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SSC Scampi Inquiry - 1.0 Executive Summary
Press Release: State Services Commission
26th May 2004
Scoop.co.nz
1.0 Executive Summary
This Inquiry was established by the State Services Commissioner, following allegations of corruption and impropriety on the part of the Ministry of Agriculture & Fisheries and the Ministry of Fisheries, in relation to the management of the scampi fishery.
The Inquiry was established under the State Sector Act and was charged with undertaking an inquiry into the allegations and to assess the quality of the administration and management at the time referred to in the allegations, to determine whether there was a need to take further action to ensure that the current management and systems of the Ministry of Fisheries met public expectations.
1.1.1 Allegations of Corruption and Impropriety
The allegations of corruption and impropriety on the part of both MAF/Fish and the Ministry of Fisheries in relation to the management of the scampi fishery, were raised in Parliament, referred to the Serious Fraud Office, and repeated in the media and in a Television New Zealand "Assignment" programme. The Inquiry has undertaken a detailed assessment of the allegations. Many witnesses resiled from restating the allegations, and withdrew parts of the affidavits in which they were placed.
The Inquiry has concluded that the evidence heard by it and the information available to it, do not substantiate any foundation on which to recommend to the State Services Commissioner that he investigate or refer the matters to another agency for further investigation for potential criminality on the part of either officials or fishers. In particular, there is no foundation for the allegations of impropriety or corruption on the part of Mr Crothers or Mr Wood, who were MAF/Fish employees, both of whom were specifically named.
In making their recommendations, the Reviewers have specifically recommended to the State Services Commissioner that no further action should be undertaken, either by the State Services Commissioner or by other parties, in respect of those allegations.
In inquiring into the performance of the former MAF/Fish and the Ministry of Fisheries, five specific questions had to be answered, each under a specific Term of Reference.
1.1.2/ 1. The Systems for Permitting
Whether the former MAF/Fish acted reasonably in administering the grant of permits to scampi fishers from the late 1980s to 1992, and in particular whether the administrative processes were adequate, appropriate and consistent?
Scampi is a prawn like crustacean, closely related to a rock lobster, living in burrows on the ocean floor in sediment at depths between 200 and 500 metres. They can be caught by pots, but the most successful is by trawling, using mesh size of approximately 43 mm. The relevant Regulations prohibited mesh size of less than 100 mm, so to trawl for scampi required a permit exemption and this was done by special permit until September 1990.
Scampi is a non-QMS species and after the introduction of the QMS system in 1986, MAF/Fish circulated non-QMS policy directives to the regions, to assist them in deciding which category (e.g. developing or fully developed fishery) non-QMS species were to be placed in and which type of permit should be issued.
The regional organisational structure for MAF/Fish from 1985 to 1995 devolved the permitting and licensing functions to the regions.
Because little was known about this scampi fishery, it was principally classified as a developing fishery and special permits were issued to enable investigative fishing to take place and to specifically permit scampi fishers to use undersized mesh.
In August 1988, MAF/Fish Head Office signalled a policy change to commercial permits, because the use of special permits for a commercial fishing operation was contrary to the purpose of special permits.
The change to commercial permits was critical and significant. A commercial permit gave a fisher "a foot in the door" as he could expect the permit to be renewed annually on application. This differed from a special permit which did not accord such an expectation or right. To a commercial fisher therefore, once a commercial permit was issued, it was a de facto acknowledgement that the fishing operation was commercial and the commitment of capital and vessels would not undertaken on an investigative basis any more.
In July 1988, prior to the policy being released from Head Office, Mr Wilkinson of Simunovich learned of the change to commercial permits from the Auckland office and wrote to the Registrar in Auckland requesting the issue of commercial permits. These were issued to Simunovich from January 1989 and Barine later in the same year, for all fishing areas in New Zealand.
The policy change was buried in an appendix to a policy directive of 29 August 1988. The only region which followed the directive was the Northern region, which issued commercial permits together with special permits, endorsing the use of undersized mesh.
