Rainy Day reading —The Spinoff : Ministry of Transport fraud case

The ever-deepening storm centred on the Joanne Harrison fraud case just became a hurricane. Yesterday’s State Services Commission investigation report is likely to trigger a new chain of events that could extend well beyond embattled Auditor General Martin Matthews, writes Peter Newport

### thespinoff.co.nz July 21, 2017
Politics
The Ministry of Transport fraud case: Why the rot goes deeper than Joanne Harrison
By Peter Newport | Contributing writer
The State Services Commission investigation, published yesterday, makes one thing very clear: Joanne Harrison influenced the exit of four fellow Ministry of Transport employees who tried to tell their bosses that she was a fraudster. She managed to hire friends and steal over $700,000 from the ministry despite numerous staff attempting to call attention to her actions. This all happened while she was reporting directly to then-chief executive Martin Matthews, who is now our auditor general – albeit on temporary leave. The Commission has now apologised and is offering compensation to those former staff members. Its report also highlights many other issues at the Ministry, arguing that the 17-year-old legislation that covers whistleblowers needs to be changed and improved.

A second investigation, into whether Martin Matthews is a suitable person to continue as auditor general, is due from Sir Maarten Wevers in the coming days. Matthews is currently constructing his response to the unpublished, but complete, Wevers investigation. He has been given until the end of this week to complete it.

The Harrison case has some similar dynamics to the Todd Barclay drama. It’s become less about the initial problem than how it was handled. Who told the truth and who tried to obscure or even bury the truth. The difference with the Harrison situation is that she is now in jail and the truth is coming out – fast.

The Spinoff has been looking at exactly who did what, and when. That job has been made easier by a new, recent MOT whistle-blower who has produced and provided to us a detailed timeline noting all the evidence, which we publish here, utilising material released by the Ministry of Transport and available to view here. The same whistle-blower has shared a bizarre insight into Martin Matthews’ statements during his time at the Ministry of Transport.

But first, a quick tour of the jigsaw puzzle of documents that reveal a picture of Martin Matthews being given not clues, or hints, but what appear to be multiple solid facts that highlighted Joanne Harrison as a Grade A con artist and thief.
Read more

Founded in 2014, The Spinoff is New Zealand’s fastest growing media startup, amassing a monthly New Zealand audience of over 500,000 in less than three years.
We’ve assembled a team of agenda-setting journalists and critics, working across text, audio and video to create a true 21st century media brand. In just two years, The Spinoff has been nominated for 24 Canon awards, winning six. Our growth has been driven by a creative editorial style and innovative business model, emphasising long-term relationships with like-minded brands and a close connection with a young, educated and urban audience. Duncan Greive won both NZ Marketing Magazine‘s Editor of the Year as well as the People’s Choice title for Editor and Media Visionary in their media issue, July 2017. The Spinoff also claimed the title for Digital Media Brand of the Year as well as the People’s Choice title for the same award.

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Comment received from russandbev
2017/07/21 at 10:52 am

The recent revelations about what happened to the whistleblowers in the Ministry of Transport have, I’d suggest, application in Dunedin. Think of the parallels. In the MoT case a manipulative person with a barely-hidden track record of fraud and vindictiveness as well as a well developed sense of entitlement goes about systematically defrauding a government department of close on 3/4 million dollars. Not through some incredibly complex fraud, but one of simply creating business that didn’t exist and creating invoices from them for services that were never provided. Not exactly something that would take a lot to investigate.

Whistleblowers blow the alarm whistles to their managers and nothing happens and the further up the chain the questions were asked, the more dismissive the denials became. Meantime the fraudster moves against the whistleblowers. The Head of the Ministry moves on to even more wondrous things as Auditor General (is that ironic or is that ironic?) and the Minister dismisses all suggestions of wrong-doing. Even the Speaker of the House who employs the Auditor General doesn’t want to get involved.

