Did NBN Co’s recruiters miss CFO's accident prone past?
Tenure at Alcatel and Crédit Lyonnais unaccountably missed
The sudden exit of NBN Co’s CFO, Jean-Pascal Beaufret, raises doubts over the original selection process by which the French executive was given charge over the purse strings of the Australian government’s most ambitious infrastructure project.
Recent Department of Broadband, Communications and Digital Economy documents published under FOI reveal that the executive head hunters who identified NBN Co candidates Mike Quigley and Jean-Pascal Beaufret, Egon Zehnder, charged more than $US280,000 across three contracts to provide assistance with the recruiting board and management, including responsibility to provide a thorough risk assessment of candidates.
However, it appears that the executive search process overlooked not only the brewing Alcatel bribery scandal in Costa Rica, but another scandal in Beaufret’s home country of France.
According to a DBCDE briefing document, the search tender required “interviewing and short-listing candidates for the executive chairman position including conducting referee, background, probity, police and financial checks and negotiating the remuneration framework.” The FOI documents also state that risk assessment was part of the brief.
The government has consistently said it was unaware, when it appointed Quigley to head up the company building the NBN, that Alcatel was under investigation in the US over accusations of bribery in its Costa Rica operations.
While no findings were ever made against Quigley or Beaufret – in fact, they were never investigated or even interviewed by the US Securities and Exchange Commission – that matter was not brought to the government’s attention by Egon Zehnder.
Moreover, the recruiter also missed the potential for uncomfortable revelations about Baufret’s employment history in his home country of France.
While the Australian media, Government and opposition have been busy revisiting the NBN Co executives’ time at Alcatel, and almost entirely focusing on Quigley, they too failed to note that for Beaufret, this was certainly not the first taste of uneasy scrutiny.
Beaufret and Crédit Lyonnais
The 60 year old, highly regarded former executive in the French Ministry of Finance, was also one of the key protagonists in two other well documented corporate scandals in France – one of them counting as one of the biggest to embroil France’s banking sector.
In 2003, before Beaufret joined Alcatel, nine senior civil servants were accused of complicity in an alleged £1.8 billion banking scandal at the then government-owned Crédit Lyonnais.
These included current President of the European Central Bank, Jean-Claude Trichet, and Beaufret, all accused in a Paris court of helping to cover up massive losses at Crédit Lyonnais in 1993.
Key allegations included deliberately understating £1.8bn provisions for risky investments in 1993 to avoid breaching European solvency rules. During the drawn-out case, three former Crédit Lyonnais executives were charged with publishing misleading accounts and issuing fictitious dividends, and three auditors were accused of failing to reveal the problems.
Trichet and Beaufret (who had joined Alcatel as finance director by the time the allegations were made in court) were charged with complicity.
At the time of the alleged activity, Beaufret was Head of Monetary and Financial Affairs at the Treasury. He was appointed administrator of the Crédit Lyonnais August 7, 1992 and it was alleged that he was partly responsible for "spreading false or misleading information" for the year 1992 and first half 1993.
Three of the nine executive were convicted, but both Trichet and Beaufret were acquitted, allowing the former to take his role at the ECB while Beaufret continued at Alcatel.
In its verdict, the court said that under Trichet's leadership the treasury had only "imprecise or inexact information" which was inadequate for them to detect any manipulation of the accounts at Crédit Lyonnais. It said that neither Trichet nor his assistant at the time, Beaufret, "participated personally in the elaboration of the accounts in question."
Beaufret then had to weather the storm of the bribery charges at Alcatel, where he was CFO, from 2002 to late 2007. Although that ended with an admission of guilt from the vendor and a hefty settlement with the FCC, Beaufret was never named in documents as having anything to do with those investigations.
Beaufret has attracted heat for his role at investment bank Natixis, which he joined in February 2008, as board member in charge of all functional departments.
Baufret’s role at Natixis included overseeing finance, risk control, human resources and asset management.
French newspaper Libération revealed in April 2009 that Beaufret was paid 1.3 million euros for nine months work, while the company posted a loss of 2.8 billion euros during his tenure.
At the time, Natixis said the payment to Baufret was compensation "for damages" resulting from breach of contract. He reportedly had a contractual clause that in the event of his ousting from the Board, he would receive compensation equivalent to two and a half years' salary.
Beaufret then resurfaced in Australia, joining his colleague Quigley as NBN Co's CFO in September 2009. His next move is uncertain, but judging by his last payout perhaps the claim that he is retiring is true.
Andrew Bland, owner of employment and business law specialist Blands Law, told The Register that blame could be shared between the government and its contractor.
"Recruiters have an obligation to do comprehensive background checks on clients. If information is readily available, in the public domain and easily verifiable their obligation to the employer is to disclose relevant issues.
“Responsibility for background checks is also not entirely in the recruiter’s domain. Even though they have been paid handsomely to do so, the client, in this case the government should do its own background checks also."
While The Register is confident that no findings of dishonesty or complicity have ever been made against Baufret, the absence of any questions relating to Crédit Lyonnais or Natixis in the recruitment process must raise questions about the degree of scrutiny applied during the executive search.
Both NBN Co and the Department of Broadband, Communications and the Digital Economy have been contacted by The Register. A departmental spokesperson referred the matter to NBN Co. The Register is awaiting NBN Co's response. ®