Whistleblowing in the UK, Ep. 2: Is it ‘British’ to pay whistleblowers?

0:00Nick Ephgrave: What happens next in the story of money? Nuveen has spent over 125 years helping clients answer this question. By investing in the growth of businesses, real estate, infrastructure and natural capital, we continue to deepen our expertise across income and alternatives so investors can confidently write the next chapter of their own portfolio stories. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible. My colleague Martin Arnold, who's the FT's financial regulation editor, has been reporting on the world of UK finance for many years.

0:37Nick Ephgrave: And over time, he's seen an ongoing hesitation on the part of regulators to pay corporate whistleblowers. It's just not cricket, I think is what I would say. I am unfamiliar with that phrase. It's just not cricket. What's that mean? It's just not very gentlemanly to be doing it for money. you should be doing it because it's the right thing to do anyway. There's something slightly tainted, slightly commercial about it. As recently as 2018, the head of the UK's serious fraud office, which prosecutes financial crimes, said that paying whistleblowers just isn't British. But the tide might be turning.

1:20Nick Ephgrave: The SFO now has a new director, and he's become a major advocate for whistleblower rewards.

1:28Suzi Ring: In the US, you're not embarrassed or ashamed, and nor should you be, of saying, if you give us information that helps us convict a criminal, we're going to pay you for that.

1:36Nick Ephgrave: That's Nick Effgrave, the new head of the SFO.

1:39Suzi Ring: I think that's an entirely good thing to do. We do it in the UK with criminal informants. Why are we so reticent to do the same thing for whistleblowers? I just cannot understand it.

1:50Nick Ephgrave: This is Behind the Money from the Financial Times. I'm Michaela Tendera, and this is part two of our series on corporate whistleblowing in the UK. In our first episode, we spoke with people who came forward to expose wrongdoing at the companies they worked at, and then paid a high price for it. On today's episode, we'll talk about how and why things might be changing in the UK. The country seems to be shifting from an attitude against whistleblower rewards to something more like an American system, where corporate whistleblowers receive financial payments in exchange for their information.

2:30Nick Ephgrave: For a long time, there's been resistance to the idea of paying whistleblowers, and that's for a number of reasons. The main one we've heard about during this series is that paying whistleblowers just isn't British. And, well, neither am I. So I wanted to understand what that actually means. I spoke with my colleague Susie Ring, who's the FT's legal correspondent in London, and she broke down this resistance into three main categories. The first is concerns that it will lead to a lot of illegitimate claims, that people will just try to kind of flood the system with anything that they think they may be able to generate a reward from, which will just bind regulators and prosecutors up in lots of documents they have to sift through.

3:15Nick Ephgrave: So concern number one, fake claims will surge and they'll waste time and money. The second is that whistleblowers are often involved in such conduct. So in order to be able to know something's happened, they're often implicated in some way. And that leads to concerns from people that you could end up rewarding someone who's actually been complicit in criminal behavior. And then finally, prosecutors often raise concerns and defense lawyers that juries don't like whistleblowers. They don't like the idea that somebody has been kind of potentially paid for information that could undermine the evidence.

3:52Nick Ephgrave: It could kind of compromise them in terms of the legitimacy in a trial, and that could in some way kind of undermine the case. So opponents of paying whistleblowers cite a lot of worries, everything from potentially rewarding criminality to hampering court cases. But Susie told me that some of these attitudes might be shifting. There's been a number of national scandals over the last few years that have really shone a light on the fact that whistleblowers are not always listened to and that perhaps the first impulse is to disbelieve a whistleblower rather than believe them. When I asked her what she meant by that, one of her first thoughts was about the UK's post office scandal.

4:35Nick Ephgrave: The computer system post office spent an arm and a leg on is faulty.

4:39Suzi Ring: No one else has ever reported any problems with Horizon.

4:43Nick Ephgrave: Over years, hundreds of post office employees were convicted for offenses, including theft and false accounting using flawed evidence from a faulty IT system. An inquiry found that the post office higher-ups knew or at least should have known about this. Susie told me that the story only got serious traction when it was adapted as a TV series last year called Mr. Bates vs. the Post Office. You're responsible for the loss. I haven't got that money and I don't know where it's gone.

