12 September 2012

A 2006 United States federal statute enables tax authorities to pay informants up to 30% of the revenue recovered as a consequence of their whistleblowing. Such payments are not about rewarding people with a sense of civic responsibility. The program is purely fiscal, paying a commission for information that increases the tax take.

The Inland Revenue Service recently made the largest informant payment – of US$104 million – to a banker who had inside information on how UBS ran offshore banking arrangements for US taxpayers.

UBS paid $780 million to avoid prosecution and provided details about more than 4,000 of its account holders who had undeclared holdings in the Swiss bank.

Ironically, the informant is currently serving a prison sentence having been convicted of conspiracy to defraud the revenue, relating to the part he played in UBS setting up secret bank accounts.

A contributor to the New York Times who for more than ten years has written about ethical issues commented recently in his final column on the ethical dilemma he encountered most among his readers. This related to whether there was a ‘duty to report’. Are there circumstances when whistleblowing is an obligation, or is providing information to enforcement agencies optional?  Is it acceptable to be influenced by any financial reward?

The scenario was that “…people who had done nothing wrong themselves were aware of the wrongdoing in others, and they wanted to know when they had an obligation to come forward. The suggested guidance was; “… when someone is acting in a way that presents an imminent, serious threat to other people, you have an absolute duty to come forward…. If you found out that your friend was a pirate and 50 years ago looted a ship and buried pirate gold, you don’t have a duty to the community to set that matter right, to dig up that treasure chest and report your pirate friend. If your friend is about to attack another ship, then you have a duty to come forward.”

The implication is that there is nothing morally wrong in holding on to information until it can be “sold” to an enforcement agency, unless there is an “imminent, serious threat to others”.

The State Services Commissioner’s guidance on Understanding the Standards of Integrity and Conduct for the State Services indicates a more positive duty to report. “…We are aware that public trust is influenced by the perception that the public has of our organisation. This means responding objectively if we become aware of any unlawful activities in our organisation. We appreciate the importance of modelling the standards set by the code of conduct and taking responsibility to support our organisation take decisive action when we learn that standards are being breached…” In practice most agencies that have a code of conduct, are explicit in requiring staff to report misconduct when they become aware of it.