Labor's corrupt cabal

• Mark Coultan and Leo Shanahan
• The Australian
• August 01, 2013 12:00AM

• Print

Former Labor powerbroker Eddie Obeid arrives for an ICAC hearing in May. Picture: John Grainger Source: TheAustralian

IN 2007, Morris Iemma won Labor a fourth successive term in NSW. It was a victory even members of his government would come to regret, concluding it would have been better to lose.

Certainly that last term of the Labor government was when the wheels fell off. The ALP would churn through three premiers and countless scandals, and go on to lose in the biggest landslide in more than 150 years of representative government.
The consequences have been played out in the forums of the Independent Commission Against Corruption, and may now shift to the criminal courts.
For Labor in NSW, yesterday's ICAC findings were the worst-case scenario.
Former minister for primary industries Ian Macdonald was found corrupt on two separate matters: the grant of a coal exploration licence over ALP powerbroker Eddie Obeid's family farm and accepting the sexual favours of a prostitute provided by Sydney property developer Ron Medich.
Obeid was found to be corrupt over the coal licence, as was his son Moses, who also was found corrupt for arranging a discounted car for former roads minister Eric Roozendaal, who escaped sanction. As well, five businessmen were found to have engaged in corrupt conduct in trying to conceal the involvement of the Obeids in the mining deal.
Macdonald and the Obeids face possible criminal charges, while four of the businessmen face prosecution under the Crimes Act as well as under the Corporation Act.
It was a devastating indictment of how corruption had infected the top ranks of Australia's most powerful political faction: Labor's NSW Right.
And not just the Right. Macdonald was a senior member of the party's Left, but his close association with Obeid meant there was little to differentiate the Left from its factional enemy.
ICAC even heard that leading figures of the NSW Left, including Doug Cameron, now a senator, fought to maintain Macdonald as leader of the upper house while others wanted him out.
Yesterday's report marks an important milestone for ICAC. Counsel assisting the commission, Geoffrey Watson SC, called the investigation "the most complex and the most important investigation ever undertaken by ICAC".
That assessment could be disputed, given one of its early investigations led to the downfall of the premier who created ICAC, Nick Greiner -- mistakenly, as it turned out, as the finding of corruption against him was overturned on appeal, much to the commission's shame.
ICAC will probably face a similar legal test following the latest findings. Both Macdonald and Eddie Obeid had suggested they would challenge the corruption findings in the courts, and that's before any criminal charges are contested.
The series of business figures found to have acted corruptly are likely to test the full limits of their legal rights, and they have the money to do so.
Mining identity Travers Duncan has already tried, unsuccessfully, to disqualify commissioner David Ipp by taking his appeals to the High Court.
Somewhat ironically, this investigation is exactly what Greiner would have envisaged ICAC doing to the Labor government of the 1980s: an ongoing royal commission into the previous administration. Certainly the sums of money involved far outweigh anything in Greiner's day.
But Watson says the investigation was important "not because of the sums of money involved, although the sums of money involved are enormous. The importance of this investigation stems from the identity and rank of the public officials involved and the subject of the decisions which they made."
Certainly, the ICAC investigation touched a wide span of Sydney society, from the murky world of bottom-feeding property developers to some of Australia's richest businessmen, not to mention the cabinet room. It might say something about NSW Labor, or perhaps just about NSW, that some of the state's wealthiest and most powerful business figures became enmeshed in this extraordinary episode.
John Kinghorn, the man whose philanthropic generosity caused Sydney's huge cancer research centre to be named in his honour, yesterday was found to have acted corruptly in connection with his role in the Cascade deal.
Also found to have acted corruptly was Duncan, one of Australia's wealthiest individuals and most prominent mining figures, who had sold his company Felix Resources to Chinese miner Yanzhou Resources for $3.5 billion.
Duncan had fought tooth and nail against the release of the report, arguing bias on Ipp's part. Yesterday he was just another Cascade Coal investor on the list of those found to have acted corruptly. Mining executive John McGuigan and John Atkinson, a former partner at international law firm Baker & McKenzie, were another two. Like all involved, they denied any wrongdoing and vowed to fight.
