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Bribery & corruption: How vulnerable is your council?

Bribery & corruption - NZ Local Government Magazine May 2017

Peter Winefield says bribery and corruption could happen in any council in New Zealand. He suggests some practical ways to guard against it. And he asks whether traditional public service ethics are being lost as local government embraces a more commercial approach to doing business.

The chief executive of Auckland CCO Watercare spoke about the importance of public trust in a recent Local Government Magazine article (Raveen Jaduram: One man’s view of the water industry). In a survey of customers, less than half the respondents indicated that they trusted Watercare. That’s obviously a disappointing result but I’d suggest that if you asked the same question of ratepayers anywhere in New Zealand you wouldn’t do much better.
Kiwis have an instinctive dislike of public bodies – and it seems the bigger the organisation, the less they’re trusted.
An event that goes to the very heart of trust in local government was the recent bribery and corruption trial in Auckland: New Zealand’s largest bribery case according to the New Zealand Herald.
In addition to large cash payments (north of $1 million) we heard about overseas holidays, business class travel, large restaurant bills plus extensive hotel accommodation and gifts. It was quite spectacular.
In December 2016, after a seven-week trial, a senior council official and a consultant engineer were sentenced to five years and five and a half years jail respectively. A third council official was earlier convicted and sentenced to 10 months home detention and prior to that a number of other council officials left the organisation.
The case related to the transport sector rather than the water sector but this is irrelevant – the method of operation meant that it could have occurred in any department of any council.
The case is interesting from a number of perspectives. For example:

  • The offending took place under the cloak of collaboration – a popular and successful method of managing outsourced contracts in local government.
  • It occurred over a long time – the prosecution covered a seven-year period of offending.
  • Over time, a culture of largesse became accepted practice in the organisation (breakfasts, lunches, ‘celebrations’) making it difficult for staff to clearly differentiate right from wrong, especially as the ‘new way of operating’ was sanctioned from the top.
  • The corruption relied extensively on concealment of the truth rather than manipulation of information. This made it very difficult to detect.
  • Compounding the last point is that much of the bribery and corruption actually occurred outside the organisation – away from the normal checks and balances.

Thankfully, cases like this are rare in New Zealand but I can also recall troubles at Dunedin City in recent times and the Serious Fraud Office is currently looking at another South Island council.
This is all the more reason why councils should be taking an interest in these cases and thinking about how to protect themselves.
What happened in Auckland could happen in any New Zealand council. Make no mistake: the outcome of this sort of offending is devastating – especially for senior staff and colleagues of the offenders.
Reflecting on the case, I wonder if traditional public service ethics have become a bit lost in modern local government. Over the past 30 years the industry has embraced a more commercial approach to doing business (particularly outsourcing operations) and the gains have been huge.
But the public sector is fundamentally different from the private sector and we should never forget that. The concepts of honesty, duty, integrity and good faith are less fashionable today – but just as relevant as they always were.
If I were a CE, I’d be thinking about the culture of the organisation I led and whether those concepts are well enough understood. To my mind, providing clear leadership (and ‘walking the talk’) on these core public service ethics is the most important thing councils can do to mitigate the risk of this sort of crime.
Another suggestion is that CEs look at the composition and competencies of audit committees to ensure there is an appropriate range of skills and experience.
I’d also be thinking about a risk review to identify areas that might be vulnerable to bribery and corruption – high-spend departments, physically isolated operations and so on.
And I’d be looking at procurement policies, whistle-blower policies, gift policies and secondary employment policies.
Probably the worst thing an organisation can do is overreact to the situation and introduce over-the-top policies. In some organisations I work for outside New Zealand I can’t even buy a client a cup of coffee because this is perceived as bribery.
Common sense is a good guide and interestingly, in the Auckland case the High Court referred to: “… gifts of token value that are part of the usual courtesies of life”.
All this sounds pretty obvious and you are probably thinking ‘it would never happen here’. But what I’ve learned from this case is that if someone is determined to commit a white-collar crime it will come as a complete surprise, it will rock your organisation to the core, it will damage reputations and leave a trail of carnage.
Furthermore, the offender will most likely be a person you always liked and implicitly trusted.
Going back to an earlier point about ‘the bigger you are the less you’re trusted’, I suspect Auckland Transport’s public reputation has not been harmed that much by this affair. It’s not that well-known and as a CCO its relationship with ratepayers is somewhat oblique.
It also deserves congratulation for identifying and dealing with the problem as quickly as it did. However, the crime will linger in the minds of some ratepayers and damage to the wider roading industry will take time to heal.
You can’t eliminate the risk of this sort of thing happening but I think you can mitigate the risk. Vigilance is the key.

• Peter Winefield is a director of public sector management consultancy Participate. pwinefield@icloud.com

This article was first published in the May 2017 issue of NZ Local Government Magazine.

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