Ryall appoints new Otago DHB Chair
As widely expected Tony Ryall has replaced the Chair of the Otago DHB. His PR said:
This afternoon Mr Ryall announced he has removed Richard Thomson from the position of appointed Chair of the Otago District Health Board.
“During Mr Thomson’s chairmanship, the largest fraud in New Zealand State Services history was taking place at Otago DHB. $17 million was defrauded over 6 years,” said Mr Ryall. …
Mr Ryall also announced that Mr Errol Millar, an appointed member of the Otago District Health Board will take up the role of Chair immediately.
Mr Millar was appointed to the Otago DHB in 2007, having been appointed to the Southland DHB in 2002 and 2004. He was also Chair of the Airways Corporation 2001-2004, and is currently Deputy Chair of the Civil Aviation Authority. …
Mr Thomson remains an elected member of the Otago District Health Board.
This isn’t about blame or responsibility for the fraud – but accountability.
As I blogged a few weeks ago, the Board does have some accountability for this. Their goverance was sub-standard in my opinion. They should have had policies around competitive tenders etc.
February 17th, 2009 at 5:08 pm
Dude, you’ve cut and pasted a National Party press release – have some shame. This is pretty clearly politically motivated on Ryall’s part.
As NZPA reports:
Considering the fraud started before he was Chairman and was stopped under his watch there’s a pretty thin case here to blame Thompson for it, let alone give him the sack. There’s something very fishy going on here, not to mention hypocritical after all Ryall’s whining over the Hawkes Bay DHB.
[DPF: Dude, I explicitly said I was quoting from the PR. I was about to head out when I got the PR, and no story had yet appeared on the news wire.
90% of the fraud occurred while Thomson was Chair. he is not to blame but if he had any brains he would have offered to resign long ago. HB DHB is very different. The Minister there sacked the entire Board. Here the Minister has just replaced the Chair - and the Chair is always a Ministerial appointee]
February 17th, 2009 at 5:11 pm
Actually, not “accountability”, but “confidence”. On the latter, it’s a political judgement that a Minister is entitled to take.
February 17th, 2009 at 5:12 pm
Bollocks Tane – in the Hawke’s Bay DHB, Cunliffe sacked an entire democratically elected Board, and just a couple of months after they were elected to boot. Ryall han’t sacked anyone who has been elected by the public. Thompson remains on the Board. The only decision that Ryall has overriden was the Board’s election of Thompson as Chairman. Did Pete Hodgson write Thompson’s media release?
February 17th, 2009 at 5:37 pm
Squealing like stuck pigs, the whole lot of sorry arsed incompetent Labour lackeys. May there be many more tossed out of their feather bedded sinecures where their first loyalties always were to the Clark regime. Governance was waaaaaaaaaaay down the list of THEIR priorities.
February 17th, 2009 at 5:39 pm
You can’t expect a freeloading loser like Tane Tutae to understand accountability. How’s it feel to be doing fuck all while getting paid with other people’s (generally struggling workers) money, Tutae?
[DPF: That's 10 demerits - attack arguments not people]
February 17th, 2009 at 6:03 pm
So that’s it?
The chairman is stood down but remains a board member.
No one else goes.
Ouch!
Accountability?
February 17th, 2009 at 6:05 pm
Inventory2 – AFAIK the Minister appoints the Board chairs although the Minister might ask the Boards for ideas.
February 17th, 2009 at 6:33 pm
Accountability? An old fashion word that lost any meaning during the clark years.
February 17th, 2009 at 6:41 pm
If the captain consistently goes down with the ship over the next term this approach is OK with me but I do have concerns that the CEO and CFO haven’t been summarilly fired first – this is incompetence of the highest order.
February 17th, 2009 at 6:44 pm
hey all,
the EFA repeal is going through its final reading at the moment.
theres probably 30 mins left once they get back from dinner at 7.30.
come down to the house to celebrate, or watch on tv if you cant make it!
February 17th, 2009 at 6:45 pm
If anything like this happens again, would the Minister step down? After all, it will have happened on his watch?
[DPF: The voters decide when Ministers step down]
February 17th, 2009 at 6:57 pm
Mike S – good point – in my opinion – having happened once and if a new one happened in this term or an existing fraud was not spotted in a timely fashion then, to be consistent, they should walk the plank.
February 17th, 2009 at 7:29 pm
DPF Said [DPF: The voters decide when Ministers step down]
JK appoints and he can un-appoint – but I would hope we don’t copy the labour years where there was no responsibility taken by ministers and the old protocol of taking responsibility for your ministry’s behaviour was dropped.
February 17th, 2009 at 8:02 pm
Um, but he is a freeloading loser. Lucky i didn’t use the word beginning with C ending with T and with the United Nations in the middle that I was going to use to describe him. His argument had little or no merit. There’s no need to be nice to the Standard, they’re not nice to you (link would have gone here but i don’t want to send those freeloading something-with-United Nations-in-the-middle the traffic).
February 17th, 2009 at 9:17 pm
shit didn’t read the whole initial post – Errol Millar? oh dear.
February 17th, 2009 at 9:22 pm
accountability.? Poor bastard got unlucky.
Apparently there is a job going at the UN Thomson could apply for. Key would back him.
February 17th, 2009 at 9:27 pm
OMG!
Thomson deserves to be fired for that hair and mo. FFS, thats sick!
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10557206
February 17th, 2009 at 9:28 pm
This guy still does not get it. Says that it sends the wrong message by firing him. It sends the right message, accountability will be sheeted home to individuals. He can stand for re-election and let us see how it goes. I did not realise how policised Health had become with Labour flunkies everywhere. There is a small step from to clinical decisions becoming policised – you do not get care unless you are a member of the Labour Party.
February 17th, 2009 at 9:37 pm
Just by-the-by, I live in Dunedin and my family know a lot of people within the medical community, and Richard Thomson has total and utter support from every medical professional I know. I’m not talking about idiots either – senior medical staff, GPs, surgeons, specialists, everyone.
