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Parliamentary Joint Committee on the Australian Commission for Law Enforcement Integrity
19/08/2011
Integrity testing

PEZZULLO, Mr Michael, Chief Operating Officer, Australian Customs and Border Protection Service

STOREN, Ms Donna, National Manager, Integrity and Professional Standards, Australian Customs and Border Protection Service

[12:24]

CHAIR: Thank you. I now welcome representatives from the Australian Customs and Border Protection Service. I thank you for your patience. I would like to pass on the thanks from this committee and from the law enforcement committee regarding the visit to the Sydney customs port and airport facilities on 29 July. In relation to this hearing, I invite you to make an opening statement and then the committee will ask questions.

Mr Pezzullo : Chair, I do not have a formal opening statement other than to inform the committee, not that it probably needs too much by way of briefing, that of course we are eight months into a process of bedding in our relationship with the Australian Commission for Law Enforcement Integrity, where of course we have come under their supervision and oversight. Ms Storen's branch has got a very close relationship, as I think this committee is well aware. In the context of that relationship building exercise, we have of course engaged in a number of referrals already. We had, if you like, an initial stock of referrals that were made when the legislation took effect and the new scheme of oversight came into effect on 1 January. Since then of course we have provided further referrals.

In the context of the matters that are of interest to this committee in terms of its inquiry into integrity testing, the view that the CEO and the senior management have taken is that we are very much a follower in this area. We very much look forward to the ultimate findings and recommendations that this committee is no doubt going to make. As part of the interagency governmental response process, where we work through a response to your recommendations, we will take a final and definitive position on integrity testing. Noting that in the end, we cannot really easily contemplate a situation where if a matter was of such serious dimensions in terms of potential criminality involving one of our officers and a referral had been made to ACLEI, our position is that it would be ACLEI's final judgment as to whether integrity testing was a valued and positive tool that they would employ as part of furthering an investigation in relation to those matters. In a similar way to the crime commission's position that was just put to you in evidence before, if ACLEI then referred a matter back to us because it did not meet relevant thresholds of interest or concern to them, it would then be a separate matter as to whether we needed some kind of organic capability potentially to employ integrity testing as a way of resolving that matter. But, our thinking on this is very much at a formative stage and we very much look forward to the committee handing down its report. Thank you.

CHAIR: Thank you for that statement. I accept what you are saying about the agency being a follower in this matter. Have you given any thought to the type of integrity testing that you think would be appropriate?

Mr Pezzullo : We have done this very much only in the preliminary sense given the invitation from this committee to give consideration and some contemplation to these matters. When we received the invitation, as you could imagine, we would have consulted with our colleagues in the Attorney-General's Department, the federal police, and ACLEI of course. We are very much in a formative stage of reflecting on the submissions that we know that they have provided to you. I have listened with great interest all through the morning to the evidence being given. I would not characterise our thinking in this area as being anything other than very much at a formative stage.

CHAIR: Thank you.

Senator IAN MACDONALD: Not directly on the inquiry, but could you just tell me of the referrals that have been made to ACLEI; what percentage of referrals has resulted in further action and what has been found to be without any substance?

Mr Pezzullo : I will ask Ms Storen to speak to the detail of that and there might be some sensitivities and a concession that we may wish to avoid going to. In terms of the coverage that came into effect on 1 January, as I indicated in my opening remarks there was, if you like, a stock of allegations or matters that we felt had met the test. They were referred and since then there has been almost a monthly marginal addition to those referrals. I will ask Ms Storen to address this. I cannot recall off the top of my head whether ACLEI has brought any matter to a single conclusion such that an officer has been charged and is currently before the courts. There are a number of matters on foot but I might ask Ms Storen to address that.

Ms Storen : From 4 January to 1 August this year, we have referred 22 matters to ACLEI. Of those matters at this stage I would not be able to provide you with an analysis of all the acceptance because we are still waiting for a number of matters to come back from ACLEI as decisions of whether they are going to accept them as being notifiable. I can inform you that we have referred 22 matters from 4 January to 1 August this year.