5:14Suzi Ring: These deficits were most likely caused by you. That is the post office case.

5:20Nick Ephgrave: All our hopes, all our savings down the pan.

5:23Suzi Ring: That was a lie, actually.

5:27Nick Ephgrave: And there were so many whistleblowers in that scandal, but yet it took like a TV drama to really kind of get people to listen. Susie told me that one of her other thoughts for why attitudes about whistleblowers might be changing was the Grenfell Tower fire. In 2017, it killed dozens of people. It emerged that the problem was cladding on the building, which people had been blowing the whistle on for years and saying it wasn't safe because it was highly flammable. But again, it took like a major disaster for anything to actually change or happen. And there's a sense that we can't always wait until these disasters happen.

6:06Nick Ephgrave: and we need to change our attitudes around whistleblowing and how people are listened to, you know, before these events. In the midst of these events came two initiatives. One is to create a central office of the whistleblower for the whole country. This is purely just about safeguarding information, making sure it's dealt with in the best and most proper way, protecting whistleblowers more. This initiative is making its way through Parliament, albeit slowly. The other, that Nick Gaffgrave of the SFO is supportive of, is the introduction of a program that would allow financial rewards to be paid to whistleblowers who provide significant information that leads to a successful outcome like a fine or a penalty.

6:49Nick Ephgrave: This is the one that really raises all those concerns of the un-Britishness for some people. Here's Nick again.

6:56Suzi Ring: What I want to do is try and persuade policymakers in the UK that the benefits of developing a scheme which incentivizes whistleblowing and properly codifies it effectively, it's not just a kind of a marginal gain. This is an absolute paradigm shift if you could do this in the UK.

7:13Nick Ephgrave: You can think of the SFO as an equivalent to the US Department of Justice, but focused only on white-collar crime. It can lead on investigations, and it can also act as a prosecutor. And Nick Effgrave isn't a typical head for the agency.

7:31Suzi Ring: Every other previous director has been a trained lawyer, for good reason, of course. That's a really important part of the job, but I'm not a lawyer. And I think whilst that doesn't make me better or worse, it gives me a different perspective on how we might go about our business.

7:46Nick Ephgrave: Nick is a lifelong policeman. He joined London's Metropolitan Police Force 35 years ago and rose through the ranks. After he retired from police work, he applied to be the head of the SFO.

7:58Suzi Ring: I was thinking maybe I could bring some of the skills and experience I had from mainstream policing into the SFO. And I just thought, what a great challenge.

8:07Nick Ephgrave: So I'm curious when you first started looking at whistleblowers and how they're treated.

8:11Suzi Ring: I think on day two, probably.

8:14Nick Ephgrave: Yeah, right away.

8:17Suzi Ring: This is a nose on your face, frankly. It's an open goal. We're failing to put the ball in the net.

8:23Nick Ephgrave: What makes you say that?

8:24Suzi Ring: So I was aware that in the States, there's a number of agencies that have got well-established whistleblower programs. And I started to look at, you know, how successful were they?

8:34Nick Ephgrave: It turns out pretty successful. In the U.S., according to a Securities and Exchange Commission report, the agency has awarded more than$2.2 billion to whistleblowers since 2011. Another stat that really stood out to Nick was this.

8:50Suzi Ring: Since 2012, we know for sure that 700 UK-based whistleblowers have gone to the US to blow the whistle. That really is, I see it as an intelligence drain. We're losing the ability to prosecute those individuals in this country, in this jurisdiction, arguably, because they've gone abroad. We're losing the intelligence that they could bring us.

9:09Nick Ephgrave: But Nick says the UK is missing out on even more.

9:13Suzi Ring: We're losing the revenue to the treasury that we could gain because many of these corporate fines are large and that money goes back into the public purse to help fund the health service, repair the roads, provide education and so on and so forth. it's a massive, massive drain. And I was thinking if this were any other type of crime, if this were counter-terrorism, for example, and we knew that we were having a massive intelligence drain across the Atlantic or anywhere else, frankly, or child abuse or drug smuggling or gun running, there'd be outrage. But no one seems bothered that we're losing this opportunity in this sphere of corruption, bribery and serious fraud.

