‘Pandora’s box’: Real conspiracy behind robo-debt (2024)

Evidence heard during one of the most incendiary weeks at the robo-debt royal commission has revealed the extraordinary lengths two federal government departments went to in order to cover up a multibillion-dollar crime that spanned years.

By early 2017, two years after the Centrelink debt fabrication scheme had begun, there were two external agencies with prying eyes threatening to expose the legal fiction on which the entire program rested.

The Commonwealth Ombudsman was investigating, and damning decisions were also coming back in greater numbers from the Administrative Appeals Tribunal.

Both the Department of Social Services and the Department of Human Services adopted a “pattern of behaviour” that would deliberately mislead the ombudsman, ignore directions from the AAT and conspire to keep the government’s dodgy decisions in-house by refusing to ever challenge them past a first-round loss with the tribunal.

It was this latter strategy – according to Emeritus Professor Terry Carney, who sat on the AAT and a predecessor tribunal for decades until the former Coalition government suddenly ended his tenure in 2017 – that was the main reason robo-debt was “able to operate for so long and at such costs to applicants”.

His evidence and the other evidence given this week is the clearest account yet of the extraordinary efforts the government and its departments went to in the name of continuing a scheme that they knew was unlawful and was raising fake debts. Tens of thousands more people were dragged into the mess while this was known.

“Had there been a public ventilation of what the AAT was ruling, there wouldn’t have been an instant change to, or abandonment of, the scheme,” Carney told the hearing on Tuesday.

“But it would have been a lot quicker than the three or more years that nearly half a million people had to suffer the raising of unlawful debts against them.”

The fact the Commonwealth never appealed against a single decision was “unprecedented”, Carney said. This was even more startling a strategy when it became clear lawyers and appeal branch managers in the Department of Human Services (DHS) knew what was going on and did nothing to change course.

Under Commonwealth model litigant obligations and separate responsibilities enshrined in social security law, the federal government is required to have “due regard” to AAT decisions and should act to contest them where it involves a significant matter of law or policy or where different decisions create “inconsistencies” in the application ofpolicy.

Former DHS appeals branch manager Elizabeth Bundy, a qualified lawyer, told the Royal Commission into the Robodebt Scheme on Tuesday that she probably didn’t read one of Professor Carney’s adverse tribunal decisions that was explicitly sent to her for monitoring “because it was very long and legalistic”.

Emails between Bundy and a lawyer in her team, Damien Brazel, sent in late March 2017, show they understood the significance of the Carney decision because it involved the use of income averaging from the “manual” pilot stage of robo-debt, a domain they say they believed was not an issue.

“We need to escalate this ASAP,” Bundy wrote to Brazel on March 24, suggesting they should inform DHS deputy secretary Malisa Golightly.

The following day, a Saturday, at 8.35pm, Darren Zogopoulos, a manager in DHS, emailed about a “third set aside … decision” with a note of alarm.

“This one is very interesting,” he wrote. “I would be concerned of [sic] legal services didn’t contest this. If they don’t, it will open up Pandora’s Box.”

Not only did they not contest this or any other decision, however, but DHS lawyers met some of the decisions with institutional arrogance.

On May 30, 2017, Aaron Baril from DHS forwarded a query from an authorised review officer, Karen Keary, who was given the job of implementing an AAT decision with directions to recalculate a debt to his division’s legal team.

“Apparently, Ms Keary has been unable to obtain income verification from one of the applicant’s employers such as to substantiate the debt in the manner contemplated by the Tribunal,” he wrote.

“Is there a process we follow in these instances? On the face of the Tribunal decision, it appears to me that, if we cannot base the debt on salary records, the debts are not recoverable.

“Would we then write off the debt? Inote that the debt amount is $7452.76.”

DHS principal government lawyer Brian Sparkes was dismissive of the tribunal in response.

“It is not the case that we cannot raise adebt on the basis of the ATO advised income regardless what the AAT1 said in this instance but we do need to explore all avenues and to use our information gathering powers before we do so,” he wrote.

“The AAT2 has expressed this view in the past and indeed the AAT1 has, where it has sensibly considered the law.”

Brazel, the former acting general counsel in DHS’s litigation division, was questioned about this email exchange while on the stand on Wednesday.

“In your time in the Department of Human Services, did you ever encounter a situation where the DHS gave explicit advice recommending actions contrary to a direction from the AAT?” Angus Scott, KC, asked.

Brazel said he could not recall such a situation and that this was the first time he had ever seen it happen. The debt was recalculated against the direction of the tribunal.

“Would you agree with me,” Scott asked, “that it’s plainly contrary to the obligations of the Commonwealth as a model litigant to continue with the process which an administrative tribunal has concluded is unlawful, without any appeal by the Commonwealth against that decision, in circ*mstances where its own internal advice concludes that decision involved no error of law?”

As with many of this week’s witnesses, Brazel tiptoed carefully around the inference. “I’m not sure I agree with that proposition entirely,” he said, “but I can see why you’re suggesting that.”

What has emerged from the third robo-debt hearing block might seem complex and at times incremental, but it builds spectacularly on the half-answered questions supplied during sessions held late last year. The picture it provides is horrifying.

On Wednesday, as successive DHS and Department of Social Services (DSS) witnesses took the stand in the most revealing day so far, the squeeze from the senior counsels assisting – Justin Greggery, KC, and Angus Scott – finally began producing names of people who made critical decisions.

One of these crucial decisions led to a months-long mission to “conceal information” from the Commonwealth Ombudsman. This mission began the moment officials learnt the ombudsman was investigating the online compliance intervention, which was the first iteration ofrobo-debt.

It is helpful to go through this time line in detail.

The sequence of events begins around January 11, 2017, when DSS officials – including former director of payment integrity and debt strategy Robert Hurman – became aware of the ombudsman’s investigation.

