Conflict of interest costs former ARC employee

Rodney Hide. Photo / Mark Mitchell.

Rodney Hide has just made the headlines for using the perk that gives MPs a taxpayer-funded 90 per cent fare discount for themselves and their partners, to take his girlfriend overseas.

Coincidentally, the Employment Relations Authority has recently ordered a former employee of the Auckland Regional Council to reimburse it for payments he authorised to be made to a woman with whom he was having a relationship, and which she used for an overseas trip.

Mr Katuni Tilialo was employed as a programme manager by the ARC. He was tasked with coordinating action on customer service management for his department, and engaged a person referred to in the Authority's decision as "X", to assist with that work. The Authority's decision goes into some detail about the poor quality of the work carried out by X.

It turned out that Mr Tilialo was conducting an extra-marital relationship with X. He did not disclose this to his manager. From about early 2007, Mr Tilialo and X were planning a trip to the USA together. X sent Mr Tilialo two invoices for her work, in the name of a trust, each for $4,500 plus GST. He approved them for payment.

The ARC obtained copies of X's credit card statements for the period concerned. These showed deposits of similar amounts into the credit card account in the days immediately following the payment of the invoices. The credit card statements also record a number of transactions in the USA. Mr Tilialo and X travelled to Los Angeles, New York and Las Vegas at around this time.

The issue came to the ARC's attention because it was told by a third party that X had told them of a recent trip to New York with her "boyfriend", allegedly paid for by the ARC. Mr Tilialo resigned later in the same month. While he was still at work during his notice period, the ARC discovered the invoices and initiated a disciplinary process. It dismissed Mr Tilialo for serious misconduct on 23 April 2008.

What makes this case particularly noteworthy is that the ARC did not stop there - having dismissed Mr Tilialo, it sought damages for the costs of the investigation process, including legal advice, and a forensic examination of Mr Tilialo's work laptop.

The Employment Relations Authority said Mr Tilialo had breached his obligations and acted dishonestly. There was a clear conflict of interest. It ordered him to pay the ARC $9,000 to reimburse it for the amount covered by the invoices.

That was not all, however - it also ordered him to pay to ARC $22,408 for the legal advice it had obtained in carrying out the investigation, and $5,408.90 for the forensic investigation of his laptop that it arranged.

It also awarded $3,000 in relation to general inconvenience, representing loss of management time and interruption of business (notwithstanding the absence of any specific cost incurred by the ARC in this regard). Finally, it ordered Mr Tilialo to pay the ARC a penalty of $2,000 - all up, the bill for Mr Tilialo was circa $42,000.

This case is interesting not just because of all the recent headlines about MPs' perks (although it's worth adding that the debate regarding MPs' perks is very different to the issues that arose in this case).

It is unusual for employers to seek damages from employees, particularly for loss of management time, which is not a specific cost akin to legal fees - and it's even more unusual for an employer to succeed in such a claim. This case serves as a warning to employees who abuse their position on account of a conflict of interest.

 

Greg Cain

 

Greg Cain is an employment lawyer at Minter Ellison Rudd Watts.

 

pictured: Rodney Hide explains his taxpayer funded trip to reporters. Photo / Mark Mitchell.