The History of Corruption within Victoria, Australia

Abstract

Corruption is a difficult concept to define and address as it encompasses various behaviours, which often sit outside the criminal law. These are an insidious form of behaviour as they erode trust and integrity in government institutions, such as democratic values, the rule of law, and the economic efficiency and stability of governments. Corruption is estimated to cost the world 5 per cent of global GDP, approximately 2.6 trillion. It is difficult to measure the extract amount and how much corruption takes place, as most behaviours are often hidden from public view. These concepts are explored and critically discussed within the Victorian, Australian landscape as a case study example of how corruption has changed and evolved over time. It will be suggested that corruption and what is considered corrupt behaviour changes as society and its values change, making what constitutes and is defined as corruption an evolving concept throughout history.

1. Introduction

Corruption has existed since the beginning of civilization and is a problem that affects every government in the world, with the effects of corruption far reaching [1]. Corruption is a complex phenomenon, where there is no universal definition of its meaning. It is commonly defined as the abuse of public office for private gain, where behaviour is hidden to avoid detection [2, 3]. While corruption is present in all countries of the world its pervasiveness varies, as is evident from country scores on the corruption perceptions index (CPI) published by Transparency International as well as other cross-country governance indicators published by the World Bank Institute [4]. Corruption causes economic loss and inefficiency. Obtaining exact figures on the economic loss of corruption is difficult, however it is estimated that the cost of bribery globally to be between $1.5 and $2 trillion per year [5]. This represents a total economic loss of approximately 2% of global GDP, not considering the economic cost of all other forms of corruption.

Corruption leads to a lack of confidence in institutions, and in turn this has the potential to undermine public policy, weaken investment and economic growth and undermines the rule of law [5]. The cost of corruption to economies is well established, as is the loss of public confidence and integrity in the political system [6]. It comes at great expense to governments both financially and through public goodwill regarding the ideas of government and democratic values [7]. Moreover, the public loses trust in their political leaders, and in public institutions when they believe corruption is widespread and corrupt officials are not being held accountable [8]. When political non-accountability increases, these perceptions persist and political participation and trust in those institutions declines [8]. In addition, social norms could encourage corrupt behaviour as people may then think “if everybody else is doing it, I might as well do it too” [8]. Failure to meet public expectations for zero-tolerance of corruption may have serious consequences for the legitimacy of State institutions and the utility of formal norms that the public sector is expected to follow [8]. Trust and confidence in the rule of law, and that people are equal before the law is seriously damaged when corruption runs ramped.

Corruption has existed throughout Australia’s political history at both a Federal and State level. There have been many recent examples of corruption within Australia at both the Federal, State, and Local Government levels. Throughout Victoria from the time of early settlement and colonisation, federation, to modern and present day, corruption has existed and has taken on many different forms as it evolved and continues to evolve over time. The definition of corruption has evolved from the historical contexts in which it is found. For example, the notion of blame and how fault is attributed to behaviour forming part of the criminal offence of corruption, and how this informs the key elements of proving such offences, such as the intention to commit corruption and what is required to prove corruption beyond reasonable doubt has evolved over time [8].

The behaviour forming the elements to prove corruption, such as intention, knowledge, recklessness, and negligence evolved alongside Victorian society. Four themes of corruption become clear when traversing the history of corruption within Victoria; bribery, fraudulent activity, nepotism, and other practices that can be described as corrupt practice. These four themes are set against a wider context of a relaxed attitudes amongst the Victorian Government to combat corrupt practices, at least until recently, with the introduction of governance institutions such as the Independent Broad-based Anticorruption Commission (IBAC), and other forms of government integrity administration which has been established to combat corruption.

2. Development: the 1800S

The opportunity for corrupt practices in the administration of government appears to have been born out of a sense of paternalism [9] and belief that the public were not best placed to make judgements for themselves [9]. In the development of Victoria in establishing itself as its own colony, there was a shift towards an electoral system of appointment for public office, where these systems had built in them several criteria. The primary criterion was that only those considered ‘gentlemen’ could stand for election into public office [10]. This raises questions of what constitutes a ‘gentleman’ as it is inherently subjective and open to the possibility of nepotism, where people in power would recommend connections and family members as ‘gentlemen’, it is therefore of little surprise that despite what appears to be the best of intentions, there was soon a system of administration established that was ripe for criticism based on loose practice at best and criminality at worst.

