CSG reviewed Ultranet; Darrell Fraser is 'going to go to jail'

By David Donaldson

March 4, 2016

Former Victorian Education Department deputy secretary Darrell Fraser was worried his “life is ruined and he’s going to go to jail” claimed Stephen Birrell, a senior employee of the company contracted to deliver the department’s Ultranet software system, the anti-corruption hearing into the project has heard.

CSG employee Heath Caban responded to Birrell, “I don’t think you can go to jail for skipping a procurement process”, referring to a million-dollar contract the department had signed without going to a tender process, the Independent Broad-based Anti-corruption Commission inquiry heard on Thursday.

Contracts above $150,000 would ordinarily go to tender, but an exemption was approved by the department’s “rubber stamp” procurement board following a process that failed to verify information provided by Fraser.

“You know there was some dodgy stuff going on, although it’s relatively minor in the scheme of life.”

Birrell, the executive general manager of CSG, told Caban in a recorded phone call played in the court that Fraser was “going to go to jail”. Birrell made the comment after meeting with Fraser following media reports about Ultranet, though maintained Fraser had not admitted to him he’d done anything wrong. Fraser was concerned he was “the subject of a witch hunt”, Birrell said.

The inquiry was also played a phone call recording in which Birrell told his son, “you know there was some dodgy stuff going on, although it’s relatively minor in the scheme of life”. Birrell stated he was referring to media reports of alleged corruption surrounding Ultranet and not anything he was personally responsible for.

The non-tendered contract in question, to conduct a review of learning technologies in use across Victoria, including Ultranet, was made between the department and Alliance Recruiting for $4 short of $1 million. Anything over $1 million would have had to have been approved outside the department.

But while the money was paid by the Education Department to Alliance Recruiting, Alliance was then paying CSG the bulk of the funds. In fact, the review was largely conducted not by Alliance, but by the company contracted to deliver Ultranet, CSG. Education Department employee Ben Cushing told IBAC that there were no Alliance employees sitting on the working group that was in charge of the review and that, instead, all non-department staff were from CSG.

Unusual review by CSG into Ultranet

Cushing said it was “absolutely” unusual that such an audit would be conducted in large part by the company delivering one of the main projects being reviewed. Cushing added that he had concerns about the capability and level of experience of the staff CSG provided to conduct the evaluation, in particular its lead, Heath Caban.

But it was not clear to many outside the review that CSG was doing the work. A letter was sent out to school principals about the review in which Caban was referred to as an employee of Alliance Recruitment, rather than his real employer, CSG. Birrell responded that there had been no instruction he was aware of to “hide” CSG’s involvement in the review.

CSG was in financial trouble at the time of the deal, former CEO of CSG Denis Mackenzie told the inquiry on Wednesday. Cushing said he was left in “no doubt” after discussions with Fraser that the project would “alleviate financial pressures” for the company.

There appears to be broad agreement the review was worth much less than the department paid for it. Cushing suggested the audit, for which the department paid $1 million, would have been worth about $100,000. Documents from CSG itself indicated the total costs of the project, including overheads, would have been in the region of $200,000 — far short of the money paid by the department.

An email presented to the hearing from Caban to colleague Julie-Ann Kerin stated, “I am treating this project as a real consulting engagement with a tangible client deliverable”, wording that counsel assisting Ian Hill QC was “rather intriguing”. Hill suggested “this was not a real project”.

IBAC also heard CSG’s director of government affairs Melissa Horne prepared a brief to “mitigate any public perception risk with CSG doing the audit via Alliance Recruitment” which “could easily be painted by our friends (not) at The Age and the grub at the Herald Sun to look like a conflict of interest”, which highlighted as a “risk” a situation in which “Alliance Recruitment is contacted by a journalist/member of the opposition/Victorian Auditor-General’s office to see how the review is progressing”.

Birrell responded that it was Horne’s job as director of government affairs to consider the “worst-case scenario” possible, but admitted he was “not sure” why she would have raised interest from the auditor-general as a potential risk.

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