5.0 The Employment Investigation

-5.1 Were these Actions Consistent with Standard Policy?

-5.1.1 Standard Policy

The standard policy for employment investigations in the Department is set out in the Human Resources Manual in the section "Managing Misconduct and Poor Performance". It provides a scheme for handling employment investigations. The scheme identifies five components of an employment investigation:

(a) Advise the respondent employee of the allegation;

(b) Gather the information;

(c) Record the findings of the employment investigation;

(d) Determine whether misconduct has occurred; and

(e) Manage the outcome of the investigation (for example disciplinary interview).

In relation to components (a) to (c), the standard format of an employment investigation requires a manager to organise a preliminary interview with the respondent employee, at which time he or she is advised of the allegations and their seriousness as well as his or her rights. Once this is done an investigator, who can either be a manager or someone to whom the manager has delegated the task, commences gathering information. The investigator is required to question the respondent employee and other persons involved in the matter and refer them to any relevant material. Any new or significant material discovered during the investigation is to be put to the respondent employee for explanation or rebuttal. Under the standard format the respondent employee is interviewed last so as to ensure he or she has a full opportunity to address all adverse material. The investigator is then required to prepare a report, which is to include an introduction, terms of reference, background to the incident, a summary of the evidence collected, any disparities in the evidence and recommendations on the findings of fact. The report is to be given to the respondent employee's manager.

In relation to components (d) and (e), when the manager receives the investigation report he or she makes a decision on whether misconduct has occurred. If it has, a disciplinary interview is arranged. Prior to that interview, the manager informs the respondent employee of the evidence in the investigation report, the seriousness of the allegation(s), any disciplinary action proposed, and the respondent employee's right to obtain advice and to make representations in writing or in person about the proposed disciplinary action. At the disciplinary interview, the manager reiterates the evidence against the respondent employee, explains the seriousness of the situation and the proposed disciplinary action, and advises the employee of the time frame he or she has to consider and respond to this information. Once the employee's response is received, the manager considers the response and determines what disciplinary action is needed, if any. Then both the respondent and any complainant employee are advised of the outcome of the complaint and disciplinary action, if any, to be imposed.

The investigative process set out in the Human Resources Manual reflects the due process requirements of employment law. The process is designed to resolve discrete incidents of allegedly inappropriate behaviour by individual employee(s). Its purpose is to inform a manager if disciplinary action is appropriate in relation to an individual employee. An investigation of this type can lead to a decision as to whether particular action(s) amounts to misconduct and whether a penalty should be imposed on an employee. The process works well when used in this circumstance as the issues are usually discrete, specific to the employee(s) concerned, and the evidence is likely to be readily obtainable and manageable.

To summarise, the standard employment investigation process follows two stages. First the person charged with responsibility for conducting the investigation carries out the entire task of:

(a) Gathering information from all relevant persons including complainants, any other witnesses who can add to the information pool and the respondent employee;

(b) Ensuring that the respondent employee is fully informed of adverse information and has an opportunities to reply to it;

(c) Considering the respondent employee's response; and

(d) Making an assessment of the evidence, reaching factual findings and preparing an investigation report. Any disparities in evidence between the persons interviewed are identified in this report and recommendations are made on findings of fact stemming from those disparities.

The responsibility then shifts to the respondent employee's manager. This is the person who, using the investigation report for evidence, determines if there has been misconduct and, if so, the next stage of the process commences. Only then does the issue of penalty arise.

In their comments on the draft report, Ms Love and Mr Dyer stated that the Human Resources Policy set out above was not the policy document in place at the time of the employment investigation. Their comments may have been prompted by the fact that at the time the draft report was written I had been given a paper copy of the policy printed in 2003 but with the Department's assurance that the policy set out therein was unchanged from 2000. As a result of receiving the comments of Ms Love and Mr Dyer, I requested that a hard copy of the Human Resources Policy containing policy and procedure documents as at 2000 be obtained. The Department's hard copies of its manuals are in loose-leaf form and sections of a manual can be updated at different times. The Department provided me with a hard copy of the Human Resources Policy with a section on "Managing Employee Misconduct and Poor Performance" dated June 1999; I was told that was the document in force between 1999 and 2000.

I have now had the benefit of reading hard copy Human Resources Policy documents, relating to employment investigations, dated June 1999 and December 2003. The procedures on "Managing Employee Misconduct and Poor Performance" in both hard copies are the same. During this Inquiry I have looked at a number of manuals issued by the Department, all of which are in loose-leaf form. Re-prints of policies with the date of the re-print noted on the hard copy are common. From reading these manuals, it is clear to me that when a re-print of procedures is undertaken it does not entail a change of all the procedures that are re-printed. The Department tells me there was no change between the 1999 and 2003 procedures for employment investigations. From what I have seen of the Department's manuals, it would be very odd for procedures stated in 1999 to be changed by 2000 and then revert back to 1999 procedures by the year 2003. It follows that I have no reason to think there was any such change.

The terms of reference require me to identify whether there were standard policies and if what was done was consistent with the standard policies. I have no doubt that the hard copy documents the Department has supplied to me set out the Department's official standard policies for handling employee misconduct and poor performance as at 2000.

-5.1.2 What Actually Happened?

Mr Monk, the Regional Manager, chose to use an employment investigation into Messrs Bird, Smith and Kelly as the means of addressing the allegations of inappropriate CERU behaviour. Mr Bird was the manager of the CERU, Mr Smith had acted as second-in-command of the CERU, and Mr Kelly (who was the region's dog handler but who worked with the CERU on its operations) had at times assumed a second-in-command role of the CERU.

The employment investigation commenced in August 2000; by this time the CERU had been disbanded. The terms of reference were drafted by Mr Monk in consultation with Head Office and he chose the investigation team. They were: Maureen Love (the then Human Resources manager for the Canterbury Prisons Region), Anthony Dyer (the then Manager Operational Risk for Public Prisons based at Corrections Head Office in Wellington), and John Kinney who is part of the Department's Internal Audit team based in Christchurch.

The process followed by the employment investigation team commenced in accordance with the standard policy in the Human Resources Manual to the extent that: Messrs Bird, Smith and Kelly were informed of the complaints, and they, as well as many other persons, were interviewed by the investigation team. However, once the investigation was underway there was a move away from standard policy. This was partly driven by the circumstances facing the investigation team. The Human Resources Manual's standard policy for employment investigations has a more simplified process than that which is required for investigations of multiple employees, especially if there are multiple incidents of inappropriate behaviour. The need to grapple with more extensive issues than would usually be faced in an employment investigation appears to have caused the investigation team to depart from standard policy.

In addition I have doubts about how well versed the investigation team was with the Department's standard policy. During his interview Mr Kinney referred more than once to his unfamiliarity with human resource investigations and report preparation and compared this lack of knowledge to his in-depth knowledge of Internal Audit investigations:¹⁶⁸

"I was not familiar with the way a Human Resources or an Employment Investigation report should look. So I just relied mainly on Maureen's [Love] guidance and direction. As far as we were concerned, based on our findings resulting from the allegations, we had ... something like about six or eight of these Eastlight folders of information and evidence, and we would go through each of the allegations and check to see whether we had a sufficiency of evidence before we made any conclusion. Now I don't know exactly - I am not familiar with the reporting methodology that they would use in an HR investigation because I am not experienced in that area."

However, Ms Love had only commenced work as Human Resources Manager for Canterbury Prisons Region on 31 May 2000. She was appointed to this position as a consequence of regional restructuring. Prior to that, she had had several years' experience in a human resources role, including 10 years with the Inland Revenue Department. Although she may have been an experienced person in human resources, that is not to say she would have been experienced and familiar with conducting employment investigations in accordance with the Department's Human Resources Manual's standard policy¹⁶⁹. Mr Dyer, the other member of the investigation team, had only joined the Department on 17 July 2000 as the Manager Operational Risk for Public Prisons Service. He could not be expected to be familiar with standard policy for employment investigations.