Now, I’m not suggesting there shouldn’t be accountability for this fraud, but I just want to point out that a lot of people whom I know and respect think Thomson is the best thing since sliced bread.
February 17th, 2009 at 9:37 pm
It’s called an infestation tvb.
February 17th, 2009 at 9:41 pm
But what about the hair Christopher. You just CANNOT support that surely?!
And the guy had ultimate responsibility for governance of the ODHB budget, substandard governance as it turned out to the tune of at least $16 million.
February 17th, 2009 at 9:44 pm
My subconscious blocks it out.
Yep, for sure, I’m not arguing one way or another on that.
I just wanted to add some facts that I have that not a lot of other people will have; Namely, that the guy is very, very well respected down here, and by people who know what they’re talking about.
February 17th, 2009 at 10:08 pm
Chris I think you are getting confused by people who thought he was doing a good job but really had no idea, and people who were getting what they wanted from the bureaucrats (i.e. Dick Bunton on Radio Pravda tonight) and so thought he was a good guy.
I’m sure Richard Thomson isn’t a bad rooster. But the buck has to stop with someone. When will Ryall fire Brian Rousseau?
February 17th, 2009 at 11:13 pm
Umm, no, not really. The people I am talking about are some of the top medical professionals in Otago (and in two cases that I can think of, world leaders in their fields). These are people who are not foolish, and are in fact very, very intelligent, thoughtful and successful. They are the sort of people I listen to, and their support lies with Thomson.
I also know a few people who have known Swan since childhood. Their only real surprise regarding him is that he got caught – most say he’s an exceptionally intelligent (and nasty) chap.
February 18th, 2009 at 12:44 am
Another serve to Labour’s former corrupt regime.
Thank goodness for regime change on 8 November 2008.
February 18th, 2009 at 9:42 am
“The people I am talking about are some of the top medical professionals in Otago ”
So they are good Doctors. Thats nice. But we are talking about having the ability to spot a 16 million dollar fraud. Infact simpler than that. Its about recognizing your systems are so crap in vetting contracts and examining costs that 16 mio slipped through the nett. How many Dr’s have that skill?
Whats next? We appoint top Squash Players to our Health Boards. Oh wait…..
We really need to forget this representation of the people bullshit on DHB’s and just go for professional Managers.
February 18th, 2009 at 11:54 am
And the CEO?
February 18th, 2009 at 9:52 pm
Christ, if this is the standard of right wing debate democracy is in deep trouble. A few facts wouldn’t go amiss in evaluating the role of the Board, not to mention the hair and mo, in all of this. We could start with Farrars comments that the Board needed some decent competitive tendering policies. Good idea but a bit late. We had those. Funny thing about fraudsters but they tend not to bring their “contracts” before the Board, let alone competitively tender them. This fraud was perpetrated through a structure set up almost two years before I Chaired my first Board meeting. At the time IT spend was just under $8m. It remained at that figure for the next three years. So what should a Board have spotted? The Board I chaired twice bench marked its IT spend (it was lower than DHB averages), had external consltants in to review its procurement procedures, including examining top ten vendors in a number of areas (strangely these “contracts” didn’t appear in those lists – thats because they didn’t actually exist and the fraudster as the CIO had the ability to control what and how information was presented), and yes there was a full internal and external audit programme that never found a problem with our management control environment. Readers Digest version – Swann was able to divert funds from existing and approved users to users whose bank account he controlled, but in a manner that resulted in no additional spend. If all of you simplistic idealoges want to have an informed opinion I suggest that you read the material that has been put in front of the people of Otago – they, as Christopher has alluded, have taken a rather more generous view as to my actions in catching Swann, than the badly informed above. Oh, and what is it about all you right wingers that you can’t actually use your real names. I’m happy to answer any questions from anyone who wants facts rather than nonsense. Cheers, Richard Thomson (used to be ODHB Chair)
[DPF: Thanks for entering the debate, and appreciate the info you provided.]
February 19th, 2009 at 6:20 am
Appreciate the input is this a defence of his record or an attack on ‘Right-Wingers’? It infers quite a lot about Mr Thomson’s political persuasion and leads me to wonder whether that was a factor in his initial placement in the role.
It’s a syllogism isn’t it — Kiwiblog is right wing – therefore kiwibloggers are right wing-
So all criticism of someone here is by rightwingers.
I feel your hurt Richard, and I’d like to present a first question to you which is:
- In your opinion, how much of your present predicament would be now evident to us all if ‘left-wingers’ were still in charge of teh Government?
February 19th, 2009 at 6:30 am
Richard of course raises quite valid points.
However, did any senior staff question how Swann afforded exotic sports cars, a luxury boat and home etc…. Especially since these would have been fairly recent aquisitions. Surely there was some gossip going around about how he afforded his lifestyle.
I bet this Swann must have been fairly intelligent and quite convincing. People like that can be hard to catch out.
February 19th, 2009 at 6:37 am
The evidence suggests that Tony Ryall made the right decision in cleaning up Labour’s mess.
I congratulate the National/ACT Government for taking the necessary and sound action of replacing the Chair of the Otago DHB. People voted for an end to Labour corruption on 8 November 2008.
February 19th, 2009 at 7:29 am
And when the Fraudster turned up to work in a Ferrari, Thompson was asleep, perhaps as a left-winger he thinks people receiving public money should be allowed to turn up in such a vehicle like a corrupt official in the LEFT wing Mugabe regime.
February 19th, 2009 at 7:43 am
Richard Thomson Says:
February 18th, 2009 at 9:52 pm
Christ, if this..
Watching the communists twist in the cold, cold wind of accountability is extremely satisfying.
