Suppose you are the Chair of the Supervisory Board of a company and you receive a letter from the recently hired Chief Financial Officer (CFO), expressing his concerns about the financial administration. Is this a whistleblower report? You decide to discuss the letter with the CEO, who also holds the majority of the shares of the company. Can you be jailed for this? More on that in this investigative report from the Dutch House for Whistleblowers (the Dutch Whistleblowers Authority).
The Investigations Department of the House for Whistleblowers (further: the House) has published another new investigation report. It was about time; the previous report dates from 2024. The new report offers an interesting insight into how the House assesses whistleblower reports. But it also raises some important questions.
The reporter accepted a role as interim CFO at a trading company supplying electrical products and systems in July 2022. The previous CFO had left abruptly six months earlier. The company is a family-owned business with a turnover of about €125 million. Soon the new CFO noticed that the company’s stock was not valued in compliance with laws and regulations.
In December 2022, he warned of likely financial setbacks. Although his critical attitude was not appreciated by everyone, he was given a permanent employment contract nonetheless. During 2023, the relationship between the CFO and the CEO deteriorated.
The company did not have a whistleblower procedure, even though this company was obliged to have one since 2016. In May 2023, the CFO expressed his concerns about the financial management and administration, and in particular his concerns about the actions of the CEO, in a letter to the Supervisory Board (SB). Because the situation had a major impact on his mental and physical health, he also reported sick at the same time.
Although the Chair of the Supervisory Board characterizes the letter as a suspicion of wrongdoing, he does not decide to conduct an investigation because, according to the Chair, the letter contained only assumptions and suspicions and no facts. However, he does inform the CEO that the CFO had sent a letter expressing his concerns, without elaborating on the content.
At the end of June 2023, an employment dispute arose between the CFO and the company. The company asked the subdistrict court to dissolve the employment contract. The CFO disagreed and disputed the dissolvement citing retaliation, which is prohibited under the Dutch Whistleblower Protection Act. Nevertheless, in November 2023, the subdistrict court granted the request for dissolution, upon which the CFO appealed.
In July 2024, the trial court ruled that the employment contract should not have been dissolved because this is prohibited in The Netherlands when somebody is ill. The court did not address the prohibition against retaliation. Which is kind of strange.
Meanwhile, the questions about the 2022 financial statements that were asked by the external accountant, were still not answered. Therefore, no qualified opinion on 2022 had been issued by the external accountant.
In May 2024, the CFO requested the House for Whistleblowers to investigate his case, which it does in December 2024. This involved both an investigation into the wrongdoing and an investigation concerning the retaliation against the reporter. Here, the House looked not only at stock valuation but also at other possible violations of applicable laws and regulations.
Unfortunately, the investigation report does not reveal whether the CFO was an “accountant in business”. If he was, then the CFO did exactly what could be expected of him under the rules of the NOCLAR (Non-Compliance with Laws And Regulations). Had he not done so, a reprimand, suspension or expulsion might have hung over his head. We would like to see that accountants would follow the NOCLAR principles more frequently. Especially while bearing in mind how this case developed.
The House ultimately ruled that in this case indeed wrongdoing took place. The accounting rules were not followed, which meant that the financial statements may not give a true and fair view of the company’s assets and results. According to the House, this violation rose above personal interests and was also structural in nature. Because the external accountant refused to approve the financial report, the violation also qualified as “serious”. In addition, the proper functioning of the organization was jeopardized. The House further takes into account that there was no whistleblower policy in place until September 2023.
The letter to the Supervisory Board (SB) is therefore classified by the House as a whistleblower report. According to the House, the reporter was subsequently disadvantaged in several ways. For example, the accuracy of the allegations of the CFO was not verified. Furthermore, the Chair of the Supervisory Board disclosed the identity of the reporter to the CEO. His employment contract was also terminated. Finally, after his termination, employees were instructed to sever contacts with him. They were even ordered to remove him as a LinkedIn contact on their profile.
The verdict of the House raises some questions:
- Can the lack of a (proper) whistleblower procedure be considered as ‘wrongdoing’ in the sense of the Dutch Whistleblower Protection Act? After all, this is a violation of the law, endangering the proper functioning of the organization. It transcends personal interests and is also structural in nature.
- Suppose there would have been a whistleblower procedure, would the letter to the SB have been considered a whistleblower report even if the procedure did not mention the SB as a reporting channel?
- Can not investigating a whistleblower report already be considered as disadvantagment of the whistleblower?
- Can a fine and imprisonment of (at most) one year be imposed on the Chair of the SB for revealing the identity of the reporter without the reporter’s consent? After all, this is the maximum penalty for disclosing the identity of the whistleblower without their consent.
After reading the report, one can argue that the answer to these questions must be ‘yes’. Although the House probably took the complete picture into account to come to a final verdict. By the way, the lack of a proper whistleblower procedure, when the company has the obligation to, should at this moment always be considered as ‘wrongdoing’ in the sense of the Dutch Whistleblower Protection Act, as it is a violation of EU law.
The full report in the Dutch language can be downloaded here.
This report underscores once again that non-executive directors should also be familiar with the Whistleblower Protection Act and/or know when to engage an expert to advise them on this. Of course, we are always available. And non-executive directors are also welcome to attend our course on the Whistleblower Protection Act in practice.
