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Finance and Public Administration Legislation Committee
12/02/2016
Estimates
CROSS-PORTFOLIO INDIGENOUS MATTERS
Office of the Registrar of Indigenous Corporations

Office of the Registrar of Indigenous Corporations

[09:40]

CHAIR: Welcome, Mr Beven. Do you wish to make a brief opening statement?

Mr Beven : I do not have an opening statement, thank you.

CHAIR: A question from me: is it fair to characterise your role as being the corporate watchdog for the C(ATSI) Act, or Corporations (Aboriginal and Torres Strait Islander) Act?

Mr Beven : Yes, that is an accurate representation.

CHAIR: And the C(ATSI) Act allows you to prosecute corporations?

Mr Beven : I can conduct investigations, and then I put a brief of evidence to the Commonwealth Director of Public Prosecutions, who makes independent decisions as to whether a matter should proceed for criminal prosecution.

CHAIR: But you can recommend prosecution?

Mr Beven : I can submit a brief of evidence for the consideration of the CDPP.

CHAIR: What role, then, do you have when an organisation makes a commercial decision that you consider to be a poor one?

Mr Beven : As with mainstream organisations, with Aboriginal corporations, at the end of the day, the organisation is a private entity, it is managed by its directors and any decisions relating to the business of the corporation, its future direction and its goals and ambitions are matters for the directors and members of the corporation. So, in relation to a bad commercial decision, that is a matter for the directors and we do not get involved, as with mainstream organisations. If an organisation makes a bad commercial decision, that is not an issue for the regulator. Where it may become an issue for the regulator is where proper processes were not followed. Were there conflicts of interest? Was independent legal advice obtained? Was there due care and diligence? But, in the main, if it is just a decision as to invest in A or B and the decision is a bad commercial decision, that is not an issue for the regulator.

CHAIR: I will paraphrase it. The train wrecks are not your responsibility unless there has been an inappropriate use of the corporations act or conflicts of interest, as you mentioned.

Mr Beven : That is right. At the end of the day, they are private organisations with their own boards and membership base, and those decisions are rightly taken by the management.

CHAIR: Can you tell me how many recommendations for prosecution you have sent up the chain and how many successful prosecutions there were last year?

Mr Beven : My office was first established in 1978, so it has been around for a long time. From 1978 until 2010, there had not been a single criminal prosecution ever, to my knowledge. When I started in the job, we moved the focus towards establishing an investigation and prosecution section. In late October 2010, we had our first criminal prosecution. From October 2010 up to today, we have had 135 criminal convictions and significant civil penalty actions against various individuals and corporations.

CHAIR: Are those 135 discrete cases or are there, for example, three convictions recorded against one individual or five individuals? I do not need the absolutes, but I need to know whether they are compounded against a smaller number.

Mr Beven : At a rough estimate, of those 135 probably 120 or 125 would be discrete.

CHAIR: So 120 or so individuals have been found—

Mr Beven : One hundred and thirty five individuals and corporations have been found guilty, but we might take action in one matter against three or four directors. In that case, I would say there would be 120 to 125 individual actions against 135 individuals and corporations.

CHAIR: Are you able to tell me—and you can take this on notice—how many investigations found wrongdoing on the part of individuals versus the corporation, if you will? Have you found individual directors or others—

Mr Beven : In relation to individuals versus corporations, the majority of the actions we take would be in relation to corporations, but the majority of our significant criminal matters would be against individuals.

CHAIR: Where individuals have clearly misused funding or misled government structures, are you in a position to recommend them for prosecution?

Mr Beven : It depends. If it is a breach of a funding agreement, that is a breach of a contract. If the breach also amounts to a breach of directors' duties, yes, I would be involved. But, if it is just a breach of a funding agreement—say the organisation was funded to do a particular task but it used that money for another particular task—unless there were conflicts of interest or criminal intent in that process, that would largely be a breach of a funding agreement or breach of a contract between the funding body and the organisation.

