Kiwiblog

Tukituki MP Craig Foss has been blogging a series of documents about the HB DHB, released under the OIA. These deserve some critical scrutiny.

The latest is fascinating.

• 14 months before the DHB was sacked, Peter Hausmann was suggesting future appointees to the Minister
• He was proposing a way to stop the Board Chair being elected to the Board
• He suggests an Ian Wilson be appointed Deputy Chair
• Ian Wilson, was appointed as Chair of the Review Panel which coincided with the Board being sacked

While WIlson may have been unaware Hasumann was promoting him, it certainly shows that Hausmann was plotting against the democratically elected Board for a long period of time, and presumably having a receptive ear in the Minister who eventually sacked them.

Bill Ralston and Fran O’Sullivan both write in the HoS on the Hawke’s Bay DHB. We’ll let ladies go first, and quote Fran first:

Atkinson believes the inquiry should have addressed other issues that the former board recently uncovered. These include the secret emails between Hausmann and the executive, which Ryall told Parliament showed Hausmann changed tender documents to his advantage. Ryall said both parties withheld these and they came to light only after independent forensic analysis of the back-up tapes.

This also highlights why independent external inquiries with powers to compel evidence are preferable, to inquiries like Ingram and this one which are limited in what they can do.

And now Bill speaks:

When neither you nor your spouse is having an affair it is probably best that you do not write letters and make public statements denying any shagging is going on.

This is political common sense 101, yet former Health Minister Annette King has done exactly that in a breathtaking act of stupidity, neatly adding the missing ingredient of sex to the scandal surrounding the Hawkes Bay District Health Board.

I said much the same. An MP or spouse having or not having affairs is not a matter for the media, but by having written the letter (while Minister of Health), it has meant the issue does hit the public domain.

After the board was controversially sacked by new Health Minister David Cunliffe, King went public, alerting media to the sex rumours. Now, when confronted by reporters with questions about the letter, she accuses the media of being part of a “dirty tricks campaign” and refuses to confirm the letter exists, saying she cannot find it on the ministerial database, avoiding the question of whether she wrote it privately to the board employee.

Heh, I am trying to imagine the look on the face of the Ministerial Secretary if it had been done through the office and entered into the database. First of all how do you classify a letter which threatens someone over alleged affairs by the Minister’s spouse. I doubt it would fit in any of the standard categories!

The report is more interesting for what is not in it than what is. It doesn’t cover whether King should have appointed Hausman; it doesn’t comment on the fact that board staff gave Hausman tender documents ahead of rival bidders; it doesn’t look at Lind’s involvement with the whistleblower or Hausman’s company.

Yes, once again anything like the above was ruled out of the terms of reference.

Perhaps most of all, the report failed to acknowledge that the DHB became a “culture of mistrust and dysfunctional” only after King appointed Hausman.

And it was all predictable.  Appointing a board member against the advice of the Chair flies in the face of good governance. If you are going to do that, you should replace the Chair.

Meanwhile, Cunliffe continues to threaten the sacked board with further investigations of what it may have been up to, King burbles on about a dirty tricks campaign against her and the combined local bodies, and the sacked board prepares for legal action against the Government.

It is a mess that won’t go away until there is a full, transparent, independent inquiry into what happened.

Indeed. And if we don’t get one in 2008, maybe a new Government can order one in 2009?

There are numerous stories in the Hawke’s Bay District Health Board report.

First the main Herald story by Paula Oliver:

But it is what was missing from the report which will be the subject of ongoing argument.

The review did not canvas questions of whether former Health Minister Annette King should have appointed Mr Hausmann to the board.

The panel decided that topic was out of the scope of its report.

The report also did not delve into allegations that the board’s chief executive Chris Clarke colluded with Mr Hausmann over a contract.

The treatment of the whistleblower who drew attention to the conflict also was not canvassed in the report.