The investigation team's lack of experience with the Department's employment investigation standard policy, coupled with the subject matter of the investigation, were responsible for a number of departures from standard policy. These were:

(a) Inordinate delay in completing the investigation and its outcome;

(b) A single/joint investigation covering the three respondent employees instead of three separate investigations;

(c) Omitting to include in the draft report:

(i) a summary of the evidence collected;

(ii) some identification of the disparities in the evidence;

(iii) a recommendation outlining the investigation team's preferred version of
the facts.

(d) The investigation team's draft report recommended the dismissal of the three employees when standard policy made no provision for recommendations on outcome at this stage of the investigative process;

(e) A departure from the standard process for rebuttal of adverse material by the respondent employees; and

(f) A departure from the standard process decision-making process by the manager.

I deal with each departure in turn below.

-5.1.3 Delay

All too soon the investigation became bogged down by the multiplicity of allegations requiring resolution. The investigation became long and drawn out; it did not run smoothly. The investigation team had difficulties interviewing a number of persons. One of the reasons why the investigation took much longer than expected was because once the gathering of information commenced the investigation's focus was soon drawn away from the three employees' conduct and onto wider management issues. Resolving these wider issues in the framework of an employment investigation became impossible, resulting in the separation of the investigation into two parts.

Another reason for the delay was the difficulty the investigation team had in obtaining all the relevant information. Both the investigation team and some of those whom they interviewed spoke disparagingly to me of the investigation's process. The employment investigation was faced with a number of serious disputed allegations of inappropriate conduct. The number of these allegations, their sometimes general nature, and the factual conflicts arising from them meant they were not easily or expeditiously covered through a process of individual interviews. Messrs Bird, Smith and Kelly complained that they had no opportunity to respond to the information provided by the persons who accused them of misconduct. As the allegations involved accusations of dishonesty and wrongly obtaining a financial advantage, they understandably wished to challenge these accusations. On the other hand, the investigation team were critical of the difficulties they encountered in interviewing some persons and blamed these difficulties in part for the investigation's delay:¹⁷⁰

Question "Was it hard to get information?

Answer This is an understatement. . .fair to say that a number of interviews were dragged out deliberately and it was quite frustrating [to get] information and trying to corroborate information. It was a long drawn-out process. But to be fair to [Maureen] Love, to the best of her ability she allowed natural justice to be followed; she gave them lots of opportunities and followed through the opportunities. John Slater, the union delegate - he was reasonably happy with the process and thought Maureen Love was generous in allowing time for these guys to get further information."

They also believed that relevant material had been destroyed. Some of the interviewees found the process unfair as they considered they were not sufficiently forewarned of adverse comment others had made about them. They considered they should have been given more time and more information before they were interviewed.

During the course of the investigation it appears that a person or persons unknown entered Ms Love's office at Christchurch Men's Prison and removed records of confidential interviews. The contents of some interviews became known by prisoners. Although the Police were called in, no-one was able to establish who was responsible for the unlawful entry. The effect of this unintended disclosure caused those interviewees who expected their evidence to be kept confidential to lose confidence in the investigation team, and it discouraged potential interviewees from coming forward.

The investigation and its outcome were not completed until May 2001. The passage of time between the investigation's establishment and completion (August 2000 to May 2001) had a damaging impact on the choice of penalty open to the Department in relation to the incidents of misconduct which were ultimately found proven. Inordinate delay in this circumstance could of itself disqualify dismissal.

The damaging impact the investigation's delay had on the choice of penalty has attracted criticism of the investigation team. Undoubtedly, the delay was prolonged and harmful in so far as it reduced available penalty options; but the investigation team should not be blamed for something that was beyond their control. The issues they were grappling with went well beyond the type of issues capable of resolution by an employment investigation alone. Perhaps the only criticism that can be made of them in this regard, and only then with the benefit of hindsight, is that once they realised their investigation was taking them beyond individual misconduct and into systemic issues, and that this was causing the investigation to become bogged down, they should have raised these issues with the Department and asked the Department to re-think how the subject matter of the allegations should be approached:¹⁷¹

Question "Did it not occur to you once you were starting to get into this issue.. That ... the circumstances before you lent themselves more naturally to an internal audit investigation?

Answer It did. Yeah, it did I suppose. In hindsight, I suppose it was later on towards the end of the field work, you know after we looked at the extent and the number of allegations involved, although they were all relating to people rather than systems, it was probably..... This is only my opinion and in hindsight it may have been better that the Management Issues report or the management issues side of the investigation should have perhaps been done independently by the Internal Audit Group."

-5.1.4 Single Investigation

The employment investigation into Messrs Bird, Smith and Kelly proceeded as a single investigation into three employees. The standard policy envisages investigations of single employees; it is not specifically designed for investigations involving multiple employees and multiple incidents.

Ms Love informed me that the investigation team attempted to report separately on each individual under investigation in its first version of the employment investigation report but that the Department did not want this approach:¹⁷²

"... this was an investigation into three individuals and each of those individuals had the right to privacy, so the findings about Doug Smith had nothing to do with Mike Kelly. He had no right to know what we found about Doug for example. Now, they didn't like that and we didn't do that."

-5.1.5 No Proper Exposition of the Evidence Discovered

By January 2001 the fact finding part of the investigation was completed; on 10 January 2001 the investigation team forwarded a draft report to Messrs Monk, McMurray and McCarthy. The draft report was formatted unusually. Apart from a brief introductory narrative in ordinary text format which set out the background, identified the investigation team members, terms of reference, process etc, the draft report produced a series of tables, in landscape format, for each term of reference. Each table was divided into three columns headed "Issues", "Evidence" and "Findings" respectively. Attached to this were four appendices. Each appendix was also presented in a tabular landscape format which had two columns, one of which was headed "Topic" and the other "Findings". The first appendix set out the general findings; then each of the remaining appendices dealt individually with the three employees. The format was messy and it did nothing to aid the reader's comprehension of the subject matter.

The appendix headed "General Findings" covered issues which the investigation team considered pointed to systemic management failures within the Canterbury Prisons Region. Mr Monk's response was to remove himself from having any influence on the report's outcome. This was a proper response given that the "General Findings" section of the draft report contained criticisms of his management. In a memorandum dated 11 January 2001 he wrote to Ms Love and Mr Dyer:

"I don't think it is appropriate for me to handle the report or to make decisions regarding recommendations.

The comments made about my position and the recommendations for further investigations place me in somewhat of a conflict of interest position and I don't want to be seen as attempting to influence any particular outcome."

At this point Mr McCarthy assumed Mr Monk's role in relation to the report. On 24 January 2001 Mr McCarthy sent the investigation team a memorandum in which he commented on the draft report of 10 January 2001. His comment focussed on two main areas: format and presentation of the report; and substance especially in relation to some operational judgement issues. His comments on format and presentation are relevant here. He expressed concern about the unusual tabular and numerical listing of findings and the difficulty that posed for a reader in trying to extract key information. He said:

"The problem is that it leaves us with a set of appendices in search of a report."

He went on to advise the investigation team that it was important:

"... at the end of the day that you provide a free and frank indication of your findings. However it is equally important that the way those findings and recommendations are presented provides management with a clear indication of the major issues needing attention, in particular those actions that constitute serious misconduct and clearly distinguishes them from other misconducts, areas for management attention and simple observations. I also want to see the report drafted in a more traditional style."

He then went on to suggest a better way of organising the information in the report. He suggested that the general findings section be recast in a narrative form under a series of headings such as Non-Compliance, Finance & Resource Issues, Operational Issues, the Unpaid Work Issue, Staff Management Issues. He went on to say that it may be sensible to separate completely the general findings on systemic management issues:

"Options for management section dealing with the management and systems issues from a misconduct discussion relating to the actions of individuals possibly under each of the above heads."

He then recommended a similar fine-tuning and recasting to be applied to the recommendation section which in the current format he found to contain much duplication and to lack a sense of "prioritisation". He then went on to make a number of comments about the substantive content of the draft report which are not relevant to this discussion.

When I interviewed Mr McCarthy he informed me that his memorandum was an attempt at trying to bring some sense to the formatting of the report. I can understand these sentiments. To me the January draft of the report looks more like a working document than a draft report. Mr McCarthy described it in this way:¹⁷³

"It was appalling. The draft was a shocker, just absolutely dreadful. It was badly written. It didn't - it was impossible for me reading it to work out what was significant and what wasn't, what was opinion and what was demonstrated fact, and you will see the comments I made in the memo were basically, it was drafting advice I was trying to give them, and saying this is the sort of document I think we are going to need, and this is how I think you can improve it."

