Whistleblowing in a Pension Fund Context Graham Damant

INTRODUCTION • The business environment – A history of scandals • The role of whistleblowers? • Do whistleblowers need protection? • Whistleblower protection generally • The Protected Disclosures Act • The PFA – Obligations and rights • Conclusion

THE BUSINESS ENVIRONMENT • Bad individuals v Bad Organisations • Bad organisations Ø Leadership complicit in cover up of individual/group wrongdoing Ø Leadership actively involved

ORGANISATIONAL WRONGDOING INTERNATIONALLY • • • Enron Volkswagen Emissions scandal Harvey Weinstein Wells Fargo Siemens/Airbus/BAE/Samsung Rate fixing (LIBOR) Price fixing Collusion Kickbacks Cartels

ORGANISATIONAL WRONGDOING LOCALLY • • Steinhoff Eskom PRASA Gupta’s and state capture Regal Bank The arms deal Price fixing, tender collusion, etc.

ORGANISATIONAL WRONGDOING PENSIONS • Fidentia • Ovation • Gavhalas surplus stripping exercise • Bophelo Beneficiary Fund

EXPOSURE OF WRONGDOING • Extremely difficult to detect • Occasionally a slip up (Makwakwa) • Usually an insider • Usually an aggrieved employee/spouse • Occasionally an outsider – auditor / bank / contractor

INDUCEMENT TO EXPOSE • Most countries provide protection • Some countries provide inducement

IN THE U. S. A. • “Washington DC, August 30, 2016 – The Securities and • • Exchange Commissions Awards to whistleblowers have surpassed the $100 million mark with the program’s second largest award of more than $22 million announced earlier today” “An in-house accountant who raised a red-flag about a tax lapse that his employer then ignored, leaving him to tip off the IRS, has received $4. 5 million in the first IRS whistleblower award. ” “SEC to pay $30 million whistleblower award, its largest yet. ”

PERILS OF WHISTLEBLOWING – HIGH RISK • “Moses Chaka, an auditor in the Free State Department of Agriculture, was investigating provincial projects, including the controversial Gupta-linked Vrede Dairy Farm, when he was hijacked and deliberately maimed in February 2013. He died after three agonizing months in hospital. ” • “In the second case, in June 2014 Dr Radebe was driving through the gate of his house late one evening when police allegedly fired three bullets at his car and drove off. Radebe is a former counsellor in Vrede who first the whistle on the controversial dairy project. ” blew

PERILS OF WHISTLEBLOWING Where the law cannot provide protection: Ø Ø Anonimity and the internet Wikileaks The Gupta e-mails The Panama Papers

THE PROTECTED DISCLOSURES ACT 26 OF 2000 (PRE 2017) (“PDA”) • Procedure for employees to disclose unlawful and irregular conduct by their employer • Protection for employees

PROTECTED DISCLOSURES • • Criminal offence Failure to comply with legal obligation Miscarriage of justice Health and Safety Environmental damage Unfair discrimination Concealment of above

TO WHOM DISCLOSURES ARE TO BE MADE • Employer (in good faith) • Where jurisdiction exists Ø Public protector, Human Rights or Gender Equality Commission or Auditor General Ø Prescribed body (in good faith and substantially true)

GENERAL DISCLOSURE • Believes prejudiced by employer; or • No prescribed body and evidence to be concealed or destroyed; or • Previously made to employer and no action; or • Impropriety exceptionally serious

TO BE PROTECTED GENERAL DISCLOSURE STILL NEEDS TO CONSIDER • • Good faith and substantially true No personal gain To whom disclosed Seriousness Whether continuing Breaches confidentiality Action employer had taken The Public interest

THE PFA – DISCLOSURE OBLIGATIONS • Obligation to report matter that may prejudice a fund or members Ø S 7 A – Board members Ø S 8 – Principal officer Ø S 9 – Auditor Ø S 9 A – Valuator Ø S 13 B – Administrator (material matter) • Obligation to report reason for removal

THE PFA – PENALTIES AND OFFENCES • Fine not exceeding R 10 m • Imprisonment not exceeding 10 years • S 13 B licence?

THE PFA – WHISTLEBLOWING PROTECTION • S 9 B(2) – Disclosure by – Ø Board members, principal officer, valuator Ø Other officer or employee of fund or administrator Is a protected disclosure

THE PFA – WHISTLEBLOWING PROTECTION • May not suffer any occupational or other detriment • Occupational detriment (employment related) Ø Discipline Ø Dismissal Ø Demoted Ø Refused reference Ø Denied appointment

DID IT PROTECT EMPLOYEES ONLY OR THIRD PARTY CONTRACTORS? • RFS Adminstrators & Another v National Fund for Municipal Workers & Others Ø Administrator reports irregularities by chairman and principal officer Ø Administrator contract terminated on notice Ø Was administrator protected?

THE PDA – 2017 AMENDMENTS • “Worker” protected Ø Person assists in carrying on business of employer of client Ø As independent contractor, consultant or agent

REMEDIES Order that is just and equitable Payment of compensation Payment of actual damages Order to remedy (specific performance) • For employees automatically unfair dismissal • •

PROCESS FOR REPORTING • Information circular PF 1 of 2018 Ø Report must state it is made in 9 B Ø Covers S 7 A, 8, 9, 9 A and 13 B obligations Ø Must specify if confidential or anonymous Ø Treated to ensure confidentiality • S 22(2) of Financial Services Board Act applies

CONCLUSION • Obligation and rights far reaching • In pension area – organisations protected • Effective? • FSB inspectorate • Prosecutions?

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