Adele Ferguson - on protecting whistleblowers
Adele Ferguson’s keynote address to the 2016 Press Freedom Australia Dinner, Sydney, May 6 2016.
It is a great honor to be here tonight and to speak on subjects that are of national significance: whistleblowers and our need for a Royal Commission into the financial services sector.
Over the past three years, my stories at Fairfax and the ABC’s Four Corners, have laid bare serious failures and misconduct from some of our biggest companies. Household brands such as Commonwealth Bank, National Australia Bank and 7-Eleven have all broken our trust and ruined the lives of thousands of people.
It’s hard to believe in this day and age that such things can happen, but they do. Sadly they will continue to happen without a serious change in the culture of these companies, better laws backed by heftier penalties and a stronger backbone from our corporate regulator to use the powers it has.
The conduct of our banks is an election issue with Labor promising a Royal Commission and the Liberal party against it. With the polls showing that the majority of Australians are in favour of just such a Royal Commission, politicians need to remember it doesn’t matter if you’re from the left or right, voters from both persuasions have been victims.
None of these stories would not have come to light without the brave contribution of whistleblowers. Without them, the bright light would not have shone on the financial planning arm of CommBank, systemic wage fraud at 7-Eleven and misconduct at CommBank’s life insurance arm CommInsure. We all owe them an immense debt of gratitude.
Tonight I would like to lead you through my experiences dealing with whistleblowers on these stories, ponder some ways to improve our system and also highlight what I believe is a dangerous development.
Whistleblowers have not always been flavour of the month though. For some perverse reason they have been portrayed in the popular culture as lonely and disgruntled employees who spilled the beans out of malice.
In 1971 Harvard trained lawyer Ralph Nader, who blew the whistle on the US car industry, told a conference in Washington DC that whistleblowers were seen as “squealers”, “stool pigeons” and “informers” who “ratted” on their bosses.
As well as wearing a “badge of shame”, whistleblowers were often sacked, bullied or sidelined.
This is still the case in Australia.
Jeff Morris, who was a financial planner at CommBank, is a whistleblower. He came to me in March 2013, a week after I had been served with a subpoena from billionaire mining magnate Gina Rinehart to get my contacts.
Here I was going up against Rinehart, who was a major shareholder of Fairfax at the time, and about to take on the biggest bank in the country.
Jeff came to me, after he and two other whistleblowers had unsuccessfully sought action from the corporate regulator, to expose forgery, fraud and a cover up of management in the bank’s financial planning arm.
What I found was an aggressive sales culture in the bank, which encouraged its planners to take risks with other people’s money while also turning a blind eye to practices that may have amounted to criminal acts. Signatures were forged, documents were doctored and victims were given minimal compensation and forced to sign confidentiality agreements.
Exposing wrongdoing in this division proved that the bank’s ruthless profit-first culture was widespread. A dying man, Noel Stevens, was refused a life insurance payout after being talked into swapping from one that was always guaranteed to pay him out. The switch was made so that the teller and the planner could earn a commission. The bank fought the action but eventually lost, with the judges saying the bank had been “misleading and deceptive” in their scathing judgement.
The joint investigation with Four Corners, called “Banking Bad”, showed how Dodgy Don Nguyen, a notorious financial planner at the CBA, was being rewarded inside the bank despite management knowing he was putting clients’ money at risk. Don was allowed to resign in 2008 and has so far received hundreds of thousands of dollars from income protection insurance paid by CommBank. We tracked him down Don at his family’s dry cleaning business where he blamed lax oversight for his actions.
CBA promotes itself as a trusted institution which puts the interests of its clients first. The joint investigation exposed the ugly truth behind this facade – a hunger for profits which destroyed lives and a culture of cover-up – that continues to this day – to avoid exposure at all costs.
Astonishingly, it would take the corporate regulator 16 months after Jeff went to them to investigate the bank. When ASIC finally arrived, the bank embarked on a wide scale witch hunt for the leakers.
It is hard to imagine how stressful that would be. All three whistleblowers were interviewed by CBA Group Security in an effort to identify the source of the leaks. One of the three whistleblowers died in his sleep at the age of 35 after leaving the company. A second remained anonymous but suffered considerably from the atmosphere of suspicion and intimidation and also left the company.
Jeff Morris remained on his own in this hostile environment in an effort to continue feeding information to ASIC. After becoming aware of a possible death threat and receiving no assistance or protection from the regulator, he was eventually diagnosed with post traumatic stress disorder, known as PTSD.
This had an impact on his family. Jeff’s children were only 2 and 4 when he made the fateful decision to become a whistleblower. The full extent of his sacrifice became apparent one night when he came home to an empty house. Eventually his position in the company was made untenable. In 2013 he quit the bank.
