FREMANTLE COUNCIL EXPOSED TO FRAUD AND CORRUPTION

AUDITOR’S REPORT STATES CITY HAS NO ANTI-CORRUPTION FRAMEWORK: SECRET MEETINGS ARE CAUSE FOR CONCERN

In an extensive report delivered to Fremantle Council the City’s auditors have revealed:

‘The City has no Fraud and Corruption Framework, there is no Fraud and Corruption Prevention Policy nor Procedures’.

The auditors, Paxon Group Pty Ltd, describe themselves as specialists in aspects of urban renewal, development feasibility and the structuring of joint ventures between public and private entities. 

 Paxon Group also reported that the City has no Fraud Prevention Officer.

The audit reveals:

‘Purchase orders have been raised after expenditure’ and ‘Invoices have not been approved by authorised personnel’.

Paxon’s note that issues related to the delegation of authority have “been actioned”.

WARNINGS GIVEN IN 2015  :  REQUIRED TRAINING NOT IMPLEMENTED

Paxon’s findings reveal the lack of Risk Management Analysis dates prior to 2015. They say that under a previous Regulation 17 report of 2015:

“ . . . risk analysis was new to the City and required further refinement and training scheduled for 2015. This did not take place”.

(Links to the auditor’s information published in Council’s agenda and minutes are at the end of this article)

COUNCILLORS MUST HAVE ACCESS TO CONTRACTS  :  MAY HAVE NO LEGAL PROTECTION.

Fremantle is increasingly favoured by developers and at least one, Sirona Capital, has been described in court documents as having questionable professional ethics.

If councillors did not receive advice related to aspects of fraud and corruption they may have a defense against future legal action associated with the financial failure of projects, especially if councillors have not been given full details of projects’ contracts. 

Fremantle Backchat understands councillors have not had access to contracts. Therefore they cannot understand the implications.

Not requesting access to contracts may indicate a lack of due diligence which could expose individuals to legal action in the event of financial or other failures of projects.

By understanding contracts fully, if necessary consulting independent legal advice, councillors would be in a position to question the administration and clarify any doubts they may have. Due diligence may help protect elected members from legal actions and advise the administration to refrain from imprudent management practices. They may also protect ratepayers from costly misinterpretations.

REQUEST FOR CONTRACT IGNORED  :  COUNCIL SECRECY IS CAUSE FOR CONCERN

Lack of transparency within the Council’s administration is palpable. The administrator’s findings cast doubt on past and current administrations and their procedures. The findings should prompt councillors to ensure legal protection which may be assisted by having a  full understanding. of contracts

Fremantle Backchat has written to the City’s CEO, Philip St John, requesting a copy of the contract between the City and Sirona Capital so that it may be independently examined in the interests of Fremantle ratepayers who are repeatedly described as partners with Sirona Capital in the redevelopment of King’s Square. He has not replied.

SECRET DISCUSSION OF  CASH FLOW BY AUDIT AND RISK MANAGEMENT COMMITTEE

Underlining the Council’s lack of transparency a meeting of the Audit and Risk Management Committee was held in camera to discuss the Kings Square Civic Building Cash Flow Summary. The meeting was on 14th May 2019. In some circumstances Government legislation does allow council business to be closed to the public. 

The council has recently contracted Pindan and concerns have been raised that the contract may not have a fixed price. That is not uncommon but ratepayers have been given details of costs which appear to be fixed.

If contracts are not fixed price there may be concerns that substantial increases in construction and fit-out costs can be expected.

Fremantle’s ratepayers who are financial partners in the development of  Kings Square should have considerable cause for concern that contracts and related financial matters which are shrouded in secrecy are not available for inspection.

NOTE: For detailed information related to the auditor’s report refer to these links:

Agenda:<https://www.fremantle.wa.gov.au/sites/default/files/Agenda%20-%20Ordinary%20Meeting%20of%20Council%20-%2022%20May%202019.pdf>Starting on pp95

Minutes:<https://www.fremantle.wa.gov.au/sites/default/files/Minutes%20-%20Ordinary%20Meeting%20of%20Council%20-%2022%20May%202019.pdf>Starting on pp111

Roger Garwood, Editor, Fremantle Backchat; <editorbackchat@gmail.com>

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COUNCIL LOSE $450,000 PER YEAR ON SALE OF SPICER CAR PARK

SPICER SITE SALE LOSES COUNCIL MILLIONS IN PARKING REVENUE.  WAS SALE  LEGAL? WHY DID SPICER SITE NOT GO TO PUBLIC TENDER?

