Chapter 2 FWA report on the HSU and AEC analysis
Introduction
2.1
Chapter 7 of the Report of the Delegate to the General Manager of
Fair Work Australia: Investigation into the National Office of the Health
Services Union under section 331 of the Fair Work (Registered Organisations)
Act 2009 (FWA report) examines expenditure of Health Services Union (HSU) National
Office funds for the purpose of assisting Mr Thomson’s election to Federal
Parliament for the seat of Dobell.
2.2
On 16 May 2012 the Australian Electoral Commission (AEC), in response to
the request of the Special Minister of State, provided the Reporting
obligations under the Commonwealth Electoral Act 1918 and the Report of the Delegate
to the General Manager of Fair Work Australia (AEC analysis). In its
analysis of the FWA report, the AEC considered whether ‘there have been any
failures to comply with the provisions of the Commonwealth Electoral Act
1918 (Electoral Act)’.[1]
2.3
The fundamental question, for the FWA, was the issue of expenditure of HSU
National Office funds and whether or not it was authorised by the HSU National
Executive (see Chapter 7 of the FWA report). The FWA delegate concluded that
the National Executive did authorise a national campaign against the proposed
Work Choices legislation. However, there was no resolution authorising funding
for the ALP federal election campaign or for Mr Thomson’s campaign in the
seat of Dobell.[2]
2.4
The FWA report acknowledged that it was not commenting on Electoral Act
disclosure requirements :
Mr Thomson has submitted that all expenditure was disclosed
in accordance with relevant electoral disclosure laws. While I make no comment
or judgement (and have no knowledge) regarding whether or not this statement is
correct, I note that my investigation concerns whether there have been
contraventions of the Rules or of the RAO Schedule and that any disclosures
under electoral law are not relevant to my consideration of whether such contraventions
have occurred.[3]
2.5
In evidence to the committee the FWA Delegate confirmed that the focus
of his investigation was on the HSU’s observance of the rules for registered
organisations:
My investigation dealt with the Fair Work (Registered
Organisations) Act. That act, in dealing with the expenditure by Mr Thomson,
largely revolved around whether that expenditure was authorised in accordance
with the rules. That was the essence of my investigation, not whether it did or
did not comply with any aspect of the Electoral Act.[4]
2.6
The AEC examined the FWA report against the overlay of the reporting and
disclosure obligations contained in the Electoral Act. The FWA report concluded
that Mr Thomson expended $71 300.23 of HSU funds on the Dobell
election campaign. In its analysis, the AEC advised that it would seek further
information about four items of expenditure which total $17 014.88.[5]
2.7
The AEC subsequently produced an addendum to its analysis, which
addressed these four items of expenditure.[6] The details will be discussed
in the following section on the Dobell campaign.
Scope of the AEC analysis
2.8
The AEC analysis raised a number of points important for understanding
their consideration of the issues in the FWA report. Firstly, that the AEC
document ‘does not purport to address matters relating to the conduct of
Mr Thomson and others mentioned in the FWA report against relevant
industrial laws administered by FWA’.[7]
2.9
Secondly, the AEC explained that whether or not ‘a payment was
authorised under the HSU National Office or under the requirements of the Fair
Work (Registered Organisations) Act 2009 is not of itself relevant to the
operation or interoperation of the Electoral Act’.[8]
2.10
Thirdly, the Electoral Act defines specific categories and periods of
‘electoral expenditure’. The AEC stated that the Electoral Act is not concerned
with the ‘motives for the expenditure, such as raising a prospective
candidate’s profile’. [9]
2.11
A final key point is that disclosure obligations under the Electoral Act
do ‘not apply to the pre-selection of new candidates or expenditure that they
have incurred before they are actually endorsed by a registered political party’.[10]
The AEC noted:
The schema in the Electoral Act does not recognise that the
expenditure of funds to raise the profile of a person in an electorate prior to
that person actually being endorsed by a registered political party could be
categorised as being for the benefit of the registered political party that
subsequently endorsed the person as their candidate.[11]
2.12
In evidence to the committee, the AEC set out the parameters of its
analysis of the FWA report:
The AEC analysis of the Fair Work Australia report was
released as quickly as possible due to the continued public interest involved
and to give time for members of parliament to digest the complex analysis of
the application of the requirements of the Electoral Act to the information
contained in the Fair Work Australia report. Indeed, work on the AEC analysis
commenced on the evening that the Senate publicly released the Fair Work
Australia report, prior to my receipt of the request from the Special Minister
of State contained in his letter to me of 8 May 2012.
What the AEC analysis attempted to do was to examine each
item of expenditure described in the Fair Work Australia report as assisting Mr
Thomson in his election bid during the 2007 election and to make an assessment
on, firstly, whether that item of expenditure was disclosable under the
Electoral Act; secondly, who had the disclosure obligation; and thirdly,
whether that item of expenditure was actually disclosed in one of the political
expenditure or donation returns lodged over the 2006-08 period. The AEC
analysis points out that the AEC is not making comment on, nor can it be taken
to have made comment on, the question of whether the payments and donations
made were or were not properly authorised by the various entities in which
Mr Thomson was involved over the period leading up to the 2007 election.
That is not the role of the AEC. Nor does the AEC analysis carry any
implications for the veracity or otherwise of the findings of the Fair Work
Australia report in terms of the charter that Fair Work Australia has to carry
out. All the payments identified in the Fair Work Australia report have been
taken at face value and simply assessed against the provisions of the Electoral
Act in terms of an obligation for disclosure.
Whether or not the payments were properly authorised under
either the relevant union rules or under industrial laws is not material to the
disclosure obligation arising under the Electoral Act.[12]
2.13
At the public hearing on 16 July 2012, the Delegate was asked to comment
on the AEC analysis of the FWA report:
CHAIR: Have you looked at the Electoral Commission's
report in relation to this matter we are looking at?
Mr Nassios: I looked at it briefly when I got your
correspondence at the beginning of last week.
CHAIR: Are there any comments you want to make in
relation to that? It really looks at different areas, I think.
Mr Nassios: The report of the Electoral Commission
itself makes it fairly clear. I certainly did not look at my investigation in
terms of how it may impact on the Electoral Act. To that extent I can only
agree with the views expressed in the Electoral Commission's report.[13]
2.14
As mentioned in Chapter 1, the FWA report released by the Senate
committee did not include Annexures A to M. During the course of the inquiry,
the committee heard that in conducting its analysis of the FWA report, the AEC
had not received a copy of the Report on suspected irregularities in the
expenditure of the National Office of the Health Services Union 2002-2007,
contained in Annexure J of the FWA report.
