NZ POLITICS DAILY: Can the Auditor-General be trusted to combat corruption in New Zealand?

In 1997, former Auditor-General Jeff Chapman was jailed for fraud. Yes, one of the most senior government officials, whose role it is to keep a watch over the public sector, ensuring the various government agencies and organisations are free of corruption and financial mismanagement, was himself found guilty of serious crimes. This history is a reminder that we need to seriously scrutinise the people appointed as public watchdogs. We need to be able to trust them.

This goes not only for their character but also their competence. And there are currently serious questions being asked about the competence of the new Auditor-General, Martin Matthews. This is occurring in the wake of information slowly surfacing about how Matthews’ former Transport Ministry allowed major fraud to occur.

The extraordinary story of fraud in a government department
The gist of the story, and the involvement of Auditor-General Martin Matthews, was succinctly dealt with by Karl du Fresne on Friday in his column, Accountability the price of keeping the system honest: “Former Ministry of Transport head Martin Matthews must be squirming as the media reveal acutely embarrassing details of the audacious $725,000 fraud perpetrated by his ex-employee Joanne Harrison. Judging by what's been reported, there were multiple signs that Harrison was ripping off the ministry. Short of wearing a flashing neon sign saying ‘I am a crook’, she could hardly have been more brazen. Yet far from having his career prospects damaged by the scandal, Matthews was rewarded with a promotion to the position of auditor-general – a job in which he's required to make sure no one misuses taxpayers' money.”

Harrison, the ministry employee, was convicted and sentenced to three years and seven months in prison. Further details about her fraudulent activity continue to be revealed. Likewise, the public is slowly finding out how her bosses failed for years to detect what was going on, despite numerous alarm bells going off.

On Thursday last week, the Dominion Post newspaper called for a public inquiry into what had occurred, arguing that “The political pressure is building on Auditor-General Martin Matthews. Questions persist over his handling of the fraudster Joanne Harrison while he was head of the Ministry of Transport. Doing nothing no longer seems possible” – see the editorial, Time for another look at the fraudster in the bureaucracy.

Noting the rising partisan politician involvement in the debate, the newspaper called for “caution and cool heads,” agreeing with Geoffrey Palmer that “the auditor-general should be protected from political pressures.” Nonetheless, it believes an inquiry should be carried out by the State Services Commission: “Nobody could accuse the SSC of any kind of party-political witch-hunt. On the other hand, the SSC is one of the state's major bulwarks against corruption and bureaucratic inertia or failure.”

The editorial takes issue with Prime Minister Bill English’s pronouncement that the controversy had already been "satisfactorily" dealt with, and instead says: “Questions remain about whether Matthews took enough notice, and promptly enough, of the warning bells reportedly sounded by more than one whistleblower in the department.”

What really makes this case concerning is that the person in charge while all this occurred has been promoted to a much more important position. Blogger David Farrar explains: “It looks as if there were multiple missed opportunities to detect her fraud at an earlier stage… If Matthews was simply the CEO of another government agency, I would say this one issue should not blot his record. But the role of auditor-general is different. This is about systems and checks and robust process. And it is clear that this did not happen on his watch at Transport” – see: Why did it take so long to expose Harrison?

Whistle-blowers and warning bells ignored
Stories have slowly been emerging suggesting the head of the Transport Ministry had been informed of strong suspicions about Harrison’s behaviour but that he chose not to intervene. Much of this is detailed in Benedict Collins’ report, Jailed fraudster got friend job at Transport Ministry.

Collins says: “The newly released Transport Ministry documents also show that as far back as 2013, three years before Harrison was eventually caught, senior staff were warning the then chief executive Martin Matthews about her conduct. "How can a senior person in any organisation credibly claim to be unaware of the need for a contract when getting external providers to do work?’ ‘I find it astounding,’ senior ministry official David Bowden wrote to Mr Matthews. Mr Matthews responded that he ‘agreed with your sentiment’ and thought he would remind the leadership team of their responsibilities when it came to procurement and contracting.”

Furthermore, “documents also show that in 2014 Mr Matthews was aware the Victorian Police fraud and extortion unit were seeking information on Harrison – but accepted her word that the matter did not directly relate to her and had been dealt with."

There were staff who essentially tried to “blow the whistle” on Harrison, by reporting their concerns. Three such staff were subsequently made redundant in a restructure, with many suspecting Harrison managed to get them removed. According to John Weekes, Labour’s Sue Moroney “said there should be an investigation to ensure staff who raised concerns about Harrison's financial transactions and later lost their jobs were treated fairly” – see: The fraud that won't go away: MPs argue after Joanne Harrison swindled $725k.

Winston Peters has also complained: "These staff members deserve our admiration instead of suffering the typical response that whistle-blowers get in this country. They were denigrated and then dismissed."

