Donations from a Liberal Party-owned company, through which thousands in taxpayer dollars have been funnelled, expose deep flaws in political fundraising. By Mike Seccombe.

Parakeelia: The inner workings of the Liberals’ funding rort

In 2005, Ron Walker was appointed chairman of the Fairfax board. At the time, journalists feared their cherished editorial independence was under greater and greater threat.

Walker was not just personally conservative, as board members tend to be. He had been a major political player as the Liberal Party treasurer, the legendary fundraiser who, through channels overt, covert and often controversial, had raised record millions of dollars in donations.

Editorial staff were disturbed when Walker first came onto the board in 2003, but he sought to pacify them by offering an assurance that he had resigned from the Liberals and intended to be impartial in his role at Fairfax.

In 2005, as he ascended to the chairman’s role, Walker repeated his assurance, telling the company’s annual general meeting: “I am an independent person … I have no relationship with the Liberal Party, both at officer level or at any other level whatsoever.”

But those repeated assurances were not warranted.

Eighteen months later, then Sydney Morning Herald journalist David Marr discovered that while Walker had been claiming he was uncompromised by partisan involvement, he had remained the principal shareholder in a Liberal-owned company called Parakeelia Pty Ltd.

As Marr wrote in a story of March 20, 2007, Parakeelia “was set up in 1989 shortly after Mr Walker became Liberal Party treasurer. For the past decade the company has been developing and selling controversial Feedback software that allows MPs to collate and store information on their constituents.”

1 . Tracing the money

As we now know, there are much dodgier aspects to Parakeelia’s operation than Ron Walker’s misleading denials of involvement. The company appears to have served as a conduit through which large amounts of taxpayers’ money were siphoned into party coffers.

The Department of Finance’s guidelines for entitlements help explain how it works. MPs and senators are entitled to “claim reimbursement from their office budget for specific software, servicing, backup and training”.

To claim the money, the guidelines say, parliamentarians must produce a tax invoice and evidence of payment from a computer software provider. “The major political parties have each nominated a single software provider,” the department notes, “and reimbursement will only be made for purchases through that provider.”

Both sides pay a software provider – $2550 per member per year in the case of the Liberals and about the same for Labor – to maintain a central database of constituent information.

But where Labor has contracted an external private provider, Magenta Linas, to collate that constituent information, the Liberals have their own company.

The relevant fact is that Parakeelia in turn is a major donor to the party.

It is worth noting that back when Ron Walker was asserting his impartiality to Fairfax staff and shareholders, Parakeelia appeared not to have been a donor. It has only been in the past five years or so that the Australian Electoral Commission’s records show the Liberal-owned company as a big funder of the party.

In 2010-11, Parakeelia gave just $12,100. In each of the two following years it gave $200,000. In 2013-14, Parakeelia handed over more than $411,000. Last financial year it gave $500,000. All up, it has given more than $1.3 million to the Liberal Party.

There are other questionable aspects to the Parakeelia operation, too, which we will come back to shortly. First, though, let’s return to David Marr’s story of 2007.

Marr rang Ron Walker to ask about his involvement with Parakeelia. It was not a pleasant conversation. Walker appeared to resent being asked questions by one of his employees.

Walker said his continued involvement – he held 98 of Parakeelia’s 100 shares “as trustee for the members … of the Liberal Party of Australia” – was an oversight. He blamed the former federal director of the Liberal Party, Andrew Robb, who he said had assured him that all his connections to the party were revoked at the time he joined the Fairfax board.

Marr was told that Walker would meet with the then Liberal Party director Brian Loughnane within days to rectify the situation.

2 . Public funding debacle

The conservative parties, particularly the Liberals, have a long record of playing fast and loose when it comes to the rules on donations and fundraising. But on the biggest rort of all, public funding, which will give all parties $2.62 for every first preference vote they receive at this election, Labor is in lockstep.

Interestingly, the man who first came up with a proposal for public funding of political parties, former New South Wales state Labor minister Rodney Cavalier, now considers it the worst error of his political life.

“I am thoroughly ashamed at my role in helping to establish a scheme that has changed so fundamentally that it is antipathetic to democracy,” he wrote in a 2014 submission to a NSW inquiry into the funding system, called in the wake of the Independent Commission Against Corruption (ICAC) revelations about the Liberal Party’s Free Enterprise Foundation rorting.

In fairness to Cavalier, what he and his committee first proposed back in the early 1980s was far different from the system we have today.

He recommended that individual candidates should be reimbursed for the amount they actually spent on getting elected, up to a ceiling; that funding was to be strictly for election campaigns; and that “funding was expressly not to be used for internal party administrative purposes”.

Then the party machine men – the right-wing powerbroker Graham Richardson prominent among them – degraded the concept.

“Richardson told me that he would make sure there was no constituency component and was going to separate revenues from reimbursement,” Cavalier recalls.

Thus millions upon millions of taxpayer dollars flowed directly to party organisations, which disbursed it as they saw fit.

“Public funding underpins parties without a membership base,” wrote Cavalier. “An utterly reliable source of funding has become a substitute for membership activism. When the party below disappears, there are cultural consequences.

“If the panel is pondering why the Independent Commission Against Corruption has been discovering such evidence of corruption and tolerance for criminal behaviour, I suggest to you that parliaments across Australia on both sides are filling with individuals who are values-free and scarcely connected with the local party membership.

“Public funding and company donations have separated local representation from local communities and local party organisations.”

3 . An end to big donations?

Cavalier’s views on public funding are shared by another former Liberal Party treasurer, Michael Yabsley.