2.15
At its public hearings the committee discussed whether the AEC’s
analysis may have been comprised by not being able to also take the contents of
Annexure J into consideration. The AEC described its approach in undertaking
the analysis:
Mr Killesteyn: We took each of the payments that were
identified under the Fair Work Australia report. We applied them against the
law and we made a view about whether they had been disclosed or not. That is
what we did.
Mrs BRONWYN BISHOP: As you read the FWA report you
would have read all the references to the report. If any report was referred to
me that was lacking the annexures to that report, which are intrinsic to the
value of the report, I would simply write back and say, 'I cannot do it until I
receive that report.' But obviously near enough is good enough, is it?
Mr Killesteyn: I acknowledge that. But what we did, as
I have said on many occasions, was to analyse the payments identified in the
Fair Work Australia report because that is what the public interest was around
in relation to whether those payments have been disclosed or not.
Mrs BRONWYN BISHOP: The minister said he asked you to
do a review of the report. He did not say, 'Just look at these bits of it.' He
asked you to do a proper analysis on whether there had been gaps in the act.
Mr Killesteyn: Indeed, and that is what we have done.[14]
2.16
The AEC acknowledged that when undertaking its analysis there were
instances where it did not have sufficient information to draw conclusions:
Mr Pirani: There was the other area where we raised
the concern of the issue about the Dads in Education Father's Day donation. We
raised an issue on that one that it was not clear what the arrangements were in
relation to that donation—
CHAIR: That is page 42.
Mr Pirani: and whether that included a right to appear
on television. Again, right at the end we say:
Further without any information
concerning whether the payment of the sponsorship included any rights of
publicity it is not clear whether this involved any disclosure obligation on
the HSU National Office under section 314AEB …
So there are some areas where we have looked at the Fair Work
Australia report, we have applied the prism of the Commonwealth Electoral Act
and there was still not sufficient information for us to be able to offer a
firm conclusion.[15]
The committee
subsequently wrote to the AEC asking it to review the BDO Kendalls report,
Annexure J to the FWA report, and transcripts of interviews undertaken by the
Delegate, and to advise the committee if this material impacts on the analysis.
On 13 September 2012 the AEC indicated that these documents did not change the
conclusions in its analysis or the content of the 17 possible measures. The
AEC’s response is available at Appendix F.
2.17
Annex 2 of the AEC’s submission to the inquiry reproduces a statement
provided to Senate Estimates on 23 May 2012, entitled Health Services Union and
Craig Thomson – failure/late lodgement of returns under Part XX of the
Commonwealth Electoral Act 1918. It outlines action taken by the AEC in dealing
with this matter.
2.18
The AEC contended that it acted within the powers provided to it under
the Electoral Act. For example, at the hearing on 16 July 2012 the committee
discussed the matter:
Mrs BRONWYN BISHOP: You still have not addressed the
question that is the most serious, so far as I am concerned, and that is the
finding that large amounts of money which were unauthorised payments by Mr
Thomson during the reporting period, which have been either misappropriated,
fraud or theft, are given a tick-off by you as having been disclosed by the HSU
and therefore there is no problem. To me that is a gaping hole in the act. You
still have not addressed the question of how that should be remedied. Giving
you more powers is certainly not the answer, because you do not use the ones
that you have got. ...
Mr Killesteyn: ... The difficulty I have with this
question of whether the payments were authorised or unauthorised is that
irrespective if the AEC concluded that there was a payment that was not
authorised, we do not have any power to do anything about it. Our power is simply
vested in the Electoral Act. At this point it is a finding of Fair Work
Australia. The matter is going forward for civil proceedings. That is
presumably going to be defended. At this point we have to take the payments as
they have been made and make an assessment as to whether they have been
disclosed. That is the limit of the act.
... section 318 of the act provides the scope for
dealing with payments that an organisation believes are not authorised. The
facility was there all the time for the HSU national office to make a statement
to the Australian Electoral Commission that they could not provide a complete
return because they had concerns about particular payments. That is a facility
that already exists.[16]
2.19
The rest of this chapter examines the issues raised in Chapter 7 of the FWA
report and overlays this with the AEC analysis of each matter.
The Dobell campaign
2.20
Mr Thomson was preselected as the ALP candidate for the Dobell
electorate on 13 April 2007.[17]
2.21
While the National Executive passed a motion in support of a marginal
seats campaign at its 7 December 2006 meeting, neither of the minutes of the
two National Executive meetings held in 2007 record a ‘direct specific
resolution’ which authorised the expenditure of National Office funds in the
electorate of Dobell.[18]
2.22
The FWA report outlines charges made to HSU credit cards which related to
Mr Thomson’s campaign for Dobell totalling $71 300.23. These included:
n establishment of the
campaign office at Long Jetty—$4 826.99;
n payments to the
Dobell Federal Election Committee (FEC)—$3 500.00;
n campaign bus—$1 277.96;
n payments to LBH
Promotions (letterbox material related to the ‘Your Rights at Work’ campaign)—$7 409.93;
n postage
expenses—$9 574.17;
n ALP advertising—$12 511.40;
n radio advertising—$18 731.00;
and
n printing expenses—$13 468.78.[19]
2.23
In the AEC analysis on the FWA report, the AEC stated that the HSU
National Office disclosed the expenditure in relation to the postage, ALP
advertising, radio advertising and printing expenses. However, the AEC indicated
that it was seeking further information as to whether the NSW Branch of the ALP
or HSU National Office had disclosed expenditure on the first four items, as
listed above.
