The deeper corruption at the heart of the governance issues on Groote Eylandt

 

He draweth out the thread of his verbosity

finer than the staple of his argument.

Love's Labour's Lost, Act 5 scene 1

 

The Minister for Indigenous Australians, Malarndirri McCarthy has released the review into the Anindilyakwa Land Council commissioned by the former Minister in February 2024 (link here).

The Minister’s media release (link here) refers to the review as ‘the Independent Review’, however this is complete spin as the review which was ostensibly prepared by accounting firm Bellchambers Barrett, was clearly undertaken with close oversight by the NIAA (who arguably are not independent given their previous funding of projects associated with the proposed Winchelsea  mine), and in conjunction in many respects with the ALC. The final report is signed and approved by three individuals: Cherelle Wurrawilya, Chair of the ALC, Sean Worth, Group Manager integrity NIAA, and Russell Livermore, Partner Bellchambers Barrett.

The report avoids providing a clear statement of the formal terms of reference provided to BellChambers by NIAA, and provides only general information on the dates from which the review began work. The time frame covered by the review is limited to the date of publication of the ANAO Audit and extends to July 2024. It is apparent from the context that the review is focussed entirely on the progress (or lack thereof) in implementing the ANAO recommendations which as I pointed out in previous posts was itself focussed on process and not outcomes, and limited to the operations of the ALC. The Review was not focussed (except in an indirect manner) on the ways in which the ALC has been utilising the various related entities in receipt of royalty equivalents (which are required to be CATSI corporations) to bypass the legislative constraints on ALC actions and/or to obscure financial flows directed to various commercial projects (such as the proposed Winchelsea mine and perhaps retail activities of various kinds on Groote).

What is missing from the Bellchambers Review is any context. There is no explanation of the role of the Minister and her responsibility for ensuring that statutory entities within her portfolio are complying with both their establishing legislation and various other Commonwealth governance requirements such as those set out in the PGPA legislation. There is no explanation of the role of land councils in the NT, of the way in which the royalty regime operates, of the significance of the ABA, nor of the regulatory frameworks in place in relation to distribution of royalty equivalents and other mining related payments. There is no mention of the substantial dissatisfaction amongst numerous residents on Groote with the ALC’s operations as evidenced by the petition signed by some 200 people and tabled in Parliament earlier this year. There is no mention of the fact that a Commonwealth entity (and I am reliably informed a number of other individuals) have lodged complaints with the National Anti Corruption Commission. I was reminded of the episode of Fawlty Towers ‘Don’t mention the war’ (link here).

Instead, what we have is a technical exercise in bureaucratic pedantry focussed on the extent to which various processes recommended by the ANAO have been implemented.

I am not proposing to undertake a detailed critique of the analysis by Bellchambers related to the ALC’s compliance with process requirements. They conclude that the ALC response to the ANAO recommendations relating to various governance process requirements remains deficient. Focussing on process is useful, but it no substitute for focussing on outcomes. The allegations of outcome deficiencies (potentially involving tens of millions of dollars) demand a regulatory response. It is not good enough to say that this is an issue for the ALC nor to say that the NACC is investigating.

I will make some short comments on the recommendations of the Bellchambers Review set out in section three under the anodyne heading Identified Enhancements to Governance.

Under theme one dealing with conflicts of interest, the Bellchambers Review recommends inter alia:

1. The ALC Board and Management should review all roles for Board members and ALC Management and assess whether: a. It is possible to effectively manage identified conflicts of interest for: i. the dual remuneration CEO positions for ALC and Winchelsea Mining Pty Ltd. ii. related party entities / ORICs that are beneficiaries of funding decisions made by the ALC Board. b. Management strategies for declared conflicts by ALC Board members or Management, including conflicts relating to immediate family members, are appropriate and operating effectively.

My comment: this is extraordinary. Bellchambers and the NIAA appear to believe that an entity whose key members are the subject of multiple allegations involving financial impropriety and are the subject of a current NACC investigation should be trusted to decide how to manage the conflicts of interest identified by the ANAO and more than a year later are still in place. Do Bellchambers and the NIAA believe that the systemic networks of conflicts were put in place by accident or oversight? Get real! Furthermore, the recommendation explicitly accepts that the ALC CEO, who as a statutory office holder is paid a salary determined by the Commonwealth Remuneration Tribunal (based on the fact that the CEO is employed full time), should also be the recipient of a private sector salary, and by implication will not be providing full time services in his role as the CEO.

