in the conflict. Daniel Ellsberg, an ardent War supporter who worked for the Rand Corporation, was one of the chief analysts.
In the course of his review, Ellsberg became increasingly disillusioned as he uncovered major government lies to deceive America. When the Pentagon sought to cover up, democratic principles led Ellsberg to tell the truth. After a fruitless approach to the Senate Foreign Relations Committee, Ellsberg, two years later – in 1971 – leaked the Pentagon Papers to the New York Times and the Washington Post.
Predictably, the Justice Department swiftly sought an injunction to prevent publication, but in a majority decision of the US Supreme Court, Justice Hugo Black, wrote the following: Only a free and unrestrained press can effectively expose deception in government. And paramount among the responsibilities of a free press is the duty to prevent any part of the Government from deceiving the people and sending them off to distant lands to die of foreign fevers and foreign shot and shell. In my view, far from deserving condemnation for their courageous reporting, The New York Times, The Washington Post and other newspapers should be commended for serving the purpose that the Founding Fathers saw so clearly. In revealing the workings of government that lead to the Vietnam war, the newspapers nobly did precisely that which the founders hoped and trusted they would do. The public fallout intensified when Watergate erupted as a result of an anonymous whistleblower known as “Deep Throat”.
A decade later, with the 1986 explosion of the Challenger, there could be no turning away from public demands to protect whistleblowers. During the Presidential Commission hearings into the Challenger tragedy, three courageous employees of the company that built the Challenger rockets testified about the engineers who had tried to stop the launch. Their bosses had overruled them. In spellbinding testimony, they spoke about how the engineers were told that if they would "take their engineering hat off and put on their manager's hat" they would know why the launch had to go forward despite the risks. Upon returning to work, each was demoted.
The fact that a political agendum had trumped the lives of seven people outraged the American people, who responded by swamping congressional phone lines and mailboxes. In 1989, in the aftermath of the tragedy, President Bush signed into law the Whistleblowers Protection Act providing strong legal protection for government whistleblowers.
But as with any socially-minded and revolutionary new law, the legislation was only one element of broader cultural changes. Already, Washington had seen the birth of numerous public advocacy organizations, most notably, the Government Accountability Project (GAP), founded in 1977 to promote “truth-tellers” and help those struggling with whether to tell.
No one has been more influential in shaping the global whistleblower movement than lawyers Louis Clark and Tom Devine, GAP’s founding Executive and Legal Directors, both still with the GAP. Providing counsel to thousands of whistleblowers worldwide, as well as executives of governments, their message illuminates the power of one individual to make enormous contributions to society. Completely independent from government, funding comes only from individuals and foundations including Ford, Deer Creek, John Merck, and the Fund for Constitutional Government, along with litigation awards.
Established in 1999, the Federal Accountability Initiative for Reform (FAIR) is Canada’s only public interest organization promoting accounting through occupational free speech and protection for whistleblowers. It has benefited immeasurably from the contributions of GAP, participating in documentaries, public symposia, and media interviews. Counting on public support, FAIR intends to pursue the four-prong mandate of GAP: educate, assist whistleblowers, build campaigns to clean up wrongdoing, and monitor policies.
Whistleblower Activism Increases
Throughout the 80s and 90s, there was significant expansion in whisteblower activism. Whistleblowers forced the cancellation of American nuclear power plants 97 and 86 per cent complete because of shoddy materials and falsification of quality assurance records. Injunctions were obtained to close down incinerators because toxic emissions were poisoning the play areas of children. And at the Hanford nuclear weapons reservation in Washington State, conscientious resisters revealed that the actual levels of radioactive waste were in fact 440 billion gallons, a far cry from the official record of 5000 gallons.
Ironically, as Canada debates whether to participate in United States’ missile defence program, whistleblowers, most notably MIT Professor Postol, continue to expose the lies and cover-up associated with the program. In a vignette that would be a parody of bureaucratic audacity were it not so alarming, one of GAP’s whistleblowers revealed that during the 80s the Pentagon faked key tests. Following poor success in shooting down prototype enemy missiles, the Pentagon put a homing device on the Russian prototype so that the US interceptor could locate it. Fudging the results even further, the Pentagon then placed an explosive charge in the prototype and blew it up! Once disclosed, President Bush’s request for $5.1 billion was slashed to $1.7.
And in one of the more graphic illustrations of corporate hokum, television’s “Primetime Live” featured nineteen employees of Foodline Corporation who told how management had authorized slimy past-due turkey to be “washed” in bleach water and put back on the shelves for another week, and how rotten chicken was recycled by blanketing it in tomato sauce to sell for a buck more a pound as “gourmet chicken”. After the show, the stock price collapsed and has yet to recover. Profit plummeted $ 47 million to 3 and 80 stores were closed rather than opened.
