Every state has a trouble-prone Government authority, but has anyone got one like Sydney Water ?
Of all the public, private and government-owned
commercial organisations in Australia at the moment, there’s probably none as
cursed with ‘bad luck’ as Sydney Water Corporation.

How else then can you explain a long list of unfortunate happenings from
‘losing’ water, to losing millions of dollars in a failed billing system,
losing millions more in an apparent insurance scam that only came to light this
week and the ‘departure’ of two Chief Executives in 18 months, one in odd
circumstances still not fully explained after a vote of no-confidence in him by
the board.

That old line of many commentators that one problem is bad luck, two
coincidence and three a stuff-up come to mind now when looking at Sydney
Water’s recent history.

Accident prone, troubled, and very political, its a wonder in these times of
greater concern about corporate transparency, that anyone from the private
sector would want a gig on the board.

In fact you’d be entitled to wonder if good governance practice was more
observed in the breach at Sydney Water, compared to what’re required in the
private sector these days..

It was a coincidence that on the day the news broke of yet another problem at
Sydney Water, that seven impending board vacancies were again advertised in the
NSW media. Required by law, they revealed four directorships will become in
September this year and another three a year later. Will anyone from the
private sector be interested? The line is probably forming right now in
Macquarie Street Sydney outside Parliament!

After the recent spate of ‘bad luck, the end obviously can’t come quick enough
for some of them. But whether the new lot will be any better is debatable.

Sydney had a huge water quality scare in 1998 that cost some management and
board members their careers at Sydney Water. Then there was the hundreds of
millions of dollars spent on inadequate sewerage systems in Sydney’s northern suburbs.
The system still overflows in heavy rain, when it is supposed to be aiding the
quick dispersal of stormwater discharges!

The National Bank board came a cropper on governance and risk management
issues, Looking at the board of Sydney Water, you’d be entitled to wonder how
some of these people have survived the last few years.

So who’s on the Sydney Water board? The chair is Gabrielle Kibble, a
well-connected bureaucrat who used to be head of the Department of Planning and
the Department of Housing, in a long career with the NSW Government. She
survived the Giardia water contamination scare in 1998.She replaced former ALP
insider, David Hill, who ‘disappeared’, much like the two recent Chief
Executives have ‘vanished’.

In addition to chairing Sydney Water, she is presently the Administrator of
Liverpool Council in south-western Sydney. She was put in there to make put a cap on the Liverpool Council’s involvement
in the Oasis property development which also involved the Sydney Bulldogs and a
salary cap breach for the NRL team, plus Macquarie Bank. The scandal forced the
Government to sack the council before the NSW Local Government elections in
March when the ALP-dominated council was looking at a heavy defeat.

She is also the daughter of former Governor General, Sir John Kerr and is a ‘go
to girl’ for the Carr Government when difficulties arise in sensitive areas
relating to planning issues. A former Sydney Water executive supplied
this background She was appointed by Minister Craig Knowles because she was
head of the Department of Planning while he was Minister. Frank Sartor now has
control of Sydney Water, while State Treasurer, Michael Egan is the
shareholding Minister. Sartor and Kibble to not get on due to their time on the
Central Sydney Planning Committee when he was Lord Mayor and she was the
Government representative.

Another director is Alison Peters. According to the Sydney Water website Ms
Peters is the Deputy Assistant Secretary(Community Affairs) for the NSW Labor (that’s
the way its spelt)Council and the National chairperson of the Australian
Services Union. So she’s effectively an ALP insider. Her’s is the seat reserved
for the union representative.

The Australian Services Union is the key union covering many Sydney Water
employees. So you have the quite poor governance situation of a director of a Corporation
taking and participating in decisions (such as on pay and conditions) that may
or may not advantage union members. And even if she excuses herself from these discussions,
she has inside knowledge of the Corporation’s affairs that would help to the
ASU.

But hey, what’s the problem? Bob Carr’s NSW Government is following those fine
examples set by Federal ALP in Government of appointing people like
‘Bruvva” Ducker to the Qantas board. and endless other union appointees to
government corporations around Australia. The final appointee of interest is
Professor Peter Baume, the ‘wet’ NSW Liberal, Federal Minister and
well-regarded medical academic. While he knows health issues, what does he know
about financial risk management and technology issues with billing contracts? He
was put on the Board after the Giardia water quality scare in 1998 to bolster
the ‘health’ input into the Corporation’s thinking. But the Department of
Health still dominates the SWC’s thinking when it comes to water quality
issues. Directors of interest with a business background include Ralph Kelly, a
director in the Corporate Advisory and Equities Division of Westpac’s
Institutional Bank and Sydney accountant and company liquidator, Jim Grant.
With their backgrounds, they would be ideal to assess financial and other
forms of risk and the ability of the Corporation to manage them.