In a recent investigation of the corrupting influence of political donations on the political process, by the ABC’s Four Corners program, Yabsley also argued for an end to all big money donations. Only individuals on the electoral roll should be able to donate, he said, and only up to a maximum of $500.

That would force parties back to engaging with their membership, and the people.

“Far better to take the fundraising to the sausage sizzles than some sort of arcane process around a boardroom table,” he said.

Yabsley was being facetious. We’ll never see Malcolm Turnbull manning the grill outside Bunnings on a Saturday morning.

But the idea of taking the big money out of political campaigns not only has merit, but is workable. Exhibit A, Bernie Sanders.

Sanders’ campaign for the Democratic Party US presidential nomination pitted him against the well-oiled, big-money machine of Hillary Clinton. He managed to raise well over $US200 million. The average size of donation was $US27.

Until as recently as April, when it became clear Clinton was going to win, Sanders, with his millions of small donors, was actually out-fundraising Clinton, with her corporate benefactors and Super PACs (political action committees).

And here in Australia, we have the Greens party, which also survives largely on small donations from individuals, although it, too, gets public funding. According to the party, 95 per cent of its donations come from individuals. Almost all are below $500.

The Greens, incidentally, employ no equivalent to the Liberals’ Parakeelia or Labor with Magenta Linas. Individual members and senators are responsible for compiling their own constituent databases. Information is not shared with head office unless a constituent specifically requests to go on a mailing list.

4 . Disendorsed Jensen calls out Parakeelia

Much of what is now known about Parakeelia is known because of one disaffected Liberal, West Australian Dennis Jensen. Jensen was disendorsed by the party and is now running as an independent in the seat of Tangney against the Liberals’ new candidate, former state party director Ben Morton.

Jensen was upset to find his access to Parakeelia’s Feedback service was cut off as soon as he was disendorsed, “even before I left the Liberal Party, while I was still a member, despite the fact that the taxpayer has paid for that access until November”.

All the constituent data compiled by his office was suddenly unavailable to him, which, he claims, set him to thinking about the ethics of the operation.

“There’s a big privacy issue here,” he says. “Quite rightly, members of parliament, senators and their offices are exempt from privacy laws, because we could be representing constituents with bodies such as Centrelink or the tax office and so on. We deal with sensitive issues such as child abuse, et cetera.

“But I see no reason why parties should be exempt.”

Jensen is concerned that all that sensitive data he and his office compiled over his time as an MP is in the hands of the party machine and possibly Ben Morton’s campaign.

His sudden concern about such information being shared is self-serving, perhaps, but nonetheless valid.

“I think constituents would be horrified to know that details of all their meetings and correspondence with the member’s office have been spread far and wide,” he says.

He has contacted the party machine to ask what it has done with the data. There has been no response.

The embittered Jensen now wonders about the possibility that Parakeelia or Magenta Linas could onsell the information to outside marketers. The Liberal Party denies this, but the possibility for misuse nonetheless remains.

Back in 2007 then-special minister of state Gary Nairn alleged Magenta Linas had passed confidential voter information to the ACTU, which was running a campaign against the Howard government’s proposed changes to industrial relations laws. He referred the matter to the Electoral Commission for investigation, and they found the use of data was not in breach of the Commonwealth Electoral Act.

Jensen thinks the parliament should provide secure software to all members and senators, unavailable to party machines.

Perhaps the most outrageous aspect of the affair, though, is the evidence that the Liberal Party was double dipping on the taxpayer – not only funnelling money through Parakeelia to itself, but also using public servants to train members in how to use the system.

According to reports in the Fairfax papers, backed by leaked emails, parliamentary staff employed by something called the Coalition Advisory Service, recently rebadged as the Members and Senators Support Unit, were simultaneously working for Parakeelia. Thus the Liberal-owned company’s staff costs were apparently shifted onto the taxpayer.

“It clearly is fraudulent because those people are supposed to be ministerial advisers and instead they are seconded to another office where basically they do political stuff,” Jensen says.

He concedes his staff received such training. He even forwarded The Saturday Paper a copy of the training manual, a complex 44-page document instructing on how to collate information of all kinds on electors.

The Labor Party has sought an investigation of Parakeelia by the office of the auditor-general. The Greens believe it should also be investigated by the Electoral Commission and the Department of Finance. They say it strengthens the case for a federal anti-corruption body akin to NSW’s ICAC. Jensen agrees with all of these demands.

5 . Liberals’ defence

On Wednesday night, the Liberals’ national campaign director, Tony Nutt, issued a statement saying the operation “complies with the law”. He offered full co-operation with any investigation.

Nutt is a clever man, a veteran of many funding imbroglios, including the Free Enterprise Foundation scandal, and he is quite possibly right in a strict legal sense.

But legality is not the same as morality.

When the Liberal Party says it complies with electoral law, it is very much like when Google says it complies with tax law.

It means they have exploited another loophole.

And 13 years after Ron Walker assured the journalists at Fairfax that he had quit all associations with the Liberal Party, 11 years after he told shareholders the same thing and nine years after David Marr was assured the “oversight” would be fixed in a matter of days, Walker remains the major shareholder in Parakeelia.

In an email to The Saturday Paper on Thursday, the party assured us again: “Appropriate arrangements to transfer this shareholding will be made in due course.”

Just as in due course the Liberal Party will reform Australia’s corrupted donation laws.

This article was first published in the print edition of The Saturday Paper on June 18, 2016 as "Parakeelia: The inner workings of the Libs’ fund rort".

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