Opinion

Richard Ackland
Cascade falls as ICAC vindicated

After months of largely misinformed battering from its enemies and victims, the New South Wales Independent Commission Against Corruption has received an important boost to its morale and confirmation of its effectiveness.

The NSW Court of Appeal has upheld ICAC’s corruption findings against a clutch of business identities who had their paws embedded in the infamous Cascade Coal, the company that had been issued a coal exploration licence by former Labor minister Ian Macdonald over an area of land at Mount Penny owned by interests associated with his colleague, the corrupt former politician Eddie Obeid.

Not that you would read much about that significant triumph in the Murdoch press, which is compliantly in step with interests who want ICAC neutered, if not closed down.

The Cascade Coal story gives us a fascinating insight into business life beneath the surface, and it’s worth trawling through some of the details. This is the ICAC investigation that counsel assisting the inquiry, Geoffrey Watson, described as “the most important investigation ever undertaken” by the commission.

It bears the tag line: “Corruption on a scale probably unexceeded since the days of the Rum Corps.”

Through their corporate interests, Sydney business identities Travers Duncan, John McGuigan, John Atkinson and Richard Poole were all shareholders of the privately owned Cascade and its directors as well. Another wealthy businessman, John Kinghorn, was also a director of Cascade Coal, but his story is different because he was not part of this appeal.

Duncan was a long-time coal entrepreneur and had made a fortune in the mining game. McGuigan and Atkinson had been partners at the global law firm Baker & McKenzie – McGuigan at one stage the worldwide head of the firm. Poole was a wheeler-dealer and investment banker, and Kinghorn the founder of the RAMS Home Loans business, which he successfully floated just before the market crashed in 2007.

The issue that was the focus of ICAC’s attention was the plan to sell Cascade for $500 million to White Energy, a public company in which these same businessmen, except for Poole, were also directors and shareholders. Cascade had purchased the Mount Penny licence for $1 million and the directors and owners were now trading this public resource for $500 million.

Because the transaction involved directors who stood to make mouth-watering amounts of money by selling a major asset, acquired courtesy of the state, to a listed company, the Australian Stock Exchange was informed and an independent board committee was established to assess the proposal for White Energy.

The independent director was Graham Cubbin and he was required to report to shareholders whether the proposal to invest $500 million of their money was squeaky clean. The task of Duncan, McGuigan, Atkinson and Poole was to make sure Cubbin was kept in the dark about the Obeids and how Cascade had secretly bought out the Obeids’ interest in the tenement for a down payment of $30 million with another $30 million in the pipeline.

Obeid and his son Moses have been charged with conspiracy in relation to their dealings with the coal deposits at Mount Penny.

Conceivably, White Energy shareholders would vote down the proposal if they knew that the Obeids had been involved and were to be the recipient of further funds sourced from the company. To the great annoyance of the Cascade directors, Cubbin started sniffing around and seeking advice from the accounting firm Deloitte.

McGuigan was caught on a phone intercept talking in legalese to Cascade investor and close friend of Ian Macdonald’s, Greg Jones: “This prick Cubbin… he’s going to have his nuts nailed on the fucking quarter mast.”

Fellow shareholder Kinghorn was also angry about Cubbin’s investigations and told McGuigan that he wanted to “chop this arsehole’s head off”.

The intercepts also had McGuigan describing the takeover of Cascade Coal as “the shortest distance to a pot of money”.

McGuigan stood to make $50 million from the transaction, so you can understand he was edgy that his payday not be spoiled by Cubbin stumbling on the details of the Obeids’ involvement.

When it came time for him to be cross-examined by Watson at ICAC’s public hearing there was one of those golden moments when the witness’s evidence is contradicted by an audio recording of his own voice.

Watson: What is outrageous about the independent board seeking advice from Deloitte?

McGuigan: No, there’s nothing outrageous about that.

Watson: Well, why did you say it was?

McGuigan: Well, there was a… there was a process that was going on and on and taking many, many twists and turns, and that was causing frustration from a timing viewpoint. But, but to your question, Mr Watson, that is exactly what the independent board should do and what Deloitte were appointed to do.

Watson: Alright. But, see, what you were trying to do is just take the shortest route to the big pot of money. Isn’t that right?

