Very unusual payments
IBAC investigates the Victorian education department’s failed Ultranet
By April 2016
In late February, Dr James Watterston, the director-general of Queensland’s Department of Education and Training, gave evidence to the Victorian Independent Broad-based Anti-corruption Commission (IBAC). The hearings were further examinations of IBAC allegations of corruption at the Victorian Department of Education and Training (DET), which commenced last year. Watterston was quietly spoken; his microphone was brought closer so he could be heard. His testimony, however, was like a detonation.
Recalling his time as a deputy secretary in Victoria’s DET, Watterston nominated 11 May 2012 as “one of the most memorable days of my career”. While preparing for a Public Accounts and Estimates Committee (PAEC) hearing, only days into his new role, Watterston learned of a media report questioning department expenditure, and instructed his office director to trawl through the previous 12 months of invoices. Within an hour and a half it was confirmed that some “very unusual payments” had been made.
One example of a suspicious payment was an amount of $4 less than $1 million (the latter being the threshold under which no tender was required). Darrell Fraser, Watterston’s immediate predecessor, had signed off on the payment. It was for a putative consultancy report that Fraser had procured to “survey the connectivity of all IT applications related to the Ultranet”, a very expensive, unsuccessful and ultimately abandoned online learning management system developed to “improve student outcomes” in schools. For close to a decade, Fraser had dedicated himself, in an obsessive way, it was heard, to funding his vision for the Ultranet. The payment in question, Watterston discovered, was to a company that seemed to have no expertise in IT matters. The report, he said, was incomplete and “amateurish in the extreme”.
Alarmed, and not wanting to be “embarrassed at the PAEC later in the day”, Watterston summoned staffers who’d worked on the procurement, under Fraser’s direction, to answer questions. Watterston told the hearing that two of them, long-term department staff Sonya Velo-Johnstone and Ben Cushing, became distraught in the meeting, with Cushing breaking down in tears in front of him.
Dr Watterston told the counsel assisting, Carmen Currie, that these meetings took place in “a glass office … open to sight from everyone … on the floor. It seemed to me that … there was a pall over the office. People seemed to know that there was a big issue being discussed.” When Watterston suggested to Velo-Johnstone that the report was worth “more like $90 rather than $900,000”, she became “very distressed but agreed”. Watterston told the hearing that Velo-Johnstone had said the payment was “somehow connected to the Ultranet contractor, CSG” and that she had “always been worried [and] was now relieved that it was now out in the open”.
What this “it” was, Watterston said, was not yet clear.
Over five weeks, in February and March, IBAC’s Operation Dunham detailed this “it” in public hearings. In the case of the Ultranet project alone, IBAC alleges that $180 million, and possibly as much as $240 million, of department funding was funnelled out of the government schools’ budgets, with significant sums of this money allegedly manipulated by senior executives in Machiavellian deceits and sham transactions. For students and teachers, the much-hyped Ultranet was ultimately a monumental waste of funds, a flop, a no-show. For Darrell Fraser and his co-opted executives, friends and commercial partners, the six-plus years of major public funding allocated to the Ultranet seemed to be an unparalleled windfall.
The hearing learned that between approximately 2002 and 2012, Darrell Fraser, Jeff Rosewarne (DET deputy secretary and acting secretary), Ron Lake (Ultranet board member), and regional directors Wayne Craig and John Allman – along with complicit and/or deceived and bullied department staffers, plus private sector contractors and consultants – had allegedly devised and transacted lucrative deals. These were carried out on department time and through department channels, but not for the benefit of schoolchildren. Plain-as-day conflicts of interest regarding the various tender, procurement and review stages of very large DET-related jobs were blatantly ignored. At least one Ultranet board member and his girlfriend, also a department employee, allegedly conducted insider stock-market trading relating to the public listing of an Ultranet company. Darrell Fraser and Dianne Peck, another senior manager on the Ultranet project, were air-lifted out of the DET and into highly paid positions within the same company, leaving a trail of chaos in their wake. Many of the group, it was also alleged, had committed gross abuses of department credit cards and travel privileges over long periods of their tenure.
Two more senior figures, Professor Peter Dawkins (secretary of the DET from 2006 to 2010) and Bronwyn Pike (the state minister for education from 2007 to 2010), gave evidence towards the end of the hearings. Both had received complaints about probity issues and other concerns within the Office of Government Schools Education (OGSE) senior management, particularly relating to its “blokey, boozy culture” in which, it was heard, certain executives ruled by fear.
Professor Dawkins, a remote-seeming man with impeccable manners, politely blinked his way through responses to Currie’s questions. He testified that it was only at the very end of his five-year period as department secretary that an idea of a boys’ club existing at OGSE came to his notice.
Counsel assisting, Ian Hill QC, explored whether ex-minister Pike was in a position to take effective action against the executives under investigation. He questioned her about an intercepted phone call she’d had with Darrell Fraser in 2014, and suggested that the tone revealed Pike’s “fairly close relationship” with the former deputy secretary. Pike, it was also heard, socialised on a number of occasions with Fraser at his house. In a tendered email exchange from 2010, Fraser had said that Brian Burgess, the then president of the Victorian Association of State Secondary Principals, was a “snake” for questioning Fraser’s $1.4 million spend in a single day to celebrate the arrival of the Ultranet. Pike replied to Fraser, “Thanks for that. We will Freeze him [Burgess]. I hope that other [principals] have the courage to chastise him.”
In 2006, Fraser and other staff members at Glen Waverley Secondary College in Melbourne’s east had all been promoted into the highest reaches of the OGSE secretariat. This steep elevation of Fraser and friends – from principal and teaching staff one day to departmental management the next – is a central mystery of the alleged DET corruption saga. When asked to explain Fraser’s rapid ascent to the top levels of the department, Professor Dawkins said that his predecessor, Grant Hehir, claimed he recruited Fraser because he needed a person “who was going to drive a strong and innovative agenda, particularly around improving the quality of school leadership and teaching and learning”. Dawkins was told that “Mr Fraser was the best candidate for the position”, a statement that, after weeks of astonishing testimony to the contrary, elicited incredulous guffaws from the gallery.
But it was Ben Cushing, the man who broke down in Dr Watterston’s glass-windowed office, who gave the hearing an insight into the human cost of the alleged cronyism, fraud and corruption. Cushing, an apparently once robust man, now appeared fragile.
In an email tendered in the hearings, an executive involved in the Ultranet rollout referred to Cushing as a man “sucked in by the promise of … free Pina Coladas”. But something about the deceptions must not, at some level, have sat well with Cushing. In what might be seen as a ray of hope in the circumstances, it seems it only took the interventions of a single, more principled outsider, Dr Watterston, to bring Cushing to his senses.