There are no legal precedents in Australia to a case now before the Federal Court in which a former senior legal counsel with the domestic arm of Credit Suisse Asset Management (CSAM) is suing the business after claiming he was fired for making a report that should have qualified for protection under Sarbanes-Oxley reporting obligations.
Lawyers specialising in financial services and business disputes, and an accountant in the compliance field, said they were unaware of any previous cases in which an employee of an Australian arm of a US financial services company sued the parent for allegedly not providing the protection legislated in the ‘maintaining privilege’ section of the Sarbanes-Oxley Attorney Reporting Obligations.
The applicant in the CSAM case, Philip Johnson, also claims that his reports qualified for protection under part 9.4AAA of the Corporations Act, generally known as the ‘whistleblower’ laws. While there had been many cases in which employees had claimed protection under these laws, there were none in which people “had been dismissed for whistleblowing,” said a representative of a major law firm, who requested anonymity.
Peter Whyntie, partner with KPMG within the firm’s financial risk management, regulation & compliance division, said he personally was unaware of a precedent to the case Johnson had presented. “In the compliance area, I’m unaware of any litigation like this since the inception of this [whistleblower] clause,” Whyntie said.
One law firm noted that the case of ASIC v P. Dawson Nominees was the only preceding action that resembled Johnson’s suit, but was still “not entirely on point”. In this case, which ended in July, ASIC refused to produce certain documents related to Multiplex, which had entered an enforceable undertaking to meet a $50 million indemnity and set up a $32 million fund to cover shareholders’ losses after it failed to publicly disclose a drop in forecasted profit from its Wembley National Stadium project – from £35.7 million to zero.
P. Dawson Nominees brought an action against Multiplex on behalf of shareholders and issued a subpoena to ASIC to disclose certain documents, but ASIC refused to present some of these documents on the grounds of public interest immunity.
At the time of the Federal Court’s ruling in favour of ASIC, Tony D’Aloisio, chairman of the commission, said the result was important for whistleblower provisions. “It affirms the principle that when people come forward to report matters to ASIC in confidence, their confidence will be respected where that is in the public interest,” he said.
Another lawyer, who has contributed to the case between Johnson and CSAM, said there had not been any litigation of this manner pertaining to Sarbanes-Oxley in Australia. Enshrined in the Credit Suisse Group compliance policy is the “Policies and Procedures for ‘Up the Ladder’ Reporting by Attorneys of Evidence of a Material Violation under the Final Rules of the US Securities & Exchange Commission”.
In his statement of claim before the court, Johnson contended that he was fired as a consequence of reporting what he claimed was an unlawful backdating of a sub-investment agreement, sent from New York, which terminated CSAM Australia’s investment advisory responsibilities for the Credit Suisse Japan Growth Fund.