You be the judge: Is QLDC telling the truth over how it spends our money?
- by Peter Newport :
- Jan 15,2021
Analysis. A Crux Investigation.
For the past three years Crux has been trying to uncover exactly how QLDC spends $100 million a year of our money – the ratepayers’ money. By law that expenditure has to be open, fair and transparent.
Now we have new information that suggests failures around open, fair and transparent processes are being deliberately covered up by our local council.
Such a big project, and such a large amount of expenditure to unpick, has stretched our resources (and our patience!). We’ve been blocked at every turn by lawyers, technical loopholes, privacy and confidentiality arguments and even what we see as the vexatious use of the Media Council to stop us reporting on this fundamental issue.
This article presents new information that we have uncovered – in particular around one case study that we selected at random – the two former QLDC staff working as consultants via ZQN7 Ltd. Those two people, one a close family friend and former nanny who worked for Mayor Jim Boult, have been paid $630,000 in just over two years by QLDC while they both earned big money elsewhere in New Zealand – often working for other local councils. In fact it looks like these two former QLDC managers earned around one million dollars from different consulting clients (including QLDC) spanning a two year period during 2018 - 2019/20.
To be clear we are not saying that ZQN7 did anything illegal – they made a huge amount of money in a short period of time but there is nothing to suggest that any of their invoices were fraudulent or that they did not deliver the contracted work. What we are looking at is whether QLDC followed its own rules in the way it hired and paid ZQN7 – did QLDC check that all invoiced hours and days were satisfactorily delivered and was there a genuine attempt to deliver the best value to QLDC ratepayers.
We’ve reached the point where the council consistently denies breaking their own rules on how our money is spent – but a body of evidence points in the opposite direction. Now we want to present the evidence to you – the residents and ratepayers of the district – and ask if QLDC is telling the truth or not. Click the link at the end of our story to register your verdict – and have your say on what should happen next.
Links in this story will take you to the official emails and documents that support the dates, figures and facts we have published as part of this investigation.
- Ruth Stokes and Jendi Paterson (ZQN7) were paid $150 an hour for 135 days to review one of three council bylaws. The total ZQN7 bylaw review fees are in excess of $600,000 - not including the work of other external consultants who also worked on the same project. The work is required on a routine basis every five years but QLDC had not budgeted for this work and had to use funding from their wages and salaries budget to pay ZQN7.
- There is no evidence of a tender or bid process for this work – or a detailed reason for such a process being avoided – as required by QLDC’s own procurement policy and guidelines.
- Jendi Paterson worked for the Hamilton City Council as their Parks Manager during this same consultancy period – earning $25,000 a month.
- ZQN7 was also paid an additional $150,000 for a separate review of Hamilton's Parks operations during the QLDC bylaw review period.
- Ruth Stokes worked on a number of high-profile projects elsewhere in New Zealand during the overall period of being contracted to QLDC for her work in Queenstown.
- ZQN7 was paid $166,328 by Auckland City Council for an unspecified project in 2019 during the QLDC consulting period.
- QLDC’s CEO resolutely denies breaking his own financial rules on this project even though QLDC’s Procurement Manager says processes that should have taken place did not.
- Jendi Paterson has now formed a new consulting company - JALP Consulting Ltd - that continues to be paid by QLDC. She has recently 100% deleted her LinkedIn profile as has Myles Lind (you'll see detail of Mr Lind's role later in this story.).
- The NZ Taxpayers Union is referring the issue to the Office of the Auditor General (see below) and Crux has made a formal complaint to the Ombudsman’s Office over QLDC’s tactics in blocking our enquiries – including a coordinated complaint, with the Queenstown Airport Corporation, to the Media Council that Crux believes was vexatious and designed to silence our legitimate public interest enquiries into both organisations.
- Crux has now asked QLDC for full details of other contractors and consultants who were hired without the required bid or tender process (direct appointments) – in particular former QLDC staff and managers.
To investigate how every dollar of ratepayer money is spent would be impossible – even for a big team of well-resourced journalists. It took Crux two years to get a list of the contractors and consultants who soak up the bulk of the QLDC’s $100 million a year budget.
Then it took another six months to extract details of consultants and contractors who QLDC said deserved to be kept secret because “individuals could be identified from the supplier’s details.”
From that final list we decided the only way to produce a meaningful body of work was to look at one single example – in depth. We selected a company called ZQN7, at random.
Our concern is that weaknesses discovered in the course of this investigation could be systemic and involve a large number of former QLDC staff and managers. The sums involved run into tens of millions of dollars.
ZQN7 – What we discovered and why it matters.
There is no doubt that the use of external contractors and consultants makes sense for local government. It would not be economically feasible to maintain a permanent staff of experts and experienced managers to handle specialist or one-off projects.