Mr Kinney agreed that the January draft report was more like a working document:¹⁷⁴

Question "Does it look in any shape or form like what you would expect a report to be?

Mr Kinney From an internal audit perspective - no. It is more like a working paper or a matrix with a whole lot of findings and it is just like a working document, although at that stage I didn't know what an HR report should be like.

Mr Leck Yeah it looks like a working paper.

Mr Kinney Yeah a working paper.

Question My understanding is that was given originally to Phil McCarthy and it was given to Phil because Maureen had become concerned that the investigation was raising issues about Paul Monk and Paul Rushton's management. ...Were you aware of any of that going on?

Mr Kinney I think - yeah in the background I did hear that Phil was unhappy with the format of the way this was written.

Question Did that surprise you?

Mr Kinney Not really, I don't think so. But however once again I wasn't privy to what an HR Investigation report looks like. I just assumed that 'ah right this is the way they do them and obviously they must be familiar with these up there' but certainly Phil asked her to re-write the report or reformat the report and I was aware of that, and then it was changed to that sort of format."

Mr McCarthy's memorandum had unintended consequences. The investigation team interpreted his memorandum as requesting them to provide him with no more than a series of findings and that is what they did; in February 2001 a re-written employment investigation report was given to the Department:¹⁷⁵

Question "One of the things ... that I found unusual about the employment investigation report [February draft] was the fact that it had a series of findings without the reasoning behind the findings. So you see the finding but the basis on which, the evidence, which caused you to come to that finding, is not fully outlined. Can you tell me why the report adopted that particular format?

Answer I could show you why the report adopted that format, which you may or may not have. This is what we got back from Phil McCarthy concerning the first draft of the report [the McCarthy memorandum of 24 January 2001] and as you go through that, you will see why the report ended up looking like it. ...

...Now, quite obviously when you write a report like that, whoever gets it should be saying to you well, you've found that because I said to Paul Monk "all of it is in these folders Paul", which were locked in my office because my office had been broken into earlier in the investigation and information removed, ...So, consequently you couldn't actually read our report at all without going to the evidence. Now, we didn't think we were dealing with people who were so stupid, they didn't know that and I'd made it really clear. I don't know how much clearer I could have made it that you had to do both. But in fact, no reference was made to my knowledge, and it had to be to my knowledge because I had the files so no one could have got to them without coming to me. No one came looking to say, why did you find that there was not a match between the meals that were ordered and the people who attended dinner, for example. It was there, all in black and white. There was not one thing that we found that could not be traced back to some documentary evidence...

Question Who was the one, ... I see what is being said here by Phil McCarthy,[in the memorandum of 24 January 2001] but who was the one who in the end said you should do the findings without summarising any of the evidence to support that?

Answer Phil McCarthy. That report, that was the final report that was sent to him again in draft. He rang me at home to tell me what he wanted done to it. It had to be in that format from his perspective. ...there were staff who were perturbed by how long it was taking on both sides, to be honest. So, it had to be finished, it had to be in an acceptable format. It had to be presentable to the people who were entitled to receive it but those people needed to also be in a position where they could actually read the evidence that justified it. Prior to, whenever I've done investigations and I've done plenty of them, I always attach the evidence to the report. So, whatever interviews I'd done were attached. If I had any other supporting documentation, it was always attached. It's always given to the employees concerned and it's given to the person making the decision. In this particular case, that didn't happen and it didn't happen not because it couldn't happen, but because the decision makers involved in it, Bryan McMurray and Paul Monk, did not make it available."

Mr Dyer formed the same view of Mr McCarthy's memorandum as did Ms Love:¹⁷⁶

Question "One of the things that struck me about the report when I read it is the series of findings and factual accounts behind the findings, but there's not a lot of detail in terms of the references to the evidence or the reasons as to why you came to those findings, and I'm interested to know why the report was written in, given the brief of the investigation, such a succinct way.

Answer Well that was how we were told to write it.

Question How did that fit with your experience of writing up the report?

Answer Not very well but they won't, but Phil McCarthy wouldn't accept it in any other format than what we gave it to him - right - and that was the other thing that infuriated me later, was the fact that they then said, well we didn't give him any, you know we didn't back anything up.

Question Yes.

Answer Well we did it the way, and we had all the stuff there, nobody ever went and looked at the evidence that we had collected.

Question So to what extent as an investigative team, did you make sure you could substantiate the findings that you found?

Answer We could substantiate every finding in either of the reports, but because of the way we wrote or had to write the first one, you have to go back and look at, we had eight ring-backed binders full of documentary evidence...

We knew how we were sitting in this by the time we were writing the report and we weren't going to say anything that we couldn't substantiate, every single thing could be substantiated. Now we were told to cut it back ... write it in that format and then we had the evidence there to back it up, but nobody ever looked at the evidence."

Mr McCarthy informed me that he did not intend his memorandum of 24 January 2001 to be read as requiring the employment investigation report to contain no more than a series of findings:¹⁷⁷

Question "The writers of the report in terms of Maureen Love and Tony Dyer interpreted this memo as a request that they simply provide you with findings, which is how their final report and the employment report reads, and in a sense you have a series of findings which do not go into great detail about the evidence in support of the findings.

Answer That wasn't what I was asking for."

My reading of Mr McCarthy's memorandum does not lead me to think that he was requesting the employment investigation report contain findings only. I can understand why he was not happy with the format of the January report and I agree with him in so far as he found that report difficult to understand. The January report provided detailed evidence but left it to the reader to more or less draw his or her own conclusions on what the evidence meant; the February report contained findings without the evidentiary reasons for the findings being disclosed. Neither of these draft reports complied with standard policy requirements for drafting an employment investigation report.

Although the February report was not ideally formatted, Mr McCarthy made no further attempts at suggesting improvement:¹⁷⁸

Question "Were you surprised given your memo of 24 January 2001 with the document you actually got?

Answer Well I didn't focus particularly; I mean I will have read it at the time, but at that stage it was an action document for Bryan and Paul ..."

By this time the systemic management issues were being dealt with in a separate report and so Mr Monk resumed responsibility for dealing with the outcome of the employment investigation into Messrs Bird and Smith, while Mr McMurray was responsible for the outcome in relation to Mr Kelly.

-5.1.6 Recommendations on Outcome

Standard policy makes no allowance for investigators to make findings in their reports to managers on whether or not misconduct has been established. Nor does standard policy permit investigators to make recommendations on an appropriate penalty to impose on a respondent employee. Investigators are essentially fact gathers. They are required to gather the relevant information, identify factual conflicts and to recommend an interpretation of them. But this is the extent of an investigator's ability to make recommendations. Proposed penalties are not considered until after the manager who initiated the investigation has read the investigation report and decided if the circumstances reported on amount to misconduct. If the manager is satisfied that a factual basis for misconduct (or poor performance) exists, standard policy requires the manager to conduct a disciplinary interview with the respondent employee, at which time the employee has a further opportunity to be heard. After taking all this information into account, the manager makes his or her decision, advises the employee of the proposed penalty, and he or she is given the opportunity to respond to the proposed action; time can be given for the response. Once the employee has responded, the manager decides on the appropriate penalty, if any, to be imposed.

The employment investigation team's report on the investigation into Messrs Bird, Smith and Kelly made specific findings of misconduct and recommendations that these persons be dismissed. This action was completely outside standard policy in the Human Resources Manual for conducting employment investigations. Entire stages of standard policy were omitted. Standard policy provides a staged sequence for handling allegations of inappropriate employee behaviour which, at each stage along the way, provides specific opportunity for the respondent employees to comment on proposed decisions or courses of action.

In his memorandum of 24 January 2001 which set out Mr McCarthy's comments on the draft employment investigation report of 10 January 2001, he does not refer to the report's departure from standard policy for employment investigations.

