When is a whistleblower not the hero but the villain?

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The protection of Whistleblowers is a crucial element in contemporary corporate governance. In the UK they are protected by law and rightly so. But the motivations of whistleblowers and their behaviors vary a great deal. So while it is vitally important that they are protected, they should not be immune from criticism. There are many things that can inspire a person to report his or her colleagues. This is the story of a whistleblower who nearly destroyed a company by his actions. It raises the question: should the whistleblower also be held to account for what they do.

In May of 2009, the Swiss investment house GAM acquired Augustus Asset Managers Limited, a fixed income and foreign exchange investment management company, and brought in Tim Hayward and Daniel Sheard. The two became co-managers of an absolute return bond that made them and GAM a great deal of money over the next decade. (Sheard bought his six-bedroom house with indoor swimming pool in Grantham for £850k cash in 2010 and four bedroom holiday home in “Chelsea on sea”, north Norfolk, for £475k in 2014. Also without a mortgage.)

In May 2011, Sheard and Hayward,  launched GAM’s Unconstrained Bond Strategy designed to generate positive absolute returns with a low correlation to global bond markets – this became the Absolute Return Bond Fund. GAM’s Unconstrained fixed income team was primarily based in London with a team of 28 individuals, including three co-portfolio managers, Hayward and Sheard and Jack Flaherty, who oversaw strategy. Most of them have now been made redundant. 

Haywood had joined Augustus (then Julius Baer Investments Limited) in 1998 from Orient Overseas International Limited in Hong Kong, where he was Chief Investment Officer. He had worked as both CIO and CEO of Augustus, established the hedge fund business, as well as being the founder and original investment manager of an emerging market bond fund. Haywood did his MBA at the University of Cranfield and a BSc in Chemical Engineering at  Edinburgh, and had passed the General Securities Registered Representatives examination. 

Sheard had joined Augustus in 2006 as deputy Chief Investment Officer and became Chief Investment Officer in 2008. Sheard previously worked at Prudential M&G, where he was a Director of the Institutional Fixed Income group. Prior to that he was a Principal within the Advanced Strategies group at Barclays Global Investors, and before that was an Associate Director within the Fixed Income unit at Schroders. Before that he was dismissed from HYPO Foreign & Colonial, who he joined from university, when an overvaluation of an asset was discovered while he was away on holiday. Sheard holds a BSc in Financial Services from the University of Manchester Institute of Science and Technology, a Postgraduate Diploma of Law from Nottingham Trent University, and is a charter holder of the Chartered Institute of Bankers.  

Sheard and Haywood, were known internally as the mother and father of the absolute bond. But divorce can be messy. Daniel Sheard is a short, driven individual who is highly competitive, a compulsive obsessive cyclist who likes to be around combative people. In the early days it was clear that Tim, Daniel and sometimes Jack Flaherty were the star team. They were listed in corporate structure diagrams as three equal  co-managers.

After the breakup, Sheard told journalists, including Katherina Bart and Tom Bergin, that he had been the quiet, cautious, background one and Haywood liked the limelight. He tried to paint a picture of himself as the responsible, ethical one. What his actions during the crisis and since make clear, is that there were actually years of cumulative anger building up which in the end destroyed his judgment. Because by 2017 Tim Haywood was getting star treatment in coverage of the team. If Tim Haywood was the star, Daniel Sheard was the grunt. They had worked closely together for years but Haywood was getting the praise and presumably, the bigger bonuses. Sheard was falling behind. People close to the pair suggest that he especially disliked one source of investment opportunities in particular: Lex Greensill. 

Lex Greensill, an Australian, had introduced GAM to the industrialist Sanjeev Gupta. It was Gupta’s GFG group that had been very lucrative for GAM but Sheard was not included in the negotiations for the deals and felt left out and exposed. In Sheard’s view GAM was putting too much investment into GFG companies. Sheard began to confront Haywood in internal weekly meetings, he complained formally to their boss. Sheard became so obsessed by Haywood that he stopped coming into work towards the end of 2017. Some close to the events suggest he had a breakdown. He filed a freedom of information request with the Scottish government that turned up nothing. When fired for misconduct earlier in his career he gave an interview in which he said the “The regulatory environment is a bit of a witch-hunt.” But now he reported Haywood to the FCA. 

After the formal complaint by Sheard, an internal inquiry compelled Haywood to report all gifts he had received from Greensill and these included flights, including one for a holiday. The internal investigation found that Haywood had failed to declare these gifts, he had used work email for private purposes but that there was no impropriety as far as GFG was concerned. Moreover, all of the investments with GFG had shown returns on par with other parts of the fund and there was nothing wrong with any of the investments. The funds exposure to GFG was only 12% of the overall fund. Haywood had his knuckles wrapped by GAM and was given a warning in March 2018.  

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That was not enough for the disturbed Sheard. He wanted to win, so he leaked all the details of the investigations that he could to the press. He contacted Katharina Bart, a financial journalist at finnews.com. She in turn shared the story with her old colleague from Reuters, Tom Bergin. It is not clear if Sheard paid the journalists to push the story but he clearly thought little of the consequences for his colleagues. Since his first firing he had clearly been much more careful. Now he seemed to lose all sense of proportion or collective responsibility.

Once GAM knew that the press had the story, they had to then confirm the reports and issued a statement suspending Haywood and promising to protect the identity of the whistleblower: Group CEO Alexander Friedman saying: ‘At the heart of every modern financial services firm’s systems and controls should be a culture that encourages people to come forward with concerns about colleagues’ behaviour. The only way to maintain that culture is to protect those who are brave enough to do so and to hold accountable those found to be breaking the rules.’  

In the aftermath the absolute bond was liquidated and all the funds were returned. Sheard was taken off any role in the fund. The news was released by GAM at 7am on 31 July 2018. The share price collapsed.  GAM went from a net  profit of CHF123.2 m in 2017 to a net loss of CHF929.1 million in 2018. As the profits collapsed so redundancies followed. They included Daniel Sheard. He did not go quietly, leaking the story to his existing journalistic contacts including Katharina Bart. He also continued feeding stories to the FT. When he was first fired from a job in 1994, the company made clear there had been no fingers in the till. This time he was fired because his actions had resulted in the till being emptied. 

The whistleblower in this case outed himself to the media. Destroyed the company that he spent years helping to build up. Caused most of his close colleagues to lose their jobs. He did this while failing to show that any losses were incurred by the investments that he questioned. GAM has maintained throughout that Hayward did not break any internal or external rules as far as the actual investments were concerned. So the matter could have been dealt with internally but instead Sheard set fire to the house. This represents a fatal lack of judgment on his part. It is vitally important that whistleblowers be protected when they are acting in the public interest. But what if they are not? What if they are compulsive obsessives who have been driven by jealousy comparable to a lover scorned or a wife betrayed. Surely in these circumstances it should be the whistleblower who is prosecuted for the irresponsibility of their actions and it is the whistleblower who should face up to and admit the consequences of those actions. Mr Sheard does not appear to be doing that. Rather he is set on trying to further undermine and destroy the lives and reputations of old friends and the current and former clients of GAM . Sometimes it is not the whistleblower who needs to be protected in the public interest, it is the public interest that needs to be protected from the out of control whistleblower.

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