Released on February 01, 2013, 1:00 AM EST 
Tag #: 651

Issue: Institutional failure. Who to blame?

Toronto based legal firm received $ 717,123.22 pay cheque
Disbursements also includes airfairs and hotel charges

WikiLeaks Sudbury investigative team uncovered that a Toronto based legal firm which received an outside legal contract for labour and employment matters cashed $ 717,123.22 pay cheque from the City from January 2007 to August 2012.

Legal support for Labour and employment matters for the City was contracted out to two legal firms that qualified and entered in agreement with the City. The estimated cost of the legal fees for labour and employment matters was $151,865.00 annually.

It appeared that the first Toronto based legal firm cashed almost the full allocated amount which comes from our tax dollars. However there are no clear records available on how much the second legal firm cashed for labour and employment matters for the City.

Evidently, the lawyers of the Toronto based legal firm did not hesitate to include airfares and hotel bills when they visited Sudbury, and ultimately, the burden was passed on to tax payers. It was estimated that airfares and hotel bills added an additional 30% to their disbursements.

Table 01: Payout for Toronto Legal Firm

Figure 01: Payout to Toronto Legal firm

Figure 02: Trend Analysis of Legal Fees Paid to Toronto Legal Firm

It is clear that labour and employment legal expenses continually rise during this period. This indicates a serious problem in governance. It seems  City officials  have failed to make any substantial decisions to prevent further escalation of this situation.

The internal grievance process has four stages, and only at the final stage do matters lead to mediation or arbitration. WikiLeaks Sudbury has learnt that it is a common practice with city managers to send employee grievances to mediation or arbitration. Some of the employees’ grievances can be addressed for less than $20.00 when resolved between employees within the division.  However it is estimated that over 98% grievances moved to next stage, and ultimately ended up in mediation or arbitration. It also appears that a large amount of tax dollars were wasted through-out the internal conflict resolution process in these years.

The City of Greater Sudbury has many legal firms which have the professional qualifications to handle any labour and employment disputes. The labour and employment matters contracted out will not be beneficial to local professionals and ultimately the benefit of tax dollars not stay within the local economy.

WikiLeaks Sudbury will not disclose names of both legal firms to protect third party economic interest.

Related Documents
Request for Proposal out side legal service for Labour and Employment matters. 

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Editorial:
Released on February 01, 2013, 1:00 AM EST

The original article initially appeared on Journal of  College of Law, Faculty Publications. Paper 27. 01: (01). Excerpts from the article as follows   

Sarbanes-Oxley’s Structural Model to Encourage Corporate Whistleblowers

While academic and public attention has focused almost exclusively on Sarbanes-Oxley's version of the Anti-retaliation Model: this Article is the first comprehensive academic work to analyze the ability of Sarbanes-Oxley's Structural Model to engage corporate employees in the battle to reduce corporate fraud. Utilizing social science research that analyzes whistleblower motivations, authour conclude that the Structural Model may produce more effective disclosures from whistleblowing employees than prior attempts to encourage whistleblowing because the Model addresses two significant problems that previously kept employees from consistently functioning as successful corporate monitors: (1) the corporate norm of silence, and (2) the corporate tradition of blocking and filtering employee whistleblowing.

Ultimately, Sarbanes-Oxley's Structural Model is an improvement over prior attempts to encourage whistleblowing because the Act requires a structure that will encourage whistleblowers and help them effectively provide information about wrongdoing to corporate officers with the power to address the misconduct. But, in its current form, Sarbanes-Oxley fails to properly balance the need for employees to disclose important inside knowledge to independent directors with the need for directors to efficiently and effectively monitor all aspects of a corporation's business.

Despite the advantage of external monitors, however, their external position presents a significant challenge: monitoring the inner workings of a company from the outside. External monitors must rely upon information they receive from corporate executives to fulfill their monitoring Even under the best circumstances, this information is certain to be incomplete and self-serving due to information blocking and filtering by executives and subordinate managers. Under the worst circumstances, corporate executives may & affirmatively hide or misrepresent information in order to evade a monitor's oversight. Thus, flow-of-information problems can arise because these traditional corporate monitors do not have enough information, and the information that they do have is often distorted and filtered.

These problems contributed to the failure of traditional monitors to detect the wrongdoing at the center of recent corporate scandals. Certainly the greed of corporate executives triggered the massive fraud and traditional corporate monitors should have been more active in their oversight responsibilities. Other systemic issues also contributed to this unprecedented failure in corporate governance, such as internal incentives to inflate stock prices caused by managerial stock options. There is sufficient blame to go around.

Corporate employees could be instrumental in solving the inherent information problems of traditional external corporate monitors. Employees have an information advantage over traditional corporate monitors because they have more complete knowledge regarding the inner workings of a large corporation.  Financial misconduct on the scale that occurred during the recent corporate scandals necessarily requires the assistance of low- and mid-level employees because of its scope and complexity.

Additionally, even if an employee does not participate in the wrongdoing, corporate accounting and finance employees, who are trained in the proper methods of conducting business, should recognize when corporate actions fall outside legal boundaries.  In fact even with few corporate or legal incentives provided to whistleblowing employees, roughly one-third of fraud and other economic crimes against businesses are reported by whistle blower. Given their central role in corporate activity, information from rank-and-file employees is essential to uncovering wrongdoing in a timely manner. Accordingly, effectively encouraging employees to disclose their knowledge of wrongdoing is a critical step in discovering fraud and other corporate misconduct.

Recent corporate scandals demonstrated that, despite the efforts of a few employee whistleblowers, many corporate employees failed to report the misconduct they observed. Problems with information flow from employees to traditional corporate monitors undermined the ability of employees to perform any monitoring role effectively.

Sarbanes-Oxley's Structural Model presents an improved attempt to encourage corporate employees to overcome these flow-of-information problems. The Model should lead to more employee whistleblowing because it better corresponds with employee motivations and reduces the most prominent disincentives to whistleblowing. Also, the Model will likely improve the effectiveness of whistleblower disclosures because it encourages reporting directly to independent corporate directors who have the authority and responsibility to respond to information about wrongdoing.

Sarbanes-Oxley's Structural Model encourage employees to play an active role in monitoring corporate behavioral role that not only benefits society by reducing corporate misconduct, but also improves corporate decision-making by increasing employee voice within the corporation.

Editor
WikiLeaks Sudbury
February 01, 2013

Reference:
Moberly, R. (2006). Sarbanes-Oxley’s Structural Model to Encourage Corporate Whistleblowers . College of Law, Faculty Publications. Paper 27. 01: (01), 1107-1180.

Related Document:
Sarbanes-Oxley’s Structural Model to Encourage Corporate Whistleblowers