Fremantle Backchat recently questioned the CEO and Mayor asking them to clarify who will receive parking revenue from the Spicer site. According to the Council’s accounts the revenue is in the region of $450,000 a year. 

They were asked: “Who receives the parking revenue from the Spicer Site now that it has been reported as sold to a third party?”

The Director of City Business, Glen Dougall,  replying on behalf of  Mr. St John, confirmed the net income (sale price) from the  Spicer’s was $6,650,000 (the valuation made in 2012), explained the site was now in the ownership of a Mindaroo portfolio (Andrew Forrest ). He said: “The City assumes that parking revenues from this site either passes to the Mindaroo related entity or the contractor managing the property for the owner”.

This confirms that the city will lose approximately half a million dollars a year from the sites parking revenue.

A further question was asked by Fremantle Backchat: “Did the revenue from the Spicer Site, prior to the sale, go into (the city’s) parking revenue? It is recorded by the Council as having been allocated to the King’s Square Plan (KSP). Does that mean it was paid to Sirona Capital? If not how did it contribute to the KSP?”

Mr. Dougall replied: “Net proceeds from the sale of Spicer were placed into Reserve Funds, the proceeds will be used as part funding for the new Civic Building”. 

However he did not detail what had happened to the parking revenue prior to the sale and Fremantle Backchat could not find a record of Spicer parking funds being paid into the City’s Reserve Funds. A lack of detail in the reply leads to the reasonable supposition that the parking revenue may have been paid to Sirona Capital as, until the sale of the site, Sirona appear to have had total control of the property while repeatedly asking for extensions of time to pay Council. 

This underlines a point made by Fremantle Backchat in a previous article (link below) which questioned Sirona’s solvency. In effect the longer Sirona had control of the property the more revenue they possibly gained from the parking facilities.

Council will now see a continuing loss of revenue amounting in the medium term of, say six years, of approximately $3,000,000 plus any revenue which may have previously been absorbed by Sirona Capital.

When the property was ceded to Sirona $12.65m was removed from the City’s Reserve Funds to assist in covering the Council’s operating costs. 

Sirona had agreed to purchase a number of properties and apparently still owe Council $6,000,000.

Legal advice on the sale of the Spicer Site was apparently $50,000. It is recorded as ‘Advice on Spicer settlement and possible Kings Square Redevelopment and Spicer se (sic) Legal Services’ in the accounts. Mr. Dougal explained that the advice between the Council and its lawyers is privileged and offered no further details.

WAS SALE CONDUCTED LEGALLY? WHY DID THE PROPERTY NOT GO TO PUBLIC TENDER?

A readers question to Fremantle Backchat  pointed out the City evade answering questions and asked: “How was the purchaser (Mindaroo), able to buy the site without going through a public tendering process?”

While pursuing a lack of transparency by the Council a series of questions have been asked by Fremantle Backchat related to Council’s partnership with Sirona Capital.  The questions will be published together with any clarifications from the Council.

Roger Garwood, Editor. <editorbackchat@gmail.com>

Links to related stories:

SIRONA MISS DEADLINE  <https://wp.me/p3YA9m-Az&gt;

ARE SIRONA SOLVENT?  <https://wp.me/p3YA9m-zA&gt;

FREMANTLE RUNNING ON EMPTY <https://wp.me/p3YA9m-mT&gt;

FREMANTLE- A PERFECT TORM OF COMMERCIAL CRISIS AND BAD MANAGEMENT <https://wp.me/p3YA9m-2E&gt;

 

 

 

 

 

 

 

 

 

GOVERNMENTS REVEAL FREMANTLE HAS WORST FINANCIAL RECORD & HIGHEST PAID MAYOR IN WA

IMG_9107
                          Work progressing on Fremantle Council’s new Administration Centre 

•Fremantle Has Highest Financial Risk Factor

•Brad Pettitt Top of the Financial League of Mayors

•Government Advise Ratepayers: ‘question council performances

Statistics, published in The West Australian (17th April 2018), show Dr Brad Pettitt has become the highest paid mayor in Western Australia.. These figures are confirmed by Fremantle Council’s accounts and exclude various allowances. 

