12 Apr 2017

CERA aware of business interests, say accused ex-officials

9:09 am on 12 April 2017

Two former officials accused of serious misconduct at the Canterbury Earthquake Recovery Authority (CERA) say their bosses knew all about their other business interests.

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Photo: RNZ / Diego Opatowski

An inquiry has found Gerard Gallagher and Simon Nikoloff had a clear conflict of interest when arranging property deals through their own company. Their actions have been referred to the Serious Fraud Office.

But the men say CERA's management knew all along about their other business interests.

The inquiry was carried out by Michael Heron QC on behalf of the State Services Commission.

Mr Heron's report found the men to have been using a private company to attempt to participate in a business deal for personal gain with the same parties they were engaging with in their capacity as CERA employees.

Read the full public statement by the commission here.

"The owner of that property thought he was dealing with CERA employees and wasn't aware that they were on the other side of the transaction as dealing with a company and involved in a sale and purchase agreement," said Mr Heron

Following their employment with CERA, Mr Nikoloff and Mr Gallagher began working for another Crown company, Ōtākaro, that delivers large government projects in Christchurch.

In a statement, Ōtākaro said a disciplinary process was underway but never completed because Mr Gallagher left the organisation on 7 March and Mr Nikoloff on 10 April.

In a statement issued by a public relations firm yesterday, the men said they maintained that "the CERA legal team, leadership and CERA's external legal team were aware of what we were doing with our outside business interests".

"Coming from a business background, we have pursued various business interests since before joining CERA, and these interests were fully disclosed to CERA.

"In fact, CERA hired us because they needed our extensive private business networks, knowledge and commercial expertise - expertise and connections that CERA did not have.

"They chose not to advise us there was a potential conflict. We acknowledge we should have declared what we were doing in writing."

The statement also said the State Services Commission investigation had found that allegations of any criminality were completely unfounded. Both Mr Heron and State Services Commissioner Peter Hughes said that was not correct.

"I didn't investigate criminality," said Mr Heron. "I did consider it. I've referred both matters to the Serious Fraud Office."

A third CERA official, Murray Cleverley, was also a shareholder in the company. Mr Heron accepted that Mr Cleverley was not aware the company was actually operating, but found he'd made a significant error in judgement by not disclosing his shareholding to CERA.

The investigation also looked into the management of a conflict of interest related to Mr Cleverley's new role as chair of the Canterbury District Health Board.

Mr Cleverley is the director of a company which leased property to the health board. He did not accept recommendations from the Ministry of Health and the State Services Commission to step down from the company.

The investigation found Mr Cleverley risked undermining trust and confidence in the health board. He resigned as chair of the Canterbury and South Canterbury district health boards yesterday.