Senator IAN MACDONALD: As I say, it is not directly relevant to this particular inquiry but it is relevant to the issue of whether it was right to bring Customs within the purview of ACLEI. Or, it may be that none of the things you referred have any issues of concern at all, in which case perhaps we have overdone it by bringing you in. That was the nature of the question. I appreciate there would be some sensitivity in the response.

Mr Pezzullo : Just on the point of the value of the coverage, it is probably too early to tell whether, over the course of time, the parliament's legislation in this area had the desired effect in an empirical sense to say, 'This number of referrals occurred, this many prosecutions then resulted, and this many officers were charged.' I think there is a different way to frame a perspective on that; it has had a very immediate effect in terms of a demonstrated commitment on the part of the leadership of the agency and through to its workforce that we take matters of fraud, corruption, and integrity very seriously. We have engaged in a very comprehensive series of staff engagement activities where the staff has been briefed, notwithstanding the fact that a lot of them have been in the agency for a long time and this was in no way a reflection on our part of a lack of trust. We said that in this modern era, where criminality is becoming in some senses somewhat more pervasive and certainly more dangerous and where the techniques and capabilities available to the criminal elements are becoming more sophisticated, their ability to penetrate and infiltrate is becoming much more subtle. It has enabled us to send a very strong signal to our staff that that oversight is actually something that we welcome. It does mean that their behaviour and their conduct has to be, if you like, even more exemplary than it used to be. It is really about taking on the challenges of working in this environment given the trends and the phenomena that we are seeing in evolving criminality.

Senator IAN MACDONALD: I agree with that all and I think the committee and the government were wise in involving you. The points you have made have been well made at the two visits we have had to your organisation, for which I repeat the Chair's thanks for hosting us and showing us what is a very good organisation

Mr Pezzullo : Thank you.

Senator IAN MACDONALD: Again, hoping I am not asking questions which give the wrong impression in the answer, but since the initial block, you say you have referred some issues. Can you quantify them? Is it one a month, two a month or three every six months?

Ms Storen : I do not have that data available to me at the moment.

Senator IAN MACDONALD: No, but what is your feel? In fact I probably do not want the data but is it a few every month, a couple?

Ms Storen : It is probably on average about two a month. We did refer on 4 January a number of matters that we were holding and currently investigating at that time.

Senator IAN MACDONALD: I appreciate that.

Ms Storen : That would have been the largest number of matters that we referred to ACLEI, and that was in January. It has decreased, but as the chief operating officer has just stated, we are presenting more widely throughout the organisation and providing better education, training and awareness on how to report through to integrity and professional standards. I think some of you were also issued with our Z-cards over the last couple of months on how to report issues through to integrity and professional standards. As we are educating our staff more widely, we are getting people who are referring, but then we are assessing whether or not they fall within the definition of notifiable under the LEIC Act. We are seeing a decrease in the numbers that we are referring through to ACLEI.

Senator IAN MACDONALD: I think we have learned before that it is actually your unit, area, Ms Storen, that deals with these issues?

Mr Pezzullo : That is right.

Senator IAN MACDONALD: Again, this is a bit hypothetical, but if integrity testing was going to become something that the Australian Customs and Border Protection Service did, would again that go to your area? I suppose it is a bit hypothetical, is it not?

Mr Pezzullo : I think I can answer it based on our existing governance framework. I might just take a minute or so to lay that out because I think it will in fact answer the question. Over the last several years, we have been building capability in this area moving from a very strict internal affairs approach which was obviously somewhat reactive to allegations being put. Both in the internal affairs unit era and also the more recent integrity and professional standards branch which Ms Storen heads up—which we created about 18 months ago to broaden the lens beyond reactive investigations, to bring in corruption prevention, fraud prevention and the like—there has been very close partnering with our internal audit unit who help with, for example, financial assurance, financial checking of people misusing say credit cards and the like. We have built that practice out from a very strict internal affairs focus to a more preventative and a more risk management savvy approach, if I can use that term.

