The spending of public money by former Waikato District Health Board chief executive Dr Nigel Murray has been referred to the Serious Fraud Office after a high-level investigation found more than half his claims for travel and accommodation were unjustified.
The State Services Commission investigation, the findings of which were announced this morning by Commissioner Peter Hughes, found Murray's actions were "serious and sustained breaches of the State Sector Code of Conduct".
The four-month inquiry, ordered by Minister of Health David Clark last November when Murray's expense receipts became public after repeated media requests, found Murray's conduct fell short of what is required of a state-sector leader and that oversight of his expenses by the former board chairman lacked rigour.
The investigation found Murray had unjustifiably spent $120,608.
The breaches uncovered were so serious the SSC has now referred the matter to the Serious Fraud Office, to decide if it meets the level of criminal wrongdoing.
Commissioner Peter Hughes didn't hold back at a press conference about the investigation.
"This is hard-earned taxpayer money, and I think Dr Murray's behaviour is an affront to the taxpayers of New Zealand.
"They have every right to feel aggrieved.
"They should expect the highest standards from the state servants that they entrust with the stewardship of our state services."
He said this case was one "out of the box".
"When you're in the business of public service, the highest standards are called for.
"Taxpayers of New Zealand work hard, and they expect that money, every cent of it, to be spent on health services.
"In this case it was not, and that's not good enough."
Murray resigned on October 5, ending a Waikato DHB investigation into staff concerns of unauthorised spending.
The commission's investigation, led by John Ombler QSO, found:
• Murray spent $218,209 of Waikato DHB money on travel, accommodation and related expenses between July 2014 and October 2017;
• There were 129 items of expenditure on travel and accommodation during the former chief executive's tenure;
• 59 of the items, valued at $101,161, did not meet Waikato DHB's policies for appropriate authorisation; • 45 of the items, valued at $120,608, were unjustified when measured against the Auditor-General's guidelines;
• Murray spent $74,265 on personal costs and had to reimburse the money;
• Murray has repaid $54,831 and $19,434 remains in dispute;
• More than half of Murray's travel and accommodation (by cost) was unjustified, and about half was unauthorised or had authorisation deficiencies;
• Murray's relocation expenses contravened the agreement made in his letter of offer and the Waikato DHB policy on staff travel and accommodation.
"Dr Murray made significant claims for reimbursement of travel and accommodation expenditure that were outside the DHB's policies and spent public money on travel and accommodation without authorisation, which led to serious and sustained breaches of the State Sector Code of Conduct," Hughes said.
"The investigation report shows Dr Murray spent public monies on private travel and made claims for the reimbursement of expenses he was not entitled to claim for.
"As the chief executive he should have known better. He was supposed to be setting an example for his organisation."
Hughes said it was not the role of the inquiry to determine whether there was any criminal wrongdoing.
"That is why I have referred the investigation report to the Serious Fraud Office."
The investigation also blamed the Waikato DHB as being too trusting.
"The board did not carry out the normal checks and balances expected at a big public sector organisation, which allowed Dr Murray's unauthorised and unjustified expenditure to continue for too long without being addressed," Hughes said.
"The former chair's oversight of Dr Murray's expenses lacked the rigour and standard of care expected."
He said Simcock retrospectively approved 20 of Murray's travel applications, and at least 42 of the total travel applications approved by the former chairman had no or inadequate evidence of business purpose.
"The investigation found the former chair was too trusting of Dr Murray. And Dr Murray let the chair down."
Hughes said the board acted with good advice and urgency to address the growing concern about Murray's conduct, but should not have allowed him to resign rather than face disciplinary action.
"The board put pragmatism ahead of principle and the public interest," Hughes said.
"That was not the right thing to do. This meant Dr Murray did not have to answer for his conduct. And that was wrong.
"Serious allegations ought to be fully determined wherever possible, so that either a person's name is cleared or they are held publicly to account for their actions. Public accountability and transparency is essential to maintaining public trust and confidence.
"If Dr Murray was employed by me I would have terminated his employment based on what I have seen."
The inquiry found the board failed to check with a previous employer when he recruited Murray.