In his memorandum Mr McCarthy makes it clear that he is simply setting out his preferences for the employment investigation report's format. However, the references in the memorandum indicate his interest in being informed of actions that constitute serious misconduct and having these distinguished from other misconduct. This may well have caused the employment investigation team to consider that it was part of their role to write a report that not only narrated the facts of the subject matter under investigation but went the next stage by providing conclusions on whether or not those facts established the existence of serious misconduct and other misconduct (and the penalty to be imposed).

Failure to adhere to the process provided in an established and communicated standard policy (the Department's Human Resources Manual is such a policy) can result in an employment decision being procedurally unfair and therefore unsustainable. In so far as there were departures from standard policy, the process the employment investigation team adopted may have contravened the fair process requirements of employment law. In addition, employment law requires that an employee has a fair opportunity to address adverse material and any proposed adverse outcome before a decision is reached. If there were allegations that were not fairly put to Messrs Bird, Smith and Kelly at the interview stage, then the issuing of a draft report finding misconduct on their part and recommending dismissal deprived them of their opportunity to be heard. Since the draft report came out in this format before Messrs Bird, Smith and Kelly received a copy of it for comment, the subsequent opportunity they were given to explain or rebut anything adverse in the report may not cure the procedural defect. These legal concerns provide a good reason for not following the draft report's recommendations, however it is unclear to me the extent to which they were recognised at the time decisions on the outcome for Messrs Bird, Smith and Kelly were under consideration.

-5.1.7 No Proper Opportunity for Explanation or Rebuttal of Adverse Material

During the course of their interviews Messrs Bird, Smith and Kelly had the opportunity to rebut or explain some of the adverse comment and information. However, later on they alleged that certain adverse findings in the employment investigation's draft report had not been put to them, so it seems that the opportunity they had at the interview stage may not have covered all adverse information. The employment investigation never resolved this issue. I have not attempted at this late stage to go through all the allegations made at the time for the purpose of determining if the investigation team adequately covered them in the interviews with Messrs Bird, Smith and Kelly. The actual process adopted - providing a draft report to them for their comment - suggests that the interviews were never intended to provide the final opportunity for Messrs Bird, Smith and Kelly to rebut adverse material or comment on it.

The standard policy gives a respondent employee the opportunity to explain or rebut any adverse information at the interview stage of the investigative process. Nonetheless, when allegations are numerous and complex the policy's intent could just as readily be achieved by giving the respondent employee or employees a draft report for comment and then having the investigation team assess all the evidence, including any explanation or rebuttal from the respondent employees, and then reporting to management. Although a departure from what standard policy provides, an approach like this would be consistent with the intent of standard policy's investigative process. However, when a departure like this has occurred the investigation team should still be responsible for finalising the factual analysis in the investigation report; this will include considering any comments made by the respondent employees on the draft report and making recommendations on findings of fact. The manager should then receive the report and determine if it established that misconduct has occurred. If the manager is so convinced, the next stage of the process (a disciplinary interview) should commence. None of this happened. Once the investigation team completed its draft report, the team's involvement in the investigation process ceased. What occurred was contrary to the investigation team's expectations. Mr Kinney informed me:¹⁷⁹

Question "Now ... in terms of the employment investigation, did you ever see ... the Bird/Smith/Kelly submission [in response] to the draft employment report ... dated 30 February 2001 [which] was given to Bird/Smith/Kelly and they responded with that document.

Answer No, I didn't actually see this report. I heard that they were doing a response and we were looking forward to seeing it. No, I never actually saw this report. No. We were waiting for some time. In fact I think Maureen had sent quite a number of emails to Paul wanting a response to her investigation report and also later on to the Management Issues report, and I don't recall her ever actually getting one because we were awaiting for that response as well.

Question Would you expect in the normal course of events that if a document such as the Bird/Smith/Kelly document came in commenting on your report, that you would have the opportunity to read it and consult with them and take it into account and then finalise your report.

Answer Exactly, I would expect that to happen. In terms of the natural justice and so forth that you would certainly - to be fair, you have got to give them the opportunity to comment, and then we would go through and take those comments on board and consult and come to some sort of conclusion accordingly."

Ms Love informed me:¹⁸⁰

Question "Usually what happens when you've prepared a report like that and it goes to the decision maker, my understanding is that you will provide a report, yet again in a draft form ... so it could be handed to, for example Mr Bird, Mr Smith and Mr Kelly for comment. What usually happens is after the people who might be adversely affected by a report have an opportunity to comment, their comments go back to the original report writers who take those comments on board and then decide what the final conclusion are. Whether they will stand by what they've said originally or whether the comments they've received back caused them to change their view in any way. Now my understanding is, that didn't happen in this case?

Answer I've not seen to this day what the response was. I do not know which made it quite difficult for me to understand I guess the decisions that were ultimately made, and it also made it very difficult for me to accept the criticisms that were then tossed at us."

And Mr Dyer informed me:¹⁸¹

Question "... did the Department ever come back to the investigative team officially and say these are the comments that we received on your draft report, can you please assess them and respond to them so that we know whether or not what merit there is in the comment?

Answer No, certainly not to me and certainly not to the team."

The impression I gained from the investigation team was that they expected to receive the comments of Messrs Bird, Smith and Kelly as part of a consultative process that would result in a final version of the investigation report. Mr Kinney informed me:¹⁸²

"...I thought that all along that we would be given the opportunity in all fairness to make a response in relation to their rebuttal, if you could call it that. And that there should have been some sort of consultation in terms of procedural fairness. I would have thought that that would have happened ...

The final round of consultation never took place which would have enabled a lot of issues that they have raised to be sorted or issues that we have raised to be concluded."

It seems, therefore, that the investigation team expected its draft report to be altered as a result of consultation with Messrs Bird, Smith and Kelly. It is hard to understand, therefore, why the investigation team chose to include recommendations on penalties in the draft report given that they anticipated the possible alteration of their report. This would suggest that the recommendations were only tentative and susceptible to change once consultation was completed.

There is another aspect to this matter. Once Messrs Bird, Smith and Kelly received a copy of the draft employment investigation report their efforts in responding to it were frustrated by their inability to access all the evidence the investigation team had relied upon to reach its findings and recommendations. Since the employment investigation report did not set out the evidence relied upon to support the findings and recommendations, this had to come from somewhere else. Messrs Bird, Smith and Kelly requested information under the Official Information Act 1982 to enable them to respond to the draft report. The information was not always forthcoming. Requests which I considered to be relevant were rejected on the ground they were irrelevant. Mr Smith informed me that:¹⁸³

"... I think one of the biggest concerns for us was that we requested disclosure of these things for our defence, which are from pages 95 through to 102, 107 [of our written submission], there were 49 requests for disclosure.... And I'd have to find the one for 'a copy of the official exhibits register, or a stores requisition order form order number applying to same, a copy of all PPS approved training provided to managers...' ... It explains why we wanted it, and the reason it was declined was that it had previously been provided.... 'Information not readily retrievable, disclosure of information would involve unwarranted disclosure of affairs, privacy of another individual ... Information irrelevant to investigation' ... All the way through we've said, you know, this isn't a homicide inquiry, but all we're asking for is what was said ... so we can at least try and defend ourselves, but that those pages to us are quite important in that it clearly states why we wanted them and some of the reasons: 'frivolous, vexatious and trivial in nature' and we didn't get anything."

In its submission to me, the Department was critical of the time Messrs Bird, Smith and Kelly took to reply to the draft employment investigation report. However, this overlooks the fact that the report gave no reasons for its findings and when they sought the relevant information their requests for information (made under the Official Information Act 1982) were not dealt with appropriately by regional management (who had responsibility for dealing with these requests. Without the evidence to support the findings, it is no wonder Messrs Bird, Smith and Kelly took their time to prepare a submission which attempted to provide answers to the findings.

The Department's failure to ensure Messrs Bird, Smith and Kelly were properly and fully informed of all the adverse evidence against them was a further procedural flaw which could, in terms of employment law principles, impact on penalty.

