Canadian Lawyer InHouse

35 CANADIANLAWYERMAG.COM/INHOUSE MAY 2015 I n d u s t r y S p o t l i g h t '' '' the bounty. People tend to like money." According to Waitzer, the OSC should design the program such that a whistleblow- er must try to raise the issue with his or her employer fi rst. Otherwise, the OSC gives whistleblowers rich reasons to bypass inter- nal compliance processes. And if too many whistleblowers do that, companies may fi nd fewer reasons to invest in developing strong internal compliance platforms. Dimitri Lascaris disagrees. A partner at Siskinds LLP in London, Ont., he encour- ages the OSC to largely stay the course it has laid out in the consultation paper. "Corporations critique the whistleblower program because it potentially incentives whistleblowers to go outside of the orga- nization, circumventing internal reporting structures," he says. "From our perspective, that's a good thing. Oftentimes, whatever a company may say to encourage people to come forward internally, they are frequently subject to retribution and their warnings are not heeded." PAUL MOORE: FIRED FOR SPEAKING UP Lascaris lists a few high-profi le examples. Paul Moore, a manager at U.K. bank HBOS, lost his job in 2004 after warning the company that it was taking excessive risks. Richard Bowen, a senior vice president at Citigroup, was fi red in 2006 after he warned upper management that the company was buying and repackaging fraudulent mortgage loans. "He was simply ignored and eventually forced out," Lascaris says. Carmen Segarra, a lawyer at the U.S. Federal Reserve, was escorted from her offi ce in 2012 after refusing to alter her reports on Goldman Sachs, which the Reserve regulated. She took issue with Goldman's apparent confl ict of interest with respect to a company it was advising. Kristine Robidoux, a Calgary-based partner at Gowling Lafl eur Henderson LLP, says the OSC's proposed system seems to strike the right balance between supporting internal compliance and giving whistleblowers an alternative way to help address misconduct. "I think overall the proposal looks to direct individuals to see their issues resolved through a company's internal reporting system, which is good. Companies that fail to take appropriate remedial action are then at risk of having that insider report to the OSC." She notes that the whistleblower program is designed to help the regulator discover well-hidden transgressions. "The OSC is looking to investigate and identify serious misconduct. Oftentimes, that misconduct is carried out by individuals who are very sophisticated. It can be exceptionally diffi cult to detect this wrongdoing. And even once detected, these are time-consuming and complex investigations. Presumably, receiving high-quality, original information will assist the commission greatly." RECOMMENDED IMPROVEMENTS But the fact that sanctions have to be above $1 million could be a problem. If the OSC chooses that threshold, it risks missing many substantial problematic activities just below the level. "An $800,000 sanction against a company is still signifi cant," Robidoux says. "But it wouldn't result in a payout to a whistleblower, even if the whistleblower's information was key to detecting and prosecuting the fraud." Waitzer says the OSC also has to consid- er its ability to run the program. "There's a perception out there that they're having a hard time coping with existing enforcement issues. For them to introduce a whistleblow- er program without doing something about capacity doesn't make sense. They're just going to get swamped." Lascaris says the regulator needs to rethink the cap on rewards. "The people who are best placed to expose fraud are frequently fairly high up the managerial chain. If you think there's a realistic risk you'll be terminated and you won't be able to fi nd employment in your area of expertise in your industry, $1.5 million won't provide you with security for life." Instead, there should be no cap. But if the OSC insists on imposing one, it should be much higher than $1.5 million to compensate people for what could be the end of their careers. NEXT STEPS FOR IN-HOUSE LAWYERS Ask him what in-house lawyers should be doing at this point with respect to the OSC's whistleblower program, Lascaris recom- mends thinking twice before discounting it as an inevitably intrusive system bound to disrupt internal compliance. "There's a lot of resistance from in-house legal depart- ments to this program. I think they should reconsider. This is the most sensible way to ensure people come forward." Robidoux says now's the time for in- house teams to ask hard questions about their compliance programs. "Do we have a paper program, or do we have a living, breathing ethics and compliance program that employees believe in? Do they believe company management will do the right thing when faced with an allegation of wrongdoing? Do they feel comfortable that the company will not retaliate against them?" Waitzer says in-house lawyers should participate in the OSC's consultation pro- cess to help steer the regulator in its efforts to improve securities regulation. "At this stage, [in-house lawyers] should be thinking about and commenting on the details — or lack thereof — in the OSC paper." IH Companies that fail to take appropriate remedial action are then at risk of having that insider report to the OSC. KRISTINE ROBIDOUX, Gowling Lafl eur Henderson LLP

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