The Ultranet schools IT project was dumped by the Coalition government last year.Senior Victorian education department officials bought shares in and took jobs with the company given a $60 million contract to deliver the failed Ultranet schools IT project.
The revelations will re-ignite questions over the former Labor government’s handling of the project – dumped last year by the Coalition after its cost blew out to $180 million – and come as Victoria’s anti-corruption agency continues its probe of the education department.
The shares scandal was uncovered by a secret 2010 internal education department inquiry which revealed its general manager, John Allman, had bought shares in CSG Limited before it was announced winner of the Ultranet contract in July 2009.
The internal inquiry also found two of the department’s then regional directors, Wayne Craig and Ron Lake, purchased 11,289 and 1112 CSG shares respectively after it was awarded the Ultranet contract.
Mr Lake’s assistant regional director for Loddon Mallee, Julie Baker, also bought 14,238 CSG shares in August 2009. CSG’s share registry confirms these purchases.
Fairfax Media understands the department’s former acting secretary, Jeff Rosewarne, received the findings of the internal inquiry in early 2011.
But it appears Mr Rosewarne, who also headed the Ultranet Project Board, had not acted on the inquiry’s recommendations for disciplinary action and referral of the share purchase to the Australian Securities and Investment Commission by the time he was appointed head of the Primary Industries department in August 2011.
Fairfax Media can also reveal the education department deputy secretary responsible for the Ultranet, Darrell Fraser, took an executive job with CSG in July 2011, two years after he was instrumental in giving the company its biggest-ever contract against the advice of Premier and Cabinet and Treasury.
Mr Fraser was joined at CSG six months later by another senior education bureaucrat responsible for the Ultranet, Dianne Peck.
The decision to award CSG the Ultranet contract shocked many in the education department and IT sector, with widepread concern over the Darwin-based company’s lack of experience and expertise in delivering major projects.
Victoria’s Auditor-General confirmed these concerns in December 2012, reporting “serious process and probity issues” with the Ultranet tender process, including CSG’s suspension from bidding in February 2009 only to months later re-emerge as the contract winner.
Fairfax Media can reveal that the key to CSG winning the Ultranet tender was its $5 million offer to buy a small company part-owned by a former colleague of Mr Fraser and Ms Peck’s weeks before tender process began in November 2008.
CSG bought a little-known company called Cinglevue Pty Ltd on October 17, 2008. Cinglevue was a vendor for US software giant Oracle’s educational products.
Oracle had been a partner in the Ultranet prototype trialled at Glen Waverley Secondary College, where Mr Fraser was principal and Ms Peck his assistant principal in the early 2000s.
Company records show another former Glen Waverley Secondary College staff member, Frank Aloisio, was a director and part owner of Cinglevue until its sale to CSG in October 2008.
Cinglevue’s other owners were former WA education department official-turned-Oracle executive, Greg Martin, and Perth IT businessman, Greg Tolefe.
Mr Aloisio was also a former business partner of the education department’s Ultranet project director Ben Cushing. Mr Cushing had worked at Glen Waverley under Mr Fraser and Ms Peck.
West Australian Supreme Court documents reveal that CSG paid $1.8 million for Cinglevue in October 2008 and a further $3.2 million when the Ultranet contract was signed in June 2009.
The documents refer to an “exclusive teaming agreement” between Oracle and Cinglevue to enable the Australian company to “act exclusively as the prime contractor with respect to the Ultranet tender response and the subsequent Ultranet agreement”.
In a statement, an education department spokeswoman said the department’s secretary Richard Bolt was provided with the internal inquiry into the CSG share purchases shortly after he was appointed to the role in late August 2011.
“Mr Bolt instructed his department to refer the report to ASIC and he also implemented the disciplinary actions recommended to him. In May 2012, ASIC advised the department it was not going to initiate a formal investigation,” the spokeswoman said.
Mr Allman, who is now the department’s south-east regional director, said he co-operated with the internal inquiry and accepted its recommendations.
