The ICAC's destruction hits both sides
Nick Efstathiadis

By ABC's Quentin Dempster Wed 19 Mar 2014

Arthur Sinodinos gives first speech in Senate Photo: Senator Arthur Sinodinos (pictured) "has other involvements which will come under scrutiny in Operation Spicer," says Geoffrey Watson SC, counsel assisting the ICAC. (AAP: Alan Porritt)

In the weeks ahead the constant media coverage of the ICAC proceedings will re-confirm the public's worst fears about what really goes on behind the closed doors of government. The Liberal Party will now stand besmirched and tainted alongside Labor, writes Quentin Dempster.

Update: Arthur Sinodinos has stood aside as Assistant Treasurer.

The destruction of trust has now hit both sides.

In one devastating opening address on Monday, an animated Geoffrey Watson SC wiped away a five-year political advantage enjoyed by the Liberal  Party in New South Wales on corruption, influence peddling and slush funding.

The Independent Commission Against Corruption, a creation of the 1988 Greiner Coalition government, and now with added resources (forensic accountants, IT specialists, telephone interception and covert surveillance) has exposed the evidentiary leads. They go from the Labor Party directly across to the Liberal Party with allegations of bastardry, venality, vicious reprisal against public servants and the audacious scamming of a public utility, Sydney Water.

There is one perception many observers will come to: this state's "Rum Corps" culture of corruption extends to the NSW Liberal Party with its own blowflies of urgers, chancers, powerbrokers  and "lobbyists".

Why five-year political advantage?

It was in 2008 that, through the courageous disclosures of Wollongong City Council informants, the "dirty, sexy, money" favours for development approvals scandal was first exposed. The NSW ALP's network of "donor developers" and their modus operandi became apparent to all. Although the party moved to prohibit party political donations from property developers in a guilty response, this polity's traditional support for the ALP (Labor had ruled here for about 50 of the last 70 years) rapidly declined from 2008 onwards.

Labor's defeat was more than the "it's time" factor. Now realising it had been treated with contempt, the electorate reacted with devastating anger.

Video: Both sides of politics implicated in latest Obeid-linked corruption inquiry (7pm TV News NSW)

In the 2011 state election the Liberal/National parties reaped a historic political benefit, reducing ALP MPs to just 20 in the 93-member bearpit.

The Liberals, with 50 seats, now "own" all of western Sydney. The Nationals* are at an electoral high point with 19 seats.

The 2011 and 2012 ICAC inquiries into Eddie Obeid, the Graham Richardson-recruited fixer, discredited the once all-powerful, expedient Labor machine known as Sussex Street or the NSW Right. In a laughable response, the party announced it was moving its headquarters to Parramatta.

Outgoing ICAC commissioner David Ipp QC recommended that the ministerial code of conduct be made applicable in future to the ICAC Act. That would help to change ministerial conduct through external oversight applied to a minister's compliance with the code. With the Westminster convention of a Minister of the Crown's "honourable" exercise of his or her discretion exposed as wilfully ignored and easily manipulable or subverted by "mates" within the ALP, NSW Premier Barry O'Farrell committed himself to the reform to try to restore public confidence in government itself.

It was at least an acknowledgement that what had been exposed reflected adversely on all in government, and not just one party. We're still waiting for the Ipp reform, which should become a political imperative before the 2015 state election campaign kicks off.

In an interview exchange we broadcast in February last year, then minister for resources and energy Chris Hartcher (Liberal, Terrigal) presciently reflected on the Obeid/ALP corruption exposures:

Interviewer : This destroys public trust in government doesn't it?

Minister Hartcher: It does, it does. It's not just the Australian Labor Party which is tainted by this ICAC commission. All politicians and government, the entire political process will be tainted by this. Because so many people will be saying to each other right across the country, "Well that's what politicians are like". Well politicians aren't like that and they should never be like that. And the whole purpose of the ICAC is to expose it and implement the processes to make sure it never happens again.

Well said, Mr Hartcher.

Last December, Hartcher resigned from the O'Farrell Cabinet after the ICAC raided his premises in its investigations into Australian Water Holdings' regular payments, through its then chief executive, Nick Di Girolamo, into a central coast Liberal Party entity, Eightbyfive, "in return for which Mr Hartcher favoured the interests of AWH".

Hartcher denies any impropriety and will run the ICAC gauntlet from April 28 in its Operation Spicer investigation.

The ICAC's Operation Credo that started public hearings this week lays out some devastating allegations that destroy any self-righteousness that may still exist within the O'Farrell Coalition Government.

The inquiry traces the origins of Australian Water Holdings from a not-for-profit consortium of land developers (Rouse Hill Infrastructure Trust) into a profit-generating, fully commercial company whose beneficiaries came to include the Obeid family.

AWH and all its beneficiaries, including Di Girolamo, a prominent Liberal Party fundraiser, worked hard to secure a public private partnership (PPP) with the state-owned utility Sydney Water. This PPP would effectively take over the utility's monopoly services and cash flows from northwest Sydney. If achieved, the value of the enterprise would have been worth hundreds of millions of dollars.

Counsel Assisting Geoffrey Watson SC told the commission the PPP proposal was assessed by Brian McGlynn, one of Australia's leading experts on long-term infrastructure contracts. Mr McGlynn applied the "public sector comparator" to work out the costs and benefits to government through the PPP. "As a result in April 2010 Mr McGlynn recommended that the Government should not enter a PPP with Australian Water Holdings."

What can be done to restore public confidence? The Ipp reforms are a start. The reform of the dark arts and practices of political lobbying is also needed.