Additional statistics, published in WA Government’s Financial Health Index (FHI), show that during Dr Pettitt’s tenure the City of Fremantle has fallen to the lowest position in the State with a Financial Health Index  figure of 44

In two of the immediate past three financial years the city had a low score of 42 and 44. In the Financial year of 2016-17 the score was also very low but the city changed its accounting methodology and elevated the FHI to 87. At that time Treasury issued a statement saying: ‘We stand by our original figures’.

Top Mayoral Salaries are:

Fremantle: $139,419

Joondalup: $139,410

Belmont:   $139,409

Bayswater: $139,310

The Financial Health Index of those Councils show:

Fremantle: 44

Joondalup: 61

Bayswater: 86

Belmont:   94

The higher the score, the better the financial health of a council. These scores are an indication of financial management and of services offered to ratepayers. They show ratepayers’ their value for money.

It is interesting to note the second lowest performance is Nedlands with an FHI of 50. Fremantle based consultancy LewiCorp Pty Ltd, owned by Chris Lewis who spearheaded the failed ‘Keep the Dockers in Fremantle’ campaign, is shown as being paid as a council adviser in the accounts of both Fremantle and Nedlands. Lewis was also instrumental in a fundraising campaign for Dr Pettit’s first mayoral campaign. 

GOVERNMENT ADVISES COMMUNITIES TO QUESTION COUNCIL PERFORMANCES

The WA Government website <https://mycouncil.wa.gov.au/Council/CompareAllCouncil> advise to ratepayers states: “A very high or low FHI may be a prompt for questions to be asked by the community about a local government’s revenue, expenses, and service delivery. The FHI is best viewed as a trend over time”

ACADEMIC THEORY- ARE THE CHOOKS COMING HOME TO ROOST ?

When Dr Pettitt was first elected mayor he stated: ‘. . . I’m delighted to be able to put my academic theories into practice in Fremantle . . . ’. but has never detailed his academic theories. After nearly ten years in the top job, and based on the performance of council under his leadership, the theories must be questioned.

A ratepayer-funded, multimillion dollar, public relations campaign has failed to halt the slide in the city’s fortunes. The campaign includes websites, newspaper advertising and a magazine which has ceased publication after council admitted it has failed. 

There is a growing impatience among ratepayers and businesses, a very high proportion of whom have closed shop and left or are struggling to pay higher rents and increasing rates in the face of falling customer numbers.

FAILED PROMISES

The city’s east end now has approximately 80 vacant retail premises with no sign of the resurgence of business promised as a result of the development of a Woolworth’s shopping centre (now prematurely closed). The increase of trade from residents expected from new developments have not materialised. Anectodal evidence indicates the LIV apartments are about 50% occupied following an increase in service personnel taking up residence..

In the instance of the re-development of Atwell Arcade the mayor promised that 300 people would be employed in the new offices. That was three years ago. So far there are about 40.

Without knowing Dr Pettitt’s academic theories it is difficult to comment but there is scant evidence of their success. There is no questioning Brad Pettitt’s youthful enthusiasm but after ten years it is reasonable to question the efficacy of his theories.

Over the next few weeks Fremantle Backchat will examine issues related to the current failure of the city to improve its financial position.

Part Two: Next Week. Council’s Lack of Transparency

Roger Garwood, Editor. <editorbackchat@gmail.com>

70th ANNIVERSARY of the BLESSING OF THE FLEET

This Sunday, 28th October, Fremantle’s Blessing of the Fleet opens  Fremantle’s annual festival. A new book celebrates the 70th anniversary of one of the oldest religious  ceremonies in Australia.

The Fishing Fleet Festival Association have published “Blessing of the Fleet” compiled and edited by Susanna  Iuliano and Maria Amato-Gorman. The 224 page book has interviews with leading members of the fishing community as well as photographs taken by  many people who are an intricate part of the festival.

