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ICAC poses one big question: why would a party buy an election it has already won? By Mike Seccombe.

Illegal donations from developers fund NSW Libs’ win

Tony Bandle, director of the Free Enterprise Foundation.
Credit: AAP Image

The name of the company was Elmslea Land Developments. On the face of it, most would not have trouble imagining the nature of such a business. As counsel assisting the Independent Commission Against Corruption (ICAC), Geoffrey Watson, is fond of saying, blind Freddy could have seen it.

Elmslea Land Developments was a property development company. Thus it was prohibited from making political donations in New South Wales. But an awful lot of people connected with the Liberal Party would have us believe they are not quite as quick on the uptake as Watson’s Freddy. They were apt not to notice clues to the sources of illegal money flowing to the party.

The latest was a bloke called Tony Bandle.

His will not be a name familiar to most people, but it is well known to generations of Liberal Party money men and party benefactors. For 33 years the Free Enterprise Foundation (FEF), of which Bandle is a trustee, has discreetly directed the flow of donations between the rich and the powerful.

Bandle was back before ICAC this week, for his second grilling over his foundation’s role in the epic flouting of NSW electoral laws by the Liberal Party before the 2011 state election.

And it was in that context that the Elmslea Land Development company came up. Counsel assisting asked Bandle if he recalled a $20,000 donation to the FEF from the company. He said he did.

This is the exchange that followed, between Watson and Bandle:

“Did you know that that was money coming from a property developer?”

“No, I didn’t.”

“What did the name of it, Elmslea Land Developments, tell you about it?”

“Ah, yeah...”

“What did you think it was doing?”

“Well, there are many different names for, for companies, ah…”

“It’s true, but this one was Elmslea Land Developments. What did you think that name meant? That it might have something to do with land development?”

“Yes, it could have possibly, yes.”

“And would it strike you that land development was another aspect or one aspect of property development?”

“Yes, correct.”

“Would that cheque on its face alert you to the fact that it most probably came from a property development company?”

“Yes, it would.”

But Bandle had an explanation, of sorts, for why he had not noticed money was coming from Elmslea and other banned donors. He was, he insisted, oblivious to the fact that it was illegal under NSW electoral law for property developers to donate. He didn’t find out until long after the election, he said. Was unaware, indeed, until the issue came up before ICAC. Nobody from the Liberal Party told him – “No, nobody, nobody.”

Most notable among the people who didn’t tell Bandle were Paul Nicolaou, the chief fundraiser for the NSW Libs – who was earning a 6 per cent commission on the monies he raised – and Simon McInnes, the party’s finance director. The men were Bandle’s chief points of contact.

But according to blind Freddy Bandle, he was not told, and apparently saw nothing odd about the sudden flood of some $700,000, much of it from banned donors, which passed through the FEF in the year 2010-11. This compared with about $50,000 the year before.

Why the big difference? Well, 2011 was an election year, as Bandle pointed out.

But that is only a partial explanation. There was a special factor to that election: the ban on developer donations, which came in at the end of 2009 under the Labor state government.

The FEF plan

This threw the Libs’ money people into a panic. They reckoned the change to electoral law would cost them about half a million dollars, or about one-third of their total donations. They considered the new law an attempt to further enhance Labor’s funding advantage. At the previous state election, in 2007, Labor outspent the Coalition parties by a margin of well above two to one. Now they were cutting off one of the Libs’ most reliable sources of money.

It was Nicolaou who suggested at a meeting of the party finance committee that it might be possible to get around the ban by routing donations through the FEF. He told ICAC he discussed the idea with various people: the now-stood-down federal assistant treasurer Arthur Sinodinos, then-state director Mark Neeham, and other party heavyweights, including Peter McGauran, John Pegg, Angus Taylor, Robert Webster and Michael Photios.

The use of the FEF to wash tainted donations was widely known among those in the organisational wing of the party. Emails in the possession of ICAC suggest that even the party’s federal director, Brian Loughnane, was aware of it. Loughnane, of course, is one half of Australian politics’ primo power couple. His wife, Peta Credlin, is Prime Minister Tony Abbott’s chief of staff.

The ICAC evidence suggested banned donors were in on the plan also.

Robert Millner, the chairman of Brickworks, a long-time large donor to the Liberal Party, told ICAC the company had been asked in 2010 to direct donations via the FEF. And in an email on July 2010, Brickworks managing director Lindsay Partridge informed Nicolaou: “Paul, via the diversionary organisation there is $50k for NSW, $250k in total.”