Peters is also quoted, saying, “The fate of whistleblowers in this country, upon which so much transparent government depends, is seriously a bad one” – see John Weekes’ Fresh claims prompt call for new investigation into Transport Ministry fraudster Joanne Harrison. According to this article, “Documents released under the Official Information Act proved Harrison urged her former boss at the Transport Ministry, Martin Matthews, who is now the Auditor-General, to ‘close down’ investigations when colleagues raised concerns.”

The whistleblower issue is also dealt with by Gordon Campbell: “If whistleblowers don’t feel protected if and when they relay their concerns to senior staff – let alone if they later feel impelled to go public to the media – then the formal protections on paper are worthless. The fact that three Transport Ministry workers were made redundant only two months after communicating their concerns about now convicted fraudster Joanne Harrison – in a restructure in which Harrison was allowed to play a role – should alarm anyone interested in the existence of an honest, transparent public service in this country. The Transport Ministry situation will have a chilling effect on whistleblowers generally” – see: On the Transport Ministry scandal.

And today, two of the whistleblowers forced out of their jobs have gone public, speaking anonymously on RNZ’s Morning Report – see Benedict Collins’ Whistleblowers tell of 'incredible' day their jobs were axed. Both expressed they “were in no doubt the concerns they raised led to their axing.” One of the whistleblowers says: "I think it's disgusting quite frankly and the fact he is now auditor-general is appalling – he should be held accountable … I don't think a good chief executive should allow one of his general managers to go against ministry policy – well, you could excuse it once but to allow it to go on for three years it's not a good thing, is it."

Losing the confidence of Parliament
Parliament’s confidence in the auditor-general appears to be quickly eroding, making his position less tenable. After all, it is the parliament that appointed Matthews to the position. In fact it’s the job of a committee of four MPs to decide who to recommend for the appointment: “Along with the Speaker, the committee members were: Tim Macindoe (National); Trevor Mallard (Labour) and Barbara Stewart (NZ First)” – see Richard Harman’s How the Auditor General joined the plot to trap the fraudster.

In the above article, the Speaker, David Carter, explains how the committee was briefed by the Serious Fraud Office, who seemingly spoke incredibly highly of Martin Matthews’ and his role in the Harrison prosecution. However, some of the parties on the committee feel that they were misled because crucial information was withheld. The best account of this is Jane Patterson and Benedict Collins’ MOT fraud: Matthews 'acted in an exemplary fashion'.

This article reports that MPs were not aware of emails that show Matthews knew of concerns about Harrison’s activities. In these emails an internal inquiry was being proposed, but that as Secretary of the ministry he decided not to pursue the matter: “The emails showed Harrison then contacted Mr Matthews, asking him to close down the inquiry. A newly released email, sent by Mr Matthews to the chief legal adviser, said that he would not pursue the matter because he had sought and received assurances from Harrison there would be no further problems with procurement compliance. In the email he also said he did not have enough information to prove Sharp Design had not provided the services it had been contracted to do.”

Winston Peters has been leading the charge against the Auditor-General, saying "The appointment process went to Parliament, and parliamentarians and parties are required to say whether they support or don't support… If we'd have known what had gone on, there's no way we would have said that. We feel seriously brassed off, and so should the public."

Peters reportedly says “he found it hard to believe Mr Matthews did not know what was going on” – see Benedict Collins’ Calls for independent investigation into Transport Ministry fraud. The same article reports that “The Labour Party and United Future is also calling for an independent inquiry into the extent of the fraud.” Peters adds that the Auditor-General needs to stand down from his job while this occurs.

Labour’s Sue Moroney has also been at the forefront of exposing the controversy and in John Weekes’ article, 'Clandestine rendezvous' plotting revealed in Joanne Harrison Transport Ministry fraud case, she is quoted saying, "There are some decisions for Martin Matthews to make now around the integrity of the auditor-general's office but he's the only one who can make those decisions. Well, it's between him and the Speaker." And the Greens’ Julie Anne Genter says, "It is quite surprising that Martin Matthews has got the job as the auditor-general, given what happened under his watch at the Ministry of Transport."

But is it appropriate for politicians to apply such pressure to an independent watchdog like the Auditor-General? Sir Geoffrey Palmer is quoted in this article suggesting that the “auditor-general, once appointed, should be insulated from political pressures”. However, he does point out that there seems to be too much secrecy involved in such matters: "There is a major difficulty here – that is, the Official Information Act does not apply to Parliament.”

Finally, questions continue to be raised about the culture and management at the Ministry of Transport, especially since the bosses there have been so reluctant to front up with any information about what has happened. Therefore, Ryan Boswell reports that Sue “Moroney says she wants to know why it took four months before the Ministry spoke publicly about the case, and only after questions were raised by 1 News” – see: Transparency of Transport Ministry called into question after fraudster employee's dealings kept quiet.