Loopholes in disclosure laws are allowing major donations to be funnelled into parties via an elaborate network of forums and sponsorships. By Sophie Morris.

Politics’ hidden millions in party favours

In this story

Ahead of the Nationals’ Federal Council in Canberra this weekend, the party sent companies a little green pamphlet offering “priority access to the Nationals federal government team”. All that was needed to secure this privilege was $75,000, plus GST. The lucky business would become a platinum sponsor for the event.

Apparently there were no takers at this price. But some companies did contribute smaller amounts, as the junior Coalition party uses its role and influence in the Abbott government to replenish its coffers.

Eventually, the Nationals will have to declare the identity of some sponsors. But there is a long lag in the publication of this information. It need not be revealed until February 2016.

And the Nationals are not alone in soliciting funds. 

Sponsorship of events is just one way of courting the corporate dollar. A selection of more than a dozen invitations to political fundraisers, obtained by The Saturday Paper, shows both the Coalition parties and Labor are selling access to their decision-makers through events ranging from $1000 lunches to $11,000 conferences to annual memberships of business forums, costing up to $30,000.

Loopholes in disclosure laws have spawned a massive political fundraising industry. Many of these events are structured in such a way that the companies targeted for cash are not obliged to publicly declare it. Unlike the monies described in the last sessions of the Independent Commission Against Corruption (ICAC), all this concealed money is ostensibly legal.

Prime Minister Tony Abbott plays a major role in his party’s fundraising, including attending a dinner with donors in Melbourne on Monday night, along with frontbenchers Kevin Andrews and Josh Frydenberg. Those who attended refused to comment but it has been suggested that the exclusive event was hosted at the Pratt family’s historic Kew mansion, Raheen. The next day Abbott apologised for arriving late to the Coalition partyroom meeting, saying he had needed to schedule a public visit to
a cancer research centre in Melbourne that morning to justify billing taxpayers for the trip.

On Tuesday, Liberal senator Bill Heffernan was on the warpath over the ICAC revelations in NSW. He told the Liberals’ partyroom meeting that whoever was responsible for arranging illegal donations to the party’s associated entity, the Free Enterprise Foundation, “should have their nuts cut out”.  Heffernan’s disgust at the behaviour revealed by ICAC is palpable. “The most important qualification in public life is to not have a price,” he says.

Brown paper bags and envelopes stuffed with cash reek of corruption. But the more prosaic reality is that our electoral system relies on corporations – and unions – paying millions of dollars each year to political parties to fund their electioneering. The rules are so lax and complicated, with variations between state and federal laws, and the loopholes so huge, that much of this funding need never be disclosed. The donations that are disclosed annually and after each federal election represent only a fraction of the private funding received by political parties.

The latest Australian Electoral Commission figures, for the 2012-13 financial year, show that the Liberal Party’s state and federal divisions declared $13 million in donations, while the ALP’s divisions declared $3.6 million. But so sketchy and incomplete is this published information that there is a real incentive for companies to seek to contribute through a method that allows them to avoid declaring it. Those who do declare attract the headlines.

The Saturday Paper spoke to several current and former officials from different parties, who all acknowledged that the source of funds was obscured under the current system, allowing at least the perception of impropriety.

One former state official, now a Liberal in federal parliament, says outright donations from rich individuals – some of which must be disclosed – are not the main source of funds. The big money is in fundraising events and business forums organised by parties and their associated entities.

“It’s opaque but it’s very critical to the funding of political parties,” the Liberal says. “The question is, ‘How long can the current arrangements continue?’ When people give money, they expect access. Access doesn’t mean an outcome but they expect to have their voice heard.”

One of the most absurd loopholes allows donors to avoid scrutiny if they can claim they got value for their money. The Australian Electoral Commission donor guidelines put it this way: “Payment for attendance at a political party function, conference or luncheon for commercial reasons may not be considered a donation if the commercial value or benefit of attending is equal to or exceeds the amount paid.”

In other words, if a company considers it is worthwhile paying several thousand dollars to attend a lunch, where they may sit next to a senior politician, then they may not have to declare it. Presumably, the value is not in the hors d’oeuvres or rubber chicken. And parties have become increasingly sophisticated in using such events to raise funds: often the costs are covered by a sponsor, so the ticket price goes straight to party coffers.

Some invitations to fundraisers are even explicit about the fact that it need not be declared. For instance, an application form from the Queensland LNP’s QForum invites businesses to sign up for an annual $11,000 satellite group subscription. This is a common price for fundraising events, conveniently under the $12,800 disclosure threshold that applies federally and in Queensland.

Lest companies fear they may still need to reveal their contribution, the application states: “Joining QForum satellite group does not constitute a donation or membership of any political party.”

State director of the LNP Brad Henderson says companies do not need to disclose payments to QForum because they are buying a “subscription for services provided by the party” rather than making a donation.

The application form says the $11,000 fee buys entry to five events, each in a “private dining setting” with “federal, state and local parliamentary leaders”, and with attendance restricted to 15 business leaders. These are intimate gatherings where business people finance the LNP in return for access to their politicians.

The QForum events launched in 2012, shortly before the LNP came to power in the state. In 2009, corruption fighter Tony Fitzgerald warned that the practice of selling access to politicians risked dragging Queensland back into its “dark days”.

“Access can now be purchased, patronage is dispensed, mates and supporters are appointed and retired politicians exploit their connections to obtain success fees for deals between business and government,” Fitzgerald said.

