- Synergy 360 and procurements at Services Australia and the NDIA
Introduction
1.1During the course of the recent Joint Committee of Public Accounts and Audit (JCPAA) inquiry into Commonwealth procurement, evidence came to the Committee’s attention that raised questions about procurements undertaken by Services Australia and the National Disability Insurance Agency (NDIA).
1.2Following media reports about a series of procurements at these two agencies, DrIan Watt AC was appointed to lead an Independent Review of Services Australia and NDIA Procurement and Contracting (referred to as the 'Watt review'). The Watt review, which commenced in December 2022, addressed questions about the involvement of Milo Consulting (trading as Synergy 360) and associated entities in procurements at the two agencies. The Watt review was completed on 6 March 2023.
1.3The JCPAA held a public hearing on 14 April 2023 to consider the issues raised by the Watt review, initially as part of its existing procurement inquiry. At the hearing, the committee heard evidence from Dr Watt, Services Australia, the NDIA, and people involved or connected with Synergy 360. Questions were asked of current or former Synergy 360 owners based on a tranche of emails which had served as the basis of earlier media reporting on these procurements.
1.4On the basis of this hearing, and in particular because the scope of the Watt review was limited and related solely to the conduct of Australian Public Service (APS) staff, the Committee resolved to inquire separately into the issues raised in and associated with the Watt review rather than incorporate this new material into its existing procurement inquiry. The Committee’s inquiry was therefore intended to complement the Watt review by examining the conduct of all parties involved in the relevant procurements, including Ministers, lobbyists, consultants and vendors.
1.5This interim report considers the evidence raised at and subsequent to the 14 April 2023 public hearing with respect to the activities of Synergy 360 and related entities.
Conduct of the inquiry
1.6The JCPAA has a statutory responsibility to examine the financial affairs of authorities of the Commonwealth, and to examine all reports of the Auditor-General presented to the Australian Parliament (as per Section 8(b) and Section 8(c) of the Public Accounts and Audit Committee Act 1951).
1.7On 12 May 2023, in light of evidence received as part of its existing inquiry into Commonwealth procurement and in order to consider that evidence in fuller detail, the JCPAA adopted an inquiry into procurement at Services Australia and the NDIA.
1.8On 17 May 2023 the Committee issued a media release announcing the inquiry and inviting submissions from interested parties. Thus far the Committee has received five submissions, which are listed at Appendix A.
1.9The Committee has held one public hearing for this inquiry to date, which is listed at Appendix B. A transcript of the hearing is available in HTML and PDF formats on the inquiry website. The Committee has also held two in camera hearings.
Evidence relating to Synergy 360
The Hon Stuart Robert’s alleged involvement with Synergy 360
1.10On 11 May 2023, the JCPAA resolved to publish on the inquiry website a redacted version of the emails which had been the subject of questions at the 14 April 2023 public hearing. It later emerged that Anthony Daly was the source of the emails (the ‘Daly emails’). Mr Daly is the ex-husband of Khamphone Xaysavanh, a co-founder of Synergy 360. He later provided a written submission which was published, also in redacted form, by the Committee.
1.11Mr Daly claimed that he and Ms Xaysavanh (to whom he was then married) established Milo Consulting (which traded as Synergy 360) on 1 April 2017. From then until March 2020, Mr Daly claimed to have conducted day-to-day operations for Synergy 360, which included 'webpage management, IT operations and email administration'. Mr Daly further claimed that he and Ms Xaysavanh jointly funded the business from its founding until mid-2019.
1.12According to Mr Daly, the ownership of Synergy 360 was restructured in September 2017, with Ms Xaysavanh surrendering 21 per cent of her stake in the company. David Milo received 1 per cent to give him a controlling 51 per cent stake in the business, while United Marketing, a company owned by John Margerison, received a 20 per cent stake in the company. Mr Margerison is understood to be a long-time friend and business partner of the Hon Stuart Robert and had a lead role in Liberal Party fundraising for Mr Robert in his electorate of Fadden.
1.13Mr Daly alleged that this arrangement was entered into to ‘facilitate the flow of funds through United Marketing and onward to Stuart Robert’:
The main objective of this arrangement was to secure Stuart Robert's involvement and support in acquiring federal government contracts. Stuart Robert's political influence and connections within the government sector were deemed crucial in ensuring favourable outcomes.
1.14The Daly emails contained an instruction from Mr Margerison to forward any proceeds from United Marketing's stake in Synergy 360 to an entity referred to as 'APUT'. At the 14 April 2023 public hearing Mr Margerison identified APUT as Australian Property Trust, which was a unit trust under his control.
1.15Mr Margerison also acknowledged, that Mr Robert had previously held a beneficial interest in Australian Property Trust:
I had a business relationship with Mr Robert at one point in time. That finished around about, give or take, the end of 2018. He would have been a unit holder through whatever mechanism, whether it be his family trust or personally - I don't know the detail of it - up until around about that time, give or take ... I am the actual beneficial owner since the end of 2018-ish.
