The Crown-owned company behind spying on quake insurance claimants was increasingly concerned about its reputation, an inquiry has found. David Williams reports.

Southern Response chief executive Anthony Honeybone wrote to Treasury officials on February 8 of this year to explain its engagement of security firm Thompson & Clark.

There were limitations with the response, Honeybone explained, given the events happened “several years ago” and Peter Rose, the then chief executive of the Crown-owned company, left in July 2016. “This limits our ability to obtain a detailed and accurate first-hand account.”

Concern, including that from shareholding Minister Megan Woods, centred on a meeting of Christchurch insurance claimants in March 2014 to discuss a potential class action. There was a suggestion the meeting was recorded – that Thompson & Clark (TCIL) had spied.

Treasury wanted to be clear if what was done on Southern Response’s behalf was lawful and ethical. Honeybone responded: “We are not aware whether TCIL attended the class action meeting in person, or how this information was obtained by them, but we acknowledge a reference in their email to a recording made of the meeting.”

Southern Response hadn’t identified a recording or any transcript from this meeting, he said. Even if it had, it wasn’t aware of any ethical or legal obligations arising from recording “this public meeting”, at which other people could have taken notes. “It is more conceivable,” Honeybone wrote, “that media and other attendees at the meeting may have recorded the meeting themselves.”

He concluded: “Any advice or actions that Southern Response may have taken as a result of TCIL’s advice accorded with genuine concern for the safety and wellbeing of company personnel.”

This letter can now be consigned to the rubbish bin of history.

A State Services Commission inquiry into the use of external security contractors, released yesterday, confirmed how the closed March 2014 meeting, and several other claimant-only gatherings, were recorded by an unlicensed Thompson & Clark investigator, potentially illegally. The recordings were shared with Southern Response. Emails from the security firm talked about getting around the Official Information Act and, from what was said, suggested it suspected the recordings were illegal.

State Services Commissioner Peter Hughes, who apologised yesterday for breaches of the state sector code of conduct, has laid a complaint with police over the recordings.

The inquiry, carried out by former Deputy State Services Commissioner Doug Martin and Auckland barrister Simon Mount QC, criticises Southern Response for its “minimal” oversight, mainly run through its communications team.

The inquiry’s findings also make a mockery of Honeybone’s February letter. At best, it can now be seen as ignorant – at worst, an ill-advised deception. To borrow a line from Honeybone, it is more conceivable there was enough remaining knowledge within Southern Response to know what really went on. A phone call to his predecessor Rose would have cleared it up. But perhaps the company was careful not to look too hard.

Following the inquiry, the biggest question was about accountability. Last night, Minister Megan Woods announced she had accepted the resignation of the company’s chair Ross Butler. Woods says secretly infiltrating private claimant meetings and recording closed-door conversations is “wrong, plain and simple”.

(Curiously, inquiry head Martin’s advice to Woods in June was that it had no concerns ahead of her making Southern Response board reappointments. “Southern Response was able to demonstrate a mature governance approach with a robust set of policies and procedures in place to govern decision-making.”)

Threats were real, some referred to police

Southern Response was created to settle outstanding AMI claims after the collapse of the insurer in the wake of the Canterbury quakes. The public quickly tired of its perceived foot-dragging and it came in for some furious criticism, especially during a protest at its offices in late 2013. In early 2014, Southern Response accepted a Thompson & Clark proposal for a security review.

The threats were real. From early 2014 until the State Services Commission inquiry began in March of this year, there were five direct death threats, seven threats of serious harm and 22 cases of harassment or abuse made against employees or board members of Southern Response. Appropriately, the Crown-owned company referred the more serious cases to the police.

Where Southern Response went wrong, according to the inquiry report, was to engage Thompson & Clark on the basis of security and then let its mandate shift. Perhaps, early on, there was a case for openly attending meetings to assess threats. But once the actual and perceived threats to staff were dealt with, the real benefit of spying on quake claimants was “informing an assessment of the extent of negative public sentiment towards the company, and the associated risk to corporate reputation and brand”.

Once it was clear recordings of closed meetings had been made, Southern Response should have been aware of the potential damage to public confidence. “The inquiry does not consider that health and safety obligations require or justify surveillance of individuals or groups by external security consultants in circumstances such as these.”

Don’t mention the recordings

Back in 2014, a Thompson & Clark representative told Peter Rose he should pressure police to talk to the person who suggested at the March meeting that claimants “go around and have a chat [to Southern Response board members] at 2am Sunday morning”. But there should be no mention of the recording, Rose was advised. In fact it was suggested the source of the information be misrepresented.

