1. Arif Ahmed, EIRC, Kolkata, August 25, 2017
Whistle Blower & Corporate Financial Concern - Reporting & Investigation
Arif Ahmed, EIRC, Kolkata, August 25, 2017
Copyright of various resources used in the presentation is retained by the respective owners as mandated by governing laws

2. From ancient times
Kautilya had proposed- “Any informant (súchaka) who supplies information about embezzlement just under perpetration shall, if he succeeds in proving it, get as reward one-sixth of the amount in question; if he happens to be a government servant (bhritaka), he shall get for the same act one-twelfth of the amount.”
Whistle blowers are reckoned as heroes by the public but within the organisation, they are considered as a traitor who has been disloyal to the organisation and colleagues

3. The original whistle blower

4. Modern evolution
Whistle blowers: Individuals who expose corruption and fraud in organisations by filing a law suit or a complaint with Government authorities that prompts a criminal investigation pf the alleged behaviour.
US civic activist Ralph Nader coined the phrase in the early 1970s to avoid the negative connotations found in other words such as "informers" and "snitches".
In India need for a formal framework for protecting whistle blowers gained ground after two incidents where the whistle blowers lost their lives
An engineer, Satyendra Dubey, was murdered in November 2003; Dubey had blown the whistle in a corruption case in the National Highways Authority of India’s Golden Quadrilateral project.
Two years later, an Indian Oil Corporation officer, Shanmughan Manjunath, was murdered for sealing a petrol pump that was selling adulterated fuel

5. Types of whistle blowers
Internal: When the whistleblower reports the wrong doings to the officials at higher position in the organisation.
External: Where the wrongdoings are reported to the people outside the organization like media, public interest groups or enforcement agencies it is called external whistleblowing.
Alumni: When the whistleblowing is done by the former employee of the organisation
Open: When the identity of the whistleblower is revealed, it is called Open Whistle Blowing.
Personal: Where the organisational wrongdoings are to harm one person only, disclosing such wrong doings it is called personal whistle blowing.
Impersonal: When the wrong doing is to harm others, it is called impersonal whistle blowing.
Government: When a disclosure is made about wrong doings or unethical practices adopted by the officials of the Government.
Corporate: When a disclosure is made about the wrongdoings in a business corporation, it is called corporate whistle blowing

6. Interactionist model of whistleblowing
Extracted from Keenan and McLain

7. THE WHISTLE BLOWERS PROTECTION ACT, 2011
Whistle Blowers Protection Act, 2011 is an Act of the Parliament of India which provides a mechanism to investigate alleged corruption and misuse of power by public servants and also protect anyone who exposes alleged wrongdoing in government bodies, projects and offices. The wrongdoing might take the form of fraud, corruption or mismanagement.
The Act was approved by the Cabinet of India as part of a drive to eliminate corruption in the country's bureaucracy and passed by the Lok Sabha on 27 December The Bill became an Act when it was passed by the Rajya Sabha on 21 February 2014 and received the President's assent on 9 May 2014.

8. Salient features of the 2011 act
Section 3 provides that any public servant or any other person including a non- governmental organization may make a public interest disclosure to a Competent Authority.
“Public Interest Disclosure” means any disclosure by a public servant or any other person including any non-governmental organization before the Competent Authority in Public interest notwithstanding anything contained in the provisions of the Official Secrets Act,
Purpose of this act is the protection of the persons who make public interest disclosure or have assisted in such matters from possible victimization or harassment and the Central Government has to ensure such protection .
The Competent Authority has been empowered to give proper direction to the concerned authorities for the protection of complainant or witness either on an application by the complainant or based on its own information. It can also direct that the public servant who made the disclosure may be restored to his previous position.

9. Scope of whistle blowing
Whistle blowers may make complaints about:
corruption (as defined in the Prevention of Corruption Act, 1983);
wilful misuse of power or discretion which may lead to demonstrable loss to the Government or wrongful gain to any person including a public servant;
Commission of or attempts to commit offences recognized under law by any public servant to the competent authority.
Major weaknesses :
Covers only central government employees. Does not cover state government / private bodies
No provisions of incentives for whistle blowing.
Does not cover corporate whistle-blowers
Powers of CVC is limited to making recommendations. It cannot impose penalties.
Victimisation neither defined nor covered properly.

10. Amendments bill 2015 The scope of major amendments
Whistle blowers should not be allowed to reveal any documents classified under the Official Secrets Act of 1923, even if the purpose is to disclose acts of corruption, misuse of power or criminal activities.
It also puts a bar on disclosure of any information that could prejudicially affect the interest of sovereignty and integrity of India, friendly relations with foreign State.
Effectively the bill restricts whistle blowing in such a way that only some information obtained through RTI etc. has been kept in its ambit.
Whistle blowers would be entitled to official protection only if these conditions are met; and they could face action if they are not.

11. Other legal framework Section 177 of the Companies Act, 2013
(9) Every listed company or such class or classes of companies, as may be prescribed, shall establish a vigil mechanism for directors and employees to report genuine concerns in such manner as may be prescribed.
(10) The vigil mechanism under sub-section (9) shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases:
Provided that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board’s report.