1.16Mr Daly also claimed that Mr Milo arranged meetings at various locations around Canberra to facilitate contact between Mr Robert and various companies involved in bids for government contracts. The purpose of these meetings was to give the attendees opportunities to discuss forthcoming tenders with Mr Robert. According to Mr Daly, Mr Robert 'omitted the majority of these meetings from his parliamentary diary to maintain confidentiality and avoid public awareness’.
1.17Evidence from Infosys Technologies, which won a contract in November 2019 from Services Australia to redevelop the Entitlement Calculation Engine (ECE) which underlies welfare payments, indicated that company personnel met with Mr Robert 14times between September 2018 and February 2022. Andrew Groth, Infosys’ Region Head for Australia and New Zealand attended 11 of these meetings. Infosys further advised that according to its records, APS staff or probity advisers were present at only three of these meetings.
Responses to the allegations
1.18Stuart Robert, David Milo, John Margerison and Khamphone Xaysavanh all denied the allegations relating to improper conduct.
1.19In response, Ms Xaysavanh said that Daly had never been an employee of Synergy 360 and that Mr Daly in fact 'worked for Qantas as a baggage handler at Canberra airport at the relevant times'. She further alleged that the Daly emails were obtained illegally and altered with malicious intent in an effort to blackmail her and David Milo.
1.20David Milo likewise denied the allegations made by Mr Daly, and said that Daly had never been employed by Synergy 360:
The assertions contained in Daly’s statement are refuted in their entirety. His claim to have been employed or had any role in Synergy360 is untrue. Synergy360 was founded by Kham Xaysavanh and I in early 2017 to leverage the experience I had gained as a partner with Deloitte and subsequently as the government sector consulting lead at Aurecon.
1.21When asked questions relating to the Daly emails at the Committee’s 14 April 2023 hearing, Mr Milo similarly claimed that the emails were illegally obtained, and also that they had been doctored:
I will just make the point that you've demonstrated that you hold a bundle of emails that were dishonestly or unlawfully taken, including all of the data off my computer. I'm not sure of the authenticity of any of the documents that you're quoting from. I've seen documents published that have been altered and one recently that was absolutely not written by me but purported to be written by me.
1.22In response, Anthony Daly claimed in his submission to have gained access to the emails as part of his work overseeing Synergy 360’s IT systems. In relation to the allegation that the emails were doctored, Mr Daly said:
I deny these accusations and state that l have not made any modifications to any emails in any manner. This assertion l'm sure can be readily confirmed through the utilization of email forensics software, which is specifically designed for email authentication purposes.
1.23For his part, Mr Robert stated that he has no recollection of ever meeting or speaking to Mr Daly. He went on to say that:
To the extent that Mr Daly makes allegations of impropriety against Mr Robert, they are rejected, as they have always been and as the Committee well knows. At no time has Mr Robert been paid for any advice or guidance in any form. At no time did Mr Robert lobby to assist any organisation as alleged.
1.24Mr Robert pointed out that Daly’s allegations were not based on any direct knowledge of Mr Robert’s activities, which in his view demonstrated their untruthfulness:
Mr Daly does not purport to give any first-hand account of matters. Indeed, its fundamental vice, apart from its untruthfulness, is its complete failure to provide any proper detail of what Mr Daly alleges Mr Robert has in fact done ... That the Committee has not provided Mr Robert with any evidence supporting the serious allegations Mr Daly has made is, of course, consistent with the fact that they are untrue.
1.25At the 14 April 2023 public hearing, John Margerison said that he had never held a direct financial interest in, or received payment from, Synergy 360/Milo Consulting:
I have never been a principal of Milo Consulting. I have never been a director of Milo Consulting. I have never been an employee of Milo Consulting. I have never received any money from Milo Consulting. I have never received any dividend or other payment from Milo Consulting. I have not ever personally been a shareholder of Milo Consulting, albeit my family trust was, and no longer is, a shareholder. I have not been actively involved in the day-to-day operations of Milo Consulting.
1.26At the hearing, Mr Margerison described how his family trust came to own a stake in Synergy 360:
I helped Mr Milo when he wanted to start a business. He said to me he wanted to offer me shares in the business because a lot of businesses in Australia and around the world fail soon after opening. He actually offered me 33 per cent of the shares, and I declined. I said that the first rule of business is that you need to control your own business, so you need at least 51 per cent. After a couple of conversations, he offered me 20 per cent of the business.
Further evidence sought by the Committee
1.27The questions asked of Mr Margerison during his appearance at the 14 April 2023 public hearing were limited in number in deference to the fact that was, at the time, recovering from a surgical procedure. Following the hearing, therefore, the Committee sent him several written questions seeking information on issues not covered adequately at the hearing.
1.28After several fruitless requests for a response to its questions, the Committee resolved to issue a summons to Mr Margerison to require his attendance at a public hearing to provide answers to the Committee's questions. In response, Mr Margerison informed the Committee through his legal counsel that he was now resident overseas and that he had 'severed all ties' with the country of Australia. No evidence was provided to support this claim.
