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New documents show the clearest picture yet of Scott Morrison’s dismissal at Tourism Australia, including scathing correspondence from Fran Bailey. By Karen Middleton.

Fresh documents in Morrison’s sacking

Prime Minister Scott Morrison.
Credit: Mick Tsikas-Pool / Getty Images

Thirteen years after Scott Morrison was mysteriously sacked from a senior public sector job as managing director of Tourism Australia, a six-month investigation by The Saturday Paper has created the clearest picture yet of the events surrounding his dismissal.

Documents obtained by The Saturday Paper under freedom of information laws show Morrison received a pay rise less than a month before he was sacked, taking his annual base salary from $318,031 to $332,030, with discretion for his employer to add up to 2.5 per cent on top.

They reveal then tourism minister Fran Bailey expressed alarm in the weeks before Morrison’s sacking about the way Tourism Australia was handling taxpayers’ money.

They also show that previous decisions of the Remuneration Tribunal – which sets the salaries, terms and conditions for senior public sector officeholders – had specified that an officer who lost a job prematurely for poor performance was not entitled to severance pay. The Saturday Paper is not suggesting Scott Morrison was sacked due to unsatisfactory or poor performance.

Around the time of Morrison’s dismissal it was suggested he was paid out after having his contract terminated more than a year early. Sources have since confirmed this.

The size and conditions of that payout have never been officially disclosed, nor the reason for the termination.

It was long speculated that the sacking was the result of a personality clash between Morrison and Bailey or differences over her plans to restructure the agency.

But late last year, The Saturday Paper uncovered an auditor-general’s report from 2008 examining the handling of three major contracts, which had delivered a scathing assessment of Tourism Australia’s management.

The report provided the first indication as to the real reason Morrison was removed.

The contracts were worth $184 million, and the auditor focused most on the two biggest – those with companies M&C Saatchi for global creative services or advertising campaigns, and Carat for media placement.

The audit report revealed that information had been kept from the board, procurement guidelines breached and private companies engaged before paperwork was signed and without appropriate value-for-money assessments.

Both before and since becoming prime minister in August last year, Scott Morrison has refused to answer questions about why the tourism minister took the unusual step in July 2006 of sacking him as head of the agency. He has also refused to answer questions about the handling of the contracts, which were signed the previous year. He did not respond to questions for this story before time of press.

Now retired from politics, Fran Bailey will not explain her decision, telling this newspaper in November last year: “I reiterate that it was a unanimous decision to get rid of Mr Morrison by the board and the minister.”

Scott Morrison joined Tourism Australia on a three-year contract in 2004, after four years as state director of the New South Wales Liberal Party.

The Tourism Australia board, on which Morrison sat as managing director, was then under the chairmanship of former deputy prime minister and Nationals leader Tim Fischer.

Other members included Andrew Burnes, the owner of what is now the Helloworld travel company and the current Liberal Party treasurer.

The contracts in question were related to the crafting, production and rollout of what became a controversial but highly successful international tourism campaign, focused on the slogan “So Where the Bloody Hell Are You?”

After the audit report on Tourism Australia came to light late last year, The Saturday Paper sought documents under FOI from a range of agencies, including the Remuneration Tribunal, Tourism Australia and the Department of Prime Minister and Cabinet.

In 2005 and 2006, the Prime Minister’s Department had become involved in scrutinising Tourism Australia’s handling of the two large contracts, due to concerns that government procurement guidelines were not being followed.

In response to the FOI applications, the agencies have provided some documents in full, partly redacted some and blocked others from release on the grounds of privacy or commercial confidentiality.

The Prime Minister’s Department took six months to process the FOI application, which was only finalised when the Office of the Australian Information Commissioner stepped in and refused the department’s application for a further extension.

The documents put a time line to the growing concern within government in 2005 and 2006 about the way Tourism Australia was handling these large contracts and about how the dismissal of its managing director was managed.

