Hey, Pete and your fellow directors – what are you thinking?

Yesterday I bored you with some dates and facts from the timeline of Callaghan Innovation’s botched procurement process, and the subsequent inaction of the Callaghan Innovation Board in making any attempt to put things right.      

Governance is something I know a little bit about. While boards in the main seldom actually do any of the doing, they definitely set the tone for how things are done in an organisation. To the Chair, Pete Hodgson, and the rest of the Callaghan Board, you need to know that the buck stops here, with you!

While you may not have actually caused the hiring of a conflicted investigator, or the leaking of the reports, or the whitewash that was the EY review, you most certainly are demonstrating, by your silence and inaction, that you condone all of these things. That is not okay.

To what extent have you independently checked the facts of the case and read some of the commentary in social and other media? Or have you relied mostly on management to tell you that all is well? Nothing to see here!

And what have you told your Minister about this whole saga?

Callaghan Innovation has so much potential. An organisation populated by so many talented and motivated people, trying to support innovation in New Zealand. As directors, you have a duty of care to the organisation, to uphold and build up its reputation, to position it to attract the best talent internally, and the best partnerships externally.

In fact, your stated vision is to be “the place where talent wants to be”.

Your behaviour should, and I’m sure is, causing people and organisations to reconsider whether they wish to work for you, or partner with you. What right-minded organisation would put themselves at risk of being ‘hung out’ on the public gallows should your next RFP due diligence process uncover something about them, to which you give them no proper right of reply? Information that you allowed to spread, through deliberate sharing and subsequent leakage, in direct contravention of the confidentiality promise in the tender documentation.

What director in their right mind would consider applying for a position at your board table?

In fact, back in February this year, I did exactly that. After several prompts from people I respect, I applied for an advertised position on the Callaghan Innovation Board – a position which I note has still not been filled. In fact, earlier this month, I received the by now regular update email noting that there was still no selected a short list for the position.

In my application, I noted that:

“As an experienced board director who is fully immersed in the early stage, deep-tech and angel investment ecosystem, I am excited by the opportunity to join a board charged with leveraging Kiwi innovation to create a real impact for New Zealand – our economy, our environment and our society.”

I was genuinely excited at the opportunity, though I was totally realistic that I was unlikely to get the appointment. However, following the behaviour, and particularly the apparent inaction of this Board in the face of the Manaaki situation, I had to rethink. Sadly, I withdrew my application, noting (below) that the reputation risk of joining the Callaghan Innovation board is simply too great!

So, my question for the Callaghan directors is this – while I may not have been your preferred candidate, might there be others who now feel the same way?

In a market where talent is looking to work for organisations that do good, and are good on the inside… how important do you think Callaghan’s reputation is? And is it perhaps worth rethinking your inaction.

You are the only ones who can fix this.

Admit that the investigator was conflicted.

State unequivocally that the due diligence reports, commissioned under the confidentiality of a government procurement process, should never have been shared around other organisations by your then CEO.

Make it clear that you are upset and angry (are you?) at the way the reports have been leaked to all and sundry, including social media influencers and the press.

Clarify that the EY review was not a review of the due diligence findings, nor of the conflicts of interest – but simply a review of the mechanics of the investigative process.

Officially withdraw the due diligence reports.

And above all, tell us whether you really want these documents to be used to drive Manaaki out of business, and to destroy the reputations of its founders. Because if that is what you actually want, you’re doing a great job of achieving your goals.

So tell us, Mr Chair and your fellow directors, what are you REALLY thinking?

Hey, Pete – what are you thinking?

Last week I pondered the decisions made by Callaghan Innovation CEOs, past and present, in regard to the due diligence process they undertook on Manaaki / We Are Indigo; and the subsequent use of that report, deliberately spread and then widely leaked, as a weapon to destroy livelihoods and reputations.

For those who do not know, “Pete” is Peter Hodgson, former Minister of Research, Science and Innovation some 15 years ago, now the Chair of the Callaghan Innovation Board.

Today I am reflecting on the inaction of the Callaghan Innovation Board under his leadership, in choosing to sit on the sidelines while the battle to destroy Manaaki and its founders continues; a battle which has been partly created and largely enabled by their organisation, its actions and inactions.