CHAIR: There are breaches of funding agreements and there are criminal acts, but there also is the ability for individuals to spend money in accordance with their charter but completely inappropriately, whether it be on travel, accommodation, entertainment, hospitality or any of those things, so the money does not get to where it is meant to go. Are you able to go after those people?

Mr Beven : We see the same thing that you see where we think that money is not being spent where it should be; but, as I said earlier, those are commercial decisions. As to whether—

CHAIR: Well, they are not commercial; they are self-interested, lifestyle decisions, but I know what you mean.

Mr Beven : I suppose what I am getting at is that, for a private entity that is using private moneys, at the end of the day it is the directors and members of that corporation who determine where that money gets spent.

CHAIR: And the frustration with your response there—and I am not having a crack at you; you are saying it is private money in private corporations—is that, unfortunately, it is public money that goes into private corporations and gets spent on propping up lifestyles for individuals, which I think is a problem and it seems that we cannot arrest it.

Senator Scullion: Can I say a couple of things. Generally speaking—though I should not generalise—there are organisations that are funded with public money, but there are a number that are not and are exactly the same as a private company. It is their money; it is their royalties. The mischief, I think, evolves in a number of areas. One of the areas where I still have some ongoing concerns, as I know Mr Beven does, is the nature of informed consent. A board member signs off to a CEO and they put something in front of them. I was recently having to confront a board about some matters. I provided evidence and said, 'Look, you've approved 29 hours overtime on this day. There are only 24 hours in the day.' Through that conversation, I can understand clearly the capacity of a director with somebody who is obviously acting in a mischievous and unlawful way, saying, 'All you have to do is sign this; it's all okay'—of course it is for their overtime—and they end up working over 400 days in a year. This is just nonsense. But the fact is, under the corporations act, that the chair or the director approved it and there is no mischief there. There is no benefit to them at all. So, around informed consent, I think it is important for us to ensure at a board level that they all understand, if they need additional information, that perhaps just having one person doing it makes it difficult.

There have been a number of these incidents lately where we have had, 'I'm just getting a redundancy package; it's somehow in my contract,' and the redundancy package when the person has worked for a year or a couple of years is worth nearly $1 million. It is just patently ridiculous, and yet the person who signed the form then said, 'That's not what I was told was in it.' So I think we need to do a lot of work there.

We do have almost 100 per cent non-Indigenous individuals whom I see pop up. We attempt to prosecute and then they pop up somewhere else. I see them pop up because I am everywhere, as many of the senators would be, but it is very difficult in this area to make a list of those individuals who are unsavoury. It is something you are not allowed to do, basically. We do need, perhaps, to think about a list of those people who we would recommend and give boards and organisations some assistance in the selection of those people in terms of the efficacy. That is something I think we need to do more work on.

CHAIR: Minister, that is no different to any corporation. There is a lack of credible directors in corporate Australia—no matter where you go.

Senator Scullion: But when we are dealing with legacy issues for a community like royalties, it is the management of these royalties today that will determine whether or not intergenerational issues get better. We are very keen to ensure, where we can, that we have independent directors. Plenty of people around the country would like to make a philanthropic contribution, and they do so by playing a role of an independent member of the board. They can bring that corporate experience to ensure that the board can have professional development within the board. There are a number of those areas that we have been talking about. They are the areas that I suppose have been affecting this area for some time, and we are very conscious of them.

Senator MOORE: I am just interested, with that process, about the issue of privacy—how you would bring those issues into this discussion. We will not fix it this morning, but I just wanted to put that on—

Senator Scullion: Probably, since I have the foot on the sticky paper—

Senator MOORE: You have.

Senator Scullion: I am considering a review about all of these things. It is about having some input into how we can do it better. We have been doing the same thing for a while. These things have been coming up for a while. So I am just working on some terms of reference at the moment and, perhaps, I will circulate those terms of reference just to the committee before we finalise them. It is to have a broad look at a lot of these matters and about what we can and what we cannot do. Privacy issues are very frustrating, but we understand them as well. Perhaps there is some other way to deal with those matters.