But the real disclosure revolution for corporate America came in the aftermath of the riveting testimony of Enron’s Sherron Watkins and Worldcom’s Cynthia Cooper, which gave the world firsthand accounts of unprecedented corporate malfeasance and corruption. With a nation in crisis from Enron, Worldcom and 9/11 and confronting its national security and fragile financial markets, a swift and aggressive response was required. In July 2002, with uncharacteristic alacrity and resolve, Congress passed the Sarbanes-Oxley Act imposing stringent controls and accountability. A new paradigm of corporate ethic, responsibility and executive liability had arrived.
To date most of the analysis has focused on the duties and obligations of audit committees, the stringent accounting rules, board independence, codes of ethics and business conduct, and greater management accountability. The centerpiece of the Sarbanes-Oxley, however, is the protection for corporate whistleblowers.
For the first time in history private sector employees have stronger free speech rights than government workers. Now it is illegal to harass any worker at a publicly traded corporation for disclosing misconduct that violates federal fraud laws or that could materially threaten the company's stock value. If the employees do not receive a speedy administrative ruling, they can take their case to a jury in federal district court. The resulting depositions and public trial would cast a glaring spotlight on nefarious corporate conduct.
Whistleblowing in Canada
The Tainted Blood, HRDC, Gun Registry, Radwanski, Walkerton and Sponsorship Scandals, are evidence that Canada has had its own share of government corruption and breaches of public trust. The Bre-X and Cinar frauds, the seismic collapse of Nortel, the disgrace of Livent and allegations of autocratic entitlement by Lord Black, demonstrate that our private sector has also engaged in wrongdoing and betrayals. Clearly, it would be disingenuous to think that in all instances there were no employees wanting to speak out.
Public confidence and cynicism also run high with a Leger poll reporting that 70% of Canadians believe that government is somewhat corrupt. The view of corporations is roughly the same and a recent KPMG survey reported that eighty-four per cent of directors on the boards of major corporations suspect a Canadian public company will be caught fudging its books this year. Toxic workplaces and mental illness including depression attributable largely to bullying and lack of control over one’s work cost Canada $33 billion annually. Clearly, it’s time for reform.
Appallingly, Canada has no whistleblower protection statutes other than some scattered environmental and health and safety enactments. New Brunswick and Saskatchewan offer limited protection in labour standards laws for violations of a law or regulation. But the futility of this protection was recently demonstrated when employee Linda Merk was denied protection for disclosing to senior management rather than going outside to the police or some other “lawful authority”. Merk is under appeal to the Supreme Court of Canada.
And when the Government finally in March 2004 acted on its ten-year-old promise to introduce legislation to protect whistleblowers, the result – the Public Servants Disclosure Protection Act – was a disgrace. It was an “anti-whistleblower” measure, replete with conflicts of interest, state-controlled “free speech” stipulations, heavy on sanctions and devoid of real protection. Frighteningly, if an employee deviated from a prescribed procedure, the Act subjected them to prosecution and disciplinary action. In our testimony to the Parliamentary Committee, FAIR denounced the Bill as worse than no law, and stated good faith required its withdrawal. Fortunately, the Bill died with the election. The legislative vacuum awaits a legitimate and principled law.
But despite the absence of legislation, employees of conscience have spoken out. At Health Canada, Dr. Brill-Edwards sounded the alarm about the arbitrary drug approval process including a rush to market of inadequately tested products. Likewise, Health Canada veterinarians Shiv Chopra, Margaret Hayden, and Gerard Lambert spoke out and testified at Senate Hearings about the risks associated with the bovine growth hormone.
Career diplomat Brian McAdam and, subsequently, veteran RCMP officer Robert Read, revealed corruption in Canada’s embassy in Hong Kong and risks to our national security through fraudulent visa schemes and penetration of our immigration computer system by organized crime. And Colonel Michel Drapeau (now a lawyer) denounced corruption amongst senior military brass and was an outspoken critic during the arbitrarily truncated Somalia Inquiry.
As one of the most profiled whistleblowers in Canada, Dr. Nancy Olivieri, sparked an international debate on the erosion of the sacred principle of university independence from corporate influence. Threatened when she sought to disclose adverse drug trial results to her entrusted patients, ten years later, she remains embroiled in costly and draining litigation.
All were fired except Brian McAdam, whose destroyed health forced retirement, and Dr. Brill-Edwards, who conscientiously resigned. For Brill-Edwards, employment came in the form of a weekly train commute from Ottawa to Toronto.
But the consequences that can arise when no one speaks are tragically patent in the incalculable human suffering of the sixty thousands infected with HIV and Hepatitis C during Canada’s Tainted Blood Scandal. As a result of the Krever Inquiry we learned that contrary to the US and most of Europe, Canada chose not to implement timely screening of its blood banks. The investigation by former Privacy Commissioner John Grace further revealed that unbelievably ten years of tapes and verbatim transcripts of the high level meetings attended by Canada’s provincial and federal health ministers were destroyed following Access to Information Requests and the launching of two lawsuits. Buried in this destruction are the secret decisions that resulted in a death sentence for thousands. But the coup de grace is that ten years later the RCMP quietly declared that no charges would be laid as they felt there was no criminal intent. With blood plasma products more valuable than gold, profit triumphed over life.
