Politics

The Ministry of Transport fraud case: Why the rot goes deeper than Joanne Harrison

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 

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 Matthews is currently constructing his response to the unpublished, but complete, Wevers investigation.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.

Part of the whistle-blower’s forensic guide to Ministry documents. A link to the entire document is above.

Crucially, the MOT documents show that Joanne Harrison was not some sophisticated operator capable of bewitching and beguiling honest and astute civil servants. She was a brassy and clumsy fraudster who got spotted really early – three years before any action was taken at the top. She was spotted early by people who then subsequently suffered at the hands of Harrison.

The document trail clearly shows Matthews being told by his own senior legal and financial people, time and time again over a three year period, that Harrison was failing to comply with public service rules around contracts and invoices. The invoices were fakes. Amateur, rough fakes. Illegal travel to nonexistent conferences. Government jobs engineered for her husband and an acquaintance. It was a criminal romp.

And yet the invoices were paid. Why?

Matthews appears to have personally shut down internal investigations into Harrison – amazingly, at Harrison’s request. Why?

Melbourne’s police fraud and extortion unit contacted the Ministry of Transport on July 25, 2014 saying that Harrison, clearly identified by her date of birth, was a person of interest who they wanted to interview. Matthews actually discussed this with Harrison, but nothing was done. Why?

Australian police email to the Ministry of Transport in 2014. Source – MOT

Yesterday’s Commission report is limited to reporting on whether Joanne Harrison influenced the subsequent departure of MOT staff who made complaints about her. She did influence that process. She did put these staff at a disadvantage even though the restructuring itself was found to have been a valid exercise.

However the Commission’s findings will surely flow through to the sentiment in parliament when Wevers’ report is released. Is Martin Matthews a suitable person to be our auditor general? Yesterday’s report shows that, on his watch, whistle-blowers were significantly disadvantaged by Harrison on top of his failing to listen to their complaints about her fraudulent activity.

The back story to what happened at the MOT goes further than the relatively narrow remit of the State Services Commission report.

This new whistle-blower shared some fascinating background with The Spinoff.

Martin Matthews was assistant auditor general for eight years from 1990. One of his core responsibilities was fraud prevention. His boss for much of that time was Jeff Chapman. Chapman holds the dubious distinction of being New Zealand’s highest ranking civil servant to be convicted and jailed for fraud. As auditor general and head of ACC, according to evidence at his trial in 1997, Chapman lived the high life: first-class travel, fine wine and food, trips on Concorde and helicopter rides from the French Riviera to Monte Carlo. He was found guilty of defrauding ACC of $20,000 and the Audit Office of $34,549.

According to our source, Matthews had given MOT staff the impression that he was aware his former boss, Auditor General Chapman, had been cheating the system. Matthews, said the source, had been clear that he would not breach the rules, and always stayed, for example, in standard, public service approved hotels. If Matthews did have knowledge of Chapman’s crooked behaviour, however, there is no evidence that he blew the whistle himself.

But according to the former Ministry of Transport employee, the very telling of this story by Matthews was inferred as a discouragement to raise alarm over wrongdoing. According to our source’s account, the impression gained by senior staff was that whistle-blowing was better avoided.

Another former employee, speaking on the condition of anonymity, told The Spinoff that in 2015 Martin Matthews instructed MOT staff that during an upcoming visit by auditors they should answer only direct questions and not volunteer any information.

The Spinoff asked Matthews to answer questions relating to this story through the office of the auditor general, and was referred to his May 24 statement: “I have no further comment to make on these matters while this process is under way.”

Auditor General Martin Matthews, left, and his former employee Joanne Harrison at her sentencing earlier this year.

The first two groups of sacked whistle-blowers had ended up talking with Labour’s Transport spokesperson Sue Moroney. The Government’s own Protected Disclosures Act, designed to protect whistle-blowers, had failed. They were out in the cold with no official support. And so they turned to the opposition MP. Moroney explained why she is so alarmed by the Matthews affair. “The systems did work in that the Harrison fraud was spotted quite early by the legal and financial people at the MOT. But the correct actions weren’t taken.”

In parliament Moroney stated that Martin Matthews was told no less than 12 times, on eight different occasions, that Harrison was a fraudster. The MOT documents tend to back up this claim.

One of the other safety nets that should have helped shut down the Ministry of Transport fraud is the Public Service Association, the union for public service employees. The PSA represents around 63,000 public servants but the number of PSA members in each Ministry varies. Sometimes the PSA represents 99% of a particular arm of the Public Service, but notably at the Ministry of Transport only 30% of staff are PSA members. One of the PSA’s roles is to support and protect whistleblowers.

