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We Are Indigo co-founder Pat McFie, nee McPhee. (Photo: Supplied)
We Are Indigo co-founder Pat McFie, nee McPhee. (Photo: Supplied)

BusinessDecember 10, 2022

The troubling backstory and new legal chaos engulfing We Are Indigo

We Are Indigo co-founder Pat McFie, nee McPhee. (Photo: Supplied)
We Are Indigo co-founder Pat McFie, nee McPhee. (Photo: Supplied)

This week brought a massive new contract and an ominous new legal threat to celebrity-backed agency We Are Indigo. Multiple sources have provided The Spinoff fresh allegations which suggest this storm is only gathering momentum.

It was a long strange week for We Are Indigo, the agency at the centre of a growing storm within both the innovation and creative sectors. It began with a massive, life-changing win – the announcement that it has been selected by Creative New Zealand (CNZ) to create a huge new $5.3m platform to help digitally transform the arts sector. The contract runs through 2027, longer than the company has been in existence. It’s a transformative project, especially given that its precise shape is deliberately unclear. We Are Indigo has set up another new company, Toi Ki Tua (it already has a subsidiary called Manaaki), to run it, and the first job is figuring out exactly what it should be making.

That set off a shocked reaction within the creative sector, which is used to having scratch and claw to receive comparatively tiny sums from CNZ, and be extremely clear about exactly what it is the government is paying for. In October there was an international furore when it declined $31,000 in funding for Shakespeare programme. So more than $5m being allocated to a new platform with little guidance left many in the sector in shock.

Still, CNZ held firm despite the uproar. Just when We Are Indigo might have been forgiven for thinking it could celebrate, Vic Crone, the ex-chief executive of Callaghan Innovation, the government’s innovation agency, put an explosive post on LinkedIn. “Today I speak up,” she wrote, “commencing legal action towards We Are Indigo / We Are Manaaki, and personally against its Directors Andrew Hamilton, Monty Betham and Patrick MacFie.”

The three leaders of the agency are all powerful and highly connected in their own right. Hamilton founded the Icehouse and is a major player in New Zealand’s technology scene. Betham is a former captain of the NZ Warriors who has gone on to fame as a boxer, while MacFie had a key role with NZ tech behemoth Xero and has become a major voice on the role of Māori in technology and creative industries. All three have been represented by Mike Heron, the former solicitor general, a King’s Counsel and one of the country’s most prominent lawyers.

Heron has spent weeks trying to control the blowback from some controversial and still-confidential (though now widely leaked) due diligence reports commissioned by Callaghan. In the process they have cast Crone and her professional conduct in a poor light. The LinkedIn post was Crone announcing that she’d had enough, and potentially sets the stage for an explosive defamation trial in the new year.

We Are Indigo’s Andy Hamilton, Patrick MacFie and Monty Betham (Image design: Tina Tiller)

How did it come to this?

This all began a year ago, when Crone was still running Callaghan Innovation. The agency exists to help New Zealand businesses in tech and R&D-based industries thrive and grow faster, and asked private entities to pitch for the opportunity to create a “Founder and Startup Support Programme” to work with various business communities. As part of that process, Crone inserted a clause which would prove fateful: all applicants had to undergo a due diligence process to determine that they were fit and proper to carry out the work. This extra layer of due diligence was in response to the death of Jake Millar, a founder whose fate came to symbolise the stresses the sector can exert on the often young and vulnerable people who start the ambitious businesses Callaghan is tasked with fostering.

Callaghan were of the belief that the due diligence repots could be shared with other government agencies involved in procuring similar services – though We Are Indigo strongly dispute this. While the contents of the reports are currently confidential, and sit with the ombudsman to determine whether they should be released under the OIA, we can say that there were two reports, and the material uncovered was damning enough that Callaghan did not consider We Are Indigo / Manaaki for the programme. Further, in one of her last acts as leader of Callaghan, Crone passed the reports on to a key procurement official at the government’s business ministry, MBIE, because she was sufficiently troubled by what they contained. In November, Callaghan board member Rachel Kelly resigned over what she perceived as Callaghan inaction over the reports, citing “serious conflict over my ethical code and the decisions made by the board”.

