Ratepayers Victoria Inc

Linette Treasure 5155 9498

(AG REPORT AVAILABLE www.audit.vic.gov.au. )

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From Ratepayers Meeting Lakes Entrance 25/7/05

THE REPORT OF THE AUDITOR GENERAL ATTEMPTED SALE, EAST GIPPSLAND

The Palmers Road action was finally settled out of court after considerable cost to ratepayers.

The struggle had not simply been about a gross sell off of valuable public property, it was struggle for proper processes, democratic rights and respect for law.

After a year’s investigation the Report of the Auditor General was tabled in Parliament last week . The ratepayers who had been publicly derided as "demented loonies" have been vindicated in their action and millions of dollars of public property saved. However the matters set out as facts in the Auditor General’s Report need to be carefully studied and further actions taken before matters can be put to rest.

The Foreword to the Report tables a sad list of deficiencies in the Council’s processes:

*Lack of evidence that a comprehensive analysis was undertaken prior to pursuing the sale of the property

*Inadequate due diligence on prospective purchasers of the property

*Poorly conducted tender process for the sale of the property which was further compromised by the actions of the then mayor

*Lack of transparency to the community and inadequate community consultation

*Deficiencies in advice from council officers to the council.

From the trauma of those involved in the protracted Palmers Road issue it is now up to us to insist that genuine changes can be brought about for greater transparency and accountability in Local Government. For this to be done there is a need for critical appraisal of current practices to set up mechanisms to ensure that similar abuse does not occur again.

In issues raised throughout the Report, lack of transparency is a key issue, also failure of senior staff to fully inform council, also insufficient follow through by the CEO of council directions. The extent of discussion in informal sessions of the council closed to the public is shown as a significant issue.

(This remains a challenge for the current council which has continued the practice - now called CEO/Councillor Discussions. Another practice which needs to be challenged is that of moving motions while "in camera’ - which can hide decisions indefinitely )

From the saga one has to ask how things could have been so miscarried and why different individuals or groups, staff or council, at different points did not insist on proper process when they were so consistently and publicly challenged.

It also raises questions as to the extent of predatory activity focusing on local government throughout the State, raises the need to examine pitfalls, and suggest processes to ensure genuine accountability, transparency and accessible intervention where there is considerable public concern.

The now updated Local Government Act purports to be more democratic, transparent and accountable but the conditions which allowed the Palmers Road issue to get out of hand could occur again given a wrong mix of persons and activities. There is too much faith in "Codes of Conduct" and "Best Value Principles" and insufficient mechanisms to prevent corruption or to provide the public with means of scrutiny and intervention.

In light of growing complexity there is need for a Commissioner for Local Government accessible to ratepayers with real powers and independent of government.

And in East Gippsland what must be now clarified are the mechanisms either the present or a new council could put in place to ensure such abuse cannot happen again.

From the number of phone calls to us over the past few days and also to members of parliament it is clear that justice needs to be addressed . Those who saw the flouting of proper process by persons of public authority, believe that an accounting is needed for reassertion of the dignity of law . Ratepayers around the State were aware of the East Gippsland action which should not be dismissed as an unfortunate isolated incident.

The Report of the Auditor General is an important step from which we need now to demand further action. The improper actions of a number of persons holding positions of responsibility has cost the ratepayers of this shire close to one million dollars.

Section 77 of the Local Government Act states that a councillor must not make improper use of information acquired as a councillor to gain, or attempt to gain, directly or indirectly, a pecuniary advantage for himself or herself or for any other person….Penalty 20 penalty points ($2,000) Penalty for second or subsequent offence -imprisonment 3 months."

It is important to note, no pecuniary advantage needs to be shown to have been gained personally, it is enough that it be for advantage for any other person. Much has been made of the fact that key players in the Palmers Road affair were not proven as having gained an advantage for themselves. However that benefit was provided to other parties is evident.

Take as example : Page 50 "The mayor had clearly conveyed the amount of (a higher bidder) offer to Lakes Village thus giving the company an opportunity to match or better it. The mayor did not pass on Lakes Village’s offer to (the other bidder) to give him the opportunity to increase his offer."

Page 77 of the Auditor General’s Report " The 2001 tender process was "messy" at best and the actions of the then mayor compromised the integrity of the tender process. We identified many significant departures from the council’s tendering policy and a number of circumstances which in our view provided Lakes Village Pty with an unfair advantage over other potential tenderers."

