State sector spy inquiry finds wide failings

A scathing report has found multiple government agencies broke the public service code of conduct in their use of private investigators to spy on an array of people including earthquake claimants and protesters.

The main investigation firm involved in the inquiry, Thompson & Clark Investigations Limited, has been removed from a government procurement panel and referred to police over potential law breaches.

State Services Commissioner Peter Hughes has also developed a new set of standards on how government agencies can use surveillance and information gathering for their work, describing the use of surveillance on protesters as "an affront to democracy".

The State Services Commission first launched an inquiry into Crown-owned insurance claim settler Southern Response‚Äôs use of private investigators Thompson & Clark on March 18, following allegations it had spied on Canterbury earthquake victims.

The scope of the inquiry was widened in June to include the entire state sector, after a number of Government agencies and Crown entities - including MBIE, MPI, and the NZSIS - admitted to potential issues with how their staff had used Thompson & Clark.

Potential law breaches

The inquiry, carried out by former Deputy State Services Commissioner Doug Martin and Auckland barrister Simon Mount QC, focused on the last 10 years of the firm's involvement in the state sector, although events further back were also covered.

Among the findings were that Crown-owned insurance claim settler Southern Response had broken the SSC's code of conduct when Thompson & Clark attended and recorded several closed meetings of insurance claimants at its request.

The recordings were made by a contractor who was not a licensed private investigator, a potential law breach, while copies of the recordings were not kept in breach of the code of conduct.

Hughes said he had laid a complaint with police regarding the recordings, while he had also written to government ministers Megan Woods and Grant Robertson - who oversee Southern Response - outlining his concerns.

A number of agencies at fault

A number of other agencies were also fingered by the inquiry, with two employees at the Ministry of Primary Industries found to have undertaken secondary employment with Thompson & Clark. While both people were now out of the public service, MPI had referred the issue to the Serious Fraud Office which was now investigating.

The Crown Law Office breached the SSC code by providing "broad instructions" to a different private investigator in a 2007 civil case which alleged abuse in state care, which led to low-level surveillance possibly being carried out on one of the witnesses.

The Ministry of Social Development was found to be at a lower level of fault regarding the same case. Hughes, chief executive of MSD at the time, said he had referred the issue to the incoming Deputy State Services Commissioner given the conflict.

The Ministry of Business, Innovation and Employment had breached the code of conduct by "failing to maintain an appropriate level of objectivity and impartiality" regarding oil exploration, while the NZ Transport Agency had failed to appropriately monitor authorised access to its motor vehicle register.

The inquiry uncovered system-wide failings across the entire public service, including a pattern of inappropriate closeness with Thompson & Clark and poorly managed relationships with others.

"It is never acceptable for an agency to engage in surveillance or information gathering about people or groups just to manage reputational risk to an agency."

Hughes said he was most concerned by the company's treatment of "issue-motivated groups" as a security threat, something which was not challenged by government agencies when they received reports on that basis.

"This is not consistent with how we should view democratic freedom. It is never acceptable for an agency to engage in surveillance or information gathering about people or groups just to manage reputational risk to an agency," he said.

Hughes said he had issued new standards for government agencies, called Information gathering and public trust, which set out minimum expectations for how the public service should gather information or use surveillance for compliance and law enforcement.

While there were legitimate reasons for an agency to carry out such work, it needed to have appropriate rules and oversight, while using third parties like Thompson & Clark was "not a way to contract out of the State Services Code of Conduct", he said.

Agencies would have until April 30 next year to develop policies on how they would use investigative tools.

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