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SA Health CEO refers himself for investigation over private directorship

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EXCLUSIVE | The CEO of SA Health has referred himself to the Public Sector Commissioner over revelations he was still listed as the director of a private company during the first two months of his public appointment – and that a related company began work on a $13 million contract for SA Health while he had both roles.

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Health Minister Stephen Wade told parliament yesterday it was his understanding that McGowan had stepped down from all his roles at private company Silver Chain Group when he started at SA Health in May 2018.

McGowan had led the major not-for-profit healthcare provider for a decade before his public appointment.

But emails and letters from Silver Chain Group officials to McGowan from 2018 indicate he continued to appear on company records as the sole director of its subsidiary, Silver Chain Corporate Services, until mid-July last year – more than two months into his role as SA Health boss.

On July 1, 2018, during the period the documents say he held both roles, Silver Chain Group began a major contract with SA Health – which, according to the Auditor General, has since cost taxpayers at least $13 million.

Responding to questions from InDaily this morning, an SA Health spokesperson said McGowan had today referred himself to the Public Sector Employment Commissioner over the matter.

McGowan stressed that he had no involvement in the negotiation or procurement of the contract and also emphasised that he had not received any remuneration from the company after his appointment to SA Health.

“To ensure transparency and in an abundance of caution, Dr McGowan has asked the Commissioner for Public Sector Employment to review the issue,” a spokesperson for SA Health told InDaily this morning.

“An administrative error by Silver Chain led to a delay in changing officeholder details on a non-operational, dormant subsidiary company of Silver Chain.

“As soon as Silver Chain identified the administrative error, the directorship details were updated.”

The Opposition says the Premier’s office must launch an independent investigation into the matter and that McGowan should step aside.

“An internal review of this serious matter is not good enough,” said Opposition Health spokesperson Chris Picton.

“The Premier must immediately launch an independent investigation into Dr McGowan’s directorship of Silver Chain Corporate Services Pty Ltd, and Dr McGowan must stand aside until that investigation is complete.”

Two officials from Silver Chain Group wrote to McGowan in mid-July 2018, indicating that he was still recorded as the subsidiary’s sole director, and asking that he sign documents confirming that he had actually resigned two months earlier.

The emails and letters were obtained by the Opposition under Freedom of Information laws and provided to InDaily.

One of those letters, from Silver Chain Group financial controller Scott Logan, identifies McGowan as the company director as at July 16, 2018, and asks him to complete forms saying that he had resigned from the position:

The attached forms both feature a space for McGowan’s signature, his name and the date May 4, 2018.

Here is the form confirming McGowan’s resignation:

And here is the form appointing a new director of the company, also pre-filled with McGowan’s name and the date 4 May 2018:

A Silver Chain Corporate Services company extract, published by corporate regulator ASIC, says that he resigned on the date – May 4, 2018 – that was pre-filled on the forms Logan sent to McGowan in July.

Another written communication – an email from an assistant to the Silver Chain Group board to McGowan, also dated July 16, 2018, suggests that an administrative error had caused the then-CEO of SA Health to remain listed as a company director.

It asks that he sign a document labelled Silver Chain Corporate Services director resignation resolution-May 2018.pdf and return it to the company.

 

Silver Chain Group wholly owns Silver Chain Corporate Services. Both companies are registered at the parent company’s headquarters in Perth.

In South Australia, Silver Chain operates not-for-profit healthcare and aged care service RDNS.

A spokesperson for Silver Chain Group told InDaily this morning that there had been “an administrative error in the resignation of Dr McGowan from all Silver Chain entities”.

“All Silver Chain/RDNS contracts have been awarded via formal government procurement processes.

“Silver Chain/RDNS has provided community health services in SA for over 120 years.

“In 2018, the re-tendering of community health services resulted in a change from RDNS becoming the predominate provider of community health services to one of four on a panel, and in fact reducing our services.”

Picton said the documents raised serious questions for the Government.

“What did the Premier and Health Minister know and when did they know it?” said the Labor MP.

During question time yesterday, Health Minister Stephen Wade said he believed McGowan had relinquished all of his roles at Silver Chain when he was appointed as SA Health CEO.

“Did Dr McGowan immediately relinquish any and all roles at Silver Chain upon taking up the role as SA Health chief executive last May?” asks Labor MLC Ian Hunter.

“Certainly my understanding (is) that he did but I’ll take that on notice,” Wade responds.

A spokesperson for the Minister told InDaily this morning: “I understand this has been referred to the Commissioner for Public Sector Employment who will look into it.”

The South Australian Public Sector Code of Ethics says that public sector employees:

“…must not engage in employment or other remunerative activity outside of their public sector employment where the activity conflicts with, or has the potential to conflict with, their role as a public sector employee, or if the performance of such outside employment or activity might affect their capacity to perform their public sector duties.”

It also requires that:

“Employees will disclose in writing to their chief executive or agency head any actual or potential conflicts of interest at the earliest available opportunity.”

