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FERNANDES V. NETCOM CONSULTANTS

F was employed for 4 years by a UK telecommunications company operating internationally. The company is a wholly owned subsidiary of a United States corporation which is ultimately owned by a Luxembourg company. At the time of his dismissal, the applicant was the Chief Financial Officer responsible for the accounts of Netcom (the respondent) and two sister companies based in the UK.

Within six months of taking up the post of managing director, the MD began to submit his expense claims without any receipts. F was responsible for scrutinising the expenses - whether incurred through the company credit card or through cash advances - and when he asked the MD for the receipts, the MD assured the applicant that he would bring them in but never did. In January 1997, when the MD submitted his expense accounts still without supporting receipts, F faxed a letter to raise his concerns with his contact at the US parent company. The contact telephoned F and told him “You’re lucky I picked up your fax”, and advised him no further action would be taken, that his fax would be destroyed and that he should do the same and ‘look after your butt’.

F continued to request receipts from the managing director who reassured him that he had all the receipts in a large box, but still none were forthcoming. By early spring 1999, the pattern and acceleration of the expenditure was such that F thought something should be done. F was suspicious about the legitimacy of some of the expenses which included payments to clothing shops and to a solicitor. Later, he was told by the managing director’s wife that she and her husband had recently moved house which could have explained the solicitor’s payment. The Tribunal noted that audits in 1996, 1997, 1998 and an internal audit in 1999 failed to pick up any problems. F prepared a document which outlined his concerns about the expenses as well as concerns about cashflow problems which had resulted in non-payment of corporation tax and late payments to staff pension funds. In November 1999, F sent a letter and supporting documents to five senior management officials and Board members in the US and Luxembourg. He also faxed this letter to the UK team, including the managing director and on the same day he was told to remain at home pending investigation by the American company.

Within a week of disclosing his concerns, F was twice interrogated by a US security man and once by the Chief Executive of the American company with the security man present. Further he was asked during two telephone conversations to resign and the second time threatened with criminal prosecution and told he would have to repay the unauthorised expenses. F refused to resign. Less than two weeks after disclosing his concerns F was summarily dismissed for gross misconduct. The stated reasons for dismissal were related to the applicant’s failing to pay the corporation tax and making late pension payments, and in particular for allowing the misappropriation of £316,000 in unauthorised expenses by the MD. The MD however retained his position.

Result:
F was successful at an interim relief hearing, following which the MD left Netcom. At the full hearing the Tribunal found that the reasons given for F’s dismissal constituted a smokescreen and the real reason for his dismissal was disclosing his concerns about financial malpractice to his employers under s. 43C. The respondents argued that they had not dismissed him for raising his concerns but rather had done so because of F’s own failings and his involvement in the malpractice. The Tribunal found that the expenses system was such that F could only confirm the validity of expense claims after the money had been paid. Further, the Tribunal found that the task of authorising expenses was the function of each employee’s line manager. F was found to neither approve nor benefit in any way from the managing director’s activities. The Tribunal was further fortified in its view in light of the differential and preferential treatment afforded to the managing director.

The compensation hearing was held 12 June 2000 and an award of £293,441 was announced on 10 July 2000.