Nicolaou immediately sent an email to state finance director McInnes: “Please note! Another $50k for us via Free Enterprise Foundation from Brickworks.”

Several emails about the Brickworks donations were copied to Senator Sinodinos and to Loughnane.

Donations poured in from companies that blind Freddy might have assumed were property developers, such as Harry Triguboff’s Meriton Apartments ($50,000); Nathan Tinkler’s Boardwalk Resources ($53,000); Frank Lowy’s Westfield Group ($150,000) and, biggest of all, Brickworks ($280,000).

In every case, Bandle sent a letter back, acknowledging receipt of the money.

In the case of the Boardwalk donation, he sent two replies to Philip Christensen, a Boardwalk director, for even though the money arrived one day in December 2011, it came in in two cheques, one for $35,000 and another for $18,000.

As we now know, those amounts were put, respectively, towards the campaigns of Newcastle MP Tim Owen, who has now quit parliament after lying to ICAC about another donation, and Londonderry MP Bart Bassett, who has moved to the parliamentary crossbench.

The punctilious Bandle also made sure he told his point people in the state Liberal Party every time he was sending money on.

“I do that with all of the state divisions or federal secretariat. I always advise them that there’ll be a cheque coming or a donation coming,” he told ICAC.

This meant, of course, that he had a lot of contact with Nicolaou, the man who first thought of the idea of using the FEF and who, as we have seen, was otherwise happy to crow about its success.

Yet we are to believe the veteran trustee of the FEF remained ignorant of the reason behind the stratagem. Bandle maintained that the Free Enterprise Foundation was not just a part of the fundraising machinery of the Liberal Party. 

Counsel Geoffrey Watson certainly wasn’t buying this line. He pointed the FEF trustee to a letter from Brickworks, addressed to the foundation, care of Paul Nicolaou, and sent to the postal address of the NSW Liberal Party.

This was no simple mistake, he suggested. “It’s quite deliberate, isn’t it?”

Prohibited donations would come into Nicolaou’s NSW fundraising body, the Millennium Forum, be passed through the FEF, and “end up back in the hands of the Liberal Party”, exactly as the donor intended.

“That’s how it worked, isn’t that right?” barked counsel assisting.

Bandle was certainly not about to agree to that, and for important legal reasons. The Free Enterprise Foundation was set up as a discretionary trust, and as the name implies, that means it is supposed to exercise some discretion in the way it hands out funds that come to it.

Although it is classed as an “associated entity” under federal electoral law (NSW has no such classification), it is also supposed to be an independent entity.

Thus the wishes of a donor could be disregarded by the trust when the money was disbursed. To take a hypothetical example, someone could donate in the hope that the money would go to the Liberal Party, but would be powerless to stop the trustees deciding to give it instead to, say, Médecins Sans Frontières, to fight Ebola in Africa.

Of course, that is not how things tend to work in the real world.

How to prove discretion in a discretionary fund?

As Joo-Cheong Tham, associate professor of law at Melbourne University, who has been studying Australia’s electoral systems for 15 years, notes: “It’s quite murky who actually controls these associated entities.”

If it was clear a discretionary trust was not exercising any discretion, but was simply following orders, that would indicate where control actually lay. Thus at ICAC on Tuesday, there was a vigorous semantic debate about whether the FEF was simply following orders, as Watson suggested, or acceding to requests, as commissioner Megan Latham put it, or acting on its own discretion, as Bandle would have it.

Bandle argued that while the FEF had done as donors wanted, and passed money to the Liberal Party in NSW, they did it because they wanted to, not because they were ordered to.

“It’s not an accession to the request,” he said. “We… we made the decision.” And again: “We made the decision to… to donate, at our discretion, to the party.”

He repeatedly asserted discretion on the part of the FEF discretionary trust. Serendipitously it seemed that time after time the FEF trustees’ discretion accorded with the wishes of the banned donors and the Liberal Party.

Bandle was challenged to show evidence of any occasion during that big money year of 2010-11 on which the trustees directed money other than as requested. He did not. The commission gave him a few more days to come up with some.

It remains to be seen if anything is forthcoming, and we will see what ICAC makes of the whole FEF gambit when it reports in December.

Joo-Cheong Tham, probably the country’s foremost legal academic expert on electoral matters, offers this view: “My broad observation – not commenting on ICAC, but speaking more broadly – is that if a property developer gave money to an intermediary, with the intention for the intermediary to pass that money on … it’s strongly likely it’s in breach of the NSW election funding laws. It defies belief that experienced party officials would think otherwise.”

