Exclusive: Payments to former minister concealed
In a Senate estimates committee hearing last week, Defence Minister Marise Payne was asked to explain the appointment of one of her predecessors, former senator David Johnston, to a specially created position as the federal government’s first defence export advocate.
Her colleague, Defence Industry Minister Christopher Pyne, had announced the appointment in April. Payne and her departmental officials confirmed that nobody else had been considered and that the job was a part-time, paid position.
They wouldn’t say exactly how much Johnston was receiving, claiming it was commercial-in-confidence because he was an “eminent person”.
Pyne had consulted Payne before making the appointment and advised cabinet afterwards.
Under parliamentary rules, Payne has to notify the Senate of government appointments in the Defence portfolio, no later than a week before its committees hold each round of estimates hearings. The current hearings are the first round since April.
Aside from the reluctance to divulge what might ordinarily be expected to be a publicly available figure for a taxpayer-funded appointment, the way Johnston’s job was described in Payne’s Senate notification letter created further confusion.
The notification said his appointment was as defence export advocate on the Centre for Defence Industry Capability Advisory Board.
It said the term of his appointment was “permanent” and listed the remuneration as “nil”.
In the Senate estimates hearing, Labor frontbencher Kim Carr queried the description, which appeared to contradict evidence from earlier that day.
The committee had heard that Johnston’s advocate position was for a year only – renewable at Pyne’s discretion – and paid at an undisclosed rate.
Officials said the usual per-day rate for eminent persons was between $2500 and $4500, although some were paid more. They refused to say where – or whether – Johnston’s pay fell within that range.
When Kim Carr first raised the query at the hearing, departmental first assistant secretary Dr Sheridan Kearnan had insisted Johnston was paid for the board appointment.
“He gets paid for any work that he does,” Kearnan said. “As the export advocate sitting on the CDIC board, he would get paid for that.”
It seemed a puzzling contradiction.
When the estimates committee returned from the lunchbreak, Carr pressed them on the issue of Johnston’s “nil” remuneration in the appointments listing and the apparently conflicting assurances about payment.
Acting departmental deputy secretary Scott Dewar offered a new explanation.
“Mr Johnston is on the board, but in his capacity as defence industry advocate,” Dewar said. “So the board does not pay him. He doesn’t get paid for being on that board – he gets paid for being the defence export advocate – so that’s why there is nil on this attachment.”
Later, Marise Payne echoed what Scott Dewar had said: that the Senate notification listing did not relate to Johnston’s substantive appointment as advocate because that was, she said, exempt from the disclosure requirement.
In other words, she didn’t have to give the Senate details. She did not cite the authority for this claim.
Payne said the listing was for the board appointment that came with the advocate position.
“It is not an appointment for which he receives remuneration,” Payne assured the committee.
It seemed to clear things up. Except, it didn’t.
Investigations by The Saturday Paper revealed that Johnston was already serving on the CDIC board – and being paid for it.
Johnston had been appointed to the board from October 11, 2016, for a term of three years – a full 18 months before his job as defence export advocate was created.
Marise Payne lodged notification of Johnston’s paid board appointment with the Senate on February 22 last year, as documents covering that notification confirm.
Those documents show Johnston was not serving gratis then, but receiving a per diem rate of $393 whenever it met.
David Johnston told The Saturday Paper that any questions about his new job should be directed to the government. Minister Payne was in Europe late this week and neither she nor Minister Pyne responded to The Saturday Paper’s inquiries before press deadline.
But it is understood the government’s explanation of Johnston’s board appointment is that it was terminated when he was appointed as defence export advocate and he was then reappointed to the same board in an unpaid capacity, typically referred to as an ex officio board position.
It is not clear why other unpaid appointments included in the minister’s regular notification lists have been clearly marked “ex officio” while Johnston’s was not. By only listing “nil” remuneration, the notification appeared to refer to his new advocate position.
None of this was explained to the estimates committee hearing. Neither was the fact that the position had not been advertised nor subject to any competitive process.
Johnston’s appointment as defence export advocate has raised other questions.
He left politics at the 2016 election, having been dumped from the Defence ministry 18 months previously, when he lashed out at government-owned ASC (formerly the Australian Submarine Corporation), declaring in parliament that he “wouldn’t trust them to build a canoe”.
Johnston is now being engaged to promote the very capabilities he ridiculed. He has subsequently said things have changed at ASC and standards are much higher.
In his new job, Johnston will report to both Pyne and the department secretary, Greg Moriarty.
“The export advocate’s role is to assist with Australian defence exports on a global scale,” Scott Dewar told the committee.
Senator Kim Carr asked for key performance indicators.
“The government has set out a strong focus on defence exports and the advocate’s role is to support those efforts across government,” Dewar responded.