2.24
The ALP advised that it had not included these four payments in its
disclosure returns, as it was ‘not aware of the expenditure’. The AEC found
that the HSU had only disclosed some components of these expenses.[20]
Long Jetty campaign office
2.25
In relation to the establishment of the campaign office at Long Jetty,
the AEC noted that the amount was under the disclosure threshold for the
expenditure to have been particularised in either a donor return or an annual
return. In its analysis, the AEC stated that it was ‘currently seeking further
advice about whether or not this expenditure has been included in the total
amounts that have already been disclosed’.[21]
2.26
In the addendum to the AEC analysis, the AEC provided an update on the
disclosure of expenses associated with the establishment and operations of the Long
Jetty campaign office. Information from the HSU National Office indicated that
expenses in relation to the Long Jetty campaign office were ‘generally included
in three returns lodged by Ms Kathy Jackson in October 2009’.[22]
2.27
The purchases of workstations ($1 587) and a printer ($604.95) were
disclosed by the HSU in the 2006-07 return. However, the cost of an air
conditioner ($1 053) was not identified as related to this office, and was
not included due to an oversight.[23]
2.28
Telephone and fax charges ($860.64) were not disclosed in the 2007-08
return, as it was thought that some of these costs were incidental to Mr Thomson’s
duties as the HSU National Secretary. The total of $4 826.99 also included
$721.40 of internet access costs, not mentioned in the AEC analysis addendum.
2.29
The ALP advised that the payments queried by the AEC in relation to the
Long Jetty campaign office were not included in the ALP disclosure returns, and
that the party was not aware of the expenditure.[24]
Dobell Federal Election Committee
2.30
The AEC found that there were two separate payments made to the Dobell
FEC totalling $3 500, which were under the disclosure threshold that
applied in the 2006-07 financial year. The AEC also sought ‘further advice
about whether or not this expenditure has been included in the total amounts
that have already been disclosed’.[25]
2.31
In the AEC analysis addendum, information obtained from the HSU National
Office indicated that ‘these two payments were not disclosed in a donor return
for the 2006-07 financial year as they were below the disclosure threshold’. [26]
2.32
The ALP advised that payments to the Dobell FEC were not included in its
disclosure returns, and that it was not aware of the expenditure.[27]
The AEC noted that there was no disclosure obligation on the HSU National
Office.[28]
Campaign bus
2.33
The FWA report found three separate payments for a campaign bus totalling
$1 277.96.[29] Mr Thomson agreed that
the bus was used in his campaign for the seat of Dobell and that this was ‘an
election expense’.[30] Again, in its analysis the
AEC indicated that it was ‘seeking further advice about whether or not this
expenditure has been included in the total amounts that have already been
disclosed’.[31]
2.34
In the AEC analysis addendum, the AEC noted HSU National Office advice
that two of the payments made in relation to the campaign bus were ‘identified as
likely electoral expenditure and included in the return for 2007-08’.[32]
The third payment ‘was described in the HSU records as “motor vehicle expenses”
which did not provide any direct link for this payment to be categorised as
possible electoral expenditure when the annual returns were being prepared in
2009’.[33]
2.35
The ALP advised that payments for the campaign bus were not included in its
disclosure returns, and that it was not aware of the expenditure.[34]
Payments to LBH Promotions
2.36
The FWA report found that two separate payments totalling $7 409.93
were made to LBH Promotions for the ‘Your Rights at Work’ campaign.[35]
The AEC sought ‘further advice about whether or not this expenditure has been
included in the total amounts that have already been disclosed’.[36]
2.37
In the AEC’s update on the status of these payments, the AEC noted HSU
advice that in relation to the first and larger of the payments of $5 931.53,
the National Office is ‘still unable to identify whether this expenditure was
for the ‘Your Rights at Work’ campaign, the activities of Coastal Voice or some
other matter’.[37] Consequently the HSU was
not able to determine whether it was electoral expenditure and it was not
included in the
2006-07 return.
2.38
The second smaller amount of $1 478.40 was identified as payment
for a mail out as part of the March 2007 NSW State election and thus not
disclosed in any return under the Electoral Act. The AEC noted this amount was
also under the disclosure threshold of $1 500 in the NSW Election
Funding Act 1981.[38]
2.39
The ALP advised that payments to LBH Promotions were not included in its
disclosure returns, and that it was not aware of the expenditure.[39]
Postage expenses
2.40
In relation to the postage expenses totalling $9 574.17, the FWA report
concluded that it seemed ‘probable’ that this was related to Mr Thomson’s
Dobell campaign. The assumption was based on the location of the purchases in
Long Jetty, the site of his campaign office, as well as an invoice and
statement sent from Australia Post addressed to Mr Thomson as the ‘ALP
candidate’ and ‘Member for Dobell’. [40] The AEC analysis
questioned this conclusion stating:
The actual evidence to support this conclusion is not
apparent as there is no information as to whether this was part of the ‘Your
Rights at Work’ campaign or some other ALP specific advertising.[41]
2.41
The AEC also noted that it has:
... previously been advised by the HSU National Office on 10 February
2012 that the expenditure on postage and envelopes from Australia Post for Long
Jetty campaign office were included in the Annual Return Relating to Political
Expenditure for the 2007-08 financial year.[42]
ALP and radio advertising
2.42
The FWA report stated that Mr Thomson agreed that payments made for
ALP advertising totalling $12 511.40 were most likely for ‘ALP-related
expense that should have been declared’.[43] The AEC analysis stated
that ‘this amount corresponds to the amount disclosed by the HSU National
Office Annual Donor Return for the 2007-08 financial year’. The AEC was
satisfied this item has been properly reported.[44]
2.43
For expenses incurred on advertising with Central Coast Radio Centre
from 25 October 2007, FWA commented that ‘it is clear Mr Thomson accepts that
these payments were for campaign advertising which he commissioned in relation
to his own political campaign’.[45] The AEC analysis noted
that:
The AEC has previously been advised by the HSU National
Office on 10 February 2012 that payments to Central Coast Radio Centre and Nova
1069 Pty Ltd corresponding to these amounts were disclosed in the Annual Return
Relating to Political Expenditure for the 2007-08 financial year.[46]
Printing expenses
2.44
In relation to the printing expenses from The Entrance Print, which commenced
in May 2007, Mr Thomson stated that the payments were made for a ‘variety of
things’. He explained that it was unlikely earlier charges were for electoral
purposes, but conceded that later charges could have been. He added the caveat
that although some of the later charges were directly for the Dobell campaign,
they may also have been for the ‘Your Rights at Work’ campaign.[47]
The AEC analysis noted that:
The AEC has previously been advised by the HSU National
Office on 10 February 2012 that this expenditure was included in the Annual
Return Relating to Political Expenditure for the 2006-07 and 2007-08 financial
years.[48]
AEC analysis addendum conclusions
2.45
While there were some items not disclosed, the AEC found that the HSU
National Office ‘made reasonable attempts to disclose all electoral expenditure
that they were able to identify from the incomplete records available to them
in 2009’.[49] In the addendum to its
analysis, the AEC concluded:
(i) there
were difficulties with the availability and accuracy of records held by the HSU
National Office which led to uncertainties over the characterisation of
expenditure that had been incurred on the credit cards issued to its various
officers and employees;
(ii) those
difficulties led to some amounts of electoral expenditure that has been
identified in the FWA Report not being included in any disclosure return lodged
by the HSU National Office, while other amounts were included which probably
were not electoral expenditure (e.g. the total salaries of Ms Stevens and Mr
Burke);
(iii) the
HSU National Office took reasonable measures in 2009 to attempt to comply with
the disclosure obligations contained in the Electoral Act; and
(iv) the
total amount of electoral expenditure that has been identified in the FWA
Report and which has not been disclosed is less than the disclosure threshold
that was in force at the relevant time.