From this date, the fuse of bureaucratic panic was lit.

Within hours, Hurman had been sent the only written advice his department had ever sought about the legality of the scheme: the 2014 advice written by Simon Jordan and second-counselled by senior lawyer Anne Pulford, which was unequivocal in its statement that the fundamental basis of robo-debt was illegal.

What to do?

Greggery laid out the department’s blueprint for deception.

“I suggest to you there was a common understanding within DSS – from the time the ombudsman’s investigation was received – to go on the front foot and defend the scheme as being both lawful and accurate in raising debts,” he said to Hurman.

“There was a pattern of behaviour from the start by people within DSS, of which you were a part, and it was designed to establish the lawfulness of the scheme in the representations that it made to the ombudsman, irrespective of the true position.”

Hurman responded that they “were trying to show it in a positive light”, a description that rankled the senior counsel.

“Yes,” Greggery said, “but it’s a bit hard to put a positive light on something that you understood was being conducted unlawfully according to the advice that had been given in 2014.”

Hurman and colleagues commissioned a new set of legal advice from Pulford, the same lawyer who co-authored the 2014 advice, only this time the answer to ostensibly the same proposition was that income averaging could be used to raise a debt.

This “2017 advice” wasn’t delivered until later in January. Six days before it arrived, on January 18, DSS officials attended a walkthrough with DHS leadership about the robo-debt scheme. About the same time then ministers Alan Tudge and Christian Porter were making public statements asserting the lawfulness of the program.

Although Hurman was on leave for this January 18 walkthrough, he authored an email that stated DSS staff were “comfortable that the current process is lawful and clear”.

Greggery asked how this could have been so. The walkthrough happened after the 2014 advice had been recirculated, noting the scheme was unlawful, and before the new Pulford advice had been received.

“So how could you be satisfied, or how could you represent that senior department staff were comfortable that the current process was both lawful and clear,” Greggery pressed, “in circ*mstances where you had been given contrary advice?”

Initially, Hurman had believed the original advice should be withheld. After a tense back and forth between the policy and legal teams, a decision was made to send both to the ombudsman.

However, on February 23, Greggery said, Hurman learnt that only the 2017 advice had gone to the ombudsman. The legal opinion acknowledging the scheme was likely unlawful was not sent. Former branch manager Russell de Burgh, Hurman’s boss, accepts that the 2017 advice was the only document the department ever had that could be construed as suggesting the scheme was even remotely lawful.

Hurman told the commission that the initial effort to hide the first round of legal advice from the ombudsman came because “someone in DSS had changed the draft” email he had written. For the first time in these hearings, he gave a name: DSS deputy secretary Serena Wilson.

This was a significant moment in the royal commission. What Wilson didn’t know then was that the Department of Human Services had been a little too overeager with the ombudsman, handing over the original ministerial brief that was prepared for Scott Morrison and was subject to cabinet-in-confidence.

It did not have to do this, but in providing the document, DHS inadvertently tipped off the ombudsman about the existence of other written advice and legal input regarding robo-debt.

The ombudsman came back again, revealing its hand, and requested all notes, memos and documents relating to the policy and legal advice provided by DSS, all the way back to 2014. Faced with this, officials came up with an emergency strategy that was to cut the 2014 advice away from its context – the question that lawyers were asked to answer about whether income averaging could be used – and to send the 2017 advice for a second time in a desperate bid to obscure the true impact of that early opinion.

It worked – and it is now a matter of public record that the ombudsman made somewhat minor recommendations but ultimately found the online compliance intervention was operating within the bounds of legislation. This was never true.

“So DSS hung its hat on the 2017 legal advice which was obtained after the ombudsman had begun its investigation,” Greggery said while addressing Hurman’s boss, Russell de Burgh, this week.

“The inference to be drawn from that is that it needed to justify the legality of the scheme to the ombudsman.”

De Burgh conceded this point. “Yeah, I mean, part of this is the premise that the 2017 legal advice was asked for because of the ombudsman question,” he said.

Greggery had sprung his trap.

“And I suggest to you that it was commonly understood between yourself, Mr Hurman, Cath Halbert and Serena Wilson that there was a need to justify the legality to the ombudsman,” he said.

Yes, de Burgh agreed.

“And that every step along the way,” Greggery said, “was done with that purpose in mind.”

The reality of the mendacity exposed by the commission this week is shown in the testimony of victims such as Rosemary Gay and Ricky Aik, who gave evidence on Monday.

Gay, a pensioner who could work only two days a week due to physical health problems, was tormented with a completely fictitious debt of $64,000.

A retired single mother in her 70s, who budgeted meticulously and was a professional record-keeper and legal clerk throughout her career, Gay worried she would lose everything.

“Everybody needs to understand how many thousands of people were affected so badly by a system that was put in by a government department who you have full trust in that they are doing things correctly, when obviously they are not,” she said.

“And it will continue to remain with me forever. It’s just something I will never get over, and it has had a huge impact on my physical and mental wellbeing.”

Aik, a member of the working underclass who lived alone in remote Victoria, was told the only way he could get the debt collectors off his back was to have 50 pages of bank statements printed, at $2 each, a cost he simply could not afford.

His work suffered. As the debt was pursued further, he thought about self-harm.

While people like Gay and Aik were being hunted, the scheme was beginning to unravel internally. Efforts by many public servants – and ministers who were either ignorant or who simply did not care – kept the conceit alive for another two years.

The key players – Alan Tudge, Christian Porter and former DHS chief counsel Annette Musolino – will give evidence next week.

This article was first published in the print edition of The Saturday Paper onJanuary 28, 2023 as "‘Pandora’s box’: Real conspiracy behind robo-debt".