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ICAC finds former FACS officer corruptly obtained over $1.67 million for own company

Thursday 27 August 2020

The NSW Independent Commission Against Corruption (ICAC) has found that a former headlease coordinator for the then Department of Family and Community Services (FACS) engaged in serious corrupt conduct by authorising, or arranging authorisation, for over $1.67 million in payments for work on properties leased for public housing to be made to his own company.

In a report released today, Investigation into the alleged corrupt practices of a headlease coordinator at the NSW Department of Family and Community Services (Operation Cygnet), the Commission finds that between August 2015 and February 2018, FACS headlease coordinator Chanse Baynham improperly exercised his official functions to obtain $1,673,330 for his company, Sardonyx Project Management Pty Ltd. Mr Baynham authorised FACS payments himself, or arranged for their authorisation, to real estate agents or the property owners for work on properties leased by the NSW Land and Housing Corporation (LAHC), knowing that the agents/owners would then pay Sardonyx Project Management.

The ICAC found that Mr Baynham also engaged in serious corrupt conduct by misusing information or material acquired in the course of his official functions in relation to two properties in Maroubra, and consequently securing work for Sardonyx Project Management at the properties. He also authorised payment by FACS of two invoices dated 2 February and 17 March 2017, purportedly from a contractor for work carried out at a property in Marrickville, which he knew to be false so he could obtain amounts totalling $16,970.80 for his company.

Headleasing refers to Housing NSW’s practice of increasing its supply of public housing by leasing properties through the private rental market and then subleasing them to approved public housing tenants. Housing NSW was then part of FACS. The headlease coordinator was responsible for inspecting the property at the end of the term and comparing the condition of the property with the condition report and photos taken at the commencement of the headlease, usually in the company of the owner or a real estate agent.

Repairs to fix tenant damage could be undertaken by Housing NSW or by the real estate agent/owner and then charged to FACS. However, it was more common for the real estate agent/owner to arrange for the repairs to be done and then submit the contractor quotations and invoices to the FACS headlease coordinator for approval. Mr Baynham explained to the Commission that he would submit a Sardonyx Project Management quotation to the agent/owner for the works to be carried out (sometimes after having access to quotations from other contractors) or was directly engaged by the agent/owner to carry out the works without submitting a Sardonyx Project Management quotation.

As the headlease coordinator, he was responsible for approving any quotations provided by the agent/owner. It was accepted practice to approve the lowest quotation provided, which meant that he routinely approved quotations from his own company. After engaging contractors to carry out the work and managing the work through his company, Mr Baynham would send the Sardonyx Project Management invoice to the owner/agent, sometimes from his FACS email address. The agent/owner would then send the invoice to Mr Baynham in his capacity as a headlease coordinator, and upon receipt of the invoice, Mr Baynham would authorise the payment by FACS to the agent/owner. The agent/owner would then pay the money received by FACS to Sardonyx Project Management. The Commission is satisfied that FACS provided limited guidance to agents/owners about the end-of-lease repairs process.

The investigation found that while FACS had a number of policies and procedures in place that applied to headlease coordinators as well as other staff, such as in relation to undertaking private work, managing conflicts of interest, and limits on financial delegations, Mr Baynham was able to engage in his conduct by ignoring requirements or claiming he had not been told he had a limited financial delegation. The autonomous nature of the headlease coordinator role and the amount of time spent in the field and alone also meant Mr Baynham was not required to account for his whereabouts. His understanding of building project management and the knowledge he had obtained from a previous role at the LAHC also meant he had experience and confidence that other headlease coordinators lacked.

When allegations were brought to the attention of his manager about alleged fraudulent behaviour by FACS staff, the subsequent internal investigation relied on Mr Baynham’s word that requested records would be obtained, and a recommendation to conduct a full audit was ignored. There was no follow-up conducted when Mr Baynham failed to produce the records. The Commission’s report describes the internal investigation as “utterly deficient”.

The Commission’s investigation identified numerous control failures across operational, financial and human resource processes and procedures. The Commission has made 14 corruption prevention recommendations to assist the Department of Communities and Justice (of which FACS is now part after merging with the Department of Justice) to reduce further opportunities for corrupt conduct.

The Commission is also of the opinion that consideration should be given to obtaining the advice of the Director of Public Prosecutions with respect to the prosecution of Mr Baynham for the offence of misconduct in public office and an offence of fraud.

The Commission determined that it was not in the public interest to conduct a public inquiry in this matter. In making that determination, the Commission had regard to the following matters:

•    a substantial amount of cogent evidence was obtained in the course of the investigation that indicated the likelihood of corrupt conduct
•    based on the evidence obtained during the investigation, it was unlikely that a public inquiry would uncover new evidence relevant to the investigation
•    the evidence obtained by the Commission indicated that the alleged conduct was limited to Mr Baynham
•    a public report would make the public sufficiently aware of the relevant conduct and system weaknesses, and the Commission’s corruption prevention recommendations.

 The report is available on the ICAC website at www.icac.nsw.gov.au.

Investigation report   Fact sheet