How RSL NSW is restoring good governance structures after 2014 fraud scandal

Thursday, 01 August 2019


    Former RSL NSW president James Brown says good governance will help bring the organisation back to its roots of helping veterans and their families.

    From the moment James Brown took on the presidency of the Returned Services League (RSL) NSW in May 2017, he was in a race against time. The organisation’s governance, finances and fundraising were in chaos and it had been under scrutiny by the Australian Charities and Not-for-profit Commission (ACNC) since 2016. Of concern was the allegedly fraudulent behaviour of former president Don Rowe, who had resigned citing ill health in 2014 — and a subsequent alleged cover-up by RSL NSW of the wrongdoing. Just a few days before Brown’s appointment, the NSW government had announced the Bergin Inquiry into three RSL NSW entities under the Charitable Fundraising Act 1991. Brown had jumped in the deep end.

    Two years later, after changes to the Returned and Services League of Australia (NSW Branch) Incorporation Act 1935, addressing numerous governance issues and a campaign of consultation that has formulated a proposed new constitution, Brown resigned as RSL NSW president and board director on 27 June. In a statement, Brown said, “For a veteran with a young family, it [the unpaid president role] is not sustainable in the long term. Accordingly, and appropriately, I have resigned as president and chair in order to contest the merit-based selection process.”

    Brown announced his intention to apply for the CEO role. RSL NSW can fill the casual board vacancy created by Brown’s resignation and hopes to call an election early in 2020 after the overhaul of membership records and processes is complete as required by the new RSL NSW Act 2018.

    Reflecting on his tenure as president and the saga that almost overran RSL NSW, Brown says, “It would have killed any other organisation, frankly. RSL NSW has this incredibly important mission and a century of service behind it. Everything we have, including the privileged position we’re in as an organisation, comes from 100 years of blood, sweat and tears, and sacrifice. That was betrayed by some of the people in the leadership here during the past 10 years.”

    Patricia Bergin SC summed up the depth of the 2017 scandal that enveloped the organisation, and its 35,000 members. Her 705-page report described the chilling statistic of 41 suicides of veterans in the first six months of 2016 and the urgent need for support and expert assistance for those returning from combative deployments to civilian life. Programs to support them require funding to ensure the appropriate services are delivered when needed. The public is “entitled to expect that those organisations to which they make the contributions will ensure that it is the veterans who are the beneficiaries”. 

    james brown

    Bergin wrote that the term “old guard” is “exquisitely apt for the state councillors of RSL NSW, the trustees of RSL Welfare & Benevolent Institution (WBI), and the chair and state councillor directors of RSL LifeCare” who were in office at the time the controversies were made public. The old guard “dug in” at a time the organisation was in deep crisis. RSL NSW conceded “extensive non-compliance with the statutory regime for fundraising at the sub-branch level”.

    “Each of these RSL entities must live with the shame of not only the governance and other failures of their former leaders, but also the fact that in the past it has not been possible to vouch that every dollar of publicly raised funds to assist veterans has been used for that purpose,” wrote Bergin. “It will take time, commitment and public support for the new leaders of these organisations to expunge that stain with which the many thousands of volunteers who have worked tirelessly and honestly for years do not deserve to be associated.”

    Bergin recommended questions about former president Don Rowe’s expenses be referred to the police. Rowe has been charged with fraud over misuse of a credit card and at time of publication had failed in a bid to have the charges dealt with on mental health grounds. The case returns to court on 19 August.

    The mission

    Brown says the RSL mission is: “Making sure that for as long as Australia deploys people in harm’s way, these people are welcome when they come back.” He knows what that re-entry can be like after spending eight years in the army, including deployment as a cavalry troop commander, operating in hostile territory in Afghanistan and Iraq — a job that requires quick thinking.

    “You’re getting three radio feeds into your helmet at once, he explains matter-of-factly. “You’re talking to your driver, your gunner... and thinking about what’s coming next.”

    When he left the army in 2010, Brown married Daisy, daughter of former prime minister Malcolm Turnbull, with whom he now has two children. He also joined his local North Bondi sub-branch. “It was a great sub-branch because it was very involved with the Special Forces community,” he says. In practical terms, that included organising family days and other help for the children and partners of serving men and women who were away, surfing lessons for veterans, and a huge Anzac Day service with up to 600 attending.

