AAP
Former NSW Resources Minister Ian Macdonald conferred "massive cascading profits" of $100 million to his then Labor colleague Eddie Obeid and his family, a corruption inquiry has been told.
The Independent Commission Against Corruption (ICAC) began its inquiry on Monday into Mr Macdonald's 2008 decision to grant exploration rights in the Bylong Valley in central NSW.
Counsel assisting the inquiry, Geoffrey Watson SC, said ICAC had found the Obeid family had inside information about the decision to open the area to coal mining, over which Mr Macdonald placed a number of unusual restrictions.
First, the expression of interest process was not advertised, and secondly, only smaller miners were invited to tender, Mr Watson said.
"Evidence shows that the Obeid family knew in advance of the public announcement that the minister had decided to open various areas for exploration," Mr Watson said.
"There is also evidence that the Obeid family knew of the identity of those mining companies who were going to be invited to participate in the process."
One of the tenements, Mount Penny, fell directly under a farm owned by the Obeids.
Mr Watson said the market value of the Obeid farm quadrupled after Mr Macdonald's decision, producing a windfall profit of $13 million, plus another $1 million to $4 million on adjacent properties the family had bought.
In his opening address, Mr Watson said the Obeids took a "substantial" share of the company that won the Mount Penny exploration licence, Cascade Coal, and in 2010 agreed to sell that interest for $60 million.
"It was a very good deal for the Obeids - they outlaid $200,000 to recover $60 million," Mr Watson said.
The family also had a $30 million interest in the nearby Yarrawa tenement, which was also subject to an exploration licence granted by Mr Macdonald, he told the inquiry.
The Obeids disguised their involvement in the mining deals through "multiple layers of discretionary trust and $2 shelf companies".
"In all, decisions taken or influenced by Ian Macdonald may have enabled Eddie Obeid and his family to acquire profits in the order of $100 million," Mr Watson said.
"The practical effect of Mr Macdonald's decision has been to confer massive cascading profits upon Mr Obeid and his family.
"I understand that both Eddie Obeid and Ian Macdonald will say this came about by accident, and is merely the product of a coincidence."
Mr Watson described the inquiry, which is expected to run well into next year, as the "most complex and the most important" in ICAC's history.
It involved enormous sums of money and went "inside the NSW cabinet room", he said.
Assets worth tens of millions in revenues had been passed to third parties "for a comparative trivial return for the people of NSW".
"We will examine how it came to pass that massive benefits were lost to ... the people of NSW while the profits were ultimately acquired by a small group of well-connected businessmen on the back of comparatively paltry investments," Mr Watson said.
"This public inquiry will be investigating whether corruption was involved. If it is corruption then it is corruption on a scale probably unexceeded since the days of the Rum Corps."
The Operation Jasper inquiry before Commissioner David Ipp is continuing.
© 2012 AAP
