Unasked questions in the Christine Holgate watches probe

Christine Holgate questioned over the watches affair at a Senate estimates hearing last year. Picture: Gary Ramage

While there is no definitive plan to hold an election this year, the Morrison government is now removing two potential road blocks so that it has the option on the table - the Australia Post affair and submarines.

The Australia Post affair went very close to derailing the election option.

The success of Josh Frydenberg’s JobKeeper program and the looming speed-up of payments in the small business sector provides a very favourable business backdrop to a 2021 poll.

And, at least at the moment, the opposition is not looking like an alternative government.

The Australia Post affair was particularly dangerous because it exposed the Prime Minister and it also had the potential to disturb part of the Liberals’ election funding base, because the Australia Post board is dominated by people with links to the Liberal Party and its finances.

On the surface the Australia Post affair has been nicely put to bed but a revelation this week by Melbourne’s Herald Sun, as a result of freedom of information requests, shows how close the Australia Post board and the Prime Minister came to a disaster.

The report by the independent investigator Maddocks into watches awarded to top performing executives for outstanding service sets out the cumbersome and flawed governance systems in the post office which made a chief executive’s job potentially very dangerous because authority is not clear.

Maddocks declared: “There is no indication of dishonesty, fraud, corruption or intentional misuse of Australia Post funds by any individual involved in the matters relating to the purchase and ‘gifting’ of Cartier watches.”

Nevertheless Maddocks found that “the purchase of the Cartier watches was inconsistent with the obligation imposed by the PGPA act on the board relating to the proper use and management of public resources”.

Those simple words mean that the Prime Minister is off the hook.

But a key piece of evidence to support the improper use of resources was, according to Maddocks, “the unanimous view of the non-executive board members interviewed that they would not have approved the purchase of the Cartier watches”. (It is agreed by everyone that there was no specific board motion approving the purchase of the watches).

This week the Melbourne Herald Sun, in a page one article entitled “life of luxury”, sets out a series of expenditures that chief executives of large corporations often undertake as part of the as part of their duties. Almost every CEO in Australia would be guilty of “a life of luxury”. In fact the 24-hour a day CEO job is no luxury.

But in the article was a stunning revelation--- a $2095 Montblanc pen was given to the retiring Australia Post chairman, John Stanhope. It was a very well-deserved reward for 10 years service and included a card signed by some or all of the directors.

Had Maddocks been aware of this reward recognition they would almost certainly have asked directors whether they actually signed the card. Those that did sign would then have been asked why they claimed they would not have approved $5000 watches as a recognition of service, yet approved a $2095 pen.

Conceivably the answers to those unasked questions might have changed the Maddocks conclusions and left the Prime Minister and Australia Post and its Liberal Party finance connections under pressure.

Former Australia Post chairman John Stanhope. Picture: Adam Yip

Everyone agrees, including former chief executive Christine Holgate, that presenting the watches was a mistake. She clearly believed she was entitled to buy watches under her recognition and reward powers at Australia Post, but these recognition and reward parameters we’re not clearly set out and somebody inserted the word “gift” in the paperwork. Maddocks seized on it.

Although Maddocks did not spell this out it was clear from their descriptions of the complexity of Australia Post decision-making that an expert on board and management relationships needs to go through the Australia Post organisation.

To its credit Maddocks points out that Australia Post’s induction process for new board members does not appear to adequately provide training “with regard to the detailed operation of the legislative and policy frameworks” applicable to a corporate Commonwealth entity and a government business enterprise.

This has “implications” for the board collectively and board members individually.

Given the size of Australia Post, these issues are far more important than “Four watches and a Pen” (apologies to the 1994 film).

And dwarfing Australia Post is of course the submarine issues which I described last week.

A clear option of the government was to walk away from the submarine contract but that would not be a good strategic move on the eve of election in either 2021 or 2022.

And from Australia’s point of view this week’s new government strategy of taking a tough line with the French and demanding they honour their obligations makes sense as a first step.

But if there is not a complete change from the French then, after the election, the submarine project’s future will be on the table.