In these circumstances the AEC has been unable to identify
any public interest that could result in action being now initiated against the
HSU National Secretary, Ms Kathy Jackson, in relation to the apparent failure
to fully disclose three items of expenditure which were not included in the HSU
National Office returns for 2006-07 and 2007-08 financial years.[50]
Ms Criselee Stevens
2.46
The FWA report identifies Ms Stevens as commencing work for the HSU
National Office in July 2005 as an Organising Works trainee and that Ms Stevens’
employment was based on the NSW Central Coast.
2.47
The FWA report noted that the purpose of the trainee program was
outlined in a Memorandum of Understanding between Trade Union Training
Australia Inc and Unions Participating in the Organising Works Traineeship
Program. The program’s aim was ‘to recruit, train and support “a new generation
of union organisers to focus on organising for growth and acting as a catalyst
for change within unions”’ and that ‘to meet the broad objectives of the
program, trainees shall primarily be organising non union workers, not
servicing existing members’.[51]
2.48
Ms Stevens described her duties at the HSU as encompassing a range of
activities including: running aged care meetings for the public, a local
campaign to ‘check on your neighbours’, ‘informing’ and ‘educating’ people
about industrial relations issues and predominantly working on industrial
relations issues. Ms Stevens was
also identified as the primary contact for a sponsorship deal with Central
Coast Rugby League which was related to the ‘Your Rights at Work’ campaign and
the organiser of the community group Coastal Voice.[52]
2.49
The FWA report approximated Ms Stevens’ employment related costs as
$114 208.83 between 26 September 2005 and 14 December 2007. The report
also identified a further $39 314.24 of expenditure by Ms Stevens between
December 2005 and December 2007 and $1 190.89 after this period totalling
an amount of $154 713.96.
2.50
The FWA report concluded that Ms Stevens ‘had no involvement in ordinary
activities of the HSU that exposed her to engagement with employees in the
workplace’ and that her duties ‘were closely connected to, if not entirely
directed towards building [Mr Thomson’s] profile within the electorate of
Dobell, and later towards campaigning for his election as the member of Dobell’.[53]
2.51
Chapter 1 of the FWA report noted that the wage of Ms Stevens was disclosed
by the HSU National Office in annual returns lodged for the 2006-07 and 2007-08
financial years. This was done on the basis that she was ‘primarily engaged in
activities connected with the public expression of views on an issue in a
federal election during the relevant period’.[54]
2.52
In correspondence with FWA relating to this matter, the HSU National
Office also explained that as there were issues with record keeping, the union
had erred on the side of greater disclosure:
Consequently, in circumstances where, while uncertain, it was
plausible given the material available to it that expenditure may have been
political expenditure within the meaning of the Electoral Act, the Union chose
to disclose that expenditure.[55]
2.53
The FWA report raised two findings in relation to Ms Stevens’ employment
as having possible disclosure implications:
n At a minimum, a
reasonable person in Mr Thomson’s position would have:
e. ensured
that appropriate transactional records of all expenditure of Ms Stevens were
maintained to ensure that the National Office would be able to fulfil its
reporting obligations to the Australian Electoral Commission and the AIR.[56]
n Mr Thomson
contravened subsection 287(1) of the RAO Schedule by improperly using his
position as National Secretary to gain an advantage (namely, to advance his
prospects of becoming elected to Parliament) for himself by employing Ms
Stevens and by purporting to authorise, expenditure of National Office funds
referred to ...[57]
2.54
The AEC analysis concluded that given that Ms Stevens’ salary was
included in the third party political expenditure returns for the relevant
years, ‘this expenditure has been disclosed by the HSU National Office’.[58]
2.55
The AEC also noted public comments ‘that the salary of Ms Stevens
should have been disclosed as a donation to the ALP NSW Branch or to Mr Thomson’.
The AEC found that Ms Stevens ‘was engaged in a range of duties that pre-dated
the pre-selection of Mr Thomson as the endorsed ALP candidate for the
Division of Dobell’ and that her duties ‘included a range of matters’.[59]
2.56
The AEC considered that while some of these duties did not give rise to
a donor reporting obligation (namely work with Coastal Voice and the Central
Coast Rugby League sponsorship), ‘the duties that Ms Stevens performed
that solely related to the election campaign of Mr Thomson after 13 April
2007 could be argued to have been more appropriately disclosed in another
return’.[60] However, the AEC commented
that there is not enough information contained in the FWA report for such a
conclusion to be reached.
Coastal Voice
2.57
A sum of money was expended by the HSU National Office at the direction
of Mr Thomson on an organisation known as ‘Coastal Voice’, in and around May
2006. An application was received by the NSW Office of Fair Trading on 3 May
2006 for the incorporation of Coastal Voice in which Mr Thomson described its
objects as:
Protect rights; especially of the elderly and youth; promote
provision of quality aged care services; health care services.[61]
2.58
Mr Thomson also described the principle activities as:
Volunteer aged care hotline; seek opinions of Central Coast
residents on key community issues.[62]
2.59
Coastal Voice was issued a certificate of incorporation on 22 June 2006.
Mr Thomson was president until his resignation in March 2007 when he
sought pre-selection for the seat of Dobell.
