Sydney Water Corporation - allegations of corrupt conduct concerning inspectors and property asset manager (Operation Siren)

Year: 2011 Status: Completed

The ICAC investigated whether various Sydney Water Corporation (SWC) inspectors sought corrupt payments or rewards from contractors in relation to the performance of their SWC duties. The Commission also investigated an allegation that then SWC Property Asset Manager Edward Harvey engaged in corrupt conduct in dealings with Paul Makucha and associated companies.

In its report on this investigation, which was made public on 22 March 2011, the ICAC made findings of corrupt conduct against nine individuals including Messrs Harvey and Makucha, plus former Sydney Water employees Kenneth John Buckley, Bryan Kane, Richard Fayers, Robert Funovski and Anthony Vecchio, current employee Robert Rodgers, and constructor John Gerard Ryan.

The ICAC has stated its opinion that the advice of the Director of Public Prosecutions be sought with respect to the prosecution of Messrs Buckley, Funovski, Kane, Harvey and Makucha for various offences. The Commission has also made 18 corruption prevention recommendations to assist Sydney Water to prevent similar conduct from occurring in the future.

Findings of corrupt conduct

The ICAC has made corrupt conduct findings against Kenneth John Buckley, Richard Fayers, Robert Funovski, Edward Harvey, Bryan Kane, Paul Makucha, Robert Rodgers, John Gerard Ryan and Anthony Vecchio.

Former Sydney Water Civil Delivery section inspectors, Messrs Buckley and Kane, engaged in corrupt conduct by soliciting and/or receiving payments from numerous Sydney Water accredited constructors. Mr Funovski, also a Civil Delivery section inspector, engaged in corrupt conduct by soliciting and receiving a $3,000 payment from another constructor in relation to work he arranged to be performed for the constructor's company using Sydney Water resources.

Sydney Water Plumbing Inspection and Assurance Service (PIAS) inspectors, Messrs Fayers and Vecchio, engaged in corrupt conduct by accepting payments in return for favourably exercising their duties towards a number of licensed plumbers.

Mr Rodgers, another PIAS inspector, engaged in corrupt conduct by deliberately failing to seek Sydney Water's permission to engage in secondary employment in circumstances where he knew his secondary employment adversely impacted on his performance as a PIAS inspector.

Mr Harvey engaged in corrupt conduct by authorising payments of invoices submitted by Mr Makucha and his accountants totalling $293,000 when he had no authority to do so, and by falsely representing to the Supreme Court of NSW that he had authority to agree to the release of a $25,000 bond lodged in the Court. Mr Harvey also engaged in corrupt conduct by executing a Business Implementation and Confidentiality Agreement on behalf of Sydney Water when he had no authority to do so.

Mr Makucha engaged in corrupt conduct by submitting invoices to Sydney Water for payment, which he knew contained false information. He also engaged in corrupt conduct by attempting to obtain a financial advantage by procuring Mr Harvey's execution of the Business Implementation and Confidentiality Agreement when he knew Mr Harvey had no authority to do so, and by deliberately misleading Mr Harvey about the nature and purpose of a document he persuaded Mr Harvey to sign which Mr Makucha then used to falsely represent that he had Sydney Water's consent to the registration of its trademark and logo with respect to bottled water.

Recommendations for prosecutions

The Commission must seek the advice of the Director of Public Prosecutions (DPP) on whether any prosecution should be commenced. The DPP determines whether any criminal charges can be laid, and conducts all prosecutions. The Commission provides information on this website in relation to the status of prosecution recommendations and outcomes as advised by the DPP. The progress of matters is generally within the hands of the DPP. Accordingly, the Commission does not directly notify persons affected of advice received from the DPP or the progress of their matters generally.

The Commission is of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of Messrs Buckley, Funovski, Kane, Harvey and Makucha for various criminal offences. Offences and status are as follows:

Mr Buckley: for offences under section 249B of the Crimes Act 1900 of soliciting and/or receiving corrupt payments from Sydney Water accredited constructors. DPP advice not to proceed with the prosecution of Mr Buckley for discretionary reasons has been accepted by the ICAC.