Communications between the mayor and Lakes Village were not known to the other councillors or his communications with other potential tenderers and the council’s real estate agent.

An excerpt from this time: "Your name would probably be recorded if you pick up a tender document, so it may be advisable to get someone else to pick up the tender documents for you. It would be better if it was not {the council’s’ real estate agent}. I could arrange for someone else to pick up the documents for you. They would not know who they are picking it up for. There may be a charge of $25.

If you pick them up yourself, then it may pay to do so later, rather than sooner.

{The council’s chief executive officer} had a visit from one of the major objectors who said that they [ARREG] were having a meeting on Tuesday next week to gauge the level of support for continuing the protest.

I think that the numbers are falling off as the more sensible ones see that the others are stupid and illogical."

As part of summary recommendations the Report notes "the potential for conflict arising from the dual role as both seller and responsible planning authority in relation to Council land"

As to vindication of ratepayer concerns regarding probity of those involved with the purchasers:

On Page 37 "OzCapital Pty Ltd was a company registered on March 2000 with a share capital of 100 $1 shares fully paid up and owned by a single shareholder;

Interstar Securities Holdings Pty Ltd was registered as a company with ASIC in April 1999 with a share capital of 5 $1 shares fully paid up and held by a single shareholder."

Further to this, on Page 107

"Dr Bennett was made bankrupt by Order of the Federal Magistrates Court of Australia on 22 August 2000

The CEO of OzCapital Pty Ltd filed his own bankruptcy petition with the Official Receiver on 10 January 2001.

There are many questions that could be explored as to dereliction of duty by the CEO and council officers in what was not provided as timely advice to the Council. The Probity of the purchasers (see Page 36) is such an area. "Our audit found that council officers failed to obtain credit references on Dr Bennett and the other potential prospective purchaser."

"On 19 December 2000, the chief executive gave councillors and some senior staff a copy of a 7 December 2000 press article about Dr Bennett’s conviction in the County Court, and briefed them about discussions with the Council’s real estate agent about Dr Bennett’s offer and other potential options for sale of the property. The chief executive did not, however recommend that the sale cease negotiations with Dr Bennett."

This I believe was a key point in the saga. The sale may have been abandoned at this stage if proper diligence and timely advice had been supplied.

How far can incompetence be argued across a whole range of process?

Where is the accountability in Local Government if things are seriously ‘off the rails.’ What accountability measures apply to senior persons in public organizations?

ARREG has had to move a mountain to save the valuable property at Palmers Road and to get the Auditor General investigate the matter, now the Report must not be suppressed, it needs to be made available to all interested people in East Gippsland. The many people who attended meetings, gave donations and supported the action are entitled to read parts of the story which were hidden from us. Some excerpts may be read with wry amusement as we get a glimpse of behind the scenes.

An example :"On 31 August Cr Smyth sent an email to a member of the Lakes Village group advising that he had voted not to go to go to tender and that he was going "on the front foot" with a positive media release. Dr Bennett replied on 4 September, stating his belief that the mayor "would not let it slip away next time."

The councillor replied the same day that there had been a positive reaction to his blast at negative people in the local newspaper of the previous day and that he and the mayor were "whipping up support". He also wrote in his email that: "{The mayor} is extremely supportive and was concerned when he saw the councillors begin to buckle…The tender will specify ‘best value’ to the community. I think the councillors just wanted to be ‘safe’. Some of them don’t like any ‘heat.’

Where to from here ?

If we look for referral to other agencies we find the Auditor General has referred material on Dr Bennett’s breaches of the Corporations Act to ASIC. This could be followed by a request for investigation by the Fraud Squad.

The Minister of Local Government when approached by ARREG prior to legal action had also advised taking concerns to the police if this was considered appropriate. Now in light of the Auditor General’s findings this would be a valid option.

And taking into account the protection offered to a first whistleblower, investigation by the Fraud Squad might flush out further information that could be used in civil action.

So where does Council stand on further action ?

That depends largely on the seriousness of public pressure to seek restitution. Five of the present 8 councillors came from ARREG, the Palmers Road issue brought them to public notice. But for the matter to be taken further, ratepayers will need to be very clear as to next steps they expect from Council. .

Section 77 of the Local Government Act provides strong basis for legal action.

It’s not simply about a million dollars lost through improper processes but about greater respect for Local Government, mechanisms for greater transparency, respect for law and accountability of those with public responsibility. The air is far from clear, the dirt cannot simply be swept under the mat.

Collated with notes incorporated - Linette Treasure