2.60
The FWA report considered that:
At least as far as Ms Stevens was concerned, it is clear that
Coastal Voice was intended to be a community group that would set out to engage
with persons on the Central Coast who did not identify themselves as being
supporters of any particular party.[63]
2.61
However, Ms Stevens’ evidence also indicated that Coastal Voice was
intended to be a vehicle for attracting ‘soft votes’ for the ALP.[64]
2.62
The launch of Coastal Voice was timed to coincide with an ALP function
which was being patronised by the then Federal Opposition Leader, the Hon Kim
Beazley MP. It was intended that Mr Beazley would attend the Coastal Voice
function after his official duties.
2.63
The FWA report concluded that:
Coastal Voice was always intended to operate as a profile
building vehicle for Mr Thomson on the Central Coast for the purpose of
enhancing his electoral prospects rather than for purposes related to the HSU.[65]
2.64
The FWA report also found that Coastal Voice appeared to have been
moribund since Mr Thomson’s resignation in March 2007.
2.65
The FWA report raised two findings in relation to Coastal Voice as
having possible disclosure implications:
n At a minimum, a
reasonable person in Mr Thomson’s position would have:
e. ensured
that appropriate transactional records of all expenditure incurred in relation
to the activities of Coastal Voice were maintained to ensure that the National
Office would be able to fulfil its reporting obligations to the Australian
Electoral Commission and the AIR.[66]
n Mr Thomson
contravened subsection 287(1) of the RAO Schedule by improperly using his
position as National Secretary to gain an advantage (namely, to advance his
prospects of becoming elected to Parliament) for himself ...[67]
2.66
Mr Thomson, in his submission included in the FWA report, quoted an AEC finding
into whether Coastal Voice was an associated entity:
In the absence of full and specific details of all the
activities undertaken by Coastal Voice in specific time periods, the AEC is
unable to conclude that those activities which may reasonably be regarded as
directly benefiting a particular political party comprise the whole or a
significant portion of all the activities undertaken by Coastal Voice and are
of benefit to a particular political party. The AEC is of the view that the
present information and available evidence is unlikely to be sufficient to
enable a Court in a criminal prosecution to find that Coastal Voice is
operating “wholly, or to a significant extent” for the benefit of the ALP.
Accordingly, the AEC concludes that there is no information or available
evidence to show that Coastal Voice meets any of the six grounds set out in
paragraph (b) of the definition of an “associated entity” contained in
subsection 287(1) of the Electoral Act.[68]
2.67
Section 287(1) of the Electoral Act defines ‘associated entity’ as:
(a) an entity that is
controlled by one or more registered political parties; or
(b) an
entity that operates wholly, or to a significant extent, for the benefit of one
or more registered political parties; or
(c) an entity that is a
financial member of a registered political party; or
(d) an
entity on whose behalf another person is a financial member of a registered
political party; or
(e) an entity that has
voting rights in a registered political party; or
(f)
an entity on whose behalf another person has voting rights in a registered
political party.
2.68
The AEC analysis concluded that the FWA report supported its previous
findings that Coastal Voice was not an associated entity.[69]
2.69
The AEC also maintained that there were no reporting requirements
contained within the Electoral Act for candidates or their parties, prior to
their official pre-selection. The report concluded:
As Coastal Voice has found to have been moribund since 18
March 2007 (being a date before Mr Thomson was endorsed as the ALP candidate
for Dobell), it could not have been operating ‘for the benefit of’ a registered
political party ... as Mr Thomson only became the endorsed ALP candidate for
the Division of Dobell on 13 April 2007.[70]
Mr Matthew Burke
2.70
Mr Matthew Burke commenced employment with the National Office of the
HSU in July 2006 as a result of being approached by Mr Thomson. Mr Burke
ceased employment with the HSU close to March 2007.[71]
2.71
Between March and November 2007 Mr Burke was employed by Senator Stephen
Hutchins. Mr Burke also performed
unpaid work for the HSU National Office and the HSU incurred any costs
associated with this work.[72]
2.72
The FWA report found that the estimated employment costs and other
expenditure made by Mr Burke totalled $41 707.46, with Mr Burke’s salary
costs totalling $29 400.
2.73
The FWA report concluded that while ‘there is some evidence that Mr Burke
did at least perform some ordinary administrative duties for the National
Office ... this evidence does not seem to suggest that this was a significant
part of Mr Burke’s duties’.[73]
2.74
The FWA report further concluded:
It appears that the majority of Mr Burke’s time was spent on
activities on the Central Coast ... closely connected to, if not entirely
directed towards, building Mr Thomson’s profile within the electorate of
Dobell, and later, towards campaigning for his election as the member of
Dobell.[74]
2.75
Chapter 1 of the FWA report notes that the wage of Mr Burke was disclosed
by the HSU National Office in annual returns related to political expenditure
lodged for the 2006-07 and 2007-08 financial years. This was done on the basis
that he was ‘primarily engaged in activities connected with the public
expression of views on an issue in a federal election during the relevant
period’.[75]
2.76
The FWA report raised two issues in relation to Mr Burke’s
employment as having possible disclosure implications:
n At a minimum, a
reasonable person in Mr Thomson’s position would have:
e. ensured
that appropriate transactional records of all expenditure by, or in relation
to, Mr Burke were maintained to ensure that the National Office would be able
to fulfil its reporting obligations to the Australian Electoral Commission and
the AIR.[76]
n Mr Thomson
contravened subsection 287(1) of the RAO Schedule by improperly using his
position as National Secretary to gain an advantage (namely, to advance his
prospects of becoming elected to Parliament) for himself by employing Mr Burke,
and by purporting to authorise expenditure of National Office funds totalling
$41, 707.46 by, or in relation to, Mr Burke, including after Mr Burke’s
resignation from the HSU, which was not expenditure on, or for a purpose
reasonably incidental to, the general administration of the HSU.[77]
2.77
The AEC made the following observations regarding the FWA report findings
into Mr Burke’s employment:
n Mr Burke was engaged
in a range of duties that pre-dated the pre-selection of Mr Thomson as the
endorsed ALP candidate for the Division of Dobell;
n The duties of Mr
Burke appear to have included a range of matters including the “Your Rights at
Work” campaign and included “some ordinary duties” for the HSU National
Office;
n That Mr Burke ceased
his employment with the HSU National Office in March 2007 prior to the
pre-selection of Mr Thomson as the endorsed ALP candidate for the Division of
Dobell;
n Given the statement
at paragraph 119 of Chapter 1 of the FWA Report (that Mr Burke’s salary was
included in the third party political expenditure returns for 2006-07 and
2007-08), this expenditure has been disclosed by the HSU National Office.[78]
Central Coast Rugby League
2.78
In 2006 Mr Thomson, in his position as National Secretary for the HSU,
signed a sponsorship contract with the Central Coast Division of Rugby League.
