Sunday, September 23, 2012

The  school, the cliquey in-group who can do no wrong, and the unfortunate prefect who stuffed up counting the annual fete’s takings

The schoolyard is life’s stage at its Darwinian brutest.  And here I don’t mean “stage” as a chronological, passing thing; rather, “stage” as in the raised surface on which we rehearse, over and over, the script for the rest of our lives.  You might be initially reassured by its being only a rehearsal – there’s no real audience – but there’s quite enough happening backstage (i.e. in-school) during these years to make opening night and beyond, before an actual audience (i.e. the big wide world), seem like no big deal.  At least for some.  For others, if you struggled during the “rehearsal” years, the rest of one’s life can seem like the teenaged backstage bullies have merely moved 20 metres, into the prime seats, in adulthood.

Following the last week’s oh-so-Melbourne, storm in a pinafore (or so I initially thought) saga of sacked MLC principal Rosa Storelli has had all the elements of a Year 9 drama.  Whether you see this drama as set in the primal schoolyard (as I suspect Ms Storelli does), or the boardroom (where Year 9 is only a fondly remembered, middlebrow David Williamson school play) makes all the difference as to who you perceive as the baddies.
The known facts seem to be in surprisingly little dispute. Ms Storelli’s employment was subject to a salary-packaged arrangement.  Salary packaging, which basically means (legally) minimising assessable income for tax purposes, is common for highly-paid executives and for workers across the board in the not-for-profit sector (who are usually not highly-paid).  Where these two groups coincide, as they appear to in Ms Storelli’s case – a highly-paid principal of a not-for-profit school – a salary packaging deal would appear to be both irresistible and complex.

A “secret Deloitte report” into alleged overpayments to Ms Storelli shows two types of shortfall, totalling $716,905. The first is a relatively straightforward imbalance between money that the school has paid to third-parties (including a nanny) under salary sacrifice arrangements, versus that which the school has so far been reimbursed by Ms Storelli.  This apparently amounts to about $267,000 (accrued since 1997-98), of which more than $100,000 is for the nanny alone.  The nanny’s $100,000+ is separately itemised because this was an amount Ms Storelli apparently had previously agreed (in early 2012) to repay the school, with the Board’s full knowledge and consent, at least at that time.  We also know in some detail how and when this particular debt accrued:

“As the nanny's salary went up, so did the amount deducted from Ms Storelli's salary. In 2001-02, the nanny was paid $31,151 - the same amount deducted from Ms Storelli's salary. But there [i.e. from 2002-03] the salary deduction stayed: $31,151 a year being deducted, while the nanny's wages climbed to $45,433 by 2012”.
The second type of shortfall is the more complicated matter* of fringe benefits tax (FBT).  Apparently, the school has paid FBT of $1.33 million on Ms Storelli's expenses, but allegedly recovered only $882,105 under salary sacrificing, leaving what the board says is a FBT-reimbursement shortfall of about $450,000.

Ms Storelli appears to dispute her liability for repayment of the $716,905, other than for the nanny’s $100,000+.  Her main defence here seems to be that one or more of three previous chairs of the school board (Christine Kilpatrick, Margaret Jackson and Lyndsey Cattermole) – not the board itself – had made oral and written representations to her stating that those other liabilities were properly the school’s, and not Ms Storelli’s personally. Ms Storelli has also pointed out that all of the disputed arrangements were on the record, at least such that accounting-consulting firm Deloitte (which has done the school’s external audit every year since 2006), must have been aware of them, and so at least implicitly approved them.

On the other hand, the school board and Deloitte have presented a formidable and united flank.  Their strategy here appears threefold:  to continue throwing further mud at Ms Storelli; to not even address suggestions of past negligence on their own (or their predecessors’) part; and to profit from (in the case of Deloitte, and possibly at least one other large accounting-consulting firm) doing the first two of these. (I am assuming that the “further Deloitte review  . . . into the salary packaging arrangements of other senior staff at MLC” now under way is not pro-bono.  Less clear is whether the two other big accounting-consulting firms, which both have partners on the school board, PwC (at whose offices Ms Storelli was formally sacked at) and KPMG also have/had vested financial interests here.)

