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UPDATE: Makhlouf in denial, no resignation offer

Thursday 27th June 2019

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Public sector chief executives should offer to resign in the case of "major failings", but there was no such offer from Treasury secretary Gabriel Makhlouf over the Treasury website security lapses that allowed the National Party to access secret budget documents, says State Services Commissioner Peter Hughes.

"On major failings, I would expect an offer (of resignation)," Hughes told a press conference accompanying publication of the report by deputy commissioner John Ombler into the incident.

Ombler concluded that while Makhlouf acted reasonably and in good faith in some of his reactions to the incident, he had failed to take personal responsibility for it and had concentrated instead on who had undertaken the breach, which he erroneously described as a systemic, deliberate "hack" of the Treasury website.

Hughes decided to "call out" Makhlouf's failure to take personal responsibility and the "clumsy" subsequent response, while also concluding the incident did not constitute a sacking offence. Formal warnings or black marks on Makhlouf's employment record would be "cynical and meaningless", given that the Treasury secretary leaves the role today to become governor of the Reserve Bank of Ireland.

"This is not The Apprentice," said Hughes, referring to the signature "you're fired" phrase from the reality TV show once fronted by the now-US president Donald Trump. Hughes said he was obliged to consider the whole of Makhlouf's service over eight years.

He would not answer a direct question about whether Makhlouf should have offered his resignation, noting only that "no offer was forthcoming" and that Makhlouf "was aware of his options".

Ombler also disclosed that Makhlouf disagrees with the findings of the report, which say that while he acted "in good faith, reasonably and without political bias" in his advice to Finance Minister Grant Robertson and in referring the alleged "hack" to the police, his use of the phrase "deliberately and systematically hacked" was not reasonable and nor was his analogy in a radio interview to the Treasury website being like a bolted door that someone had managed to break through. He should have sought advice earlier from the government's cyber-security agency, the GCSB.

His other fault was "continuing to focus on the conduct of those searching the Treasury website rather than the Treasury failure to keep budget material secret".

That "should never have happened under any circumstances".

Hughes said Makhlouf had fallen short of his expectation that when things go wrong, public sector chief executives should "own it, fix it and learn from it".

However, he said that Makhlouf's "personal reputation has taken a major hit here", as could be seen by Irish media reports questioning his appointment to lead that country's central bank.

This was a heavy price for a senior public servant to pay and Hughes said his decision to hold a press conference to explicitly "call out" Makhlouf's failure would cause further reputational damage.

"He will have to live with the consequences of that. That's the stakes in jobs at this level."

Deputy leader of the National Party Paula Bennett said Makhlouf "should have offered his resignation following the early release of Budget information, and at the very least should apologise for how he handled it". 

It is unclear whether Makhlouf intends to make any public comment on the report's findings.


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