During the period of nineteenth century government appointments were made by the Governor, usually having arrived from the United Kingdom. Often, service men, such as constables and watchmen were appointed via connections to the people in power [11]. This created unease within the public with complaints being made regarding these appointments [11]. There was then a shift within society for elections to take place and make the process open and transparent [11]. However, there were still criteria as to who could stand for election for these positions, with only ‘gentlemen’ being considered again for these roles. Due to the increase in crime, it was then decided that constables would be appointed by Magistrates as the free population increasingly comprised ex-convicts, who were viewed by the people in power as not to be trusted, to appoint suitable persons for the role of constables due to their troubled past [12].

Complaints were then made by the opposition party regarding nepotism, for example the investigation into the Honourable Treasurer Mr. Berry in 1872, which investigated the appointment of the Treasurer’s father-in-law. Although, it was found that the ‘most corruption ever made by any government in this colony’, the committee that was tasked with investigating the conduct determined not to formally report it [12]. This demonstrates how often conduct that is deemed to be corrupt did not go through the implemented channels of investigation due to political influence and motivation, allowing corruption to continue without punishment.

In October 1873, by what commenced as a routine examination of accounts by the Audit Office, it was discovered that Hugh James Vincent O’Ferrall, a land licencing agent/officer of the Department of Crown Lands and Survey had defrauded his department during a prolonged period of inadequate financial supervision (dating back as far as 1866) committing in the process what proved to be the largest embezzlement by a Victorian public servant to occur in the nineteenth century [13]. Often routine audits uncovered fraudulent conduct that had been occurring for some time [14] and had remained undetected due to lack of adequate processes and procedures implemented to detect corruption [14]. Sale of land was also heavily policed, and licences were given to people who officials favoured and or accepted brides [13]. Together with minutes and transcripts of evidence it was tabled in the Legislative Assembly of Victoria. It is noteworthy, that the Select Committee did not pursue the question of possible collusion between O’Ferrall and certain staff members working for the Audit Office. O’Ferrall was later captured in Singapore in January 1875 and brought back to Melbourne where he was tried and sentenced to nine years imprisonment to hard labour on 22 April 1875 [13].

The gold rush area also brought much corruption with the increase of travellers to Victoria. Gold was discovered to the northwest of Melbourne, Ballarat, and the rush that followed caused the population to surge [11]. More ships were coming from England and within a decade the population of Victoria overtook Sydney and remained that way for the next forty years [11]. Miners’ licences were often associated with corruption, government officials accepted brides as did police who policed these areas [11]. Where large amounts of money are readily available corruption will be found, as has been demonstrated in more recent times with the corruption that has been uncovered within government and private cooperation on large projects. With the advent of the Gold Rush in Victoria, allegations of corruption connected with mining licences were rife, including instances of government and officials accepting bribes in return for prime stake licences [15]. This is not unique to Victoria and is little reflection on the character of the province, as instances such as these connected to gold rush era appear to be ubiquitous worldwide [16]. What is notable however, is the sheer number of investigations of sufficiently serious nature to warrant recording at senior level or the status of Royal Commission, between 1851 and 1900.

In 1856 a Royal Commission investigation into allegations of bribery and accepting large sums of money against Richard Woolley in his role as Secretary of the Railway Trustees was found to be lacking in evidence [17]. Similarly, in 1858, another Royal Commission investigation, this time into whether Captain MacMahon had a personal interest, either direct or indirect, there were found to be ‘errors of detail only’, however, the Commission was not in a position to draw any firm conclusion, as due to the ‘extremely loose manner in which the business of that office had been conducted, it was next to impossible for the Audit Office to ascertain the precise state of the accounts’ [18]. This inability to prove or disprove allegations due to poor record keeping is possibly the most pervasive theme throughout this period.

There are two eventualities that may be found in terms of the receipt of bids and tenders. The first is that of refusing to accept applications for tender, which was first recorded in the case of the Land Officer for Camperdown, another Royal Commission investigation. Scandals pertaining to land, continue to pervade the corruption landscape in Victoria in 1862 with the Camperdown Royal Commission that investigated the principal charges of the land officer, where he refused to receive applications when formally tendered to him in conducting the business of the office, he favoured certain persons, where he was known to take brides regarding infrastructure, such as the railways and licences to conduct business and land development [18].

