Victoria's anti-corruption agency will on Monday outline explosive details of how millions of dollars meant to benefit students has been stolen or fraudulently misused by a ring of allegedly crooked senior public servants and school leaders.
In what will be one of the state's biggest public corruption hearings in decades, the Independent Broad-based Anti-Corruption Commission is expected to publicly question up to 60 past and present Education Department officials and school principals over the next two months.
If IBAC finds corrupt conduct, recommendations will be made for criminal charges to be laid against past and present senior officials and principals. Several former top public servants have engaged prominent criminal lawyers to represent them.
With the hearings beginning in the Country Court on Monday morning, Fairfax Media can reveal fresh probity concerns within the Victorian school sector emerged last week with allegations a principal at a Melbourne primary school has been caught inappropriately using school funds and rigging a school council election to oust his critics.
A formal complaint about the matter is understood to have been lodged with IBAC.
As revealed by Fairfax Media in December, the IBAC hearings will focus on a multimillion-dollar funding program called "banker schools", which was used to pay for unauthorised travel, car leases and alcohol instead of student programs.
This program involved senior bureaucrats placing huge sums of money with select schools on the basis the money would then be distributed to others schools nearby. A confidential 2011 audit found $28 million deposited in banker schools which it described as being part of a "shadow financial system".
Some of the money was later withdrawn by senior officials to be used for allegedly improper purposes and with no accountability.
Fairfax Media has been told by senior former department officials that a small circle of top public servants used an old-fashioned paper notebook to keep track of where money had been covertly placed.
It is understood some school principals were complicit in the program and that some schools not even known to the department as formal "banker schools" were also used to hide money.
Counsel assisting the IBAC Ian Hill, QC, is expected to today provide a broad outline of the commission's long-running investigation – codenamed Operation Ord – into alleged corruption within the Education Department and schools.
IBAC will ask witnesses to explain how schools were chosen to be part of the program, the circumstances under which principals and business managers were directed by senior bureaucrats to pay invoices for goods or services that did not benefit the school, and the generation of invoices.
The public hearings will also cover "the existence of any familial relationship or other personal or business connection between, on the one hand, businesses or entities (or their directors and officers) that issued or purported to issue the banker school invoices or supply goods or services", according to an IBAC statement last month.
The hearings will also deal with any attempts to cover-up the allegedly corrupt conduct.
Fairfax Media has identified three private companies which have received valuable contracts with the Education Department or schools in recent years whose directors are close friends with a senior department manager who is on extended leave.
The Education Department has sent a briefing to staff on the IBAC hearings and warned them on their obligation to comply with the commission's "confidentiality notice".
The department has tried to assure staff that just because they had received a summons from IBAC, they should not assume they suspected of corrupt behaviour.
But it also warned it may launch disciplinary action against individuals as a result of the inquiry.
By the afternoon they had some dirt ( very interesting and I think the tip of the iceberg) and printed this story:
Victorian secondary colleges and primary schools were allegedly involved in a corrupt scheme involving the diversion of millions of dollars in taxpayer funds to companies or figures linked to senior education official Nino Napoli.
The claims were made on Monday morning as part of an opening statement by Ian Hill QC, the counsel assisting the first major public inquiry by the Independent Broad Based Anti Corruption Commission.
Mr Hill told the inquiry that between 2007 and 2014, more than $1.5 million in tax payer funds were shifted from accounts controlled by so-called 'banker schools' to companies controlled by relatives of Mr Napoli.
Mr Hill said the movement of the money involved "potentially improper and corrupt payments made out of public funds".
The primary schools named as having held accounts from which the money was improperly transferred include Chandler Park, Kings Park, Norwood and Moonee Ponds West.
The secondary schools allegedly involved included John Fawkner College and Sale College.
Mr Hill said Mr Napoli had allegedly directed the scheme, which involved the corrupt movement of at least $2.5 million to companies linked to his relatives. Payments were then allegedly made back to Mr Napoli by these companies.
IBAC investigators believe a far higher amount than $2.5 million may have been allegedly corruptly siphoned off by Mr Napoli and his associates.
"The state schools holding public money … paid out those monies on the presentation of invoices which in many cases were demonstrably false," Mr Hill said.
Since 1992, Mr Napoli was a high ranking departmental official and recently controlled a budget of $4 billion, or over a third of the entire departmental funding pool.
He was suspended during the IBAC probe - which began in late 2013 - and is understood to have been sacked in the last few days.
Mr Hill said that Mr Napoli had "unfettered discretion" to spend $7 million annually in departmental funds.
Mr Hill said there was evidence that some education officials, including department employees and principals, may be culpable in the corrupt scheme's operation.
Some may have turned a blind-eye or failed to ensure proper scrutiny and governance.
Mr Hill said the apparent operation of the corrupt scheme for many years revealed and "exceptional and concerning" failure within the education department that denied schools "scarce resources."
The first witness to be called is former top department official Jeff Rosewarne. The hearings are expected to run for six weeks and call up to 60 witnesses.