The ALC response includes, after some anodyne pabulum:

The Board has commenced this review for the ALC CEO position. On 22 August 2024 the Board resolved to give in principle support to the draft NIAA report finding that the ALC CEO no longer also be the CEO of Winchelsea Mining. Specifically, in an ordered way, the ALC Board resolved to give in principle support to the current ALC CEO’s proposal that he cease in the ALC CEO role and commence as a consultant for Winchelsea Mining and Groote Holding Aboriginal Corporation matters, which consultancy is anticipated to include other pressing matters particularly the GEMCO mine closure and Transition Steering Committee. A final decision about the current CEO’s proposal will be made by the incoming ALC Board (ie after current elections) after receiving the NIAA’s final Independent review report.

My comment:

The CEO is proposing to resign as CEO of Winchelsea Mining but remain as a consultant and presumably a Director. Given the small size of Winchelsea, its tight Directorship structure, and its low staff numbers, it beggars belief that Mr Hewitt would exercise any less influence as a consultant than as CEO. Furtehrmore, there are real questions as to why the CEO is on the Board and not any members fo the corporation who actually own the stake in Winchelsea (see below). Moreover it also beggars belief that the Minister and the NIAA are prepared to openly countenance what is in effect double dipping by a statutory office holder employed in a statutory corporation.

ERRATUM: It has come to my attention that I have probably misinterpreted the highlighted text above and that the proposal from the ALC is that the ALC CEO will resign as CEO of the ALC (and not as I had read it as an ALC representative Director on the Winchelsea Board). 

While this would be a signfiicant imporvement on the status quo, to the extent that the current CEO excercises substantial informal influence, it may make no difference whatsoever. It is unclear why Mr Hewitt would need to take up the role of consultant on Winchelsea given that he is already a Director. Presumably the issue of remuneration (potentially funded by the ALC or AAAC (the corporation which owns the Indigenous equity in Winchelsea) provides part of the reason. END ERRATUM

Under theme two, the Belchambers Review recommends:

The ALC should collate information for all remuneration, benefits and related party transactions for ALC Board members, ALC Management, immediate family members and related party entities / ORICs to support enhanced transparency and information for Board members. The remuneration, benefits and related party transactions should be subject to periodic review and update and used to ensure that all remuneration, benefits and relathed party transactions are appropriately authorised and monitored. 

My comment: As the ALC response points out, it is unclear that the ALC has the formal powers to collect this information. Again this is an entirely passive and anodyne. More importantly, where is the critical engagement by the NIAA Integrity Group?

Under theme three, the Bellchambers Review recommends:

3. The ALC should establish an Independent Board Advisor Role with direct responsibilities to the Board including: a. Understanding Board matters, papers and forward workplan agenda b. Governance matters, including monitoring of conflict of interests and associated management strategies c. Governance training d. Supporting attendance / participation by the full Board….

My comment: apart from the logistical and communication challenges, this is precisely the role of the CEO of the ALC. It implicitly accepts that the current CEO has been incapable and unwilling to provide the level of independent advice required by the Board. There is a simple and clear solution to that problem which for some reason entirely evades the Minister and her NIAA advisers.

Under theme four, the Belchambers Review recommends a closure process for the ANAO recommendations.

My comment: this is core business for the ALC Audit Committee which is chaired by the partner in an accounting firm whose services in relation to the Audit Committee the ANAO identified as being the most expensive by far of the four land councils, and which is itself heavily conflicted by virtue of the provision of other services to corporations which are controlled indirectly by the ALC. The ALC response foreshadowed requests for additional funding to cover off a function which is already overfunded and which is clearly compromised and ineffective. None of this appears to be on the radar of the NIAA Integrity Unit!

The Real Story

Minister McCarthy’s media statement identifies only two substantive actions arising from the review:

I have written to the ALC Board to ensure the Board and voters are aware of the review’s findings ahead of the ALC Board elections next week.

I have taken the unusual decision to withhold approval for the ALC’s 2024/25 budget, instead approving an operational budget until 1 December 2024. The full budget will only be considered when ALC has demonstrated to the NIAA that it is sufficiently prioritising and implementing the recommendations of the review and the ANAO audit.