Now found that the whistleblowers were entirely vindicated by their concerns and they get private and public apologies and a confidential settlement to, in part, recompense them for their treatment by both a fraudster and by management and governance failures. The Protected Disclosures Act [2000] is supposed to protect whistleblowers in BOTH public and private sectors.

Now, I don’t think anyone is suggesting fraud in the case of Aurora/Delta and that should be made plain. However look at the track record of these companies. A fearful record of stupid property speculation costing many many millions which is still going on thanks to Yaldhurst. A willingness to go along with borrowing to supply dividends to the DCHL and the DCC. Decades of ignoring maintenance on the Aurora network closely linked to the governance requirements to minimise costs, maximise profits and supply dividends to build vanity projects by the owners and now the spendup of northwards of 3/4 billion dollars on urgent maintenance bought about these years of neglect.

And then think of the years and layers of denials that these things happened over. When Richard Healey found he could no longer keep working in the company because of all that was being hidden, he gets vilified by EVERYONE that should have listened. EVERYONE is in denial including his past Managers who continued to receive their grossly inflated salaries and those in governance – many of whom refused to even sit down with him and discuss his concerns.

Am I the only one to see the parallels in how a Ministry or a City company deals with whistleblowers? I wonder if we will ever see similar end results in the case of Richard Healey?

{Link added. -Eds}

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Reply from Elizabeth
2017/07/21 at 1:02 pm

Not involving Aurora:

Charges of Constructive Fraud have been brought, by joinder, against Delta Utility Services Ltd in the Christchurch High Court by the caveators (original property owners of the Noble Subdivision) at Yaldhurst. The case proceeds.

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[decisionmaker.co.nz] formatted by whatifdunedin

█ Transparency International New Zealand
http://www.transparency.org.nz/

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Related Posts and Comments:
19.7.17 Southern Police : Nothing changed since Tom Lewis wrote Coverups & Copouts
18.7.17 Delta | Infinity | CCC staff collude to defeat Yaldhurst residents (again)
23.5.17 Topical debates on Corruption in New Zealand
22.2.17 Some Councils/CCOs get cleanup from FRAUD and CORRUPTION #NotAll
9.12.16 Auckland corruption charges proved —ring any bells? #South
28.1.16 New Zealand local government T-shirt #haze #corruption
20.9.15 Corruption serious threat to New Zealand #CAANZ
14.9.15 Screening tonight: Paradigm Episode 2! Local Government Corruption in NZ #Sky #YouTube
23.7.15 Publicise: laudafinem.org
13.5.14 Stuff: Colin Espiner usefully defines Corruption

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Posted by Elizabeth Kerr

This post is offered in the public interest.

Topical debates on Corruption in New Zealand

At Twitter:

It shouldn’t be career ending to get done over by a crooked employee but it should mean you can’t be Auditor-Generalhttps://t.co/wvMn1dehUU

— Matthew Hooton (@MatthewHootonNZ) May 22, 2017

A convicted fraudster apparently headed an inquiry into workplace harassment just months before she was arrested https://t.co/FqTA5VgyRZ pic.twitter.com/fAKwp0hsuI

— nzherald (@nzherald) May 22, 2017

Other media items:
22.5.17 Can the Auditor-General be trusted to combat corruption?
21.2.17 NZH: Ex Ministry of Transport manager jailed for $726k fraud
26.8.16 Former Ministry of Transport fraudster denied bail

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Read Bryce Edwards’ full opinion piece linked below, and the associated reference links.

It’s Worth Your While Dunedin
Because you know instances of this bigger story, and you know them well.

The following is an abridgement.

This website has bolded some words provided by Mr Edwards and the commentators he cites. Words that bloggers increasingly have a ‘steam problem’ to include in everyday use of the English language.

So much for district heating schemes, eh.

