Posted on May 26, 2022 by Ming Gu and Lindsay Taylor
ICAC Report: Investigation into the Former NSW Roads and Maritime Services
On 20 May 2022, the Independent Commission Against Corruption (‘ICAC‘) released its report on the investigation (‘Operation Ember‘) into the awarding of contracts by employees of the former NSW Roads and Maritime Services (‘RMS‘), which is now part of Transport for NSW (‘TfNSW‘).
Operation Ember concerned allegations that two employees of RMS dishonestly exercised their official functions to award government contracts valued at over $12.2 million to companies owned by their friends. The two employees concerned respectively occupied the positions of ‘manager’ and ‘business systems analyst’ in the Heavy Vehicle Programs Unit of the RMS.
Relevant Findings of Fact
The ICAC found that from November 2015 to June 2016, the manager misused his position to:
- assist a company, of which a friend of his was the sole director and shareholder, to be appointed to the RMS’s Heavy Vehicle Maintenance Panel,
- manipulate tender processes to arrange for contracts to be awarded in the company’s favour, and
- run a deliberate joint enterprise/scheme with the friend to maximise profit for the company under the contracts.
The ICAC also found that from January 2017 to August 2018, the manager and the business systems analyst together misused their positions to:
- assist a company that was under the control of a common friend of theirs, and of which the friend’s wife was the sole director and shareholder, to be appointed to the RMS’s Professional Services Contractor Panel,
- ensure the company to be a winning tenderer by manipulating the specifications and requirements of the request for tender in favour of the company, and
- draft the tender submission for the company.
In both instances, the ICAC found that the employees concerned either deliberately failed to declare that there was a conflict of interest, or falsely declared that there was no actual, perceived or potential conflict, arising from their friendships with the owners of the companies in exercising their official functions, when in fact there were serious conflicts of interest existed.
Independent Commission Against Corruption Act 1988 (NSW) (‘ICAC Act’)
Section 8(1) of the ICAC Act defines corrupt conduct as follows:
‘(a) any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the honest or impartial exercise of official functions by any public official, any group or body of public officials or any public authority, or
(b) any conduct of a public official that constitutes or involves the dishonest or partial exercise of any of his or her official functions, or
(c) any conduct of a public official or former public official that constitutes or involves a breach of public trust, or
(d) any conduct of a public official or former public official that involves the misuse of information or material that he or she has acquired in the course of his or her official functions, whether or not for his or her benefit or for the benefit of any other person.‘
Relevantly, s8(2) of the ICAC Act provides that the conduct outlined in s8(1)(a) can also involve any of the following :
- official misconduct (including breach of trust, fraud in office, nonfeasance, misfeasance, malfeasance, oppression, extortion or imposition) (see s8(2)(a)),
- bribery (see s8(2)(b)),
- obtaining or offering secret commissions (see s8(2)(d)),
- fraud (see s8(2)(e)),
- embezzlement (see s8(2)(h)),
- obtaining financial benefit by vice engaged in by others (see s8(2)(r)),
- matters of the same or a similar nature to any listed above (see s8(2)(x)), and
- any conspiracy or attempt in relation to any of the above (see s8(2)(y)).
Section s8(2A) of the ICAC Act specifies that corrupt conduct is also any conduct of any person (whether or not a public official) that impairs, or that could impair, public confidence in public administration and which could involve any of the following matter:
‘(a) collusive tendering,
(b) fraud in relation to applications for licences, permits or other authorities under legislation designed to protect health and safety or the environment or designed to facilitate the management and commercial exploitation of resources,
(c) dishonestly obtaining or assisting in obtaining, or dishonestly benefiting from, the payment or application of public funds for private advantage or the disposition of public assets for private advantage,
(d) defrauding the public revenue,
(e) fraudulently obtaining or retaining employment or appointment as a public official.‘
However, s9(1) of the ICAC Act provides that despite s8, conduct does not amount to corrupt conduct unless it could constitute or involve the following:
‘(a) a criminal offence, or
(b) a disciplinary offence, or
(c) reasonable grounds for dismissing, dispensing with the services of or otherwise terminating the services of a public official, or
(d) in the case of conduct of a Minister of the Crown or a member of a House of Parliament—a substantial breach of an applicable code of conduct.‘
For the purpose of s9, the term ‘criminal offence‘ means a criminal offence under the law of the State or under any other law relevant to the conduct in question, and the term ‘disciplinary offence‘ includes any misconduct, irregularity, neglect of duty, breach of discipline or other matter that constitutes or may constitute grounds for disciplinary action under any law (see s9(3)).
Corrupt Conduct Findings
The ICAC found that the relevant conduct of the employees was corrupt conduct because:
- the conduct came within the scope of s8 of the ICAC Act, and
- for the purpose of s9(1) of the ICAC Act, their conduct could respectively constitute or involve:
- the offence of fraud under s192E(1) of the Crimes Act 1900 (NSW) (‘Crimes Act‘),
- the offence of corruptly soliciting and receiving benefits as an inducement or reward for showing favour to the companies in relation to the affairs or business of RMS under s249B(1) of the Crimes Act,
- the common law criminal offence of misconduct in public office,
- the disciplinary offence for serious breaches of the relevant requirements under the RMS’s code of conduct, and
- reasonable grounds for dismissing or otherwise terminating their services at RMS.
The ICAC also found that certain conduct of the friends of the employees concerned, who played their corresponding roles in the corrupt schemes, was corrupt conduct.
Corruption Prevention Recommendations
ICAC determined that the corrupt conduct of the employees was allowed or encouraged by the following factors:
- the employees’ conflicts of interest were not reported to RMS’s management despite being known to another RMS officer,
- the manager had a significant level of control of the relevant RMS procurement processes and used this control to completely undermine the integrity of the processes,
- the manager’s level of control over the processes was in part facilitated by substantially inadequate procurement governance, which resulted in opportunities to prevent or stop the corrupt conduct being missed, and
- the manager was subject to limited managerial oversight, which also resulted in missed opportunities to prevent or stop the corrupt conduct.
Pursuant to s13(3)(b) and as required by s111E of the ICAC Act, the ICAC recommended that TfNSW undertakes the following corruption prevention measures:
- update its training program relating to conflicts of interest, fraud and corruption prevention, and procurement,
- review all relevant supplier panels that are identified in the report for compliance with past and current procurement policy, and consider mandating additional oversight in the formation and maintenance of all its supplier panels,
- consider requiring use of a secure electronic system for seeking quotations from suppliers,
- revise its supplier due diligence procedures,
- develop a data analytics program aimed at detecting suspicious conduct in its procurement processes,
- develop a register of its relevant assets, and
- perform a ‘lesson learnt’ exercise or audit based on the ICAC’s findings in the report.
A copy of the ICAC’s report on Operation Ember can be found via this link.
ICAC’s media release on Operation Ember can be found via this link.
If you want to discuss the issues raised in this post, please leave a comment below or contact Dr Lindsay Taylor on 02 8235 9701.