McGuigan: No. I, I, I, I, I either wanted to get this deal done or not and move on and as I’ve said to you before, I did not see this transaction as a route to a pot of money.

Watson: Alright. Well, that’s funny because listen to this tape.

An audio recording was then played where McGuigan talked about the Cascade takeover as “the shortest distance to a pot of money”.

Apart from Mount Penny, other exploration licences were also examined by ICAC, including Glendon Brook and Doyles Creek, all involving public assets where the citizens of NSW did not see the proper benefit of their value. ICAC recommended that those licences be expunged by legislation, a recommendation the state government accepted.

Ultimately, ICAC also made findings of corrupt conduct against Duncan, McGuigan, Atkinson, Kinghorn and Poole, involving breaches of the fraud provisions of the Crimes Act and of directors’ duties under the Corporations Act. One way or other they have been in court ever since.

In July 2014 Justice Robert McDougall dismissed the finding of corrupt conduct against Kinghorn, but upheld it against Duncan, McGuigan, Atkinson and Poole, and the companies. Then it was on to the Court of Appeal, with the most expensive silks in the land at the ready.

NSW bar president Noel Hutley appeared for Duncan; David Jackson for McGuigan, Poole and the corporate entities; Allan Myers for Atkinson; and Bret Walker for ICAC.

It was also a top-line appeals bench – Chief Justice Tom Bathurst, president of the Court of Appeal Margaret Beazley and senior appellate judge John Basten. They were divided on different questions but overall the appeals were rejected.

It was a remarkably significant, yet underreported, judgement that upheld ICAC’s “most important investigation ever”. It’s not over yet – as a special leave application has been filed in the High Court. Oddly enough, The Australian newspaper preferred to report leaked findings by the council of the NSW Bar Association in which counsel assisting Geoffrey Watson was “cautioned” for speaking to The Australian Financial Review during a later ICAC investigation into Australian Water Holdings and its association with Liberal Party figures such as Senator Arthur Sinodinos.

In an interview with the paper, Watson said: “I have done all these cases involving the Labor Party, the police associations … Boy, they are hard. But I have never known anybody to kick and scratch more than the bloody Liberal Party.”

Chris Hartcher, a former Liberal minister from the hard-right faction, was scandalised and complained about the article. Accompanied by bugle calls from The Australian, the bar found this statement breached a rule prohibiting barristers talking to the media about their current cases.

It was an extraordinary finding, since most journalists working in the area have been fed morsels by barristers about their current cases – they just don’t have wounded souls like Hartcher complaining about it.

There have also been a number of misguided articles in the Murdoch press that fail to recognise the different standards of proof employed by the corruption commission and the courts. It has led to massive outpourings of indignation that people who have been found by the commission to have engaged in corrupt conduct are not subsequently convicted after a trial.

This does not reflect poorly on ICAC’s process at all, since the commission is fulfilling executive functions under its act and determining whether conduct meets statutory definitions of corruption. When it comes to the trial of charges, the courts occupy another planet altogether.

It’s anyone’s guess the extent to which misinformation plays a role in the figuring about a federal corruption commission. There’s no doubt that ICAC had helped make NSW a better place. Old Augean stables have been cleansed and new ones are waiting their turn.

Now that ICAC has turned its attention to the Liberal Party fundraising apparatus and the role played by Senator Sinodinos, where reports are pending, the Baird government has decided to cut the commission’s budget. Staff will have to be reduced from 123 to 103. A further 9 per cent reduction in the budget will take place next financial year.

You know when the captains of industry and their cabin boys in parliament call for hearings to be held in private, and for findings to be expunged from the record if charges are not laid, that what they are really hoping for is a Clayton’s corruption commission.

The lobbying is going on right now to ensure that if there is a Canberra-based ICAC at all it will be neutered from the start. That’s why it’s valuable for the community to know what happened at the latter-day Rum Rebellion, with Cascade Coal and its directors and the politicians who tried to make off with the assets of the state.

This article was first published in the print edition of The Saturday Paper on Jul 30, 2016 as "Cascade falls". Subscribe here.

Richard Ackland
is the publisher of Justinian. He is The Saturday Paper’s diarist-at-large and legal affairs editor.