February 19th, 2009 at 7:44 am
“Oh, and what is it about all you right wingers that you can’t actually use your real names.”
yeah, like Roger Nome, Jacob van hartog, IrishBill, Toad, Greenfly etc etc -
February 19th, 2009 at 7:50 am
Well good on Thomson for manning up. But dude, get a haircut.
>> This fraud was perpetrated through a structure set up almost two years before I Chaired my first Board meeting. At the time IT spend was just under $8m. It remained at that figure for the next three years. So what should a Board have spotted?
…The increase in IT spend in the year you started chairing the board and associated lack of RFI and tender process.
>> and yes there was a full internal and external audit programme that never found a problem with our management control environment.
…But the ODHB couldn’t reconcile IT budget to actual IT contract spend on a per contract basis?
>> Readers Digest version – Swann was able to divert funds from existing and approved users to users whose bank account he controlled, but in a manner that resulted in no additional spend.
…Who were your auditors, just so we all know who not to use.
Patrick Starr, don’t worry about the own names thing, generational misunderstanding about the interweb etc. Its not malicious just 20th century.
February 19th, 2009 at 7:57 am
expat – I’m not concerned about his misunderstanding – just his belief that its confined to “right wingers “
February 19th, 2009 at 8:23 am
>Oh, and what is it about all you right wingers that you can’t actually use your real names.
Thomson seems to think that the use of nicknames and anonymity on the Internet is a right wing thing, rather than being all pervasive. I’m guessing that this might be the first time he has ever used a computer. In which case we have an explanation for why the IT department he was responsible for wasn’t delivering the services it was being paid for.
But then Thomson appears to be quite obsessed by right wingers. Perhaps if he had skills that were organisational rather than ideological, he might still be chairman.
February 19th, 2009 at 8:27 am
In Reply to Lee C:
I am sure that my political persuasion probably assisted my appointment at the time. Is he suggesting that this is any different under any government? However, it’s not the right question. the right question is whether i had the background and skills for the job. Although these days i own and run a chain of retail stores, I was previously a lecturer in psychological medicine at the otago medical school. I have an extensive background in the care of the disabled and mentally ill, and I set up and have chaired for almost 20 years the Hawksbury Trust which provides 24 hour care for 120 intellectually disabled adults. i imagine that all those factors might have had some relevance to my appointment. I am also an elected Board member. That well known Communist organ, the Otago Daily Times in todays editorial (entitled Ryall’s Blunder) notes that “he has sacked an experienced, capable, respected, and popular chairman…and caused widespread upset and concern. While Mr Ryalls demands for accountability are understandable, he picked the wrong scapegoat”. So yes, happy to wear my political colours on my sleeve. If I can recognise competence in right wingers then surely it’s conceivable that it just might exist in the odd liberal as well?
In answer to your second question – how much of your present predicament would be now evident to us all if ‘left-wingers’ were still in charge of teh Government? Well all of it actually. I have been completely open with all the facts as Otago people will be aware.I have done that against legal advice because I considered that the public interest outweighed the risks.
And in answer to Wreck1080:
However, did any senior staff question how Swann afforded exotic sports cars, a luxury boat and home etc…. Especially since these would have been fairly recent aquisitions. Surely there was some gossip going around about how he afforded his lifestyle?
Well not to me anyway. My predecessor as Chair received a warning as to swanns alleged previous dishonesty. Two previous employers had “let him go” for alleged dishonesty. one tried to get the police interested to no avail, the other perhaps has some reflection on civic duty to do. Regrettably that warning was not passed on to me when I took over, nor was it passed on to the auditors apparantly. (My predecessor was appointed by Bill English in case anyone was planning to ask). Although the previous CEO and CFO were aware of this warning they never passed this information on to the new CEO I appointed in 2002. On the contrary, he was briefed that Swann was independently wealthy and only worked out of interest and because we were the biggest computer game in town. In investigations subsequently it appears that many staff believed that he had sold a computer software programme to microsoft. Swanns lifestyle was unknown to me. Although everyone considers this so obvious now it remains a mystery to me that no-one spoke to me till 2006. Then they did so on condition of annonynimity, and were passing on the concerns of two other people who were to remain annonymous. No evidence was provided. Notwithstanding that, I acted immediately. The first investigation failed to find anything suspicious. A second investigation by a new CFO did. Interestingly, when we took our concerns to the Police the fraud was “so obvious” that they declined to take an interest, not believing that we had a case. in the end it was only our direct approach to the SFO that got a prosecution.
To oob; I rest my case regarding my earlier comments as to the standard of right wing debate.
February 19th, 2009 at 8:32 am
I reckon this Thomson guy is on the level.
And do you recall me having ever said that about any Labour party person before?
February 19th, 2009 at 8:38 am
In reply to expat:
What increase in IT spend in the year I took over the Board? There wasn’t one.
February 19th, 2009 at 8:39 am
Although it poses some interesting questions about the quality of independent auditors, the police, the ability of DHB members to provide a governance comensurate with the budget; and then we discover that the SFO (proposed to be killed off by Labour) delivers the goods.
Lets reflect on that shall we.
February 19th, 2009 at 8:42 am
I thought thats what you alluded to here “This fraud was perpetrated through a structure set up almost two years before I Chaired my first Board meeting. At the time IT spend was just under $8m. It remained at that figure for the next three years.”
