Whistle down the wind

Amid growing concern over the worsening climate of corruption in South Africa, Laury Jeanneret speaks to Wouter Grové about Vuvuzela – the country’s newest corporate crime fighting initiative

Wouter Grové (pictured opposite left) is a man on a mission. Fresh off the back of the Travelgate scandal and continuing allegations of sleaze and corruption within the government, Grové has taken up the mantle to cure the ethical malaise currently sweeping South Africa. Like a white-collar Indiana Jones, Grové has been appointed Chief Operating Officer of the Vuvuzela Hotline, an independent and confidential service to provide a safe and efficient means for reporting corporate corruption and unethical behaviour.

The Hotline was the brainchild of forensic accountant Jonathan Jacobs (pictured opposite right), who is also Vuvuzela’s Director. Amid post-Enron global whistleblowing developments such as Sarbanes-Oxley (a United States federal law passed in 2002 in the wake of the Enron and WorldCom scandals) the pair took the lead from the United States, seeking advice on how to set up a business facilitating best practice in South Africa.

Grové, who trained in the United States as a polygraph examiner, has also received FBI training in interviewing techniques – a skill that he has utilised within Vuvuzela. All of the Hotline’s call centre agents are trained in such techniques to enable them to effectively gain information from callers and assess the content of claims, as well as to differentiate between bona fide and hoax calls.

Although many companies already provide internal channels for whistleblowing, Grové stresses the need for an independent and anonymous service. “The concept of Vuvuzela is that of a ‘safe space’ to report wrongdoing if you have exhausted all other channels,” he says. “Many of our callers are highly distressed and genuinely scared that they will be punished, intimidated or stigmatised for reporting misconduct.

“Vuvuzela ensures callers anonymity and there is no chance they will be recognised by the call centre agents. We’re dealing with serious issues here – which affect the economic and ethical bottom line of the country. Assured anonymity is essential to building up a culture of anti-corruption – where whistleblowers feel safe to do the right thing.”

Statistical evidence appears to bear out Grovés claims. The 2003 Institute for Security Studies (ISS) National Victims of Crime Survey reported that 27% of respondents stated that they were afraid to report incidents of corruption for fear of reprisals. “Vuvuzela acts as a conduit for this information to be passed,” Grové goes on to explain.

Once a claim is made, the Hotline staff work alongside a team of specialists, such as forensic managers, labour lawyers and IT attorneys, who assess and then follow it up with internal contacts within the relevant company. In this way Grové hopes to realise his objective of creating “pockets of integrity” within business to “change the existing culture of corruption and ensure a free and transparent flow of information.”

Professionals increasingly disillusioned with the endemic nature of white-collar crime in South Africa have related this mainly to the breakdown of business values during the apartheid era. Often innovative but immoral means of conducting business were accepted, moreover encouraged, as a means to gain access to world markets and circumvent international sanctions.

“Corruption continues because we allow it to,” says Grové. “Obvious abuses are tolerated and it has now become so entrenched in our culture that people are becoming immune to it. An impimpi culture has grown up, whereby people are so used to working outside the boundaries of ethical conduct that it is no longer shocking to them. Cases such as Tatolo Setlai’s are prime examples of the mixed messages we are sending out.”

Setlai, former Head of Grootvlei Prison in Bloemfontein, was suspended from his position in 2002 and faced criminal charges after allowing inmates to make a secret video exposing corrupt warders who were smuggling drugs and firearms into the prison and condoning the rape of juvenile inmates in exchange for food.

Yet aside from fear of reprisals, there is also a culture of aversion that has flourished in the workplace towards the perception of being thought of as a “traitor,” resulting in considerable pressure on employees to turn a blind eye to malpractice.

Additionally, many companies actually nurture a climate of secrecy through all-embracing confidentiality clauses ‘gagging’ employees from disclosing market sensitive information. And statutes such as the Public Service Act, Explosives Act and the Protection of Information Act prevent others from making work related disclosures.

Such was the case when chartered accountant André du Toit, who after discovering major corruption within his company, Beige Holdings, blew the whistle to the board of directors, who took no action. When du Toit again reported his suspicions to a shareholder, he was suspended from his position for disclosing information to a third party.

The issue of corporate confidentiality versus whistleblowing is a complex one, but ultimately it does appear that the duty of the employee to report criminal misconduct outweighs that of maintaining the confidence of a corrupt employer. In theory, the law appears to recognise this with the dictum “there is no confidence as to the disclosure of iniquity.”

