QLDC agrees February 8th deadline with Ombudsman for “missing” $25m emails

by Peter Newport - Jan 27, 2024

The Queenstown Lakes District Council has agreed what’s believed to be a final deadline of February 8th with the Chief Ombudsman to release to Crux official information documents linked to up to $25 million of breaches of the council’s own "value and transparency" financial rules.

Initially the office of the Chief Ombudsman set a deadline of January 24 for the council to confirm compliance with a recommendation that the search for official documents be repeated using a broader criterion and to include communication between senior members of QLDC executive leadership team including CEO Mike Theelen.

In an email to both Crux and the Chief Ombudsman’s investigator Charlotte Leggett the QLDC’s Senior Official Information Advisor, Madeline Patterson, says:

"We have discussed your latest letter and our next steps regarding the recommendations."

"We will fulfil all Ombudsman recommendations by Thursday, 8 February 2024."

Crux has been asking for documents connected with QLDC’s failure to follow its own financial rules since 2020 and 2021.

The amount of ratepayer money involved has been stated by QLDC as 7% of the total council purchase orders or $4.7 million in the year 2019 – 2020. Repeated over five years from 2016 (when the spending rules were adopted) to 2021 the amount involved ranges between $15 million and $25 million.

Crux uncovered the non-compliant spend by investigating one randomly selected  QLDC supplier, the consultants ZQN7 Ltd. ZQN7 Ltd was paid $600,000 by QLDC to review three bylaws in spite of the rules requiring a formal competitive bid process that did not take place. The main owner of ZQN7 Ltd is former QLDC manager Ruth Stokes.

QLDC also split the $600,000 into thirteen smaller budget categories that were under what council managers mistakenly thought was a $50,000 limit for “no paperwork” type deals. This type of "splitting" of a larger total amount is forbidden under both QLDC and Auditor General rules. 

Crux discovered that the council’s 2016 procurement rules actually required either a special plan or a competitive bid process from zero dollars, not $50,000. This aspect of the procurement rules was so serious that council staff had to call an extraordinary meeting in early 2021 of elected members to change the rules otherwise the daily operations of the council could not continue. The zero level for all procurement rules meant that hundreds of monthly payments were non-compliant including things like IRD tax payments.

For one year after uncovering the ZQN7 scandal in early 2020 Crux asked council staff if the rules were being followed and we were told on numerous occasions, from sources including CEO Theelen, that they were. Non-compliant expenditure continued for many months the Crux investigation has been published.

The council claims that the rules were being followed turned out not be true when CEO Mike Theelen finally admitted to Mayor Jim Boult in January 2021 not only that the rules not been followed but that problem went far beyond ZQN7 Ltd, to include 7% of all council spend on suppliers and consultants.

The 2016 procurement rules were put in place by former QLDC CEO Adam Feeley, the former head of the Serious Fraud Office. The purpose of the new rules and guidelines was to provide ratepayers with transparency over value for money and fair competition in the hiring of suppliers, in particular consultants, some of whom were former council managers.

The missing emails that Crux has been trying to access under official information legislation are expected to show whether the council either never read their own rules or did read them and made the deliberate decision not to follow them.

Importantly the emails are expected to show the chain of command involved.

Crux already knows from partially released emails that CEO Mike Theelen was briefed on the ZQN7 Ltd situation, by the senior manager doing the deal, in 2018.

Crux will publish the new documents on or soon after February 8th.

Here is a link to the full findings of the Chief Ombudsman, how previous council searches were limited or not carried out at all, and the recommendations that QLDC has now agreed to comply with.

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