Mutiny for a bounty: Rewarding heroic whistleblowing

President Gotabaya Rajapaksa 

As Sri Lanka slumps down yet again in the Corruption Perceptions Index, the slump vividly reminds voters in the city that the octopus of corruption continues to grip governance institutions in its slimy tentacles. The harassment of a whistleblower of the garlic scam, despite being hailed as a hero by the public, brings into stark relief the audacity of the corrupt. Most realise that the many arms of law enforcement shield the corrupt and do not protect the people. 

Despite constitutional guarantees of freedom of expression, the residence of an investigative journalist is invaded at gunpoint and rocks and organic fertiliser hurled at his house. A social media activist is abducted by those, it turns out later to be police whose operating manual was not the Code of Criminal Procedure but the Gestapo Manual (rev. Ed. V. Putin). 

A realist would be foolish to put much faith in Governmental institutions and the various arms of law enforcement to do their job in the way it should be done. Instead, a realist, tired of the continuous anti-people behaviour of officials who are under a duty to protect the people but who instead have chosen to betray their oath to uphold the constitution by doing the illegal biddings of their political patrons, would advocate outsourcing the job of fighting waste fraud and corruption to whistleblowers, protect them from possibly violent retaliation, and incentivise them with a bounty. 

Ample source material exists to help set up a functioning whistleblower system in the country. The American False Claims Act, enacted during the Civil War, rewards whistleblowers with bounties. Other American laws, like Dodd-Frank, have followed suit. The UN Office of Drugs and Crime has studied various models of whistleblower regimes and has consolidated its findings and suggestions in the Anti-Corruption Toolkit available online. Article 32 of the UN Convention Against Corruption, to which Sri Lanka is a party, but which like many treaties in the EU GSP Plus list the Government resents as an offensive intrusion of its sovereignty fit only to line the bird cages of kaputas, recommends anti-retaliation legislation to protect whistleblowers. 

In the book, “1000 Years of Joys and Sorrows”, about his father, the highly acclaimed poet, Ai Qing, the world-renowned artist Ai Weiwei writes movingly about the travails of his father during the Cultural Revolution. Observing the results of Deng’s market reforms, Ai Weiwei states, “I could see so many luxury cars but there was no justice or fairness in this society.” The more clued-in voters in Sri Lanka, looking at overpriced highways, the monuments to personal vanity built with public money, and a personality cult society cannot but share Ai Weiwei’s lament. 

Unfortunately, millions of other voters are either unaware of the scale of robbery, are indifferent or feel powerless. These millions would include the tuk-tuk driver, with a Sinha le sticker proudly displayed with his engine switched off to save petrol while he and others are held up for an hour to let a convoy of luxury German vehicles, with security personnel flashing their lightsabers like Star Wars characters, grandly sweep by. The driver would not know that the convoy he lionises carries his former mate in the tuk-tuk rank, now the holder of an online doctorate and the state minister for the production of toilet brushes. But if he did the first reaction would be that his former mate was born under a lucky star. Such is the fatalism that is shared by many. 

Wake up from their slumber

However, if Sri Lankan voters given many opportunities since 1948 to wake up from their slumber and get serious about reducing waste (duty-free car permits), fraud (commodity scams) and corruption (unsolicited bids for mega-infrastructure), they could have put an end to this at the voting booth but have consistently failed to do so. Democracy in the country seems to be an exercise of swapping one set of rogues for another.

When at a marina, Groucho Marx was shown several superyachts owned by brokers, he is supposed to have asked “But where are the customers’ yachts?” There were none. Likewise, in view of the numerous instances of fraud and corruption reported to anti-corruption institutions with much fanfare and in view of several anti-corruption laws including those laws about unexplained wealth and tax laws, one can similarly ask, “Where are the prisons that should be bursting at the seams with these crooks?” 

Airbus bribes, Panama Papers disclosed offshore accounts and hoardings, collecting bribes in the Taj Hotel car-park, all seemed to have vanished into thin air. American authorities nabbed Al Capone on tax fraud, but our local bigwigs are far more powerful than Al Capone as the tax department, which should be hauling billionaire tax dodgers with the same zeal that the CID summons turbulent Catholic priests do not see it fit to aggressively combat rampant tax evasion by those who arrived in the metropolis on second-hand push bicycles but now proudly own mega-mansions and a fleet of European luxury cars. 

That Sri Lankan politics is a mutual back-scratching exercise where politicians of all stripes protect each other should, at least at this late stage, be widely recognised. The contemptuous one now languishing in jail has proclaimed this truth over and over again. The visits to the Bribery Commissions, the You Tube Videos, the malapropisms are but Javanese shadow puppet theatre productions. The case of the absconding former governor of the Central Bank is the poster boy for the “Mutual Backscratching & Protection Club” or (MBPC”). People should be perplexed that he is scot-free after orchestrating the theft of billions but not if one remembers the MBPC which in the land like no other has more power than Masonic lodges. 