The second is the receipt or offering of money or favours to ensure that a tender is won [19]. This can take the form of bribery or nepotism. In 1869, it is unclear whether the entrepreneur Hugh Glass paid MLA member Edwin Jones for the actual award of tenders, but certainly money was exchanged for parliamentary votes of no motions that benefitted the interests of Hughes and his colleagues. While Glass was found guilty and Jones expelled from the Legislative Assembly, the sentence for Glass is a matter of concern, as he and his colleague Quatermain, also found guilty, were detained ‘during the Legislative Assembly’s pleasure’, to the extent that a writ of Habeus Corpus was finally issued for their release [20]. This course of action indicates a sense of revenge, rather than justice in the actions of the Legislative Assembly. This was not the first time Jones had been accused of accepting bribes, though a Royal Commission had found the evidence for an 1865 incident unreliable [21]. Further instances of Select Committee reports into parliamentary charges, unsubstantiated, against a Magistrate in Ballarat for bribery and corruption are recorded in 1871 [22]. While in 1872 nepotism was investigated in the case of the honourable Treasurer Mr. Berry’s appointment of his father. Again, while it was clear that corruption was rife, sufficient evidence to convict was not presented [23].

While these cases of nepotism-based bribery appear to be quite common throughout the latter half of the nineteenth century, only one case of outright fraud appears to have been investigated, when land licencing Hugh James Vincent O’Farrell was found to have defrauded the Department for a prolonged period, partly due to the opportunities provided by inadequate financial supervision going back at least five years [24]. During this investigation, further evidence of both nepotism and bribery incidents were uncovered [24]. There was another form of nepotism that came to the fore throughout the late 1870s and early 1880s with the rise of the Ned Kelly gang. With a police force largely of Irish descent, there was a certain amount of cultural nepotism and corruption, where people turned a blind eye, or judge’s rulings made based on the cultural sentiments of the day, rather than following the rule of law [25].

There are common themes that pervade the discourse and landscape of corruption over the centuries within Victoria and that are still present today. People in power, that have the means and opportunity to be corrupt, that is either take brides to affect an outcome, and or collude with others for financial benefit are at risk of corrupt practices [26]. Particularly, if there are no frameworks in place that can prevent these practices from occurring or at least limit their occurrence. It is also interesting that most matters that are investigated during this period in history are those that have been made via complaint, via an organisation or employee or Government Department or via Opposition Party, all being politically motivated [26]. For example, throughout the Ned Kelly era the political landscape at the time consisted of a lot of police corruption, decision makers such as judges were making decisions based on the cultural sentiments of the day and not according to the rule of law [27]. Ned Kelly being an icon of anti-authoritarianism sentiment was the subject of police harassment and corruption, which played an essential role in the Kelly story. Many of the local constables were of Irish decent and Kelly outs the police as traitors for co-operating with the existing power structure of the local constables and political landscape more generally. This reinforces class-based stereotypes and the ‘larkinism’ movement begins to take shape within Australia, rooted within rural banditry, bushrangers like Ned Kelly were heroes to this ‘larrikan’ movement.

Bush ranging at the time, meant both robbery under arms and stock theft, which was a significant problem in Victoria and where law enforcement was using any means available to limit its occurrence even if sufficient evidence was not present for law enforcement intervention [28]. The gold rush era had made Melbourne one of the wealthiest cities in the world, but many people did not share in that wealth. The trial that Kelly was subjected to upon his arrest and charge was not conducted according to the rule of law and had it been appealed on today’s legal and ethical standards it is likely that Kelly would have been acquitted [28]. Corruption is therefore shaped by the society of the day and the standards and values that are prevalent at that point in time. This means that corrupt conduct is culturally defined and what is seen as corruption in one era may not be perceived as such in another. However, some conduct and behaviours are so abhorrent that its corrupt nature transcends time, as was the case with police harassment and judicial interference as was uncovered through the Kelly trial.

3. The twentieth century

This feeling of cultural iconography may well have persisted into the early twentieth century, as asserted by Piper, who states that many of those accused of theft were in fact rather more guilty of white-collar, low-level fraud [29]. Throughout the early twentieth century, there appears to be a gradual moving away from high-profile, upper-class incidents, although the influence of wealthy families linger towards a more mundane type of corruption with a somewhat parochial ambience. Even those that involve Members of Parliament, such as the investigation into allegations of bribery in connection with the Money Lenders Bill of 1838 and the Milk Board Bill seem only to have been able to prove that bribery was attempted, not completed [30]. From this point on, this kind of scandalous high-level accusation appears to recede, and incidences of expenses and corporate fraud appear to increase.

By the 1940s and into the 1950s, a series of incidents that can be attributed to the war related streamlining of processes were being reported in a variety of Melbourne newspapers, notably The Age and The Melbourne Argus. The concerns that the removal of the tender process would lead to corrupt behaviour was identified before relevant Victorian legislation was passed in 1940 [31] and by 1943, allegations of corruption in the selection of a distillery site [32] and nepotism in the awarding of a Wool Centre contract [33] were being made. There also appears to be a rise in allegations of corruption and collusion between government administrators and Union officials in 1944 [34]. Further into the 1950s, nepotism appears to remerge as the corruption of the day, with allegations made against the Gas and Fuel Corporation in 1950 [35], and the Victorian Government in 1953 [36]. Evidence of corruption from the late 1950s until the early 1990s, focuses on corruption within land scandals within local governments.