They also reveal the steps the minister, Fran Bailey, then took, with the support of then prime minister John Howard, to change the governance arrangements for Tourism Australia in the wake of Morrison’s tenure, to make the board more accountable to its minister.

The Saturday Paper understands the board authorised Morrison’s payout, which was finalised soon after Morrison’s dismissal in July 2006. He had received a pay increase from July 1, as per a Remuneration Tribunal ruling affecting all public sector officers at his level.

Notifying Fischer of the pay rise decision on June 21, 2006, the tribunal’s president, John Conde, reminded him he was obliged to report back if an executive’s circumstances changed.

“Employing bodies are required to notify the Tribunal of any change to a [Principal Executive Officer’s] terms and conditions within 4 weeks of such a change being determined,” Conde’s letter to Fischer said. There is no evidence in the schedule of documents provided that Fischer did so before determining Morrison’s severance package.

On July 11 of that year, he wrote to Conde acknowledging the advice.

“I will give full consideration to your advice when reviewing the total remuneration for the managing director [of] Tourism Australia,” Fischer wrote. “As requested, I will advise the tribunal of any change in remuneration as and when it is determined.”

Within three weeks, Bailey had sacked Morrison and the board was preparing to meet to finalise his termination.

The Sydney Morning Herald reported his removal on July 26, 2006.

On August 1, a flurry of emails relating to Morrison’s termination began.

The Remuneration Tribunal secretariat wrote to the secretary of the Department of Industry, Tourism and Resources, who was then Mark Paterson, and who had been a government representative on the board of Tourism Australia.

The secretariat also exchanged emails with its president, John Conde. It prepared a brief for a tribunal meeting, to be held on August 7, ahead of a meeting it had requested with the minister, Bailey.

The tribunal has acknowledged the existence of all of these emails relating to Morrison’s remuneration and the meeting briefing note – but refused to release them.

The tribunal’s principals – John Conde, Janet Grieve and John Allen – held their meeting on August 7, 2006, with Allen participating by phone. Conde and Grieve then went to see Fran Bailey in her office the same day, to discuss what a meeting summary recorded as “their respective perspectives on matters related to the departure of the managing director of Tourism Australia prior to the expiration of the term of his appointment”.

The next sentence in the summary is blacked out. It then says the tribunal noted its intention to write to Tim Fischer about the matter.

That letter, from Conde, was sent the next day. The letter itself – plus two unsigned drafts – has been blocked from release. But The Saturday Paper understands the tribunal spelled out its concerns over the payout.

An attachment to the letter containing the tribunal’s salary determination was also initially blocked but released after this newspaper requested a review of the tribunal’s initial FOI decision.

That attachment was the December 2005 salary determination for a “principal executive officer” – Morrison’s designation – and included the rules for termination.

They contained a clause that the officer was “not entitled to separation benefits” where “the appointment was terminated prematurely for reasons of misbehaviour or unsatisfactory performance”.

Fischer replied to Conde on August 23. That letter has also been withheld.

Bailey’s concern about Tourism Australia’s handling of the two major contracts had been building for more than a year.

Contracts valued at more than $5 million required ministerial approval and in June 2005, when Tourism Australia first sought it, Bailey asked her departmental secretary, Mark Paterson, for advice on whether its process satisfied the Commonwealth government procurement guidelines.

Because Paterson’s membership of the board presented a potential conflict of interest, he asked the Department of Prime Minister and Cabinet to offer “an independent view” of the initial proposed contracts with M&C Saatchi and Carat, amid concerns about the tender process.

In a meeting with Tourism Australia executives on June 27, 2005, officials from the Prime Minister’s Department put “a number of concerns about the assessment process, particularly shortlisting of tenderers for creative, prior to detailed assessments”.

Reports in advertising industry publications suggested M&C Saatchi received favourable treatment in the tender process.

The agency had overseen the successful “100% Pure” campaign for Tourism New Zealand when Morrison and his Tourism Australia marketing director, Ian Macfarlane – not the Ian Macfarlane who was a federal minister at the time – had both worked there.