The agreement was in force for the 2006, 2007 and 2008 seasons for $30 000
per annum plus a CPI increase each year for the 2007 and 2008 seasons. The
total estimated cost is $103 393.32.[79]
2.79
The contract required the HSU logo to be placed on the team jerseys and alongside
the ‘Your Rights at Work’ logo on the weekly completion programs for the 2006
season. The logos were also placed on letterhead, advertising and promotional
signage at the grounds. The HSU was provided with advertising space in the
competition programs.[80]
2.80
The FWA report considered that ‘the payment of those monies was not
authorised by either the National Council or National Executive’.[81]
However, the FWA report also found that ‘any personal advantage [to Mr Thomson]
is remote’[82] and concluded that :
It seems probable that the key reason for entering into the
Sponsorship Agreement was the one identified by Mr Thomson, namely, that
it gave exposure through naming rights, advertising and signage to the HSU and
to the ‘Your Rights at Work’ brand.[83]
2.81
The AEC analysis considered that:
Given that there is no connection between this expenditure with
the election campaign of Mr Thomson during the ‘election period’ this
would not have been required to be included in a candidate election return.[84]
2.82
The ‘election period’ is defined under section 287(1) of the Electoral
Act as:
... the period commencing on
the day of issue of the writ for the election and ending at the latest time on
polling day at which an elector in Australia could enter a polling booth for
the purpose of casting a vote in the election.
2.83
The AEC further noted that a payment made for the 2008 season occurred
well after the November 2007 election.
Dads in Education Fathers’ Day Breakfast
2.84
The HSU National Office was invoiced for $5 000 for ‘Support of
Fathers’ Day Breakfast’ on 25 June 2007. The payments were made in two payments
of $2 500 on 22 and 23 August 2007.[85]
2.85
The event was described by Mr Thomson as originating on the Central
Coast, but occurring in schools in Sydney and the ACT as well. It was held at
the end of literacy week and encouraged fathers to come into schools to read to
their children.[86]
2.86
Mr Thomson appeared, but apparently did not speak, at a nationally
televised media event on Sunrise in order to promote the event.[87]
2.87
The FWA report raised the following findings as having possible
disclosure implications:
The benefit of sponsorship of the Fathers’ Day Breakfast to
Mr Thomson’s candidacy in Dobell is patent given that the agreement was
entered into in mid 2007 and that payments for the 2007 Breakfast were made in
August 2007. Given that Fathers’ Day is in the first Sunday in September and
the federal election was held in late November 2007, Mr Thomson’s appearance on
National television in association with this event just a few months before the
election would, on any reasonable view, have assisted in gaining publicity for
his candidacy in the seat of Dobell. ...
A reasonable person in Mr Thomson’s position would have taken
steps to ensure that these payments were approved by National Executive and
recorded in the minutes of National Executive.[88]
2.88
In relation to this matter the AEC analysis noted that:
As the individual amounts of payment involved in this matter
were below the applicable $10,500 disclosure threshold that applied in the
2007/08 financial year this payment would not have been required to have been
particularised in either a donor return or an annual return under the Electoral
Act.[89]
2.89
The AEC also questioned whether a reporting obligation would have
existed had the payments been above the threshold. The AEC indicated that to
make a conclusion of personal gain to Mr Thomson’s candidacy in Dobell,
further evidence would be required regarding the contents of the television
program, such as whether his candidacy in Dobell was mentioned or as to whether
the payments entitled Mr Thomson to rights of publicity.[90]
Golden Years Collectables
2.90
In November of 2006 a payment of $2 050 was made to Golden Years
Collectables to purchase memorabilia to donate to the ALP for fundraising
raffles.
2.91
In Mr Thomson’s submission to the FWA, he stated that ‘the HSU
supported the ALP and this donation was disclosed in accordance with the
political donation laws’.[91]
2.92
The FWA report concluded that the expenditure for this item was not
approved by the National Executive. Further, the report finds that Mr Thomson
was ‘motivated by a desire to increase his profile within the ALP by promoting
the memorabilia to the ALP’.[92]
2.93
The AEC noted that while it was apparent that this donation ‘could be
reasonably regarded as a donation to the ALP’, there was no ‘potential donor
disclosure obligation as the amount is below the $10 300 disclosure
threshold that applied in the 2006-07 financial year’.[93]
Central Coast Convoy for Kids
2.94
On 12 September 2006, the National Office made a payment of $5 000
to the ‘Central Coast Convoy for Kids’. The event was described as a
longstanding Central Coast community event that fundraises for a local
children’s hospital. The event was not connected with the HSU or the ALP. In
Mr Thomson’s submission to FWA he noted that ‘the HSU had a history of
donating to the Central Coast Convoy for Kids’.[94]
2.95
The FWA report concluded in relation to this matter that in making the
donation, Mr Thomson was motivated by a desire to increase his public
profile within the seat of Dobell explaining:
The payment to Central Coast Convoy for Kids was made some
six months before Mr Thomson was preselected for the seat of Dobell. While he
was therefore not actively canvassing for votes as a preselected candidate at
this point in time, sponsorship of the event must nevertheless have had at
least the potential to raise Mr Thomson’s public profile within the seat
of Dobell in anticipation of fighting for ALP pre-selection and (should that be
successful) subsequently for election to Parliament.[95]
2.96
In its analysis, the AEC found that as the payment was made well before
Mr Thomson was pre-selected as the endorsed ALP candidate for Dobell,
there was no requirement for this payment to be disclosed.[96]
HSU National Office and the category of associated entity
2.97
There was discussion at the committee’s hearings as to whether the HSU
National Office should be classified as an ‘associated entity’, as provided in
287(1) of the Electoral Act.
2.98
At the committee’s request, the AEC provided copies of correspondence on
this issue. A brief summary of relevant exchanges are outlined in Table 2.1.