We Are Indigo has maintained that the reports are compromised, saying that the process by which investigator John Borland was hired by Callaghan is suspect and that he has links to their antagonists. Crone disputes this, saying that it was above board – and that regardless, it is the content of the reports which matters. She says she has consulting firm EY on her side – they vetted the reports and agreed that they are “aligned with generally accepted good practice”. Yet because millions of dollars in public funding and some very prominent reputations are on the line, this has become subject of a rolling dispute which shows no signs of abating.

On one side you have Crone, former MD for Xero NZ, a director of Contact Energy and chair of Stats NZ’s advisory board. On the other that trio of founders, a sports star, a startup scene veteran – and MacFie. The fight is fuelled by over $10m in government funding, with a large group of Māori and Pacific people working in creative and digital industries caught in the middle.

Former Callaghan Innovation CEO Vic Crone (Image: Callaghan Innovation)

The pre-history of Pat McPhee

“Pat MacFie has form”, read an email which arrived in the aftermath of The Spinoff publishing its first feature on the We Are Indigo saga. Multiple sources sent through information around his dealings when he went by Patrick McPhee in the early ‘00s, and was involved in a convoluted deal involving disputed leases, Te Māngai Pāho and Māori Television which fell apart in a tangled web of related parties, and accusations of forged signatures and figurehead shareholders.

Some years later he changed his name to MacFie, to distance himself from his father, he says. He plunged himself into further startups, including Splurf, a business directory, and an online magazine, itself called StartUp. There he employed journalist Sonia Yoshioka Braid as editor, but failed to pay her for her work. The debt was $8,000 and still hurts to this day, she says. “This was at a time when I really needed it, as a single mum putting myself through university as a mature student… He refused to pay – and has never ever stumped up, despite repeated requests.”

Some years later MacFie had another small tech company going, a sports news aggregator called OnSport. He employed rugby writer Jamie Wall for months, but the site never got out of beta. “I ended up working for three or four months without getting paid,” says Wall. “Pat eventually wrapped the project up and promised we’d get our money, but we never heard from him again.”

When asked about the bad debts, MacFie did not dispute Wall and Yoshioka Braid’s claims. “I’ve never hidden from my failures in life or in business, yes I’ve failed before, and while I haven’t heard from the people mentioned for many years, and any outstanding debts are related to the business, I would welcome the opportunity to reconnect with them and to personally provide them with compensation,” MacFie said in a statement released to The Spinoff.

Is it really over?

MacFie’s contention is that his actions prior to the founding of We Are Indigo in 2019 are in the past, and not relevant to its future, or his suitability as the majority shareholder and leader of We Are Indigo. Yet while the contents of the due diligence reports remain confidential for now, reporting by the NBR’s Maria Slade revealed a lengthy dispute between We Are Indigo and a supplier named K&J Growth Partners over an invoice for $160,000, which was only resolved after a threat of legal action.

Another contractor who worked for We Are Indigo on a government-funded campaign named Digital Boost in 2020 says she had major issues with being paid too. She has asked to be anonymous due to working in a similar agency now, but she says her experience was so bad that she decided to end her career as a freelancer as a result. We Are Indigo was, she says, “without a doubt, the worst client I have ever worked with in my life”.

She says she was expected to be at her desk from first thing in the morning until well into the evening, far beyond her contracted hours. She also says that We Are Indigo broke the terms of the agreement, which required 50% payment up-front, followed by the balance on completion. Despite repeated requests, she was never paid the initial amount, leading to considerable stress, as she was relying on the income to pay her rent. It was only after the contract finished and she threatened legal action that she was finally paid.