The assumption was that the time 2 years prior to your start as Chair was 2 years into the ‘next 3 years’
February 19th, 2009 at 9:02 am
Expat – without taking years of your and my valuable time to explain in detail, the IT spend was around $8m in the two years prior to my appointment and in the three years subsequent. It stepped up in the fourth year by about 15% which was the year he came under suspicion – although most of that 15% was actually quite legit. What Swann was able to do was create bogus licencing and maintenance “contracts” which were incorporated into the structure of the IT budget back in 2000. he was also over time able to redirect some legitimate expenditure from authorised and appropriate vendors to vendors that were a front for him. These changes were controlled by Swann in his capacity as IT manager and were never advised to the CEO or to the Board (had they been legit they would have required CEO recommendation and Board authorisation but naturally these were never sought). Although some finance staff did have concerns as to his authority to make these changes, and some have said subsequently that they advised the then CFO of those concerns, for whatever reason those concerns were not acted upon or advised to the CEO or Board. So what the CEO and Board had were flat budgets and no unexplained variances from budget. Academic research on fraud suggests that only about 15% of corporate fraud is picked up by audit, and the likelihood reduces the more senior the perpetrator is. Most is picked up by the offendor making a mistake or tipoffs as to lifestyle. The latter is what happened in this case. An interesting question is why so many in the community apparantly knew he was wealthy but didn’t make any connection between that and possible dishonesty (or if they did why they didn’t approach me or the CEO). The reality is I suspect that most people rationalise these things and don’t act in case they are mistaken. i do wish there had been a few more socially inept people in his circle who didn’t care about making a mistake!
February 19th, 2009 at 9:09 am
Ahh yes, blame the right wingers…. an excellent way to worm your way into the hearts of the Dunedin Labour party.
I reckon whatever your political persuasion is, this shouldn’t have anything to do with you being appointed to this sort of position. It’s about delivering a public health system, not a popularity contest. Getting people off waiting lists is more important than this silly posturing. Now that you are no longer the DHB chair, I hope you spend your time on the board to do a good job helping the ill in Dunedin.
February 19th, 2009 at 9:16 am
Here’s a question Richard – have the CEO (the Board’s sole employee) and CFO been censured or dismissed for their roles in this fraud being able to continue over an extended period?
February 19th, 2009 at 9:18 am
Thomson has a point. Having worked on large govt fraud in the (distant) past it does seem to be a ‘narc’ that does in the perpetrator & not ‘the system’.
This matter, combined with the HBDHB IT fiasco does warrant the question : Does NZ need a centralised health IT strategy and procurement body? Sure seems like it.
February 19th, 2009 at 9:20 am
Richard Thomson: This fraud was perpetrated through a structure set up almost two years before I Chaired my first Board meeting. At the time IT spend was just under $8m. It remained at that figure for the next three years
Richard, thanks for entering the debate, and people should give you karma for that.
However, it is industry practice to tender ever 3 years. Why didn’t tender the contracts for 5 years?
I fully agree with you that at a certain level, fraud can be extra-ordinarily hard to detect.
February 19th, 2009 at 9:21 am
My opinion still stands; the Chair is where the buck stops on governance.
February 19th, 2009 at 9:24 am
Thompson is accountable but not necessarily to blame. He should have resigned immediately the fraudster was convicted, that is the honourable thing to do. He didn’t so the Minister on the public’s behalf acted. Meanwhile Thompson tries to put a political spin on things, well let him, he is showing his character through and through.
February 19th, 2009 at 9:38 am
To Inventory:
Good question. Firstly there have been three CFO’s in the time since Swann was employed. The current CFO conducted the second investigation I referred to in one of my earlier posts and this was what caught Swann. So, he’s one of the good guys. I am not in a position to censure or dismiss those who are no longer there so its better that I simply don’t comment on that. I clearly had to give consideration to what the CEO could or should have known. I don’t do sacrificial lambs. If the CEO had had the warning passed on to him from his predecessor and had not acted I would have held him culpable. Had he recived any feedback from other staff that he had not acted on I would have held him culpable. Had he approved dodgy contracts, likewise. As I posted earlier, he was briefed that Swann was independently wealthy and never had any cause to doubt that. when I received my tip off he acted immediately. So, I don’t hold him culpable. He is an incredibly competent CEO and I see little point in making an example of someone for some symbolic reason. We might as well just get every tenth staff member to step forward and run them through. They tell me its good for morale and it would open up employment opportunities in these tough times. I know people like a good sacrifice but fairness comes into things somewhere too doesn’t it?
February 19th, 2009 at 9:45 am
Richard, Why are you a Labour man? You seem too well balanced.
February 19th, 2009 at 10:15 am
To Berend:
Yes, thats correct re tendering. well sort of. Two points. If you have an IT system in place and you have licensing requirements then they are with that company. EG., telling microsoft that you intend to continue using their system but will tender as to who we pay the licence fees too, isn’t actually an option. In this case the licensing was bogus in some instances but if you don’t know that then you would maintain the “contracts” as long as you ran the system. Secondly, the reason I put inverted comma’s around “contracts” all the time is that they didn’t actually exist. It’s difficult to retender a contract that doesn’t exist. This is actually about false invoicing not contracts. False invoicing won’t be picked up by a Board unless it results in a change against budget or an increase in spend (or auditors get lucky). It should also get picked up by staff where it falls outside of delegated authority. There were a few invoices that did but the majority were individually within delegated authority.
Now I have to go and do some real work. I’ll check back later and see what other questions there are. there is still a place for informed debate amongst the rant.
February 19th, 2009 at 10:17 am
Dear Mr Thomson
One of the ‘Quid Pro Quo’s” about political appointments is that if you are favoured when the wind blows from one direction, then it stands to reason that when the wind direction changes you have to be prepared to be blown away.
That rule applies irrespective if you are leaning left or right !!
Auditors – yes this episode is just another reminder of how useless the audit system is. I have asked several times that auditing of public companies be decided at the AGM by vote from the floor – but it never works – it always seems to be decided by the directors – who have a vested interest in any problem never coming to the surface (obviously).
Finally – transparency. Ive been involved in management positions from boards of large companies thru to local church vestry. In all cases there is an underlying feeling (I suppose you could call it) that the pathway that money takes thru an organisation is really a matter only of concern to those who have a financial background. I think the underlying problem is that its felt “Joe Public” will never understand it and that it’s a hopeless vision to ever expect him to do so. I recall at one meeting I suggested that the accounts be pinned up on the notice board so that everyone could see them. You’d have thought that I’d accused them all of the most heinous sexual acts from the look on the faces around the table.
