Declare or beware: probity reminders from IBAC report on lobbying – Australian Education City

By Julian Hammond 

Key takeaways

• Operation Clara is an important reminder for public entity directors to ensure that they do not use (and are not perceived to use) their board position to advance their personal interests or the interests of third parties. Proper management of conflicts of interest by public entity directors is critical to adhering to probity standards.
• IBAC has recommended that the governance documents pertaining to lobbyists and public entity directors be updated to expressly address the possible conflicts that may arise if a person is both a lobbyist and a public entity director.

What was Operation Clara?

From 2015-19, the Australian Education City consortium (AEC) was engaged in negotiations with the Victorian government regarding a possible $31 billion project to develop 400 hectares of land within the East Werribee Employment Precinct.  The Independent Broad-based Anti-corruption Commission (IBAC) sought to determine whether Mr Theo Theophanous, a board member of the Victorian Planning Authority and a former Minister, attempted to influence public officials or misused his position when supporting the AEC proposed project.

What did IBAC find?

In its special report on Operation Clara, IBAC found that Mr Theophanous:

• lobbied ministers and departmental officials in support of the AEC’s proposed project;
• failed to declare, for the purposes of his role as a VPA director, a conflict of interest in relation to his lobbying activities;
• failed to register the AEC as a client on the register of lobbyists;
• endeavoured to use his position a VPA director to advance his private lobbying business;
• sought payment from and obtained other benefits from the AEC.

Obligations and duties of public entity directors

While the probity requirements of public entity directors vary with the circumstances and governing legislation, there are several key duties to bear in mind.

• Public entity directors must act honestly; in good faith in the best interests of the public entity; with integrity; in a financially responsible manner; with reasonable care, diligence and skill; and in compliance with the entity’s establishing Act or instrument.^[1]
• Public entity directors must not:^[2]
  • unless properly authorised, give any person any information acquired by reason of being a public entity director; or
  • improperly use their position (including any information from that position) to gain an advantage for any person or to cause detriment to the public entity.
• Public entity boards must:^[3]
  • ensure a director code of conduct and gifts policy is in place;
  • ensure that conflict of interest processes are in place. These processes must address financial and non-financial interests, require full disclosure and recording of interests, and enable the board to exclude directors with a material conflict of interest from relevant matters; and
  • ensure appropriate financial records are kept and fraud control policies are in place.
• Public entity directors must also handle personal information consistent with the Information Privacy Principles under the Privacy and Data Protection Act 2014 (Vic).

Operation Clara is a firm reminder to public entity directors to ensure that they do not (and cannot be perceived to) use their public position to further their own interests or the interests of third parties. It is also prudent to regularly review and update conflict of interest processes and disclosures.

What did IBAC recommend?

IBAC considered that there is an inherent tension in acting as both a lobbyist and a public entity director. A lobbyist’s role is to influence government decision making in favour of a particular private interest, while a public entity director is required to act impartially and in the public interest.  In IBAC’s view, the circumstances that were subject to Operation Clara suggest existing conflict of interest arrangements do not adequately manage this tension where a lobbyist’s clients have interests that may be affected by the board of which the lobbyist is a member.

IBAC’s recommendations focused on changes to key documents that regulate lobbying and the conduct of public entity directors.

Rec. No.	Document	Responsible entity	Recommended change
1	Appointment and Remuneration Guidelines	Department of Premier and Cabinet (DPC)	Prohibit the appointment of a lobbyist to a public entity board that has functions relating to any matter on which the lobbyist has represented the interests of third parties (in a specified period). Require a person completing a declaration of private interests to indicate whether they are on the register of lobbyists (and if so, provide details of the clients and industries in which they have operated in the preceding 12 months).
2	Lobbyist Code of Conduct	DPC	Prohibit public entity directors from lobbying in relation to the functions of the public entity. Require public entity directors to comply with integrity requirements, including conflict of interest disclosures made when being appointed.
3	Code of Conduct for Directors of Victorian Public Entities	Victorian Public Sector Commission
4	Victorian Planning Authority Act 2017 (Vic) (VPA Act)	Minister for Planning	Provide that summary offences against the VPA Act (such as a deliberate failure to properly manage a conflict of interest)[4] may be prosecuted within three years after the alleged offence. Currently, the standard limit of 12 months for summary offences applies.

 

[1] Public Administration Act 2004 s 79(1).
[2] Public Administration Act 2004 s 79(2)-(3).
[3] Public Administration Act 2004 (Vic) s 81(1).
[4] As to summary offences against the VPA Act, see ss 29(1)-(2), 30(1)-(2), 31(1)-(4), 32(1), 41(1).