The Baillieu Government will request a sit-down meeting with the troubled Victorian Managed Insurance Authority to deal with a “culture of fear” that has engulfed the organisation, following persistent bullying complaints and the exodus of eight senior staff in the last three months.

Two damning letters, sent by a former senior staff member to finance minister Robert Clark yesterday and obtained by Crikey, spell out in detail a history of financial bungling, intimidation and redundancies at the statutory body, presided over by a well-paid executive team.

They have spurred the government into action, with Clark promising this morning to raise the issues with the chairman of the VMIA, retired ALP heavyweight Robert Ray.

According to the letter: “very high staff turnover continues and behind many of the staff resignations, terminations and redundancies there are many recollections of bullying and ostracism. For many staff and for many observers in the insurance industry, VMIA has become a brutal place of work and is to be avoided.”

The VMIA is the state government’s in-house insurer and was established in 1996 by former treasurer Alan Stockdale following Joan Kirner’s sale of the State Insurance Office. Its leadership is drawn mostly from the private sector and the current executive team has become increasingly entrenched. The body employs about 140 staff in its Collins Street headquarters, with many on individual employment arrangements not covered under the general Victorian Public Service Agreement.

In 2009, management was slapped with an official WorkCover bullying notice and since then at least 20 senior employees have been dismissed or encouraged into premature retirement. Many received payouts and signed confidentiality agreements to ensure details of the poisonous climate never emerged.

“The staff are fearful…it was just a climate of fear and distrust. The workplace is completely paranoid,” one former senior employee told Crikey, who, mindful of retribution, did not wish to be named. “The whole place is in constant turmoil.”

The whistleblower salvos follow two press releases sent out in late 2009 by Liberal MP Gordon Rich-Phillips — now assistant treasurer — that slammed the organisation for its “bullying and harassment” and led to an internal “witch hunt” to identify leakers. Questions on notice were raised in state parliament, however until today the seven-week-old Liberal administration had failed to act.

Following Crikey‘s queries, Clark said he “was concerned about the issues raised by Gordon Rich-Phillips while in opposition” and that he had “taken up the matter with the Department of Treasury and Finance.”

“I intend to further raise these matters with the chairman of the VMIA when we have our first meeting in the next few weeks,” he said.

The intervention follows a sordid four years at the organisation as staff turnover skyrocketed while morale slumped.

An earlier letter sent by a group of “concerned VMIA employees” last November to Rich-Phillips and former minister Tim Holding  — also obtained by Crikey — lays bare a litany of complaints over funds mismanagement and backs the bullying claims.

“It is common knowledge by current and former staff that there is a culture of bullying at VMIA and that the bullying/victimisation has continued and that in some cases there has been victimisation of staff who have been suspected of providing that information to Gordon Rich-Phillips in the first place,” the letter reads.

One former senior executive in the VMIA Human Resources division told Crikey that executives used “divide and rule” tactics that led to staff breaking down before being pushed out.

“It’s a classic case of bullying where they isolate someone, run them down, ruin their confidence, ruin their health and then realise they’ve got themselves in all sorts of bother and pay to get rid of them.”

The intervention follows a number of disturbing allegations raised by current and former staff in the letters and confirmed separately by several sources, including:

  • Written comments on official State Services Authority staff satisfaction surveys and internal surveys over four years have been scathing, but staff — and the Liberals in opposition — have been denied access. Quantitative results are slanted because around one-third of senior staff rely on positive feedback for their annual bonuses. In response to a 2010 staff survey, only 51% of respondents agreed with the statement that “most of the time it is safe to speak up in the VMIA”.
  • Over the last 20 months the HR team of eight has had five team members leave, with four feeling bullied or mistreated. In two cases the Community and Public Sector Union was called in to assist with the claims. According to one victim: “You know if you complain…you are going to get terminated. If anyone stands up and thinks about what the right thing is then they’ll be gone.”
  • Bullying has been hidden from the VMIA board. A 2008 internal report on staff morale was apparently only discovered by accident after its existence was leaked to the minister. The successful 2009 WorkCover claim detailing severe emotional distress by a senior executive team member — which was communicated to the board — did not appear to curb the executives’ behaviour.
  • Some senior staff members have obtained taxpayer-subsidised vehicles, including gas-guzzling Ford Territory Ghias and Statesmen, in apparent contravention of state government eligibility criteria.
  • Senior executives regularly work from home, come in late and leave early for personal reasons — a privilege denied to more junior staff.
  • An increasing use of consultants, contractors and program managers that has seen the total number of staff explode to around 140. Expense increases of 73% in employee wages and benefits, 240% in program management and 45% in supplies and services have demonstrated a lack of fiscal restraint.
  • In one instance a senior executive demanded to know whether his assistant was a lesbian, constantly calls women ‘Bella’ and hosts Friday night drinks in his office for a select group of acolytes.

The 2009 Rich-Phillips media release demanded the Brumby government investigate the bullying inside the organisation that had resulted in a staff turnover of 65% in the previous two years, highlighted slumping morale contained in a suppressed 2008 People Matter satisfaction survey. But a freedom of information request to the government to release the full text of the survey was denied.

A second release was issued 10 days later after Rich-Phillips’ office was inundated with further complaints, with staff reporting that fear and paranoia had overrun the organisation’s premises after the concerns were first aired.

Last March, Ray was appointed as VMIA chairman following the departure of Adrian Nye, who was considered close to the current management team, led by CEO Steve Marshall. There was pressure on Ray to reform the culture, but so far this seems to not have born fruit. At the time, Ray was criticised by industry observers for a lack of experience and, according to the opposition had benefited from a “Labor mates” culture.

Ray told Crikey this morning that bullying in general was “endemic” and that “there would always ben the odd incident”. “It occurs everywhere, but it is certainly not a culture that can be tolerated.” He said that once the allegations appeared he instructed management to draw up a response to each of the claims, which will go to the next VMIA board meeting in February.

The Community and Public Sector Union confirmed to Crikey that it had repeatedly dealt with bullying allegations at VMIA over the last four years. State Secretary Karen Batt said that there were “known issues” at the authority and that the union would continue to assist staff that raised grievances and blew the whistle.

Peter Fray

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