Update: The man at the centre of the WA Corruption and Crime Commission's report into bribery in maintenance and service contracts within the North Metropolitan Health Service walked away from the department with a $221,932 golden handshake.
John Fullerton was the executive director of facilities management at the NMHS for five years. He took a voluntary redundancy under the Voluntary Targeted Severance Scheme in 2016.
David Mulligan, who was the executive director of Perth Children’s Hospital Integration and started in 1999 as the executive director of clinical planning at the North Metropolitan Health Service received a $218,464 severance payout in December 2016.
He was found to have received cash payments, lunches and travel and recommended for prosecution by the CCC.
Shaun Ensor, former acting manager area facilities development at the NMHS received a $163,506 severance payout.
The CCC report found Mr Ensor started to accept offers of hospitality from Natalie Bell of Gowdie Management Group in 2015 after the completion of a successful project. In a period of just over two years, Gowdie spent $5353 on hospitality in the form of expensive lunches that were attended by Mr Ensor.
A Department of Health spokesperson said: "As the CCC was unable to advise whether adverse findings would be made — as the investigation was in its early stages — there was no legitimate basis to withhold payment."
'You have to trust executives'
Those were the words of WA Department of Health director David Russell-Weisz on Thursday after a mind-boggling level of corruption, greed, and wining and dining in order to earn health construction contracts on occasion worth more than half-a-million dollars each was uncovered by the WA Corruption and Crime Commission.
"This is deplorable, abhorrent behaviour," Dr Russell-Weisz said.
"It was deceptive. It was deliberate. It was organised. You can't argue this was either incompetence, you can't argue this was just a mistake. No, it was a number of public officers trying to subvert normal procedure and practice."
Mr Russell-Weisz confirmed the severance payments for two officers were given while the department knew the CCC investigation was going on, upon receiving advice that the department needed to "act normally".
"I am now obviously very uncomfortable that payments were made and we will seek to recover them," he said.
In return for awarding work, the public servants were showered with tens of thousands of dollars in gifts, including travel, accommodation, entertainment such as golf days and boozy lunches in expensive restaurants.Corruption and Crime Commission report
Health Minister Roger Cook confirmed the Health Department would seek urgent advice from the State Solicitors Office and pursue "every avenue possible" to recover severance paid to the corrupt ex-employees.
But the issue is so much bigger than those payments.
The WA Corruption and Crime Commission says its report on bribery in maintenance and service contracts within the NMHS highlights "serious misconduct at its most shocking".
In return for awarding work, three public servants were showered with tens of thousands of dollars in gifts, including travel, accommodation, entertainment such as golf days and boozy lunches in expensive restaurants.
Contracts worth more than half a million dollars were awarded at health services around Perth,
including Sir Charles Gairdner Hospital, PathWest, Graylands Hospital, Midland and Joondalup Health campuses.
The report found John Fullerton, former executive director of facilities management, was known to regularly go out for lunches with contractors, accepted gifts and travel.
WA Health investigated the corruption allegations in 2014 and tabled a report in 2015 with suggestions for improvement. But no public officer was named and Mr Fullertons’ activities
continued - and increased.
‘Layer of fat’
After paid-for travel and lavish wining and dining by a select group of contractors, contracts for works for the health department were awarded, the CCC report into bribery revealed.
Public officers authorised the payment of invoices that covered corrupt payments. These
were described as a layer of ‘fat’ that some contractors added to legitimate invoices to recoup the money they spent on lunches, travel, accommodation and cash payments, the CCC report found.
On occasion, money added to NMHS invoices were purely for greed rather than to recoup money spent on gifts, the CCC said.
The inner sanctum
Over the course of a six to 10 year period, a group of building and facility maintenance contractors invoiced NMHS for tens of millions of dollars of work. An introduction to the group of favoured building contractors was coveted and actively sought.
How did those contractors gain entry to that special group?
- Fox United Building Pty
Fox had been providing building maintenance services to WA Health since 2001. Fox director Philip Wood provided building services to WA Health through another entity from 1996. Fox was engaged by Mr Fullerton and Grant Alexander of PA Projects in August 2015 to renovate Mr Fullerton's private residence. In return, Fox was awarded NMHS building maintenance contracts.
- Howzat Constructions Pty Ltd
Liam Howard established and ran Howzat Constructions Pty Ltd as a sole trader from 2012 until September 2016. Between 2012 and 2016 Howzat invoiced NMHS a total of $1,690,405 in fees for building and maintenance services. The highest billing year was 2015 which coincided with the period during which Howzat was working on Mr Fullerton's house renovation.
The dirty reno deal
Mr Wood, a director of Fox, used this opportunity to fraudulently invoice NMHS for a portion of
the work Fox had performed on Mr Fullerton's private residence.
The arrangement was that Fox would bill Mr Fullerton personally on a 'cost plus' basis for the house renovation to a total sum of $700,000 to $900,000. The 'plus' was the builder's margin which ranged from 10 to 30 per cent on top of the cost, including placing a margin on materials.
In addition, Fox would retain approximately $100,000 of credits billed to NMHS through invoices
submitted for payment in relation to legitimate NMHS projects.
The invoicing of the credits was to be done by adding at least five per cent to NMHS project invoices.
Half of the five per cent was to be credited against the cost of work carried out by Fox on Mr
Fullerton's private residence.
The other two and a half per cent was to be retained by Fox as a 'convenience fee' or additional
profit margin, as a reward for undertaking the house renovation.
Mr Alexander and Mr Wood decided which invoices to NMHS could accommodate a portion of the
renovation cost or 'invoice fat'.