But no one could answer the question “are the members not allowed to know the situation? Its their money!”
If total transparency was applied to spending of public money you wouldn’t be trying to explain the situation now.. I know that a lot of what Swann did was set up before your arrival at the board, but if transparency of all DHB spending was made, then believe me someone out there – maybe old “joe public” himself – would have spotted what the guy was up to.
Its not a matter of bringing a contract before the board – its exposing ALL expenditure to the public – after all its their money. I know your reaction – “its just too complicated”
Maybe that’s the problem !!
Oh – and last tip. Independantly wealthy, working for a salary for the challenge, biggest game in town , etc. Thats the first sign that something is wrong.
February 19th, 2009 at 10:19 am
More I hear the more I think there were no expenditure controls in place there.
February 19th, 2009 at 10:21 am
One of the main faults of the ODHB was to allow Swann to act as a one-man-band in the IT area. He seems to have got away with this by a combination of bullying, and ingratiating himself with management with favours and hospitality.
February 19th, 2009 at 11:07 am
Let me make the brief point that I’m about as right wing as it’s possible to be. I use my real name. All the people who do use their real names on this blog are right wing, apart from one notable exception (philu). It is common practice on the internet to use aliases, and is especially helpful in political debate because it discourages ad hominem attacks.
I use my real name because I am unafraid.
On topic: Most people here know that i generally hate Labour filth with the fury of ten thousand suns, and usually this would extend to Richard Thomson. However, while he does himself no favours by coming here with what is clearly a political chip on his shoulder, I still do not support his removal.
Why? Well, as I’ve said before, he has overwhelming support here in Otago from very well-known and well-respected people, my father among them. Furthermore, these people are able to see past Mr Thomson’s insane political affiliations and universally proclaim him an excellent chairman.
The thing about the Swan case is that the guy is clever. He’s really clever. To be honest, I’m surprised he got caught.
I’m not keen on people stealing my hard-earned tax dollars either, and I would love for heads to roll over this fraud, especially if those heads are filled with Labour bullshit.
However, Mr Thomson is simply not to blame for this.
February 19th, 2009 at 11:45 am
One problem with “government” type organisations is that they tend to rely on auditing for finding fraud and are less likely to look for it themselves than commercial organisations. I have seen this many times. Also many of an accounting background are more about the numbers than the finance, if that makes sense. They’re happy when all the numbers go in the right boxes and they add up and are less focussed on the business. Once again I have seen this many times and it is why I rarely take any notice of business advice from accountants (there are exceptions but they tend to get out of accounting and in to business). So accountant types are poor at finding fraud because of this. Many CFOs are of this ilk, particularly in “government” type organisations.
The sheer size and time scale of the fraud points to major incompetence and for me the buck on financial fraud always stops with the CFO. Listening to Richard I get the impression that the latest CFO found the fraud (correct?) but I would look to know who the CFOs who did not as they really should not be allowed positions of responsibility until we are sure they are not vulnerable to the same incompetence. A good CFO is close to major spends and knows the whys and the wherefores and is hard to fool. Obviously not in this case. A good CEO needs to be happy that he has a good CFO and frankly, in the case of major fraud is almost as culpable as the CFO. Frankly, the order of blame is CFO, then CEO and then the board members. We do seem to be this arse about face.
The tendency for high reliance on auditing needs to be bred out of these guys. Auditors often have a small number of highly competent staff and the rest are qualified monkeys going through a rote process that is easily fooled if one has decent accounting background.
Case in point; I recently joined the national board of organisation, became treasurer as I have experience in running businesses. First thing I did is to sit down with the CFO equivalent and walk through all the money, accounts, sources, spends, authorities and checks. Not an audit – I was just aware that I needed to understand the financial workings of this organisation, major spends, weak spots etc. Now, in the case of fraud possibilities, I know which sets of three people need to work together (or some of them be incompetent) if there is any possibility of significant fraud – not that I believe they are likely to but that I would not be diligent in my role if I did not understand the weaknesses in the organisation. The previous treasurer was an accountant and was really happy that the accounts structure had been “fixed” but apparently never bothered to see how the system was managed and to look for making sure the money is safe.
Barry’s comments around limited understanding of finance is relevant. The other board members’ eyes glaze over when we discuss the finance side, they struggle to understand the various financial reports and I have to give them a business focussed description of what is happening.
In the case of Richard, the appointment and subsequent removal are probably affected by political leanings, but to me what is also relevant is the protocol that the captain goes down with the ship (even if it’s not the captain’s fault). I would hope in a similar position I would fall on my sword (be hard to do though).
February 19th, 2009 at 11:59 am
Oh Christopher – you have forgotten the big rule.
It goes lie this: “The buck stops here!”
Ireelevant is the question if Thomson is to blame – hes the boss and when there is a screw up like this the boss gets the chop – “The buck stops here!”
Him leaning to the left when a right leaning govt comes in is also rather terminal as well.
February 19th, 2009 at 12:15 pm
That’s a good point.
This actually has set me a little against Thomson. I find his assertions that it’s ok to be appointed politically but not removed politically, (or rather, it’s not ok if the “right” does it, somehow implying that we have a right-wing government), to be quite nauseating and typically socialist.
To be honest, I supported him a lot more before he came on here with his attitude. At least he can spell correctly, though, unlike the usual lefty trolls.
February 19th, 2009 at 12:25 pm
Richard, you are to be congratulated for the frank and direct way in which you have acquitted yourself. As David says, blogs give people a great channel to comment and respond to matters of the day without an intermediary.
As you note, many commenters here are incapable of anything other than reflexsive partisanship and purile insults. Not all, but many. I’m sure you can distinguish between them.