Apart from one aberrant commercial permit issued by Christchurch to United in March 1988, and the Invercargill office of the Southern region to Roderique in 1989-90, we have been unable to conclude that any other region issued a commercial scampi permit to its fishers. In the cases of United and Roderique, neither of the Christchurch or the Invercargill offices was following the policy directive. The United permit was issued before the change in policy and the Roderique permit was issued in ignorance of it.
In the lead-up to the 1990-91 fishing year, the Central region discovered that commercial permits had been issued for scampi trawling in its fishery areas. It notified the scampi fishers that subject to further research, special permits only would be issued. This arose from concerns about the juvenile catch rates, dumping of bycatch and the state of the fishery being not fully known to the Central region's personnel.
The Central region advised the scampi fishers that special permits only would be issued for the 1990-91 year. This produced a strong reaction from Simunovich and amid threats of legal action and review, a meeting was convened on 4 September 1990 in Head Office with Simunovich, MAF/Fish Head Office personnel and the acting Regional Manager for the Central region. Simunovich urged that the Minister declare an emergency in the fishery under s 12 Part I of the Fisheries Act 1983, and threatened to take further action if the commercial permits for Simunovich were not renewed.
On 27 September 1990, MAF/Fish Head Office wrote to Simunovich advising that the management of scampi would be by a s 65 moratorium which "will accommodate your concerns". No such advice was sent to any other fisher.
The s 65 scampi moratorium took effect on 1 October 1990 with commercial scampi permits being issued immediately to those that held scampi commercial permits in the previous year, while criteria were being developed to determine more precisely who should get permits.
Seven months into the 1990 fishing year, seven permits were revoked and three additional fishers were approved on the basis that their applications were received in 1990 but no permits had been issued.
In the same month, MAF/Fish declared a vessel restriction in the scampi fishery with retrospective effect, namely a restriction on any further vessels in the fishery that were not fishing as at 30 September 1990. The retrospective effect of the declaration to ad hoc changes in the vessel policy, as exemptions had to be granted to fishers who had acquired vessels in February 1991, before the vessel restriction was announced.
Three fishers were affected, two of which required a vessel to fish their scampi permits. The third was Simunovich, which acquired the Drysdale, notified MAF/Fish that the Drysdale was one of six scampi vessels currently in the fishery, and at the same time sought approval for a 43 m larger vessel to fish in Areas 3 to 9. MAF/Fish gave approval to the larger vessel and after a review in respect of the Drysdale, Simunovich had permission to fish six scampi vessels in the fishery, provided that it fished the larger vessel in Areas 3 to 9 only and nominated which of its vessels would be withdrawn from Areas 1 and 2 as a condition of having the larger vessel approved.
We have concluded that the requirement to nominate the withdrawn vessel from the fishery was not strictly adhered to and gave Simunovich an advantage. Simunovich sought permission to change for the third time the nominated vessel, effectively allowing all seven of its scampi fleet to fish in the 1991-92 year, although not concurrently.
In the same month that the Simunovich larger vessel was approved, Barine requested four extra vessels and was informed by MAF/Fish that it needed a plan but if there was more catch effort in the fishery, approval was unlikely to be granted. We agree with Barine that the effect of this response was to decline its application, as four vessels inevitably would increase effort.
Although there was a change of mind in November 1991 that additional vessels could be introduced into Areas 3 to 9, the advice to the fishers was that they could transfer effort from Areas 1 and 2 to Areas 3 to 9, not that they could bring in additional vessels.
The importance of the vessel restriction is that the catch history during 1990-91 and 1991-92 led to the allocation of fishing rights in the form of individual catch entitlements (ICE) for Areas 1, 2, 4 and 6A. Simunovich was active in urging the allocation of ICE in those Areas and MAF/Fish agreed. When the Independent Scampi Group also urged that ICE should be allocated in Areas 3 and 6B to be consistent, in the face of Simunovich opposition, MAF/Fish did not issue ICE.
We have concluded that the former MAF/Fish acted unreasonably in administering the grant of permits for scampi fishing and for vessel approval during that period.
