Auditor General resigns

I think it was the only option for Martin Matthews to resign.

RNZ: Auditor-General resigns over fraud investigation

Auditor-General Martin Matthews has resigned due to a critical report into his handling of a major fraud case when he led the Transport Ministry.

But the MPs who ordered that report are now refusing to release it to the public.

Mr Matthews was head of the Transport Ministry while a manager, Joanne Harrison, stole nearly three quarters of a million dollars over several years, despite staff repeatedly raising concerns.

He stepped aside temporarily from his subsequent role as Auditor-General while an inquiry was carried out into whether he was suitable to remain the country’s top public watchdog.

That investigation, by senior public servant Sir Maarten Wevers, began in May and was due to take two weeks, but was delayed.

Read the full official briefing on the report, released this afternoon,here.

Mr Matthews confirmed his resignation this afternoon, saying the “issues and speculation” about how he handled the fraud investigation made it “untenable” for him to continue on as Auditor-General.

“I deeply regret and apologise for the fraud that was committed,” he said in a written statement.

“I wished it had never happened but I accept I am accountable for everything done in and by the Ministry when I was CEO and I am ultimately responsible.

“I feel as angry and aggrieved as anyone about [Harrison’s] stealing and breaches of trust.”

Joanne Harrison was sentenced in February to three years seven months in prison for defrauding the Crown of $723,000.

separate inquiry by the State Services Commission last month found Harrison helped force whistleblowers out of their jobs too early after they raised concerns about her.

Background to the appalling fraud,  Matthews’ inaction and impact on whistleblowers:

The Spinoff:  Is fraudster Joanne Harrison’s old boss really fit to lead NZ’s top public watchdog?

Pete Kane has supplied these updates (audio):

Findings to stay ‘secret’. Don’t get it’
http://www.radionz.co.nz/national/programmes/checkpoint/audio/201853471/auditor-gen-falls-on-sword-over-transport-ministry-fraudster

Update.
http://www.radionz.co.nz/national/programmes/checkpoint/audio/201853483/report-that-prompted-auditor-gen-to-resign-won-t-be-made-public

More background from RNZ:

Auditor general to stand down

Stuff: Auditor-General Martin Matthews to stand down pending independent inquiry

The Offices of Parliament Committee decided unanimously to undertake an independent inquiry into Auditor-General Martin Matthews’ suitability for the position.

He will stand down in the meantime. Review is expected to take a fortnight and will be done by Sir Martin Weevers.

The committee, who appointed  Matthews in the job, earlier met at 4pm to discuss his handling of fraudster Joanne Harrison while he was chief executive of the Ministry of Transport (MoT).

Speaker expects Ministry of Transport to completely comply with investigation, which will determine suitability of Matthews in the position of Auditor General.

I think that this was inevitable.

Concerns raised in Harrison fraud case

Concerns have been raised about why Joanne Harrison was able to get away with fraud in the Ministry of Transport.

Winston Peters calling for a resignation is nothing new, and he does so in this case, with the now Auditor General his target.

Stuff: ‘Clandestine rendezvous’ plotting revealed in Joanne Harrison Transport Ministry fraud case

Fraudster Joanne Harrison tried arranging a night-time “clandestine rendezvous” in her Ministry of Transport office while she was under investigation.

The ministry has also confirmed there were multiple concerns raised about Harrison long before she fled the country last year, in the wake of her $725,000 fraud.

Harrison wreaked havoc at the transport ministry for years and was wanted in Australia over fraud allegations. She stole money from the ministry partly through invoicing fake companies.

New documents released after an Official Information Act request by Stuff show someone was caught on a surveillance camera trying to sneak into the ministry’s office on April 25 last year, three days after Harrison learned she was under investigation and that her building access would be revoked.

Harrison urged a contractor to enter the premises, access her office, and leave an envelope in the payroll office.

Peters, Labour’s Sue Moroney, and the Greens’ Julie-Anne Genter​ raised concerns this week about the fraud, and about Matthews continuing as auditor-general.

Peters…

…has now called for Harrison’s former ministry boss Martin Matthews – who is currently the auditor-general, to stand down.

“He should step down,” Peters said of Matthews on Tuesday afternoon, citing the plight of three MoT whistleblowers he said were treated abysmally.

Peters said that, based on his analysis, “a number of people seriously misled Parliament when they were asked to endorse” Matthews.

Moroney..

…said it was time for Matthews and Speaker of the House David Carter to talk.

“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.”

Genter…

…said the fraud was “shocking” and added: “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.”

Peter Dunne says that there does need to be an investigation but shouldn’t need to stand down while that is done.

Matthews…

…said last night he stood by previous assertions that he had handled the saga decisively, and investigated it thoroughly.

Matthews has repeatedly said he stood by his handling of the case. He is overseas at a conference of auditors-general this week, and said he was unavailable to talk.