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### NZ Herald 2:48 PM Tue May 23, 2017
Political Roundup: The unaccountability of elites
Politics
By Bryce Edwards
OPINION —How much accountability is there in New Zealand politics and public life? Not enough, it seems, going on recent controversies. Mistakes by those in authority can lead to disasters and misfortunes of various magnitudes. Yet a number of recent examples – ranging from the Pike River tragedy through to the Havelock North water contamination crisis – suggest that there is often a worrying lack of consequences or accountability for the authorities involved.
Following on from yesterday’s Political Roundup column about managers failing to prevent serious fraud in a government department (Can the Auditor-General be trusted to combat corruption?); an obvious question is whether New Zealand has a culture in which there’s a lack of accountability for elites who make serious mistakes.
This need for this question is further underlined by Peter Newport’s strongly argued opinion piece, Is fraudster Joanne Harrison’s old boss really fit to lead NZ’s top public watchdog? In this must-read piece published yesterday, Newport details all of the whistle-blowing attempts to alert Ministry of Transport managers to the crimes being committed in the government department, and how those whistle-blowers then lost their jobs, seemingly as a result. Reading Newport’s account, it seems that much of the fraud was entirely preventable. He asks: “Where was human resources? The Public Service Association? The police? The SFO? The auditor general? The chief executive? This all happened in a modern New Zealand government ministry. In the full light of day.”
He concludes that “the chief executive, and his successor, have consistently refused to properly investigate either what she got away with or the further systemic failings behind the scenes… It’s disgusting. Where does the buck stop and who gets the whistle-blowers their jobs back?”
….[break]
Part of New Zealand’s democratic deficit relates to a lack of a culture of accountability in public life and governance. According to Karl du Fresne, “Accountability, the long-established principle that someone should be seen to take responsibility for serious mistakes, is frequently talked about but rarely practiced” – see his column, Accountability the price of keeping the system honest. He makes some important points about the apparent decline in standards of accountability in political and public life in New Zealand, pointing out that the end result, is “public confidence in ‘the system’ continues to be steadily eroded.” This is a major democratic problem, says du Fresne: “If no one ends up accepting personal responsibility and incurring a penalty, there’s little incentive to make sure it doesn’t happen again. […] Part of the problem is that “genuine political commentary and critical analysis in New Zealand has been eroded almost to the point of non-existence over the past few decades”. This is the view of Bob Gregory of the Victoria University of Wellington, who links the decline of accountability to the decline of public debate and information…..
….[break]
So, does all of this lack of accountability mean that New Zealand is possibly more vulnerable to corruption than people assume? This is discussed by former parliamentary staffer Grant McLachlan in his opinion piece, NZ should raise the bar on corruption. McLachlan suggests that New Zealand isn’t well protected from corruption: “Our processes to deal with corruption are flawed. […] When a judge in our highest court doesn’t declare a conflict of interest, the Attorney-General shouldn’t offer the judge a golden handshake to save the taxpayer the cost of an inquiry. When a dodgy mine explodes killing 29, out-of-court payments should not influence the dropping of a prosecution. The Protected Disclosures Act was meant to protect good faith whistle-blowers when reporting ‘serious wrongdoing’. Poor internal processes, however, have resulted in witch-hunts and whitewashes.”
….[break]
Finally, does the culture of misinformation and opaque politics play a part in limited accountability? Graham Adams thinks so, and says that there’s good reason for being appalled by the deception that comes out of government these days. He says “Kept in the dark and fed endless bullshit, it’s difficult for even engaged citizens to make sense of much in New Zealand’s public and political life” – see: Information underload: We’re all mushrooms now.
Read more

█ Bryce Edwards, until recently a lecturer in Politics at the University of Otago, researches and critiques New Zealand politics, public policy, political parties, elections, and political communication. His PhD, completed in 2003, was on ‘Political Parties in New Zealand: A Study of Ideological and Organisational Transformation’. He is currently working on a book entitled ‘Who Runs New Zealand? An Anatomy of Power’. He is also on the board of directors for Transparency International New Zealand.

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Posted by Elizabeth Kerr

This post is offered in the public interest.

