Critical PAC report puts pressure on Murphy

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SAM McBRIDE tells the story behind Cono Murphy’s sacking of four NI Water directors last year, based on yesterday’s forensic report by Stormont’s Public Accounts Committee.

WHEN he sacked them almost exactly a year ago, Sinn Fein couldn’t do enough to push the story.

Conor Murphy’s email of dismissal to NI Water directors Declan Gormley, Chris Mellor, John Ballard and Ruth Thompson was presented as the actions of a tough republican minister throwing out well-heeled directors for incompetence or worse.

Rounds of interviews, a broadly well-received statement in the assembly and the obligatory press releases from party colleagues thanking and praising him for taking such “swift and decisive action” followed.

Yesterday, exactly a year after Mr Murphy wrote to all but one of NI Water’s five non executive directors asking them to “consider their position” before removing them, Stormont’s powerful Public Accounts Committee (PAC) delivered a rather different verdict on a minister who to that point had been seen as a competent Sinn Fein counter-balance to the much-criticised Caitriona Ruane.

It is unclear how much Mr Murphy knew of the events outlined in the PAC report. However, as more and more evidence has emerged over the last year to discredit the ‘independent review’ which he said was the reason for sacking the directors, he has become increasingly dogmatic that he was entirely right to remove four people whom the PAC report portrays as, at best, partially-to-blame.

The story begins last January. NI Water chief executive Laurence MacKenzie had fallen out with his board and tendered his resignation to Mr Murphy’s Department of Regional Development.

That boardroom power-struggle would have merited limited headlines, even if Mr MacKenzie had then gone, had it not been that he was Mr Murphy’s third NI Water boss in as many years and had only been in post a matter of months.

Days later, Mr MacKenzie withdrew his resignation after DRD agreed with him to establish an ‘independent review team’ into some procurement breaches which had been discovered.

However, when the review team — made up of Deloitte consultant Jackie Henry, consultant Glenn Thompson and Phoenix Gas chief executive Peter Dixon — reported, Mr Murphy’s most senior official, Paul Priestly, was unhappy.

The PAC recorded how he felt that their report could be read as blaming the department for the problems which had developed at NI Water. And, despite the review being ‘independent’, he asked for key changes to be made to their report, some of which were accepted by the review team and would later be used by Mr Murphy to justify the sackings.

When the review was presented to Murphy, he decided to fire the four directors. Though it received scant attention at the time, one non-executive director was kept on. Senior Northern Bank figure Don Price — despite joining the board on the same day as Declan Gormley — was retained.

The PAC said that unpublished interview notes from the review team showed that Mr Price “knew” Peter Dixon, who in the notes said he had no conversations with him about the review, an observation the PAC said was of “no value” as the notes were never published.

He wasn’t the only figure involved who knew those investigating him. Laurence MacKenzie also knew Peter Dixon. In an email obtained by the committee, Mr MacKenzie told Mr Dixon that he wanted to meet him as he needed help from friends.

The PAC also raised serious concerns about Mr Murphy’s decision to appoint the third — and most senior — member of the review team, Jackie Henry, whose 20 days’ work on the case saw her company, Deloitte, receive £36,443. Deloitte, the PAC discovered, had been paid millions of pounds by DRD and NI Water in the three years prior to her appointment as an independent investigator. Among several links to individuals or processes which could form part of the scope of her investigation, Mrs Henry’s company had been “instrumental” in drawing up NI Water’s governance arrangements — the very arrangements under review.

The committee said that it was “entirely wrong” to appoint her to such a role.

Even after the changes requested by Priestly “diluted” criticism of the department, the review did not recommend that any board members be sacked, much less single out who should go. In fact, the PAC said that despite costing more than £50,000, the review team’s report was “far too general”.

It found that the review team had been unable to fulfil its terms of reference because of the “undue haste” with which Mr Priestly insisted the review be completed, a haste which the PAC noted was “completely out of character for the Northern Ireland Civil Service”.

The PAC found that the report was “deficient in terms of process,” yet, “was used as a basis of advice which led to the dismissal of four board members”.