The problem of balancing accountability and innovation in government administration is a real problem in the 1970s. The Bland report recommendations into the transport sector did not adequately address the difficulties involved in reforming the Victorian structures of government. Bland’s reports were written from a perspective vastly different from those that have shaped the states administration prior [37]. A difficulty facing all reform proposals in the Victorian Local Council Government scene have seen few grounds for sweeping changes. A major outcome of the Bland report was the Railways (Amendment) Act 1972, which passed the management and operation of the railways from the Victorian Railways Commissioner to a Victorian Railways Board, the Board was then replaced in 1983 when the Transport Act 1983 was passed. Over the past one hundred years there have been instances of corruption and mismanagement by councillors or their employees, nor is there an immediately obvious way of managing local units better, given their financial problems in a service orientated grass roots ideological climate. Attempts to change the system seem only to rally entrenched supporters of local democracy who find an immediate response in the community. There seems to be a public reservoir of sympathy for local government.

The 1970s also brought corrupt practices within abortion clinics, which were illegal at the time, by doctors who bribed police in exchange for information as to whether raids would occur and to keep secret the underground clinics to perform these services [38]. The strange case of John Friedrich who defrauded the National Safety Council of Australia on a massive scale between 1977 and 1989, giving the profits away to a wide number of worthy causes [39]. The 1990s, see a return to administrative corruption, normally involving fraudulent expansion of expenses [40], but there also appear to be a recurrence of concerns about the suppression of Police Intelligence and other matters [41]. This is not only an after effect from the Ned Kelly days but appears to carry on from the alleged manipulation of police behaviour in the witness box from the 1920s to the 1960s [42, 43].

4. The twenty-first century

The pressure to do something about corruption at every level of the administration has gathered pace since the beginning of the twenty-first century. Not only have the number of investigations proliferated significantly, covering the broadest range of corruption, a number have concentrated on nepotism and conflict of interest at their widest scope [44]. There is now a clear message that nepotism does not simply refer to family, but to a broader range of connections [45]. Throughout the early 2000s, there is a distinct growth in the lack of tolerance for low level corruption, such as conflict of interest. Repeatedly, reports by special investigations and commissions criticise not just those guilty of the crimes they are accused of, but the lax controls that allow the opportunities in the first place [43]. In 2009, a report into Conflict of Interest, at Brimbank City Council, for instance, discussed at length the importance of internal controls and compliance auditing [44]. Similarly, in 2012, another investigation into conflict of interest made recommendations to assist the council to prevent such instances recurring [46].

Further instances can be found in 2014 in the investigation into fraud in aged care programmes in Latrobe City Council [47]. Most concerningly, the realms of administrative fraud appear to be joining up with more violent crime, such as the trafficking of drugs by members of Ambulance Victoria [48] and links to motorcycle gangs [49]. These, along with many other instances point to a continued culture of fraud, bribery, nepotism and other types of corruption. What is also evident, however, is a growing awareness by both the public and those in authority, that the environment of lax administration that allows these activities to continue, is damaging to the relationship between the Victorian Government and the community and is increasingly not to be tolerated [50]. Failure to declare conflicts or perceived conflicts of interests as well as nepotism regarding hiring are themes present in 1800s and are seen in present day, as is evidenced from this documented history. Calls for integrity-based systems and structures were called into question by the Victorian public and the government responded, after years of corrupt behaviour having been identified, leading to the creation of IBAC. Investigations done by IBAC focus on uncovering corruption within the public sector and identify audit processes and procedures focusing on robust processes to ensure that any discrepancies can be detected early and effectively managed [51].

5. Key themes identified over the history of corruption

Documenting the historical landscape of corruption within Victoria from 1800s until present day, there was often insufficient evidence to make out corruption was occurring if behaviour was identified, and the people thought to be involved within various government organisations or members of parliament continued in their occupations whether being in organisations and or parliament. Where evidence was identified it was often insufficient to find someone guilty of an offence, let alone at the criminal standard or threshold required and there was little recourse that could be achieved regarding that person’s employment status, which allowed the person to go on to reoffend. Changes were often made to the organisation in question/government departments, but little direct consequences except for job losses in minimal circumstances occurred. Rarely did criminal prosecutions eventuate and when they did, little to no criminal sanctions were imposed.