[picdn.net]

City council “justifiably proud of its fiscal discipline” —Cull The Delusional

ODT 30.11.15 (page 8)

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Comments received at other threads:

photonz
Submitted on 2015/11/30 at 9:34 am
Several more blocked drains seen later on Friday and also more on Saturday, including some so bad they were flooding right across the road.

And today in the ODT we have the Mayor slapping ratepayers across the face again with the laughable claim that rate rises are due to rises in the cost of bitumen and pipes.

Considering how much is spent on bitumen and pipes, compared to wages and interest, that sounds [like as] big a lie as “the drains are properly maintained”.

The ODT should call Mayor Cull on this – because blaming year after year of rate rises on the costs of bitumen and pipes sounds like a big fat lie.

[Published in abridged form at ODT Online: Your Say:
DCC not responsible for flooding? Yeah right]

photonz
Submitted on 2015/11/27 at 9:26 am
Just posted to the ODT website –

“Taking the kids to school this morning, the drain at the end of our road is blocked and water is flowing across the street. So I started counting blocked drains on my short journey to Queens and Tahuna schools. Grand total – 14 blocked drains, including three bad enough for large amounts of water to be flowing right across the street.

Similarly a relative’s business in town has been flooded several times, every time because of blocked drains. Often they are left with the choice of going out in the rain to unblock it themselves, or hiring a private contractor to suction-pump it.

Because even though the DCC know it’s a problem, they still don’t maintain it.

Do the DCC not realise that all they do is make themselves look like either incompetent fools or liars, when they make the laughable claim that the drains are well maintained and do not contribute to flooding?”

photonz
Submitted on 2015/11/27 at 11:36 am
Several more blocked drains seen on the way into town, including two so bad the water is flowing right across the road. And it wasn’t even raining very hard at that stage.

At least three of those flood across the road very time it rains hard – ie 10-20 times a year.

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Posted by Elizabeth Kerr

DCC financial position | DCC reply: “$20M cash on hand” #LGOIMA

### dunedintv.co.nz May 5, 2015 – 12:27pm
DCC’s financial position better than expected
The Dunedin City Council is finishing the financial year on a high, with an operating surplus of almost $8m. Its finance committee has just analysed the latest accounts, which show the council’s in a better position than expected. It’s received more money through its invested Waipori Fund, and saved on asset maintenance. The council’s got less debt to pay than what was initially budgeted for, and has deferred some work. But it’s received less than expected from the New Zealand Transport Agency for roading projects, and it’s lost some money on the sale of a Dukes Road property. The financial year ends in June.
Ch39 Link

As tabled at the DCC Finance Committee meeting on 4 May 2015:

█ Report – FC – 04/05/2015 (PDF, 1.2 MB)
Financial Result – Nine Months to 31 March 2015

█ Report – FC – 04/05/2015 (PDF, 1.2 MB)
Financial Result – Eight Months to 28 February 2015

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WHERE DID DCC’S $20M “CASH ON HAND” DEMATERIALISE TO ?????

From: Elizabeth Kerr
Sent: Tuesday, 23 September 2014 11:13 p.m.
To: Sandy Graham [DCC Group Manager Corporate Services]
Subject: LGOIMA request

Dear Sandy

Re: Cull warns debt still hurdle for council (ODT 15.9.14)
http://www.odt.co.nz/news/dunedin/315949/cull-warns-debt-still-hurdle-council

Within the news item it says:

“The forecast had included about $22 million in “cash on hand”, but, since Mr McKenzie’s arrival, the decision had been made to slash the amount to about $2 million, he said.

“The cash was instead used to pay for capital projects, avoiding the expected need to borrow for the work, which reduced the council’s need to borrow by $20 million, he said.”