-5.1.8 Decision on Investigation's Findings

A copy of the draft report was provided to Messrs Bird, Smith and Kelly for their comment. They prepared a joint 144 page submission in answer to the allegations made against each of them. The length of their response serves to illustrate the unsuitability of the choice of an employment investigation on its own. The extensive nature of the allegations and the answers that Messrs Bird, Smith and Kelly gave to them demonstrates the need for a different type of investigation, perhaps additional to an employment investigation. This issue is dealt with in more detail under the heading "Were the Department's Actions Appropriate to the Presenting Facts?"

When the Bird, Smith and Kelly submission was completed it went to Mr Monk. He took the unusual approach of determining the investigation's outcome for Messrs Bird and Smith without first referring the Bird, Smith and Kelly submission to the investigation team for the purpose of finalising their draft report. Mr McMurray did the same in relation to Mr Kelly. The Bird, Smith and Kelly submission was never seen by the investigation team. It did not participate at any departmental meetings or such like occasions where the submissions of Messrs Bird, Smith and Kelly, and the weight to be attached to them, were considered:¹⁸⁴

Question "Did Paul Monk ever sit down with you and have any discussions with you about some of the findings in your final draft report in view of comments that had come in to him from Doug Smith, Tony Bird and Mike Kelly?

Answer I think we might have had a couple of conversations where... it certainly wasn't put to me that they had said this is not right. He did say, I think it was on two separate occasions what was your evidence for this and I would explain that to him. I can't recall exactly what they're about.

Question Were these formal sessions where when he questioned you, you could show him the evidence?

Answer No, no. What they were, were usually tagged on another meeting we might be having or in passing, I'd pop into his office perhaps to ask something else then he'd just say to me '...well, I've been reading the report Maureen and I'm a bit confused about this bit. What was your evidence for this?' And I would say well it's this or that or whatever, would you like to see it... 'no'.

Question Did you ever show him any evidence to substantiate one of your conclusions?

Answer No. Unlike any other manager I have ever dealt with in relation to any investigation, they want to see why any conclusion or finding has been made. This man did not come near the evidence and yet he had every opportunity to do so. As far as I'm aware, I will say that but to get into my office, he would have to have a key.

Question So he never actually sat down with you in any structured session and had a blow-by-blow discussion of findings your investigative team had made in their draft final report? Responses that had come in from Bird, Smith, Kelly or anyone else affected by the report and then said to you, well in view of what's said here, where is your evidence for maintaining these findings that you've got in your draft final report?

Answer No.

Question And at no time did you ever see the submissions that Bird, Smith or Kelly put in to Paul Monk? Did you see any submissions anyone else might have put in to Paul Monk regarding your draft final report?

Answer No. Were there some?"

Since the investigation team had carried out the investigation they were familiar with the factual background and so they were in the best position to assess the Bird, Smith, Kelly submissions against their draft report. As the fact gatherers they had received all the factual information and where the Smith, Bird and Kelly submission put forward a different version or view of the facts. The investigation team was best placed to identify the factual conflicts and recommend the preferred version.¹⁸⁵ Neither Mr Monk nor Mr McMurray was as well versed with the facts as the investigation team. Nonetheless, the task of assessing the Bird, Smith and Kelly submissions against the factual findings in the employment investigation report was not given to the persons best able to carry it out.

I can understand the departure from standard policy by permitting Messrs Bird, Smith and Kelly to provide a written submission in response to the draft report. The detail was so extensive that they could not have answered adverse information without the benefit of having some time to digest the content of the allegations made against them and prepare a written submission in response. What does concern me is the action Mr Monk subsequently took. His decision not to refer the Bird, Smith and Kelly submission back to the employment investigation team to enable them to assess whether their original comments and conclusions on the facts should be amended in the light of this submission is most unusual and contrary to any process I am familiar with for resolving disputed allegations.

Apart from Mr Monk, who advised me that the process he followed in the investigation is the one he uses for all employment investigations, no-one else was familiar with this process. The union representatives I interviewed from the PSA and CANZ had not encountered this approach before. As union representatives for the unions representing prison officers they are regularly involved in employment investigations the Department carries out from time to time. Like me, they expected that the person responsible for carrying out the investigation would be the person responsible for resolving discrepancies and contradictions in the evidence (as much as this was possible) and therefore they expected that a respondent employee's response to a draft report would be left to the writer or writers of the draft report to assess. Once such an assessment was completed a final report would be given to the decision-maker who should then decide if further action (such as disciplinary action) was warranted.

The CANZ representatives that I interviewed told me that:¹⁸⁶

Question: "...So from your perspective of being involved in employment inquiries, how does that fit with the normal process?

Answer: In my experience if a Team is set up to investigate certain allegations there is a preliminary inquiry ... once the report has been completed, sometimes with recommendations in terms of action and sometimes without, it then goes to the defendants from Mr Monk. Depending on the Region you are in, given the opportunity to respond, and that response goes back to the people who originally drew up the report to give them the opportunity obviously of giving their response ... and that is normal procedure. And I have actually been to the Employment ... Tribunal whereby one of the main people giving evidence on behalf of the Department has been the person who originally drew up the report and they often focus on the responses they have given - of the replies they have given to the original feedback that we provide on behalf of members. So that, to say the least is unusual ..."

The PSA told me that:¹⁸⁷

Question: "... Does that fit with your usual understanding of what happens in an employment inquiry?

Answer: No. The ... inquiry officer would have access to all the information ... would ask for reports, would ask all people being interviewed if they wanted other people to be interviewed, and would see the results of them, would conduct the interviews...

Question: ... if a draft report is prepared for comment ... the natural justice issue ... the comment that is received goes back to the person who prepared the draft report ... the person who wrote the original report gets to look at the comments on it and then evaluates his or her comments against what has come out. Does that accord with what people expect to happen?

Answer: Yeah, I think so ... when we look at the procedure for employment investigations in prisons, it's robust if you take it on its own...

But certainly ... the notion of a draft employment investigation would be rare, I would have thought. Usually, what you'll find, as I said, is a preliminary investigation followed by an employment investigation where you've interviewed the appropriate people and the investigating officer has weighed the evidence on the balance of probabilities and said this person said this, this person said this, and you will see through the employment investigation transcripts of interviews and would say at this point this person said this but this is contradicted by that point. And then at the end there'd be a series of recommendations.

But the notion of a draft report, is of itself, odd. And the fact that that was not referred back to the investigation team, is again, very odd. Because you'd expect that at that point that the investigating team would receive the Smith/Bird/Kelly submission and finalise the report and subsequently submit that to Mr Monk in order for his conclusions to be reached ... as manager..."

In its submission to me, the Department was critical of the employment investigation team's draft report; part of its criticism was that the report did not substantiate its findings and that senior managers within the Department had to undertake the exercise of reconciling the Bird, Smith and Kelly submission with the findings in the draft employment report. However, this criticism overlooks the fact that the employment team were not responsible for this state of affairs; they played no part in the decision to exclude them from finalising the employment investigation report. From the employment investigation team's perspective, the time for pulling together all the information came at the stage of the report's finalisation:¹⁸⁸

Question "... you unearthed a lot of information. The final report that went to the Department doesn't seem to me to measure up, ie it doesn't have the types of things I would expect. You read the conclusions, but don't know why, and the consequences - [there is] nothing to support it.

Answer ... the field work and the interviews - we collected a sufficiency of evidence. Always of the understanding that the report was a draft report that would go out for consultation, and the consultation phase would pull it together and tease out.

Question [Quote from Department's submission] "Senior managers then needed to undertake an extensive reconciliation exercise" - that only happened because of the departure from the usual process where the comments go back to the writer of the report to make an assessment and have a consultation and come up with a final report.

Answer Yes. I never saw the large document that they submitted. We were waiting for it.

Question Now it seemed to me that what happened here because the submissions coming from Bird/Smith/Kelly went to Mr Monk, he had to draft a report. In fact he was faced with them at times denying matters or saying they had never been questioned about it. He never went back to you, the Inquiry Team, on these points so these issues were just left hanging. Consequently no-one could follow on in terms of taking steps because there were a whole lot of matters unresolved.

Answer Exactly. They are still unresolved today."

In addition the investigation team believe that the reason their report only sets out findings and does not refer to evidence that substantiates the findings is due to Mr McCarthy asking for the report to be prepared in that way.