Definitions of class and character had an impact on whether police pursued a matter particularly in earlier time periods and how it was dealt with in the courts, affecting the way that fault and blame was attributed to certain classes of offences, such as political nepotism, bribery, and kickbacks. Looking at the law and doctrinal definition of what constitutes an offence, as opposed to viewing conduct through the prism of what is right and just regarding Victorian society, can provide some understanding into the history of corruption and the establishment of integrity institutions within the Victorian public sector. Due to the elements of proving an offence under the Crimes Act 1958 (Vic) (the Act), particularly the mental intention (mens rea) of the offence of corruption and the complex enshrined types of corruption under the Act, being difficult to legally prove. The law and society to a degree, relies on people doing the right thing, via a sense of self-regulation through community values and sentiment. Especially where conduct falls outside the criminal law, as is often the case in corrupt behaviour.

Education campaigns regarding behavioural and attitudinal change which become important in this regard, rather than relying purely on legal sanctions alone. Particularly as the definition of corruption changes as societies’ values and community standards change with it. Some behaviours are so abhorrent that they transcend time periods in that if they were corrupt in the 1800s, they would still be today, for example bribery of the police force and other people in positions of power. One of the main consistent themes throughout the history of corruption within Victoria, Australia was that corruption erodes trust and confidence in government and its systems and damages integrity in the processes and institutions that form the basis of society no matter how large or small, these actions chip away at the democratic processes and the rule of law, allowing corruption to take place and be seen as common place. Especially when perpetrators are not held to account or fall outside the traditional criminal justice process. If things aren’t classified as criminal, are they necessarily wrong? Or do they still infringe societal values? And as a result, should people be held to account?

Despite good intentions on stamping out corruption, a review into the integrity frameworks regarding Victorian public sector agencies found that corruption and its prevention is generally not a prominent consideration of Victorian public sector agencies and departments [52]. Research conducted from IBAC looked at perceptions of corruption by senior public sector employees, which concluded that many employees would have difficulties identifying fraud and corruption risks within their organisation and were not aware of the systems in place to prevent or report it within their agency [52]. Few agencies reported having systems in place to assess risk assessment processes. There was little evidence of senior management being involved or having oversight into corruption prevention policies and procedures [52]. Agencies saw that improper behaviour led to a risk to their agency affecting their brand and service delivery, however they did not see this as presenting a risk to the public’s perception of integrity of government processes generally. Integrity is often viewed as an underlying tenet in public sector decision making, providing legitimacy to the government of the day [53]. While senior executives and people in power including politicians are endeavouring to build the right culture in fighting corruption and preventing its existence, more needs to be done to prioritise corruption control, and to ensure that where corruption controls exist, they operate as intended.

6. Conclusion

Australia has experienced corruption at all levels and at all time periods since its discovery [54]. Across Australia there have been many investigations into fraud and corruption in the public sector at both State and Federal level. Some investigations have seen Royal Commissions into this conduct resulting in Court action against Government officials with some being imprisoned [54]. When the history of corruption within Victoria, Australia is traversed, four themes of corruption become clear; bribery, fraudulent activity, nepotism, and other practices that can be described as corrupt conduct. What is clear from this history is that what is deemed as corrupt behaviour varies over time and is dependent on the values and sentiments of the day that deem the conduct criminally illegal and subject to punishment. Where corruption goes unpunished it erodes the political legitimacy of the government and erodes key principles such as the rule of law.

It is difficult to measure the true extent of fraud and corruption in the public sector, as often it is hidden from public view [53]. The most common means of assessing the prevalence of corruption is through the subjective judgement of the people who know whether and to what extent it is occurring, that is, people working within the sector to combat corruption [54]. If those who are in a position to know are able to form a consensus on whether and where corruption may be a problem, and whether there is more or less of it now than there used to be, one may at least be able to develop a plausible impression of the extent of the problem and whether the perceptions of fraud and corruption match the capturing of those statistics and the cases that get chosen for investigation and prosecution [54].

What is apparent is that as society evolves and community values change, what is deemed to be corrupt conduct changes also, including what is serious enough corrupt behaviour to be deemed criminal. When corrupt conduct goes unpunished it creates a culture of acceptance and non-accountability, eroding democratic values. Corruption is costly for a range of reasons, consumers and taxpayers suffer as a result with the waste of public expenditure on projects that may offer brides and ‘kickbacks’ to government officials, against more worthy projects that do not. Resulting in higher cost to consumers for products, to the loss of integrity in the public sector, to the potential for political instability and an impact on the national security. The effects of corruption are wide reaching and culturally dependent, requiring a mix methods approach to combating and limiting its existence [54].