Yep, it all comes down to the terms of reference.  This is how the Ingram Report found Field had done no wrong, yet the Police have laid dozens of charges against him. Ingram was only allowed to look into Field’s actions as a Minister. Likewise this report was not allowed to cover Annette King’s actions or the actions of management.

John Armstrong writes the report vindicates David Cunliffe’s decision to sack the Board:

Health Minister David Cunliffe professes to be satisfied with the damning findings of the independent review of Hawkes Bay’s troubled district health board.

Satisfied? Cunliffe should be satisfied – deliriously so. If his Beehive office were not so cramped he would have been excused performing cartwheels across it.

But he notes:

While Cunliffe can claim to have been vindicated, King, however, cannot claim to have been cleared by the report in terms of the wisdom of appointing Hausmann to the board.

Determining that it was outside the scope of its terms of reference, the panel rejected the board’s request to examine King’s role.

Marty Sharpe in the Dom Post focuses on the former Chair, KevinAtkinson, calling it a whitewash:

Kevin Atkinson, sacked with the rest of the board last month, says the “weasel word” report is a “whitewash in every sense of the word”. He urges the auditor-general to investigate.

But Health Minister David Cunliffe says the report, which criticises the board for failing to meet basic conflict of interest procedures and highlights major rifts with senior management, justifies his decision to sack it.

There certainly was a rift with senior management. But if I was a director and my senior management had been secretly taping conversations, improperly allowing a fellow director preferred access to RFP details, not implementing board decisions etc then I might have a rift also.  Whose fault the rift is, is something that was out of bounds for the report as management were excluded. The Auditor-General is his report on one contract found much to criticise.

NZPA reports today that the Minister denies any political interference with the report, and that there is more information to come out.

Finally the Dom Post editorial says the report misses the big picture:

The report makes no comment on the wisdom of former health minister Annette King appointing Mr Hausmann, the managing director of a company with significant interests in the health sector to the board, no comment on the wisdom of board staff giving Mr Hausmann a tender document ahead of rival bidders for a district health board contract and no comment on the appropriateness of the board’s former chief operating officer Ray Lind, Mrs King’s husband and now an employee of Mr Hausmann’s company, secretly recording a meeting with the whistleblower who first questioned the appropriateness of an e-mail from Mr Hausmann to a staff member.

Mr Wilson says that is because the focus of the review was governance. But given the disquiet created by the sacking of the board just 72 days after it was elected, the existence of a substantially different draft report, the contents of which the National Party has begun dripfeeding in Parliament but which The Dominion Post has been prevented from reporting by lawyers acting on behalf of the director-general of health and Mr Hausmann, and the relatively narrow focus of the inquiry, the report will not be the end of the matter.

The board was clearly remiss in its handling of conflicts of interests. Quite possibly it deserved to be dismissed. But the wider question of whether or not Mr Hausmann should ever have been appointed to the board has not been addressed. Nor has management’s role in the debacle.

The region has been poorly served by the board, board staff and government ministers.The only beneficiaries are the National MPs campaigning to retain the Napier and Tukituki electorates later this year.

Indeed it is far from over. The number of unanswered questions remains high.

After days and weeks of the Minister and Peter Hausmann suggesting that the final MOH report would clear everything up, hey presto it is released today and by avoiding minor little issues such as why someone with such massive conflicts was appointed in the first place, it gives people a tick.

The report is on the MOH website and is a massive 190 pages. The report itself is very fine within its careful terms of reference (and has some very good recommendations).  Things people should note are:

• management’s conduct and performance was excluded.  Now recall there was a near civil war between the governors and management, and only the governors were reviewed.
• The deletion of e-mails is not covered
• The treatment of the whistleblower is excluded
• The taping of conversations by Ray Lind is not covered
• The Minister’s decision to appoint Hausmann is out of bounds
• Any disclosures by Hausmann prior to appointment are not covered

You see it all is like Yes Minister taught us.  Frame the terms of reference correctly and you are guaranteed a report which will not cause problems.  Clark did the same with the Ingram Report.  This casts no aspersions on the report writers, but shows the limitations of the type of inquiry chosen.
Despite that the report by no means “clears” Hausmann. On numerous occassions it states he should have acted differently. But in the end I don’t think Hausmann is the main issue here. Other board members are also slated.