Acting PSA National Secretary Kerry Davies says the PSA membership is often influenced from the top. “Union membership of the PSA is driven by the workplace culture within a particular government agency and that culture is very much determined by the chief executive and the senior leadership team.”

Joanne Harrison actually referred in one of the documents to an MOT staff member’s PSA membership as being akin to misbehaviour or disloyalty.

I asked Davies if she thought the PSA was doing enough to support whistle-blowers. She said more needed to be done and that the association was keen to educate their members on their rights when it came to speaking up about fraud or other serious public service issues.

One of New Zealand’s top corporate governance experts is Cathy Quinn, a partner at law firm Minter Ellison Rudd Watts. Already she sits on an advisory board to the Treasury’s chief executive, an example of private sector expertise influencing behaviour at a government level.

She told me that in the private sector, chief executives are usually kept close to the company chair, not just to make sure things are not going wrong but so that the board can understand if the chief executive is under any unusual pressure in their personal lives. She paints a picture of benign, even benevolent, oversight and tells me that in most big companies the chair and chief executive would talk at least once a week. The chair, or other senior board member, can often act as a mentor to the chief executive.

Just as the public service, with 300,000 staff, is not political, neither is the running of parliament. They are both part of the machinery of government. Their neutrality is supposed to be sacred. The politicians create the drama, but ultimately we vote and the system is supposed to deliver against that national democratic decision.

So why was the speaker of the house, David Carter, so seemingly irked when he announced to journalists in May this year that Sir Maarten Wevers was to launch his investigation into whether Martin Matthews was a suitable person to be auditor general? Matthews had apparently, just hours earlier, stood himself down from the job and called for an investigation to clear his name. Perhaps he saw it coming?

Carter labelled the situation “trial by media” and said he had complete confidence in Matthews. After all, it was mainly Moroney’s advocacy for the whistle-blowers that had kept the whole issue alive. The Office of the Auditor General and the State Services Commission had been conspicuous by their absence. In late 2016, even after Moroney went public with her whistle-blower evidence, neither the new MOT chief executive or the Minister of Transport would agree to an investigation.

Parliament’s own cross-party committee had approved Matthews as our new auditor general, on a seven-year term, late last year. The committee had been told that Matthews’ behaviour, since the fraud had been exposed, had been “exemplary”. That reference apparently came from the Serious Fraud Office, but was limited to the time since Matthews “became suspicious of fraud”.

The MOT’s own document trail would put that date back in 2013 or 2014, not 2016, assuming Matthews had listened to his own senior staff. Those Ministry of Transport documents, catalogued by the the new whistle-blower, show Matthews only took action after someone sent him a message on LinkedIn in early 2016 telling him Harrison was a fraudster. So much for the official channels. It was a social media post that did the trick.

Labour’s Transport spokesperson Sue Moroney

Just a few weeks before house speaker David Carter’s announcement of the Wevers investigation, Moroney had finally succeeded in getting a meeting on April 26 with the state services commissioner, Peter Hughes. After several attempts, it was just about her last ditch attempt to get some action on behalf of the whistleblowers.

Moroney told me that getting the meeting was tough and she had to fly from Hamilton to Wellington especially. Parliament was not sitting and she kept the meeting private because “when an opposition MP insists on seeing the state services commissioner it can get political.

“I reminded him of how everything was connected. I reminded him that the integrity of the public service had been called into question. I reminded him that the public needed to have trust in the public service. I reminded him how important it was that public confidence in the public service is restored.”

Ten days later Peter Hughes announced that the State Services Commission would investigate how the MOT whistle-blowers came to lose their jobs. I asked Moroney if Hughes had been supportive or reluctant in offering her support at that meeting. “He was reluctant,” she replied.

Nevertheless, the dominoes had started to fall. No one yet knows where it will finish.

Somewhat prophetically, and heavy with subsequent irony, here’s what Matthews said in an interview with the Chartered Accountants magazine Acuity in January this year, just a month before starting work as Auditor General.

“Our current regimes are now nearly 30 years old, and I am not convinced they will remain ‘fit for purpose’ for much longer. I think our formal accountability regimes are increasingly being displaced in the so-called ‘post truth’ era we now live in, where citizens in some countries are now more likely to form views about governmental performance from non-authoritative sources on social media.

Effective accountability of governments is important if we are to maintain public trust and confidence in government, a critical requirement for an effective democracy and civil society.”

In this interview Martin Matthews ended up predicting what may well be his own downfall. It will be fascinating to see how the Wevers investigation plays through. Whatever the outcome, it seems a fair bet that the effect on our public service, and future whistle-blowers, will be profound.


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