Whistleblowers – To Protect or Not?
By Eugene Ang
The recent corruption scandal at the Singapore Land Authority has shown that, despite numerous safeguards and rigorous audit controls, fraudulent activities can go undetected for years. While this may signal a need to review the financial processes within statutory boards, it may also be helpful to consider enacting laws that encourage informants to step forward and blow the whistle on corrupt practices, be it in the private or public sector.
At present, there are several statutory provisions that offer some form of protection for whistleblowers. For example, Section 36 of the Prevention of Corruption Act ensures that a complainant’s identity will not be disclosed, even during court proceedings, unless the court finds that he has wilfully made a false statement in his complaint. Similarly, Section 208 of the Companies Act offers protection to company auditors by ensuring that they will not be liable for defamation for any statement made in the course of their duties.
However, the effectiveness of these laws presupposes that the main impediment against whistleblowing is the fear of reprisal in the form of termination of employment or defamation suits should the whistleblower’s identity be revealed. This is probably true for the majority of cases.
But what if the whistleblower is deterred from stepping up because he has participated in the illegal activity? Should there be laws granting whistleblowers immunity from prosecution to encourage them to report these illegal activities to the authorities?
In a landmark ruling last month, District Judge John Ng sentenced a former Chief Executive Officer of AEM-Evertech, Ang Seng Thor, to $200,000 in fines for two charges of corruption and bribery. Most notably, Ang was spared from a jail sentence despite each charge carrying a maximum of five years imprisonment.
Explaining his decision, District Judge Ng noted that Ang’s conviction was a result of his own whistleblowing, which had also led to the conviction of the company’s former Chief Financial Officer.
While this sends a positive signal to encourage whistleblowers to step forward and expose their own wrongdoings, the fact that the ultimate decision still lies in the hands of the judge may not provide sufficient reassurance.
Certain jurisdictions have laws granting whistleblowers immunity from prosecution should their disclosure incriminate themselves. For example, in the Philippines, immunity is granted to those who offer bribes to public officials in order to encourage them to testify freely against such corrupt officials.
A more balanced approach has been adopted in several countries, where there are statutory provisions that explicitly state whistleblowing as one of the mitigating factors that judges should take into account when meting out punishment.
For example, Section 35 of the South Korean Anti-Corruption Act states that if any whistleblowing leads to the detection of a crime perpetrated by the whistleblower, his punishment may be mitigated or remitted. In Malaysia, there are similar statutory provisions for those engaged in money laundering.
The merits of using such incentives to encourage wrongdoers to step forward with information has been recognised in Singapore, albeit in the limited area of preventing anti-competitive activities within the framework laid down by the Competition Commission of Singapore.
Under this framework, companies that are involved in anti-competitive activities may qualify for a reduction in, or even total immunity from, financial penalties should they provide the Commission with evidence of their cartel activities.
The question then is whether a similar framework should be adopted for the policing of white-collar crimes in both the private and public sector. While it may seem attractive to enact laws to grant whistleblowers immunity from prosecution, it would go against one’s sense of justice if a person who had initiated an illegal act were to be allowed to enjoy the same immunity from prosecution as another whose role was one of mere acquiescence.
Hence, enacting laws that expressly state whistleblowing as a mitigating factor that a judge should consider when passing sentence, or even stipulating a lower maximum sentence for whistleblowers, might strike a good balance between the interest of exposing corrupt activities and that of punishing the perpetrators.
Academics have used a game-theoretic approach to analyse systems in which there is asymmetric punishment for various participants in illegal activities. Their conclusion is that this system increases the chance of one party exposing the other to the authorities, and this in turn increases the risk inherent in corrupt deals. As such, there is a strong deterrent against participation in such activities.
At the end of the day, there are good policy reasons to structure the legal system to convince whistleblowers that their act of stepping forward will earn them a more lenient sentence, and it is likely that laws stipulating a lower maximum sentence for whistleblowers will go far in achieving that. Yet, the moral culpability of the accused must still be a factor that influences the judge’s final decision, and this system should not unnecessarily restrict the judge’s ability to mete out justice.