Emails lead to door of Housing NZ's boss

Emails alleging financial mismanagement were copied to Housing New Zealand's chief executive several months before they were revealed in the Herald on Sunday last week.

And the man who the government department tried to gag says it's time the chief executive, Helen Fulcher, explained her position over the handling of the allegations.

The Herald on Sunday has copies of the emails the whistleblower sent to the corporation, outlining his concerns about the way it was managing its finances. Ms Fulcher was copied into the emails as early as September last year.

The terms of reference for the Auditor-General's inquiry, released last week, effectively focus on two documents written by the corporation for the whistleblower.

The first was a letter on November 23, sent by one of the agency's senior executives, Gerard Coles, listing the whistle-blower's allegations including:

* accounting is "manipulated" so programmes "come out on budget";

* a senior manager in Housing NZ is aware of the accounting "manipulation" and is "encouraging it";

* management reports supplied to Housing Minister Chris Carter are "untrue";

* there is a deliberate lack of scrutiny over invoices being sent to one particular division of the corporation.

The second area of focus for the Auditor-General is the "gagging letter", which shows Housing New Zealand would only give the whistleblower his final pay if he did not speak to MPs, Ministers or the media about his allegations.

That letter, revealed in last week's Herald on Sunday, led to Mr Coles being stood down. The Auditor-General's inquiry has to examine the extent - if any - that Ms Fulcher knew of the gagging letter.

On this, at least, the whistleblower has already made up his mind. "I feel for Gerard Coles, strongly," he told the Herald on Sunday. "In most conversations, Gerard does talk about Helen giving the sign-off, Helen okaying it before going ahead with this. He reiterates this over and over.

"Despite all this information, why is Helen not standing up and being counted?

"Why does Gerard Coles have to go if Helen has given the okay?

"Fine, he did that contract. He signed it.

"But at every point of time, including the verbal conversations we had, he always indicated he had to get the okay from Helen Fulcher."

Neither Ms Fulcher nor Mr Coles would speak to the Herald on Sunday.

On December 14, 2005, the day the gagging letter was sent to the whistleblower, Mr Coles wrote at 9.37am:

"As mentioned, my CE is out of town till tomorrow and I will see if the acting CE is prepared to authorise this so can settle today."

The gagging letter, which was faxed through to the whistleblower at 3.37pm that afternoon, reads: "The suggested settlement with you is as follows (subject to chief executive approval)."

The faxed copy states the approval is "now given".

Regardless of whether she had specifically signed off the final pay, this email exchange follows months of emails copied to Ms Fulcher.

On October 25, at 3.32pm, the whistleblower expressed fustration to Mr Coles, copying in Ms Fulcher and other senior managers.

He wrote: " ... it is now nearing the end of 3 months since I first highlighted this matter. I would regard this lack of any concrete action on HNZC [sic] part as totally unacceptable, irresponsible and a general lack of commitment to look into a matter that I feel is very, very serious.

"You would agree with me and have indicated that you regard this matter as very serious and so does the CEO. If you fell [sic] that inappropriate accounting of taxpayer funding and misleading the board is not worth investigating, please let me know and in which case, I would appreciate the board contact details."

Mr Coles responded the following day at 1.59pm, again copying in Ms Fulcher.

He wrote: "We do appreciate you bringing this matter to our attention and do take the allegations seriously and look forward to your assistance going forward."

The whistleblower said he became frustrated at the lack of progress and, feeling the "external" inquiry he was promised on November 23 was being handled internally, he went public.

He said he had never been contacted by Ms Fulcher, though he copied her in on almost all emails and was assured she was authorising Mr Coles' actions.

How the story unfolded

The Housing New Zealand "hush money" scandal is one of the most serious to hit the state sector since Labour took office in 1999.

The story began with a contractor at the crown entity raising concerns about serious problems with the agency's accounting. Housing NZ promised an internal inquiry but when the contractor left in December, it gagged him with a confidentiality agreement that, in return for his final pay of $3000, banned him from raising his concerns with any Minister, MP or journalist.

Three months later, frustrated with the inquiry's lack of progress, the whistleblower called NewstalkZB's Kerre Woodham and then agreed to share documents with this newspaper.

After having his evidence examined by independent experts, the Herald on Sunday on Friday April 7 presented the allegations to Housing Minister Chris Carter and Housing NZ senior manager Gerard Coles, who signed the gagging order. The Prime Minister was immediately informed of the allegations.

Early that evening, Carter released a statement condemning the gagging order as inappropriate and summoning Housing NZ board chairman Pat Snedden to an urgent meeting on Monday morning. Shortly afterwards, Housing NZ also released a statement, admitting the gagging order was a mistake and pledging a full investigation.

Last weekend, in an exclusive report, the Herald on Sunday exposed the gagging order imposed on the whistleblower and reported his allegations of financial mismanagement.

That morning, as other media picked up the story, Housing NZ stood Gerard Coles down on full pay pending an investigation.

Speaking to Paul Holmes on NewstalkZB on Monday, Mr Snedden admitted the gagging order was wrong, both in policy and ethically, but refused to reveal whether Ms Fulcher had advance knowledge of it.

Prime Minister Helen Clark said the board should have told the minister about the allegations much earlier.

After declaring that morning that the agency's external auditors, Ernst & Young, would conduct the inquiry, Mr Snedden was forced in the afternoon to upgrade the investigation to an independent inquiry by the Auditor-General.