Whistle blower at Ernst & Young awarded $10.8m damages
A whistle blower at the global accountancy company Ernst and Young has been awarded $10.8 in damages after revealing unethical auditing practices.
The case involved Amjad Rihan and four UK-based companies that were part of the Ernst & Young network. The company is now known as EY.
In 2013, Rihan was a partner in EY's Middle East and North Africa (MENA) office. He conducted an assurance audit of a Dubai-based client Kaloti Jewellery International. He claimed to have discovered that Kaloti was participating in irregular activities which suggested that it was involved in money laundering; that the local regulator (the DMCC) pressured him to cover up his findings; and that the DMCC and Kaloti required him to conduct the audit unethically and in a way that amounted to professional misconduct.
He asserted that the company colluded with the DMCC in that regard, which led to his resigning, publicly disclosing the wrongdoing, and fleeing Dubai out of fear for his safety. He claimed that he was thereafter unable to secure alternative employment and his earning capacity was largely destroyed. He sought damages for economic loss, mainly in the form of loss of earnings.
He claimed that the company had breached its duty to take reasonable steps to prevent him suffering financial loss by reason of their failure to conduct the audit ethically and without professional misconduct (the audit duty). The High Court found in his favour. The company’s conduct was to be measured against the code of ethics published by the International Federation of Accountants (the IFAC Code) and, by that measure, it was unethical, improper and unprofessional.
Moreover, they had put improper pressure on Rihan to acquiesce or take part in it. Compliance with the DMCC's review protocol was not enough: an audit could be ethical by the standards of the country in which it was carried out, but unethical by the standards of the IFAC Code and English law.
It was readily foreseeable that Rihan would resign and suffer consequent financial loss if the audit were conducted in a manner which he considered to be unethical, and it was generally known that whistle blowers often suffered financial loss as a result of subsequent unemployability.
It was not a huge leap to extend an employer's existing duties to the protection of employees against future loss of earnings by providing an ethically safe work environment, free from professional misconduct.
Had Rihan been supported by the company he would have continued his career with EY up to retirement, and his losses amounted to some $10.8 million.
Please contact David Rushmere if you would like more information about the issues raised in this article or any aspect of employment law.