News

The ICAC inquiry’s findings of corruption by the former NSW premier stop short of advocating criminal charges, but raise questions as to how pork-barrelling should be dealt with. By Mike Seccombe.

What the Berejiklian case says about ‘corrupt’ spending

A middle-aged woman on a street footpath and tailed by journalists holding cameras and microphones.
Former NSW premier Gladys Berejiklian attends ICAC hearings in November 2021.
Credit: Mark Kolbe / Getty Images

Former New South Wales premier Gladys Berejiklian engaged in serious corrupt conduct, the state’s Independent Commission Against Corruption has found, but it has not recommended criminal charges be laid against her. The implications may go no further for the former premier, but they present a challenge to her political successors.

The long-delayed ICAC report found Berejiklian had breached public trust in 2016 and 2017 in her roles first as treasurer and then premier, in the awarding of two grants for projects championed by former Liberal member for Wagga Wagga Daryl Maguire.

Berejiklian had “presided over and/or been a member of” the Expenditure Review Committee of Cabinet that approved grants for two big projects: $5.5 million for a gun club, the Australian Clay Target Association, and $10 million for the Riverina Conservatorium of Music.

“At the same time, Mr Maguire and Ms Berejiklian were in an undisclosed close personal relationship,” the commission said in a summary statement accompanying the two- volume report.

By failing to declare that relationship, ICAC found, Berejiklian placed herself in a position of a conflict of interest between her public duty and her private interest, which could “objectively have had the potential to influence the performance of her public duty”.

In the case of the grant to the gun club, Berejiklian pushed for its inclusion on the ERC agenda, and ordered her staff to monitor its progress and seek a reassessment of the cost-benefit ratio that initially found the club did not warrant funding.

The ICAC report further found she had engaged in serious corrupt conduct by “refusing to discharge her duty under section 11 of the ICAC Act to notify the Commission of her suspicion that Mr Maguire had engaged in activities which concerned, or might have concerned, corrupt conduct”.

“At the time Ms Berejiklian failed to report her suspicions to the Commission, she was the premier of the state. The report notes Ms Berejiklian must have known that she was not entitled to refuse to exercise her official functions for her own private benefit, or for the benefit of Mr Maguire. To do so to conceal conduct she suspected concerned, or have might concerned, corrupt conduct on the part of Mr Maguire, another member of Parliament, both to protect herself and him from the Commission exercising its investigative powers, was grave misconduct.

“It undermined the high standards of probity that are sought to be achieved by the ministerial code which, as premier, Ms Berejiklian substantially administered.”

Berejiklian retains support among some prominent Liberal Party figures, and may appeal the ICAC findings, as former NSW treasurer Matt Kean has urged her to do. In a statement following the release of the watchdog’s report, Berejiklian said, “At all times, I have worked my hardest in the public interest. Nothing in this report demonstrates otherwise.” She added that the report is “currently being examined by my legal team.

The report found Maguire had engaged in serious corrupt conduct over a longer period – between 2012 and August 2018 – and has referred him to the Director of Public Prosecutions for possible criminal prosecution, along with two of his business associates, Phillip Elliott and Maggie Wang.

Indeed, it was the ICAC’s investigations of Maguire’s corrupt dealings that led accidentally to the resignation, and now the disgrace, of the once-popular and apparently squeaky-clean premier.

Maguire was first the subject of an investigation codenamed Operation Dasha, relating to allegations of impropriety in relation to development approvals involving Canterbury council in Sydney.

The revelations from that operation resulted in Maguire’s resignation, on July 13, 2018, from the Liberal Party, and the following month from the parliament. Operation Dasha was followed by Operation Keppel, which investigated other schemes – property plays and an immigration scam, through which Maguire sought to monetise his position as a member of parliament.

As part of those investigations, Maguire’s phone was tapped. This revealed numerous conversations and text messages between him and Berejiklian, in which he talked about his various money-making schemes and endearments were exchanged.

And so Operation Keppel was then expanded to investigate Berejiklian’s actions. It emerged that she and Maguire had been in a secret relationship for years.

Berejiklian said she had kept it secret for a number of reasons: partly because things might be awkward if it became known that the premier was engaged in a personal relationship with another member of parliament, and partly, she told ICAC, because “I didn’t feel the relationship had sufficient substance for it to be made public”.

Yet in his evidence, Maguire said he loved Berejiklian and believed she loved him, and that they had discussed marriage and having a child.

There were other inconsistencies. Berejiklian told ICAC the relationship began shortly after the 2015 election, but other evidence suggested it was earlier than that. In a text message exchange on February 11, 2014, Maguire wrote: “Hawkrss good news One of my contacts sold a hotel for 5.8 million I had put her in contact so I should make 5K.”

“Hawkrss” was clearly a typo. As Berejiklian explained to ICAC, it is more usually spelled “hokis”. It is an Armenian term of endearment, translating roughly to “my soul” or “my beloved”.

In reply she wrote: “Congrats!!! Great News!!! Woo hoo”. Subsequent messages in the exchange discussed Maguire’s percentage commission from the deal.

Berejiklian claimed not to have much interest in the details of Maguire’s numerous “pie in the sky” schemes.

One that attracted particular interest in the ICAC hearings related to Maguire’s efforts in 2017 to broker a deal involving Chinese property developers and a 230-hectare parcel of land at Badgerys Creek, adjacent to the new Western Sydney airport site. The land was owned by Louise Raedler Waterhouse, of the noted racing family.

Had the $330 million deal proceeded, Maguire and an associate would have received a large commission. Under questioning, Maguire reluctantly conceded they might have been in line for up to $1.5 million.

