Buried treasures: Armstrong audit 'whitewash'

Today, in our series on reports released in the dead zone round Christmas: the inquiry into the Armstrong affair. By FRAN O'SULLIVAN assistant editor


Opposition MPs are fuming at the Auditor-General's "whitewash" of the Ross Armstrong affair.

They want the Serious Fraud Office called in to investigate and Parliament to hold a major debate on the report's findings.

A Herald inquiry has since disclosed that Dr Armstrong spent heavily on top-class hotels when he travelled with the Prime Minister on "state visits".

The Auditor-General's year-long inquiry into Dr Armstrong's expenses - released on December 19 - found the former chairman of three major SOEs and confidant of Helen Clark had double-dipped at the taxpayer's expense 48 times when claiming overnight accommodation allowances for his Wellington apartment.

Incensed by the report's timing - too close to Christmas to get any media leverage - high-flying National and Act MPs Murray McCully and Rodney Hide are now preparing their arsenal for a tough fight once Parliament resumes. They believe the matters uncovered by the Auditor-General warrant further investigation.

A raft of questionable practices were unearthed in the report. Among them:

* Documentation on $120,000 of expenses was so poor it was difficult to work out whether the expenditure was for business purposes or public benefit;

* Dr Armstrong's actions in engaging $284,000 of outside professional services - the report said good practice would require board and management involvement in such decisions.

But the report glosses over a further $43,829 in "other" expenses claimed by the former high-flyer.

Mr Hide wants the Serious Fraud Office - or police - to investigate the double-dipping. Dr Armstrong paid back some $10,000 in wrongly claimed accommodation allowances once the inquiry got under way.

Dr Armstrong said last night he would not respond to Mr Hide.

"I made a statement as soon as the report came out - I'm going to stick to that."

The report said that "a firm view on the legality of the actions could not be reached given that Dr Armstrong had accepted his actions were 'inappropriate' and has repaid the money".

At issue is a statement by the Auditor-General that "we do not doubt either that assurance or the honesty of his explanation as to how the claims occurred." However, the Auditor-General report adds that it was surprised at Dr Armstrong's failure to cross-check claims among the three entities he had chaired.

But Mr Hide says it's not up to the Auditor-General to "let Dr Armstrong off the hook by giving him the benefit of the doubt - public funds were involved".

"Here was a guy at the commercial pinnacle of three Government business operations and confidant of the Prime Minister.

"Yet it seems to be one rule for him and not everyone else."

Assistant Auditor-General Terry McLaughlin was yesterday adamant the Audit Office would have called in the SFO if it was warranted. "These things aren't always black and white - they are questions of judgment.

"We're in a reasonable position as auditors to determine whether there is any fraud involved," Mr McLaughlin said.


Once Parliament resumes next month, Mr McCully will request a snap debate.

"This is a matter which meets all of the formal requirements for such a debate," said Mr McCully. "In addition, what is clear from senior management and directors who served with Armstrong is that every time he was challenged he invoked his close association with the Prime Minister.

"When you boil it down, it was Armstrong's close relationship with the Prime Minister which made him immune from the normal checks and balances which would have avoided many of the problems outlined in the report.

"It clearly falls to Parliament to do what the Auditor-General has avoided doing: draw some logical conclusions about what happened, how and why it happened and how such conduct can be avoided in future."

Mr McCully's claims that Dr Armstrong's close relationship with Helen Clark gave him a protection blanket have been dismissed at Beehive level.

The Auditor-General's report does touch on Dr Armstrong's use of his Television New Zealand credit card to fund a dinner with Helen Clark and former Australian Prime Minister Paul Keating to discuss public-private partnerships - a factor that played a part in his demise as chair of TVNZ, NZ Post and Industrial Research.

The report goes into some detail on Dr Armstrong's international travel expenses - many of which lacked sufficient documentation to quickly establish whether they were for private or business purposes.

But it does not comment on the amounts that NZ Post forked out for its former chairman to accompany Helen Clark on two "state visits" to Turkey and Greece - which had been board-approved.

NZ Post documentation - since made available to the Herald - shows that on his sojourn in Turkey in April 2000, Dr Armstrong's stay at top-line hotels was a costly affair: the Ankara Hilton ($2412 for two nights) and Cirigan Palace Hotel ($3500 for three nights) were the largest amounts. It is not clear whether much directly NZ Post-related business was transacted.

NZ Post's own documentation said Dr Armstrong's overseas travel costs had been "approved by the board for the chairman to accompany the Prime Minister on a state visit to Turkey".

Dr Armstrong told the Auditor-General a later visit to Greece in March 2001 was as a member of a NZ Post delegation for a "state visit to Greek Post" accompanying the SOE Minister and NZ Post chief executive.

"The visit centred on a potential partnership that would allow Transend Worldwide to provide consulting services to Greek Post," the Auditor-General's report noted. Again the NZ Post documentation pointed to the need for the chairman to accompany the Prime Minister on a state visit.

Yesterday Helen Clark's press secretary David Lewis confirmed Dr Armstrong did meet up with the Prime Minister's delegation in Athens, where he was on NZ Post business, but was unsure whether he also went on to Crete with Helen Clark for the anniversary of the Battle of Crete.

What concerns MPs is that the Armstrong issue should have been nipped in the bud earlier.

"It is fair to ask why ministers did nothing when he was so clearly placed on notice," said Mr McCully.

The lengthy delay in publishing the Auditor-General's report worked to Dr Armstrong's advantage by keeping the affair under wraps.

The three SOEs stymied requests under the Official Information Act for material relevant to Dr Armstrong's spending habits while the Auditor-General's inquiry was in progress.

Why it was late

Ross Armstrong's delaying tactics pushed out the publication of a damning report into his spending at three SOEs until just before Christmas.

On September 10, Assistant Auditor-General Robert Buchanan was sufficiently confident to issue a press statement saying the report was expected to be published in November. The inquiry's results had been collated and given to Dr Armstrong for comment.

"His response is due next month when he returns from an overseas business trip ... Dr Armstrong has co-operated fully with the inquiry and had told him of his business travel intentions well in advance."

By October 10, Broadcasting Minister Steve Maharey - during an interview with the Herald- indicated the November deadline was unlikely. "The wheels of the Audit Office grind slowly. I understood a little while back that they were very close to it. But they've had enormous problems in finding Ross ... it's slowed the final bits down because he's got the right of reply."

In early December, the Auditor-General's office assured the Herald the report would not be dumped just before Christmas - "we'll hold it over if we run out of time", said a spokeswoman.

The Auditor-General's report did not finally land on journalists' desks until 2pm on Friday, December 19 - three days after Parliament had risen for the year and most MPs had cleared their desks and departed for their Christmas/New Year break.

Herald inquiries have since established that the Speaker's Office was notified three days earlier that the report would be tabled on Friday. Mr Maharey got his copy on December 18.

It was up to Parliament's Speaker, Jonathan Hunt, to determine the exact release time on the Friday.

Yesterday Auditor-General Terry McLaughlin described the delay as "pretty common". The November date had been a "best estimate" but it was a complex report and there would have been a range of feedback required for "natural justice" reasons. However, he noted that the Armstrong factor would have contributed.

Mr McLaughlin professed to be happy with the timing "or otherwise we wouldn't have done it".

TOMORROW: Paying the Donna price

FRIDAY: The Russell McVeagh saga