The one difference we have though relative to some of the other agencies that have appeared, and this is an important difference to draw out for the committee's benefit, is that officers of our service are Australian Public Service employees within the meaning of the Australian Public Service Act. They of course are employed to implement and enforce the Customs Act but in and of itself those two acts, even in combination, do not create any special head of investigative or indeed coercive powers. We have got some limited investigative powers strictly related to the pursuit of infringements or breaches against the Customs Act and associated acts which gives us a degree of limited investigative powers in relation to general citizens who might be breaching the Customs Act, say, in terms of importation. Even there, where, if you like, serious investigative firepower has to be brought to bear such as warrants, listening devices and the like, we work in partnership with police forces, predominantly the Federal Police but others as well. Where relevant, we partner with the Crime Commission in the sorts of matters that Ms Bailey was referring to in her evidence. We actually start from a different starting point. We are in effect public servants and the only investigative powers we have are the general administrative inquiry powers that any public servant has pursuant to a delegation from the agency head, in our case, the CEO of the Australian Customs and Border Protection Service.

When Ms Storen's area does receive an allegation or, through their proactive work, comes to a view that there might be some suspicious or worrying activity, they can, to a certain extent, commence an investigation in their own right using those general administrative inquiry powers. Under the ACLEI scheme of notification, we also make an assessment about whether the notification thresholds have been triggered.

Frankly, in most serious cases I cannot imagine a circumstance where the commissioner and his staff over at ACLEI would not in fact take a very active interest in pursuing it. In those circumstances, as I intimated in my opening remarks, were a general integrity testing regime to come into effect across the Commonwealth, I would think that ACLEI either directly, organically or through some kind of outsourced model, would apply that integrity testing scheme as a specific tool to pursue a serious matter of potential corruption or criminality. We may not even be advised of this. He, of course has got his own motion powers. Generally speaking our experience has been one of very close engagement and collaboration, a high level of awareness by the executive of the matters that he and his officers are choosing to take forward. That then really leaves one I think relatively minor class of cases which would be matters that are then referred back to us. They might be serious but they do not meet the relevant thresholds that the commissioner and his staff apply.

The question for us would be, and we will have to give this some thought as the government's response to your committee's report is developed, as to whether we would then need either organic or outsourced powers to pursue particular matters that have been referred back to us using an integrity testing tool. As I said in a previous answer to the Chair's question, we are very much in our formative stages of thinking about those two levels of integrity testing.

Senator IAN MACDONALD: Thank you very much.

Mr HAYES: Of the matters that have been referred to ACLEI, without going into detail, are they issues of possible integrity or suspected corruption?

Mr Pezzullo : It is probably a combination of both. I am going to be fairly general in my characterisation for reasons you would well understand. In most cases the most worrying issues relate to external linkages, as I would describe them, as to serious and organised crime elements, pertaining to the passage of information that then facilitates those elements pursuing their criminal agenda. Yes, integrity is involved because it obviously goes to the heart of our professional reputation and our professional standards to have an officer behaving in that way. Yes, it is an integrity issue, but it is also a corrupt practice. In that example that I posit, that is a corrupt and indeed in some cases a criminal practice of the unauthorised disclosure of information. Depending on the nature of the crime that is being facilitated or assisted, it is a straight out criminal matter too because you are potentially part of a conspiracy to conduct criminal acts against either the Commonwealth and or state statutes. I guess it is a combination, and in one action it might be a breach of integrity, a corrupt matter being undertaken as well as a straight out criminal matter as well.

Mr HAYES: Up until recently, when the act was varied to come under the oversight of ACLEI, in that respect would the matters that have been referred to it now have been referred to the Australian Federal Police?