Fairfax first published Jeff’s story in June 2013. It triggered a senate inquiry which recommended a royal commission into CommBank on the basis that the regulator couldn’t be trusted to do the job properly. CommBank staved off a royal commission by agreeing to set up a compensation scheme and writing to hundreds of thousands of customers offering to review the advice they had been given.
Jeff has now dedicated his life to changing the financial services industry’s culture.
Since blowing the whistle Jeff has appeared at many senate hearings and been a strident advocate for a Royal Commission into the banking sector. He has been a mentor to other whistleblowers. Interestingly he says that of the potential whistleblowers he talks to, very few will go ahead and pay the high personal price to do the right thing under the current system.
Jeff has also helped victims successfully fight the banks for compensation sometimes for free and sometimes for a fee.
Taking on the financial services sector is fraught. Not only do the banks play tough using their legal and commercial might. But they also play hardball. It might all be within the law, but brutal put down techniques are used to intimidate or bully some journalists into not covering some controversial issues. Journalists who write something negative about the banks are denounced to their editors as being ‘anti-business’. Bank executives, public relations personnel and lobbyists have been in overdrive using unimaginably underhand back channel techniques to confuse and misdirect politicians and the media.
Off the record whispering campaigns about Jeff Morris to some journalists and politicians have been a disgrace. These started when the first story ran three years ago and have continued to this day. The most recent was around the time CBA announced that it aspired to being Australia’s most ethical bank. The bank, having agreed to pay Jeff Morris’s advocacy fees for some victims he was representing, tried to portray it differently. The implication was that he was an extortionist when in fact he was charging for services rendered, a far smaller fee than most lawyers charge.
But Jeff isn’t the only whistleblower to suffer a smear campaign.
A whistleblower at another large financial services company IOOF, who had been inspired by Jeff Morris, decided to take his concerns to the company instead of ASIC. Big mistake.
IOOF is one of the biggest 100 companies listed on the ASX. It has thousands of shareholders and customers. The IOOF exposé, published last year, included insider trading, cheating on exams, staff giving financial advice without proper educational credentials, the company misrepresenting performance figures for the purpose of getting customers to invest in IOOF funds and staff producing faulty research reports that had buy and sell recommendations on stocks without any basis. Remember IOOF’s customers made decisions based on those recommendations with real money, their money.
The whistleblowing employee had initially reported the scandal to the company, hoping to make a difference. He was bullied, sacked, told he was vindictive and not a whistleblower!
He then came to me with thousands of documents. So together with a colleague we sorted through the maize of lax compliance inside IOOF.
But the smear campaign that followed was disgraceful. I received an email from a senior representative at IOOF and my jaw dropped:
It said my “so called whistleblower” was a blackmailer and had threatened to kidnap the children of several staff members.
The email went on: You have been sucked in by a person who has mental problems and in doing so you have grossly abused the privileges given to journalists to report fairly.
Myself and a colleague met the IOOF officer who made the accusations against the whistleblower. He had no proof of any of his allegations.
Sadly, it is tactics 101 for companies in the crosshairs of a public scandal to discredit the whistleblower and try and detract attention from the main game: misconduct.
The IOOF whistleblower hasn’t got a hope in hell of getting a job in the industry. His reputation has been destroyed.
Was it worth it? I asked him just the other day?
He said a few times he had thought about that question and if he was placed in that situation again. “I would go straight to the media and not to the company. That’s the regret.”
He is also disappointed with the regulator. He said he had been contacted once for a 35 minute chat and that was only after he sent an email to the chairman Greg Medcraft and cc’d me in it, complaining that nobody had contacted him or had asked about the 59,000 documents or how to navigate them. He is still waiting.
Another whistleblower who I have dealt with is the CommInsure whistleblower, Dr. Benjamin Koh, who was the chief medical officer at CommBank’s life insurance arm CommInsure. When he joined CommInsure trade magazines wrote him up as a big coup for the bank, due to the seniority and his credentials.
He opened a pandora’s box into the $44 billion life insurance industry when he exposed how sick and dying people were being treated by CommInsure. Some had their claims delayed for years, some were denied on the basis of medical definitions that were out of date. Employees at CBA claiming on their life insurance policy weren’t immune. One employee, Helen Polydropoulos had multiple sclerosis and was medically retired by the bank. When she lodged her claim she was knocked back on the basis she could work. She fought for four years with mounting legal fees but was paid out after she appeared on Four Corners.
Dr Koh could see what was going on inside the insurer and decided to speak up. He alleges claims managers were cherry picking doctors or leaning on doctors to deny claims. In the case of victim Evan Pashalis he was terminally ill yet they gave him the run around and denied him his money, the money he and his family were entitled to receive, until he appeared on Four Corners.
Dr Koh decided to speak out for the greater good. It is a measure of his courage that despite being warned about the likely consequences for himself he still went ahead. It was very emotional for him. I remember him saying to me a few nights before 4 corners went to air “I have put my life in your hands”. That sentence has stuck in my brain!