Table 2.1 List of
correspondence on whether the HSU National office is an associated entity
|
Date
|
Key details
|
|
10 March 2009
|
Letter: ALP National Secretariat to AEC
Providing a list of the ALP’s associated entities, which
included the HSU National Office.
|
|
12 May 2009
|
Letter: AEC to HSU National Office
Advising that the HSU National Office had been identified
by the ALP as an associated entity and seeking lodgement of their associated
entity annual return for 2007-2008. The return was due on 20 October 2008.
|
|
18 May 2009
|
Letter: AEC to political parties
Asking for a list of all associated entities of federally
registered political parties for the 2008-2009 financial year.
|
|
20 May 2009
|
Email: AEC to HSU National Office
Seeking to ensure that the HSU complies with their
obligation to lodge an associated entity return for 2007-2008.
|
|
26 May 2009
|
Letter: HSU National Office to AEC
Noting that the HSU National Office had not yet lodged a
return and that an independent audit of HSU National Office was underway due
to issues arising out of the exit audit after the change of leadership at the
National Office.
|
|
27 May 2009
|
Letter: ALP National Secretariat to AEC
The ALP updated its advice to the AEC as to which
associated entities were affiliated to it: The ALP stated: all unions and
some other entities are affiliated at state level only, there is no process
of national union affiliation and unions do not have voting rights at the
national level.
The ALP indicated that there had been some confusion due
to prior legislative changes as to which organisations fell under the
definition of an associated entity for each party.
|
|
13 October 2009
|
Letter: HSU National Office to AEC
Responding to an earlier letter from the AEC in relation
to HSU reporting obligations as an associated entity.
The HSU National Officer asserted that it was not an
associated entity.
|
Source Correspondence
provided by the AEC, see Submission 1.3.
2.99
Prior to 2009, the AEC believed that the HSU National Office was an
associated entity and expected it to lodge an associated entity annual return. The
HSU National Office, in a letter to the AEC, set out the following claims as to
why it should not be classified as an associated entity:
By virtue of s27 of the Fair Work (Registered Organisations)
Act 2009 (Act), the Health Services Union is an incorporated entity. As you
know, the Union is divided into a number of separate branches, each of which,
pursuant to the rules of the Union and the operation of the Act, operate
autonomously, including with respect to their financial affairs and reporting
with respect to those affairs. This is particularly governed by s242 of the
Act. A number of the branches of the Union, specifically the NSW Branch, the
Tasmanian Branch, the West Australian Branch and several of the Victorian
Branches are Associated Entities of the Australian Labor Party. In each case,
they are affiliated to the Australian Labor Party in their respective states
and they provide delegates to the conferences of those branches of the ALP.
Pursuant to s242(5) of the Act, the National Office of the Union
is regarded by the Act as a separate branch for the purpose of reporting.
However, unlike the state branches of the Union described above, the HSU
National Office, is not affiliated with the ALP and does not provide delegates
to any forum of the ALP. It seems to us, in those circumstances, that the
National Officer of the HSU cannot be an Associated Entity having regard for
the definition within the Australian Electoral Commission Act.[97]
2.100
The AEC advised that it accepted the arguments as to why the HSU National
Office was not an associated entity:
... the authorised officer made the decision on 16 October
2009 in relation to the status of the HSU National Office and part of that was
a letter to me from Kathy Jackson dated 13 October 2009 where they went through
provisions of the Fair Work (Registered Organisations) Act to deal with the
status of the HSU National Office.[98]
2.101
Further, the AEC explained how it came to this conclusion:
CHAIR: In plain English can you tell us what was the
key factor in your mind in then conceding that they were not an associated
entity?
Mr Pirani: Two key factors: firstly, that the HSU
national office did not have voting rights in the ALP separate from other
branches of the HSU and, secondly, that under the Fair Work (Registered Organisations)
Act—in particular section 245—their national office is deemed to be separate
from the other parts of the party. When we put those two factors together we
accepted that they were not an associated entity.
CHAIR: Is there anything that has come to your
attention since that would change your mind or are you still of that view?
Mr Pirani: Based on the information we have there has
been no change.[99]
2.102
Some members of the committee disagreed with the AEC’s finding and maintained
that the HSU National Office should be classified as an associated entity. The
AEC was examined on this issue at the public hearings:
Mr Pirani: It has a separate registration process
under our act. In relation to the union structure—and it is included in our
background here—we had advice from the union itself and from the lawyers of the
union pointing to a provision in the Fair Work (Registered Organisations) Act
saying that the Health Services Union national office was legally separate from
each other branch that had separate legal status because of the Fair Work
(Registered Organisations) Act.
That is the basis on which we were dealing with this matter.
Mrs BRONWYN BISHOP: So that was your sole source of
legal advice as to whether or not the national office was an associated entity?
Mr Pirani: The separate registration under the Fair
Work (Registered Organisations) Act, yes.
Mrs BRONWYN BISHOP: No other legal opinion?
Mr Pirani: No other legal opinion.
CHAIR: There is no other opinion asserting the
contrary, is there?
Mrs BRONWYN BISHOP: So you simply got it from the
union?
Mr Pirani: No, we also looked at the Fair Work
Australia website, which has a list of the separate registration of all the
various bodies that made up the Health Services Union at that time. Then we had
a discussion with both Ms Kathy Jackson and the lawyers for the Health Services
Union national office, and they directed us to a particular provision in the
Fair Work Act which deemed the national office to be separate from the other
bodies that made up the Health Services Union. I will just try to find where
that is referred to.
CHAIR: Could I also ask you: in your understanding, is
it not common within the union movement to have the national office separate
from the state offices, similarly to the political parties? The national
secretariat of the ALP is separate from the New South Wales office.
Mr Pirani: If I could just refer you to page 56 of our
submission. I refer to the contact—
Mrs BRONWYN BISHOP: Which submission?
Mr Pirani: The submission to JSCEM. It refers to
contact that I had and a letter that I had from the senior lawyer for the law
firm Slater and Gordon. When we were originally dealing with this matter, we
initially had formed a view that the national office of the Health Services Union
may well have been an associated entity. We were directed to several provisions
that were in the Fair Work Act under which they were able to argue—and I agreed
with the view—that the national office, because of these provisions in the Fair
Work (Registered Organisations) Act, was legally separate and therefore was
separately registered for the purposes of the Fair Work (Registered
Organisations) Act. Therefore it was a separate body corporate and legal entity
from each of the other branches.
