Blowing the whistle in an ethics desert
South Africa’s most famous – some might say infamous – corporate whistle-blower now lives in Bushman’s River.
Ten years ago Wendy Addison blew the lid off LeisureNet, exposing misconduct in the company that had created the Health and Racquet Club franchise.
It collapsed with liabilities of R1.2-billion, and liquidators recovered only a fraction of it.
It took seven years for the matter to go to court, with former joint chief executives Rod Mitchell and Peter Gardener convicted of fraud totalling R12-million for concealing their interest in a German gym operation bought by LeisureNet in 1999.
Gardener was sentenced to eight years in jail, and Mitchell to seven years, but neither man has served any time as their appeal is still pending *1. Gardener was also fined R2.9-million for VAT fraud and insider trading and received a suspended sentence.
Addison was LeisureNet’s treasurer and had worked for it for eight years. Alarm bells went off when she was told to transfer millions of rands of shareholders’ money to a foreign-based German-named company.
“The board of directors didn’t even know,” she said, and delayed making the transfers.
“Normally I would have gone to the auditors, but I didn’t feel comfortable with them. They were sued for R200-million by the liquidators. I don’t know what’s happened to that.
“I didn’t trust anyone I worked with on a senior level.”
“I contacted (the SA Revenue Service), anonymously at first. I was too afraid to come in.” She told them she did not want to contact the auditors as she did not trust them. There was no whistle-blower protection then.
She eventually let the money go to the offshore account. But a month later, forensic accountants, Sars investigators, liquidators and attorneys walked into the Cape Town offices and “the 12 executives, including myself, bar the two guilty parties, were told to pack our bags and go”.
Her evidence – 32000 pages of testimony – was key to the trial, but she was not hailed as a hero. The label of whistle-blower became a stigma.
Not only did she lose her job as the firm folded, she did not get any severance pay either.
“There is a law that an employee can claim one week for every year worked as severance. I didn’t know that. The liquidators didn’t tell me that. But they used my willingness to expose what had happened.
“I received death threats. I put myself in self-imposed exile in the UK” where she got a job with Virgin boss Sir Richard Branson, who had bought the Health and Racquet clubs. “But when he found out I was the whistle-blower for what happened at LeisureNet, he let me go. I ended up begging on the streets of London with a 12-year-old child.”
It had been “incredibly tough” but she started doing care work in the UK and now travels back and forth to South Africa.
But the seed also germinated to address corporate ethics here.
“Humans know innately and instinctively when something’s wrong. The key is how to process and report that information and be protected. I think South Africa is failing badly in ethics.”
Addison feels rules-based – as opposed to holistic – codes of conduct do not work.
“People will break the law and codes of conduct. Ethics can’t be managed through rules.”
She is also pursuing further justice. “I’ve applied for a pro bono attorney to seek compensation in terms of the Companies Act, that the (LeisureNet) directors responsible are held personally accountable. There are laws the government has put in place for compensation for someone like me, but nobody knows about it. People need to know about it.”
With acknowledgements to John Houzet and The Herald.