6.5.15 This paragraph goes unexplained in Ms Graham’s reply below;
a further clarification has been sought on WHICH CAPITAL PROJECTS

I would like the DCC to precisely itemise the way(s) in which the city council has spent this $20 million of “cash on hand”, to include the capital projects by name or other reference; the name(s) of the relevant council department(s) and or committee(s) that incurred this expenditure; the dates of expenditure; the spending delegations attributable to which, by name, formal signatories on account; and any other information in legible form that would assist the city council to meet my request in a forthright, full and transparent manner.

I look forward to reply.

Thanks, kind regards

Elizabeth Kerr

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* My LGOIMA request was made on 23 September 2014.
** Dunedin City Council was legally required to reply within 20 working days.
*** Dunedin City Council finally replied on 29 April 2015.

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From: Sandy Graham
Sent: ‎Wednesday‎, ‎29‎ ‎April‎ ‎2015 ‎1‎:‎36‎ ‎p.m.
To: Elizabeth Kerr
Subject: RE: LGOIMA request [DCC expenditure of $20M cash on hand]

Dear EJK

I do appear to have sent this on Friday. I’m resending. Can you confirm receipt?

Regards
Sandy

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From: Sandy Graham
Sent: Friday, 24 April 2015 1:40 p.m.
To: Elizabeth Kerr
Cc: Carolyn Allan; Grant McKenzie
Subject: RE: LGOIMA request [DCC expenditure of $20M cash on hand]

Dear Elizabeth

We have considered your questions and now provide the following response which we hope finally answers your enquiry. Apologies for the delay in providing this clarification.

First I want to background a couple of things to give context to both the question and our response. In our budget (the Annual Plan), the Council ensures that there is enough money to meet its financial obligations. This means that the Council has budgeted money in order to pay for a liability if and when it falls due over the course of the financial year.

While the budget provides for the necessary money to meet the various financial obligations that fall due over the course of the financial year, it is not financial best practice to have large sums of money sitting in the bank at the same time as the Council has debt. This is because the cost of borrowing is generally at a higher rate than the return on money invested in the bank.

With that background I want to deal with the specific situation referenced in the ODT on 15 September 2014 which forms the basis of your enquiry. For clarification, the article in the ODT on 15 September 2014 referred to a decision to “slash” the amount of cash on hand from $22 million to $2 million. To clarify, the $22 million was a budgeted amount of cash based on the Annual Plan for 2014/15. It was never physically in the bank – it was simply a budgeted figure.

The reference to “slash the amount” to about $2 million simply means that the Council (which had intended to borrow this money following the completion of certain capital expenditure projects) did not borrow it. It wasn’t spent on anything – the debt wasn’t raised. If it did borrow the money, then the Council would’ve had the money sitting in the bank. As outlined above, the current practice is to have a minimal amount of money in the bank but access to money if and when required.

The Council is currently consulting on a draft Financial Strategy which formalises this approach and incorporates it into the budget from 1 July 2015 onwards. I have attached a copy of the draft Financial Strategy for your information.

Regards
Sandy

█ Attachment: Finance-Strategy

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From: Elizabeth Kerr
Sent: Friday, 24 April 2015 1:56 a.m.
To: Sandy Graham
Cc: Carolyn Allan
Subject: Re: LGOIMA request [DCC expenditure of $20M cash on hand]

Dear Sandy

Please can you have the information requested since 23 September 2014 to me within 5 working days. Appreciated.

Regards, Elizabeth

Sent from Windows Mail

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From: Elizabeth Kerr
Sent: Thursday, 9 April 2015 11:49 a.m.
To: Sandy Graham
Cc: Carolyn Allan; Elizabeth Kerr
Subject: Re:RE: LGOIMA request [DCC expenditure of $20M cash on hand]

Dear Sandy and Carolyn

The draft LTP has recently been signed off by the Council and is now available for public consultation.

Further to your last email, Sandy, if you can, please provide timeline for delivery of the information promised to me regarding DCC’s use of the $20M cash on hand, as referred to in the Otago Daily Times on 15 September 2014 (refer correspondence below).

