In its decade-long life as a private training company Careers Australia has never been far from controversy.
The company has been at the centre of a Queensland Crime and Misconduct Commission (CMC) inquiry, been forced to repay tens of millions of taxpayer dollars gained from inappropriate marketing of training courses and is currently under investigation by the Federal Government training regulator over further complaints.
Careers Australia was founded by well-connected Queensland lobbyists and – even though they have now gone – the company now boasts a roster of heavy-hitting Liberal lobbyists. It has also recently emerged as a major political donor.
The extraordinary growth of Careers Australia has been underpinned in recent years by easy access to taxpayer funds as Labor and Liberal Governments have opened doors to allow private companies to compete against public education institutions.
In a pure financial sense the rise and rise of Careers Australia has been phenomenal.
Careers Australia has become the largest and best politically-connected private training company in Australia.
In the most recent year financial records are publicly available for Careers Australia boasted a turnover of $241 million and student enrolments of 15,000. It was a phenomenal result for a company which in 2011 had a turnover of just $18.4 million from about 8000 students.
Careers Australia’s financial success, however, is very fragile.
In its annual financial report for the 2015 financial year the company cautioned:
“the group is dependent on state and federal government funding for approximately 85 per cent … of its revenue in various forms — the funding being received from the government on behalf of students.’’
Government funding, the company stated, “is critical for the Group to operate as a going concern.”
With the goodwill of the government critical to its survival, the company emerged in late 2014 as a major political donor to both the Liberal and Labor parties.
A Queensland door which revolves
Ever since the company was founded in 2006 Careers Australia has been entwined with lobbyists and controversy.
One of the founders of Careers Australia in 2006 was Trevor Rowe, who was both a shareholder and – until late 2012 – the Chairman of the company.
The two leading lights in the creation of Careers Australia were Rowe and Vernon Wills , who had a background in finance and investment. Both were partners in the Brisbane-headquartered PR and lobbying firm Enhance Management, which Rowe had founded in 1996.
Wills was a key driver behind the formation of Careers Australia and went on to become a major shareholder and Director of the company.
In August 2005 Wills turned to Scott Flavell, the then Director-General of the Queensland Department of Employment and Training (DET), for advice and assistance in making the concept of Careers Australia a reality.
For over a year Flavell and Wills canvassed how a company could exploit the emerging market for private training even though the publicly-funded Technical and Further Education (TAFE) colleges were well established.
At some point Wills also courted Flavell with the offer of becoming a shareholder and working as a senior executive at the yet-to-be-established company. (When exactly this occurred is disputed. Flavell insists it wasn’t until after he had resigned as Director-General of DET, though the CMC noted one of the company’s internal documents “suggests that the intention to share the financial establishment (and rewards) of the venture was of long standing, and had been known to the investors (including Mr Flavell) from discussions in early 2006.”)
In September 2006 Flavell ceased working as Director-General of DET, though he continued as Acting Director-General of the Department of Mines and Energy until mid-October.
The day after leaving the Queensland public sector, Flavell was appointed CEO of Careers Australia Group. Flavell invested just over $102,000 in purchasing a batch of just over 10.2 million shares at a cost of about 1 cent each. During 2007 the company canvassed the possibility of a public sharemarket listing with estimates of the initial float price discussed as being in the 20 to 35 cents range. This, the CMC noted, would have been “a substantial return on investment” for Flavell.
Ultimately the possibility of the sharemarket float evaporated when Flavell’s appointment to the company triggered a complaint in May 2007 to the Crime and Misconduct Commission (CMC).
At the centre of the CMC’s investigation was the nature and extent of Flavell’s contact with Wills between August 2005 and October 2006. The CMC investigation centred on whether confidential government information had been provided to assist in the establishment of Careers Australia and whether Flavell had discussed the possibility of working with the company while he was still Director-General of DET.
The CMC’s report, Public Duty, Private Interests , was withering.
Between August 2005 and commencing as CEO and shareholder of Careers Australia Group in mid-October Flavell “gave considerable assistance to Mr Wills in establishing the future company,” the CMC found.
This assistance, the CMC stated, included:
• “Providing a ‘business concept’ strategy paper (which included the suggestion that if ‘we’ poached the manager of a TAFE college the future training company would be able to significantly damage the business of the existing TAFE);
• Disseminating in-confidence departmental information to Mr Wills and his associates, which may have provided them with a commercial advantage; of particular significance was the disclosure of the list of funding allocations, an in-confidence document awaiting approval by the Executive Council;
• Requesting subordinate officers within the department to provide (and in some cases develop) departmental information and materials which he then passed on to Mr Wills;
• Authoring, or contributing to developing, a number of business planning documents for the future company;
• Discussing with two senior DET staff the possibility of future employment in the company;
• Identifying ‘target’ registered training organisations (RTOs) for possible purchase by the new company, and approaching one RTO personally to make enquiries regarding its availability for sale, on behalf of Mr Wills; two of those identified were eventually purchased by Mr Wills.”
While the CMC stated it considered Flavell had put “himself in a position of a conflict of interest with respect to the future company because of the extent of his assistance and the personal nature of it”, there was little they could do. As he had left the public service, no disciplinary action was possible. Nor did the Director of Public Prosecutions consider the evidence available was sufficient to support prosecution of Flavell for the disclosure of government information.
Ultimately, the CMC was left to recommend changes to legislation governing the disclosure of government information and proposed an 18-month ban on senior public officials making representations to ministers or public agencies on matters they have previously been involved with for government. (Flavell complained to the Queensland Parliament’s Crime and Misconduct Committee about the CMC’s investigation and public hearing into his case. The substance of his complaint was rejected by the committee.)