That our lawyers could not extradite the former governor from corruption-phobic Singapore under Singapore’s Extradition Act of 1968 pursuant to Item 18 of Part 1 and the abetting provision of Part 2 is a sign of ineptitude or worse. Failing extradition, the next best thing would have been to sue him for fraud in the Singapore courts. (Under Conflict of Laws principles, actions should be instituted in the jurisdiction where the defendant resides.) Singapore has world-class litigation lawyers who could have been hired to plead Sri Lanka’s claim. Of course, this would have meant that the reclusive banker could have been cross-examined, and Singapore being serious about the penalty for perjury, the whole can of worms would have been opened. 

The country was denied the opportunity of getting at the truth of a scam that the bond scam presidential commission, so slavishly solicitous of the “dignity” of the then Prime Minister that it ordered the then Attorney-General who was not a part of the legal team to question him, could have ever uncovered. The commissioners, who were also judges, appeared to have not seen the blindfold worn by the Statue of Justice atop the Old Bailey and seemed also to believe that the goddess of justice is afflicted with a severe case of strabismus. Singapore courts would not have been so disempowered. The case of the free as a bird ex central banker shows how powerful economic and political interests were yet again easily able to overcome any meaningful accountability so that they could pursue their special interests at the expense of the Sri Lankan people. 

To put things in perspective, there are hundreds of billions of rupees, if not dollars, that belong to the Sri Lankan people and remain in the hands of the thieves. The beneficiaries of the various commodity scams, the bribes of aircraft companies and agents of procurement scams all hold their ill-gotten gains as constructive trustees for the Sri Lankan State. Moreover, the fruits of such scams in the form of investments such as luxury properties in Sri Lanka, London, Dubai or Singapore also belong to the Sri Lankan people. 

The Privy Council in Attorney General of HK v Reid followed Singapore law and rejected the hoary case of Lister v Stubbs to hold that not only the bribe but also the fruits of the bribe could be recovered from the wrongdoer. Of course, this pelf amounting to hundreds of billions held in trust will never be recovered by the Sri Lankan people so long as those who are partners in wrongdoing are in charge of recovery proceedings whether by seeking a declaration of trust or by unjust enrichment proceedings.

The public must challenge the hypocrisy of the MBPC. Only an omnibus whistleblower law properly crafted and enforced has the potential to bypass the obstructions raised by the nefarious gold star members of the “MBPC”. This can be done if the present law enforcement capture is matched by a parallel politically insulated mode of enforcement. If the country has a dual enforcement track that rewards whistleblowers with a bounty amounting a percentage of the “wrongful gain” or “wrongful loss” (to use the language of the Penal Code) as determined by an independent arbitration board consisting of respected professionals, there could be reason for hope. 

American experience shows what a robust whistleblower law that provides for bounties can achieve. In 1863, Congress enacted the False Claims Act (“FCA”), amended in 1986, which encouraged private citizens to act like private attorneys-general and sue on behalf of the US Government. Rewarding the whistleblower with a bounty has been the heart of this act. The bounty provisions have successfully incentivised persons to blow the whistle on fraud, waste and corruption. The US Department of Justice announced that in 2021 alone, it collected $ 5.6 billion in FCA related recoveries. 

In October 2021, the Commodity Futures Trading Commission announced a $ 200 million award payable to whistleblowers. These bounties are recovered pursuant to a writ known as the qui tam. The whistleblower, known as the “relator” in qui tam cases receives a reward of 15%-25% of what the Government recovers if the Government joins the case. If the Government doesn’t join the case, the relator receives 25%-30% of the recovery proceeds. In America, the Government can recover treble damages. The American legal experience has throughout its long history shown the effectiveness of offering cash bounty regimes to those who surface information about corruption.

Putting a system like the above in place in Sri Lanka will embolden timid public servants and also be a deterrent to the bottom feeders who hungrily devour public funds in the shark tank that is Sri Lankan politics. Those higher up the food-chain in the tank would also be justifiably wary of continuing with the present quid pro quo practices of public procurement. 

Five basic pillars

 The regulatory architects providing for a bounty mechanism would have to confront and resolve some of the obvious challenges posed by the maimed law enforcement culture. Arguably, the architecture of an effective whistleblowing law should provide for five basic pillars that would take into account the existing obstacles to the functioning of a rule of law society.

The first pillar relates to the protection of the whistleblower. Fear of retaliation is a factor that all whistleblowing regimes provide for. While in other countries, the retaliation could take the form of dismissal or demotions, in countries like Sri Lanka the retaliation might also be violent if not deadly. In a recent case, a whistleblower was prevented from leaving the country on the flimsiest of pretexts that his evidence might be needed. Depending on the scale of defalcation involved and the status of the political patron, the harassment could range from assaults to abduction and murder. Accordingly, a threshold issue is how best to ensure the safety and welfare of the whistleblower.