Bill English says he thinks that the situation has been dealt with, but it is a matter for the State Services Commission. He won’t comment further without more ‘clarity’.

James Shaw on the Saudi sheep deal

From RadioLive: JAMES SHAW: Things you need to know about the dodgy Saudi sheep deal

The Auditor General’s report into the Saudi Sheep deal, released on Wednesday, is the first step towards us actually understanding how this shabby, sorry saga played out.

This report is a damning indictment of Minister McCully’s rogue behaviour and his total disregard for transparency, due process and the respectable use of public funds.

But that’s only half the story.

Where to begin?

As many people will recall, public outrage began when in 2015 it was revealed that the Government paid a Saudi businessman $6 million to help set up a model farm in the desert.

The businessman, Sheikh Hamood Al-Ali Al-Khalaf, was frustrated after successive New Zealand Governments refused to restart the export of live sheep to Saudi Arabia.

His grievance was getting in the way of the Government’s desire to get a trade deal with Saudi Arabia over the line. Minister McCully had a plan. It involved appeasing Hamoud through a ‘partnership’, allowing him to avoid “a plethora of lawyers and bureaucrats”.

(Someone should tell him that running a country generally involves working with people who know what they are talking about).

This plan involved an AgriHub in the Saudi desert to showcase New Zealand expertise; one that neither the Government nor the New Zealand Government has formal access to.

It got worse: we later learned that apparently to secure the trade deal with Saudi Arabia, the Government also needed to pay Al-Khalaf another $4 million.

According to Minister McCully and the Prime Minister, the “contract” with Al-Khalaf’s business was required because, amongst other things, he had discussed the possibility of a law suit in the $20-30 million ballpark.

This at least is what the Minister told Cabinet, who signed off on the deal.

Three days later, the Ministry of Foreign Affairs and Trade paid $4 million into a bank account, before the company had provided any of the services they were supposedly being paid for.

As the Auditor General herself says, Minister McCully’s plan to pay out Al Khalaf with this contract was a ‘convenient mechanism’ to achieve objectives that the Minister did not clearly identify.

The Prime Minister and Minister McCully have both repeatedly used the legal claim to defend their deal.

It’s unbelievable that, according to the Auditor General, no-one actually stopped to ask whether this claim had a leg to stand on.

On Thursday I asked the Minister why he still refuses to explain how a potentially baseless claim for legal compensation prompted him to spend millions of dollars on a deal that as of today, has produced 700 perished lambs and no Free Trade Agreement.

He was not forthcoming.

Beyond the fact that the Minister misled the public and the Cabinet, he has also set a dangerous precedent.

On the basis of this deal, what’s to stop any other well-connected, millionaire businessmen from demanding a payout to secure a FTA?

Certainly Minister McCully doesn’t know, or refuses to tell us.

The Prime Minister seems happy to stand behind Minister McCully because the Auditor General’s report says he isn’t corrupt (although of course he hadn’t actually read it when he said this).

I think people deserve a higher standard of their Ministers than “didn’t break the law”. We deserve better than three years of cover-ups, misuse of public funds, and rogue behaviour.

John Key needs to let Minister McCully go.

Saudi sheep report

The Attorney General’s report into the Saudi sheep deal looks mucky for Murry McCully, but the AG said that while McCuly didn’t act illegally and there was no corruption there problems with how it was dealt with.

Inquiry into the Saudi Arabia Food Security Partnership

The Auditor-General’s report Inquiry into the Saudi Arabia Food Security Partnership was presented to the House of Representatives today.

In June 2015, we received letters and asking for an inquiry into the Saudi Arabia Food Security Partnership. Concerns were raised about money that the Government had paid to a foreign businessman, and questions were asked about whether the payments amounted to corruption or bribery. In August 2015, we announced our decision to inquire into the spending of public money on the Partnership and set our terms of reference for the inquiry.

In our report, we outline the complex history and background to the arrangements entered into as part of the Partnership. We also consider whether:

• the arrangements were made within the law;

• the business case for spending public money was robust;

• good process was followed; and

• value for money was obtained.

Read the full report on our website.

AGSheepfindings.jpg

Some are claiming that McCully must have lied to Cabinet and lied to Parliament. He at least was far from forthright enough for a Minister.

agsheepmccully

McCully doesn’t look very comfortable.

John Key seems to be standing by McCully but this doesn’t help the perception of third term-itis.

Somehow I don’t think ‘Look, I wasn’t caught doing anything actually illegal’ is going to cut it this time.

Felix Marwick: For those that want to see Foreign Minister Murray McCully’s stand up on the OAG report on the Saudi sheep deal

Inquiry into Niue Hotel management contract

In April Andrew Little asked the Auditor General to investigate the awarding of a management contract for a Niue hotel. Little had suggested something could be amiss (the term he used was “stinks to high heaven”) as a National party donor, Earl Hagaman, owned the company that won the contract.