Some of the problems, such as water restrictions, can be traced to drought and
happenstance. But continuing poor maintenance levels and leaks are a board problem and the
media, especially Sydney’s Daily Telegraph haven’t been backward in
highlighting the problems. Many of these leaks come from within the Corporation
and old factions tied to former CEO’s, still remain.

A long time strongman at Sydney Water was Bob Wilson. He has just been used by
the NSW Government to examine water consumption and restrictions for Sydney
Water and the Sydney area.

And the board and management have to be responsible in some way for the $51
million lost on an abortive attempt to upgrade and improve the billing system
through a contract with PricewaterhouseCoopers and the $6.6 million alleged to
have vanished in the possible insurance broking scam, revealed this week. This
is now being investigated by NSW police anti-corruption authorities.
According to a statement an internal audit revealed that commissions related to
Sydney Water’s insurance broking services contract appear to have been withheld
from the authority. No further details were available.

On the failed billing deal, Sydney Water’s 2003 annual report reveals that
litigation was being considered in connection with the contract, but no further
details have been forthcoming. And this NSW Auditor General’s report on the deal is a staggering read.

The NAB’s problems are minor in comparison.

Former CEO, Alex Walker “was made to carry the can for the board and the
government’s incompetence” on the billing system contract, according to
NSW Opposition frontbencher, Brad Hazzard. This is part of an urgency motion of
his from February of this year.

“My motion is urgent because Sydney Water’s management and consultants
should not be a protected haven for the worst of the Labor Party’s mates
culture. It is urgent because, on one hand, the current managing director is
putting a cleaner through knowledgeable and capable staff, and, on the other
hand, he is bringing on board consultants by the bucket load, many of whom, it
appears, are being appointed on the “mates only need apply” criteria.

“My motion is urgent because it all comes down to the Minister for Energy
and Utilities, (Frank Sartor) who is one of the newest Labor mates. He worked
with Greg Robinson at the Sydney Harbour Foreshore Authority when Robinson was
the chief executive officer and the Minister was on the board (as Lord Mayor of
Sydney). Effectively, it comes down to a protection racket afforded by the
Minister to his mates. My motion is urgent because the selection process at
Sydney Water was delayed after Alex Walker was made to carry the can for the
board and the Carr Government’s incompetence in wasting $61 million on the
customer information billing system.”

The mention of Greg Robinson leads us to another, and possibly the most amazing
recent loss for Sydney Water. A CEO, who, after less than a year in the job was
removed earlier this year.

This is how the News.com website reported the decision in February.”
Yesterday NSW Energy and Utilities Minister Frank Sartor announced that sacked
Sydney Water chief Greg Robinson would be replaced by the head of another water
utility. Documents released by the state opposition on Thursday suggested the
corporation planned to cut spending by $1.7 billion over the next 10 years. Mr
Robinson, who held his position for less than a year, was sacked yesterday
following a no-confidence vote by the board of Sydney Water.”

The Sydney Morning Herald reported” draft notes for a speech delivered to
staff by Mr Robinson reveal it is about to undergo a range of changes,
including sweeping cuts to staff, capital and operating expenditure. “To get on
top of our present financial situation, we need to wipe out $1.7 billion or 18
per cent from our total expenditure over the next 10 years. This is on top of
the reductions in operating costs achieved over the last three years,” Mr
Robinson’s notes state. Releasing the document in part yesterday, the
Opposition Leader, John Brogden, told Parliament it showed Sydney Water is
racked with inefficiencies and mismanagement and details planned
expenditure cuts.

“Mr Robinson’s dismissal was not connected to an Independent Commission
Against Corruption (ICAC) investigation into his conduct, Mr Sartor said.

The ongoing ICAC inquiry was launched after a public contract was awarded by
Sydney Water to an architect who had done work for Mr Robinson. Sydney Water
had also held an inquiry into the matter which had cleared Mr Robinson of any
corruption allegations, the minister said.”

And finally and possibly the most political decision of all is the way the
Government has raised SWC for more and more money in the form of higher dividends.
More than $800 million in dividends and so-called ‘tax equivalent’ payments
will be taken from the Corporation in the period 2003-2005.Dividends alone will
total $588 million. In effect Sydney Water is another taxiing mechanism for the
Government and Treasurer Michael Egan. Any move to lift water charges as a way
of conserving water supplies will merely mean an effective rise in the water
tax for consumers in the Sydney area, who pay most of the tax in the state
anyway.

With a government claiming to be in a parlous financial position, you can bet
Egan and Premier Carr are mulling something like a rise in water charges right
now and how to sell it.

That’s why it needs a compliant and friendly board at Sydney Water. But not one
that’s not so cursed with ‘bad luck’ which make some of the corporate
governance problems in the private sector look like gems of good practice. And
to think that some thoughts are still held in the NSW Government about pushing
Sydney Water out the door through a semi-privatisation.. Just what Corporate
Australia wants, another error-prone organisation with poor governance
standards!

Peter Fray

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