The whistleblower must not be identified but must be represented by an attorney. The attorney will be bound by a strict duty of confidentiality so that he does not and cannot be made to reveal the identity of the whistleblower. As a further precaution, if the whistleblower’s identity gets leaked, the person must be able to petition the courts for police protection. 

The second pillar relates to the bounty. The American False Claims Act and similar statutes rest on the premise that the wrongdoers have illegitimately profited. In terms of the Trusts Ordinance, it can be said that the funds illegally obtained make up the corpus of a constructive trust where the beneficiary is the Sri Lankan State. At present, because of the symbiotic relationship between the demand and supply side of corruption, access to this fund is not possible. If the whistleblower information proves reliable, she should be entitled to a handsome percentage of the recovered funds which she can share on a statutorily based percentage with her attorney. It could be an equal share for the attorney or a third. 

The third pillar depends on achieving a set of Goldilocks criteria. In other words, if the criteria for whistleblowing is too general and lax it could spawn wasteful and time-wasting proceedings. On the other hand, if the criteria are too stringent, really big frauds could go undetected. A “just right” set of criteria will require the input of persons from the Auditor General’s Office and perhaps from procurement specialists from donor institutions such as the World Bank or the Asian Development Bank. The criteria will guide the whistleblower as well as the arbitration body in deciding whether there has been a scam.  

The fourth pillar will deal with the institution established to enquire into the whistleblower complaint. There will be a panel of arbitrators appointed by professional organisations such as the Bar Society and the Organisation of Professional Associations. Any three-member panel to deal with a specific complaint would have no more than two qualified lawyers with many years of experience as well as no more than two qualified auditors, hopefully persons who have worked in the Auditor General Department. The arbitration body must have a secretariat, consisting of lawyers, investigators such as retired police officers, and accountants. These appointments will be made by the Arbitration Panel. 

 The final pillar must deal with effective sanctions against the wrongdoers in any scam. Calculating the bounty is but the first step. Identifying the place where the loot is stashed will be a challenge. It is useful to consider this challenge in the context of local and foreign wrongdoers. The local wrongdoer could be a company whose assets have been stripped by the predators. Funds could also have been moved offshore. The arbitration tribunal needs to have a wide remit in order to recover the scam funds. 

First, it must be authorised to pierce the corporate veil and attach liability directly on the shareholders. A corporate identity separate from that of the shareholders has been a cornerstone of company law since the seminal decision of Salomon v Salomon. However, the courts have always allowed this identity to be disregarded and liability imposed on the shareholders in order to prohibit fraud. It is also likely that the wrongdoers will nominate nominees such as their drivers and cooks as the shareholders. 

Liability on shadow directors and beneficial shareholders should be allowed. Notices could be served on banks where the deposits are held and funds recovered. Foreign companies play a big part in supply side corruption in Sri Lanka. If an award against them is regarded as one in relation to an international commercial contract, which indubitably it will be, then recovery proceedings can be started against them in most countries, because the 1958 New York Convention has been ratified by the vast majority of countries. 

The grandchildren of those Rembrandts who tarred Tamil signage on street signs march proudly in the recently concluded perahera bearing aloft the national flags without the two stripes that are meant to denote minority communities. If the Antigones in the North, wanting to recover and bury their dead, were to march around with the flag with two stripes but sans the sword-bearing lion, they would soon join those whom they seek to recover. 

Although the Ministry of Home Affairs website makes it crystal clear that displays of the national flag in these ways is forbidden, it is unclear whether the attendance of present and former high officials at this perahera was an endorsement of defacing the national flag. One law for one country may be one day but one enforcement of the one law of the one country will be a distant dream. 

The choleric foaming at the mouth ethno-religious nationalists, whom Yeats would have described as “full of passionate intensity”, who colonise and pollute the impressionable minds of generation after generation of Sri Lankan youth remind one of the Sufi tale of Mullah Nusruddin. The lovable Nusruddin, the story went, was engaging in a microscopic examination of the area under a streetlamp. When asked what he was doing, he replied that he was looking for his lost key. When asked where he had lost the key, he pointed to an area cloaked in darkness. Asked why he was not looking for it there, he replied that there was no streetlamp there. Likewise, the hate factory operators ignore the area wherein lies the key that would hinder waste fraud and corruption. Meanwhile, foreign countries amputate large chunks of territory and resources, the descendants of proud kings, nobles, and commoners clean toilets in the Middle East, and the wrongdoers continue their looting. 

If those presently scorching themselves under the Halogen lights that are ethnic-religious hatred, move to the right area, they will find a magic key named “Whistleblower”. The key tag, borrowed from James Carville, would read in all three languages, “It’s the economy stupid!”

(The writer graduated from the Faculty of Law, University of Colombo. He practiced Cross Border Transactions Law in the Asia Pacific region before teaching Law at the Singapore Management University for 20 years before retirement.)