CommInsure was one of the biggest challenges of my career. As I was dealing with Dr Koh, I knew if this story was to have an impact I needed to get him to speak out on the record. Having the chief medical officer speak out about wrongdoing would be more powerful than an anonymous employee. It wasn’t easy. He didn’t want to be seen as a hero and taking on a big bank isn’t for the faint hearted.
His speaking out has had massive ramifications. The bank has paid out the victims on Four Corners, it has set up a panel to review complex claims, ASIC is investigating the industry and most importantly it has played a key role in the federal opposition’s call for a royal commission into the sector.
The banks have also come out and said they will review whistleblower policies and pay compensation.
I have received hundreds of emails from victims of CommInsure and other insurance industries. I will give you a taste of some of the emails, Hi adele I have suffered a major depression in the past two years I have been seeing my psychiatrist on weekly bases for help. CommInsure denied my claim because they said they don’t Believe my doctors. I am dying slowly. I need help. I can’t do any work … I’m about to loss my house
Another one says: I am a former CBA employee, who used to promote and sell the Comminsure Life products… For my situation, I requested Comminsure consider my claim for Total and permanent disability. The company has been nothing short of terrible… The delaying tactics are never ending, and the TPD claim is still ongoing. Comminsure had even enlisted a private investigator to stake out my house.
Or another one:
I had had a policy with Comminsure for Life Insurance for approximately 20 years. At the time of lodging my Claim, I was paying Comminsure approximately $1260 per month. In 2010 I underwent open heart surgery. I was informed post surgery that I might expect to have further surgery. My claim on Comminsure was rejected. Because of Comminsure’s lack of application to my case, I lost my home and business.
Not all emails related to Comminsure. It is an industry wide problem. Millions of people buy life insurance for peace of mind either directly or through their super fund. Many are being dudded.
When I think about the stories I have covered and the role of the whistleblowers an interesting pattern emerges. Jeff Morris went to ASIC and was thrown to the wolves and left to negotiate his own exit from CBA. The IOOF whistleblower went to the company and was sacked and smeared. Dr Koh went to the company as well, and he too was sacked and his professional integrity impugned.
The ones who suffered the least were the 7-Eleven and NAB whistleblowers. Both had decided to go straight to the media to tell their story.
The 7-Eleven whistleblower emerged when I was half way through filming with Four Corners. It was a story about systemic wage fraud against foreign students on visas. Some were paid as little as $5 an hour. The investigation showed how the business model of 7-Eleven forced many of the franchisees to underpay workers to make ends meet.
After writing to 7-Eleven for an interview, management held a meeting with staff to warn them that Four Corners and Fairfax were about to do a hatchet job. One employee decided to reach out and help. He provided internal documents that showed willful blindness by head office and agreed to go on camera in disguise. He said all stores were underpaying workers and the company knew.
When the story came out, it had an immediate impact. 7-Eleven announced an independent compensation scheme, changed its business model, heads have rolled, including the CEO and chairman, and the company has agreed to fix up its compliance systems.
It still has a long way to go but hundreds of foreign students have received more than $12 million in back pay. It has changed some of their lives and empowered them. They feel the media and the public cares.
The whistleblower at 7-Eleven, who went on Four Corners in disguise, managed to keep his job.
I spoke to him just recently and he has no regrets about going to the media. He feels sorry for the plight of the other whistleblowers who went to the company or ASIC first.
With CommInsure still fresh in my mind, I have had a few interesting experiences myself.
It began with David Cohen, CBA’s group general counsel, who is also the head of group corporate affairs, an interesting dual role. Mr. Cohen wrote to the ABC and Fairfax three days after the show went to air stating “We understand from Adele Ferguson, the journalist featured in the Four Corners program on 7 March 2016, that she has received personal information of CommInsure customers from Dr Ben Koh, a former employee of Commonwealth Bank.”
Just to be clear, I never told anyone who or how I received my information. I certainly never told CBA or Mr Cohen that it came from Dr Koh.
He went on to say that the information included highly confidential and sensitive medical, financial and private information.
If Fairfax or the ABC has held or currently holds personal information of CommInsure customers without the express consent of each affected customer, it will be necessary for CommInsure to notify the Privacy Commissioner of a privacy breach and to inform the Australian Prudential Regulation Authority.
Then another unrelated issue arose. I received a phone call from law firm Maurice Blackburn asking if I had spoken to a certain female victim of CommInsure who happened to be one of their clients. I hadn’t heard the name but asked why. Apparently this woman had rung CommInsure and Maurice Blackburn to say an Adele from Four Corners had called her up and was reciting chapter and verse all her medical history. The person was understandably disconcerted with the phone call. It seems in the course of the telephone conversation I had offered a meeting with lawyer Michael Bates to discuss her claim. Air fares, accommodation and expenses would be paid for.