Major businesses that deal with government receive multiple invitations each week to fundraisers from forums associated with individual MPs, as well as the state and federal parties.

It’s a busy year for fundraising in Victoria, as a state election looms. Abbott was scheduled to speak at a dinner in Melbourne on Wednesday, August 20, along with another 10 frontbenchers, including Julie Bishop, Mathias Cormann, Eric Abetz, Kevin Andrews and Peter Dutton. This star-studded event was a highlight in a busy fundraising calendar organised by Enterprise 500 Victoria, the fundraising arm of the state Liberals. The group offers a range of membership options tailored to different contributors. Premium packages cost more than $20,000 and grant access to more exclusive events with senior politicians. 

Businesses can arrange to stagger their payments. For instance, if the fee is $30,000, they may pay it in three instalments. Keeping the instalments under the disclosure threshold means the party need not declare it and the company can avoid declaration by arguing it is a fee-for-service rather than a donation.

Enterprise 500 Victoria offered subscribers some 40 events this calendar year, with access depending on how much they contributed. The multiple events allowed contributors to avoid declaring their donations by claiming they got value for money.

In Western Australia, about 30 senior business people pay $25,000 a year to a “Leaders Forum” that supports the state Liberals. Their combined contribution of $750,000 grants them regular access to the premier and senior frontbenchers.

Another common way for parties to raise funds is to hold business seminars that run in tandem with their political conferences, or separately. The invitations for such events often ask attendees to nominate which frontbenchers they want to meet.

In June this year, companies were asked to pay $11,000 to join the business observers program as part of the Liberal Party’s Federal Council meeting. This purchased them access to events including breakfast with the prime minister and afternoon tea with ministers’ chiefs of staff.

On the other side of politics, companies have been invited to pay $8500 to attend a “Federal Labor Business Exchange Program” in Sydney on September 11-12, where they will “receive policy briefings on major policy issues”. Unlike the Coalition, federal Labor discloses the source of all donations above $1000. The invitation to its business exchange forum warns companies of this and says “all proceeds go to the ALP National Secretariat”.

1 . Fundraising is key

So key is fundraising to political parties that Abbott was slated to attend a “Federal Election Supporters’ Programme” dinner in Sydney on Wednesday, September 4, last year, just days before the election. “This special dinner will contribute valuable funds to the NSW marginal seats campaign,” declared the invitation, which offered $5500 gold packages to secure a table for 10, with priority seating and corporate logo. An auction and raffle were also planned for the night, with John Howard as guest speaker.

Last year, Labor was also trying to squeeze donors for funds, using the advantage of incumbency as they braced for a tough election. The party’s NSW branch asked $2200 a person for a “private lunch with the Hon Anthony Albanese, Deputy Prime Minister of Australia” in the Deutsche Bank building in Sydney on  August 15, 2013, to raise funds for the party’s North Coast campaign.

But from opposition, fundraising is harder. This year, the ALP charged just $1000 for a ticket on a VIP table at its budget reply dinner in Canberra, with speakers including Bill Shorten, Tanya Plibersek and Chris Bowen. Many of
the dinners or lunches staged by Labor cost $1000, so the party can comply with its own disclosure rules while not declaring them.

Greens senator Lee Rhiannon is preparing legislation to ban corporate donations and reduce the disclosure threshold to $1000, as well as putting caps on donations from individuals and on election spending. She hopes ICAC’s revelations in NSW will persuade the major parties of the need for reform.

“We need to get the money out of politics,” she says. “These donations have a corrupting influence. It’s undermining the standing of our democratic process.” 

Her proposals would also affect the Greens, which attracted the biggest single political donation in Australia, with a gift of $1.6 million from businessman Graeme Wood in 2010.

Rhiannon says restrictions on corporate funding will necessitate an increase in taxpayer resourcing of elections.

The last time the major parties tried to organise this it backfired spectacularly. Labor and the Coalition had last year stitched up a secret deal to reduce the threshold for disclosing donations to $5000, from the current $12,800, in exchange for increased taxpayer funding. But the Coalition abandoned the deal when news leaked that the parties were secretly plotting to award themselves an extra $60 million in public funds.

Abbott has rejected calls for increased public funding, saying in May that: “At a time when we’re talking about a very tough budget indeed, the idea that we should scrap private fundraising and fund political parties through the taxpayer I think would be very, very odd.’’

Labor’s shadow special minister of state Gary Gray says there may be a role for private contributions, but that more transparency is required: “A stable political process requires that donating entities, especially if they are public companies, make moderate contributions to both sides.” 

He says he expects the issue of disclosure thresholds to be discussed by the Joint Standing Committee on Electoral Matters (JSCEM) as it continues its inquiry into the conduct of the last election. “We would expect to be pursuing arguments for enhanced disclosure and more regular reporting,” says Gray.

Some Liberals have expressed support for reform, including Christopher Pyne suggesting a ban on donations from corporations and trade unions. But the party’s submission to the JSCEM calls for less reporting, arguing that donors should not need to submit declarations at all, as they do not understand the law and frequently make errors.

Among the former and current party officials to whom The Saturday Paper spoke, there was an acknowledgement that fundraising activities and disclosure rules would inevitably be examined again in the wake of the ICAC revelations.

But as one official said: “I don’t see any great appetite for things to change.”

This article was first published in the print edition of The Saturday Paper on August 30, 2014 as "Politics' hidden millions".

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Sophie Morris is The Saturday Paper’s chief political correspondent.

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