Mr Pezzullo : Yes, in most instances at the higher end where serious criminal matters were involved. Most typically, as you can imagine given the nature of the work that we do and the sort of access to information that our officers have, it would be related to facilitation of crime at the border, by and large, but not exclusively so. The most worrying thing is our officers potentially working in collaboration with outside criminals to penetrate the border, principally drug importation but other matters as well. Yes, the function currently undertaken by Ms Storen's branch, and in previous manifestations by various internal affairs units and the like, would have applied those general administrative inquiry powers to which I earlier referred. They would have undertaken inquiries to the extent that they could and then it would have been a matter for judgement then as to whether to refer it to the crime commission or its predecessors the federal police or its predecessors or some combination thereof.

Mr HAYES: If it was the federal police I imagine they would have had power then under their own right to conduct surveillance operations within a Commonwealth facility? That is not exactly integrity testing but it is conducting a criminal investigation. Would that be in consultation or with the knowledge of Ms Storen's outfit, for instance, or did the police do that unilaterally?

Mr Pezzullo : You are referring to the period before 1 January?

Mr HAYES: Yes.

Mr Pezzullo : I might ask Ms Storen to answer that.

Ms Storen : There would be some matters that we would have referred through to the AFP so we would have knowledge of that. There would be some matters that AFP probably would have had carriage of and of which we would not have knowledge. In most cases my understanding would be that we would liaise with the AFP to assist them on their inquiries.

Mr Pezzullo : It is hard to give a historically definitive answer that extends back past our tenures. I think the practice over the years has been for the general practice to be consultation and engagement and for the exception to the practice to be unilateral activity by any law enforcement agency without the knowledge of the commissioner or the CEO of the day.

Mr HAYES: Have we deferred the call now by referring matters to ACLEI for their oversight or would you still make the call in terms of engaging the federal police in terms of suspected matters of corruption?

Mr Pezzullo : The short answer is that a three-way and indeed four-way conversation tends to occur involving the federal police, the crime commission and ACLEI. In some cases ACLEI might decide that the appropriate course would be a joint Customs and federal police investigation or a Customs and ACC investigation. I might ask Ms Storen to quickly detail those consultative processes. The decision making, of course, in relation to actions under the ACLEI act still remain with the commissioner but he and his staff engage in a process of consultation and engagement. I might ask Ms Storen to flesh that out.

Ms Storen : In relation to allegations that are referred directly to my branch, we would liaise with the AFP and ACLEI on those matters. This is done obviously with regards to privacy and also our section 16 of disclosure, but we would liaise with both agencies. With corruption issues, it depends too what environment that involves. If it has to do with Commonwealth, with the sharing of the intelligence it is very important that the AFP understands and has knowledge of that information and intelligence as well.

Mr HAYES: If it was to pass and we did move down to the road of integrity testing, for instance targeted integrity testing, presumably that would be something you would discuss with your staff?

Mr Pezzullo : Most certainly; I cannot imagine a circumstance in which it would be just sprung upon them without their knowledge.

Mr HAYES: Given that, have you any views about the impact it would have on your employees to know that they could be subject to targeted integrity testing?

Mr Pezzullo : Given it is not something that we have actively pursued, I guess I would be speculating in terms of the sense I have of workplace attitudes to such matters. My answer to the question is the same answer that the federal police gave you. I think a random regime probably would have to be explained very, very carefully because I think just intuitively and almost viscerally, a random regime might be a bit of a hit on morale. The implication is that, 'We are not really sure who the bad apples are across a wide range of the workforce so we are going to undertake some random checks.' I think that would need to be very carefully managed from the point of view of morale and the staff self-perception of how they are perceived by their management. I think a targeted regime is probably in a sense an easier sell because it could be, through staff engagement, very carefully explained as an additional tool under ACLEI oversight that has been made available that can be deployed on essentially an intelligence led basis, where all the key risks are identified in terms of using that tool and very careful control arrangements are then put in place. This is not to say that careful control arrangements would not be put in place for random testing, but I just think the staff perception of the two tools would be quite markedly different.