I wonder if you’d like to comment on the role of your audit committee and any external auditors? I had an experience where external auditors on an audit committee didn’t discover some very questionable conduct – conduct that was similarly difficult to spot because of quite deliberate acts of what I believe was deception – but which was, I thought, discoverable by experts. To this day, I’m sorry that (a) there wasn’t a criminal investigation and (b) the auditors weren’t sacked on the spot. Perhaps that’s unfair, however what’s the point of hiring and paying external auditors if all they aren’t able to add to the oversight (and by this I mean provide more penetrating oversight)?
It’s clear that your sacking is convenient. That’s politics. I suspect however, you’re standing and influence will only be enhanced (including by your comments here).
February 19th, 2009 at 12:56 pm
Based on the “large transactions and variations” approach of auditors I assume you mean? Again, I despair the predictability and superficiality of the audit process.
February 19th, 2009 at 1:03 pm
Christopher said:
Ahem…?
And may I ask what you think Redbaiter’s doing?
February 19th, 2009 at 1:05 pm
Paul – I agree with your frustration with Audit process. Remember Enron was audited.
February 19th, 2009 at 1:41 pm
Paul – agreed -auditing is only good at catching the more incompetent fraud. This is in part due to a deliberate intent of making it a process driven exercise rather than an outcome one by the big auditing companies. Should fraud not be found they can then fall back on how well they exercised the process rather than any responsibility for actually finding fraud. Thus this reduces their exposure.
The wholesale reliance on it is scary.
February 19th, 2009 at 1:55 pm
Finishing off the previous point ….
However, this is not the fault of the auditors (as much as I dislike the current auditing approach) . Any organisation that has had large size and extended timescale fraud is at fault. No discussion.
As I said before in order of culpability —- CFO, CEO, Chairman of Board, Board (if there’s a purchasing officer they often need to go in the mix as well) – the cut off how far along the chain that blame should be shouldered depends on the individual circumstances.
February 19th, 2009 at 3:17 pm
Richard Thompson is well versed in the detail of what happened and he acquits himself well and he gets extra brownie points for manning up to this blog and discussing the minutia of what happened. I heard him say on Checkpoint that he can lie straight in bed at night – of his integrity there is no doubt.
But in the big bad world of political appointments, things are not quite so easy. Whilst NZ is spared the mass resignations of people like Mr Thompson and the endless appointment and confirmation process of the incoming administration in the US, nonetheless Chairs of DHBs, given that their boards are mostly elected, are reasonably political positions. DHBs control large budgets and effect the health outcomes, and employ large numbers of, the people in the regions they cover. The position of Chair is most sought after, it is very high profile in the community and looks very good on any CV. The likelihood that Mr Thompson got the nod from the Labour Minister of Health for his ahem – favourable ideological views on matters political is very high.
If there were no problems at the ODHB then Thompson likely would’ve stayed. However, in the political world, when it become public knowledge that a senior employee perpetrated a fraud over 3 years to the tune of $17million (a record it seems), I dont care how nice, honest, thorough and dedicated to uncovering the fraud Mr Thompson was, his head is the head that must be served up. It Politics 101 – if Mr Thompson doesn’ like the outcome then he should never agreed to play in this particular sandpit. If a National government appointed the DHB Chair that administered this Board and the incoming new Labour Minister was faced with the news of this huge fraud, you can GUARANTEE the National appointee’s head would roll.
If you are going to live by the political sword then you can die by the same political sword. All of Richard Thompson’s protestations of unfair treatment reveal his naivete of the world he entered the day he signed the contract as Board Chair.
February 19th, 2009 at 9:02 pm
To Barry: Agree with you re auditors. Regards transparency, DHB financial accounts are presented in public session and totally transparent. Not too complicated at all. Re your last comment
“Oh – and last tip. Independantly wealthy, working for a salary for the challenge, biggest game in town , etc. Thats the first sign that something is wrong.”
Couldn’t agree with you more. Great shame that all those people who actually knew him didn’t think the same
To DunedinblogAl:
“One of the main faults of the ODHB was to allow Swann to act as a one-man-band in the IT area. He seems to have got away with this by a combination of bullying, and ingratiating himself with management with favours and hospitality.”
I think thats probably a fair comment although to be equally fair, such behaviour is not just the perogative of a fraudster, and it tends to be evaluated differently now because of what we know.
To Christopher: “i generally hate Labour filth with the fury of ten thousand suns”
Don’t hold back now Christopher. I have been trying to imagine my Aunty Pam as “National filth” and no matter how hard I try she still seems like a nice lady who just happens to support a different party to me. But I’ll work on it.
and “I find his assertions that it’s ok to be appointed politically but not removed politically … to be quite nauseating and typically socialist”.
There are a range of comments from others of similar ilk. Actually, I think there is a strong case for appointments that are made at a political level (probably just Chairs, as it would be chaos otherwise) that they should have to tender their resignation at a change in govt. If a Chair is good (and a Minister is sensible) then they will probably look to keep them on regardless of political stripes, as changing everyone at the same time would be potentially quite damaging, but it provdes a Minister with the opportunity to make changes as they see fit, and I don’t actually have any problem with that. I did have a problem with process here. When you offer a new Minister a full briefing so that they will have all the detail (not just what is in the public arena) and the professional briefing you think you are going to is turned into a three ring political circus by the Minister, then you tend to react. Hence my refusal to resign and my statement to him that he should have the courage of his convictions and sack me and state why. I had no doubt what the outcome of that would be and stated so publicly.