Senator SIEWERT: Are those terms of reference for a review?

Senator Scullion: That is correct. I am intending over the next 12 months to have a review of those matters around ORIC—the frustration that we have. They all look to Anthony and say, 'This is obviously a mischief', and he says: 'Actually it is obviously not. They have made a decision within their constitution—their constitution as directors. It was a properly constituted meeting.' We might think that it is not right, but he says, 'I can only investigate those things that are outside of the law and outside the CATSI Act.' So it is an opportunity to have a review. That review may make recommendations to the CATSI Act—

Senator SIEWERT: Who are you thinking of running that?

Senator Scullion: I have not put my mind to that yet. I thought that we would want to get the terms of reference—and I would certainly welcome some input in terms of those terms of reference—sorted out first. I am not sure if it will be internal/external. We are not discovering any mischief in this—

Senator SIEWERT: I understand that. I have come across a couple of organisations that are doing quite a lot of talking about how you make these sorts of decisions in a cultural framework—and that is the issue here. I think of one of the issues is that a lot of the people looking at what they think is mischief is actually people trying to operate also within a cultural context. I am not trying to use that as an excuse—

Senator Scullion: No, but that has to be taken into consideration.

Senator SIEWERT: We have to understand that. A number of organisations I have spoken to are starting to think: how do we set a set of rules that meet both the corporate expectations but also our cultural expectations?

Senator Scullion: And it touches on the allegations that are often run with nepotism. The surname of every single employee indicates that in some areas. All of those issues can be canvassed—

Senator SIEWERT: Maybe you could circulate those. Presumably that would be out of session—

Senator Scullion: Rather than us going through it twice, I would be delighted if you want to send me a note about the sorts of things you think need to be included. We will circulate it anyway, but if you have some ideas about that—

Senator SIEWERT: That would be good.

Senator Scullion: The motivation for the review is to deal with some of the frustration. We always thought that the office would be able to deal with it and being under the CATSI Act would be able to deal with it. But there are a number of those that fall outside. It is an opportunity to have a look at it. I think education is a big part, whether or not education sits with Mr Beven's organisation as a dual role. And the capacity to prosecute. If I was on your side of the table, I would be asking more questions around that. My answer would be: 'Why do we only prosecute a couple of things a year?' If you really grilled Mr Beven, he would probably say, 'Because that's only what is within my capacity.' I am not wishing to have a self-flagellation exercise at estimates, but that is the truth. Those are the matters that I think a review would be very useful for.

Senator SIEWERT: I understand the point about education. But the point that has been made to me is organisations agreeing with and having input into: what are the cultural rules that we are going to agree to that run our organisation? How do our cultural requirements fit in and how are we going to set a set of rules that address that? That is what people have talked to me about.

Senator Scullion: For those organisations that would naturally sit within here: yes, we can deal with. But I am not sure how wide we should get on all that. But, please, by all means, drop us a note, and we will do our best to include that in the draft.

Mr Beven : I agree with the minister around the informed consent. A lot of the work that we have done, as I said, since 2010 is take on those cases where people have crossed the line and we have prosecuted them. But we have also done a lot of work on building the capacity. Building people's informed consent is really important. At the end of the day, these organisations are owned by Aboriginal and Torres Strait Islander people. They have cultural, decision-making processes built into their constitutions. But we have to strengthen and build the capacity of those directors to make informed consent. What we have done over many years now is that we have a free corporate governance training program, which builds the capacity of people around governance. More importantly, we have a free—pro bono—legal service, where corporations can get legal advice from the largest legal firms in the country before they make big decisions such as signing an employment contract or terminating an employee.

