So far no Australian jurisdiction has legislated to create a system for whistleblowers to receive a bounty or reward for making a public interest disclosure that leads to a substantial fine being imposed on a corporation or a recovery by the Government of dishonestly obtained money. Bounty schemes are of interest to commentators and academics because these schemes have been very successful in the United States of America (US) in bringing fraud against the Government, foreign corrupt practices and other serious corporate wrongdoing to light. More will be said below about the US experience.
Some contributors to this review process have recommended that such a scheme be introduced or considered in South Australia. For example, non- government organisation Blueprint for Free Speech has recommended the establishment of a bounty scheme to “incentivise” whistleblowing in relation to large frauds on the Government, and the establishment of a public interest disclosure fund to assist public sector whistleblowers whose disclosures do not result in large monetary recoveries. Professor AJ Brown has argued that there is no reason why South Australia ought not to introduce a reward or “bounty” system to oversee whistleblowing.
In the US, there are a number of legislative schemes that provide payouts to whistleblowers. The False Claims Act (US) had its origins in the civil war era, and was substantially strengthened in 1986 in response to experts suggestions that the US was losing many billions of dollars per year through false claims under Government contracts. That Act permits citizens who have knowledge of fraud on the Government to take action on the Government’s
behalf. They can recover monies obtained as a consequence of fraudulent claims on government contracts, and receive a proportion of the total recovery. Reportedly, billions of US taxpayer dollars have been returned to the Government through this mechanism.
The collapse of US financial markets in 2008 led to the enactment of the
Dodd-Frank Act (US) in order to deter and prevent fraud and other illegal activity in US corporations. The Dodd-Frank Act (US) contained whistleblower provisions, including potentially large payouts for individuals who voluntarily provide original information to the US Securities Exchange Commission (SEC) that lead to a successful enforcement action against a corporation.
Interestingly, the SEC has received 39 whistleblower disclosures from Australia since late 2011,84 which reflects not only the extent of the extra-
jurisdictional reach of US laws such as the Foreign Corrupt Practices Act
(US), but also the untapped availability of this kind of information in corporate Australia to expose corporate wrongdoing that would potentially amount to Commonwealth offences.
The Dodd-Frank model for exposing wrongdoing in the corporate sector can only provide incentives for the exposure of corporate wrongdoing because of the large fines that can be imposed on corporate offenders. There is no similar financial pool from which public sector rewards could be drawn, except perhaps if there is recovery of the proceeds of large state procurements or land development decisions conducted corruptly. The
84 Ruth Williams, ‘Australian Whistleblowers provide tip-offs for US scheme amid criticism of laws at home,’ Sydney Morning Herald, 21 January 2014.
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majority of whistleblowing disclosures from the South Australian public sector would not be of that type, if reports to the OPI to date are a guide.
Another important consideration in relation to rewards to public officers for reporting wrongdoing in public administration is the potential effect of such a scheme on public sector values. People who work in the public sector are expected to have, as their ultimate goal, serving the public good according to the will of the Government of the day. A bounty scheme could have the unintended effect of providing a financial incentive for workers to move into areas where there is a greater prospect of obtaining a bounty. It is not known how this could affect the ethos of the public service.
In my view there would need to be evidence of a very serious corruption in public administration in South Australian before it would be appropriate to introduce incentives in the public sector in such a radical way. The evidence indicates that a majority of public officers already feel obliged to speak out about serious public sector wrongdoing of which they are aware.
A case in favour of bounties to public sector insiders to expose public sector wrongdoing has not been established. It would not be appropriate to reward public officers for performing a duty which they already bound to perform. In 1989, the House of Representatives Standing Committee on Legal and Constitutional Affairs considered whether an US–style bounty scheme ought to be introduced as part of legislative means to curb insider trading in the Australian securities market. The Committee rejected the suggestion, saying “such a system is incompatible with current attitudes in relation to the
credibility of evidence. It is also incompatible with accepted principles and practice within Australian society”.85
I agree with that conclusion.
Recommendation 26: That South Australia not adopt a US-style bounty scheme for public sector whistleblowing.