Lack of Clear Message to Protect Financial Whistleblowers in U.K. After Barclays CEO Punished with Fine by Regulators
On April 20, 2018, U.K. financial regulators issued draft warning notices to Jes Staley, CEO of Barclays plc, for trying to hunt down and uncover the identify an anonymous corporate whistleblower. According to a press release issued by Barclays on Friday, the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority have both proposed Staley pay a financial penalty for failing “to act with due skill, care, and diligence.”
Staley’s actions first came to light in early 2017 when an employee expressed concerns about Barclays whistleblowing procedures, prompting the Barclays board to hire an outside law firm to investigate the matter. The findings revealed that two anonymous letters had been sent to members of the Barclays board and another to a senior executive that raised concerns about Barclays’s recruitment of Tim Main, Staley’s former colleague at JPMorgan Chase & Co.
After an initial attempt to identify the authors of the letters, Staley was told that it was inappropriate for him to do so. Nevertheless, Staley again asked the Group Information Security (GIS) team to identify the author of one of the letters. GIS proceeded to seek and receive help from a U.S. law enforcement agency. Reportedly, a U.S. Postal Service official was misled in investigating the letter’s author, unaware that the matter involved a corporate whistleblower. Barclays painted Staley’s actions as an “honestly held, but mistaken, belief” that he had the authority to unmask the identity of the anonymous whistleblower.
Prior to the conclusion of the regulatory investigations, the board had decided to issue Staley a formal written reprimand and adjust his compensation, promising to take into consideration the FCA and PRA findings once their investigations concluded. The board also voiced its “unanimous confidence” in Staley and communicated its plan to reappoint him as a director.
The investigations into Staley’s actions have been regarded as a “test” of the FCA’s Senior Managers and Certification Regime, a system of individual accountability for banking officials created as a response to the financial crisis. In fact, many view Staley’s pursuit to identify the anonymous whistleblower as a witch hunt that requires his removal from Barclays. Indeed, the regulators’ response to Staley’s behavior raises questions about their ability to prioritize whistleblower protection – a necessary component to fighting corporate fraud.
Regulators lenient treatment of Staley and Barclays’ public statement of confidence in its CEO, after admitting his actions were illegal, creates a chilling effect that may give pause to future would be financial whistleblowers. “Sham enforcement is no substitute for effective whistleblower protection,” said whistleblower attorney Stephen M. Kohn. “The FCA and PRA have failed to take the necessary steps to ensure that informants of financial fraud are protected.”
Whistleblowers have criticized the financial regulators’ decision to merely fine Staley, instead of removing him from his position. “It is blatantly clear Jes Staley violated several contractual and legal standards in the UK and in Barclays. My initial response when I heard about this transgression was that he should have been fired immediately. We now scare off other whistleblowers from coming forward,” said Bradley Birkenfeld, a former international banker who blew the whistle on Swiss bank UBS’s tax fraud. Mr. Birkenfeld was the first international banker to blow the whistle on illegal off shore accounts held in Switzerland by U.S. Citizens. In 2012, Mr. Birkenfeld made history when he, represented by the whistleblower law firm of Kohn, Kohn & Colapinto, obtained a $104 million award from the U.S. IRS Office of the Whistleblower for reporting IRS Tax Fraud.
David Colapinto, one of Mr. Birkenfeld’s attorneys, warned potential UK & EU whistleblowers via Twitter “to explore using US law which regulates publicly traded companies worldwide.”
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