NSW Department of Finance, Services and Innovation (Operation Yarrow)

Year: 2019 Status: Completed

The ICAC investigated corruption allegations that Steven Prestage, an information and communication technologies (ICT) contractor working on an ICT project at the NSW Department of Finance, Services and Innovation (DFSI), dishonestly and partially exercised his public official functions in exchange for a financial benefit.

It was alleged that while working as DFSI’s project manager on the rollout of a project known as the Clarity Project, Mr Prestage dishonestly arranged for a company effectively controlled by him to be paid by DFSI for system development work performed by a number of ICT contractors.

In its report on the investigation, made public on 16 January 2019, the Commission makes findings of serious corrupt conduct against Mr Prestage.

The ICAC is of the opinion that the advice of the Director of Public Prosecutions should be obtained with respect to the prosecution of Mr Prestage for various offences. The Commission makes 15 corruption prevention recommendations to DFSI to help improve its corruption prevention systems and prevent the recurrence of the conduct exposed in this investigation.

Findings of corrupt conduct

The Commission found that Steven Prestage engaged in serious corrupt conduct by:

  • falsely representing to DFSI that Petite Software Systems was the supplier of ICT contractors to the Clarity Project. Unbeknown to DFSI, Mr Prestage had arranged for the supply of ICT contractors using the name of Petite Software Systems
  • falsely representing to DFSI that contractors from the prequalified suppliers were not suitable to be engaged for the Clarity Project (he subsequently arranged for the engagement of a number of ICT contractors who had been recommended by a pre-qualified supplier but had been rejected by him as unsuitable)
  • falsely representing that “Petite” had the ability, expertise and personnel to deliver the clarity project
  • using the name of Petite Software Systems in his communications with DFSI as part of a scheme to secure payment to himself for the work carried out by the ICT contractors
  • using the assumed names of Roger Turner, Peter Dawson, David Stone and Tracey Freedman in his communications with DFSI and ICT contractors so as to create the impression that Petite Software Systems, or “Petite”, was a legitimate service provider in the ICT space
  • establishing Petite Solutions in the name of his mother-in-law for the purpose of concealing his interest in the supply of ICT contractors to the Clarity Project
  • issuing invoices to DFSI, charging $2,000 per day for each “Petite” contractor, knowing it was an inflated rate to that which a government-approved supplier would have charged, being about $900 a day, and thereby causing a financial disadvantage to DFSI
  • issuing invoices to DFSI that falsely represented that Petite Software Systems had an entitlement to payment
  • failing to disclose in his communications with DFSI that payment by DFSI against these invoices would result in payment to Petite Solutions and ultimately to himself.

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 ICAC is of the opinion that the advice of the DPP should be obtained with respect to the prosecution of Steven Prestage for the criminal offences of:

  • publishing false statements with an intention to obtain a financial advantage contrary to section 192G of the Crimes Act 1900, more particularly the publication of:
    • emails in the names of Roger Turner, Peter Dawson, David Stone, and Tracey Freedman containing representations that they were officers or employees of “Petite” and Petite Software Systems
    • a false public liability insurance certificate
    • a Justification for Sole Source document and the email to which it was attached, falsely representing that contractors from the Department of Finance Service and Innovation’s (DFSI’s) prequalified suppliers were not suitable to be engaged on the Clarity Project
    • a quotation that contained false representations concerning the business address, telephone number, previous clients and expertise of “Petite”
    • each of the 19 invoices issued to DFSI in the name of Petite Software Systems, which falsely represented that Petite Software Systems had an entitlement to payment and which failed to disclose that payment of the invoices by DFSI would be a payment to Petite Solutions and, ultimately, Mr Prestage
  • wilfully preventing or wilfully endeavouring to prevent a witness (Emilia Valentova) from attending the Commission, contrary to section 92 of the Independent Commission Against Corruption Act 1988
  • procuring the giving of false testimony (by Ms Valentova) at a compulsory examination, contrary to section 89 of the ICAC Act
  • giving false or misleading evidence to the Commission, contrary to section 87 of the ICAC Act. The relevant evidence concerned:
    • the establishment of Petite Solutions and its bank account
    • his work experience at Gold Coast City Council and the Bank of Queensland
    • the supply of a public liability insurance certificate to Hays Specialist Consulting (Australia) Pty Ltd
    • alleged discussions with Michael Turner in relation to the receipt of curricula vitarum (CVs) from Michael Turner in mid- to late April 2016
    • the involvement of Valdi Gravitis in the drafting of a Justification for Sole Source documentalleged conversations with Michael Turner in relation to information supplied to Dennis Weitschat in emails from 29 April to 3 May 2016
    • the contents of an email of 9 May 2016 concerning alleged interviews with a number of ICT contractors
    • the availability and suitability of David Byrne to begin work as an ICT contractor on the Clarity Project
    • the availability and suitability of Tinu Babu to begin work as an ICT contractor on the Clarity Project
    • an alleged conversation with Michael Turner in relation to the timely payments of ICT contractors
    • an alleged conversation with Mr Gravitis concerning the quotation of one daily rate for contractors
    • the alleged review of CVs by Mr Prestage and the offer of advice on the implementation of the Clarity Project to Michael Turner for which he received payment
    • the registration of Petite Solutions by his mother-in-law
    • the reason why Petite Solutions made payments to Mr Prestage.

Updates

Briefs of evidence were provided to the DPP on 9 January 2019.

On 25 June 2020, the DPP advised that there is sufficient evidence to charge Mr Prestage with 18 counts of dishonestly obtain financial advantage by deception pursuant to section 192E(1)9b) of the Crimes Act 1900, 12 counts of giving false and misleading evidence pursuant to section 87 of the Independent Commission Against Corruption Act 1988, and one count of procuring false testimony contrary to section 89 of the ICAC Act.

Mr Prestage’s matters were first listed at the Downing Centre Local Court for mention on 20 August 2020. On that date, brief service orders were made, bail conditions granted, and the matters adjourned to 15 October 2020. On that date, the matters were adjourned for charge certification to 26 November 2020.

On 26 November 2020, Mr Prestage’s legal representative advised he was recently briefed and needed to brief counsel. Accordingly, the matters were adjourned for Case Conference Mention to 11 March 2021, with a case conference to take place on 25 February 2021. Bail was continued.

During the adjournment period, Mr Prestage engaged new lawyers. Accordingly, on 11 March 2021 the matter was adjourned until 15 April 2021. A case conference was ordered to take place prior to the next mention date.

On 15 April 2021, the charges laid under the Crimes Act were adjourned to 6 May 2021 to allow a case conference to take place. On the same date, the ICAC Act offences were adjourned to 27 May 2021 for committal (either for sentence or trial).

On 27 May 2021, upon application by Mr Prestage’s newly-appointed lawyers who sought additional time to brief counsel, the ICAC Act offences were again adjourned to 17 June 2021 for committal (either for sentence or trial). The ICAC Act offences were further adjourned on application by defence to 1 July 2021.

On 6 May 2021, the charges laid pursuant to the Crimes Act were committed for trial to the Sydney District Court. Those matters were listed for arraignment in that court on 11 June 2021. On that date, a further adjournment was ordered with the matter listed for arraignment in the Sydney District Court on 25 June 2021. On 25 June 2021, defence in the Crimes Act matters sought leave to withdraw to act. Mr Prestage then sought an adjournment to brief new legal representatives. The matters were stood over to 16 July 2021. A further adjournment was then sought by defence and granted to 30 July 2021. On that date, the matters were adjourned again for arraignment on 27 August 2021.

On 27 August 2021, the matters were listed for a further arraignment date on 24 September 2021.

On 1 July 2021, the ICAC Act offences were before the court. Defence in that matter had filed a notice to withdraw. The matters were stood over for a final committal date to 22 July 2021. As there was no appearance by Mr Prestage, a warrant was issued for his arrest. On 22 July 2021, those matters were again adjourned on application by defence to 5 August 2021. On that date, the matters were committed for trial to the Sydney District Court for arraignment on 27 August 2021.