The report makes clear Hausmann had been working with the DHB since 2003 on possible public/private joint ventures. It is exceedingly clear Annette King should never ever have appointed him to the DHB.  With all respect he was probably the most conflicted person in NZ with regard to that particular DHB.  Her decision went on to cause almost all the problems.   If she had left him off the board, his company might today be engaged in a happy partnership with the DHB.

Despite the criticism of Hausmann in the report, I’m prepared to give him some benefit of the doubt and say he did try to do the right thing most of the time.  But his company was so involved with the DHB at so many levels, it was always going to be near impossible – you had DHB managers asking him for advice all the time.  He probably should have been appointed CEO not a DHB member.

If one really needs to point fingers I think DHB management is a place to start. Numerous board decisions were not implemented, and it is the DHB CEO and senior staff who should have been providing the advice to DHB members on handling conflicts. The fact the CEO was tied up in the middle of all the problems made things worse.

Finally the report notes:

As such, the views contained in the draft reports were preliminary views expressed at the time that the drafts were provided. The Panel now considers that a number of these preliminary views were wrong.

That is an extraordinary change for a draft to final report.  I will be very interested in seeing the draft report when it comes out.

And the question once again I would ask if why did Annette King appoint Hausmann?  Officials in MOH and DPMC were concerned.   She did not follow best practice with an interview panel. She ignored the concerns of the current Board Chair. His conflicts were probably bigger than any other person in NZ for that DHB. She claims it is all because she chatted to him at some cocktail function and was impressed by him.

David Fisher puts his investigative skills to good use in the latest issue of The Listener. The article will not be online for a week or so, so I really recommend people interested buy a copy.  Some key points I noted:

• The e-mail between Hausmann and CEO Chris Clarke in January 2006, discussing details of the contract Hausmann was tendering for, was only accessed by Board Administrator Deborah Houston as she was filling in for his PA. Hence there may have been many more e-mails like that.
• King’s appointment of Peter Hausmann was at whim, and while legal (she can appoint anyone she wants) failed to follow best practice by having the potential appointee go before an interview panel.
• The Cabinet Appointments and Honours Committee staff alerted King’s office to the extent of Hausmann’s conflicts of interest
• A senior Ministry of Health staffer wrote a letter describing Hausmann’s appointment as posing a “huge risk”.
• Peter Hausmann asked for an inquiry not just into his own actions, but for a full review of the Board’s performance and governance. The Ministry of Health advised there was no need for this, and that it should be into Hausmann’s conflicts only as they believe “these are prima facie serious matters”.
• Pete Hodgson ignored the Ministry advice, and by making the review so much wider, meant the review took much much longer to complete, which in itself led to greater dysfunction.
• Ray Lind recorded several conversations with staff and board members, without telling them at the time.
• These secret recordings were only discovered when PWC audited the e-mail system and found Lind had e-mailed himself a copy – the e-mail had been deleted but was on the backup tape.
• Hausmann had access to the RFP months before his ten competitors did, and at least one of them complained about the lack of time to respond when it went public
• The e-mails to and from Hausmann regarding the RFP were deleted from the DHB’s e-mail system. This is arguably illegal under the Official Information Act.
• The only backup tape which had the e-mails was May 2005, and of the 12 backup tapes given to PWC, it was the only one damaged.
• DHB Management were severely criticised by the Audit Office for another (Wellcare Education) contract they gave to Hausmann’s company.
• An e-mail from Hausmann, after he was appointed to the Board, was sent to a senior manager extensively advocated on behalf of Wellcare Education, which Hausmann’s company’s owned.