The mud-throwing by the school board and profiting by one or more big accounting-consulting firms is transparent, once you juxtapose their repeated, shrill cry of “governance”, against the reality of corporate boardroom seats in 2012.  Interlocking directorships make boardrooms – and here the school was moulded identically to just about any given listed company – self-perpetuating** cliques.  Calling them “bullies”, as Ms Storelli has, may strike you as childish regression, or desperation, but in this case their pack behaviour and systemic abuse of power over a visibly weaker victim is stark.  If you think I’m exaggerating, here is how “governance” has been sanctimoniously invoked by the board three times in recent days:          

“A source close to the board said Ms Storelli had previously offered to repay the outstanding nanny money interest-free over four years.  To accept the repayment interest-free caused a fringe benefit tax problem for the college, and would not represent corporate governance best practice”.  [Note that this doesn’t explain why the board was happy to renegotiate Ms Storelli’s contract in March 2012, apparently including the interest-free element, against its own high standards of “best practice”].   

“‘You can't have your CEO able to hand out largesse bonuses to the people she was the boss of.  This is a standard governance issue’ [also] said a source close to the board” (emphasis added and quote edited). [This refers to annual bonuses of $40,000 to $50,000 allegedly paid in several years to MLC's director of corporate services Christian Gusner and funding for Ms Storelli’s long-time personal assistant Prudence Vernall to attend a professional development course in the USA, both apparently “approved by Ms Storelli without the knowledge or authority of the board's remuneration committee” (same URL).  Wow, so the board, or its remuneration committee at least (aka the clique within the clique), thinks that one of its important jobs is to mind absolutely everyone’s lunch money.]  

Board treasurer Tony Peake said: “after detailed forensic financial analysis by Deloitte, the board's unanimous decision was taken with deep regret, but with good governance as the foundation for the decision” (emphasis added).  [Translation:  after Deloitte were paid more money, they picked up things that they missed the first time.  You might say that Deloitte’s regular audits were “standard” governance (like public schooling, darling, you DO get what you pay for), its second bite at the cherry (the one that led to Ms Storelli’s sacking) “good” governance, and its pending further review promises to be no less, I’m sure, than “best” governance.]      

Talking of corporate waffle, the pending further Deloitte review “is also looking at why another staff member [Christian Gusner, I’m guessing] and Ms Storelli’s salary packages were handled internally, and not by Salpac, the external company that handles salary packaging for the majority of MLC staff”.  Translation:  when it comes to minding your lunch money, the bully clique has some hired muscle, too.  Or at least the services of a company whose apparent proficiency in the tax minimisation industry overcomes the dubious literacy of its website’s self-promotion section: 

Update 25 September 2012

When I read yesterday yet another media snippet from a “source close to the board” (i.e. presumably a board member, speaking off-the-record), I was confused by its tone:

On one hand, the anonymous board member invokes the parol evidence rule as confidently as a know-it-all first year commerce student, but on the other hand there is something disconcertingly personal about “Why would the school pay for her house to be cleaned”.  Apart from its vagueness as to which house is meant (Ms Storelli has apparently lived in off-school residences since 2004), there is the odd focus on cleaning as an apparently dubious element of Ms Storelli’s salary package.  Out of all the expense items that might, in the court of public opinion, scream that Ms Storelli was living the high life of the expense of “the school” (= school fee-payers and taxpayers), house-cleaning doesn’t seem to be up there (especially as Ms Storelli has not, so far, been accused of overpaying and/or sending off her cleaner on “professional development” courses overseas).        

My first strong hunch is that this anonymous board member was a woman (who generally have much more of a “thing” about cleaning than men), and more specifically, a woman with a bee in her bonnet about cleaning.   More specifically still, my profile suspect is of a formerly high-flying woman who is currently “reduced” (as she sees it) to doing her own cleaning.  Enter Belinda Probert.

The MLC board’s official website (as accessed today), and most of the non-Fairfax media coverage in the last week have referred to Ms Probert as “the Deputy Vice-Chancellor of La Trobe University”.  In fact, she left this position more than a year ago, in July 2011,“to do more policy and research work”. 

Judging by Ms Probert’s subsequent appearances on Google – but more importantly, her plain desperate reluctance to give up an old job-title that has long been someone else’s – she has spent the last 15 months with plenty of time on her hands, and with much less money that she has long enjoyed.  I therefore suspect that Ms Storelli’s cleaner – and much of the fuel in the current fire more generally – boils down to a matter of concentrated, venomous jealousy – as magnified by Ms Probert’s current under-employment. 