So Adele from Four Corners is also moonlighting as a client thief and spruiker, and a pretty clumsy one as well. Whoever had stolen my identity hadn’t done their research properly: Michael Bates, who appeared on Four Corners, is based in Melbourne, whereas the Michael Bates the bogus Adele from Four Corners had mentioned is a patent lawyer based in Sydney.
I rang Michael Bates, the real one, to warn him about the phone call. He then related a similar story. A CommInsure lawyer he was dealing with had told him someone from Four Corners was ringing a claims manager with 20 years experience and threatening to subpoena her if she didn’t hand over information.
I asked Michael to find out who from Four Corners was supposedly making these calls. The story that came back was different. It was a customer not a claims manager who Adele from Four Corners had called, he was told.
Someone was out to blacken my reputation and damage the Four Corners brand.
A Fairfax lawyer wrote to the bank to let them know somebody impersonating me. We are still waiting to hear back.
Just to be clear, I have never impersonated anyone.
When the Prime Minister spoke at Westpac’s birthday party recently he said more whistleblowers should speak up. Yes, I agree, they should, but he needs to recognise that until laws are changed, many won’t. Whistleblowing laws, similar to shield laws, lack teeth and uniformity. We need stronger laws. No one has ever been prosecuted for victimising a corporate whistleblower in Australia.
In the US, a reward system operates, allowing whistleblowers to earn up to 30 per cent of the money collected from penalties or legal action against government fraud. In 2014 whistleblowers received $435 million.
As I talk, three Frenchmen, one of them a journalist, who is a member of the International Consortium of Investigative Journalists have just finished a trial in a Luxembourg court over leaked documents known as Lux Leaks scandal which lifted the lid on widespread tax avoidance by some of the world’s biggest companies. The three whistleblowers face prison or a massive fine for releasing confidential information from PricewaterhouseCoopers.
One of the whistleblowers, Antoine Delatour a former auditor for PwC, said he acted in the public interest. Delatour copied confidential tax files of some of the biggest named companies while he was working at PWC.
He is seen by many as a hero. Last year the European Parliament presented him with the European Citizen Award for his whistleblowing exploits—one of 47 awarded each year.
France’s Finance minister, Michael Sapin, is a man who can obviously smell the political winds. He told the French parliament that Delatour, the chief whistleblower, was ‘defending the general interest’. Sapin has asked the French Ambassador to Luxembourg to provide assistance to Delatour.
When you think of the big exposes of the past few years, financial scandals, the Panama Papers, Leighton Holdings and Unaoil, none would have come to light without the help of a whistleblower.
The transformation of a whistleblower from stool pigeon and pariah is a welcome change. But we still have a long way to go. So too does the conversation about what motivates them. Do they have to be pearly white?
At the end of the day, shouldn’t their motivation be irrelevant?
Thanks to whistleblowers it has put the debate about a royal commission into banks firmly on the table, because we are taking about everyday, hardworking Australians who are being treated poorly by the financial institutions they are supposed to trust.
The abuses have also put the spotlight on the regulator and highlighted its shortcomings. In most cases it has taken the media to expose corporate wrongdoing, not the corporate regulator.
The government says ASIC is the tough cop on the beat. It says it has greater powers than a royal commission.
A lot of people think otherwise.
In the past couple of weeks the government has increased ASIC’s budget and lifted its powers. This sounds good in theory but the extra money is merely restoring what was ripped out of it in the past couple of years. The increased funding and powers are only useful if they are actually used – something that hasn’t sat well with ASIC. It is trying to do better but it has a long way to go.
Without a royal commission into the financial services sector, one thing is for sure, there will be more scandals and more whistleblowers wanting to do the right thing. But will they come forward under the current system that doesn’t protect them, leaves them open to smear and innuendo and doesn’t compensate them for the damage to their careers? Who could blame them if they fail to act in future if we fail now on the Royal Commission? Not me.
Just before I finish there’s an important point I would like to touch on.
Earlier this year Guardian Australian journalist Paul Farrell revealed the Australian Federal Police has a substantial file on him.
The heavily redacted 200-plus page dossier details the quite extraordinary lengths the AFP has gone using new secrecy laws to identify sources for a story he written on asylum seekers.
Whichever way you look at it state sanctioned spying on journalists is totally unacceptable, as are lengthy jail terms and heavy fines for taking on issues of public interest.
These laws are a threat to investigative journalism and deter whistleblowers from speaking out.
Once we head down this slippery path there is no telling where it might end.
As our current PM, a former worker journalist, noted: “We are one of the oldest democracies in the world. Our democracy depends on many men and women, on many institutions – all of them vitally important – but none is more important than a free and courageous press…”
Thank you.