"It should have done so. If they had checked with his current employer in Canada it would have raised a red flag. That did not mean Dr Murray would not have been employed but the board should have the fullest information in making an appointment.
"It is good that our public health system model brings commercial disciplines and expertise but DHBs are public organisations run by public servants using taxpayers' money to deliver public services to New Zealanders," Hughes said.
"Effective public organisations like DHBs need to have the trust and confidence of New Zealanders, and that means working to the highest standards.
"The public rightly expect DHBs leaders to be careful stewards of health funding, and so do I".
Clark said health funding should be used for healthcare and prevention.
"There needs to be clear justification for spending on travel and related costs," he said.
"This report confirms that was sadly not always the case at the Waikato DHB. There was a notable failure of leadership and oversight.
"As minister I will hold DHB chairs accountable for the spending on their watch. There needs to be transparency around expenses, including written authorisation for significant travel costs and robust processes for manager's expenses."
He said oversight would be bolstered by the changes announced last month in the State Sector and Crown Entities Reform Bill.
"To say this has been a disappointing episode for all involved is an understatement, but I have no doubt that lessons have been learned."
Waikato DHB acting chairwoman Sally Webb said Murray clearly "routinely breached our DHB policies and let the health board, the Waikato community and the former chair down very badly".
"This is one man, out of a staff of 7000, who was a bad apple, did not meet the high standards we would expect from a chief executive and has damaged the reputation of our DHB, but is not indicative of how the many hard working and committed staff in our organisation behave."
In response to Hughes' criticism that it was the wrong decision to let Murray resign, Webb said the board made the decision to accept his immediate resignation rather than sack him, to avoid being faced with further costs and potentially lengthy litigation.
"We weighed up many factors in coming to this decision but decided the ongoing costs to the organisation, not only financial but also in the amount of time we would spend on this, were outweighed by the need to move on and focus on delivering health services to our population.
She said the report identified that the DHB's recruitment process was good but the reference checks were not thorough and didn't include his current employer.
"Had they done so, it would have raised a red flag with us."
Webb said the report had lessons for all DHBs in how they recruit and manage chief executives, and how they ensure all expenditure goes through the correct approvals and is used appropriately.
She said the DHB's policies and procedures were not followed and that Waikato DHB had now put processes in place to ensure its policies were complied with.
"We've taken steps to ensure that this sort of behaviour can never happen again at Waikato DHB.
"Audit NZ reviewed our processes for expenses, including those of the chief executive, in November last year and made a number of recommendations that we have already actioned."
Webb praised the staff who blew the whistle on Murray's unauthorised spending.
"I'm really pleased that the report acknowledged the courage of DHB staff, who made repeated efforts to bring the issue of overspending and spending outside policy to Dr Murray's attention, before escalating their concerns to the chair," she said.
In a letter from his lawyer Peter Cullen to inquiry head John Ombler, Murray said he believed the investigation into him was "unfair" and "seriously flawed".
"As you will be aware, from the outset we have raised and continue to raise serious concerns about [inquiry head] Mr Ombler's decision not to provide Dr Murray with copies of the information and documents that he has obtained in the course of his investigation and which are relevant to the terms of reference in so far as they relate to Dr Murray.
"We simply do not understand why Mr Ombler has chosen to deny Dr Murray access to this information.
"It would seem that Mr Ombler has now softened his position and as per your email of 21 December 2017, some documents were provided together with links to others.
"However, these documents were primarily DHB policies etc. Disclosure has been at best token."
Murray's lawyer said they had made a complaint to the Privacy Commission about the lack of documents provided to them about the investigation.
"It is our advice to Dr Murray that the processes of the SCC investigation are not fair and are, in our view, not lawful.
"Dr Murray has accepted that advice, and for that reason believes that participating in this investigation at this stage will place him in unknown jeopardy."
The investigation documents included a reply to Murray's lawyers, saying he had been given "extensive" information.
Timeline of events
May 29, 2014: Nigel Murray officially terminated from his role as president and CEO of Fraser Health Authority in Canada following damning review. Offered another position which he later declines.
