The New South Wales Independent Commission Against Corruption (ICAC) has handed down its report on illegal political donations from property developers during the 2011 state election, dubbed Operation Spicer.
In Operation Spicer, ICAC investigated allegations that the NSW Liberals used associated entities to disguise donations from donors banned in the state, such as property developers, in exchange for favouring the interests of the donors. The money was channelled back to state campaign coffers.
What does the report recommend?
ICAC confirmed the NSW Liberals used two entities, the Free Enterprise Foundation and Eightbyfive, to “launder” banned political donations from developers and channel the money back to the NSW election campaign.
ICAC was hampered by a High Court challenge to its jurisdiction, which meant it was unable to make findings of corrupt conduct for breaches of electoral laws.
Nevertheless, ICAC found former Labor MP Joseph Tripodi engaged in serious corrupt conduct. He misused his position as a MP to improperly provide an advantage to property developer Buildev, which wanted to create a fifth coal terminal at the port of Newcastle. Tripodi helped Buildev with this, and leaked confidential government information in the hope he could secure future personal benefit from the company.
ICAC recommended the Director of Public Prosecutions (DPP) charge former energy minister Chris Hartcher for an offence of larceny. ICAC found Hartcher had stolen A$4,000 of donations to the NSW Liberal Party for his own personal use. He had also orchestrated a scheme where banned donations were “laundered” through an entity called Eightbyfive.
ICAC also recommended the DPP prosecute Samantha Brookes, Andrew Cornwell, Tim Gunasinghe, Tim Koelma and Bill Saddington for giving false or misleading evidence to the commission.
ICAC also found nine state MPs acted with the intention of evading election funding laws: Hartcher, Cornwell, Mike Gallacher, Chris Spence, Tim Owen, Garry Edwards, Bart Bassett, Craig Baumann and Darren Webber. It also made similar findings about property developer and former Newcastle lord mayor Jeff McCloy, and former Australian Water Holdings CEO Nick Di Girolamo.
In the hearings, McCloy infamously said he felt like a walking ATM and admitted to ICAC that he made illegal donations by giving envelopes stuffed with $10,000 in cash to three MPs before the 2011 election. He then rather shamelessly posted photos of himself with a birthday cake shaped as a brown paper bag overflowing with cash.
What are the issues with the NSW political donations system?
Operation Spicer is part of a broader problem with NSW’s system of political donations.
Within the span of two years, ICAC has undertaken nine investigations into alleged corrupt conduct by NSW government ministers. The investigations sparked the resignation of Barry O’Farrell as premier over a bottle of wine, and caused ten MPs to resign or leave the Liberal Party.
The scandals have raised questions about political donations and the role of lobbyists. The concern is that money can buy political access or influence. This is amply borne out by ICAC inquiries laying bare that politicians have acted to secure policy benefits for lobbyists or those who have opened their wallets to them.
Although NSW has one of the strongest political donations regimes in Australia, it can be evaded. There are loopholes and inconsistencies in political donations laws across the nation.
Is this enough to fix our political donations system?
There are a few necessary ingredients for effective regulation of any political donations system.
The first is the ability to uncover any illegal donations that have occurred. ICAC has done admirably well in bringing to light some shady dealings that would have otherwise been hidden. There is thus a strong case to introduce a federal ICAC, so these issues can be uncovered federally as well.
The next is an effective set of laws to regulate this area. In the wake of these scandals, the NSW government has introduced new legislation regulating lobbyists and tightening political donation rules. But there is still no consistency in political donations laws across Australia.
Just as important is the enforcement of any breaches of law. The NSW Electoral Commission has sprung into action and become more active in pursuing breaches of electoral laws. It penalised the Liberal Party for breaching electoral rules by withholding $4.4 million in public funding from the party.
The electoral commission has also recently issued letters of demand to politicians involved in Operation Spicer to repay the illegal donations. The law allows the commission to recover any unlawful donations, and double that amount if the politician knew it was unlawful.
The reforms to date and increased enforcement of breaches of electoral law do improve the NSW system. But we need a more holistic solution to this problem at the federal level to stamp out the corruption in our political system.
Authors: Yee-Fui Ng, Lecturer, Graduate School of Business and Law, RMIT University