Labour leader Andrew Little said the close timing of the donation to the awarding of the contract “stinks to high heaven” and he had asked the Auditor-General to investigate whether it was above board.

“New Zealand money, which was earmarked as aid for the island nation, has instead been given to upgrade a resort run by a National party donor.”

He said it was Mr McCully’s personal appointees on the trust which awarded the contract. “We must have questions answered on how the tender process worked, who knew about links between donations and the tenderer and whether Niuean people will ultimately benefit from the resort’s funding. The perception of propriety is key.”

The Auditor General published their report today via a letter to Little , saying that they found nothing of concern. This could be a bit awkward for Little as Hagaman is taking defamation action against him. An apology and settlement on the cards?


Dear Mr Little

REQUEST TO INQUIRE INTO THE AWARDING OF A MANAGEMENT CONTRACT FOR A NIUE HOTEL

This letter responds to your request of 18 April 2016 for my Office to look into various matters about the awarding of a management contract for the hotel on Niue. The information you subsequently provided to my Office on 27 July and 2 September has been considered as part of preparing this response.

There is one hotel on Niue. It was formerly owned by Matavai Resort Limited. It is now owned by Matavai Niue Limited, operated by Scenic Hotel Group, and called the Scenic Matavai Resort. In this letter, we use the term “the resort” to refer to the hotel on Niue.

1. Your request

The specific issues you raised were:

  1. whether the tender for a hotel operation to brand and operate the resort followed due process and whether all potential and actual conflicts of interest were declared;
  2. who knew about links between political donations and the tenderer, and what influence, if any, the donations may have had on the tendering decisions;
  3. why the resort was prioritised for $7.5 million of development funding and whether that funding fitted within the funding criteria;
  4. how the $7.5 million funding will be spent and where most of the benefits will accrue; and
  5. to what extent the Niuean people will ultimately benefit from this funding.

After a lot of detail:

In conclusion

We have found, from the available information, that there was a standard procurement process, with reasoned and documented analysis for the selection of Scenic Hotel Group as the hotel operator for the resort and for the subsequent investment of New Zealand international development assistance funds in expanding the resort.

Because of the level of interest in the issues that you raised, we have decided to publish this letter on the Office of the Auditor-General’s website so that the information is also available to the public and Parliament.

Yours sincerely,

Lyn Provost
Controller and Auditor-General

AG letter link: Response to request for inquiry into awarding a management contract for a hotel in Niue


Looking back:

Scenic Hotel company versus Andrew Little

Founders of Scenic Hotel Group, Earl and Lani Hagaman, say they would welcome an Auditor General investigation into allegations and insinuations made by Andrew Little, and they are considering legal action Little’s comments.

NZ Herald: Scenic Group founders consider legal action

The $101,000 donation was made on 18 September, the last week of the election campaign in 2014. A month later Scenic Hotels won a contract to manage the Matavai Hotel on Niue, which is owned by a trust appointed by Foreign Minister Murray McCully on behalf of the Niue Government.

Mr Little said the timing “stinks to high heaven” and wrote to the Auditor General last week asking for an investigation into the donation and the handling of the contract, which was signed between Scenic Hotel Group and the hotel board in October 2014.

The Auditor General is yet to decide whether to investigate but in a statement, the Hagamans said they would welcome an investigation from the Auditor General and would cooperate fully.

“In fact we request that an investigation occurs urgently in order to remove any doubt about the integrity and honesty of our name,” said Mrs Hagaman.

Lani Hagaman said the management contract for Matavai Resort Niue was gained by Scenic Hotel Group in an open and contestable process against other hotel groups.

Mrs Hagaman said it was a “political beat-up” by Mr Little.

“We are not interested in being Mr Little’s political football. These nasty and unfounded allegations need to stop and I would urge Andrew Little to stop wasting tax payer money on trying to promote his own political party and ego.”

This is a fairly predictable response to Little’s attack.

His insinuations suggested collusion between the National Party, Murray McCully, Scenic Hotels and the board members of the Niue Tourism Property Trust (including Jacinda Ardern’s father, ex policeman and New Zealand High Commissioner to Niue) in the awarding of a contract.

Ian Fitzgerald, the chairman of the Matavai Niue Limited which runs the Matavai has also now spoken, saying he would have “absolutely no concerns” if the Auditor-General looked into the process.

Mr Fitzgerald is one of four board members appointed by the Niue Tourism Property Trust to oversee the running of the hotel, which $18 million of New Zealand aid money has been invested in. The agreement was negotiated and signed between Scenic Hotels and the board rather than the Trust itself. Mr Fitzgerald said he was unaware Mr Hagaman had donated to the National Party and the board had only dealt with Scenic Hotels Group’s managing director, Brendan Taylor. It was in contract negotiations with Scenic Group for six months before the contract was awarded – well before the donation was made.