To Paul: “I wonder if you’d like to comment on the role of your audit committee and any external auditors? I had an experience where external auditors on an audit committee didn’t discover some very questionable conduct – conduct that was similarly difficult to spot because of quite deliberate acts of what I believe was deception – but which was, I thought, discoverable by experts. To this day, I’m sorry that (a) there wasn’t a criminal investigation and (b) the auditors weren’t sacked on the spot. Perhaps that’s unfair, however what’s the point of hiring and paying external auditors if all they aren’t able to add to the oversight (and by this I mean provide more penetrating oversight)? ”
DHB’s have no choice as to who they use as an external auditor. It is Audit NZ unless they appoint someone to act on their behalf. It’s not contestable at our end. My experience would mirror yours. Auditors do have to get lucky to catch a fraud like this. They did sample some of the invoices as it transpires but checked them for delegated authority rather than trying to match them back to a contract and reviewing that contract. In a sense you need a marriage of lawyer and accountant and a great deal of luck for an auditor to strike gold. I think that many feel that auditing is a protection. In my view it isn’t. Interestingly the auditors testified in the trial – and this is a paraphrase as I haven’t got the actual wording here – that variations of several million dollars would not have been seen as material by them.
Finally, there are two issues being mixed up here. One is whether the Board (or me) should have been able to see the fraud and therefore were incompetent because of their failure to do so. That part I reject.
The second is whether the Chair should resign when something that is not within their control happens. The Westminster convention (although the westminster of a long time ago I suspect). I actually think this is just as daft as sacrificing virgins and killing every tenth legionaire as an example. And lets just keep this separate from me for a moment – symbolism has its place I guess but it’s not nearly as good a principle as fairness. If a Chair, or a Minister, has stuffed up by omission or commission then they should resign and if they don’t they should be sacked. If they haven’t then sacking them is about nothing more than the gods demanding a sacrifice. The next time there is a fraud in the Ministry of Health I won’t be calling for the Minister to resign, unless he was aware of the problem and did nothing, or had been made aware of a loophole and ordered staff to do nothing, or whatever. If he couldn’t have known then the opposition calling for his resignation is just plain daft. The sense I get from most of the flavour of peoples posts is that you are big on symbolic sacrifice. Fair enough, I just have a different view
February 19th, 2009 at 9:51 pm
Richard
I applaud your willingness to enter in to public debate, seriously, good on you. Especially, on a right leaning blog site.
But nowhere am I hearing where the screw up was, and let’s not pretend otherwise, this is a screw up of significant proportions. If you look at my previous posts I do not believe the initial screw up occured at board level though it’s possible the board messed up as well but they would have needed management to mess up first.
You do miss the intent around the captain going down with the ship protocol. It’s almost a subconscious need to make the top man realise that we rely on them to get it right. It is not necessarily fair but it is, I believe, based on deterrent value. The boss better make sure all is good though in this case I start with the CFO and CEO not the board. Understand, we give you guys our trust and corresponding authority – we need you to use it wisely. We have high expectations, accordingly.
Relying on auditors is dumb so your comments around which auditor one uses strike me as irrelevant.
In terms of the board spotting fraud, I agree. In terms of the board making sure that management could spot fraud, I disagree as per my statement earlier. Management should be set up to manage fraudulent opportunities and if the board has not confirmed this is the case then they have secondary guilt by definition.
February 19th, 2009 at 10:13 pm
Richard Thomson good on you. I particularly admire your Aunty Pam comment. Exactly. Kia kaha
February 19th, 2009 at 10:37 pm
slijmbal – Yes, there is no shortage of things to find fault with. As is already in the public arena the Chair, CEO and CFO in 2000 were warned as to Swanns past history. The CFO was charged with monitoring Swann. The Board of the time were not informed of these warnings so there was no institutional knowledge at a governance level when the then Chair left. Those warnings were not passed on to their successors. The CFO at the time did not detect the fraud being set up. Either Swann was too clever for him or the monitoring was deficient. Regardless the guy is no longer there. His replacement (we know now) was spoken to by some finance staff who had concerns around the processing of invoices presented by Swann. That should have resulted in questions cascading up but did not. Again that person is not there now. A public blog is not the place for a wider discussion of these particular issues so if I appear to be ignoring them it has more to do with the appropriateness of the forum. One of the responses to that failure has been to institute a fraud awareness programme tied in with an independent 0800 fraudline service so that if someone has concerns and is not being listened to, but does not feel able to speak to someone more senior, then there is another option. Its not rocket science but our own research indicated that few organisations in the public sector anyway had such an option. There were some paymnts that were over Swanns delegated authority and not picked up at the payment level. So, yes there were no shortage of things that have you saying what if and how come. The biggest what if and how come though still lies with the total absence of any apparant awareness in those people who associated with Swann that he was living beyond his means. The psychology of how that can occur for so many years is frankly more interesting than debates about auditors.
The comments which auditor one uses was simply in response to someone asking me to comment. I agree regarding reliance on auditors. Sadly though I think there is a widely held view that this is part of what auditors protect you against.
February 19th, 2009 at 11:01 pm
Hi Richard,
just to be clear – as a member of a board I am aware where the responsibilities lie and realise that boards can be deceived. I also understand the difference between governance and management.
But I am also aware that if the board has not convinced itself of the correctness of spend it is guilty by omission – this may be harsh but we rely on you guys to get it right. Hopefully, information will be made public to show that the board was deceived in a way that it could not be expected to catch but whether that is true is currently unknown. If you add to this the history of screw ups at this level in NZ – most related to incompetence – I include local government in this – then the assumption the board got it wrong is not unreasonable – you are guilty until proven innocent in the publicly elected arena, remember. And this assumption is more often right than wrong once the facts are known. Goes with the territory.
The simple statement that such a significant level of fraud took so long to be found means that there was some sort of major f**k up cannot be disagreed with and seems to be missing from the current discussions. I don’t care how many changes of staff or people who did not stand up and mention lifestyle etc This amount of money should be checked to be accountable – it surely cannot have been. I am not naive about these things and often work at a senior level within multi-billion dollar companies as well as not for profit organisations. I repeat, this was a major f**k up.
I still think you’re wrong in terms on not falling on your sword and it’s not to do with whether you screwed up or not – it’s to do with setting incredibly high standards for those we elect – we need those standards to be met. We trust you guys.
February 19th, 2009 at 11:15 pm
Great to have real discussion on here about matters governance and public interest
This situation, both the fraud and the accountability has intrigued me, but I’m waiting for the book/movie to get the real story.