We have also reached the conclusion that MAF/Fish did not have adequate, appropriate or consistent administrative systems and processes for the granting of such permits. The following factors formed the basis of our conclusions:
1.1 Inappropriate Organisational Structure
The organisational structure was inappropriate, devolving decision-making and power to the regions to grant permits to the fishers in their fisheries areas with no effective system, structure or accountability from Head Office to control or manage inappropriate, inconsistent or divergent permitting practices among the regions.
1.2 Regional Inconsistency
The policy direction to the regions from Head Office was ineffectual and inadequate, leading to inconsistent permitting practices, which resulted in considerable benefit to some fishers, to the detriment of others. It also led to the exclusion of some local fishers from a fishery in their area, and to fishers in one region receiving substantial advantages over fishers in other regions.
1.3 Inappropriate Management Actions
In response to the refusal by Central to issue commercial permits and the complaint by Simunovich, MAF/Fish acted inappropriately by attending on Simunovich immediately, without undertaking a proper investigation of how the regional approaches had differed, taking advice from its officials and considering the impact on other scampi fishers.
The s 65 moratorium decision and permitting exemptions made by MAF/Fish in 1990-91 was implemented, without adequate preparation, relevant information or planning. MAF/Fish imposed a moratorium and subsequently developed criteria for entry to the fishery during the fishing year, revoking eight permits already issued.
The decision-making and allocation of ICE in SCIs 1, 2, 4 and 6A but not in SCIs 3 and 6B was inconsistent and reflected the wishes of the predominant fisher in the scampi industry.
1.4 Inconsistent Permit Types and Conditions
The differences in the types of permits issued and the contradictory conditions within them were a consequence of the regions exercising sole control over their permitting processes. The type of permit issued, namely whether it was a commercial or special permit, gave distinct advantages to those fishers that received commercial permits as opposed to those that received special permits.
Despite the wording on the special permits that no assurances were being given on future access and allocation levels, access to the scampi fishery was based in part on those permits, and later allocations were based on the catch history achieved following such access.
To issue permits, stating that no future entitlements can be acquired by way of catch history and the contrary occurs, is misleading, inappropriate and administratively inconsistent for two reasons:
The permits were never issued for investigative purposes.
The permits contributed towards conferring valuable property rights and entitlements.
1.5 Office Processes
The office administrative procedures and systems within MAF/Fish were inadequate in that:
there was no compliance with or monitoring of manual instructions on fees and timeliness of permit issue;
there were inadequate information retrieval systems
no adequate monitoring of compliance with national directives or guidelines within the scampi fishery; and
haphazard office processes contributed to permit applications either being mislaid or lost, and led MAF/Fish and MFish to deny the existence of permit applications until discovered years later.
1.6 Treatment of Fishers
Fishers received disparate treatment by MAF/Fish. MAF/Fish either ignored applications or failed to communicate in a timely and effective way.
Fishers were subject to delay in the granting of permits and did not receive information on changes in policy, resulting in some fishers being excluded entirely from the scampi fishery with others being unable to establish catch history in the relevant years, affecting the later allocations of ICE.
1.7 Vessels
The policy on vessel restriction having been imposed retrospectively, developed in an ad hoc manner, was not soundly based on relevant information and was inappropriate.
The management of the permitting of scampi vessels was grossly inadequate, inappropriate and unreasonable, resulting in uneven handed treatment among the scampi fishers.
1.1.3/ 2. Compliance Systems
Did Fishery officers in the former MAF/Fish in 1993 and the Ministry of Fisheries in 1998, have a reasonable basis to suspect illegal fishing by any fishing company involved in the scampi fishery.
The Inquiry heard evidence in relation to the allegations about illegal fishing by one or more fishing companies involved in the scampi fishery in 1993 and in 1998 in respect of four investigations into the scampi fishery. We found that the Fisheries officers in MAF/Fish in 1993 and in MFish in 1998 did have a reasonable basis to suspect illegal fishing.
In 1993, MAF/Fish did not carry out adequate investigations into those allegations. The reasons which contributed to that included the inappropriate regional structure for compliance activities, the lack of adequate oversight and prioritisation, the fragmented nature of resource allocation decisions in respect of compliance activities and in respect of Operation Export in 1993, a failure to ensure that an apparent lack of motivation to continue the investigation was reversed and activity renewed.