This confirms some obvious timing issues with Little’s claim – a one month timeframe from donation to awarding of the contract, suggested as a coincidence of concern, seemed far too short to have credibility.

In a statement, Mr Little said he was pleased the Hagamans would fully cooperate with an investigation. “The public deserves full transparency on this issue given National’s largest financial donor gave the party $100,000 during a tender process, then a month later his company was awarded a major government contract. The public must have confidence that the process led by Murray McCully was above board.”

Little is still digging – digging at McCully and digging a dirty politics hole.

If the Auditor General decides to investigate and finds impropriety in the awarding of the contract then there could be serious repercussions for McCully, who has signalled his exit from politics next year anyway.

If no problem is found this will not look good for Little, at a time that his credibility as a potential Prime Minister may come under increasing scrutiny and pressure.

Little has provided no evidence of impropriety, he has just made very strong insinuations in saying the timing “stinks to high heaven”.

Winston Peters gets away with this sort of dirty politics quite often but it is remarkable for a Labour leader to directly involve themselves in an attack like this.

This was a very risky move by Little, following an attack on tax expert John Shewan last week. It could be make or break for his leadership and possibly for his political career.

Saudi sheep inquiry

The Auditor General has announced today that she will carry out an inquiry into the Saudi sheep deal. It’s good to see this. It should shed some lihgt on an issue that has some concerning aspects.

And it’s good to see opposition MPs pushing for accountability like this.

Auditor-General to inquire into the Saudi Arabia Food Security Partnership

The Auditor-General has received requests from James Shaw MP, Hon David Parker, the New Zealand Taxpayers’ Union, and in a petition to inquire into the Saudi Arabia Food Security Partnership. Our response to those who wrote to us is set out below.

Dear Mr Shaw,REQUEST FOR INQUIRY INTO THE SAUDI ARABIA FOOD SECURITY PARTNERSHIP

Thank you for your letters of 28 May and 24 June 2015. I have been asked by you and another member of Parliament, the New Zealand Taxpayers’ Union, and in a petition from about 10,000 New Zealanders to inquire into the Saudi Arabia Food Security Partnership (the Partnership).

On 4 August 2015, the Ministry of Foreign Affairs and Trade (the Ministry) released documents that may have provided enough information for people to make their own assessment of some questions. But other questions remain; some of which I may be able to answer; some I cannot.

I have, therefore, decided to carry out an inquiry into the expenditure of public money on the Partnership.

Terms of reference for the inquiry

My inquiry under the Public Audit Act 2001 will look at the following:

  • the amount of public money budgeted and spent on this Partnership, how it has been used, and the outcomes achieved with it;
  • whether the expenditure on services was within the appropriations of Vote Foreign Affairs and Trade, as authorised by Parliament;
  • the procurement and contract management practices used by the Ministry and New Zealand Trade and Enterprise to purchase services relating to the Partnership;
  • whether the services received were in keeping with the business case and contract specifications; and
  • any other related matter that I consider it desirable to inquire into and report on.

Our work in 2013

In 2013, at the request of the Ministry, my Office carried out some work that involved commenting to the Ministry on the Indicative Business Case and the related appropriation for Vote Foreign Affairs and Trade. The letters setting out our comments have been released publicly. There have been significant developments in the execution of that business case since 2013, and the inquiry will focus mainly on that period.

Reporting publicly

I do not normally make any public comment on the substance or progress of an inquiry while our work is under way. I will report publicly on my findings once I have concluded the inquiry.

Yours sincerely

Lyn Provost
Controller and Auditor-General

NZ Herald reports on Murray McCully’s response in Inquiry to be held into Saudi sheep deal:

Foreign Minister Murray McCully said he welcomed the scrutiny by Mrs Provost.

“We have said from the outset that the Auditor-General is entitled to scrutinise any spending of public money, whenever she chooses, and we welcome her decision to carry out an inquiry into the Saudi Food Security Partnership,” Mr McCully said.

“The Government is comfortable with the process that was followed in relation to the Agrihub, and the wider Food Security Partnership, and relevant departments, including MFAT, will provide all necessary support to the inquiry.”

About $11.5 million has been spent on sending New Zealand sheep and equipment to businessman Hamood Al Khalaf’s farm in Saudi Arabia, with $6 million of that spent on establishing a farm, including equipment and technology.

Mr McCully has said it was partly done to appease Mr Al Khalaf, who lost millions of dollars during a New Zealand ban on live sheep exports.

His ill feeling was a major obstacle in the way of a free-trade deal in the region, Mr McCully said, and negotiations were now able to move on. The farm would also act as a demonstration base for New Zealand agribusiness, and remove the threat of legal action, he said.