9:53Suzi Ring: And I think that's wrong. And I wanted to highlight that.

9:55Nick Ephgrave: So with all that in mind, Nick got to work. He began speaking about the whistleblower issue wherever he could. He's also been meeting with U.S. lawyers and counterparts and agitating to get this up the government agenda. With some sort of payment program for whistleblowers, if you could kind of magically make this happen tomorrow, what would the best case scenario look like?

10:22Suzi Ring: So if I could magic something up out of nothing, and I'm not making policy in the hoof here, this is just my ideas. But in my head, what I think we need to have is we need to have an established whistleblowing bar, a bunch of lawyers who can support whistleblowers through the whole process, take their hand at the beginning, lead them through it, right to the other end of the process, if that's a prosecution, excellent. so I think you need to have kind of professional support and help I also think that there needs to be clarity about what you can expect if you're a whistleblower so you know if I'm going to put my whole career my reputation my family's well-being at stake what am I likely to get by way of compensation and I think the way to deal with that is to take a leaf out of some of the schemes you have in the US which is to describe a percentage of whatever the fine is following a successful conviction.

11:07Suzi Ring: And the point is, it's a payment by results system.

11:11Nick Ephgrave: What Nick's saying here is that the whistleblower would have to see the whole process through and would only get paid if there's a successful result, like a conviction.

11:27Nick Ephgrave: The future of fixed income investing will continue to blur the lines between public and private markets. Nuveen's credit platform was built to navigate this shifting landscape

11:56Nick Ephgrave: As head of the SFO, Nick Effgrave's been talking with Mary Inman, a prominent lawyer in the corporate whistleblowing world. We heard from her in episode one, and she believes the American system is where the UK should take its inspiration. Our reward programs, when you reveal a massive fraud, you receive massive amounts of money as a tip. So for instance, the LIBOR manipulation whistleblower who worked at Deutsche Bank received$200 million. And so I think that a lot of British people recoil and think that's too much money. And my response to that is that, well, that's a person who exposed a massive fraud across most of the major banks in the world.

12:41Nick Ephgrave: And so obviously, in a way, kind of lit his career on fire. And in fact, that$200 million number is like an advertisement, a billboard across the world attracting other whistleblowers to come to the United States. So I think there just was a failure to recognize that nothing says we value whistleblowers more than actually paying them a finder's fee for the information that they bring. The specifics of the American program are that whistleblowers are awarded between 10 and 30 percent of the fine imposed on a company. This isn't the only way to set up these rewards, though. In Canada, those percentages are lower.

13:22Nick Ephgrave: And in the case of the Ontario Securities Commission, they actually put a ceiling on the amount a whistleblower can receive. That ceiling is$5 million. So, you know, there are ways that you can construct these programs, and it's interesting to look at the differences. In terms of what I advise, I do think the higher reward ranges without caps are really powerful because of how much a whistleblower puts on the line. Another reason Mary supports higher payouts is that those awards allow her to do her job. Like her clients, Mary doesn't get paid until a fine has been imposed in a case. She says this acts as a kind of control.

14:03Nick Ephgrave: The cases she takes on have to be pretty solid. I don't worry about whistleblower payouts because that is the recipe for success, right? Every time you see a big payout, that means that somebody's information helped break open a prosecutor's case and allow them to impose enormous fines. Right. So that, to me, is an example of how these programs work. So I don't understand the resistance. Nick doesn't either. I asked him about a lot of these criticisms, the things Susie brought up earlier in the episode. First off, he doesn't worry that offering payment will encourage wrongdoing. That's because his definition of a whistleblower doesn't include what are known as participating informants.

14:53Suzi Ring: What I'm talking about are what you might call the clean skins. These are people who have been in an organization that may be the chief financial officer, maybe a senior accountant, and has seen stuff go on. They've not participated in it. They know it's wrong. They know it's against the law. These are the people I'm talking. So there is no culpability, arguably, there. If there is, it's the most minor of culpability, you know, sort of effectively failing to talk about it when they should have done, but not actual participation.