We found that MFish did carry out adequate investigations into allegations of current illegal activity in 1998, but was constrained by its understanding of the two-year limitation on prosecutions and on the exercise of fisheries officers powers, so that allegations of historical offending were not adequately pursued.
In the circumstances, this limitation is not appropriate or adequate, given the serious nature of the allegations and the complexity of potential fraud on the QMS. In order for MFish to exercise its powers lawfully and appropriately, and to ensure compliance with the QMS, the time limitation for the bringing of Fisheries Act offences should be greater than two years.
We find that in 1993 MAF/Fish did not have adequate and appropriate administrative systems and processes in place for the identification and investigation of complex offending, but they were adequate and appropriate in 1998 and M/Fish did comply with those systems.
1.1.4/ 3. Mr Nalder
Did MAF/Fish have adequate grounds for taking disciplinary action against Mr Nalder and did his dismissal have any connection with his investigation of alleged offences relating to the scampi fishery.
Between 1989 and 1994, Mr Nalder was employed respectively as the District Compliance Manager in Tauranga and Senior Fisheries Investigator in Auckland. During his employment, two disciplinary investigations were undertaken into incidents unrelated to any suspected illegal fishing in the scampi fishery.
In respect of the first disciplinary investigation, we found that there were grounds to direct a disciplinary investigation and for finding that Mr Nalder did not properly advise of costs but there were not grounds for the other disciplinary action taken. The disciplinary outcome for Mr Nalder was more serious than the circumstances warranted.
In the second incident, there were some grounds to initiate disciplinary action, but there were inadequate grounds for the finding against or the penalty imposed on Mr Nalder.
Mr Nalder took over an investigation in 1993 called "Operation Export" into suspected illegal fishing against Simunovich. On the commencement of the first disciplinary investigation, his work on "Operation Export" was curtailed and on his suspension at the commencement of the second disciplinary action it was suspended.
There was no connection between the ending of Mr Nalder's employment with MAF/Fish and his investigation of alleged offences relating to the scampi fishery.
The Terms of Reference refer to a "dismissal". There was no "dismissal" as Mr Nalder's employment came to an end by agreement.
1.1.4.1 Relationships between Ministry Officials and Commercial Scampi Fishers
Were the relationships between officials of the two Ministries and commercial scampi fishers at the relevant times, professional and at arms length.
There are six matters which arose from the Inquiry's examination of these relationships.
They are:
(i) MAF/Fish forged relationships with larger companies
The focus of MAF/Fish in forging relationships with industry players was on the larger companies or industry fishers, with whom they maintained contact and sought information. The perception by other fishers, who presented their case histories to this Inquiry, that because they were smaller fishers they did not feature in MAF/Fish's eyes, is understandable.
The ease of access for a company like Simunovich or Sanford, compared to the problems encountered by Barine, Mr Goodship and Mr Jose emphasised the perceptions that MAF/Fish was uneven handed in their approach to the scampi fishers and favoured Simunovich.
(ii) MAF/Fish had a closer relationship with industry players on working parties
The approach taken by MAF/Fish in processing applications by fishers depended on the frequency of contact and the strength of the approach made by the fisher.
Larger companies were also more likely to be at industry meetings where they could pursue their own interests outside the formal meetings. MAF/Fish's expectation that if fishers wished to pursue something, they should make a personal approach, did not reflect an even-handed approach to administration.
The problem for the smaller fishers was that they had no way of knowing, nor did they have the influence to enable them to be taken seriously as their larger competitors were. The Reviewers conclude that the interests of smaller fishers:
- Were not given proper weight in policy decision making; and
- Did not receive even-handed treatment in the processing of permit and vessel applications and associated enquiries.
(iii) Relationships with previous MAF/Fish personnel
The advantages that ex-employees could bring to their current employers as a result of being an ex employee of MAF/Fish were considerable. They included knowledge of research results, administrative processes, Ministry personnel, how to use the OIA, and the easier and more effective access that such knowledge enabled. Ex-employees in that situation are perfectly entitled, and would be expected by their new employers, to use those advantages.