At the request of Prime Minister and Cabinet, Tourism Australia provided more information about the tender process and undertook a review, which confirmed the original decision.

On July 6, 2005, Tourism Australia’s audit committee reviewed and cleared the process.

A later briefing note prepared for the department on October 28, 2005, ahead of senate estimates committee hearings, said: “We understand that Tourism Australia’s board re-approved the tender recommendations on 7 July and Ms Bailey approved the contracts shortly thereafter.”

Tourism Australia announced the successful tenderers on July 15, 2005.

Towards the end of 2005, the government began a review of Tourism Australia’s management and operating structure, as part of a whole-of-government overhaul of governance arrangements, known as the Uhrig review. It was due to be completed by March the following year.

But when the contracts came up for renewal in 2006, documents confirm Bailey was still concerned.

The agency’s board had met in Sydney on the morning of June 9, 2006, and its agenda included the approval of the extension of existing contracts with M&C Saatchi and Carat, for the 2006-07 financial year.

The minutes of that meeting were provided under FOI, but mostly redacted, except for a section noting a presentation by marketing director Ian Macfarlane, proposing that the contracts be signed.

The board asked for details of the components of the materials and production costs and eventually agreed the contracts should go to the minister for approval.

But it also stated that “if market circumstances change significantly, then board approval is required to amend the components of the approved contracts”.

Scott Morrison had written to Fran Bailey on June 13, asking for her signoff.

Bailey’s June 29 response revealed significant concern. By the standards of ministerial correspondence, its tone was scathing. “These contracts are of significant value,” Bailey wrote. “I need to be reassured that the taxpayer is receiving value for money with these substantial investments.”

The letter went on to say she noted that an internal evaluation of performance was under way but would not be finished until mid-July.

“I also understand that no independent evaluation has yet been undertaken,” she wrote. Her concerns would be reflected in the auditor-general’s findings, two years later.

The minister demanded both internal and independent assessments of whether the global creative and media placement activities represented “value for money” and detail of how Tourism Australia was planning to “monitor and manage” the contracts for the coming year, “particularly how Tourism Australia will ensure that purchases made by M&C Saatchi and Carat represent value for the taxpayer’s dollar”.

To avoid disrupting the existing international marketing campaign, she wrote that she was “prepared to approve a total of $20 million of expenditure at this stage, to enable time for you to supply the material requested” and for her to “make a decision in relation to the remainder of the funds”.

“I will only provide such an interim approach on this one occasion, and only because of the importance of maintaining the momentum of the current campaign,” she said.

“In future years, I would like Tourism Australia and the department to work together to ensure that such major contracts reach me in a timely fashion and with all the supporting material I need to make a decision.”

She wrote that she hoped the process would be “the start of a general improvement in process surrounding approval of major contracts” and she would consider further funding when the information arrived.

Morrison was sacked within the month and Tourism Australia’s handling of the contracts was referred to the auditor-general.

Despite Fran Bailey’s insistence that the board unanimously supported her decision, Tim Fischer is now praising Morrison and distancing himself from it. In September last year, he told The Australian Financial Review that Morrison had been “full of energy” as the agency’s managing director.

“They were electrifying times at Tourism Australia with a strong minister and a strong CEO,” Fischer said. “… Scott deserves full credit for the ‘So Where the Bloody Hell Are You?’ campaign. It took some courage to run that campaign and he saw it through. He was let go, wrongly perhaps.”

Fischer, who is being treated for leukaemia, stands by the comments but will not elaborate. Following Morrison’s departure, Bailey successfully amended Tourism Australia’s governance arrangements, lowering the value threshold of contracts requiring ministerial approval and receiving greater ministerial power to terminate employment where it had been “unsatisfactory over a period of time and all appropriate procedures have been exhausted”.

This article was first published in the print edition of The Saturday Paper on Jun 8, 2019 as "Fresh documents in Morrison’s sacking". Subscribe here.

Karen Middleton
is The Saturday Paper’s chief political correspondent.