    He was also parlaying his economics degree and army experience into a new career, working at the Lowy Institute, then the US Studies Centre (USSC) at the University of Sydney. But it gradually dawned on him that things were amiss with the state of RSL NSW.

    “Headquarters was a bit of a mystery,” recalls Brown. “I wanted to understand more about how the RSL operated and why it was falling short of its potential.” He unsuccessfully stood when there was a casual vacancy for the president position in late 2016; running again, successfully, in 2017.

    “I wanted to give these guys a bit of a shake-up and it’s played out in ways I didn’t imagine.”

    Most of our members are so loyal to the organisation that for them to see it fall this far is a really confronting thing.

    James Brown

    Crisis management

    In May 2017, a week before the NSW election results were announced, NSW Innovation and Better Regulation Minister Matt Kean announced the Bergin Inquiry. Preparing for whatever that might bring was imperative. As Brown got to grips with his new role, he discovered that not only is RSL NSW responsible for its tens of thousands of members and hundreds of sub-branches, but also almost 3500 staff and nearly $2b in assets, which include RSL LifeCare, operating in 50 locations with 2200 aged care beds, retirement living for 3000 residents and home care. Just as the organisation’s financial inadequacies were exposed during the inquiry, its administrative dysfunction was revealed as Brown and his team sorted through the paperwork at headquarters.

    With CEO and CFO roles vacant, Robyn Collins MAICD, general manager of RSL DefenceCare, was appointed RSL NSW CEO in August 2017. She announced her retirement in June 2019

    The board also overhauled management, many of whom had been there for more than 20 years. They moved headquarters, partly because the phone system was so bad. “We would have suicidal veterans calling DefenceCare and the calls would drop out,” says Brown.

    As president, Brown’s networks were critical. A lawyer, found via a friend, came on a 24-hour renewable contract “at an absurdly low rate”. Another friend offered the services of a project manager pro bono. Relations with RSL LifeCare were eased immeasurably when it appointed Andrew Condon — who Brown had known for a decade and trusted implicitly — as its new chair.

    And, of course, the board was restructured. Its oldest member is now 70 (compared to 81 on the previous board); there are eight member-directors and two independents were appointed in mid-June. As things stand at the moment, none will be paid, including the president.

    These and other necessary steps combined to sweep away a culture characterised by an ingrained lack of transparency. Brown summed up the issues when he addressed the Australian Governance Summit (AGS) in March, telling a packed house: “The deeper story was really the lost decades of ineptitude that meant the organisation that should have been strong and flourishing — right at the time when it was needed for veterans coming back from Iraq, Afghanistan and East Timor — did not have the systems or processes that it needed to deliver for them and their families.”

    The inquiry

    The findings of the Bergin Inquiry prompted the state government to change the RSL NSW Act. There was an imperative to redraft the constitution, and the organisation suspended sub-branch fundraising while these issues were sorted out. The fundraising ban was lifted on 12 June.

    Another hitch was that money was being spent on veteran services not recognised under the deductible gift recipient (DGR) status of the current charities laws. “A lot of our members wouldn’t fit the standard definition of being a disadvantaged person a charity should help,” says Brown. “But they have a legitimate need to have social contact with other people who have been in the military, a network that’s there for them when they need it. Essentially, that boils down to camaraderie — having that sub-branch building, office or drop-in centre.

    “You get DGR status for spending money on war memorials, for supporting people in the Defence Force, but there is no specific category that covers the RSL or the kind of camaraderie we provide to our members and veterans,” stresses Brown. “It’s been a while since those laws and regulations were updated. So we’ve begun discussions with the ACNC (to which RSL NSW is obligated) and have significantly amended our draft constitution to include camaraderie.”

    Constitutional reform

    Brown is candid about the failure to carry the members with the first draft of the new constitution. When it was voted down 68 to 32 in December 2018, the imperative need for strong and effective communications was thrown into stark relief. Brown and his team had presented a comprehensive plan, but failed to sell it.

    “Our view was that major reforms were necessary not only to fix governance issues and transparency issues, but to keep our network of sub-branches alive,” says Brown. “We thought it would be hard to return to fundraising without making changes to governance, so there was that time pressure and we had the pressure of new legislation coming in requiring us to change our constitution and the way we operate. Implementing the operational changes would be a two- to three-year process. Our judgement was that we couldn’t wait. [The RSL NSW] constitution is a 700-page mess that’s been added to incrementally over time. We wanted to grapple with these issues head-on.”