-5.2 Were the Department's Actions Appropriate to the Presenting Facts?

I do not think that the choice of an employment investigation on its own was appropriate, given the presenting facts. The decision to commence an employment investigation was made in August 2000. By that time the Department had knowledge of allegations about the CERU's inappropriate behaviour from more than one source. For reasons which I set out below I think these allegations indicated the need for a management systems inquiry (either instead of or in addition to an employment investigation into the actions of Messrs Bird, Smith and Kelly); and that the Department either would or should have been aware of the unsuitability of the employment investigation process for dealing with wider allegations of this type.

The investigative process that an employment investigation follows is not suited to resolving numerous different sorts of disputed allegations that are made against a group of employees, unless each employee is dealt with in the course of the investigation on an individual basis, where that is appropriate in the circumstances. A variety of allegations against a number of employees could point to a management breakdown in a unit rather than simply individual employee misconduct:¹⁸⁹

Question "It seemed to me that looking at the issues, although you were looking at three people the fact that their conduct involved all the things that were alleged would suggest there was a systems failure, because if the systems were good three people could not behave to the extent that it was alleged against these three people. Is that a fair assumption?

Answer Exactly. As we got into the investigation from the employment side of things we found that there were control weaknesses throughout numerous operational systems and the financial systems, and really it did ring alarm bells."

In addition the number of persons and the number of allegations made against them will complicate an employment investigation process. More information will need to be discovered and then managed. The time taken to do this may be longer than is acceptable in an investigation into employee misconduct, where delay can narrow the scope of available penalties. For example, if the completion of an employment investigation is delayed for too long, that can disqualify dismissal of the employee even if dismissal would otherwise have been justifiable.

Systemic management faults are not usually attributable to any one individual. If blame is to be apportioned for such faults, it is usually through senior management being held accountable for not spotting the problems earlier on and remedying them. In the end only those persons with the necessary authority to cure management faults can be truly held accountable for their occurrence. It follows that an investigation designed to see if management systems are faulty looks at how an organisation functions as a whole; it is not designed specifically to identify individual employees at fault. Such an outcome can sometimes follow from a management systems investigation, but it is not the purpose of such an investigation.

At times a workplace can experience both individual employees behaving inappropriately as well as systemic management problems. Here the systemic management problems are not directly responsible for the inappropriate behaviour (inadequate management systems cannot excuse individual employees' misconduct), however systemic management problems can be indirectly responsible for such inappropriate behaviour in that better management systems would either preclude such conduct, or ensure it was readily identifiable and promptly responded to once recognised. When this combination happens in the workplace, a management systems investigation is required. Particular incidents of employee misconduct may require investigation as well, but without the broader look at how the workplace has been functioning, the core problems will not be resolved by focusing on the behaviour of certain individuals. If their behaviour is a by-product of poor management, a limited employment investigation will not result in a satisfactory outcome. The underlying systemic problems will remain. I think the drawbacks (as identified below) of an employment investigation were apparent and therefore should have been recognised from the outset.

First, the allegations were widespread and the persons against whom they were made, the manager of the CERU and the two men who had subsequently assumed a second-in-command role when the manager was absent, immediately suggested a management failure within the CERU. Secondly, the process followed by employment investigations is not readily able to deal with multiple disputed incidents of alleged misconduct, especially when these reflect systemic management failure. Because the allegations of inappropriate conduct were directed at Messrs Bird, Smith and Kelly, they became the focus of Mr Monk's attention and the employment investigation was into their conduct in relation to the broader issues raised in the terms of reference. But, while the allegations were directed at those persons. This arose from the roles they occupied in the CERU. Many of the allegations were general in nature and related to CERU behaviour in general. These types of allegations are not easily handled by an investigative process designed to focus on specific incidents of an individual's misconduct.

Thirdly, the general nature of the terms of reference suggested systemic failures. The terms of reference empowered the employment investigation team:

(a) To see if there was evidence of falsification of timesheets for CERU staff and if so to what extent;

(b) To determine if departmental vehicles or staff had been used for private purposes;

(c) To determine whether rosters and work practices in the CERU were structured for personal gain of individual staff;

(d) To identify whether CERU management had taken advantage of certain staff in relation to work and overtime;

(e) To determine whether Public Prison Manuals and departmental procedures in relation to handling and storage of confiscated items, drugs and contraband had been followed;

(f) To review procedures used for visits of the CERU to Dunedin Prison; and

(g) To identify any other matters considered relevant in relation into the investigation.

These are not the type of terms of reference to expect of an investigation into specific allegations of misconduct against known individuals. The general import of these terms of reference is that the field of inquiry went beyond specific misconduct on the part of Messrs Bird, Smith and Kelly and instead required an examination of how the CERU functioned as a unit.

To set up an investigation with terms of reference of this type demonstrates some realisation of the wide scope of the investigation. In his consultation comments dated 3 December 2004, Mr Monk advised me that he consulted extensively with Head Office managers regarding the investigation, the terms of reference and the composition of the investigating team. Clearly the terms of reference were well thought through at the time. Once drafted, their width, as well as their content, should have been an indicator to all concerned that an employment investigation was not appropriate on its own. Indeed an employment investigation into Messrs Bird, Smith and Kelly required terms of reference which set out specific allegations against those persons.

The nature of the terms of reference points to a management systems-based investigation into the overall functioning of the CERU. In its consultation comments, the Department has informed me that, given the disbanding of the CERU in June 2000, by August 2000 when the employment investigation was first mooted a systems-based investigation into the CERU was unnecessary. However, the nature of the terms of reference drafted for the employment investigation suggests that, at the time, investigating the CERU's management is where the Department's interest lay. None of the terms of reference specifically refer to acts or omissions of Messrs Bird, Smith and Kelly.

The Department submitted to me that the original allegations largely centred on administrative issues such as timesheet use, management of overtime, management of contraband seized during vehicle inspections and in other ways, and approval of expenses (all of which raise questions about the CERU's management systems). The Department emphasised that the original allegations were not thought to involve allegations of mistreatment of prisoners. For this reason the Department submitted that at the time the decision to use an employment investigation was understandable but that with the benefit of hindsight it accepted that a different type of investigation was also warranted to deal with the wider allegations.

I think the Department must have taken an overly constrained view of the allegations to have reached the conclusions it has expressed to me in its submission. The misconduct that was upheld against the three employees did come down to what the Department describes as administrative issues. However, the allegations of Mr Clarke and the two CERU members included complaints about CERU mistreatment of inmates, unlawful actions in relation to searching of prison visitors at vehicle check points, unlawful handling of contraband items seized from prison visitors, off-duty behaviour that contravened the code of conduct, inappropriate and potentially unlawful disciplinary action towards staff (the Employment Court later found the disciplinary action towards one CERU member was unlawful), inequitable allocation of work and overtime and the adoption of an inappropriate military culture. All of these matters go beyond administrative-type allegations of misconduct on the part of Messrs Bird, Smith and Kelly. En masse, the allegations of Mr Clarke and two CERU members clearly indicated a malfunctioning unit.

Though the Department submitted, and Mr Monk accepted, that with the benefit of hindsight the choice of an employment investigation on its own was not sufficient and that there were better ways of dealing with the wider allegations, my view is that the unsuitability of an employment investigation to investigate the questions in the terms of reference was clear from the outset. The level and extent of the alleged inappropriate behaviour pointed to management error within the CERU. If true, the inappropriate behaviour occurred because management controls were either absent, or if present they were unable to counter such conduct.

The choice of investigation process meant that its progress was significantly delayed due to the inappropriateness of its process for handling all of the allegations before it. Part way through the investigation, the need to separate the employment issues from broader systemic management issues was belatedly recognised. This only added to the delay. Ultimately, the outcome of the employment investigation left many unsatisfied. Messrs Bird, Smith and Kelly feel they were the scapegoats for senior managers, whose own contribution to the CERU's now criticised behaviour was overlooked. Other Department employees consider Messrs Bird, Smith and Kelly were treated too leniently.