It would appear that sitting on various corporate/school boards is Ms Probert’s only paid current role – it is unclear whether MLC board members are paid (most corporate boards, of course, pay generous “honorariums”) but judging from KPMG partner and etiquette-columnist Bernard Salt’s carefully worded We-are-saints-doing-a-thankless-task column in today’s Herald Sun***, which notably doesn’t invoke the “and we’re not even paid for it!” angle, I would guess that the MLC board members are paid – and quite well – for doing their jobs.  For most, this honorarium would be merely the second/third/fourth layer of icing on their nice main-job package, but for Ms Probert, who AFAICT currently lives on this “icing” alone, the task of demolishing Ms Storelli’s cake – admittedly, it’s a bit rich – is her main job.  This task has even, it seems, involved Ms Probert going back to her first year commerce notes on the parol evidence rule.

And so far, you’d have to say, it’s been a job well done.  The cake has gone, and its eaters (not just Ms Probert) are loudly proclaiming what a thankless task it was, too.    

Further update 26 September 2012

Belinda Probert wrote a column published yesterday (which I didn’t see until today) in which she seems to claim that the MLC board are all unpaid.

Personally, I have trouble swallowing many things said by Ms Probert.   Her prose in this snippet:  “the discovery by a completely independent and highly regarded firm such as Deloitte” (same URL) seems out of the “completely unique and highly acclaimed” Bali villa-rental (or whatever) web-ad songbook.

Then again (and granted I probably should have made this disclosure earlier), I have taught and marked w-a-y too many contract-law-for-first-year-commerce-students to not have my own “thing” about such students’ textual follies and legal over-simplifications.  What’s worse, Ms Probert seems to show that they don’t ever grow out of this.

Herald Sun journo James Campbell (“Sacking of MLC principal Rosa Storelli is rich drama” 23 September 2012) is oblivious to the messy complications of salary packaging. “[T]hanks to the generosity of the Federal Government, Ms Storelli was able to pay for a lot of things including her mortgage, her car, her private credit card bills and her nanny from her pre-tax income”.  The fact that Ms Storelli apparently owes a large bill for FBT indicates that the “generosity of the Federal Government” does rather come with strings attached.  Even more dubiously, Campbell waxes on about the good old days, “[b]ack in the 1980s . . . being the headmaster or headmistress of an elite private school was a prestigious, but not especially well-paid, position. This is why they and [the school] staff were given free housing and discounted school fees for their children”.  FBT was introduced in the mid-1980s, and it seems to me to be precisely Ms Storelli’s “free” housing (etc) that has got her into her present predicament in the FBT minefield.  She was clearly well-paid (over $500k annually), but if she had, say, the present-day benefit of a “free”, executive-standard house around Domain Road South Yarra (where Campbell went to school in the good old days), the imputed market rent for this would be at least a quarter of her total package.  And the possible FBT headache with this – priceless.

** The MLC board has been literally self-perpetuating since 2008, with all new directors, other than the principal, “elected” by the existing board.  As an aside, so it’s evidently now not just we gays who are tampering with nature by reproducing asexually or its corporate equivalent, the spawn of a board's naturally-infertile, collective wank. But in a possible strange bed-fellows twist, here I also concur with the words of former MLC chaplain David Bell:  “I'd like to see a return to more church influence in the school. I do suspect the corporate model has now failed. It's not a corporation, it's not a big business, it's a school for heaven's sake.” (Footnote added 5pm 23 September 2012)

 *** Bernard Salt “MLC board member defends merits of a community board following sacking of principal Rosa Storelli” Herald Sun 25 September 2012

Other References (URLs paywalled):

Ellen Whinnett and Fiona Hudson, “How Methodist Ladies' College's powerbrokers rang alarm on principal Rosa Storelli's expenses” Herald Sun 22 September 2012

Ellen Whinnett and Fiona Hudson, “MLC board asks sacked principal Rosa Storelli to repay $700,000” Herald Sun 22 September 2012

Stuart Rintoul “Sacked principal faces demand for $700,000 following 'overpayments'”
Australian 21 September 2012 (Reference added 5pm 23 September 2012)

The case against the Board was further cemented when Tony Abbott threw his support behind them. Nevertheless, Rosa Storelli is being hailed as a great educationalist whilst her Year 12s in a letter of support sign themselves as "Year 12's". I pity the parents who have forked out $20K per year only to have their kids end up not knowing when an apostrophe is appropriate and when it is not.
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