In response, We Are Indigo said in a statement that it could not respond specifically to what it described as “vague” allegations, but did say that it has “a fast-paced and supportive team vibe here. We also get that not all workplaces are for everyone.”

On Monday Creative New Zealand announced a $5m contract with We Are Indigo. (Image Design: Tina Tiller)

Creative New Zealand does not want to know

The heart of this story remains the pair of due diligence reports, commissioned by Callaghan Innovation and performed by Borland, the award-winning ex-Australian cop who runs Isacorp, a private investigation company based in Auckland. They consisted of interviews with eight different sources named by We Are Indigo / Manaaki as part of its credentials when applying to run the $2m Callaghan startup support programme. While some of those sources were favourable to We Are Indigo, the majority were not, making allegations which, again, cannot be made public, but were certainly more than sufficient to stop Callaghan from procuring We Are Indigo / Manaaki. (Subsequent to publication, We Are Indigo’s Hamilton contacted The Spinoff to say that they were not aware that an external contractor would be hired to complete the due diligence, and disputing that the contract allowed for the reports to be shared with other government departments.)

The reports were supplied to MBIE and to executives and directors of Callaghan, but otherwise quite tightly held – when they were anonymously leaked to The Spinoff in November, almost no one we spoke to had seen them. In recent weeks their contents have become far more widely known, as an anonymous email address has sent them to a number of interested parties, which has further inflamed the situation. At the same time, We Are Indigo has its supporters too – a blogger named Debra Hall, writing under the name Rugby Mother, has cast doubt at We Are indigo’s detractors.

A statement to The Spinoff supplied by MacFie said that We Are Indigo is “appalled at the actions taken by the people who believe they are above the law and are taking matters into their own hands, leaking and sharing these reports. This action shows an effort to undermine an existing decision making process and to exert damage and injury on Indigo team and its families.”

Another key player in all this is Robett Hollis, the Māori entrepreneur and commentator who has been in touch with many of the founders whose testimony forms the basis of the reports, and has made persistent statements on his newsletter and LinkedIn about the situation.

After Monday’s announcement of the $5m contract, he wrote a lengthy open letter to CNZ’s chief executive Stephen Wainwright which made reference to “multiple innocent Māori / Pasifika who have been directly affected by all this” and asked a long series of very pointed questions of Wainwright. When asked for comment on Hollis’ letter, We Are Indigo simply said: “we don’t wish to comment on such a blatant display of defamation”.

Entrepreneur Robett Hollis (Photo: Supplied)

The centre of all this is Creative New Zealand’s decision to “not seek any advice from government procurement” and deliberately avoid accessing the due diligence reports, which it claimed were “matters of contention”. It also made the quite extraordinary claim that the extensive reporting on the situation by the NBR, BusinessDesk, The Spinoff, Stuff and the NZ Herald “originate in social media postings by one individual… and are unsubstantiated allegations”, despite multiple named sources existing in the many stories on the issue.

“Some ra-dy-rah”, as Wainwright put it in an interview with The Spinoff’s Sam Brooks earlier this week. He also said in a statement in response to Hollis’ open letter that “we’re confident that we had the information we needed to make an informed decision through our own due diligence process”.

What does We Are Indigo actually do?

Along with refusal to read the reports and its dismissal of the extensive reporting involved, a large plank of Creative New Zealand’s decision to award the $5.3m contract to We Are Indigo’s new subsidiary Toi Ki Tua was that CNZ had already completed its own programme with We Are Indigo’s other subsidiary Manaaki. It was called the Vaka Measina Pacific Creative Enterprise programme, and was intended to help Pacific people working in the arts develop sustainable funding opportunities. When asked about how the work went, a spokesperson for CNZ said that “the Pacific Arts group’s experience partnering with Manaaki on this pilot programme has been positive, open, and transparent”.