Mrs BRONWYN BISHOP: What was the position in 2007,
before the Fair Work Act was passed?
Mr Pirani: Our understanding is it was the same, but I
would have to take that on notice because I did not look at the transitional
provisions.[100]
2.103
In response to committee questioning on whether there are any national
branches of trade unions that the AEC has identified as being an associated
entity, the AEC stated:
The AEC searched our records and, for the last period for
annual returns, there were no national branches of trade unions (within the
scope of section 242(5) of the Fair Work (Registered Organisations) Act 2009)
that were regarded as being an “associated entity” due to their office bearers
having voting rights with a registered political party.[101]
2.104
Some members of the committee also expressed concern that since unions came
under the category of associated entity in 2006, only one compliance review of
a union has been undertaken by the AEC. In 2011 the AEC undertook a review of HSU
East Branch after it came to the AEC’s notice that a nil return had
subsequently been amended to a disclosure of $24 million.[102]
2.105
The AEC argued that unless certain elements are satisfied, ‘the
Electoral Act provides the AEC with no legal authority to issue the notices to
any person or entity to ascertain whether a contravention has occurred or
whether any entity is an “associated entity”’.[103]
2.106
The FWA Delegate was also questioned on this issue. However, as the
Electoral Act is not his area of expertise, he was only able to respond in more
general terms:
Mrs BRONWYN BISHOP: I now have a list of registered
organisations. It says here that the Health Services Union is 'U' type.
Presumably that is a union. It has an abbreviation and a code. So the Health
Services Union itself is a registered organisation under your act.
Mr Nassios: Correct.
Mrs BRONWYN BISHOP: We have been told all along that
it was the national office of the Health Services Union that was registered
under the act and it was not an associated entity—I think I said 'related'
entity before, but I meant associated entity—whereas it clearly shows in this
list that the Health Services Union itself is registered. I am at a loss to
know whether there was ever to your knowledge a distinction made between the
registration of the union and the national office.
Mr Nassios: Again, I am going to struggle. I do not
understand the Electoral Act at all. I do not know how that operates. As best
as I can assist you, in terms of the Health Services Union and the Registered
Organisations Act, the easiest way to explain this is if we presume that there
is an overriding national body and each state has a branch in its own name. The
way the Registered Organisations Act works is that each of those branches—in
other words, each of the states—are referred to as reporting units. It has to
report on its finances as a component part of the whole national body. The HSU
has a number of branches, most of which are based in the various states, and
there are a number that are based in Victoria.
Mrs BRONWYN BISHOP: Yes, I can see that.
Mr Nassios: Our finding in terms of HSU is that the
national office itself—this is a unique situation; it is certainly not common
amongst most organisations—is also a reporting unit for the purposes of
financial reporting. Hence the reason we had an inquiry and investigation into
the national office.
Mrs BRONWYN BISHOP: I see.
Mr Nassios: It is important to make the distinction
that we did not investigate the Health Services Union as a whole. We did not
look at, for example, Tasmania's branch reports. That is a different entity in
terms of the Registered Organisations Act.
Mrs BRONWYN BISHOP: I
see. So you would have treated the national office like a branch—as a reporting
entity.
Mr Nassios: Correct.[104]
2.107
The issue of the difficulties associated with determining whether organisations
are associated entities will be discussed under measure 5 in Chapter 3.
KPMG review of the FWA investigation
2.108
On 21 August 2012 the FWA released the KPMG Process review of Fair
Work Australia’s investigations into the Health Services Union (KPMG
review). It covered the conduct of inquiries and investigations into the
HSU National Office and the Victoria No.1 Branch.
2.109
The scope of the KPMG review was limited to the FWA investigation
processes and did not involve an evaluation of the evidence:
The scope of work for Phase 1 and Phase 2 was restricted to a
review of the process followed by FWA in undertaking their investigation of the
matters and specifically did not include the
re-performance of any part of the HSU investigations or the evaluation of
evidence presented in support of the any findings made in the HSU investigation
reports.[105]
2.110
The FWA media release made reference to the following key findings:
n That the
investigations by FWA were hampered by the absence of relevant investigation
standards and procedures, document and case management protocols and
insufficient appropriately qualified and experienced personnel.
n These issues almost
certainly contributed to the time taken to complete the investigations.
n KPMG did not identify
any indications of potential interference in the HSU investigations.
n KPMG made 31
recommendations to improve FWA’s investigations procedures.[106]
2.111
KPMG found that:
FWA is not experienced in the conduct of investigations, and
has not previously had to deal with investigations which have generated as much
public interest as the HSU investigations.[107]
2.112
Some aspects of the HSU investigations were found to have been conducted
appropriately. These were:
n Interviews conducted
by the Investigations team;
n The process for the
preparation and completion of the National Office report; and
n There was a formal
process in place to ensure the accuracy of public statements made regarding the
status of the HSU investigations.[108]
2.113
However, KPMG also identified a number of key deficiencies:
This report includes 38 findings in relation to the conduct
of the HSU investigations which are summarised as follows:
n FWA did not have and
did not refer to any relevant investigation standards and procedures;
n There is a lack of
adequate documentation setting out the investigation process followed by FWA;
n FWA did not implement
an adequate investigation case management system or process, which resulted in
deficiencies in the planning, management and execution of the HSU
investigations;
n FWA did not have
sufficient appropriately qualified and experienced resources involved in the
conduct of the HSU investigations;
n FWA did not consider
all potential sources of information, particularly electronic information, and
did not appear to fully understand its rights to access all potentially
relevant sources of information;
n FWA did not have
protocols in place for the collection and retention of documents; and
n The security
arrangements over documents were inadequate.
The findings referred to above almost certainly contributed
to the time taken to complete the HSU investigations.[109]
2.114
KPMG identified 31 opportunities for improving FWA investigation
processes. The FWA General Manager indicated that the organisation ‘had already
made significant changes to its policies and processes and would adopt all of
the review’s recommendations’.[110]
2.115
When releasing the KPMG review, the FWA General Manager also stated:
FWA notes that this review did not consider the substance of
the findings made by the Delegate of the General Manager regarding contraventions
by the Victoria No.1 Branch and the National Office, their officers, employees
and auditor. As such, the findings of the review do not detract from the
validity of the findings of the Delegate, which will ultimately be tested in
proceedings in the Federal Court of Australia.[111]