The failings of both King and Hodgson, but also Lind and Clarke seem numerous. Deleted e-mails, official advice ignored, preferential treatment, secret recordings, appointments without interviews, to name a few.

What Annette King has yet to answer is why she appointed Hausmann? She says she just met him and as impressed with him.  But why did she ffail to follow best practice? She says she was not legally obliged to do so.  Fine, we know that.  But the question is why did she not have an interview panel as normal?

And has Pete Hodgson explained why he ignored the advice from Ministry officials who had no political interest in the outcome? Did he talk to King before making that decision? Did he talk to Hausmann, Clarke or Ray Lind?

And why did DHB management not once, but twice, fall over themselves to give preferential treatment to Hausmann?

The above advertisement was paid for personally by several former DHB members. And unlike former member Peter Hausmann, they won’t be sending the taxpayer a bill for $511,000 for legal fees.

Hat Tip: Whale Oil

Some quotes from Hansard relating to yesterday’s question time in the House:

Hon Tony Ryall: Is the Minister aware of the email that shows that chief executive Chris Clarke instructed staff to send draft tender documents to Mr Hausmann—who had indicated he would be a bidder—some weeks before the tender process opened, and before any other bidder saw the documents; and is this acceptable behaviour?

Surely this is a joke. No CEO would have draft tender documents sent weeks early to a potential bidder, and even more so if they are on your Board.

Hon Tony Ryall: Is he aware of this email that shows that Mr Hausmann, appointed by the Labour Government, having received this confidential draft tender document, proposed changes that would benefit his company, and is that what he would expect of someone being appointed to the board of that very district health board?

If I got inside information on a government tender, I wouldn’t suggest changes to it. I’d delete it unread.

Hon Tony Ryall: Is he aware from this email that the chief executive agreed to alter the tender documents in precisely the terms proposed by Mr Hausmann, at a time when no other bidder had such access, and is that a proper and ethical process?

Now Tony must be kidding again. Surely no CEO would actually let the party planning to put in a bid for the tender, rewrite the tender document to better suit them.

Hon Tony Ryall: Is he aware that the final document that went out to all tenderers incorporated the changes proposed by Mr Hausmann, whose company was the eventual successful party, and does he think that all potential bidders were fairly treated equally in this process?

Maybe he isn’t kidding.

Hon Tony Ryall: I seek leave to table the emails and documents mentioned in my questions.

Leave granted.

Well if the e-mails have been tabled, I guess we can judge for ourselves if Tony was just making this up or these e-mails do actually show what is claimed.

But wait that isn’t all. In the next question, we learn that these harmless e-mails (move on move on nothing to see here – read the official report when we are happy with it) may not quite have been voluntarily handed over the the inquiry team:

Hon Tony Ryall: Is the Minister aware that the material revealing secret emails between Hausmann and the executive, in which Hausmann changed the tender documents to his advantage, was withheld from the inquiry by both parties and came to light only after independent forensic analysis in London of the back-up tapes; and what does that say about the balance of truth in this inquiry?

Now this must be incorrect. Surely a DHB with obligations under the Official Information Act wouldn’t simply delete embarrassing e-mails.

Hon Tony Ryall: Would the Minister have confidence in the chief executive of the Hawke’s Bay District Health Board if it was confirmed to him that this information was withheld and came to light only because of specialised forensic analysis in Britain of the back-up tapes, which were mysteriously damaged?

The back-up tapes were damaged? What an unfortunate coincidence. Please do not connect the dots. The dots have nothing to do with each other.

 There is a very useful article in the Dom Post with Annette King commenting on her appointment of Peter Hausmann to the Hawke’s Bay District Health Board:

Former health minister Annette King is standing by her decision to appoint Peter Hausmann to Hawke’s Bay District Health Board, and says she was not advised against doing so.

