Federal Liberal Party director Brian Loughnane has been drawn into a corruption scandal embroiling the party after an inquiry heard allegations he rubberstamped the use of federal channels to subvert the NSW ban on donations from property developers.
The Independent Commission Against Corruption resumed public hearings on Wednesday in Operation Spicer, its inquiry in to Liberal Party fundraising.
The allegations aired during a two-hour opening address, delivered by counsel assisting the commission, Geoffrey Watson, SC, resulted in Liberal MPs Tim Owen and Andrew Cornwell stepping aside from the party and joining the crossbench….
In a sensational twist on Wednesday, Mr Owen's campaign manager Hugh Thomson has rolled over and is assisting the commission in return for an indemnity against prosecution.
In his opening address, counsel assisting the inquiry Geoffrey Watson SC said there were serious irregularities in the funding of the Liberal MP's campaign.
He also revealed that the funding of the neighbouring seat of Charlestown, which is now held by Government whip Andrew Cornwell, was being investigated.
"The evidence acquired so far clearly shows serious irregularities in the way those campaigns were conducted," Mr Watson said.
"Given what went on, a real question arises as to the validity of the result of the election in the seat of Newcastle."
Excerpts from Operation Spicer morning and afternoon hearing transcripts for 6 August 2014:
* Now, I’ll just move on to the last issue and I’ll be very brief about this
because we dealt with it in detail on the earlier occasion. During the course
of opening the earlier segment of this inquiry we said that during 2010 and
2011 Members of the Liberal Party of New South Wales used the Free
Enterprise Foundation as a means of washing and rechannelling donations
made by prohibited donors. We said that this was clearly done for the
purpose of avoiding the impact of the Election Funding Act and that the
purpose was to disguise the true source of the money.
Further investigations have been undertaken and the result of those further
investigations confirms that what we said on the earlier occasion is accurate.
There is evidence that the use of the Free Enterprise Foundation in this
fashion was known at high levels in the Liberal Party.
It seems that the Federal Party was willing to allow itself to be used in that
way. We’ve been able to obtain an email sent on 23 July 2010, it was sent
by Simon McInnes who at that stage was the Finance Director the New
South Wales Liberal Party and it was sent by Mr McInnes to Colin Gracie
who at that stage was employed by the Federal Liberal Party, I’ll put it up
on the screen.
Mr McInnes’s inquiry was in respect of a donor was not a property
developer but Mr Gracie’s response is telling. If I just go down the bottom.
First email is to Mr Gracie, “We have a potential donor who wants to donate
towards the New South Wales campaign Banks for the Federal election but
don’t want to be disclosed under New South Wales disclosure laws not a
property developer.” Under Federal law they can donate up to $11,500 et
cetera, “Would the Federal Division be able to process donation.” There
may not be anything wrong with that but the answering is telling, “Hi
Simon, Brian Loughnane has agreed that for the time being the Federal
Secretariat will operate on the policy set out in the attachment. In effect
there is no benefit for a New South Wales donor to donate via the Federal
Secretariat”, and these are the words, “unless they are a property developer.”
* The first area of inquiry will look at the way that persons in the Liberal
Party conducted and funded campaigns for seats in the Hunter region in the
2011 State Election. Most of the time will be spend on the seat of
Newcastle but there is also a need to look at events which occurred in the
adjoining seat of Charlestown. The evidence acquired so far clearly shows
serious irregularities in the way those campaigns were conducted and
funded. Enough objective material has been collected so that we are
confident in saying that it will be established that the Liberal Party
campaign for the seat of Newcastle was partly funded from illegal sources.
The evidence is that there was a broad understanding that a number of
different prohibited donors would, acting under some subterfuge, provide
the funds to keep the campaign rolling. The persons involved in this
include, on the Liberal Party side, Hugh Thomson, he’s a lawyer who was
the campaign manager for Newcastle, Josh Hodges, a Liberal Party figure
who was brought in to co-manage the campaign, and the candidate himself,
Tim Owen.
The developers who contributed to the off-books funding include Buildev
Pty Limited, a company part-owned by Nathan Tinkler, Jeff McCloy, he is
the Mayor of Newcastle, and Hilton Grugeon, a prominent property
developer in the Hunter region. There were others as well.