Almost everyone I interviewed had failed to realise that the misconduct that was proven against Messrs Bird, Smith and Kelly occurred within the context of a badly managed unit that was not subject to appropriate oversight by more senior managers and that an environment such as this was hospitable to irregular conduct. The actors were responsible for their own misconduct, but they were not responsible for the environment that allowed it to occur. No-one within the Department at the time appeared to recognise the part systemic management failure had played. During the consultations on the draft report, the PSA reminded me of their evidence on the role systemic management failure had played. Alan Ware of the PSA gave evidence that:¹⁹⁰

"...the whole question of lines of responsibility and the clarity of responsibilities when the ERU was set-up is an extremely clouded issue and always has been. We believe that was avoided essentially, in the initial investigations, and that responsibilities were never sheeted to where they belonged."

And Andrew Dallas of the PSA gave evidence that:¹⁹¹

"...if you took it [the employment investigation report] in that isolated sense you'd say look, these people formed themselves into a group, they trained themselves and they were running around the South Island ... because there seems to be no clear linkages between them back to the Department, and that's what's missing first of all."

The comments of the PSA are well made. However, the fault lay not with the employment investigation's report so much as with the limitations of an employment investigation for dealing with many of the issues requiring investigation.

The facts as they presented to the Department called for a systems and management investigation of the type carried out by the Department's Internal Audit Group. That is the type of investigation that Internal Audit specialises in carrying out. It has standard policies and qualified personnel available to carry out audits of operational activities. If there were concerns about the culpability of Messrs Bird, Smith and Kelly, these could have been addressed by three separate employment investigations, each of which focused on discrete allegations of misconduct that related directly to each individual. I see no reason why the two different types of investigation could not be run simultaneously. That way, the employment investigations could have been resolved quickly and fairly in terms of the process each investigation underwent; while at the same time the bigger systemic management concerns could have been thoroughly examined by the Internal Audit Group.

In his consultation comments the Department states that the unit's disbanding in June 2000 and the implementation of WDP meant that the systemic issues arising from the CERU were historic. This is correct in terms of the CERU itself. It does not answer how the CERU's inappropriate behaviour could continue for as long as it did without some recognition from regional and Head Office management. It was still necessary for the Department to discover how this had occurred as only then could it asses if the changes introduced by WDP would prevent something like what happened from occurring again.

-5.3 Did the Actions Remain Appropriate as Events Unfolded?

I have already concluded that the choice of an employment investigation in response to the presenting facts was not appropriate on its own. Nonetheless, to the extent the initial decision to hold an employment investigation may have been appropriate to the presenting facts, it ceased to be so as events unfolded. Once the employment investigation was underway and the information was gathered, it became even clearer that what was needed was a systems management investigation:¹⁹²

Question "Did it not occur to you once you were starting to get into this issue though that in fact the circumstances before you lent themselves more naturally to an internal audit investigation?

Answer It did. Yeah, it did I suppose. In hindsight, I suppose it was later on towards the end of the field work, you know after we looked at the extent and the number of allegations involved, although they were all relating to people rather than systems, it was probably..... This is only my opinion and in hindsight it may have been better that the Management Issues report or the management issues side of the investigation should have perhaps been done independently by the Internal Audit Group. Now I don't have any authority to say 'yes we are going to do this' but I have talked about it with Mike [Martelli], the General Manager Strategic Services who is the senior manager responsible for the Internal Audit Group] since and he may well be of the same view. I am not sure."

-5.4 Were the Recommendations of the Departmental Inquiries Actioned?

The draft report of the employment investigation found there was misconduct on the part of the three employees and it recommended their dismissal. These recommendations were not followed. Neither standard policy nor the terms of reference for the employment investigation empowered the investigation team to make final decisions on whether or not misconduct had occurred. Similarly, they had no authority to make recommendations on the appropriate outcome for Messrs Bird, Smith and Kelly. Their job was to identify the facts and where there was a dispute on the facts to recommend the version to be preferred. Their job did not go so far as to determine if the factual material they discovered amounted to misconduct. In addition, the findings of misconduct and the recommendations that Messrs Bird, Smith and Kelly be dismissed were made without the investigation team having heard evidence in explanation or rebuttal from Messrs Bird, Smith and Kelly.

-5.4.1 If Not, Why Not?

In May 2001 Mr Monk decided that the appropriate outcome from the employment investigation into Messrs Bird and Smith was to issue them with a final warning (to be kept on their personal files for one year). Mr McMurray, who was the senior manager responsible for Mr Kelly (the line management for dog handlers is not regionally based; it runs from the handler through the Department's senior managers at Head Office) decided the same outcome for Mr Kelly.

Mr Monk and Mr McMurray found that a number of the allegations against these employees could not be substantiated. However, they found other allegations were established. These involved non-compliance with the Department's policies and procedures in a number of respects including: breaches of the Public Prisons Manual for searching visitors to the prison and handling confiscated items; breaches of the Human Resources procedures relating to staff discipline; and inappropriate (but not fraudulent) use of the Department's resources.

Mr Monk considered that the outcome for Messrs Bird and Smith was on the cusp of dismissal. One of the factors which caused Mr Monk to decide not to dismiss Messrs Bird and Smith was his concern about a dismissal decision being overturned by the Employment Court. This concern sprang from the time gap between the occurrence of the established misconduct (it had occurred during the lifetime of the CERU, which ended in May 2000); the delay between the complaint of misconduct being received and investigated (August 2000) and the decision on penalty, which was not made until May 2001. His concerns were soundly based. Delay, particularly of this duration, can work against a dismissal. Mr McMurray similarly considered that Mr Kelly should not be dismissed. Until Mr Kelly's involvement in the CERU (which was never formalised), he had a good work record.

I have no difficulty with these outcomes. The decision to dismiss or not dismiss an employee is discretionary and apart from clear cut cases it can vary according to all the particular circumstances. Furthermore, exercises of discretionary judgement do not always predicate a particular outcome. Cases of employee misconduct can often elicit more than one outcome. In relation to the misconduct as established by the decision-makers in this case, I can understand why Mr Monk and Mr McMurray chose not to dismiss the employees concerned. To some extent the established misconduct flowed from the poor establishment and management of the CERU; and this was something for which more senior managers were responsible, either by omission or commission. In addition, the established misconduct was not so serious that it would automatically result in dismissal, especially since the penalty imposed on an employee must take into account the employee's work record and be consistent with penalties imposed for like offences.

The evidence showed that until Messrs Bird, Smith and Kelly became involved with the CERU their work record was good. While their conduct in relation to the CERU did not always conform to that required of the Department's employees it needs to be remembered that the CERU operated in an environment that lacked the usual controls. There was a laxity and uniqueness to this unit's operation which senior managers did nothing about during the time the CERU was operative. I have described facets of this in earlier sections of this report.

There were concerns about misuse of overtime, incorrect completion of time sheets and over-claiming of expenses. However, the CERU operated in circumstances where many of its members performed operations in their own time and without payment. Although some members believe that Mr Smith abused the overtime system by claiming it when others did not, he says that he did plenty of voluntary work in his spare time. The fact is that no-one was supervising the overtime properly and senior managers encouraged voluntary work. During the preparations for the coming millennium, Mr Rushton was regularly provided with reports from the CERU which recorded members working voluntarily for up to four hours at night often after they had completed an eight hour shift. One of the inherent risks of an employer accepting too much voluntary work from its employees is that at some time such employees may feel justified in taking certain benefits in view of their voluntary sacrifice of time on other occasions. Someone who has given the Department many hours of his or her free time may fail to be less precise about hours of overtime claimed when such claims are made or they may feel freer to use the Department's property (such as vehicles) for private use. On one occasion during work hours members of the CERU drove to Mr Smith's house in the Department's vehicle to catch one of Mr Smith's roosters which was on the loose. While such conduct is not acceptable and should not be condoned, I can understand why Mr Smith and others who had worked up to four hours on more than one occasion per night voluntarily to ensure that Christchurch Men's Prison was prepared for the millennium might think that the Department should permit them to carry out this private task during work hours.

