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 om 9 January 2019. The Commission is awaiting the DPP's decision on whether proceedings will be taken.

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.

Media Releases

MEDIA ALERT: ICAC public inquiry into allegations concerning RMS employees’ awarding of contracts starts Monday

The ICAC public inquiry into allegations concerning two Roads and Maritime Services (RMS) employees and how they exercised their official functions when awarding contracts (Operation Ember) will start next Monday, 20 May 2019 at 10:00 am.

MEDIA ALERT: ICAC Operation Skyline public inquiry to resume from Monday 6 May 2019

The NSW Independent Commission Against Corruption’s (ICAC) Operation Skyline public inquiry into allegations concerning the Awabakal Local Aboriginal Land Council will resume next week from Monday 6 May 2019 at 10:00 am.

ICAC brings corruption prevention program to New England region

The NSW Independent Commission Against Corruption (ICAC) will visit the New England region next week as part of its rural and regional outreach program to bring anti-corruption initiatives and training to centres across the state.

ICAC to hold public inquiry into allegations concerning RMS employees’ awarding of contracts

The NSW Independent Commission Against Corruption (ICAC) will hold a public inquiry starting on Monday 20 May 2019 as part of an investigation it is conducting into allegations concerning two Roads and Maritime Services (RMS) employees and how they exercised their official functions when awarding contracts.

MEDIA ALERT: ICAC Operation Skyline public inquiry directions hearing 29 April 2019

The NSW Independent Commission Against Corruption (ICAC) will hold a short directions hearing in relation to the further progress of the Operation Skyline investigation on Monday 29 April 2019 at 1:30 pm.

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 Public notices

MEDIA ALERT: ICAC public inquiry into allegations concerning RMS employees’ awarding of contracts starts Monday

The ICAC public inquiry into allegations concerning two Roads and Maritime Services (RMS) employees and how they exercised their official functions when awarding contracts (Operation Ember) will start next Monday, 20 May 2019 at 10:00 am.

MEDIA ALERT: ICAC Operation Skyline public inquiry to resume from Monday 6 May 2019

The NSW Independent Commission Against Corruption’s (ICAC) Operation Skyline public inquiry into allegations concerning the Awabakal Local Aboriginal Land Council will resume next week from Monday 6 May 2019 at 10:00 am.

ICAC brings corruption prevention program to New England region

The NSW Independent Commission Against Corruption (ICAC) will visit the New England region next week as part of its rural and regional outreach program to bring anti-corruption initiatives and training to centres across the state.

ICAC to hold public inquiry into allegations concerning RMS employees’ awarding of contracts

The NSW Independent Commission Against Corruption (ICAC) will hold a public inquiry starting on Monday 20 May 2019 as part of an investigation it is conducting into allegations concerning two Roads and Maritime Services (RMS) employees and how they exercised their official functions when awarding contracts.

MEDIA ALERT: ICAC Operation Skyline public inquiry directions hearing 29 April 2019

The NSW Independent Commission Against Corruption (ICAC) will hold a short directions hearing in relation to the further progress of the Operation Skyline investigation on Monday 29 April 2019 at 1:30 pm.

MEDIA ALERT: ICAC Operation Skyline public inquiry to reconvene 17 April

The NSW Independent Commission Against Corruption (ICAC) Operation Skyline public inquiry will reconvene at 1:45 pm tomorrow (Wednesday, 17 April 2019) for the Chief Commissioner the Hon Peter Hall QC to deliver his reasons in relation to two applications.

ICAC seeks comment on lobbying conduct and regulation in NSW

The NSW Independent Commission Against Corruption (ICAC) is seeking public input as part of a new investigation it is conducting into the regulation of lobbying, access and influence in NSW (Operation Eclipse).

MEDIA ALERT: ICAC public inquiry into allegations concerning the former Canterbury City Council resumes 1 April

The ICAC Operation Dasha public inquiry will resume on Monday 1 April 2019, at 10:00 am.

MEDIA ALERT: ICAC Operation Skyline public inquiry to resume from Monday 18 March 2019

The Operation Skyline public inquiry into allegations concerning the Awabakal Local Aboriginal Land Council will resume next week from Monday 18 March 2019 at 10:00 am.

MEDIA ALERT: ICAC public inquiry into allegations concerning University of Sydney and contract security services providers starts Monday

The NSW Independent Commission Against Corruption’s (ICAC) Operation Gerda public inquiry into allegations concerning the University of Sydney, its contracted security services provider Sydney Night Patrol & Inquiry Co Pty Ltd (SNP Security) and SNP Security’s subcontractor, S International Group Pty Ltd (SIG) (Operation Gerda), will start next Monday, 11 February 2019 at 10:00 am.