There is also evidence that Michael Gallacher MLC was aware of these
arrangements and in fact suggested some of them. There is other evidence
that Christopher Hartcher MP was also aware and that he participated in
some aspects of it.
* Commissioner, the scheme was crude but it was effective. Mr Hodges
raised invoices purporting to charge for consultancy services. I pause there
and say Mr Hodges has been helpful as well.
The invoices were a sham. No such services were provided. The payments
were designed to cover the salary payable to Mr Hodges for his work on Mr
Owen’s campaign. And now I’ll show as an example a false invoice raised
by Mr Hodges to Saddingtons Pty Limited. You’ll see it there, it’s to
Saddingtons and it’s for consultancy advice, commercial premises, Wyong.
Mr Hodges has told us that that was a sham invoice. Saddingtons is a
company owned by a local identity, Bill Saddington and it’s a major
hardware supplier. I’ll show another one. This is a false invoice raised by
Mr Hodges to accompany Australian Decal Sales and Manufacturing Pty
Limited. Australian Decal had provided services in Mr Owen’s campaign.
They provide those sorts of stickers, you might see them on the sides of
political candidates’ cars, that sort of thing. And you’ll see that here, that
Mr Hodges was asked to make up a false invoice addressed to Australian
Decal for consultancy advice and business plan. So that was sent on to
Australian Decal. And then I’ll show the next document because that sum,
7,000-odd to Mr Hodges was included in Australian Decal’s own invoice.
The people at Australian Decal have assisted us as well. The $7,000-odd to
Mr Hodges was included in Australian Decal’s invoice which they were told
should be issued to Buildev. Buildev eventually paid that.
Commissioner, it was also agreed that Mr Owen’s campaign needed a media
expert. A local radio identity, Luke Grant was available and with the
assistance of Michael Gallacher, MLC Mr Grant was brought in to advise on
the way that Mr Owen’s media campaign should be conducted. Now, Mr
Grant’s work was worthwhile and he was entitled to be paid for it. And
there’d been an agreed sum, he was to be paid $20,000. An arrangement
was made so that two local property developers paid for Mr Grant. Mr
Grant too has been helpful. The idea was that Mr Grant would issue
invoices to each of these property developers for $10,000, but not exactly
$10,000 because a round figure might look suspicious.
* The first is an incident which occurred when Mr Cornwell was at work. In a
previous life he was a veterinary surgeon in Cardiff. While in surgery
Mr Cornwell was called out for an urgent meeting with Jeff McCloy. They
sat in Mr McCloy’s car. Mr Cornwell thinks it was a Bentley. But anyway
they sat in Mr McCloy’s car and Mr McCloy passed over an envelope
containing a large wad of bills. Mr Cornwell says, and I think this is quite
understandable, that he was so shocked and embarrassed that he didn’t
respond. Mr Cornwell says that he didn’t even count the money but from
other means we know that it was $10,000. Mr Cornwell says he took the
money home, he put it in his sock drawer or somewhere for a while and then
later passed it to the president of the Charlestown branch Bob Bevan.
Mr Bevan was acting as a kind of, in this respect, a kind of de facto
campaign treasurer. Mr Cornwell explained to Mr Bevan, we’ve got this
from each of them, their evidence is perfectly consistent except in one
respect, Mr Cornwell explained to Mr Bevan that it was a donation which
had come from a donor who didn’t wish his identity be disclosed.
Mr Bevan remembered that it was Mac something, the name and, but that
didn’t mean anything to him at the time but anyway Mr Bevan has told us
that he could well understand a desire for anonymity in a small community.
Mr Bevan took the cash and I might say this is the only point where the
account of Mr Cornwell and Mr Bevan parts ways, Mr Bevan says that it
was in the more traditional brown paper bag and not an envelope but
anyway, Mr Bevan took the cash, he did count it, it was $10,000 in $100
bills. He banked it into a business account of his, a company called
Harmony Hill Pty Limited and when the funds cleared Mr Bevan then
donated if that’s the right word, donated the money to the Liberal Party
under the name of Harmony Hill.