    Brown has since rethought that position. “In retrospect, that was wrong. Overwhelmingly, our members said they hadn’t had enough time to understand the need for change, to have their views heard. And having just been presented with the Bergin report, they had very little trust in head office to fix these problems. Most of our members are so loyal to the organisation that for them to see it fall this far is a really confronting thing.”

    brown and turnbull family

    Retired army officer Mick Birtles was Nambucca Heads sub-branch secretary at the time of the first draft constitution. “The way we had to run our sub-branches was to change dramatically,” says Birtles. “We felt we were being punished; that a time-proven way of doing business was being changed because of things that had occurred at state branch.”

    The RSL membership was offered two draft models, but neither suited, says Birtles. “It was either giving up too much control over the way we do business or being forced to adopt a model expensive to maintain — for example, having to fund the training for our own board of directors, money we think should be directed at welfare. The scale of the changes, what was perceived by many members as heavy-handedness — there wasn’t enough time to work through how we would implement those changes.”

    Brown led a six-month consultation to inform members of strategic issues facing the organisation, and a draft constitution, written in consultation with seven district council leaders and endorsed by them, was sent to sub-branches in mid-June for feedback. That will be incorporated in a second draft that will go to the annual general meeting in Albury in October.

    “We’re in the process of review, then we’ll provide feedback through our district councillor,” says Birtles. “On initial glance, given that the very prescriptive models have been taken out, we’re a lot happier with the new draft constitution.”

    The deeper need

    Brown’s sense of urgency remains undiminished. Speaking at the AGS, he talked movingly of the 85 veterans — including a friend he served with in Iraq 14 years ago — who took their lives during the year when RSL NSW was going through the inquiry and structural change. Brown has supported a national investigation into the suicide rates and welfare of veterans.

    Against this background of tragedy, turmoil and reform, the Invictus Games, held in Sydney in October 2018 and attended by Prince Harry, were a welcome moment. They highlighted that for younger veterans, the camaraderie they seek is likely to be found in a sporting setting. Since then, RSL NSW has set up a national sports program and signed a deal with the National Rugby League to recruit 1000 veterans as referees.

    Announcing his departure, Brown said, “We have restored... the well-earned reputation of RSL NSW. The public trusts our commitment to reform.” Acting RSL NSW president Ray James agreed. “The governance, systems and processes of the organisation have all been rebuilt under James’ leadership,” he said.

    RSL NSW Timeline

    November 2014 – After evidence of misuse of charity funds comes to light, Don Rowe (RSL NSW president since 2003) resigns, citing ill health. State council accepts resignation, but does not investigate further or report Rowe’s conduct to NSW Police.

    April 2017 – NSW Police, ACNC, NSW Fair Trading and Attorney-General investigate RSL NSW over claims of fraud, misappropriation of funds, profiteering and cover-up going back a decade.

    15 May 2017 – NSW Minister for Innovation and Better Regulation Matt Kean announces Inquiry into RSL NSW, RSL Welfare & Benevolent Institution and RSL LifeCare by Patricia Bergin SC under the Charitable Fundraising Act 1991.

    23 May 2017 – RSL NSW North Bondi sub-branch senior vice president James Brown is elected RSL NSW state president.

    7 August 2017 – RSL NSW suspends fundraising.

    September 2017 – Rowe admits improper use of RSL NSW funds and apologises.

    February 2018 – Bergin Inquiry’s damning report into the RSL NSW financial mismanagement and subsequent cover-up released.

    May 2018 – Government announces it will amend Returned and Services League of Australia (NSW Branch) Incorporation Act 1935 to change governance.

    October 2018 – Invictus Games in Sydney attended by patron HRH Prince Harry and the Duchess of Sussex.

    4 December 2018 – RSL NSW members reject a proposed new constitution at an extraordinary congress.

    22 January 2019 – Former president Don Rowe charged with fraud. (The case went before court in July and was adjourned until 19 August.)

    26 June 2019 – Brown resigns as RSL NSW president and signals he is applying for CEO role.

    October 2019 – Extraordinary congress to consider redrafted RSL NSW constitutional changes.

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