On 27 August 2021, the matters were listed for a further arraignment date on 24 September 2021.

The trial for the Crimes Act charges was set to commence on 21 November 2022. On 21 October 2022 Mr Prestage sought to vacate that date as he was legally unrepresented. His application was granted. A new trial date was set for 28 August 2023.

The trial for the ICAC Act charges is set to commence on 20 February 2023.

Recommendations for disciplinary action

As Steven Prestage no longer works for the DFSI, the issue of whether consideration should be given to the taking of action against him for a disciplinary offence or with a view to his dismissal does not arise.

Recommendations for corruption prevention

The Commission makes 15 corruption prevention recommendations to the Department of Finance, Services and Innovation (DFSI) as follows:

Recommendation 1
That DFSI ensures that recruitment companies use better practice-checking methodologies when conducting reference and other checks of applicants.

Recommendation 2
That DFSI develops a framework to ensure that the employment screening checks conducted of contractors are commensurate with the level of risk posed by their respective engagements.

Recommendation 3
That a specialist business unit within DFSI be given responsibility for managing its contingent labour engagements.

Recommendation 4
That DFSI develops a mechanism to verify that a supplier is a member of a specific prequalification scheme prior to being engaged under that scheme.

Recommendation 5
That DFSI ensures that all new suppliers are subject to a due diligence process that enables the detection of red flags indicating that a supplier may not be genuine.

Recommendation 6
That DFSI provides guidance to its staff who hold a financial delegation about red flags on quotations that indicate that a supplier may not be genuine.

Recommendation 7
That DFSI revises its processes surrounding the creation of new vendors to ensure that information supplied about new vendors is verified prior to being entered into its vendor master file, particularly when non-prequalified or newly prequalified suppliers are used.

Recommendation 8
That, wherever possible, DFSI avoids using rate card engagements from the SCM0020 or SCM0005 schemes.

Recommendation 9
That, if a SCM0020 or SCM0005 engagement is used, DFSI ensures that the reasonableness of the relevant rates is verified by an individual who:

  • has strong market knowledge
  • is not involved in the engagement.

Recommendation 10
That the NSW Procurement Board formally communicates to agencies that the SCM0020 and SCM0005 schemes are not to be used in lieu of the SCM0007 scheme.

Recommendation 11
That DFSI develops a system for reporting and/or escalating red flags related to projects and procurement activities such as:

  • the use of multiple purchase orders for the same supplier with respect to the same project or activity
  • purchase orders being raised after the receipt of invoices
  • purchase orders with dollar values corresponding to amounts that are just below those for which key processes (such as the Procure IT framework) apply.

Recommendation 12
That DFSI provides guidance about red flags on invoices to DFSI officers who either hold a financial delegation or process the payment of invoices.

Recommendation 13
That DFSI revises its invoice approval and accounts payable processes to ensure that invoices are checked for red flags.

Recommendation 14
That DFSI implements data analytic tools to help manage the risks associated with red flags on invoices.

Recommendation 15
That DFSI informs staff involved in the management or governance of projects of the risks associated with contracted project managers and the consequent need to manage these project managers carefully.

Responses to ICAC recommendations

The action plan posted below has been provided by the NSW Department of Finance, Services and Innovation in response to the ICAC’s recommendations. Its publication here is to show the status of the responses. It does not constitute approval or endorsement by the Commission.

Final report - NSW Department of Finance, Services and Innovation

Action plan - NSW Department of Finance, Services and Innovation
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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.

 

Exhibits

All Exhibits

Public notices

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The ICAC has found that pork barrelling could constitute corrupt conduct in certain circumstances, while recommending that any whole–of–government guidelines concerning grants funding be issued pursuant to a statutory regulation.

ICAC finds member for Drummoyne John Sidoti MP corrupt

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