Mr Funovski: for offences under section 249B of the Crimes Act of soliciting and receiving a corrupt payment from a Sydney Water acredited constructor and an offence under section 87 of the Independent Commission Against Corruption Act 1988. On 10 January 2013, Mr Funovski pleaded guilty in the Downing Centre Local Court to one offence pursuant to section 249B(1) of the Crimes Act for receiving a corrupt benefit and one offence pursuant to section 87 of the ICAC Act for lying to the Commission.

Mr Funovski was sentenced to a term of imprisonment of six months which was suspended upon entering a good behaviour bond under the provisions of section 12 of the Crimes (Sentencing Procedure) Act 1999 for the offence of receiving a corrupt benefit. He was given a good behaviour bond for a period of five years under the provisions of section 9 of the Crimes (Sentencing Procedure) Act for the offence of lying to the Commission.

Mr Kane: for offences under section 249B of the Crimes Act of receiving corrupt payments from accredited constructors. DPP advice not to proceed accepted by the Commission.

Mr Harvey: for offences under section 178BA of the Crimes Act of obtaining money for another by deception and an offence of misconduct in public office. DPP advice not to proceed accepted by the Commission.

Mr Makucha: for offences under section 178BA of the Crimes Act of obtaining money or a financial advantage for himself. DPP advice not to proceed accepted by the Commission.

Recommendations for disciplinary action

Messrs Buckley, Funovski, Kane and Harvey have been dismissed by Sydney Water. Mr Fayers has resigned. The Commission is of the opinion that Sydney Water should give consideration to the taking of disciplinary action against Mr Rodgers and that the Department of Services, Technology & Administration, which is now responsible for Plumbing Inspection and Assurance Service inspectors and their functions, should give consideration to taking disciplinary against Mr Vecchio.

On 13 May 2011, Mr Vecchio was dismissed from the Department of Finance & Services as result of disciplinary proceedings.

Mr Rodgers was issued with a warning as a result of disciplinary proceedings. Mr Rodgers remains employed with the Sydney Water Corporation.

Recommendations for corruption prevention

The ICAC has made the following 18 corruption prevention recommendations to assist Sydney Water to prevent similar conduct from occurring in the future:

Recommendation 1

That Sydney Water ensures staff in identified risk areas of operational and/or fraud risk are subject to intrusive supervision.

Recommendation 2

That Sydney Water provides training to its managers in relation to:

  • overseeing subordinates' interactions with external parties, including reviewing files
  • detecting and acting upon warning signs that their subordinates may be behaving improperly.

Recommendation 3

That Sydney Water reviews its organisational structure to identify and remedy other situations where supervisory arrangements are split or unclear.

Recommendation 4

That Sydney Water revises its procurement processes to ensure that one individual cannot request, approve and certify delivery of a purchase.

Recommendation 5

That Sydney Water ensures that managers are accountable for their subordinates' use of delegation.

Recommendation 6

That Sydney Water develops an automated process to check invoices for order splitting.

Recommendation 7

That Sydney Water:

  • reviews the information in its financial databases to ensure that it is accurate
  • modifies its financial management system to allow for vendor details on invoices to be compared automatically with the corresponding details in its vendor database
  • establishes processes to maintain the accuracy of the information in its vendor database.

Recommendation 8

That Sydney Water:

  • develops a list of manual checks that accounts staff should perform on invoices and communicates it to them
  • reviews invoices on a sample basis to ensure that these checks have been performed
  • ensures that accounts staff are fully aware of the risk of fraud.

Recommendation 9

That Sydney Water applies more rigour to its complaint assessments and investigation practices to ensure decisions are appropriate and verified by an appropriate quality assurance process.

Recommendation 10

That Sydney Water develops a dedicated complaint management area and associated systems to manage complaints about employees from receipt to completion and record any action for future corporate information.

Recommendation 11

That managers and supervisors at Sydney Water, as well as staff performing roles that require interaction with the public or external contractors/plumbers, be given training on how to deal with complaints about Sydney Water employees.

Recommendation 12

That access to the Corruption Hotline be extended to the public by providing an intuitive access point on the Sydney Water website home page.

Recommendation 13

That the Sydney Water Code of Conduct be amended to include advice, warning against taking reprisal action against other employees or contractors for making a complaint.