The unravelling of Labor began soon after that unexpected victory in 2007. Four months after the election, Obeid, the godfather of the NSW Right faction and a member of the state's upper house, bought a grazing property called Cherrydale in the Bylong Valley in central-west NSW, paying $3.65 million.
Obeid said it was for his retirement. Watson suggested that Obeid knew there was coal there from his time, four years earlier, as mining minster.
On May 9, 2008, Macdonald asked his department about coal resources near Mount Penny. According to Watson, even experts in the NSW Department of Primary Industries had not heard of Mount Penny.
Macdonald has always maintained that his inquiry about Mount Penny, which was next to the Obeids' property, was a pure coincidence and that he didn't find out the Obeids owned land there until he read about it in a newspaper article in October.
He said he wanted his department to find some small and medium-sized coal exploration areas. The mining boom was under way and the price of coal was soaring, and he was under pressure to bring in money for the state government.
Macdonald made the decision to restrict the expressions of interest in these areas to so-called junior miners. But Watson said this decision didn't make any sense, as the costs of exploiting the coal would mean the junior miners inevitably would sell to the major companies. He called it "akin to conferring a gift upon the investors in that junior miner".
He added that it could not be explained by some idiosyncratic notion of social justice or wealth redistribution: "The investors behind small mining companies are not ordinary people -- they are almost invariably wealthy people. Dabbling in NSW coal tenements is not the typical pastime of the man in the street. The practical effect of minister Macdonald's junior miner decision was to make some extremely rich men even richer."
Meanwhile, although the exploration areas would not be announced until September, the Obeid family was acting as if it knew a coal licence was about to granted over the land. In June the Obeids arranged the purchase of two nearby properties, using associates as frontmen.
On June 23, their solicitor's notes contain the following reference, which, given client-solicitor privilege, probably cannot be used in any prosecutions against them:
"Once EOI (expressions of interest) issues re coal lease land value increased many fold, three or four times". This was more than two months before the coal leases were made public.
But not content with quadrupling their money by selling their land, they also wanted a cut of the mining venture.
On July 3, 2008, Moses Obeid met a banker from Lehman Brothers, Gardner Brook, at the Wentworth Hotel in Sydney and told him he had property over which an exploration licence was going to be issued. Even more startlingly, a few days later he provided Brook with a handwritten list of 14 companies that were going to be invited to tender for coal licences.
During the commission's hearings, Watson went to some lengths to point out the similarities between this list and the typed list sent to Macdonald's office -- the companies were even listed in the same order.
While his son was actively preparing for a coal lease that had not been made public, Eddie Obeid was active as a political insider.
In September 2008, Iemma had lost the support of Obeid's Terrigal group over his desire to drop Joe Tripodi from the ministry and through his failure to convince the party to privatise the electricity industry.
Obeid and Tripodi threw their faction's weight behind a surprising choice, a left-winger in his first term of parliament, Nathan Rees. Eventually, Rees would dump Tripodi and Macdonald; and again, the faction would abandon him and install Kristina Keneally.
On the day he was dumped, Rees made one of the most dramatic exit statements in NSW political history, declaring: "I will not hand over NSW to Eddie Obeid or Joe Tripodi." And he condemned Keneally with words that would follow her to the next election, declaring that if he was not premier by the end of that day, his successor would be "a puppet of Joe Tripodi and Eddie Obeid".
Keneally immediately reinstated Tripodi and Macdonald, but Macdonald, dubbed Sir Lunchalot by the media, would be sacked again in June 2010 over travel rorts.
A month before Macdonald left the cabinet, Obeid, having reached the 20-year mark where his parliamentary pension entitlements maxed out, left parliament.
If he thought he was headed for a quiet retirement, ICAC had a different idea.

Accessed from http://www.theaustralian.com.au/news/features/labors-corrupt-cabal/story-e6frg6z6-1226689071162