12. Other legal framework
Regulation 22 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015
(1) The listed entity shall formulate a vigil mechanism for directors and employees to report genuine concerns.
(2) The vigil mechanism shall provide for adequate safeguards against victimization of director(s) or employee(s) or any other person who avail the mechanism and also provide for direct access to the chairperson of the audit committee in appropriate or exceptional cases.

13. Case study: bse whistle blower policy
Definitions
“Disciplinary Action” means any action that can be taken on the completing of/during the investigation proceedings including but not limiting to a warning, imposition of fine, suspension from official duties or termination of services or any such action as is deemed to be fit considering the gravity of the matter.
“Protected Disclosure” means a concern raised by a written communication made in good faith that discloses or demonstrates factual information that may evidence unethical or improper activity which may be either contrary to the laid down policies of the Company or may be contrary to the acceptable standards of integrity and ethics in similar organizations.
“Whistle Blower” is someone who makes a Protected Disclosure under this Policy.

14. Case study: bse whistle blower policy
Coverage of policy:
Abuse of authority
Breach of contract
Negligence causing substantial and specific danger to public health and safety
Manipulation of company data/records
Deficiencies in the internal controls and checks of the Company
Financial irregularities, including fraud, or suspected fraud or deliberate error in preparations of financial statements or misrepresentation of financial reports
Pilferation of confidential/propriety information
Wastage/misappropriation of company funds/assets
Any other unethical, biased, favoured, imprudent event

15. Case study: bse whistle blower policy
Protection under the policy:
The Company, as a matter of policy, condemns any kind of discrimination, unfair treatment, harassment, victimization or any other unfair employment practice being adopted against the Whistle Blower. Complete protection will, therefore, be given to the Whistle Blower against any unfair practice like retaliation, threat or intimidation of termination/ suspension of service, disciplinary action, transfer, demotion, refusal of promotion, discrimination, or any other type of harassment.
The identity of the Whistle Blower shall be kept confidential to the extent possible under applicable laws. Any other employee assisting in the investigations or furnishing evidence shall also be protected to the same extent as the Whistle Blower.
Where the Whistle Blower has any grievance on account of unfair treatment, harassment, victimization etc., he can file his grievance before the Chairman of the Audit Committee. Further, the Whistle Blower shall also be allowed access to the Chairman of the Audit Committee, in exceptional cases, as may be decided by the Chairman of the Audit Committee.

16. Case study: midas gold corp, canada
Incident Type:
Accounting / Audit regularities:
Acts related to the misstatement and/or destruction of Company audit work papers or accounting documents. Acts that fraudulently influence, coerce, manipulate, or mislead any independent public or certified accountant engaged in conducting an audit for the purpose of rendering the subjected Company’s financial statements materially misleading.
Falsification of company records
Any act or omissions, which alters any Company record from its genuine condition to a false condition. Issues related to the misstatement and/or destruction of Company audit work papers or accounting documents should be coded as “Accounting/Audit Irregularities”.
Fraud:
Deliberate attempts to deceive in order to receive gain; such as a fraudulent refund, transaction, or credit card. Issues related to the misstatement and/or destruction of Company audit work papers or accounting documents should be coded as “Accounting/Audit Irregularities”. Issues related to generating personal loans to or for any executive officer or director should be coded as “Improper Loans to Executives”. definitions.

17. Case study: midas gold corp, canada
Incident Type:
Fraud – Check / ACH / Wire Transfer
Any attempt to obtain Company funds via the creation of counterfeit Company checks, forged alterations of Company checks, forged signatures and/or endorsements of Company checks. Occurrences of unauthorized ACH/wire transfers would also fall under this category.
Fraud – embezzlement:
Any wrongful appropriation of money or property by a person to whom it has been lawfully entrusted.
Fraudulent Insurance Claims
Any claim or acceptance of insurance benefits based upon knowingly false information.
Kickbacks
The solicitation or acceptance of cash, gifts or favours to perform, a function, which the employee is required by the job description to perform. For example, accepting gifts or money from a supplier in order to gain additional business

18. Case study: midas gold corp, canada
Incident Type:
Theft of Cash
The taking of money or money instruments from the premises of the Company without authoritative permission. This would include false refunds for which cashiers obtained voids.
Theft of Goods / Services
The taking or removal of any merchandise or property from the premises of the Company without permission. Employees using Company goods and services to support their own business would be included in this category.
Theft of Time
Any act or omission, which causes an employee to be paid for, time not worked for the benefit of the Company.

19. Case study: midas gold corp, canada
Incident Type:
Unauthorized Discounts
The offering or giving of a discount or additional discount to any person whether employee or customer which is not authorized by Company policy.
Unauthorized Purchases
Use of Company credit cards and or fuel cards for nonbusiness activity. For instance, an employee using the Company credit card to purchase and pay for personal items, without the intention or the failure to reimburse the Company in a timely fashion, would fall under this category.

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23. Speak now or forever hold your peace