That is a peculiar thing to say when it is later reported:

Former board chairman Kevin Atkinson, who was sacked with the rest of the board last week, told The Dominion Post he advised Ms King on two occasions – in person and over the phone – to delay the appointment of Mr Hausmann till the tender process was completed.

and

An internal ministry e-mail from a senior analyst to the ministry’s DHB governance manager, Bruce Anderson, dated August 28, 2005, and obtained under the Official Information Act, identifies the ministry’s concerns.

The ministry advised that Mr Hausmann’s position on the board, even if he did not take part in discussions about the contract, would not address the public’s perception of fairness and might deter other companies from bidding for the tender.

King goes on to say:

Ms King said Mr Hausmann was appointed with the expectation that his conflicts of interests would be managed.

“Most potential board members do have potential conflicts of interest,” she said.

“That is not the issue. It is how they are managed and the disclosure of them.

“If handled at a governance level appropriately, these are not a problem.”

The issue of conflicts of interests is a vital one for DHBs. If they do not manage them well, then you can end up with what happened in Auckland with a massive laboratory testing contract cancelled by the High Court. So this is not a minor issue.

But Annette misses the major point. Yes many DHB members have conflicts of interests – but these are generally the result of DHB elections. Voters tend to vote for anyone with Dr in front of their name. The whole point of the Ministerial appointees is to balance the Board up with people not conflicted. And sure some Ministerial appointees may have minor conflicts but this was the largest possible conflict one could have – heading up a company which would tender for a $50 million contract.

Managing such a conflict is always going to be very very tough, even if everyone behaved perfectly (and there seems to be some evidence they did not). You see it is not just about having the DHB select the best company for the contract, but being able to manage that contract afterwards. If the contractor doesn’t perform as well as expected, it is a awful situation to manage if the contractor’s CEO sits on your own board.

I don’t subscribe any evil ulterior motives to Annette King in her appointment of Hausmann. I just can’t understand why she would have done it. The Board Chair was advising against it (and it is very very rare to appoint a Director against the wishes of a Chair), the Ministry of Health raised issues about it, and she knew he was going to be tendering for a major contract. Why create all these problems which could have been avoided by simply not appointing Hausmann or appointing him to another DHB where he wouldn’t have been conflicted?

Let me put it another way. If Annette King had not insisted on appointing Hausmann, does anyone think the DHB would have ended up sacked as has now happened?

This is not to say Hausmann himself is to blame (I do await the reports with interest though), for he was placed in a position by King where fallout like this was almost inevitable.

UPDATE: Tony Ryall has read in the House from some explosive e-mails, and has also alleged they were not given to the inquiry but recovered by forensic experts in London. I’ll blog the Hansard when it is available.

Donna Chisholm in the SST quotes from an Audit Office report on the Hawke’s Bay District Health Board. Now I can’t find the Audit Office report online, but it doesn’t look great for the Government which has effectively sided with Peter Hausmann and the management, by dismissing the entire Board.

Chisholm states the Audit Office reports finds the following:

• There was a contract to Wellcare Education, a subsidiary of Hausmann’s company Health Care New Zealand, for a pilot project to train 16 long-term beneficiaries as homecare workers in a partnership with the Ministry of Social Development.
• A total of 11 failings were found in the process.
• The $1.1m contract included a $256,000 payment to Wellcare, over two years. Board members say they have never been able to establish the reason for this.
• Management kept the Board unaware that the contract had been proposed until one month after it had been agreed and signed – despite the fact it involved on of their own board members
• It is understood Hausmann’s discussions with senior staff about the contract began as early as August 2005, six months before he declared his conflict of interest.
• The contract processes did not comply with either the board’s procurement policies or public sector good practice and there was no evidence of formal conflict of interest procedures being undertaken.
• Management could not explain why an open tendering process had not been used.
• No reasons or justifications for the selection of Hausmann’s company were recorded in files.
• The contract was signed without evidence of a completed approval process.
• Payments were made before services under the contract were delivered when they should have been tied to milestones which reflected completed work.

Now bear in mind this is only a report into the $1.1 million contract. We are yet to see the report into the $50 million contract.