Howzat also worked on the renovation of Mr Fullerton's mother's private residence from mid-October 2014 to March 2015. Howzat commenced work on Mr Fullerton's private residence in January 2015 and left the site in late August 2015 after being replaced by Fox.
Mr Howard invoiced Mrs Fullerton and Mr Fullerton for their house renovations on a 'cost plus' basis. Mrs Fullerton paid Howzat cash in the sum of $60,000 to $70,000 for the renovation of her private residence.
Mr Fullerton's invoices were sent to his private residence but were handled by Mr Alexander. Mr Alexander arranged for those invoices to be paid by Mrs Fullerton. Mr Howard invoiced NMHS a total of approximately $3500 that related to Mrs Fullerton's renovation. He did this over four invoices. In relation to Mr Fullerton's private residence, NMHS were invoiced a total of $43,700 by Howzat.
The corpus delicti
Agreement was documented in a spreadsheet (the retention spreadsheet) authored by Mr Wood
but provided to Mr Alexander periodically for verification.
In effect, the retention spreadsheet was the living document that tracked the detail of the agreement between Mr Wood and Mr Fullerton (through his recruit, Mr Alexander) to obtain
corrupt payments from NMHS, the CCC found.
The Commission initially obtained a copy of the document during the forensic acquisition and examination of electronic devices seized during the search warrant executed at the offices of Fox.
During examination before the Commission, Mr Wood explained to the Commission how the retention spreadsheet worked:
“So let’s say ambo ward I quoted it and it was $3000, okay. I would have had a discussion with Grant Alexander. He would have said, “I think that we can invoice 10,062 or we can invoice 10 grand, up your quote to $10,000.” The third column, Value Added, would have been the difference between what my job quoted would have realistically been if we’d have been doing it honestly. The second is what he would have said to actually invoice so we added on to that project which should
have cost North Metro Health $3000, we added on an additional 7062, 50 per cent
of which was kept by Fox United, 50 per cent went against John’s job.”
In turn, Fox was guaranteed to win projects.
Between 2010 and 2016, Fox invoiced WA Health for a total of $10,144,945 in building
maintenance project fees. Fox made a profit on the renovation of Mr Fullerton's private residence,
estimated to be in the order of $190,000.
Full force investigation
The report said the commission “necessitated the use of the full suite of statutory coercive powers”, including notices to compulsorly obtain documents, search warrants, surveillance and information
‘Corruption hides in poor processes and lazy oversight’
The CCC found evidence that procurement practices at NMHS were poorly understood by public officers and deliberately not followed in order for the purported purpose of 'getting things done'.
The repeated failure to comply with required policy and procedures contributed to an apathetic culture within the NMHS that was exploited by Mr Fullerton and Mr Mulligan for their own benefit.
Who is John Fullerton?
Mr Fullerton was the executive director of facilities management at North Metropolitan Health
Service for five years. He took a redundancy in 2016.
His responsibilities included oversight of the maintenance personnel, security personnel, campus
managers and project officers.
Mr Fullerton also had oversight of additional WA Health campuses at Swan District Hospital,
Kalamunda Hospital and Princess Margaret Children's Hospital.
His primary responsibility was to supervise operations and to allocate resources to meet servicing
and maintenance of the facilities. Mr Fullerton held a delegation to spend up to $1m to meet this
Who is David Mulligan?
David Mulligan was the exectutive director of Perth Children’s Hospital Integration and started in
1999 as the executive director of clinical planning at the North Metropolitan Health Service.
Mr Mulligan's role concerned project management of large new NMHS building works projects and
he had oversight of projects worth over $50m that required input from other government agencies.
He was a member of the Perth Children's Hospital Project Control Group for 12 months.
A middle man, Grant Alexander, was recruited by the public officers as a project manager. He
was the 'fixer' and facilitator for Mr Fullerton and Mr Mulligan. He was the conduit between the public officer and the person offering the public officer the gift. He facilitated the financial benefit up to the public officer and made arrangements to return the favour to the gift giver.
He managed the procurement process on Mr Fullerton and Mr Mulligan's behalf until the point
where the public officer was required to exercise his financial delegation and award the
Mr Alexander had direct and regular access to Mr Fullerton and Mr Mulligan. At Mr Fullerton and Mr Mulligan's direction and/or facilitation, he was able to manipulate the procurement process for the personal financial benefit of both public officers.
Mr Alexander also benefitted financially. Between 2012 and 2016, PA Projects invoiced WA Health
$2,077,965 in project management fees. The majority of invoices referenced NMHS projects.
Mr Alexander project managed the renovation of Mr Fullerton's private residence during 2015 and 2016; and the renovation of Mr Fullerton's mother's house during late 2014 and early 2015.
Mr Fullerton's mother is now deceased.
"It's a slippery slope"
"It is an appalling read," Dr Russell-Weisz said.
"It shows covert, deliberate behaviour to defraud the public health system for personal gain, by three public officers...and a number of companies."
An allegation from a whistleblower sparked the investigation.
CCC Commissioner John McKechnie, a former Supreme Court justice, said the problem was partly cultural, and some who saw their boss leaving for lunch to be wined and dined for hours at a time thought it was okay to do the same.
But a public officer shouldn't get more than pay and thanks.
"Obviously you've got to build a bit of a relationship - maybe a coffee, maybe even a lunch at the beginning - but it's a slippery slope," Mr McKechnie said.
The CCC suggested prosecuting authorities consider laying criminal charges against three former public servants including Mr Fullerton and David Mulligan, and 11 private sector contractors.
The CCC was concerned this may just be a sample of corruption in WA Health and possibly in other larger state government agencies undertaking contracting activities worth hundreds of millions of dollars.