In October last year we launched our independent directory portal. Corporations that are looking for really good, qualified, volunteer, independent directors can approach us. We currently have a waiting list of really qualified people who have put their hands up to volunteer to be independent directors of Aboriginal and Torres Strait Islander corporations—a good percentage of them are Aboriginal and Torres Strait island people as well. There are very qualified, very skilled people who have agreed to volunteer their time as an independent director. For us it is about taking action where appropriate, but it is also ensuring that there are skills on the board to ensure that CEOs that are doing the wrong thing are properly scrutinised and that legal advice is free and available when a major decision has to be made, whether it is commercial or internal or operational. We also have the free corporate governance training to build people's knowledge and capacity around governance.

Senator SIEWERT: I want to go to the WDLAC issue that we have been talking about. Could you, firstly, provide an update on where the process is up to?

Mr Beven : It is all good news—very good news—

Senator SIEWERT: How many times have I heard that before?

Mr Beven : since the special administrator has been in place. In the financial year to 30 June 2015 the corporation made a $2.4 million loss. Since the special administrator has been in place, just to 31 December 2015, we have been able to turn around a $2.4 million loss to a $348,000 profit. The corporation is trading profitably now. More importantly, it has won back the respect of its stakeholders, its members, the traditional owners, the mining companies that it deals with on a regular basis. In November last year, shortly after the AGM, the special administrator signed a major Indigenous land use agreement with Newcrest Mining. As result of that being signed there will be significant royalty flows coming to the Martu people.

Senator SIEWERT: Which mine is that?

Mr Beven : Telfer.

Senator SIEWERT: It is Telfer. I thought it was. I just wanted to double-check. I want to come back to that.

Mr Beven : In two weeks time, there will be an official—once a ILUA is signed, it has to sit with the National Native Title Tribunal for a period of time. That period has now come to an end. So there will be an actual formal introduction of that ILUA in Telfer in two weeks time. The special administration is ending on 26 February. The corporation will be handed back to its members with a new board of directors, including two independent directors.

Senator SIEWERT: What were the reasons for the losses?

Mr Beven : In our view, the corporation was just paying far too much in operational costs, consultants, legal advice and wages. The major turnaround that we have been able to achieve includes: contractors and consultants have gone from an annual basis of over $1 million to just on $149,000 for six months; wages have gone from $2 million down to $400,000—so $2 million for 12 months, $400,000 for six months. Also, the new model that we are looking at with WDLAC, that was spoken about with the traditional owners at the AGM on 25 and 26 November in Punmi, is a new model in which this corporation—it is between a $4 million and $10 million a year turnover corporation—will not have a CEO. So at the end of the special administration, this corporation will not have a CEO, it will not have a CFO and it will no longer have an internal lawyer and accountant. We are outsourcing that role to a reputable organisation. We have discussed that with the traditional owners. An advisory group of traditional owners will sign off on that in the next week.

Senator SIEWERT: And you cannot name the reputable organisation?

Mr Beven : It is in our newsletter. The three organisations approached were KRED, which is part of the Kimberley Land Council—

Senator SIEWERT: I know KRED.

Mr Beven : Central Desert Native Title Services and Yamatji Marlpa.

Senator SIEWERT: So they are three that are going to be—

Mr Beven : They are the three that have put in expressions of interest. Then the advisory group of senior traditional owners is going to make a decision in the next week as to which one of those—

Senator SIEWERT: Okay, thank you. It is the decision—I did not appreciate the fact that the decision had not been made yet.

Mr Beven : No, it has not been made yet.

Senator SIEWERT: Thank you. In fact, you have just answered one of my next questions. The meeting on the 25th and 26th, that signed off on the agreement with Newcrest Mining?

Mr Beven : It was an authorisation meeting for the ILUA and it was also the annual general meeting for the corporation.

Senator SIEWERT: I have had contact from people saying that they were not included in the decision making over that process. Have you had that correspondence—or any correspondence?