UPDATE: Local MP Craig Foss has several relevant blog posts on this issue, citing board minutes and written questions about the fact the contract was not tendered, and how the CEO told the Board initially it had been.

Bill Ralston thinks National hasn’t done a good enough job with the Hawke’s Bay District Health Board sacking, and that what happened there is a bigger scandal than anything to do with Owen Glenn.  He paints a nice succinct picture:

A wee while back, Annette King was Minister of Health. Her husband, Ray Lind, was the chief operating officer of the Hawke’s Bay District Health Board.

Against the wishes of many on the health board, King appoints Peter Hausmann to the board. Hausmann runs a company called Healthcare New Zealand and many on the board fretted that he, as a supplier to health boards, would have a conflict of interest as a board member. King appointed him anyway.

It is still a mystery to many why King insisted on appointing someone who would be so conflicted.  Was there no one else?

In a very short time, the chairman of the board discovered Hausmann was involved in email discussions over a tender for a multi-million-dollar contract from the board he was a member of.

Which he had promised he would not do.

A woman whistleblower in the board’s administration brings this to the chairman’s attention.

She alleges Annette King’s husband, Ray Lind, as a senior manager put pressure on her because she blew the whistle. She ends up being restructured out of her job and an employment dispute ensues.

And don’t forget the secret taping on conversations. Also do not forget the DHB CEO is a former staffer for Helen Clark.

Meanwhile, Ray Lind quits and goes to work for Hausmann.

And as the inquiry goes on, Hausmann I think tried to bill the Board $500,000 or so for his legal fees.

Flak flies, King is reshuffled out of the portfolio, her successor dithers about sorting out the rolling brawl between the board and its managers over various contracts being awarded, and the people of Hawke’s Bay respond by backing the chairman and his board supporters by resoundingly re-electing them.

Normally the good people of Hawke’s Bay will disagree on whether the week starts on a Saturday or a Monday, plus every other issue known to man.  One should not under-estimate how rare it is to be able to unite every local body in the region against you (for sacking the board).

An inquiry into the murky goings on at the DHB rumbles away while there is yet another cabinet reshuffle and two-gun David Cunliffe takes over the job and refuses to confirm the chairman in his job.

Then, just 72 days after the re-elected board takes office, Cunliffe sacks them. He says the organisation is “dysfunctional” and it has a “rapidly deteriorating” financial situation. Actually, it’s only $7.7 million in the red, within its target range of coming out plus or minus 1 per cent of its revenue. David Cunliffe might not have noticed, but there is not a DHB in the country that hasn’t had financial problems and the Hawke’s Bay board’s problem is minor.

Indeed it is not clear at all why this Board was sacked when there are other boards who deserve sacking more.  There was no intermediate step taken such as a Crown Monitor. And also unknown is how many of the problems were caused by the Government’s own review taking so long to resolve, and the failure to confirm the Chair.

Cunliffe whinged to me that the board had publicly criticised him and the Health Ministry. Diddums. When you are in politics sometimes people have a go at you.

And he had attacked them publicly.  It must be a new rule that criticism can only be made public in one direction.

He accused the board of having a dysfunctional relationship with its management. Hell, if the management had been getting up to half the shenanigans the board alleges, no wonder the place was dysfunctional.

The concept of allowing staff to choose their governors is a new one for me.

Cunliffe added another reason for sacking the board was that hospital clinicians were critical of it. When are doctors ever happy with their DHB? Besides, only two out of 120 clinicians at the DHB have ever publicly had a go at the board and one of those has since quit.

And the local head of the doctor’s union publicly backed the Board Chair.  This is very unusual for a union head.

Sorry, David Cunliffe sacked the democratically elected Hawke’s Bay DHB because it was causing his Government grief and the board was exposing something rotten that began with the disastrous mistakes of Annette King.

One has to ask once again, why appoint someone to a board who you know is about to have a major conflict of interest with that board?