So first, let’s recap on some of the flawed actions and inactions. This bit is boring – full of dates, historical facts. Stay with me – once we have the timeline on the table, I’ll move on to governance and why the Callaghan Board should care enough to act. All going to plan – today the “what happened”, tomorrow the “so what?”.

6 December 2021 – Manaaki submits an expression of interest in the Callaghan Founder Incubator RFP. This is a significant tender, with a contract value of $2.1 million Callaghan funding over three years.

29 December 2021 – Robett Hollis makes a series of social media posts about bad actors in the start-up system. On the same day, he writes to the then CEO of Callaghan Innovation, Vic Crone. It is clear there had been conversations before this. He offers to introduce Vic to John Borland (an investigator), who he has been talking with about “these issues” and suggests she engage him in the procurement process.

15 February 2022 – Further communication between Robett Hollis and Vic Crone, in which he explains that Borland has specific knowledge that is relevant, and presents ‘evidence’ of bad behaviour by Manaaki, based on what Borland had apparently uncovered in his prior investigations for an unknown party. He reiterates his desire to have Borland connected into the procurement team at Callaghan.

For me, these communications show clearly that Vic Crone was aware of Borland’s conflict of interest, should he be appointed to conduct due diligence on Manaaki. We do not know whether Vic disclosed this knowledge within Callaghan, and if so, why the conflict was ignored.

But we also see from these communications (released under an OIA request) that some of the allegations being “uncovered” were wholly without basis, for example, a suggestion that money from a named sponsor was used to pay We Are Indigo debts. I mention this because I suspect it reflects the quality of the due diligence reports to come. But let’s go back to the timeline:

9 May 2022 – email from Callaghan Innovation (Ryan Challis, from the procurement department) to John Borland and his company Isacorp, in which Callaghan Innovation asks the question – ‘Ýou have no conflicts of interest related to this activity?’.

9 May 2022 – contract signed between Callaghan (signed by Vic Crone) and Isacorp. Section 10 in the agreement states Isacorp has no conflict of interest.

I find this very hard to reconcile with the conversations between Robett Hollis and Vic Crone in December and February. Callaghan has publicly avoided this issue, stating that it is the responsibility of contractors to declare conflicts of interest. (NBR 7 November). A dissembling response?

11 May 2022 – Isacorp produces an initial report.

Two days turn around from the date of contract signing, for what we know from the EY independent review is an open source process. Extraordinary.

At some point, Callaghan requests a second due diligence report.

During June 2022– Copies of the Due Diligence reports are spread deliberately by Vic Crone to other Government Agencies. And then start being leaked more widely.

I have not seen the reports. But there are many suggestions that they lack balance, and that some of the comments are defamatory and untrue. These reports are subject to the confidentiality provisions of the RFP and require Manaaki’s express permission to have them released.

What has Callaghan done to stop the widespread release? What has it done to check the disputed information and allow balance? I am not aware of anything material that has been done by Callaghan to remedy or mitigate. This goes against Callaghan’s values, its principles. And this is not right.

30 August 2022 – EY signs a contract with Callaghan to review the due diligence reports.

As I have previously noted HERE, the scope of the review was set to exclude any conflict of interest issues. The findings of the reports are not tested. And the referee list was padded with extra respondents. Manaaki was not aware of this padding at the time. Callaghan declined the suggestion that Manaaki be allowed to review the reports.

But we do know the actual physical process of interviewing people happened – EY confirmed this, and this was the agreed scope.

Is it okay for the investigator to have made his own social media comments on this investigation?

Is it okay for a referee to publish his response to the due diligence enquiry?

And is it okay for a Callaghan Board member to have entered into the public debate?

The actions and dates give context to my conclusions. In short, it looks to me as if external parties with their own vested interest have captured the process. Definitely not best practice procurement. But this is just my opinion, you may have reached different conclusions. Personally I remain convinced that Callaghan Innovation must act to fix this, by

• Either commissioning a genuinely independent review of the process, the conflicts, the reports, and the findings;
• Or withdrawing the reports, and perhaps even; issuing an apology.

I believe that this has real implications for the governance of Callaghan Innovation, raising serious questions about the competency and effectiveness of its Board in fulfilling their fiduciary duty.

But enough for today…. more on that tomorrow, when I will STILL be asking:

Hey, Pete, what are you thinking? Or are you thinking at all?