Mr Beven : We have had that correspondence from one traditional owner. At the authorisation meeting—do not quote me—I think there was about 250 traditional owners. I cannot remember the numbers, but just under 200 voted. It was widely advertised. We ensured that people had free transport, and we had catering for all those who attended. There were lots of consultation meetings. Everyone had an opportunity to provide input into the ILUA. Ninety-nine point nine per cent of the feedback received through that consultation process was supportive. There were no issues around the ILUA itself. The main issue was: where would the money go? We have been able to address that to ensure that the vast majority of the money received goes into a trust account managed by a professional independent trustee. Only a small percentage—about 10 per cent—will go to running the operational costs of the native title body. There was a lot of discussion around this at the authorisation meeting. I attended that meeting. After a lot of discussion, people who had been opposed to the ILUA for a long period of time actually supported it. It was a unanimous decision on the day. No-one spoke against it at the end of the day. As far as I am aware, we have only had one person approach us to say that they were not consulted. But I do know that that person was consulted and that the special administrator had been emailing that person a number of times leading up to that authorisation.

Senator SIEWERT: Thank you. Previously, we had a discussion around your role in terms of being able to look at trust issues. I remain concerned about that, but I understand you cannot. Was that discussed—

Mr Beven : Just to clarify, I do have the power to look at the trust, but I do not have any power to do anything about the trust.

Senator SIEWERT: Thank you for that clarification. Did people discuss how they could build in their own protections for that process?

Mr Beven : In relation to WDLAC?

Senator SIEWERT: Yes.

Mr Beven : As I said, that major concern that came out of the consultation process and at the authorisation meeting was protecting those native title funds to ensure that they could not be misused. The arrangement that everyone was very comfortable with was that the majority of the funds would go into a trust account and that will be managed by the Myer family trust. The advisory group had selected that from a list. There was a presentation. The advisory group of traditional owners said, 'We like this one.' So Myer family were appointed. Myer family will have its separate board with its own separate, independent directors. At the meeting in two weeks time, the traditional owners will select who will be the Martu directors on that independent trustee company.

Senator SIEWERT: That is why I was asking. I understand the issue about the moneys going into a trust. What has been raised with me—and you will recall I was asking you about the trust—is concern about previous arrangements and what had happened there which is why I am asking about this one.

Mr Beven : We took that on board. It was not coming just from you; it was coming from traditional owners.

Senator SIEWERT: No, I was only reflecting back what I had been told by concerned traditional owners.

Mr Beven : At an early stage, we said to address those concerns we would have an independent private sector professional trustee company. Once again, a number were asked to provide expressions of interest. Those expressions of interest went to the advisory group and the native reference group, which is made up solely of senior traditional owners. They assessed which one they felt comfortable with and, at the end of the day, the Myer family was recommended and endorsed by the advisory group and the native title reference group.

Senator SIEWERT: Okay. Will there be any prosecutions coming out of your investigation?

Mr Beven : Not at this stage, no. One of the special administrators' task is that they have to report to me if they identify any potential breaches of the C(ATSI) Act or of any Australian law. I have not had any reports from the special administrators. Prior to that, we had an independent examiner who went through the books of the corporation also and there were some minor operational things that we required to be corrected, but nothing of a criminal standard.

Senator SIEWERT: Which relates back to the conversation earlier. Have you released all of the reports that you have prepared in relation to this matter?

Mr Beven : In relation to the special administration, everything the special administrator has done is on our website. There are regular newsletters, the process for the authorisation, the information around the authorisation meeting, the ILUA, the EOIs that were being considered—all of that is being disclosed. In terms of what has not been disclosed, the examination report that was prepared for my office prior to the corporation going into special administration, under the C(ATSI) Act it is what is called a protected document and I am prevented from releasing that. So everything else has been released.

To clarify for the record, there are some aspects around the ILUA that were commercial-in-confidence that the special administrator could not release other than to the advisory group, as you would appreciate. But the major aspects of that ILUA were summarised and the important details were provided to all traditional owners.

Senator SIEWERT: Okay. Thank you.

CHAIR: As there are no further questions, Mr Beven, thank you very much for your appearance today. We do appreciate it.