However, there’s clearly a line to be drawn when internal staff could do such work – and where it makes sense to hire extra permanent staff to meet this type of ongoing requirement.
If a pattern emerges of experienced staff leaving a council, only to be hired back as highly paid consultants almost immediately, things start to look a bit fishy. Not only does it look like a choreographed set up, but the people left behind at the council might expect to be rewarded by their former colleagues for a fat, lucrative council contract. That’s human nature but it also is either corruption or very close to corruption.
Crux is not suggesting that this scenario applies to ZQN7, but this well documented scenario is a risk for all local councils. That’s why the Government requires all councils to put in place a robust set of procurement rules that are designed to prevent corruption, favouritism, cronyism, jobs for the boys – whatever label you choose to apply.
QLDC did not have a procurement policy prior to 2016. In an attempt to improve QLDC's financial systems former CEO Adam Feeley (who was also former boss of the Serious Fraud Office) helped engineer the recruitment of three senior finance managers to work with veteran QLDC Chief Financial Officer Stewart Burns. One of those managers wrote the new QLDC Procurement Policy based on established best practice in 2016 – but Adam Feeley then resigned under internal political pressure – followed by all three of the new senior finance mangers - leaving CFO Stewart Burns again in sole charge of all key council financial responsibilities.
Under QLDC CEO Mike Theelen, Stewart Burns and Head of Corporate Services Meaghan Miller now control most council expenditure and management decisions – both Burns and Miller being 20-year veterans at QLDC. Many of Feeley’s financial reforms were abandoned or left incomplete.
The key to the Crux investigation into ZQN7 was therefore focussed on whether QLDC obeyed its own 2016 Procurement Policy. Failure to do so would raise serious questions over how ratepayer’s money is spent, how QLDC is managed and also throw a spotlight on how transparent QLDC is about important management and financial issues.
Crux has written extensively on our enquiries into ZQN7. Here’s a summary of what we know as well as new information that details the hourly rate the consultants were paid and other work they carried out during the time of the QLDC projects being in place.
The links in our summary will take you to official emails and other documents that have been provided to Crux under official information legislation (LGOIMA). Much of the information provided to Crux is heavily censored or redacted – for technical reasons argued by QLDC that Crux does not accept as reasonable. Failure to obey the letter and spirit of LGOIMA can have serious consequences. Over 3,000 documents were supplied to Crux, often in a disorganised and non-sequential manner designed, we believe, to make our work as difficult as possible.
It is worth noting the outcome of a year long investigation by the Ombudsman's Office into failures by the Christchurch City Council to abide by the letter and spirit of LGOIMA legislation. The investigation was followed by the departure of the Christchurch City Council's CEO and a deep review of all of the council's General Manager positions.
- In March 2018 a QLDC manager, Myles Lind, decided to hire Ruth Stokes via ZQN7 Ltd “to review some bylaws.” Within days internal emails show that a contract had been signed - referencing Ruth Stokes - not ZQN7. No procurement process, bid or tender process or CEO/General Manager sign off appears to have taken place.
- ZQN7 Ltd had only just been incorporated a couple of weeks earlier, using an empty Arrowtown paddock as their official company address, it had no website and no other clients.
- Ruth Stokes and her husband Andrew owned ZQN7. At the time they and their five children were all living in a modest Arrowtown house owned by Jendi Paterson’s parents. The Stokes were building a boutique hotel in Queenstown as well as developing an Arrowtown residential property in partnership with Jendi Paterson.
- Jendi Paterson is the former nanny to Mayor Jim Boult’s two children, James and Victoria, and is currently one of the Boult family’s closest family friends. Ms Paterson has a history of working with the Boult family members, including a stint in Auckland working for the same marketing agency as Jim Boult's son James.
- Both Ruth and Jendi are former QLDC managers who moved to work for the Dunedin City Council in 2015 before returning to Queenstown at the start of 2018.
- Ruth Stokes had a controversial time at DCC – earning the nickname “Ruthless.”
- QLDC’s Procurement Manager, Geoff Mayman, has told Crux that if Lind wanted to hire ZQN7 he needed to either go through a tender process or document in a detailed Procurement Plan why there should be a “direct appointment” with no other candidates and reasons why internal QLDC staff could not do the work. There was no tender process and no procurement plan produced at the time. A limited procurement plan was produced for one aspect of the work almost a year later.
- Direct Appointments need to be approved at least at General Manager level and almost certainly at CEO level. Peter Hansby was Lind’s General Manager and when QLDC was asked by Crux for emails between Lind and Hansby re: ZQN7 we were told “no such emails exist.”
- Another QLDC middle manager, Clare Tomkins (Parks Service Delivery Manager) asked ZQN7 to do some more work, reviewing the council’s Freedom Camping bylaw, in August 2019 with no apparent tender process or Procurement Plan.