My concern is the basis that this is all grouned on – he had a budget, he spent that budget, we never could have found it.
Sorry – as a taxpayer, just because you spent it last year does not give you the RIGHT to spend it next year. In an environment where efficency and scale rapidly reduces total cost I would expect a compently managed OPEX budget in IT to reduce over a 3 year period – whether formal tendering is in place or not.
Why did the Board not ask/seek some form of cost reduction from IT? Were there no specific initiatives with a business case that saved money that should have been reflected in next years budget? Why is status quo “good enough”? Do you only look at areas that think they need more”, not areas that have too much to begin with?
Oh for some form of zero based budgeting and contestability for where my $$$ go.
February 19th, 2009 at 11:42 pm
Thanks Richard for fronting up and giving your point of view.
Based on your experience what advice would you be give to board chairs? What have you learned from the experience?
I understand that this is one of the larger corporate frauds and possibly could become the subject of a book or movie. In most of the books and movies I have seen on fraud topics the fraudster usually gets offered a job with some government agency to help them out catching other fraudsters. I wonder which department will snap this fraudster up once corrections have finsihed rehabilitating him.
February 20th, 2009 at 12:51 pm
To Maurieo – “Based on your experience what advice would you be give to board chairs? What have you learned from the experience?”
Wear a bullet proof vest! Be aware that no matter how many systems you might have in place (and ours were standard governance systems notwithstanding the views of some above) a clever fraud will always be able to find their way around them. If the person in charge of a specialised area is honest then you have a reasonable chance of detecting things through systems. If the person in charge is the crook then your likelihood of detection plummets because they are the person whose advice you are seeking and the person who is reporting to the CEO or Board or both. You need to benchmark regularly against others. that might throw up something (although didn’t in our case). You need to schedule an independent review of specialised areas from time to time – this is particularly so in areas that a CEO or a Board would struggle to grasp – and I think IT is one of those. If your CIO says you ned an XJ6 with double overhead cams and a 78rpm floppy then by and large a Board will not have someone with the expertise to challenge that. Again, we did audit IT systems and this didn’t show anything up – maybe the power of the person in charge thing again. I think the biggest thing though is an IT approach to the link between contract, authorisation level, delegated authority and payment authorisation. this is bloody complicated and quite expensive in a half billion dollar a year turnover business with tens of thousands of invoices a year. The balance between cost and risk will vary between organisations i guess. we have moved down that route but still have to use some manual checking and sampling to complete all the loops.
I guess, as a final comment on all of this – if you think, as it appears many do, that fraud avoidance is about systems then you are deluding yourself. systems will encourage a better class of crook (if there are none then anyone can do it pretty obviously) and a better class of crook is often pretty good at this. Understanding the psychology of why people fail to report and how you increase that likelihood is I think one of the most important learnings.
I’ve enjoyed the interchange, even if most of you are to the right of Ghenghis Khan. It’s probably run its gamut. I’ve commented about as widely as i really can and the things that I might otherwise want to say i can’t always for legal or other reasons. so I’ll sign off now. cheers. Richard
[DPF: Thank you for your multiple contributions. I think almost everyone has been impressed with you willingness to discuss the issues in detail. I know I have been]
February 20th, 2009 at 1:28 pm
Thanks for the response Richard, I to have been impressed with your willingness to disuss the issue.
We trust people on a daily basis to do the right thing, however from time to time our trust is betrayed. In some instances the consequences of betrayal do not exceed the benefits. If we divide 17m by the time the fraudster is likely to spend inside it would appear that the fraudster made a commercial decision that a number of untrustworthy people would snap up given the opportunity.
February 21st, 2009 at 2:11 pm
What happened to the fidelity insurance claim?
Has the public been advised?
I would love to hear the explanation about why the ODHB increased its Fidelity insurance cover from $2 – $5m during the period of its investigation.
I suggest you are not telling the full story.
Your explanation of why you have been in detailed staff newsletters, ODt and now this formum discussing the issues when the ODHB has civil proceedings against 19 defendants would be appreciated. Some of the very issues you refer to about levels of IT spend and evidence in that case. I suggest you might be a dedicated and good person but have little understanding of governance.
Perhaps some answers to the questions in other forum string “Thomson responds” would be helpful. There are some real governance issues in that one.
I have no reason to doubt your integrity but you play the political, “Me” and blame others cards which are irrelevant to deflect from the real questions.
This issue is about governance pure and simple and not the buck passing you attempt to place on the former board and former CFO’s.
You are not presenting to total picture. Your term started before you chaired the first meeting. The $8m flat IT budget is mischieveous. During the period you mention there was a massive IT expansion of PC’s and two new IBM RS6000′s were acquired. There was also a significant change it IT when the labs software was decommissioned. I listened to the business analysts who set the budgets and they simply looked at the previous year and extrapolated. Total and utter incompetence was what I heard.
You have not touched on the fact the CEO recommended a change from J D Edwards to Oracle Financials which was a significant cost. Both of these products are designed to prevent invoice approvals outside delegations levels and order/contract matching. It was apparent that non of these controls were implemented.
I challenge you to admit that the ODHB had Swann approving expenditure in other areas of Propharma and building related suppliers which were well in excess of his delegations yet only singled out his IT excess delagation spending to the SFo and brushed the others under the carpet.
It is well known that many senior people in the ODHB spent outside their delgated authority. I checked a years contract register and found one entry for $900k recorded against a manger at the same level of Swann.
I again refer you to some simple questions in the other forum thread.
Simply the organistion you chaired paid around $7,600 per day to Swann and when the invoices were not presented the business analalysts went and asked for them. Your religious reference is appropriate.
Where does the ODHB draw the line? Many people have told me that medical staff get benefits or kickbacks through supporting medical suppliers either through trips, research grants stc. Where is the line drawn?