This is a contribution to the Journal of Corporation Law’s 2020 symposium on blockchain technology and corporate governance. The thesis is that blockchain technology is well suited to the monitoring function in corporate governance; that monitoring as the primary function of corporate governance is a particularly legal conception; and that the business conception of governance has far more to do with leadership, strategy, and operations. If the legal and business conceptions of governance tend to be ships passing in the night (at least in this somewhat exaggerated rendering), it is because prevailing economic and legal theoretical models have a difficult time incorporating human qualities that underlie leadership, intuition, insight, and creativity. Law schools have long taught litigation skills and transactional skills have come into vogue as well. Teaching leadership to aspiring business lawyers is the next challenge.In NSW the Independent Commission Against Corruption (ICAC) has found that employees of companies who supplied security services to the University of Sydney engaged in 'serious corrupt conduct', dishonestly obtaining hundreds of thousands of dollars by submitting false timesheets. The CEO of one company and an employee of another company engaged in serious corrupt conduct by providing benefits to the University’s security operations manager, including a pinball machine and luxury hotel accommodation, as an inducement or reward for him using his position at the University to favour their interests. The security operations manager engaged in serious corrupt conduct by accepting, or agreeing to accept, those inducements or rewards.
ICAC's Investigation into the over-payment of public funds by the University of Sydney for security services (Operation Gerda) report indicates that between December 2015 and April 2018 employees of Sydney Night Patrol and Inquiry Co Pty Ltd (SNP) and its subcontractor, S International Group Pty Ltd (SIG), obtained financial benefits by submitting timesheets in which they made false representations as to the identities of guards who provided, or purported to provide, ad hoc security services to the University, knowing that the funds to pay those claims would ultimately come from the University.
This practice, known as “ghosting”, involves the unauthorised use of the name and security licence details of a security guard who is not working a shift to secure a financial benefit. The Commission finds that SNP employees Emir Balicevac, Daryl McCreadie, and Frank Lu engaged in serious corrupt conduct through this practice, which respectively netted them about $222,905, $27,283 and $244,091. The ICAC finds that SIG security guard George Boutros also engaged in serious corrupt conduct by engaging in the same practice between October 2016 and April 2018. However, as an SIG employee, it is difficult to differentiate between the rostered shifts he legitimately claimed, and the ghosting shifts he illegitimately claimed, so the precise amount he dishonestly claimed is unknown.
The Commission finds that SIG director and CEO Taher Sirour engaged in serious corrupt conduct through facilitating payments to Mr Balicevac, Mr McCreadie, Mr Lu and Mr Boutros on the basis of the false timesheets to obtain a financial advantage from SNP at the cost of the University. He was aware that Mr Balicevac and Mr Lu were falsely claiming payments for ad hoc services that had not been provided.
Mr Sirour further engaged in corrupt conduct by providing payment for accommodation in October 2015 at the Shangri-La Hotel Sydney, a meal at Wolfies restaurant, and a car and driver to and from the hotel to Dennis Smith, the University’s security operations manager, and his wife for their 30th wedding anniversary. This conduct, and payment for a further stay at the hotel in 2017 that was ultimately cancelled, and proposed tickets for an overseas trip in April 2018, were provided as an inducement or reward for Mr Smith to use his position at the University to favour, or influence him to favour, the interests of SIG and Mr Sirour.
Mr Balicevac also engaged in serious corrupt conduct by providing a pinball machine at a cost of $10,650 to induce or reward Mr Smith to show favour to Mr Balicevac and SIG in relation to the provision of security guarding services to the University. Mr Balicevac arranged for Mr Lu to contribute $6,000 to the cost of the pinball machine (no finding is made against Mr Lu in relation to the pinball machine).
Mr Smith engaged in serious corrupt conduct by accepting, or agreeing to accept, the above gifts, as an inducement or reward to use his position at the University to favour SIG’s interests.Outcome? ICAC considers that the University’s tender process for the provision of security services and its lack of a robust contract management framework may have contributed to the occurrence of corrupt conduct. The ghosting at the University created the likelihood that campus safety was compromised. ICAC made 24 corruption prevention recommendations to assist the University to improve its systems.
ICAC also indicates that consideration should be given to obtaining the advice of the Director of Public Prosecutions with respect to the prosecution of Balicevac, McCreadie, Lu, Boutros, Sirour and Smith for various offences.