And if ICAC comes to the same view, well, it’s very big.

Much bigger than a few tens of thousands of dollars passed to candidates in the back of cars. Much bigger than donations disguised as payment for services not rendered. Much bigger than any of the other scams that have been alleged – and in some cases admitted – to have been used to subvert the NSW ban on property developer donations.

This involves hundreds and hundreds of thousands of dollars, some of the biggest names in business, and a who’s who of Liberal Party figures.

Yet Paul Nicolaou told ICAC he assumed the party would get advice on whether it was legal. And director Simon McInnes, the other key link man, told ICAC that while he knew banned donors were kicking in to the FEF, he assumed it was legal.

Credlin's emails

Let’s return now to Peta Credlin, Abbott’s chief of staff, who became the biggest news out of ICAC in this, its final week of hearings.

The story was made big in substantial part because evidence of an email exchange between Credlin and Brickworks chief executive Lindsay Partridge was initially suppressed out of concern its revelation could breach parliamentary privilege.

It was big, too, simply because of who Credlin is – unquestionably the most powerful woman in Australian politics, such a dominant figure that even Abbott routinely calls her “boss”.

When the emails were eventually revealed, though, they amounted to “a little smoke but no gun”, as The Age’s political editor Michael Gordon put it.

It was a fair point. The exchanges between Credlin and the biggest contributor to the FEF didn’t relate to money at all and bore no direct relationship to the matters being investigated by ICAC. They were about Partridge’s virulent opposition to the carbon tax. Credlin was seeking to enlist him to the cause of politicking against the tax, and he was happy to be so recruited.

The exchange certainly did not amount to “cash for questions”, as federal Labor claimed.

But strict legalities are not what politics is about. The fact is that as a result of the contact, Australia’s prime minister and a number of other senior Liberal politicians, state and federal, took to citing the views of the head of a property development company that had given huge sums of money to the party, when such donations were banned.

It was not a good look. And there’s every likelihood that it will be a worse look come ICAC’s report in December. Already the polls tell us that most Australians believe this federal government came to power after a deceitful election campaign and think Abbott is not a man to be trusted.

And that is one of the key differences between this ICAC investigation and previous investigations by the NSW anti-corruption investigator. It promises to cause huge embarrassment outside NSW.

Buying an election aready won

Another difference between this and previous political inquiries is the systemic nature of the alleged malfeasance. The NSW Labor politicians who were previously found to have acted corruptly were acting for personal gain, not for any perceived good of the party.

Most of the Coalition politicians and other party figures caught up in this investigation are not alleged to have been primarily motivated by personal greed, but by electoral considerations.

Which is very ironic. Few elections have been as surely foregone conclusions as the 2011 NSW state poll. It was obvious two years beforehand that the Liberal National Coalition was headed for a landslide win. The Labor government’s leadership revolving door was spinning: Iemma out, Rees in; Rees out, Keneally in. It made little difference. Eddie Obeid and his crooked crew, exposed by some brilliant investigative journalism and then by ICAC, had done for Labor.

Even at the height of Kristina Keneally’s premiership honeymoon, the conservative parties were never fewer than 10 points ahead, two-party preferred, according to Newspoll. In the nine months before election day, they were at least 22 points ahead, and the gap kept widening. Three months out, it was 24 per cent. On election eve, 29 per cent.

And the polls were right. On election day, the Coalition got 64.2 per cent of the vote; Labor, 35.8. It was a massacre.

Which makes you wonder: given that they were always going to win, why did the Coalition deem it necessary to pad their campaign war chest with hundreds of thousands of dollars in illegal donations?

As satirist Jonathan Biggins quipped on ABC TV this week: “The irony is, the Liberals could have won the election for five bucks.”

The ICAC report will no doubt set out for us all the who, how and when of the conservative subversion of the electoral laws.

The big question, though, will almost certainly not be answered. And that is: why?

Corruption commissions do not explain such things. But fables do.

Consider the fable of the frog and the scorpion. A scorpion wants to get across a river, and asks a frog to carry him. The frog is frightened the scorpion will sting him, but is mollified when the scorpion points out that would result in both of them dying.

So the frog carries the scorpion. But midstream the scorpion stings him. Just before both sink, the frog croaks out: “Why?”

“It is my nature,” says the scorpion.

This article was first published in the print edition of The Saturday Paper on Sep 13, 2014 as "Funds raze party name". Subscribe here.

Mike Seccombe
is The Saturday Paper's national correspondent.