Ema Tavola strongly disagrees. The founder of South Auckland art gallery and creative consultancy Vunilagi Vou was a participant in the programme, and describes it as “absolutely gross to feel demeaned, weekly, by Manaaki staff, who were speaking to us like we were so, so utterly stupid”.

Ema Tavola. (Photo: Pati Solomona Tyrell)

In emails supplied to The Spinoff a Manaaki staffer suggests “a bigger conversation about the influencing change through the application of Web3.0 in business”. Web3 is the catchall term for the blockchain, cryptocurrency and NFT-based economy which has proven controversial within multiple sectors, particularly after the high profile collapse of companies like FTX. We Are Indigo’s MacFie is a strong proponent of the scene, persistently advocating for it in multiple social media posts, and while the $5m Creative NZ RFP awarded to We Are Indigo / Toi Ki Tua does not mention Web3, it does make reference to a “step change in sector capability to create, distribute and monetise the unique arts and culture of Aotearoa New Zealand”.

Tavola found the whole course amateurish, and was bemused after being told to DM her bank account via social media to be paid the associated stipend, instead of issuing an invoice, and there being no clarity about whether the stipend was inclusive or exclusive of GST. She says that the programme was of little value, because there is a “really clear difference in both my research and my lived experience, of creatives who work in monetisable commercialised sectors (design, digital, screen-based sectors etc), and those whose work is ‘art for art’s sake’ and makes valuable contributions to our national culture and arts landscape”.

The relationship ultimately broke down, and Tavola withdrew from the course, in part after receiving an email in which Manaaki’s representative on the CNZ-funded programme lamented that “so many creatives continue to struggle to sustain themselves pre and post-pandemic beyond Govt funding”.

Tavola summed up her experience to CNZ, saying “as a creative entrepreneur with almost two decades of industry experience, I’ve found this programme poorly designed, inappropriately managed and generally a huge disappointment”. Despite this, CNZ claims to have received “no formal complaints from any member of our Pasifika Creative Enterprise pilot”, a framing of the events Tavola finds “infuriating”.

Where will it end?

We Are Indigo is not backing down, despite the drama. In a statement provided to The Spinoff, it said “We believe very strongly that a Government Agency [Callaghan Innovation] should have never overseen such a biased and flawed procurement process and should be taking more action to prevent the continual leaking, illegal behaviour and defamatory statements that are being made… We have also engaged lawyers to provide advice to us on the basis of proceedings against the main parties in this process including, Robett Hollis, Mr John Borland and Callaghan Innovation… We will protect our rights against the people behind these actions.”

Yet with Crone now saying that she is taking legal action of her own, with prominent business identities including the MindLab’s Frances Valintine, Sir Ray Avery and Sir Ian Taylor all voicing support for her, and Hollis engaging counsel too, it seems plausible that this all ends up in a titanic defamation trial. The due diligence reports have metastasized into a battle which is only escalating, with We Are Indigo having involved the Ombudsman, Attorney General and Privacy Commissioner. They join Callaghan Innovation, Creative NZ and MBIE as it spreads through an ever-increasing number of government entities.

Beyond that, the innovation and creative communities are seething, and past behaviour, long buried, is coming back to haunt MacFie. The core issue remains that in attempting to create culturally safe opportunities for Māori and Pacific creatives and entrepreneurs, various branches of government have lavishly funded a startup which a large number of Māori and Pacific entrepreneurs suggest has done more harm than good. For its part We Are Indigo feels like its mis-steps have been blown out of all proportion, and a government agency has colluded with private individuals to harm its business. It still has the potential to acquire a political dimension too, given the sums of taxpayer money and government agencies involved, though culture minister Carmel Sepuloni calls the dispute an “operational matter”, and says she has “no hand in their funding or contracting decisions”. Regardless, the We Are Indigo saga keeps expanding, with no plausible end in sight.

Update, December 14: This story has been updated to reflect that We Are Indigo dispute whether the RFP allowed for due diligence reports to be shared, and be more precise about the scope of EY’s assessment of the due diligence reports.

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