While Grové is also clear about the balance that must be struck; “it is crucial for companies to protect their intellectual property,” he says, “but when doing so compromises the public interest in terms of the illegal or the unethical then the usual duty of confidence is nullified.”

The climate of corruption of which Grové speaks is backed up by the ISS 2003 survey which concludes that corruption in South Africa has almost tripled in recent years, rising from 2 to 5.6%. Akin to these findings, the 2005 National Integrity Systems (NIS) report conducted by Transparency International, uncovered unsettling results.

According to the report, “at national level almost R2 billion was lost in 2003 to corruption in social welfare, [and] the labour ministry may have lost as much as R1 billion,” while fraud in the private sector “may cost the economy as much as R50 billion.”

Ian Trumper, one of Britain’s top fraud investigators and Director of Transparency International, states that despite whistleblowing channels and existing legislation “it still remains the case that often the employee’s position is untenable and they will leave [the company]. A lot of major companies have formal policies on whistleblwoing,” he continues, “and many employ internal whistleblowing lines – but my impression is that there is a deafening silence. There needs to be a more open, questioning culture but without encouraging foolhardiness.”

Grové appears to agree: “people must become aware of the consequences, not just of their actions, but also of their inaction,” he says. “They must be sensitised to the huge potential risk of not reporting malpractice. From the company’s perspective there is a reputational risk in not reporting, which ultimately will affect their business’ economic value.”

Grové’s viewpoint reflects recommendations made by the second King Report on Corporate Governance for South Africa (King II), which posits the building of an “ethics culture” whereby corporate codes of ethics and the training of employees on ethical principles and standards should become standard business practice.

Grové goes on to say: “one potential benefit of the Hotline is to act as an early warning system. Cases such as Barings Bank illustrate this point – if somebody had been alerted to Nick Leeson’s activities then the Barings crash may have been averted.”

Leeson, a manager and Chief Trader on the Singapore International Monetary Exchange (SIMEX) lost $1.4 billion (R8.5 billion) by fraudulently speculating on the Japanese and Singapore futures exchanges in 1995. Hiding his losses in an obscure account called Error Account 88888, the liabilities that Leeson ran up amounted to more than the entire capital and reserves of the bank and led to its collapse. His actions wiped out the savings of investors and resulted in 1,200 of his colleagues losing their jobs.

But Barings is not the only example of employee “aversion” to whistleblowing. In 1993 the charity Public Concern at Work was set up in Britain following several high profile scandals such as the Clapham rail disaster in 1988, which killed 35 people when three trains collided in south London. At the subsequent public enquiry it was found that a supervisor had noticed loose wiring but did not want to “rock the boat” by reporting it.

One year earlier, British Lord Justice Sheen had identified a “disease of sloppiness” in his enquiry into the sinking of the Herald of Free Enterprise ferry off Zebrugge in Belgium. Finding negligence at every level of the ferry operators’ hierarchy, it was discovered that concerns had been raised on five separate occasions prior to the disaster, but had been lost in middle-management. The disaster resulted in the death of 193 people and led to the passing of the British Public Interest Disclosure Act, upon which South Africa’s own Protected Disclosures Act is modelled.

The Protected Disclosures Act 2000 (PDA) sets out the procedures to protect employees of both public bodies and private companies who report unlawful or unethical conduct. The Act also covers sexual harassment or abuse, health and safety concerns and fiscal frauds. Under the Act, whistleblowers cannot be suspended, transferred, refused a reference, intimidated, threatened or have their career progression halted as a result of reporting malpractice.

But while the PDA is a radical piece of legislation on some levels, with South Africa being one of only seven countries world-wide to provide such protection to whistleblowers, it does have some inherent weaknesses. “The existing Act does not cover sub-contractors,” points out Grové.

As most businesses tend to outsource extensively, this is a problem. “The Act is a great potential tool, but it needs refining,” he says. Such issues are currently being addressed by the Open Democracy Advice Centre (ODAC), which has submitted law reform recommendations to the Law Commission.

In the meantime, it appears that Grové and his “wave of integrity” may well be one of South Africa’s greatest chances of curbing the convention of sprawling excess, unfettered business practices and rampant self interest that has spread through the country’s corporate infrastructure like a cancer.

© Laury Jeanneret, The Big Issue South Africa, 2005.

 

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