The officials explained the job involved domestic and international travel – none of the latter having yet been undertaken. Thus far, Johnston had travelled to Canberra to chair an export forum meeting.
Carr asked what administrative support Johnston was receiving in his home city of Perth. The answer was none.
“I think he just works from his home location, but I’d have to check that,” Kearnan said.
Departmental secretary Greg Moriarty said if Johnston needed any support, he could request it – but hadn’t.
In announcing the appointment, Christopher Pyne said Johnston brought “a wealth of experience and knowledge”.
In the estimates hearing, Dewar defended the non-disclosure of Johnston’s remuneration.
“The Department of Finance has a confidentiality test it applies to these sorts of contracts,” Dewar explained.
“The figure is not public. Publicising it, particularly because this is a part-time role for Mr Johnston, who may be seeking other work … if we were to disclose that figure then that could prejudice his ability to price other work accordingly.”
However, the department does publish details of other eminent people’s contracts and Johnston already has other work, both with the government and in the private sector.
The government appointed him recently to the board of the Australian Strategic Policy Institute, on which former Labor defence minister Stephen Conroy also serves, on a rate of $684 a day.
In March last year, Johnston accepted a board position with Saab Technologies, an Australian subsidiary of the Swedish military industrial supplier, which holds substantial contracts to sustain Australia’s Anzac frigates and provide systems for the Collins-class submarines, the offshore patrol vessels and the upcoming new Future Frigate program.
He did not resign this private-sector job when he accepted the government one.
At a Senate economics inquiry into naval shipbuilding on Thursday, Defence Department deputy secretary Kim Gillis said he did not consider it a conflict of interest because Johnston was advocating for “the whole of defence industry”.
“I don’t think it would be a direct conflict,” Gillis said.
Carr asked whether other companies might be concerned about it.
“You’d have to ask those companies, Senator,” Gillis said. “If it was me and I was a company CEO and there was an eminent person with David Johnston’s background, I wouldn’t have an objection to it.”
Carr told The Saturday Paper he was “particularly concerned that contract management is transparent”, especially given the size of Defence’s major shipbuilding contracts, worth $100 billion for the new submarines and $35 billion for the new frigates.
“You might say, ‘Why are you complaining about this pea-and-thimble stuff?’ ” Carr said. “Well, it sets the pattern.”
Also on the estimates committee, Senator Rex Patrick of the Centre Alliance, previously the Nick Xenophon Team, was a voluntary adviser to then minister Johnston before entering parliament.
Patrick said he did not necessarily have a problem with Johnston’s advocacy role but transparency was essential.
“There needed to be a proper process by which he was selected,” Patrick said. “There needs to be transparency in the Commonwealth funds that are now being expended and potential conflicts of interest need to be carefully managed.”
Patrick, a former submariner, and Carr have separately been asking about other Defence contracts, through both the estimates hearings and the Senate naval shipbuilding inquiry.
In late 2016, Pyne announced a new 10-member naval shipbuilding advisory board, seven members of which are Americans based in the United States. Between January last year and March this year, it held 36 days of meetings in various Australian cities and Washington, DC, including seven by teleconference.
These appointments were listed in Marise Payne’s notification to the Senate in February last year – the same one revealing Johnston’s paid appointment to the CDIC board – but their remuneration was not detailed. In place of a dollar figure were the words “contract being finalised”.
Despite the board members also being described as “pre-eminent”, the details of their contracts have now been published on the AusTender website.
The chairman of the high-powered board is Professor Don Winter, a former secretary of the US Navy. His 21-month contract, from March 31 last year until December 8 next year, is worth $1.5 million.
The others are each paid between $400,000 and $500,000 for contracted terms of just under two years.
Alongside the Americans, who include esteemed former senior US naval officers, ex-administration officials and former private sector shipbuilding experts, are two Australian board members – construction and infrastructure lawyer Ron Finlay and Lisa Paul, the former secretary of the Education Department, whose minister at the time was Christopher Pyne.
A third Australian, Mike Burgess, created a vacancy when he resigned earlier this year to take up a government job as head of the Australian Signals Directorate.
The American-led board advises the Australian government, including cabinet’s national security committee, on matters relating to naval shipbuilding.
When the Senate economics committee asked the board members to give evidence to its shipbuilding inquiry last year, the Defence Department refused to let them appear, claiming they were exempt because of their security role in briefing the NSC.
After further requests were also rejected and the committee threatened to issue a formal parliamentary summons, Defence relented. Finlay and Paul appeared before the committee on Thursday to outline their work so far.
Over in Senate estimates, David Johnston, as a contractor, isn’t being required to appear. That leaves Payne and her officials to answer the mounting questions.
This article was first published in the print edition of The Saturday Paper on Jun 9, 2018 as "Payments to former minister concealed". Subscribe here.