These are few of my favourite pictures taken in  earlier days, from 1976.  They are in  no particular order but  show  the varied and distinctive nature of the city’s oldest celebration. The book will be available from New Edition Bookshop and the Maritime Museum.

SIRONA MISS DEADLINE

SIRONA CAPITAL MISS DEADLINE FOR $6.65m SPICER PAYMENT

CLAIMING “THERE  IS NO DEBT”

Sirona Capital, after gaining an additional six month extension from Fremantle Council to settle the $6.65m payment  for the Spicer Site did not settle on the amended due date, 30th September 2018. The Spicer site has been described as a part of the The King’s Square Plan  (KSP) a joint venture between Fremantle Council and Sirona Capital and is designed to revitalise the city’s centre. COUNCIL: “SETTLEMENT … NOT YET HAPPENED” On the 8th October Fremantle Backchat  were informed by the council’s administration that: “Settlement of the sale of the former Spicer site has not yet happened, however the agreement for the City of Fremantle to sell the property to Sirona (Capital) remains in place.” A City administration spokesperson continued in an email “… under these circumstance The City and Sirona will now be subject to this process which involves a 30 working day period for settlement to occur”. That takes the settlement day to Friday, 9th November. SIRONA: “THERE IS NO DEBT” A spokesperson for Sirona Capital said in an email to Fremantle Backchat:  “ I understand you have also approached the City of Fremantle on this topic and they have responded. However, I cannot allow your interpretation of the commercial arrangement between the City and Sirona to go uncorrected. We have entered into a contract for sale with deferred settlement terms. There is no debt.” This statement leads to some confusion. Sirona claim “There is no debt”, the City claim the debt has not been paid on the due date but a process, presumably to agree a settlement, is part of a contract. Fremantle Backchat have approached Sirona Capital to clarify the ‘no debt’ statement. There was no reply at the time this story was published. COUNCIL MINUTES DEFINED DATE The date for settlement was stated unequivocally in the Council’s minutes for the 11th April 2018 General Meeting: “COUNCIL DECISION ITEM FPOL1802-12 (Committee Recommendation) Moved: Mayor, Brad Pettitt  Seconded: Cr Dave Hume That Council authorise the Chief Executive Officer authority to approve extension of the settlement date for the former Spicer property for a period up to 30 September, 2018, and amend the Project Development Deed in accordance with this extension.” LACK OF TRANSPARENCY For some years questions have been raised regarding the lack of transparency surrounding the KSP. Financial analyst Martin Lee  together with Claudia Green, a former candidate for City Ward, exposed flaws which indicated the financial plans were not sustainable and that ratepayers could face a debt of up to $50m. In January this year Sirona Capital had a writ issued against it claiming the directors  had acted “fraudulently”,  “negligently” and made “misrepresentations” related to the conversion of a $5m loan into equity. The writ, issued by Cooper and Oxley’s administrators was seeking $5 million plus 15% interest on that sum since late 2011, about $1.2 million, plus unspecified damages. This occurred at the time $6,65m was to be paid to Fremantle Council for the Spicer Site. Sirona Capital instead requested a further postponement of 12 months. Council granted six months. The writ was claimed to have been “settled” by Sirona MD Matthew McNeilly though the administrators for Cooper and Oxley did not confirm that settlement when  Fremantle Backchat requested clarification. SIRONA CLAIMED: “BACKING OF $190m” These events occurred before Sirona announced they had secured financial backing for the King’s Square plan of $190m from superannuation fund managers FSS. The question is why, with this financial backing for the KSP, of which the Spicer site has been named a part, could the company not pay $6.65m on the due date? On 15th June 2018 Fremantle Backchat questioned Sirona Capital’s solvency. <https://wp.me/p3YA9m-zA> SIRONA DIVIDED & LOSE $100m On September 25th 2018 joint statements from Sirona Capital and Harvis outlined that the Sirona’s two managing directors had divided Sirona Capital. Kelvin Flynn left Sirona and formed Harvis taking $100m of assets and a number of Sirona’s principle executives, leaving Matthew McNeilly with Sirona Capital, less $100m in assets.   Roger Garwood Editor editorbackchat@gmail.com