Now I understand that Mr McCloy will deny that this ever occurred. It will
be a matter for the Commission as to whether or not Mr McCloy is believed
on that although it would seem a very strange story for Mr Cornwell and Mr
Bevan to invent. If this exchange did occur, and especially if Mr McCloy
continues to maintain that it did not, then the Commission would be entitled
to draw an inference that the payment was made with malign intent.
* I want to say something now about Andrew Cornwell and about Tim Owen.
Both Mr Cornwell and Mr Owen were outstanding candidates for
Parliament, each had a lucrative career and each was making a sacrifice in
seeking political office. Neither was a career politician, they were not party
machine men and they were being enlisted by the Liberal Party because they
were outstanding candidates. One can see how the experience of each made
them susceptible to being manipulated by wealthy individuals who wanted
political preferences, especially if those wealthy individuals had pre-existing
support of elements within the Party machine.
Mr Cornwell has been helpful to ICAC. He has given cooperation. His
actions may have been unwise but it would seem to us, this is just an
expression of opining between Mr O’Mahoney and myself, but it would
seem to us that those actions may have been the product of a degree of
inexperience in the face of high pressure tactics from some pretty
determined characters. I should add that there is no evidence which
suggests that Mr Cornwell actually gave any preferences to Mr McCloy or
Mr Grugeon.
Mr Owen might be in the same class. It remains to be seen the extent to
which he cooperates with this inquiry. Mr Owen was brought into the
campaign late, he was surrounded by persons whose motives were not pure.
There is hard evidence of misdeeds in the campaign in Newcastle and the
Commission expects and is entitled to expect that it will get the full
cooperation of Mr Owen.
* MR WATSON: Now, Mr Bosman, I’m not going to labour this because the
statement will speak for itself, but I feel as though people are entitled to
know something of your background, those who haven’t read the statement.
You’ve had plenty of experience in the Liberal Party and managing
campaigns?---I have.
I’ll just give some examples. You’ve been a campaign manager for the
former Prime Minister, Mr Howard?---Correct.
And you were the campaign manager for John Alexander when he won back
Bennelong?---I was.
And in 2007 the Liberal Party came to you and asked you if you would
provide your services. I just said 2007?---2011.
Yeah, I’m way behind aren’t I? It’s a poor start, my first witness. In 2011
the New South Wales Liberal Party came to you and asked you to provide
your services to helping campaigns which were being conducted on the
Central Coast and in the Hunter?---It was actually in 2010, November 2010.
They came to you for the 2011 campaign?---Correct.
And I think you were given a fairly dramatic title, I think it was called
battleground director?---I was.
And so was the battleground director you were looking after two sitting
members and a number of other candidates who were trying to win seats?
---Correct.
I’ll just detail those. In terms of the Central Coast you were looking after
the campaign for a sitting member, that’s Chris Hartcher?---Yes.
And the seat was Terrigal?---Yes.
And on the Central Coast there were three candidates who were trying to
win from Labor seats, Darren Webber at Wyong?---Yes.
Chris Spence at The Entrance?---Yes.
And Chris Holstein at Gosford?---Correct.
In the Hunter you were looking after one sitting member, that was Craig
Baumann who was the Member for Port Stephens?---Yes.
And you were also looking after four candidates who were trying to win
seats from Labor, the first was Tim Owen in Newcastle?---Yes.
Another was Andrew Cornwell in Charlestown?---Yes.
And another was Garry Edwards in Swansea?---Yes.
And the fourth was Robyn Parker in Maitland?---That’s correct.
Now your work as I understand it was to oversee the campaign to make sure
that they were in the first place complying with the requirements of the
Liberal Party?---My focus was on the campaigns for the seats we were
trying to win, the sitting member seats I was not really involved in their
campaigns.
All right. I should have made that clear. In terms of the sitting members,
that’s Mr Hartcher and Mr Baumann, the Liberal Party was actually quite
confident that they would retain those seats in the 2011 election?---Yes.
And if we just go back to the detail of it, during any election campaign more
time is devoted to those seats which are in the other party’s hands but which
are winnable?---Yes, unless it’s a very marginal seat that you’re holding and
you want to hold onto it.