And:

“Public sector employees will obtain written permission from their agency head or delegate before engaging in any outside employment or remunerative activity…”

SA Health did not respond directly to questions about whether McGowan may have breached any part of the code.

According to an Auditor-General’s report published this year, Silver Chain Group had won a contract to undertake an SA Health project called ‘SA Community Care Panel Agreement’.

The report says the contract started on 1 July 2018 and that it had cost $13 million in 2018-19.

The Auditor-General’s report raised a series of concerns about the way in which the contract was awarded, including that the process did not adequately assess risks and that although the company started work on July 1, 2018, its contract was not formalised until October that year.

“Our review found that the contract management plan for the SACC Panel Agreement was not finalised and authorised until 25 October 2018, while the contracts commenced from 1 July 2018,” the report reads.

“…(SA Health) recognised that the contract management plan was not signed until 25 October 2018, but  indicated that the plan was in draft and was adhered to.

“It responded that the delay was due to the  sharing and co‐signing of the plan with the supplier.”

The report also said risks were not adequately assessed.

“Effective contract management requires a commitment to manage risks,” the report reads.

“One of the responsibilities of  the appointed contract manager is to ensure that contract risks are identified, monitored and managed (but) …documentation relating to risk was limited to listing risk headings and did not demonstrate a robust assessment of the risks or discuss mitigation strategies.”

On July 23 last year – exactly a week after he was sent the Silver Chain paperwork – McGowan told a parliamentary inquiry that before the 2018 state election, he was involved in conversations with then-Opposition Health spokesperson Stephen Wade about Silver Chain’s services.

During one of those conversations, McGowan said, Wade sounded him out about an appointment as SA Health CEO.

“We would typically talk to the Opposition so, in that context, we were talking to Stephen Wade about the Silver Chain offerings,” McGowan told the July 23, 2018, committee hearing.

“We had a number of meetings—probably five or six, I can’t recall—but during one of those meetings he asked me would I be interested in the position if it became available and I said, absolutely, I would be.”

The following day, ABC Radio Adelaide’s David Bevan asked him on air:

When you were running Silver Chain, which runs the RDNS, did you put in a bid to the State Government for services and then when you took the role as CEO of the Health Department looked at that bid and signed off on it?

McGowan responded: Did I sign it on the way in and sign on the way out?

Bevan: [laughs]

McGowan: Essentially yes, but let me explain how that works.

Bevan: You don’t think there’s a conflict there?

McGowan: Well you would think there is a conflict, right … but this is the dark art of bureaucracy that I’m still learning a little bit about.

Later in the interview, McGowan explained:

When I got into the seat (as SA Health CEO) lo and behold a briefing comes through for the Minister to approve. The way the bureaucracy works is the Chief Executive has to sign things through to the Minister.

 That’s the way it works, so I saw it coming through, knew that I couldn’t really have a play on that and just signed it straight through the way it was presented to me, so I didn’t influence it.

At another parliamentary committee hearing, last month, McGowan said he was aware SA Health had signed contracts for Silver Chain’s services, but that he had had no involvement in the process.

Committee Chair, Labor MP Kyam Maher asked:
Dr McGowan, since you have been chief executive are you aware if the department has signed any contract for services or goods with the company Silver Chain?

McGowan:
Yes, I am aware that we have.

Maher:
Have you been involved in any way in any of those decisions?

McGowan:
I have not.

Maher:
You have not signed a recommendation to the minister for goods or services for Silver Chain?

McGowan:
Correct. I do not involve myself in anything in that area of the business.

Maher:
Are you quite certain there will be no documents with your signature on it in relation to services or goods that are procured from Silver Chain? Do you remember your evidence from when you were here last? It seems kind of the opposite of the evidence you gave last time, doctor.

SA Health Deputy Chief Executive Don Frater:
We would need to double-check. I can advise the committee that Dr McGowan has transferred all responsibility for signing and authorisation of any engagement with Silver Chain.

Maher:
When did that delegation occur, Mr Frater?

Frater:
I keep calling it Silverchair, unfortunately. It’s an age thing.

Maher:
Yes, a lot of people make that mistake. When did that delegation occur, Mr Frater?

Frater:
Last year some time.

Maher:
Approximately how long after?

Frater:
I don’t recall. We can provide that for you.

Maher:
Just to double-check, your evidence today, Dr McGowan, is you have never signed a document that recommends or notes the procurement of services from Silver Chain?

McGowan:
I certainly don’t recall. Our posture is that I don’t get involved in anything in that area of the business because of the perception

Maher:
Can you please take that on notice and provide as soon as possible, once you have checked, an answer to that and perhaps reflect upon the evidence you have previously given this committee?

McGowan:
Sure, and just to re-state for the record that I have no interest in any organisation outside of the department, so there would not be an actual conflict if I had; there’s only a perception of it. We made a decision very early that I would stay well away from that, so if there is something in there at all somewhere that I have signed

Maher:
So if you had signed something recommending procurement from Silver Chain, the company you were formally employed by before starting this new role, you would agree that’s a perceived conflict of interest?

McGowan:
It would be a perception; not a real one,  just a perception of one.

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