- For reasons that are not clear to Crux, and not clearly explained by QLDC Procurement Manager Geoff Mayman, CEO Mike Theelen and his managers claim that all of the ZQN7 project work was “under $50,000” and therefore somehow exempt from QLDC’s Procurement Policy.
- Splitting a big project into lots of smaller categories or silos is specifically forbidden by the NZ Government and by QLDC’s own Procurement Policy. The reason is obvious – such a strategy would allow a large amount of money to be “hidden” as a collection of smaller projects. QLDC is therefore arguing that ZQN7 somehow worked on 13 different separate projects that had no relationship to each other and that the total expenditure on the combined projects could not have been forecast, even though ZQN7 themselves advised QLDC of the expected high total cost right at the start of project in April 2018.
- Ruth Stokes supplied QLDC with a quote for all of the bylaw review work in March 2018 - but that document has been witheld from Crux by QLDC.
- We can find no evidence that supports the assertion that Direct Appointments under $50,000 do not require General Manager/CEO approval and/or a full Procurement Plan.
- It is clear from emails that Ruth Stokes enjoyed quite a few weeks holiday while working for QLDC and other clients - even taking a "week in the sun" just as her contracts were being signed in March 2018 - and then three weeks overseas with no email contact just two months later.
The response from QLDC to this Crux Investigation has been an unwavering assertion that they have not broken their own procurement policy and guidelines. You can read the full QLDC response to our latest LGOIMA enquiries here.
This assertion has not been backed up by facts or evidence but instead QLDC forced Crux to remove two of our key ZQN7 stories in mid 2020 at a time when they filed a formal complaint to the Media Council claiming that Crux had refused to correct inaccuracies in our coverage. The “correction” that QLDC was seeking was that “Crux was wrong” in effect because QLDC simply said that we were wrong without offering any evidence to support their claims.
The Media Council criticised both QLDC and Crux in their findings saying that the relationship between the two had broken down and we should basically get our act together and work on the basis of mutual respect and QLDC’s obligation to provide full public information under LGOIMA.
Parts of the Media Council findings re: QLDC's complaint echo the frustration Crux has experienced in getting the facts relating to this investigation:
" When Newport asks, crucially, why the appropriate procurement payment was not followed for Project C, the QLDC reply reads: “We are confident that on the whole the appropriate processes and decision-making gateways were followed, and sometimes those decisions will include a judgement that is outside of the usual frameworks”. That, frankly, is a meaningless sentence that offers ratepayers no clarity about a serious admission; that the QLDC failed to follow an “appropriate procurement approach”."
Source: NZ Media Council. Read the full findings here.
Crux accepts, and apologises, that our frustration with the three-year process did sometimes result in communication with QLDC that was not appropriately moderate and polite in tone. However, QLDC has not moved from their position, simply saying, and repeating, that they did nothing wrong.
In an attempt to break the deadlock Crux spent over an hour with QLDC’s Commercial and Procurement Manager Geoff Mayman in late 2020. Far from clearing up any areas of concern, Mr Mayman made it clear that there were problems and flaws with QLDC’s Procurement Policy saying that it could be confusing and ambiguous and that he was writing a new policy that should be complete in mid-2021.
Crucially Mr Mayman made it clear to Crux that Direct Appointments should not be generally encouraged and that a Procurement Plan (even if one was produced) was not recognised by procurement professionals as a suitable approach to many situations. In an attempt to introduce a less formal tone to the interview we made it clear that we were not expecting perfection from QLDC’s procurement situation. “You won’t be disappointed” was Mr Mayman’s response.
Your can listen to our interview with QLDC Procurement Manager Geoff Mayman here.
Mr Mayman joined QLDC in mid 2018 from the Christchurch City Council where he was part of a team of twenty five people working solely on procurement. Prior to Mr Mayman joining QLDC there was nobody responsible for procurement apart from Chief Financial Officer Stewart Burns who supervised the production of QLDC’s first ever procurement policy in 2016.
In the interests of balance here is the latest full and unedited response from QLDC - Crux questions are in italics - QLDC's CEO Mike Theelen's answer are in bold.
(Crux) QLDC allowed its own policies and guidelines to be broken when ZQN7 was retained to review multiple bylaws in 2018.
(Theelen) QLDC’s procurement policies have not been broken. We have noted on multiple occasions to you the one instance where we did breach the policy to the value of $2000. We have also previously advised that QLDC’s procurement guidelines are in the process of being reviewed and updated to improve clarity and reflect current procurement best practice.
(Crux) Ratepayers money has therefore been spent without proper processes or approvals in hiring two former QLDC managers - personally known to Mr Lind and one of whom being a very close family connection of Mayor Jim Boult.
(Theelen) We dispute your assertion regarding the lack of proper process. Neither former employee was hired individually; instead, a company they were involved in was contracted to provide services. The correct processes and approvals were followed. The connection with Mayor Boult is irrelevant as he had no role in this procurement process.