Recommendation 14

That upon commencement of the Protected Disclosures Amendment (Public Interest Disclosures) Act 2010, and at regular and appropriate intervals thereafter, Sydney Water contractors be advised of their rights under the Protected Disclosures Act and the process of making a protected disclosure.

Recommendation 15

That Internal Audit includes in its audit plan evaluation of the implementation and operation of divisional corruption prevention plans derived from the current risk assessment workshops.

Recommendation 16

That Sydney Water develops a strategy to capture and champion best practice that is identified in the course of its operations. This is to include:

  • ensuring its strategic business plans provide for the integration of corruption prevention strategies
  • utilising its business risk registers to formulate corruption prevention strategies to be centrally managed.

Recommendation 17

That Internal Audit continues its actions to strengthen communication with contractors through face-to-face presentations on ethical obligations.

Recommendation 18

That Sydney Water recasts Working at Sydney Water as the Code of Conduct and expressly prohibits the acceptance of money with regard to gifts and benefits.


Implementation Plan

The implementation plan posted below has been provided by Sydney Water in response to the ICAC's corruption prevention recommendations. Its appearance here is for information only and does not constitute the approval or endorsement of the plan by the Commission.

Sydney Water - Implementation Plan

 

12 month progress report

The progress report posted below has been provided by Sydney Water in response to the ICAC's corruption prevention recommendations. It's appearance here is for information only and does not constitute the approval or endorsement of the plan by the Commission.

Sydney Water - 12 month progress report

 

24 month final progress report

The final progress report posted below has been provided by Sydney Water in response to the ICAC's corruption prevention recommendations. It's appearance here is for information only and does not constitute the approval or endorsement of the plan by the Commission.

Sydney Water - 24 month final progress report


Media Releases Witness

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Download the Witness List (PDF)

Transcripts

View all transcripts associated with this investigation. The Commission makes every effort to post the daily transcripts of its public inquiries on its website by 8:00 pm each day when possible. If the Commission sits later than 4:00 pm, the daily transcripts, particularly the afternoon session, may not be available until the next working day.

 