But how can we blame those who remain silent given our history of abusing employees who tell the truth? Faced with despair and financial ruin, most never fully recover. One year after the Radwanski Affair and despite changes at the top, almost fifty per cent of the employees in the Privacy Commission still feel that they would face reprisal for grieving harassment. Indeed, US surveys have shown that over eighty-five per cent of whistleblowers will suffer harmful consequences.
Limited only by the imagination of management, harassment includes spotlighting the whistleblower, not the wrongdoing; building damaging records; threats and smear campaigns; humiliation and isolation; and for many, the most damaging of all, denial of meaningful work and career paralysis. Having lived the experience, the list does little to capture the true agony. How does one cope with being silenced at key meetings; witnessing one’s work being assigned to unqualified colleagues, witnessing the removal of one’s name plate from her office; being suddenly struck from the departmental phonebook; sitting alone all day in a silent office; being told that to challenge the retaliation is fruitless as you are “behind the eight ball on this one”; being publicly announced as being out of your job; and being threatened with libel by your Minister of the Crown for daring to say anything was wrong? Despite top-notch credentials, whistleblowers often never find work again.
Institutions also engage in well-orchestrated cover-up. Employees are gagged; expertise is separated from authority, with only “loyal” employees vested with decision-making; work tools and information are withheld; and written records are forbidden. Often, issues will be studied to death and if an investigation is even launched, it conflicts of interest with bosses investigating themselves are the norm, not the exception.
In my experience at FAIR, it is profoundly moving to counsel employees who for years have been fighting formidable institutional power simply for the right to be heard in a fair and just setting. Standing in judgement of oneself is counterintuitive to the layperson but in government, Department of Justice lawyers have justified this abusive process for decades.
Under the current regime, senior management in the employee’s department is authorized to hear harassment grievances and prohibits such grievances from being referred to independent arbitration at the labour tribunal. With grievances dead-ending with the employee’s boss it’s no surprise that employees lack confidence in the process.
But the ultimate denial of justice are the heavy tactics used to intimidate employees who have no access to independent arbitration against bringing actions in tort in our regular courts. With this sort of impunity for government bosses, it’s little wonder that one employee out of five reports harassment.
In 2002, I challenged this jurisdictional barrier, and after losing in Ontario Superior Court with $80,000 in costs ordered against me just on the Motion, I prevailed in the Court of Appeal. It was an important victory for whistleblowers, establishing the principle that, even in the absence of a specific whistleblower protection, an employee could rely on his or her common law remedies in tort.
But the victory was short-lived and in November 2003, having not appealed, the Government quietly passed the euphemistically titled Public Service Modernization Act, where buried at s. 236, it says that public servants have no right to bring an action in our courts of justice for any employment matter. The hypocrisy of government to subject private sector employers to a higher standard is an irony not lost on most!
But regardless of the right of an employee to seek a remedy, external disclosures and litigation expose institutions to public relations disasters, not to mention costs. Just weeks ago, after the Wall Street Journal published reports that Nortel executives had “cooked the books” in 2003, the stock had a one-day dive of 10 per cent. The Sponsorship Scandal almost cost Paul Martin the prime minister’s office.
Giving The Organization A First Chance
It is significant that both Sherron Watkins and Cynthia Cooper chose to work within their organizational structures before going public. This accords with the choice of the vast majority of whistleblowers that GAP has represented over a quarter of a century. Most are employees simply wanting to do their job. But the important lesson of Enron, is that harassing and attempting to silence employees no longer is a formula for cover-ups. That antiquated perspective virtually guarantees problems are likely to become public scandals that could have been nipped in the bud.
But the decision whether to give the organization a first chance before going public depends largely on whether the employee believes that they will be treated with respect and their concerns taken seriously. The challenge therefore is to earn their trust.
In short, whatever the mechanism employed to accommodate internal disclosures, whether hotlines, ombudsman, ethic committees, certain basic principles will enhance the likelihood that an employee will in fact use them. They are:
1. The right to communicate within the profession, on the job, and with colleagues. This basic principle, if respected, would prevent the need for whistleblowing.
2. A declaration that leadership will insist that integrity is the cornerstone of all professional duties – evidenced by action, not rhetoric.
3. The right to due process with realistic burdens of proof. The fatal flaw of whistleblower protection is the inadequacy of remedies. It is wrong to ask employees to speak out and defend the public without giving them full opportunity to defend themselves.
4. The right to information to enable responsible dissent.
5. The right to make a difference by having an independent forum, free from conflict, review misconduct concerns. In our view, corporate counsel should not be part of this review.
6. The application of sanctions against those who commit wrongdoing including those who retaliate.
7. The right to vindication and to be “made whole” through relief for the wounds of retaliation.
If we have learned anything from recent events, it is that healthy institutions and “truth tellers” are on the same side. Their early warnings offer a golden opportunity for senior executives to avoid being blindsides by risks taken without their knowledge and to save them from liability for decisions taken far from their own purview.
Some may say that corporate lawyers will be motivated to adapt to the new reality simply as a function of corporate expedience. I believe that most will be motivated by the opportunity to contribute to a better and safer world.