This was reduced to a draft Cabinet-in-Confidence minute that the ICAC was told was soon falsified as it went through the office of the then minister Tony Kelly to a Cabinet Budget Committee, which knocked it back until it was withdrawn after a second attempt on the instruction of then Premier Kristina Keneally.

In dispute with AWH over a well-founded suspicion that its administrative charges for northwest contracted water works were excessive, Sydney Water became a blockage to the company's ambitions.

The hearing was told that Sydney Water's then chief executive Dr Kerry Schott and senior executive Ron Quill were seen by AWH as an impediment. According to Phillip Costa, then a Labor minister, Eddie Obeid Sr lobbied hard for Schott's removal: "... you need to sack the bitch."

Watson asserted the ICAC knew the identity (yet to be revealed) of the anonymous complainant to the ICAC that Schott and Quill were themselves corrupt in their relationship with the  multi-national Veolia.

"The allegations of corruption made against Dr Kerry Schott and Mr Ron Quill were thoroughly investigated and shown to be absolutely false," Watson said.

The manufacture of false complaints and the falsified Cabinet minute were followed after the change of government in March 2011 by an aggressive campaign by Liberal Party-related lobbyists on lucrative monthly retainers. These include Paul Nicolaou, a Liberal Party fundraiser, and the former MP now national and state lobbyist Michael Photios. (Had the PPP gone through, AWH at one stage proposed Photios receive a $1 million success fee). AWH also acquired the services of Arthur Sinodinos (former Liberal party NSW treasurer and president) who eventually was given an equity position, which would have been worth $10 million to $20 million had the PPP been accepted by the O'Farrell Cabinet.

Significantly, the former judge Terence Cole was brought in to assess the merit of the now long-running dispute between AWH and Sydney Water. He found AWH had no rights for continuity or compensation if its existing water services contract was terminated. The Cabinet did not approve the PPP and Sydney Water negotiated a 25-year commercial agreement with AWH on more market sensitive terms.

Also significantly, Watson  has declared that although the ICAC has interviewed O'Farrell on camera (O'Farrell acknowledged an association with Di Girolamo), "we have found no evidence to implicate" him in any corruption.

Watson also "cleared" former Liberal finance minister Greg Pearce and former Labor treasurer Michael Costa, who served as chairman of AWH for a time after Sinodinos.

Arthur Sinodinos and Tony Abbott Photo: Prime Minister Tony Abbott has supported Senator Arthur Sinodinos, who has been named as a person of interest in an ICAC inquiry. (AAP: Paul Miller)

But Watson  did not "clear" Sinodinos, now a Senator and Assistant Treasurer in the Abbott Federal Government.

"It's presently difficult to offer observations on the conduct of Mr Sinodinos. He has other involvements which will come under scrutiny in Operation Spicer," Watson said.

At the moment the Prime Minister is standing by Senator Sinodinos. Sinodinos denies impropriety and is entitled to the presumption of innocence, as are all the adversely named so far at the ICAC 's current investigation.

As previously reported, ICAC hearings are  inquisitorial proceedings held in public after preliminary and extensive in camera inquiry. It is likely Sinodinos has already been asked in to assist and has answered  questions under oath.

He will have to endure a painful wait to see exactly what the ICAC, which has coercive powers, has on him. There was an audible sucking in of breath when Watson remarked that it's "difficult to offer observations on the conduct of Mr Sinodinos".

Although Watson has a headline-grabbing descriptive ability it would be  an act of cruelty and irresponsibility to use these words without full consideration of their impact.

In the weeks and months ahead the constant media coverage will re-confirm the public's worst fears about what really goes on behind the closed doors of government.

The Liberal Party will stand besmirched and tainted, its high moral ground destroyed after five years of advantageous revelation.

In a laughable gesture the NSW Liberal Party announced it would refund to Sydney Water the $75,000 in political donations it received via AWH. If, as expected, the ICAC finds AWH systematically overcharged Sydney Water (i.e. the taxpayers who own it) millions of dollars over the years, the party should, with other beneficiaries who enjoyed party patronage, repay that as well even if it bankrupts the NSW branch.

What can be done to restore public confidence?

More from Quentin Dempster on ICAC:

The Ipp reforms are a start. The reform of the dark arts and practices of political lobbying is also needed.

Statutory independence for probity auditors and senior public servants to rebuild the Westminster concept of "frank and fearless" advice to government should also be on the shopping list.

The biggest challenge to the jurisdiction of NSW, however, is the rule of law. Prosecuting those accused of criminally corrupt conduct should be the top priority.

No one has yet been charged, let alone convicted and jailed. No suspected proceeds of crime have been seized in a determined application of the law by the State Crime Commission.

We're still waiting for Lloyd Babb SC, the Director of Public Prosecutions, to decide if Eddie Obeid and Ian Macdonald, declared among others to be corrupt by the ICAC last year, will actually be criminally charged.

Vested interests, Cascade Coal and associates and NuCoal have launched Supreme Court actions against the ICAC over its corrupt conduct findings concerning coal mining exploration licences and their revocation. These cases will be heard later this year.

But at the moment it remains unclear where the rule of law will fall as these entities try to have the courts effectively over-rule the ICAC.

In the meantime we must, on the plethora of evidence to date, continue to distrust our government.

*At the moment no National Party figures have been adversely named.

Quentin Dempster presents 7.30 NSW on Fridays on ABC1. View his full profile here.

The ICAC's destruction hits both sides - The Drum (Australian Broadcasting Corporation)

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