June, 2014: Murray announced as frontrunner for CEO job at Waikato DHB, same day he officially resigns at Fraser Health Authority in Canada. Board chairman Bob Simcock warned not to hire Murray.
July, 2014: Begins at Waikato DHB. Public release of British-Columbia Government-ordered review of Fraser Health finds it to be worst performing in Canada.
December 2014: Murray and guest vacate taxpayer-funded accommodation at Quest in Hamilton after six months.
July 2015: Murray fails to disclose first year's expenses.
August 2015: State Services Commission writes to DHB to remind Murray to file expenses. He does not.
December 2015: Staff member raises concerns with senior manager over Murray's relocation costs. Manager tries to get Murray to rectify situation.
June 2016: State Services Commission reminds DHB to disclose Murray's expenses.
July 2016: Murray fails to disclose second year's expenses.
October 2016: Newly elected board member Mary Anne Gill raises concerns with Simcock over Murray's expenses.
December 2016: Herald reveals Murray has not disclosed expenses for two years.
January 2017: Murray finally discloses expenses, which show $108,000 spent over two years including $36,000 relocation costs.
February 3, 2017: Senior manager alerts Simcock to potential relocation overspend. Actual amount spent was $52,000 versus $25,000 agreed. Simcock asks Murray to explain. Murray gives an undertaking costs will be immediately reimbursed.
February 8, 2017: Simcock tells Herald he is comfortable with Murray's expenses and points to relocation costs as skewing the total. No mention of order for Murray to repay some money days earlier.
May 2017: Murray pays back $30,000 after chief of staff Neville Hablous tenders resignation (later withdrawn).
June 7, 2017: Hablous and two other members of Murray's executive team alert Simcock to problems with the CEO's expenses. Simcock alerts Minister of Health, SSC, some board members and seeks legal advice.
July 4, 2017: Murray made aware of the accusations.
July 19, 2017: Full board alerted at special meeting. Agree to investigate.
July 21, 2017: Murray told of investigation. Goes on leave.
July 22, 2017: Herald breaks news of the looming investigation.
August 2017: Audit NZ begins review of management and authorisation of Murray's expenses. SSC reminds DHB Murray's expenses for the third year are overdue.
October 5, 2017: Murray resigns and DHB's investigation ends. Draft report read to board. DHB refuses to release findings.
October 18, 2017: Herald reveals DHB investigation raised questions about expenses Murray claimed, associated with two Canadian women.
October 20, 2017: Ministry of Health asks Simcock to explain Herald revelations in briefing.
November 3, 2017: Murray's expenses for three years in the job released, showing he spent $218,000. Minister of Health David Clark asks State Services Commissioner to investigate.
November 10, 2017: Former Cera chief executive John Ombler launches investigation for SSC.
November 11, 2017: Herald reveals Murray spent $45,000 travelling to promote or learn about SmartHealth, the ailing virtual health app provided by HealthTap, championed by the CEO.
November 18, 2017: Herald reveals Murray travelled for six months of final year in the job.
November 24, 2017: Damning Audit NZ report obtained by Herald, shows Murray took international trips while on sick leave, used public money for personal jaunts, booked travel without approval and tried to cover up the breaches.
November 28, 2017: Herald reveals Serious Fraud Office making preliminary inquiries into spending. Simcock resigns.
November 30, 2017: Waikato DHB announces expense checks and processes to be tightened in wake of Murray scandal.
December 1, 2017: Former Labour MP Sue Moroney makes official complaint to SFO. DHB releases Audit NZ criticism of procurement of contract with HealthTap, the American company that provides the virtual health platform for SmartHealth. State Services Commissioner asks Auditor-General to conduct inquiry into the process.
December 20, 2017: Auditor-General launches investigation into HealthTap purchase.
February 14, 2018: Murray's $1.17 million house, lived in by his wife, is listed for sale.
March 21, 2018: Herald reveals Murray spent more than $100,000 relocating from New Zealand to Canada seven years before taking up the job at Waikato DHB.
March 22, 2018: State Services Commission investigation finds Murray's actions led to serious and sustained breaches of the State Sector Code of Conduct and refers case to Serious Fraud Office.