Rose did contact police. That could have caused problems if an official complaint had been laid and Southern Response had either withheld the recording or the source was misrepresented. But the police officer said no further action was warranted and told Southern Response it was better off engaging with the individual.

The inquiry, which was widened several times to include more allegations covering more Government agencies, found Southern Response’s Thompson & Clark engagement was “poorly managed and lacked the oversight and safeguards required”. The recordings and transcripts weren’t kept. Nor was a Wordpress blog, through which updates were sent.

The inquiry report said: “Because of the lack of records in this case it has not been possible for the inquiry to establish specifically what was recorded and what information was provided.” That’s important because it’s illegal to record third-party conversations.

An email sent by Thompson & Clark said it was generally concerned “to get around disclosure, privacy and OIA [Official Information Act] issues”. That rings true, considering the company’s previous use of paid informants to infiltrate opposition groups on behalf of Solid Energy.

Worryingly, the inquiry also sets out how the security firm was able to conduct large-scale surveillance of Greenpeace through extensive searches of Government databases, in particular the motor vehicle and driver licence databases. The Serious Fraud Office is now investigating two former Ministry of Agriculture and Forestry employees who took secondary jobs with Thompson & Clark.

“The conduct could even be described as bordering on infiltration, given the contractor at least tacitly assumed the role of a member of the claimant group while being paid by Thompson & Clark.” – Inquiry report into Government agency use of external security firms

In a statement, Thompson & Clark director Gavin Clark says he’s pleased the report found there was no evidence of widespread surveillance by external security consultants on behalf of Government agencies and that much of its work was done within the state sector’s code. “We accept the findings that some processes around how and when some work was carried out could have been more stringent.”

But he digs in, saying there are aspects of the report he disagrees with.

From the report, it’s clear the firm never accepted what it did was surveillance, arguing the meetings were public and were held in a public place. (The inquiry says it was surveillance.)

The firm argued its contractor didn’t need a private investigator’s licence to spy on Southern Response claimants because he was seeking to “make an informed assessment of mood, motivation, intent and capability of the general public mood of disaffection”. (“The inquiry does not accept that distinction”.)

Thompson & Clark relied on the Summary Offences Act and the private investigators’ code of conduct to excuse its conduct. The inquiry says that is “both misplaced and too narrow”. “The conduct could even be described as bordering on infiltration, given the contractor at least tacitly assumed the role of a member of the claimant group while being paid by Thompson & Clark.”

(Asked why he didn’t identify himself as representing Southern Response, the contractor “took the surprising position that he was not representing Southern Response because ‘you can’t say that dollar that Southern Response paid Thompson and Clark then went to me’.” The inquiry disagrees.)

A pass, followed by a leave pass

Before last night’s resignation, the Southern Response board and Butler, its chair, got a pass from the inquiry. Board members didn’t know the recordings were being made, the report says. In fact, Butler expressed concern about the potential use of surveillance in an email to Rose, the communications team and Thompson & Clark at the initial engagement.

In a nuanced statement made before his resignation was announced by Woods’ office, Butler apologised for the spying, saying it was an unacceptable breach of its customers’ trust. But he reinforced that the company had a duty of care to provide a safe working environment.

Christchurch accountant Cam Preston – one of those spied on at the meetings, in a contract that cost taxpayers $177,000 – doesn’t think the apology is meaningful. “The people who were being covertly surveilled at these meetings were not a security threat to Southern Response.”

What’s almost as bad as the spying, he says, is the attempted cover-up by Southern Response. Preston maintains he was personally targeted – with an approach to his employer and a knock on his door by police – because of his vigorous pursuit of his own claim, his help given to others, and his regular use of the Official Information Act.

But he’ll take the report’s findings as a win. He sees it as a rare win for the little guy when thousands of Christchurch people are still in limbo over home insurance claims. The inquiry report was an “extremely strong, well-researched piece of work”, Preston says. He’s also heartened by inquiry head Martin’s comments that the spying is an “affront to democracy” and is glad Butler has resigned – “it’s the right thing to do”.

“I do feel justified and vindicated that it does show that spying occurred,” he says. “I feel that possibly my kids might grow up in a country where it’s just a little bit harder for organisations, particularly Government organisations, to be able to do this stuff when people don’t agree with what they’re up to.”

David Williams is Newsroom's environment editor, South Island correspondent and investigative writer.

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