(Crux) QLDC in responding to Crux and LGOIMA enquiries has consistently denied any breach of policy or guidelines when knowledge of your own rules would have made it clear that these rules had been broken. Therefore we believe that QLDC has not been truthful, open or transparent in your responses to date.
(Theelen) QLDC has supplied an extensive amount of information on the topic over the course of several months, via both our media channel and through LGOIMA responses. We have also made key staff available for interviews. We strongly disagree with any suggestion of being untruthful or not transparent.
(Crux) Further, you have used a complaint to the Media Council in an attempt to further stall and delay - even shut down - Crux enquiries on this matter.
(Theelen) Once again we dispute your allegation, and it is something we disagree with in the strongest possible terms. There were errors in Crux’s reporting, and the Media Council upheld key parts of QLDC’s complaint.
(Crux) Further, a number of senior managers at Executive Leadership level would have been well aware of the work by Ms Stokes and Ms Paterson and condoned, even hid from public view, the near total lack of compliance with QLDC’s own policies designed to protect the interests of the ratepayer.
(Theelen) This is an assertion made by you without any foundation. Again, we disagree in the strongest possible terms.
As previously advised, Meaghan Miller was not involved in the procurement process.
As for your other queries:
- Regarding QLDC’s procurement manager: In recognition of the increased capital investment programme in the 2018-2028 Ten Year Plan, and the desire to further develop procurement capability cross the organisation, QLDC created the new role of Commercial & Procurement Manager. Geoff Mayman started in that role in September 2018.
- Regarding your direct appointment query: we will be treating this as a LGOIMA. Our LGOIMA team will be in touch.
Mayor Boult denies any connection with the hiring of ZQN7
Crux is not suggesting that Mayor Boult influenced the hiring of ZQN7, based on information we currently have access to. We are republishing Mayor Boult's previous statement from February 2020.
“Jendi Paterson was our children’s nanny. She is now an employee of ZQN7. I play no part whatsoever in the selection or appointment of contractors, so no conflict exists. It is also a long bow to draw to think that a conflict extends to employees of contractors. Further, after close to 40 years in the town I know many of the contractors council uses. That is the nature of a small town. I repeat that I play no part in their selection or appointment. That is management not governance. “
The NZ Taxpayers Union and Councillor John MacDonald
Crux has shared details of our ZQN7 investigation with the NZ Taxpayers Union and the following response has been received from their Executive Director Jordan Williams.
“In principle, ratepayers don’t oppose councils using consultants if it results in better value for money. But on the face of it, this stinks of a ‘jobs for mates’ scandal.
Procurement rules are worthless unless they are actually enforced, and are supposed to protect ratepayers from precisely this situation. The fact these consultants are former staff and Queenstown is small, make the rules more, not less, important.
We’ll be urgently writing to the Auditor General asking him to investigate.
In the meantime, the Council’s Audit and Risk Committee needs to convene. How was this allowed to happen and who signed off on it? The Mayor needs to front to explain how rates received $600,000 of value from these two consultants.”
Crux spoke to the Chair of QLDC's Finance Audit and Risk Committee, Councillor John MacDonald who said that his committee will want to look into the council's handling of ZQN7's work:
"From my point of view we have a procurement policy and that policy should be adhered to, and not engineered to be got around. I can assure you that that is something that the Finance Audit and Risk committee will be wanting to learn more about."
So – where to now?
LGOIMA and the principles of openness and transparency are at the heart of NZ local democracy.
Unlike central Government there is no formal Opposition Party in the regions at council level, and there is certainly not a Parliamentary Press Gallery of strong, experienced journalists who get up every morning hoping to catch politicians and senior public servants being either dishonest or devious. There’s no State Services Commission either to manage the ethics and professionalism of local council managers and CEO’s.
In simple terms there are very few checks and balances on our local councils. In Queenstown and Wanaka we only hear from a couple of strong, new elected councillors – the others are conspicuous by their almost complete silence, with the exception of Wanaka’s Quentin Smith.
All of the checks and balances that are in place have been largely written and managed by council staff themselves. They have unsurprisingly become experts at managing these systems, often to their own advantage, leaving citizens and journalists hard pressed to break through the barrier of red tape and unlimited budgets for legal advice that drop out of having a massive monopoly income with no competition.
That’s why Crux selected one specific case study.
Click on the link below to say what your verdict is.
Has QLDC told us the truth about how over $600,000 was spent on two former managers, with that expenditure being, according to QLDC, in full compliance with their Procurement Policy and Guidelines.
Suggest what you think should happen next.
Is our council telling the truth? Register your verdict now.
Main Image: QLDC CEO Mike Theelen (left) and Mayor Jim Boult (right).