1.29Mr Margerison has not yet provided the documents requested by the Committee including those related to the Australian Property Trust and has not fully addressed the questions put to him, or advised the Committee where he is currently residing.
Committee comment
1.30The allegations provided in evidence to this inquiry give rise to serious concerns and raise questions about financial impropriety and improper relationships with parties receiving contracts from the Commonwealth. Mr Daly's evidence has brought about a concern that Mr Robert may have – whether directly or indirectly – held a beneficial interest in a company or trust that earned money from contracts awarded by the government of which he was a member, and at times a Minister. If true, this would represent significant financial impropriety on his part, and at the very least a serious conflict of interest that went undeclared.
1.31It was established in public hearings that the Daly emails accurately recorded Ms Xaysavanh’s decision, at Mr Milo’s request, to gift 20% of her shares to a man she had not yet met (Mr Margerison) on the basis that he brought unspecified ‘contacts’ to the Synergy 360 business. No specific or credible evidence was provided to support the claim that the Daly emails were ‘doctored’ or could not be relied upon.
1.32The Committee notes the evidence from Infosys that it paid significant funds to Synergy 360, including approximately $16 million in success fees, for a number of contracts. Detailed evidence was also provided by Infosys regarding a range of meetings with the Mr Robert including when they were bidding for or delivering a later troubled major IT contract. There is no evidence of probity advisors or public servants being present at this series of meetings, no contemporaneous notes or records of what was discussed made available, no apparent declaration of any conflicts of interest being made, and no evidence that other bidders or vendors unrelated to Synergy 360 were accorded similar treatment or access. These matters are of concern and may be considered further in the Committee’s final report.
1.33The Committee acknowledges that Mr Daly has not provided evidence that he saw funds changing hands or being transferred, or that he has personally met the Mr Robert, and that in key respects his evidence can be considered hearsay.
1.34It must also be noted that Mr Daly's allegations have been strongly rejected by Mr Robert, Mr Milo, Mr Margerison and Ms Xaysavanh. The Committee has not been provided with direct evidence of financial liabilities owed or payments occurring from Synergy 360 to the Australian Property Trust or other entities to the benefit of Mr Robert, though efforts in this direction have been frustrated as despite multiple requests being made for documents witnesses have refused to respond to questions in full or provide documents and Mr Margerison claims to have left Australia. The evidence before this inquiry in relation to these issues is therefore both directly conflicting and mutually incompatible.
1.35In particular, Mr Margerison’s refusal to fully respond to questions and provide documents relating to the Australian Property Trust leaves the Committee unable to adequately complete this aspect of its inquiry. In these circumstances the JCPAA is not able, given the resources available to it including a lack of forensic accounting expertise, to make findings in relation to the truth or otherwise of the allegations raised by Mr Daly.
1.36The Committee therefore considers that, in light of the serious and systemic nature of the allegations, an agency with compulsory questioning and document gathering and investigatory powers should take up the matter so that these questions may be properly assessed.
1.37A referral to the National Anti-Corruption Commission (NACC) by a Parliamentary Committee should never be made lightly; however, in these circumstances there appears no other appropriate course of action. This conclusion informs the Committee’s recommendation, understanding that ultimately it is entirely a decision for the NACC whether to commence a formal investigation and whether adequate resources should be devoted necessary to fully understand these matters.
1.38The Committee recommends that the National Anti-Corruption Commission examine all material gathered through this inquiry to determine whether or not to conduct its own inquiry into procurements at Services Australia and the National Disability Insurance Agency involving Milo Consulting (trading as Synergy 360), the Hon Stuart Robert, and John Margerison. In making this recommendation the Committee is not making any findings in relation to the conduct of any individuals.
1.39During the course of this inquiry, questions have also arisen regarding the nature of the Committee’s statutory powers under sections 13-15 of the Public Accounts and Audit Committee Act 1951. Comprehensive advice is not available to the Committee regarding the full extent of and procedures relating to these powers, which do not appear to have been used in recent memory. Legal advice is therefore required which can guide this and future Committees when necessary.
1.40The Committee recommends that the Speaker of the House of Representatives approve the commissioning of legal advice in relation to the Committee’s statutory powers under sections13‑15 of the Public Accounts and Audit Committee Act 1951 including but not limited to situations in which a person claims to be resident overseas.
1.41Finally, the Committee wishes to acknowledge the difficult personal circumstances that sit alongside this inquiry. Throughout this inquiry, the Committee has avoided referring to or publishing matters relating to Family Court proceedings or the private information of witnesses. Material presented to the committee by both Mr Daly and Ms Xaysavanh was returned to them owing to its personal nature and its inapplicability to the inquiry's terms of reference.
1.42The Committee emphasises once again that it is not in a position to make findings in relation to the role of individual witnesses. If the NACC should take the matter up, it will no doubt form conclusions on these issues, but the Committee notes that nothing came to its attention that suggests Ms Xaysavanh was involved in any misconduct with respect to APS procurement.
Mr Julian Hill MP
Chair