The auditor general has delivered a devastating critique of the conduct of Callaghan Innovation and its former chief executive, Victoria Crone, in a major report tabled in Parliament today.
The report examines the way Callaghan
Former Callaghan Innovation chief executive Victoria Crone presided over a flawed process, the auditor general says.
The auditor general has delivered a devastating critique of the conduct of Callaghan Innovation and its former chief executive, Victoria Crone, in a major report tabled in Parliament today.
The report examines the way Callaghan conducted itself in deciding not to award contracts to We Are Indigo/Manaaki, an Auckland-based company offering services to startup firms, in 2022.
The auditor general’s range of criticisms is broad, but they centre particularly on the failure to properly investigate potential conflicts of interest when it hired a private investigator (PI) to look into allegations of fraud and misconduct by Manaaki
Manaaki has consistently admitted some poor business practices in the past but has also vigorously protested its treatment by the Government’s innovation agency, particularly after the investigator’s findings were leaked to news media, including BusinessDesk.
Also among the findings is that Callaghan:
The report also makes clear that from May 2022 onwards, the Callaghan board and its chair, former Labour minister Pete Hodgson, were informed of the process, which had begun attracting media attention.
The auditor general initiated its investigation after complaints from Manaaki and after seeing a string of media reports on the issues unfolding, including the leak of the PI’s findings to media from an anonymised email address.
The private investigator, who is not named in the report but who BusinessDesk has previously identified as Auckland PI John Borland, was recommended by Crone to her procurement team to look into allegations against Manaaki on the recommendation of San Francisco-based NZ entrepreneur Robett Hollis.
A complaint by Manaaki against Borland to the Private Security Personnel Licensing Authority on the same issue was dismissed in August without publishing reasons.
However, the auditor general flays Callaghan for handling the emerging evidence that Borland had previously investigated WAI/Manaaki during a dispute between the organisation and a client.
The auditor general also questioned why Callaghan directed Borland to interview Hollis – referred to as Mr B in the report – after he made a number of social media posts disparaging Manaaki.
“The basis for this (instructing Borland to interview Hollis) was not clear to us,” the auditor general said, “because Mr B had not worked for or with Manaaki”.
Hollis styled himself as crusading for startup founders who could not defend themselves.
The auditor general also found that Callaghan staff, who engaged Borland after a recommendation from Crone, “were not aware of” earlier emails between Crone about Borland, and which Crone told the auditor general she did not act on at the time.
“However, the existence of this correspondence has contributed to the perception of bias in the process,” the auditor general concluded. “The chief executive (Crone) should have formally disclosed her connection with Mr B (Hollis) and her previous correspondence with him once Mr B became relevant to the procurement.
“This would have allowed the procurement team to consider whether this posed any risks to the procurement’s integrity,” which the auditor general concluded was compromised by this and other failings.
“Despite being made aware of the contractor’s earlier work on several occasions and being told about the related fraud allegation, Callaghan Innovation later commissioned the contractor (Borland) to do a second round of due diligence on Manaaki,” the auditor general said.
“Callaghan Innovation did not document any of its considerations about the contractor’s earlier work, the risk of bias arising from that work, or any mitigation strategies.
“The second due diligence report included an allegation of attempted misappropriation of government funds similar to the contractor’s previous fraud allegation.
Yet the auditor general “could not find evidence that an interviewee made this specific allegation”.
Crone left Callaghan in July last year after five-and-a-half years at the helm of the Government’s innovation agency and has subsequently threatened legal action against Manaaki for comments it made about the due diligence process and her role in it.
The auditor general said the desire to protect founders was “well-intentioned” and a more intensive due diligence was “reasonable”.
The Manaaki saga blew up in the context of a wider concern about the mental health and wellbeing of startup founders and entrepreneurs following the death of startup founder Jake Millar.
“However, it was important that that the process treated all those involved in the procurement fairly and transparently. Callaghan Innovation’s process was neither fair nor transparent”.
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