15:18Nick Ephgrave: Nick's also not concerned about juries hesitating to trust whistleblowers because they're getting paid.

15:24Suzi Ring: Well, of course, that's a complete misunderstanding of what we're talking about. Whistleblowers rarely, if ever, will be required to give evidence. That's the first thing to understand. They are not the providers of the evidence which will convict. What they are, and the term I use, is they are the key holder. They are the person that knows where the evidence is or can direct the investigation where to look.

15:48Nick Ephgrave: You might be wondering why we're spending the second episode of this series on Nick F. Grave and the SFO. After all, the first part of this series focused on a different agency's treatment of whistleblowers, that of the Financial Conduct Authority, or the FCA. What Nick would like to see is an approach that goes beyond just one government agency.

16:07Suzi Ring: I think my scheme, or what I'm suggesting, is a national approach to whistleblowing rather than an agency-specific scheme. There are agencies in the UK that will pay small amounts of money to people that are arguably whistleblowers, but it's not life-changing amounts of money. It doesn't do what I think needs to be done, which is to really mainstream it in this country, so it's not niche. I think if I was in the position of deciding should I blow the whistleblower, I wouldn't want to be going to boutique shopping with different agencies to try and work out what the best deal was and compare the market.com on it.

16:36Suzi Ring: I'd want there to be one process which I could trust and believe in, which provided me with a degree of clarity and certainty about what I was getting into and how long it was going to take and what I might gain at the end of it. And that has to be, you know, a single system, I think.

16:54Nick Ephgrave: So where are things headed next? Well, just a few weeks ago, while we were in the middle of putting together this episode, some news came out of the government's autumn budget. So the government announced in November a new scheme for HMRC, the UK tax authority, that's going to allow them to pay whistleblowers up to 30 % of any tax recovered as a result of their tips. This really closely mirrors the US IRS, the US tax authority scheme, which also pays whistleblowers up to 30 % for tax collected as a result of whistleblower information. And the UK has been, interestingly, very unashamedly open about the fact that it's taken inspiration from the US and from Canada around how they administer these schemes.

17:38Nick Ephgrave: So the UK taking a leaf out of the pages of the US's book and putting it into practice. I asked Susie, who's been covering this for the FT, what this means for whistleblowers more broadly. Does this bring us one step closer to making paying whistleblowers British? So I think the HMRC scheme is really fundamental in terms of demonstrating a shift in tone from the UK. The government also came out with its new anti-corruption strategy earlier this month. And within that, we saw that they had specifically mentioned that they're going to be exploring opportunities to reform the UK whistleblowing framework.

18:15Nick Ephgrave: And that includes looking at potential financial incentives set against the backdrop of the new HMRC scheme and the agitating that we've seen from the serious fraud office director, there's a sense that things are changing, that the tide is moving, and that paying whistleblowers will be something that will be much more a part of the UK enforcement landscape of the future.

18:44Nick Ephgrave: Toward the end of my interview with Nick Effgrave, I asked him why he's been so focused since day two, as he puts it, on pushing this issue of improving the treatment of whistleblowers.

18:59Nick Ephgrave: Thinking about this big picture, this issue of paying whistleblowers and improving conditions for whistleblowers, why is it so important to you?

19:09Suzi Ring: We need this thing in this country. You know, a massive improvement in our ability to detect and prosecute corruption, protecting the UK's economy, protecting victims, bringing justice more swiftly. And if I can make that happen... or help make it happen, I'll be a very happy man, and I think it'll be a job well done. And it is a lengthy and tough process to push through all these barriers, but I've got the energy and the commitment to do it, and I'll just keep going until I'm told to stop, frankly, or drop over.

19:50Nick Ephgrave: Behind the Money is hosted by me, Michaela Tindera. This episode was produced by me and Katya Kumkova. Special thanks to Jonathan Ely. Fact-checking by Simon Greaves and Lucy Baldwin. Sound design and mixing by Simon Panay. Original music is by Hannes Brown. Topher Forges is the FT's acting co-head of audio. Thanks for listening to this special series from Behind the Money. If you missed episode one, we have the link to it in our show notes. And we'll be back with a regular episode on Wednesday. See you then.

20:53Nick Ephgrave: Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.