In the end, the department’s decision to remove one of the four directors — Declan Gormley — was based on his refusal to sign off on the review team’s interview notes with him, which he regarded as “partial”. That refusal had been slammed at the time as “a lack of judgement”.

The PAC noted that a Belfast Telegraph article on February 8 suggested that “heads could roll” as a result of the review, yet when board members queried the review’s independence in light of claims such as those, the department was uninterested.

In the months after the boardroom upheaval, with little publicity and limited interest, the PAC was investigating the procurement breaches.

However, at an evidence-gathering hearing last July, Mr Priestly and Mr MacKenzie faced a stiff cross-examination from three MLAs about the independence of the review team, their reasons for supporting the directors’ firing and links to the independent review team’s members.

Mr Priestly was unhappy and, known only to a handful at the time, drafted a letter for Peter Dixon to send to the PAC attacking it for the “disgraceful” questioning of the three MLAs — Dawn Purvis, Patsy McGlone and John Dallat — and threatening legal action.

The letter on Phoenix headed notepaper was essentially a threat to MLAs for daring to make public servants answer questions about what they feared was a cover-up.

Just over a month later, the day after a UTV exposé of Mr Priestly’s role in the directors’ sacking, it emerged that Mr Priestly himself had written the letter. He was suspended and remains on full pay more than five months later.

The PAC denounced the “utterly disgraceful” actions of Mr Priestly — reportedly the only permanent secretary to have been suspended in the history of the Northern Ireland Civil Service — in withering terms.

It says that his “duplicity” was shocking and urged a prompt decision on his future by the head of the civil service, Sir Bruce Robinson.

The Christmas water crisis eventually led to Laurence MacKenzie falling on his sword, while Mr Murphy has thus far survived.

But yesterday’s report sheds light on numerous other aspects of NI Water under Conor Murphy’s watch.

It reveals that confidentiality clauses are now routine at the public body, in an attempt to conceal details which may embarrass public servants or their political masters. The PAC found that “there was an unacceptable and widespread use of confidentiality clauses in NI Water that restricted openness and accountability. Such clauses were clearly intended to keep embarrassing payments out of the public view”.

The PAC used its powers to force disclosure of several of the confidential payments. It reveals that former chief executive Katherine Bryan was given a £162,000 pay-off when she left the company in 2008, though the department signed a confidentiality clause to keep secret the reason for her departure.

And, last year — after the sacking of the directors — NI Water paid £243,550 to Contracting Out LLP and £500,000 to the Loughs Agency, both subject to confidentiality clauses.

Mr Murphy’s department was also compelled to reveal that NI Water paid consultants Steria £10.6 million last year, paid a Steria sub-contractor £2.1 million and also paid Steria’s legal costs, all under secrecy agreements.

Mr Murphy’s department also entered into contracts which attempted to place evidence beyond the reach of the PAC, which is charged with investigating how public funds are spent.

The review team’s notes were — in agreement with DRD — held by Deloitte, which initially refused to release them to the Audit Office and only did so after the threat of legal action.

The committee said it was appalled that DRD had agreed to the transfer of ownership of supporting papers to a publicly-funded report to a private sector consultancy firm, something it said “flies in the face of transparency”.

The defence used by Murphy and his supporters for removing the directors has been that there were serious procurement problems at NI Water, that tens of millions of pounds of contracts were authorised without competitive tender, which leaves open the potential for either fraud or a cheaper bidder not being considered.

Mr Murphy’s decisive sacking of the directors received prominent publicity. The Belfast Telegraph reported that directors had been sacked following a “critical independent report” into the awarding of “lucrative contracts”.

However, the minister has acknowledged that there is no suggestion of fraud.

And the PAC report says that one of the reasons was a culture of “getting the job done” — although it stresses that this an inadequate excuse for bending the rules.

Some observers have always questioned why such draconian action was taken against four of the five non-executive directors of NI Water when similar procurement breaches are widespread across the public sector.

Mr Murphy insists that such practices must end and the culprits be held accountable. The only option for him, given how thoroughly the “independent review” has been discredited by the PAC, would appear to set up a fresh investigation — this time entirely independent of his department.