Members of the CERU were accused of inflating expenses while in Dunedin. During this operation the CERU worked for many hours that were not claimed. The confusion over the amount of money spent on drinks and food and claimed as an employee expense (which formed part of the employment investigation) was partly because some believed that, given the long hours and hard work involved, a restaurant meal and drinks was their due. In addition there were "shouts" for some prison officers from Dunedin who participated in this exercise. All the prison officers engaged in this operation acted beyond their authorised duties. They essentially functioned as security and surveillance officers to protect the security of a Dunedin Prison manager. This activity is well outside the range of duties of a prison officer. Had any attempt been made to carry out the death threat against the Dunedin manager, these prison officers may have been harmed. This operation was sanctioned by senior managers. In this circumstance, the officers' belief they could unwind at the Department's expense may be understandable.

Once the boundaries of what was expected of the CERU members became blurred and senior managers accepted and even encouraged the CERU to perform voluntary work, the potential for the CERU to take something from management in return vis-à-vis some leniency and generosity in staff benefits was perhaps understandable (although not excusable).

The pattern of conduct which later led to the allegations from staff members (once acrimony within the CERU had developed) developed over time and it did so in circumstances where no-one senior to Mr Bird was supervising the CERU adequately. If a unit of staff and its immediate manager is left to its own devices, it is not surprising that after a while their conduct may depart from the norm.

For the above reasons, I can understand why it was that Mr Monk chose not to dismiss Messrs Bird and Smith. The same goes for Mr McMurray's decision on Mr Kelly. In my view the misconduct that was ultimately established in relation to Messrs Bird, Smith and Kelly was directly attributable to a systemic failure of management. Essentially, within the Christchurch Prisons Region the CERU operated differently and outside the normal confines of the other units in the Public Prison Service. It follows that it would be more difficult for the Department to require compliance with some of its rules when the CERU were permitted to operate outside other rules. In this circumstance a penalty like dismissal may well have led to employment litigation in which Messrs Bird, Smith and Kelly were successful.

For completeness, I will raise an issue that the Department has referred to in its submission to me. The submission refers to the terms of reference for the employment investigation, the failure to include the "penis on the bar" incident, and the failure of the employment investigation to address this issue under the catch-all term of reference clause.¹⁹³ The submission goes on to state that:

"A different disciplinary decision may have been made had these issues been addressed in the employment investigation."

I cannot see how addressing the "penis on the bar" incident would have made much difference to the outcome of the employment investigation. Even if it had resulted in the dismissal of the staff member, that in itself could never excuse the Department's failures, which I have identified herein. The responsibility for allowing the CERU's inappropriate conduct¹⁹⁴ to happen lies with poor management, primarily in the Canterbury Prisons Region. If the CERU had been well-managed, the inappropriate conduct giving rise to this Inquiry would not have occurred.

The events at an after-hours social event in which one member of the CERU exposed his penis and another "tapped it with a beer bottle" (to use the words of the person affected) are a side issue. To remonstrate over the failure to use this event as a basis for dismissal (presumably for bringing the Public Service into disrepute) is to miss the point about what happened in Canterbury.

Unfortunately, the outcome of the employment investigation has become somewhat controversial. By the time the employment investigation had commenced, there were tensions and schisms among the staff in the Canterbury Prisons Region, particularly at Christchurch Men's Prison, about what had happened within the CERU. Some staff and some prisoners believed that Messrs Bird, Smith and Kelly had acted dishonestly in relation to claims of overtime, misappropriation of contraband items taken from visitors to prisoners and assaults on prisoners. By the time the employment investigation was completed, Prison Inspectorate and Ombudsman investigations into individual prisoner complaints about the CERU had upheld those prisoner complaints. The recommendations in the draft employment investigation report became public. The contents of some investigation interviews removed from Ms Love's office became known to the prisoners. These events informed the views of some of the persons who believed the Department had not responded appropriately.

During this Inquiry, I interviewed persons who still had strong negative feelings about the decision not to dismiss Messrs Bird, Smith and Kelly. Some of the staff and prisoners I interviewed felt there had been a cover-up and that Messrs Bird, Smith and Kelly had been treated too lightly. These persons considered that the treatment of Messrs Bird, Smith and Kelly departed from the standard approach taken with other employees whose actions had been found to be similarly inappropriate. For some of the staff in the Canterbury Prisons Region this is still a hot topic.

While I recognise the strength of feelings of this group of persons, it needs to be remembered that termination of employment has a serious impact on employees and that such decisions must be based upon fair process and substantiated by sound evidence. In addition managers must ensure they act fairly in terms of consistent treatment of employees. Apart from the issue of delay there were other factors which told against dismissal. None of these factors appear to have been recognised at the time by regional management. This in itself is of concern as the inappropriate management of employment investigations poses its own legal risk for the Department. Though none of these additional factors were relied upon by regional management to support the employment decisions, I think it is appropriate for me to have identified them. By doing so, further justification for not dismissing Messrs Bird, Smith and Kelly is identified. I think recognition that the Department reached the correct decisions is important.

-5.4.2 If Yes, is there Evidence that they are being Adhered to?

As regards the employment investigation, I have already concluded that the recommendations of the employment investigation team were not followed.

-5.4.3 Conclusion I find that: (a) For the persons given the task of investigating whether there was a factual basis to support allegations of misconduct (the first stage of the employment investigation as set out in the Human Resources Manual), to make findings of the existence of misconduct and recommendations on penalties to be imposed was contrary to standard policy under the Human Resources Manual. To do this was (in terms of the standard policy) to move beyond the realms of their task and to trespass on the territory of the decision-maker; (b) The employment investigation team's findings of misconduct and recommendations on penalty were in breach of natural justice as they were made without the persons affected by these conclusions having the opportunity to explain or to rebut all the adverse material on which the investigation team had based its conclusions; and (c) Given the above circumstances, if the Department had followed the recommendations in the draft employment investigation report, its action would not have withstood any legal challenge brought by Messrs Bird, Smith or Kelly. It needs to be acknowledged that the employment investigation unearthed much relevant information of which the Department needed to be informed, and that this information has provided a helpful factual foundation from which to commence inquiries for this report. However, the information it discovered was not, and could not be appropriately used solely in the framework of an employment investigation into three persons. In this respect it reveals a lost opportunity to deal properly with the allegations of inappropriate behaviour of the CERU, especially in terms of discovering the systemic flaws this information revealed about the establishment and management of the CERU.

¹⁶⁸ Kinney transcript p5

¹⁶⁹ In her consultation comments on the draft report she insisted the policy I have found to be still standard policy did not apply at the time. This shows she was unfamiliar with the standard policy. Why this is I cannot say as I have not explored to this point

¹⁷⁰ Kinney transcript p8

¹⁷¹ Kinney transcript p5

¹⁷² Love transcript p6

¹⁷³ McCarthy transcript p24

¹⁷⁴ Kinney transcript p26

¹⁷⁵ Love transcript p5

¹⁷⁶ Dyer transcript p14

¹⁷⁷ McCarthy transcript p24

¹⁷⁸ Ibid

¹⁷⁹ Kinney transcript p26

¹⁸⁰ Love transcript p7

¹⁸¹ Dyer transcript p12

¹⁸² Kinney transcript p9

¹⁸³ Smith transcript p.43; pages 95-107 of Messrs Bird, Smith and Kelly's submission in response to the employment investigation sets out the details of the various request made for information under the Official Information Act and the Department's responses. From my reading of the material I think the requests were properly made and they were not always properly answered.

¹⁸⁴ Love transcript p8

¹⁸⁵ This is what the Department's standard policy provides for.

¹⁸⁶ CANZ second transcript p34

¹⁸⁷ PSA transcript p6

¹⁸⁸ Kinney transcript p51

¹⁸⁹ Kinney transcript p5

¹⁹⁰ PSA transcript p2

¹⁹¹ PSA transcript p10

¹⁹² Kinney transcript p5

¹⁹³ This was first publicly disclosed in the hearing of Mr French's case in the Employment Court. During an out-of-work social occasion, one member of the CERU applied a beer bottle to the exposed penis of another CERU member. The degree of force used is a matter of dispute. Neither of the two persons involved complained about the incident. It was referred to in the Employment Court by a third person, also a member of the CERU, as an example of the CERU's inappropriate culture.

¹⁹⁴ That which I have identified herein.