These are worthy steps, create an impression of diligent oversight, and are completely irrelevant to addressing the fundamental governance issues confronting the ALC and impacting the future  financial security of Groote’s 1200 residents (and their descendants).

In my view, the Bellchambers Review was from the start designed as a diversion to avoid addressing the deeper and systemic governance challenges that have emerged on Groote since the current CEO was engaged by the ALC. The previous posts related to Groote on this blog have primarily dealt with the widespread allegations of substantive governance and accountability failure and the concomitant adverse policy implications. I wont link to those posts here. They deal with inter alia the significant diversion of mining related financial payments towards the development of a proposed mine on Winchelsea Island; the financial arrangements related to the ownership of Winchelsea Mining Corporation; discrepancies between the investments being allocated towards Winchelsea and the value of the identified manganese deposits on Winchelsea; the governance and potential financial implications of the ALC’s apparent control of the financial affairs of key corporations in receipt of royalty equivalents; the conflict of interest implications involving the CEO, his spouse, the chair of the ALC Audit committee; and the extraordinary financial benefits made available to former ALC Board members at the discretion of the Board (which raises questions regarding potential for co-option and undue influence). And much else besides. Many of these issues have been raised either directly or indirectly in Senate Estimates Hearings, in a number of substantial investigative reports in the SMH and the Saturday Paper, and have been the subject of correspondence to Ministers from concerned parties.

While the formal response from the ALC has been to reject some (but not all) of the allegations or argue that they are misdirected, the response from Ministers has been to ignore these issues, except insofar as a review of ALC processes, not substantive allegations was commissioned. Until this week, the Bellchambers Review (whose terms of reference have still not been released) in effect served as the foil to avoid having to respond to the substantive issues.

So in addition to the complex and myriad issues related to the ALC and its governance, it seems to me that there is a fundamental questions to be asked and answered: why has the Government not been prepared to address the substantive allegations and issues related to the ALC and its governance?

My initial thought was that this was a case of politics overwhelming good policy. Yet upon reflection, I do not think the facts fit such an explanation.

A better explanation is that the ALC, or elements within it, have in effect captured the Commonwealth and probably the NT Government in relation to issues on Groote Eylandt. How else to explain the ALC’s extraordinary hold over successive Ministers, the extraordinary outcomes that have become normalised (such as the ALC Chair and CEO being on both sides of a mining agreement that requires Ministerial approval; or of the salary double dipping; or of the fact that the Aboriginal Corporation which owns 70 percent of Winchelsea has no Directors on the Winchelsea Board, but the ALC Chair, CEO and CEO’s spouse are represented).

It is unclear to me whether the mechanism of state capture involving extraordinary influence over the political elites in the NT and to a lesser extent Canberra is  driven by the corrupt co-option of those political elites, or gross administrative and political incompetence. I should note that the complicity and co-option extends to the Opposition parties in Darwin and in Canberra. In one of my earliest posts analysing the Estimates questioning following the ANAO report, I commented upon the current Federal Opposition’s apparent disinterest in digging into what was occurring on Groote. In Canberra, the former coalition ministers apparent inability to rein in the ALC was facilitated by the then Labor Opposition’s disinterest in pursuing issues of accountability in the Indigenous policy domain. Whether it is corruption or gross incompetence, the accepted standards of political and administrative accountability would normally demand that the responsible Ministers and perhaps those bureaucratic advisers who knowingly ignore their legal obligations should have their employment terminated.  

Of course, I don’t hold out much hope that the current Prime Minister will be prepared to take action. I am surprised that these issues are not on the radar of the Secretary of Prime Minister and Cabinet. I am certain of two things however: first, this is not going to end well; and second, the longer governments prevaricate, the worse the fallout will be. Unfortunately, as is the way with these things, the most severe impacts will likely fall on the people of Groote Eylandt.

Finally I should note that the ABC provides an informative overview in an article dated 29 August which places the review in a much broader context. Unfortunately it has the rather misleading headline Commonwealth freezes funding to Anindilyakwa Land Council as chief executive Mark Hewitt flags resignation (link here). It is misleading insofar as the minister has not frozen the ALC’s funding (and probably never will) but has merely deferred providing approval for ongoing expenditure beyond 1 December, and the CEO has not resigned from the ALC (as the headline suggests), but is proposing to resign as CEO of Winchelsea Mining but remain as a consultant and presumably a Director (as discussed above). ERRATUM: this last statement is probably incorrect; see the erratum above.