The Whistleblowing Bankers Who Were Sent To Jail

BBC News has recently reported on two traders who were jailed for rigging interest rates, but who were the original whistleblowers in the related scandal.

Leaked audio recordings revealed that Peter Johnson and Colin Bermingham alerted the US central bank to a fraud that the tapes suggested was directed from the top of the financial system. However, no senior figure was prosecuted. The serious Fraud Office concluded the test for prosecution was not met and instead the whistleblowers were themselves sent to jail.

According to the audio recordings, Peter Johnson, known at work as “PJ”, was repeatedly instructed at Barclays by senior managers to engage in the fraudulent practice, known as “lowballing”. This meant providing misleading information about interest rates.

The “lowball tapes” revealed that Mr Johnson tried to bring lowballing to the authorities’ attention, from 2007.

Although Johnson’s bosses were sympathetic, he was informed they were just passing on instructions from above. After his protests, Johnson participated in the fraud he was seeking to expose.

 ‘Sick and wrong’

It was during November 2007, after months of pressure from Johnson’s bosses to lie, that Johnson vented his anger to a colleague at Barclays over the phone calling the practice “sick” and “wrong.”

The phone conversation also covered how Johnson was blatantly giving a false rate to the public and that it should be much higher. Johnson protested to his boss, Mark Dearlove, saying:

Johnson also protested to his boss, Mark Dearlove including sending an email for Dearlove to circulate to senior management stating the bank was being “dishonest by definition.” This did not stop him from being ordered to lowball.

Instead of being thanked for their whistleblowing, Johnson and Bermingham were separately prosecuted by the UK’s SFO for taking part in interest rate ‘rigging’.

Shortly after this both Johnson and Bermingham were convicted and jailed as part of what the traders allege is a series of miscarriages of justice involving nine criminal trials on both sides of the Atlantic.

Comment

This news story illustrates some of the key points about whistleblowing and the risks that go with this for whistle-blowers.

The current UK whistle-blowing regime was introduced to provide employees (like the traders in this case) with protection from certain consequences of any attempts to blow the whistle on employer malpractice.

In employment law terms, this protection amounts to a right not to be dismissed on grounds that you have blown the whistle as well as a right for whistle-blowers not to be subjected to detrimental treatment.

The legal framework is complicated and so it is not always obvious who will qualify for protection and what steps the employer should take.

Employees who are complicit in the matters which they report as malpractice are not automatically protected from criminal or regulatory prosecution or enquiry.