I look forward to your update and following, prompt receipt of the information kindly requested last year.

Best regards, Elizabeth

█ The rest of the oh so tiresome email trail can be found at this thread:
3.11.14 DCC: What happened to $20 million cash on hand? #LGOIMA

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Posted by Elizabeth Kerr

DVML . . . | ‘Make the stadium work’ losses continue

Dunedin Venues Management Ltd (DVML) is a Council Controlled Organisation (CCO) —operating losses and compounding debt

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### ODT Online Tue, 1 Oct 2013
DVML loss bigger than forecast
By Chris Morris
Ratepayers will not be hit in the pocket again despite the company running Dunedin’s Forsyth Barr Stadium missing its mark by nearly $700,000. Dunedin Venues Management Ltd on Monday revealed a $986,000 loss for the 2012-13 year, which chief executive Darren Burden said represented progress after a $3.21 million loss the previous year. However, the company had been forecasting an even better turnaround, with a $298,000 loss predicted for 2012-13 in a statement of intent published in July last year.

In the end, the $986,000 loss was $688,000 worse than expected, the company’s annual report confirmed.

Mr Burden said the loss could be covered internally using income from other sources, such as ground memberships and other private sector sponsorship arrangements.

Mr Burden said the forecasts for 2012-13 were actually completed in early 2012, about 18 months before this week’s results were released. Because of that, they were also based on only about six months of trading by DVML, he said. For those reasons, there was always going to be ”a level of uncertainty”, but the accuracy of future forecasts should improve, he said.
Read more

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Associated comments at ODT Online, in the public interest:

Really?
Submitted by overit on Thu, 03/10/2013 – 9:24pm.

As has been pointed out elsewhere, these figures may not be true reflection of the FB Stadium earning its way. Now that DVML has other income streams from the Railway Station and the Dunedin Centre it would be very interesting to see what the separated financial result for FB stadium is rather than DVML as a whole.

Maybe the ODT could report on this?

A grip
Submitted by russandbev on Wed, 02/10/2013 – 6:38pm.

MikeStK, the Larsen report and the PWC report – both of which were published in the ODT – made it plain that the whole basis of the stadium’s finances were nothing than hyperbole. Huge under-estimation of costs of construction, huge over-estimation of economic benefits, and under-estimation of on-going operational costs. By now, surely most proponents of this White Elephant can see how completely destructive this project has been on Dunedin’s well-being. The only people or groups to have benefited directly from this project have been the very fortunate land owners who sold at round 3 times the budgeted amounts, the private CST who received regular fees for their management of the project, the various “consultants” who provided glowing future forecasts for stadium usage which have all proved to be optimistic at best, the ORFU who have been bailed out, the few promoters that have received subsidies for bringing in the few shows that have been staged at the stadium, the anonymous economic impact analysts who provide regular non-peer group reviewed reports on mythical income, and of course the highly paid executives of the entities themselves who seem to make sure the balls are continually being juggled to obscure the true position.

And of course the people to pay for all of this are the ratepayers. Behind it all are the potential governance people who, it seems largely, want to just pretend that all in the garden is lovely. Well, everyone now has the opportunity to make your views known. If you don’t vote, then you are as much to blame as those that made this mess happen. Vote wisely.

Diverting debt repayments
Submitted by MikeStk on Wed, 02/10/2013 – 1:26pm.

Now just a minute – back when we were pretending that income from memberships were really “private fundraising” rather than pre-purchased ticket sales the city borrowed $45m to cover the fact that this money wasn’t going to be paid up front but would instead dribble in over 5-10 years. If Mr Burden’s now going to divert this money that was supposed to be used to pay off the debt borrowed against this future income to paying off his own losses who is going to pay off the actual $45m in principal and associated interest?

This whole rugby stadium thing appears to be a giant game of cups and balls.

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Posted by Elizabeth Kerr

*Image: Dunedin Venues logo overstitched (re-imaged by Whatifdunedin)