Officers who misuse organisation funds may face significant penalties 

Case Name

General Manager of the Fair Work Commission v Thomson (No 3) [2015] FCA 1001 external-icon.png (liability); and (No 4) [2015] FCA 1433 external-icon.png (penalty)  

What were the issues?

Craig Thomson, the National Secretary of the Health Services Union (HSU), breached officer duties by improperly using the organisation’s funds for personal benefit.

Thompson was found liable for 60 breaches of sections 285, 286 or 287 of the Fair Work (Registered Organisations) Act relating to 22 separate sets of circumstances.

What happened?

Thomson used a HSU credit card to pay for escort and adult services on numerous occasions. Thompson attempted to hide these expenses by instructing the HSU’s bookkeeper to record them as “meeting” or “telephone conference” expenses in the HSU’s accounting system.

Thomson also used a significant amount of HSU funds to gain an advantage to further political aspirations in the 2007 Federal Election, in which Thompson won a seat in the House of Representatives. Thomson used a HSU credit card to pay for electoral advertising and an office fit out. Thomson also directed two HSU employees to work on the political campaign, whilst they were paid and employed by the HSU.

Thomson also used HSU funds without authorisation on personal trips, for numerous donations to charities, and to commit to a three-year sponsorship agreement with a rugby club. All these expenses occurred without the knowledge and authorisation of the HSU’s National Executive.

Thomson denied all allegations. 

What can organisations learn from this?

Organisations should have robust policies and procedures to ensure that they hold senior office holders accountable for the proper expenditure of members’ money. 

Officers risk significant penalties and compensation orders if they misuse the funds or resources of an organisation for their own personal gain. 

The case is also a reminder of the importance of accurate record keeping and obtaining correct authorisation for all loans, grants and donations. 

What did the judge say?

In the judgment on liability, Justice Jessup described Thomson’s instruction to HSU staff to falsely record the cost of escorts and adult services in the HSU’s financial records as “conspicuously calculated to deliver an advantage to [Thomson] and to cause detriment to the HSU” (at [26]).

In relation to Thomson’s use of HSU staff to work on the political campaign, Justice Jessup stated (at [77]) that:

To use the services of [HSU staff] for his own purposes was the clearest of improprieties on [Thomson’s] part. It was no different from the manager of a construction company, for example, using the services of a carpenter employed by the company to carry out renovations on his or her domestic premises without the authorisation of the board of directors ... 

In the penalty judgment, Justice Jessup referred (at [5]) to the need to send a clear message to deter misconduct by other officers in a similar position to Thomson, noting that the seriousness of Thomson’s misconduct was increased because:

[Thompson’s] position was a very senior one in a national union. Subordinate officials, and members, of the HSU would inevitably have regarded him as an example to be followed, most particularly in the areas of honesty and loyalty to the organisation which he served. … [Thomson] worked in an environment where he was subject to little or no supervision, nor even surveillance, by other officers of the HSU.

Justice Jessup found (at [7]) that Thompson had concealed misconduct over a long period of time and had shown no contrition or appreciation of the seriousness of the matters, which were matters relevant to the penalty. 

What was the outcome and the penalty?

Thomson was found to have breached officer duties by failing to act with care and diligence, failing to act in good faith or for a proper purpose and by using the position improperly to gain a personal advantage and to cause detriment to the HSU. 

Thomson was ordered to pay civil penalties totalling $175,550, but reduced to $80,050 if paid within 74 days. 

In addition, Thomson was ordered to pay $231,243.42 plus interest of $149,937.16 in compensation to the HSU for the loss caused by misconduct that was not in the legitimate business interests of the HSU. 

Court reference

VID 798 of 2012

 

Disclaimer
This information is of a general nature only and is not legal advice. The case summaries are designed to assist in gaining an understanding of the relevant provisions of the legislation and the work of the Registered Organisations Commission.