“My decision to buy those shares was simply part of a long-term ongoing interest and was in no way on the advice of or connected with any employee of the department, past or present,” he said.
Mr Craig, whose wife is understood to have bought the shares under his and her name, declined to comment. He left the department last year and was not involved in the decision to give the Ultranet contract to CSG.
Mr Lake, who resigned as the department’s regional director for the Loddon Mallee in 2012, is now a director of schools in Riyadh, Saudi Arabia. He did not respond to Fairfax Media’s inquiries.
Ms Baker has also left the department and worked as a consultant with Mr Lake in Saudi Arabia in late 2012.
Mr Fraser and Ms Peck have left CSG and have also worked in Saudi Arabia with Mr Lake. Neither has responded to Fairfax Media’s inquiries.
Mr Cushing and several other former education department staff involved with the Ultranet have also since worked in Saudi Arabia.
Mr Rosewarne, now a director of the Catholic Education Office, declined to comment.
Announcing the signing of the Ultranet contract in July 2009, then education minister Bronwyn Pike described the tender process as “rigorous and comprehensive” and said CSG had “proven it is ready, willing and able to take on this important project.”
CSG’s education technology business was bought by Japan’s NEC in 2012.
THE ULTRANET SCANDAL
What is the Ultranet?
An intranet for Victorian government schools promised in 2006 by the then Labor government. It was shelved by the Napthine government after costs blew out to $180 million and it had few users.
Why is IBAC investigating the Education Department over the Ultranet contract?
Senior Education Department bureaucrats bought shares in the company awarded the Ultranet contract, CSG, and two were given executive jobs at CSG.
HOW THE SCANDAL UNFOLDED
Labor government holds trial of Ultranet using software from US giant Oracle at Glen Waverley Secondary College.The college’s principal Darrell Fraser (left) joins education department as a deputy secretary.
Labor promises Victorians it will deliver a $60.5m IT project to connect students, parents, teachers and administrators to classrooms.
First request for tender to develop Ultranet released. All bids are over $100m so department cancels tender process and reduces project by 90 per cent. Cinglevue Pty Ltd is registered, part-owned by a former Glen Waverley SC staff member and with an exclusive deal to provide Oracle software.
October 2008 Darwin IT firm CSG Limited offers $5m to buy Cinglevue.
November 2008 Second request for tender for Ultranet begins.
Education Department Ultranet project board suspends CSG from bidding.
May 2009 CSG re-emerges as preferred Ultranet tenderer.
Labor’s then education minister Bronwyn Pike announces $60.5m contract signed with CSG.
Ultranet launched across Victoria and students given day off so teachers can get accustomed. System crashes, embarrassing government.
Ted Baillieu leads Coalition to surprise election victory. Internal Education Department inquiry into senior officers buying shares in CSG begins.
Early 2011 Report of internal inquiry confirms four senior officers, John Allman (right), Ron Lake (far right), Wayne Craig and Julie Baker, had bought shares in CSG. Report delivered to acting education secretary Jeff Rosewarne.
June 2011 Darrell Fraser resigns as deputy secretary and takes senior executive post with CSG.
August 2011 Jeff Rosewarne (left) becomes Primary Industries Department secretary. New education secretary Richard Bolt handed report into CSG share buying. He acts on recommendations, taking disciplinary action and referring to ASIC.
January 2012 Education Department’s key Ultranet officer, Dianne Peck, joins Darrell Fraser at CSG.
May 2012 ASIC decides not to launch formal investigation into CSG share trading.
December 2012 Auditor General reports cost of Ultranet has blown out to $180m and finds serious probity issues with tender process.
June 2013 Napthine government announces taxpayer support for the Ultranet will end at the start of 2014, effectively killing the project.
Read more:Ultranet shares and jobs scandal snares Victoria’s education department Ultranet executive accused of fraudUltranet’s costly failure an education in politics and procurementUltranet IT system lined up for Catholic schoolsThreat to subpoena Victorian education chiefs over Ultranet dealUltranet’s biggest losers
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