Corrupt IT manager faces wrath of church

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Corrupt IT manager faces wrath of church

Catholic church trustees have won an $8m lawsuit against a former employee who accepted bribes, falsified invoices and was complicit in systemic overcharging.

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Administrators of the Roman Catholic Church for the Diocese of Parramatta have won an $8m lawsuit against their former head of technology: he corruptly used his position to take bribes from suppliers using puppet companies, false charging, false invoicing and systemic overcharging.

Background


Mr D was employed by the trustees as chief technology officer between May 2008 and February 2014.  He was responsible for the technology infrastructure requirements of the Catholic Education Office, which administers 56 primary and 22 secondary schools, along with four early learning centres, and employs more than 6000 staff. The Education Office reports to the trustees. 

Mr D was responsible for managing the purchasing of computing and communications hardware, software and associated services from third party suppliers for the Catholic Education Office. He had authority to approve expenditure up to a limit of $200,000 between July 2008 and February 2010. That limit was reduced to $20,000 from March 2010 through 2013.

However, as Justice Beech Jones pointed out, “he had the capacity to exercise influence over the outlay of a far greater amount of expenditure.”

During his employment, Mr D made numerous decisions on acquisitions from two companies in particular – Efficient Data Communications (“EDC”) and InTouch Information Technology. While the claims against Mr D in respect of InTouch were resolved by an earlier settlement, the trustees then sought recompense for the frauds and bribery committed by Mr D in respect of EDC. 

Corruption and bribery


Witnesses alleged several instances of bribery and corruption. It was alleged by one IT networking engineer for EDC that Mr D  pulled the engineer to one side, saying that he was about to spend a lot of cash with EDC. He asked  the engineer if one of the EDC managers would give him, Mr D, $300,000 in cash. 

Mr D, it was revealed, had years earlier set up a company called MGD Strategic Business Solutions which he used to issue invoices totalling $750,200. Mr D admitted that he had received monies from these invoices. But the EDC engineer testified MGD had not provided any services. For instance, one invoice said that MGD referred to EDC back-up servers but the engineer testified EDC did not use any external back-up servers. 

“There are a number of other indications that these invoices were a ruse for payments to be made to Mr D. For example, one of the invoices bears the same number as a false invoice that was sent by MGD to InTouch,” Justice Beech Jones said. 

There were multiple other examples, such as false charging, large-scale overcharging, arranging for work-related equipment to be installed at Mr D’s home and so on. 

“I am satisfied that Mr D solicited and received payments totalling not less than $750,200 from EDC and that he did so with the intention of using his position with the CEOP to the advantage of EDC,” Justice Beech Jones held.

He added, in respect of EDC that, “having bribed Mr D, EDC embarked upon a program of systematically overcharging [the Catholic Education Office]… having been bribed, Mr D knew of the overcharging and deliberately refrained from calling EDC to account for having done so.”

Similar dubious practices took place in respect of InTouch which paid five invoices to MGD totalling $276,200 and which thereafter made 29 monthly cash payments to Mr D of $10,000 each. 

Justice Beech Jones ruled in favour of the trustees.

What this means for employers


Criminal behaviour in the form of fraud, corruption and bribery are cases for the police. And, from a company viewpoint, this case shows the need for good quality accountancy controls, commercial crime insurance and legal costs insurance. 

However, there are plenty of key points for human resources managers too. Anti-corruption certification company Ethic Intelligence points out that, “after all, bribes are always paid by individuals”. 

Professional services company PriceWaterhouseCoopers (Australia) argues there are many processes, controls and systems that can be put in place, many of which have a HR relevance. These include a top level commitment “tone from the top” and fostering a culture of integrity. 

From a HR perspective, this culture is created, in the first instance, by setting policy. 

“If the organisation does not already have a code of ethics or code of conduct, this needs to be created. Such codes should address bribery and corruption, as well as other issues related to general business ethics,” PWC says. 

Such policies should be supported at board level. Then there needs to be communication and training to foster awareness. Not to mention compliance regulatory training for those staff who may be particularly exposed to corruption and bribery e.g. staff dealing with public officials in developing countries. 

There will need to be systems to prevent, detect and respond. So there will be a need for things such as whistleblower hotlines and incident management investigations. That latter point will clearly require cross-disciplinary working e.g. HR, IT and finance may have to work together to investigate suspected misconduct in respect of corruption in IT purchasing. 

And there also needs to be consequences for those individuals that engage in corruption. HR managers may wish to carefully consider the rules around dismissal for misconduct and criminal behaviour.

HR managers also have a particular role in recruitment. As Ethic Intelligence points out, “The problem lies in the employee’s lack of personal integrity. To avoid this predicament, the human resources manager has to be particularly vigilant on the issue of any candidate’s integrity during the recruitment process.” 

Trustees of the Roman Catholic Church for the Diocese of Parramatta v  D  [2016] NSWSC 1566 (3 November 2016)

See also: How can HR prevent corruption?
“Assessing the risk of bribery and corruption to your business,” PriceWaterhouseCoopers Australia (2016)

For examples of HR policies and codes of conduct visit our sister site HR Advance.
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