In one phone intercept, Maguire told Berejiklian: “Looks like we finally got the Badgerys Creek stuff done [and] I’ll make enough money to pay off my debts.” As he rambled about the deal, she cut him off, saying, “I don’t need to know about that bit.” Maguire responded: “No, you don’t.”

In her report, Commissioner Ruth McColl noted the exchange as an agreement between Maguire and Berejiklian that “if he had shared a little bit more than the information he did share with Ms Berejiklian, she might need to take action in the exercise of her public functions”.

Which is to say, they agreed it was better that Berejiklian did not know exactly what her boyfriend was up to, lest she have to report suspected corruption.

The failed Badgerys Creek land deal was one of a number of instances in which Maguire had engaged in serious corrupt conduct, “making representations to ministerial staff and government officials on behalf of Louise Waterhouse in relation to the sale, or financing, of her Smartwest.Sydney property development at Badgerys Creek without disclosing his expectation of receiving a personal pecuniary benefit from the possibility of a commission or other payment to be paid to him …”.

In his evidence to ICAC, Maguire admitted using his status as an MP to broker an array of private business deals, and effectively turned his parliamentary office into an office for a company he “effectively controlled” called G8way International. Bags containing thousands of dollars in cash were dropped off there.

And this was reflected in ICAC’s findings.

“Mr Maguire improperly used his office, and the resources to which he had access as a member of Parliament (MP), to benefit G8wayInternational Pty Ltd … Mr Maguire also failed to disclose his interest and position in G8wayInternational and/or all the sources of his income, as he was required to do under the Constitution (Disclosure by Members) Regulation 1983,” ICAC said.

“He also misused his role as an MP to advance his own financial interests, as well as the commercial interests of his associates, in connection with an immigration scheme that he promoted to his constituents and others connected with his electoral district. Also, as an MP and chair of the NSW Parliament Asia Pacific Friendship Group, Mr Maguire misused those roles to advance his own financial interests and the commercial interests of his associates.”

The litany of his misdeeds identified by the report is too long to fully detail here. Suffice to say, he is in a lot of trouble, and faces a strong likelihood of criminal charges.

But Berejiklian, though found to have engaged in serious corruption, will not face criminal prosecution.

In fact, as Geoffrey Watson, SC, a former counsel assisting several previous ICAC investigations says, her actions in approving those grants were unexceptional but for the fact of her personal relationship with Maguire.

“It was, in part, old-fashioned pork-barrelling,” he says.

And, he notes, the former premier is on the public record as a vigorous defender of the practice of pork-barrelling, which involves the exercise of public powers, such as the making of grants or commitments to build infrastructure, in a way that favours the interests of a political party, rather than in the public interest.

In fact her exact words, when conceding her government had engaged in massive pork-barrelling, involving the commitment of several hundred million dollars in grants in the lead-up to the 2019 election, were:

“It’s not unique to our government. It’s not an illegal practice. Unfortunately, it does happen from time to time by every government.”

But few – save perhaps for the Morrison federal government – have engaged in pork-barrelling on anything like the scale of the Berejiklian government.

One example was a paper prepared for an ICAC report by professor emerita Anne Twomey of Sydney University’s law school about round two of the Stronger Communities Fund, which distributed $233 million in grants. The projects were supposed to have been subject to due bureaucratic process and distributed through the Office of Local Government within the Department of Planning and Environment under a financial delegation – that is not what happened.

Twenty-two of 24 projects, Twomey found, “appear to have been approved by the Premier and Deputy Premier, withoutany formal authorisation, and notified to OLG through emails by staff members. Many millions in public money was paid out without the approval of the responsible minister and upon the say-so of staff in the offices of Ministers who were not responsible for the Fund.

“Any documentation recording the process in the Premier’s Office was destroyed, both in hard copy and in electronic copy, in breach of the State Records Act.”

This maladministration was the subject of strong criticism from the state audit office, but did it see Berejiklian, or anyone else, hauled before ICAC? No. The sums involved in the two grants to the Wagga Wagga shooters’ club and conservatoriums were paltry in the scheme of things.

Only in cases where a politician is deemed to have sought personal benefit is such behaviour deemed corrupt or even criminal. And this is what caught Berejiklian and Maguire.

But, as Twomey wrote, “The type of political corruption that undermines public trust in the system of government is not confined to that which involves obtaining a personal pecuniary advantage.”

She argued the two arguments most commonly made by politicians in response to allegations of pork-barrelling – that it is not corrupt or unlawful because they weren’t lining their own pockets and the community received valuable support – “do not hold water”.

“Such conduct can still be regarded as both corrupt and unlawful if it involves the partial exercise of public power for a purpose other than that for which the power was granted,” she wrote.

After Berejiklian’s resignation, the revelations of the ICAC hearings and damning audit reports, her successor, Dominic Perrottet, announced a review of grants administration, and changes to the ministerial code of conduct.

And in the lead-up to this year’s NSW election, Labor leader Chris Minns also promised to “restore integrity” to the grants system by legislating against pork-barrelling.

So far little has happened, and notably the ICAC, as well as making corruption findings against Maguire and Berejiklian, has made 18 recommendations including strengthening the codes of conduct relating to members of parliament and improving the integrity of grant schemes.

In the broader context, Berejiklian and Maguire are symptoms of a much bigger problem and their removal from public life is not in itself a cure. The real test will be what the Minns government does in response to the ICAC reform agenda.

This article was first published in the print edition of The Saturday Paper on July 1, 2023 as "What the Berejiklian case says about ‘corrupt’ spending".

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