Flavell’s tenure at the company was short-lived, lasting only a little over five months after a complaint had been lodged with the CMC. (Flavell now works in London for Sia Partners, a consulting firm working in the energy sector.)
Careers Australia’s rolls on
Despite the controversy, Careers Australia kicked on.
After Flavell’s departure Careers Australia hired Patrick McKendy , the former Executive Director of the National Retailers Association, the lobby group for major retail companies.
Initially Careers Australia bought four other private education providers operating campuses in Queensland and South Australia. Then it expanded to provide courses for students in every mainland state, as well as working for major corporate clients such as the mining company Rio Tinto.
In an April 2011 corporate document opposing a takeover bid by a small training start-up, Site Group International, Careers Australia outlined its business strategy was to replicate its existing training model Australia-wide. At that stage Careers Australia was reliant on State Government contracts where funding was “contestable” with public education providers.
While the audacious Site Global takeover bid – which was estimated to value Careers Australia at about $65 million – had the support of some major shareholders, it was ultimately rejected. (Wills – a major shareholder and Director of Careers Australia was also a major shareholder and Chairman of Site Global. During the takeover bid period he stood aside from his roles in both companies.)
However, by mid-July that year Cirrus Business Investments – which was backed by a UK private equity firm White Cloud Capital – had a 45 per cent stake in Careers Australia.
Back in April 2011 Careers Australia lamented it had “significant excess capacity” with many of its campus facilities underutilised. For example, the company’s Melbourne campus had capacity for 1500 students but had just 245 enrolled.
While Prime Minister John Howard had launched the initial push to open public education funding up to competition from private providers, it was the Gillard Government which opened the floodgates.
Under Gillard the provision of federal vocational training funding was made conditional on states and territories allowing private education providers to compete with public education institutions.
The Gillard Government also expanded the student loans scheme from higher education courses to vocational education. With funds provided up-front to the education provider, there was a huge incentive for companies to launch massive marketing programs to boost enrolments. For students, loans would only need to be repaid if they earned over $53,000.
For Careers Australia the advent of massive Federal Government funding for private training proved to be a godsend, transforming a bit-part company into a big-time operator.
With a weak regulatory framework in place before the funding tap was turned on, the private education providers had every incentive to enrol people who would normally not have entered the public TAFE vocational system.
In short order private education providers proliferated, enrolling thousands of students for courses which were more expensive than traditional public education courses. To make matters worse the private training companies initially got federal funds even if few students completed the courses for which they had been enrolled.
Careers Australia was one of the early companies that got big fast.
By May 2013 Careers Australia was once more the subject of a takeover bid takeover bid, this time by Cirrus. In the intervening two years since the Site offer – bolstered in large part by increasing Federal Government funding for training – the estimated value of the company had climbed to about $112 million.
Once the Cirrus takeover was completed, the original directors – with the exception of McKendry – were replaced.
A rapid expansion though was not without its risks.
In one company document from 2011 Careers Australia cautioned that its existing relationships with universities, Governments and other service providers:
“may be adversely affected as a result of a change of key personnel or adverse publicity in respect of Careers Australia or its operations.”
It was a remarkably prescient assessment of the risks which later came to the fore.
We need more lobbyists
With both Rowe and Wills no longer associated with the company after the takeover by Cirrus, the company moved to hire some of the best connected Liberal lobbyists to ensure the company had the ear of the Federal Government and its funding and regulatory agencies.
Most prominent is the Liberal Party’s strategy and polling firm Crosby Textor Research Strategies, which had been hired to lobby the federal government and, since July 11, the NSW Baird Liberal Government . (Crosby Textor Research Strategies has also worked for the Liberal Party of Tasmania.)
With Queensland accounting for a major part of the company’s business it has also hired former Queensland Liberal Senator Santo Santoro as a lobbyist in Canberra.
Another lobbying firm the company has hired is Next Level Holdings , which has as its Director David Moore, the former Chief of Staff to Campbell Newman when he was leader of the Opposition Liberal National Party in Queensland. Next Level is also Careers Australia’s registered lobbyist in Queensland.
Since late 2014 the company has also emerged as a major political donor to both the Liberal and Labor parties.
Despite the donations and lobbyists, Careers Australia continues to find itself in the spotlight.
While the company avoided a potential prosecution by the ACCC by repaying taxpayers’ funds, it has subsequently become embroiled in new marketing scandals including buying data from online job agencies of job seekers and then seeking to entice them to enrol in the company’s training courses.
With the Australian Skills Quality Authority (ASQA), the federal regulatory agency, stating complaints against Careers Australia are “in various stages of investigation/scrutiny”, the company may be in the spotlight for some time to come.
Bob Burton is a Hobart-based Contributing Editor of Tasmanian Times. His earlier articles on Tasmanian Times are here.
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• John Hawkins in Comments: … What say you Senator Abetz?
• John Francis in Comments: I taught in the TAFE system for eight years and saw its decline in that time. Managers were appointed to areas they had no expertise in, and were simply appointed to progress the neo-liberal agenda of New Public Management. Consequently, the job of teaching became more and more difficult as bean-counting became more and more central to the task. Being harassed by my manager was the last straw for me, and even though I had a good teaching record, was well-liked by students and well-qualified to undertake the role I performed, I could not work one minute longer under that oppressive and decaying regime. Such a shame, because TAFE formerly had a positive reputation in vocational education.