Mr HAYES: Again assuming that it was introduced, your organisation, in terms of customs and border control, would be in a vastly different position to the Australian Crime Commission and the Australian Federal Police in terms of the powers of either the CEO or the Commissioner of Police. You are still fundamentally using public service powers to oversee and employ public servants?

Mr Pezzullo : Yes, but they are quite different legal constructs across the three agencies.

Mr HAYES: If integrity testing was to be introduced, would you see that it may necessitate similar powers being granted to the head of customs as what the AFP and the Australian Crime Commission have?

Mr Pezzullo : That would not be necessarily so. I am very reluctant to speculate on what legal advice ultimately might have to go to government on this in terms of legislative amendments. As a matter of record, the Public Service Act under which we work has no specific regime of investigative powers that is granted to public servants other than the general administrative inquiry powers, to which I have already referred, that every agency has to look at misconduct and issues of that nature in their agencies. It would be a question for government and I would look to my colleagues in the Attorney-General's Department of course to lead on the provision of advice to this point. I do not know what the advice would be, but it would be a matter for government to consider whether some special investigative regime would be important under the Public Service Act just for the purposes of our service. That would seem to me to be one technical possibility but it could be seen to be fraught for a whole range of reasons. Or, as I intimated earlier to Senator Macdonald, it might well be that integrity testing powers do not need to be made organic to our agency because they are managed under a more general Commonwealth scheme, in which case there would be no question then of the need to vary powers under the Customs Act or the Public Service Act.

Mr HAYES: The outcome of integrity testing in your instances would have to sustain a charge whereas that may not be the case in the instance of the AFP or the ACC, where it could be commissioner's confidence?

Mr Pezzullo : Indeed, there is the parallel regime under the Public Service Act of the code of conduct, which, as Ms Bailey from the crime commission said, is also applicable in their instance. We do not have the want of confidence power because we do not have specific legislation that goes to the creation of an employment stream. There is of course the Customs Act but it does not create, as is the case in the crime commission or the federal police, an employment class; we are employees of the public service. It is possible, and this is currently available to us whether or not integrity testing is employed. It is open to us, perhaps with a view to suspending it pending criminal proceedings, to commence a code of conduct inquiry. The penalties that would arise if someone was to be found in breach of the code of conduct through a code of conduct process which can have regard to a criminal outcome, might be quite separate from any criminal penalties, being loss of rank, financial penalties, dismissal and the like. There already are provisions under the code of conduct mechanisms to go down a path that could, in some cases, result in termination.

Mr HAYES: Thank you, Chair.

CHAIR: I will ask one question. You mentioned the fact that your perception of random integrity testing is that it is about finding bad apples. From what I have been reading and hearing about, it seems to me that targeted integrity testing would be more about catching bad apples, or people, at least, about whom there is a suspicion, whereas the value of random testing seems to be in the general deterrence, the fact that any staff member can feel that any given scenario could be an integrity test. I have just been speaking with the New York Police Department who said that the vast majority of officers passed those tests. They see that as a great vote of confidence in their internal professional standards program. If you look at it in that light, it could also be a morale booster rather than undermining confidence in the integrity of the system.

Mr Pezzullo : I can see that argument. I have had some exposure through the submissions made to this committee to the New York model and it is something that we will certainly want to look at more closely as we work with other agencies to work on the government's response. In the end, governments will make decisions about the scope and extent of this regime, should there be such a regime introduced. I can certainly see that argument, yes, indeed.

CHAIR: There are no further questions. I thank representatives from the Customs and Border Protection Service for taking the time to speak with us today.

Mr Pezzullo : Thank you, Chair.

Proceedings suspended from 12:52 to 13:35