We do not recommend constraints on such employment changes or on the use of such knowledge by ex-employees (unless it amounts to conflict of interest or breach of confidentiality).
The responsibility is on departmental staff to ensure that their processes and decisions do not unduly accommodate the advantages that ex-employees may have. The interests advocated by ex-employees must be properly balanced within the wider public interest. Current staff need to be alert to the risk that a perception of favouritism could develop if those staff do not deal with ex-employees and their interests in ways which are seen to be totally even handed.
(iv) The frequency, assertiveness and relative importance of the contacts with Simunovich
The perceptions within MAF/Fish and in the industry were that Simunovich was being treated differently. MAF/Fish appeared to have been influenced by Simunovich to the degree that a perception was created that all the key decision-making in scampi management were driven by Simunovich submission or demand.
Overall the impression gleaned from examining four to five years of interactions and the nature of the outcomes from those exchanges is that the exchanges with Simunovich were not appropriately counter-balanced by proper consideration of the interests of other sectors of the scampi fishing industry.
MAF/Fish officials failed to gauge whether they were acting even-handedly amongst all the scampi fishers, fairly and impartially. We do not suggest that any Ministry official was dishonest in any way, but their inadvertence to ensure that they were acting fairly, has led us to the conclusion that their relationship with Mr Wilkinson and Simunovich was not professional or at arms length.
We acknowledge that outcomes do not have to be equal for all industry players. But they must all be treated impartially and with integrity and decisions must take proper account of all players' interests.
(v) The acceptance of Gifts and Entertainment Offers
The acceptance of gifts and entertainment offers, and in particular the acceptance of gifts from certain companies which were also having influence in the development of fishery policy, where MAF/Fish was involved in ultimately allocating valuable property rights, compromised the independence and integrity of MAF/Fish.
(vi) Relationship with compliance staff
The evidence before the Inquiry revealed that staff of the Ministries, both in the late 80s and up to the present time, used and are still prepared to use certain fishers to detect offending by others.
To use, or be prepared to use, such offers from major industry players as MAF/Fish did in that period was to compromise the integrity of MAF/Fish's ability to be even-handed, impartial and undertake compliance procedures with the rigor, integrity and independence that compliance activities demand. We conclude that MAF/Fish did not act professionally or at arms length, in undertaking detection of offending by using the property of major industry players.
The above factors lead us to conclude that relationships between officials and commercial scampi fishers were not professional and arms length in the period between 1988 and 1992. One outcome was that Simunovich was treated in a favourable way, in contrast to the other fishers in the scampi fishery.
1.1.4.2 Other Matters
Is there any other matter concerning the former MAF/Fish or the Ministry of Fisheries that the Reviewers consider relevant to the foregoing questions.
Under this Term of Reference, the Reviewers were asked to raise any other matter concerning MAF/Fish or MFish that was considered relevant to the foregoing Terms of Reference.
We have concluded the relevant matters are:
(1) The impact of the Quota Management System on MAF/Fish's capability in both policy and compliance functions.
The Inquiry agrees that the introduction of the QMS was important and positive for New Zealand fisheries, and that it was a major change with full implementation being delayed by the 1987 Maori fisheries injunction. Insufficient time, resources and thought went into the implementation. There was no recognition that when systems and resources were so stretched in implementing change, even more attention must be placed on ensuring impartiality and integrity. The reverse occurred.
(2) The failure of MAF/Fish and MFish to respond to criticism appropriately and effectively.
MFish still demonstrates an overall defensiveness, particularly in respect of litigation. The effect of this has been that MFish has not addressed the criticisms of unfairness and unevan-handedness expressed by the Courts. MAF/Fish had earlier failed to respond effectively to reports critical of its decision-making processes and structures, in both administration and compliance.
The Inquiry received submissions that the prescriptive nature of the 1996 legislation leaves little or no discretion for MFish in the administration of permitting. Nevertheless there are aspects of decision-making and policy advice where greater emphasis should be given to fairness and even-handedness.
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