Filename File Size KB Date pp. Time
06-09-2010_Operation_Siren_transcript_pp._00001-_00056_from_10.00am_to_12.44pm.pdf 145 06/09/10 00001-_00056 10.00am_to_12.44pm
07-09-2010_Operation_Siren_transcript_pp._000164-_000214_from_2.05pm_to_4.07pm.pdf 133 07/09/10 000164-_000214 2.05pm_to_4.07pm
06-09-2010_Operation_Siren_transcript_pp._00057-_00098_from_2.20pm_to_4.08pm.pdf 108 06/09/10 00057-_00098 2.20pm_to_4.08pm
07-09-2010_Operation_Siren_transcript_pp._00099-_00163_from_10.10am_to_12.41pm.pdf 165 07/09/10 00099-_00163 10.10am_to_12.41pm
17-09-2010_Operation_Siren_transcript_pp._001035-01075_from_2.20pm_to_4.02pm.pdf 112 17/09/10 001035-01075 2.20pm_to_4.02pm
21-09-2010_Operation_Siren_transcript_pp._001232-01276_from_2.00pm_to_4.02pm.pdf 122 21/09/10 001232-01276 2.00pm_to_4.02pm
08-09-2010_Operation_Siren_transcript_pp._00215-00266_from_10.45am_to_12.58pm.pdf 136 08/09/10 00215-00266 10.45am_to_12.58pm
08-09-2010_Operation_Siren_transcript_pp._00267-_00311_from_2.05pm_to_4.07pm.pdf 125 08/09/10 00267-_00311 2.05pm_to_4.07pm
09-09-2010_Operation_Siren_transcript_pp._00312-00370_from_10.10am_to_1.07pm.pdf 148 09/09/10 00312-00370 10.10am_to_1.07pm
09-09-2010_Operation_Siren_transcript_pp._00371-_00428_from_2.00pm_to_4.09pm.pdf 146 09/09/10 00371-_00428 2.00pm_to_4.09pm
10-09-2010_Operation_Siren_transcript_pp._00429-00500_from_10.10am_to_12.50pm.pdf 182 10/09/10 00429-00500 10.10am_to_12.50pm
10-09-2010_Operation_Siren_transcript_pp._00501-00551_from_2.10pm_to_4.12pm.pdf 132 10/09/10 00501-00551 2.10pm_to_4.12pm
13-09-2010_Operation_Siren_transcript_pp._00552-00607_from_10.05am_to_12.41pm.pdf 152 13/09/10 00552-00607 10.05am_to_12.41pm
13-09-2010_Operation_Siren_transcript_pp._00608-_00648_from_2.32pm_to_4.08pm.pdf 109 13/09/10 00608-_00648 2.32pm_to_4.08pm
14-09-2010_Operation_Siren_transcript_pp._00649-00713_from_10.10am_to_12.59pm.pdf 171 14/09/10 00649-00713 10.10am_to_12.59pm
14-09-2010_Operation_Siren_transcript_pp._00714-00758_from_2.10pm_to_3.57pm.pdf 116 14/09/10 00714-00758 2.10pm_to_3.57pm
15-09-2010_Operation_Siren_transcript_pp._00759-00827_from_10.25am_to_1.02pm.pdf 175 15/09/10 00759-00827 10.25am_to_1.02pm
15-09-2010_Operation_Siren_transcript_pp._00828-00871_from_2.05pm_to_4.02pm.pdf 123 15/09/10 00828-00871 2.05pm_to_4.02pm
16-09-2010_Operation_Siren_transcript_pp._00872-00927_from_10.20am_to_12.57pm.pdf 163 16/09/10 00872-00927 10.20am_to_12.57pm
16-09-2010_Operation_Siren_transcript_pp._00928-00973_from_2.05pm_to_4.00pm.pdf 126 16/09/10 00928-00973 2.05pm_to_4.00pm
17-09-2010_Operation_Siren_transcript_pp._00974-01034_from_10.20am_to_12.46pm.pdf 164 17/09/10 00974-01034 10.20am_to_12.46pm
20-09-2010_Operation_Siren_transcript_pp._01076-01134_from_10.00am_to_12.49pm.pdf 162 20/09/10 01076-01134 10.00am_to_12.49pm
20-09-2010_Operation_Siren_transcript_pp._01135-01174_from_2.20pm_to_4.06pm.pdf 110 20/09/10 01135-01174 2.20pm_to_4.06pm
21-09-2010_Operation_Siren_transcript_pp._01175-01231_from_10.10am_to_1.00pm.pdf 151 21/09/10 01175-01231 10.10am_to_1.00pm
22-09-2010_Operation_Siren_transcript_pp._01277-01344_from_10.05am_to_1.02pm.pdf 184 22/09/10 01277-01344 10.05am_to_1.02pm
22-09-2010_Operation_Siren_transcript_pp._01345-01385_from_2.00pm_to_3.57pm.pdf 121 22/09/10 01345-01385 2.00pm_to_3.57pm
23-09-2010_Operation_Siren_transcript_pp._01386-01447_from_10.05am_to_12.51pm.pdf 166 23/09/10 01386-01447 10.05am_to_12.51pm
23-09-2010_Operation_Siren_transcript_pp._01448-01487_from_2.20pm_to_4.04pm.pdf 111 23/09/10 01448-01487 2.20pm_to_4.04pm
24-09-2010_Operation_Siren_transcript_pp._01488-01564_from_9.45am_to_1.09pm.pdf 204 24/09/10 01488-01564 9.45am_to_1.09pm
27-09-2010_Operation_Siren_transcript_pp._01565-_01635_from_9.45am_to_1.03pm.pdf 184 27/09/10 01565-_01635 9.45am_to_1.03pm
27-09-2010_Operation_Siren_transcript_pp._01636-01676_from_2.05pm_to_4.01pm.pdf 119 27/09/10 01636-01676 2.05pm_to_4.01pm
28-09-2010_Operation_Siren_transcript_pp._01677-_01748_from_9.05am_to_1.06pm.pdf 200 28/09/10 01677-_01748 9.05am_to_1.06pm
28-09-2010_Operation_Siren_transcript_pp._01749-01802_from_2.05pm_to_4.50pm.pdf 146 28/09/10 01749-01802 2.05pm_to_4.50pm
29-09-2010_Operation_Siren_transcript_pp._01803-_01846_from_9.05am_to_11.08pm.pdf 116 29/09/10 01803-_01846 9.05am_to_11.08pm
Exhibits Public notices