Former VicTrack boss breached code of conduct: auditor-general

In a report released on Wednesday, the auditor-general said that in July 2021, Mr Rose, who was appointed Eloque’s interim CEO without a competitive process, and another seconded VicTrack employee had proposed a remuneration plan for Eloque’s executive management that included themselves.

The scheme proposed that Mr Rose receive a grant of 3 per cent of the issued shares in Eloque, referred to as the ‘founder’s equity award’, and sign-on bonuses for executive staff, according to the auditor-general. It also proposed that Mr Rose receive a salary from Eloque as well as from VicTrack.

Mr Rose told the inquiry that government representatives on Eloque’s board were aware of the equity discussions.

But the auditor-general said there was no documented evidence that Mr Rose or the other representatives had communicated this information back to HoldCo (a company set up by the Department of Transport to oversee the government’s interest in Eloque), VicTrack and the state government.

“The scheme he presented to the Eloque board also noted that under Victorian public sector restrictions, he and his colleague would not be able to receive any remuneration from Eloque while employed by VicTrack,” the inquiry found.

“It proposed that Mr Rose and his colleague accrue back pay from Eloque until they would be able to transition from VicTrack to Eloque employment.”

The proposal also suggested that the founder’s equity award and sign-on bonuses be held in escrow until the employees moved to Eloque.

The Eloque board discussed the remuneration proposal on several occasions and ultimately did not accept or implement most of it, the report said.

On Wednesday, Mr Rose denied allegations that he acted against VicTrack’s code of conduct. “This report is flawed and conclusions are outright wrong,” he said.

Mr Rose provided a statement to the auditor-general claiming its findings were based on “incomplete materials” and that it was “unfamiliar with concepts of commercialisation”.

Mr Rose has previously told the Financial Review that he received no income, payment or benefits from Eloque “in any shape or form” and did not receive any financial settlement or payout when he formally left VicTrack in February.

Premier Jacinta Allan, who was transport minister at the time, said on Wednesday that when it became clear the Eloque investment wasn’t delivering as expected, a decision was made to discontinue it. “I note that there are no recommendations that are made in the report to the [transport] department or the government,” she said.

The auditor-general says Eloque was wound up in August 2022 at the request of Xerox, which had tried to reduce its 62.5 per cent shareholding to 50 per cent and set up an employee share scheme but was unable to agree on a new funding structure with the state government.

Victorian Opposition Leader John Pesutto said the report revealed a failure by Ms Allan to conduct basic scrutiny and due diligence that resulted in nearly $20 million of taxpayers’ money getting “torched”.

“Jacinta Allan simply can’t be relied upon or trusted to deliver any project, major or minor,” Mr Pesutto said.

“In any other line of work, a person would lose their job over such incompetence and yet here we have ... a litany of conflicts of interest, a failure of due diligence, a failure to undertake basic reporting.”

The inquiry found no documented evidence that Eloque had conducted a transparent and open recruitment process to appoint Mr Rose as interim CEO, or to find a permanent CEO, and that Mr Rose was actively involved in the proposal for VicTrack to second him to Eloque.

Mr Rose remained in his role as VicTrack CEO while seconded to Eloque, creating “perceived, potential and actual conflicts of interest”, the auditor-general found.

It also found VicTrack’s advice to the government about commercialising the fibre optic technology known as FiBridge to monitor bridges was “inaccurate and incomplete” and that VicTrack did not prepare a full business case.

“It gave an over-optimistic view of FiBridge as market-ready, and did not transparently outline how the commercial aspects of the venture would work,” the report said, adding the transport department did not do enough due diligence before investing.

VicTrack estimated the venture would generate annual revenue of $422 million after 10 years, at a 41 per cent return on investment.

“These projections were based on a fast-tracked report that VicTrack’s consultant developed and with information that had not been subjected to independent testing or verification,” the report said.