Dissenting report – The Hon Bronwyn Bishop MP,
The Hon Alex Somlyay MP, Senator Scott Ryan and Senator Simon Birmingham
How
Craig Thomson dodged the rules with the help of the AEC
Executive Summary
s)305A of the Commonwealth Electoral Act 1918 requires a
donor who made gift(s) to candidate(s) and/or political party(ies) made in
relation to an election within the disclosure period, which in Mr Thomson’s
case was between 13th April 2007 (date of his endorsement as a
candidate) and 24th November 2007 (Election Day) to file a Donor
Annual Return, setting out the total amount or value of gift(s). The monetary
threshold for disclosure is for 2006/7 $10,300 and for 2007/8 $10,500.
s)305(B) relieves associated entities and candidates from
filing a Donor Return as they report gifts in Associated Entity Returns or
Return or Candidate/ Agent Return respectively.
In the case of Mr Thomson a total sum of $21,901.77 was
identified by Slater & Gordon/BDO Kendall forensic accountants as gifted
from HSU to him within the relevant disclosure period. This was not reported in
either of the above returns. In the case of the HSU the AEC appears to believe
the HSU National Office was not an associated entity and said it was sufficient
just to have these gifts included in a political expenditure return, which a
year late, was filed in 2009. The Candidate/Agent did not disclose any gifts
and filed a nil return.
This however is not correct. If the HSU National Office is
not an associated entity it is not relieved of its obligation to file a donor
return. No Donor Return in respect of Mr Thomson was filed. This was not done
despite Slater & Gordon’s advice to the HSU to do so. The money concerned
was not gifted to the ALP as a political party but to the candidate himself and
as such must be disclosed by him in his/agent return. This was not done.
$12,511.40 was disclosed in a Donor Return – again late 13th October
2009, filed by National Secretary Kathy Jackson on behalf of the HSU.
In the words of Slater & Gordon, page 31 paragraph 114
of its report (forwarded to FWA but not obtained by the AEC at the time of
writing their analysis)
“Invoices which were
addressed to Thomson personally or in his capacity as a candidate for election would
seem most likely to have been Campaign Expenditure. The Expenditure incurred by
the NSW branch of the ALP which was later reimbursed by the Union would also
certainly have been campaign Expenditure. Doing the best we can, expenditure of
this nature has been marked with and (*) in attachment 7.
Slater & Gordon further state
“on available information
Slater & Gordon regard the items marked “*” in the schedule as gifts or
donations within the meaning of ss305A and/or 305B of the Commonwealth
Electoral Act.”
Expenditure identified by forensic accountants BDO Kendall
are at p)133 of attachment 7 – Schedule of Electoral Expenditure, - Expenditure
by Electronic Transfer from SGE Credit Union Account. Within the reporting
period totalled $27,651.93. This account belonged to Mr Thomson and the details
are set out below.
In addition in the relevant reporting period Mr Thomson
withdrew $13,700in cash (in $500 every 3 to 4 days) which is consistent with
his practice since 2002 (the date of his becoming National Secretary). Total
withdrawals are shown by BDO Kendall, as a schedule of ATM Cash Withdrawal
Transactions CBA MasterCard Mr Craig Thomson, to total $101,000. The relevant
pages of Schedule of ATM Cash Withdrawal Transaction is attached as Annexure A.
The tax treatment of Mr Thomson’s credit card use including
cash withdrawals should also be investigated both from income tax and Fringe
Benefits Tax as well as misappropriation, fraud or theft.
Evidence from Mr Williamson, President of the HSU stated
that first he knew of these cash withdrawals was when he saw the BDO Kendall
Report.
None of the expenditure or withdrawals during the relevant
reporting period were authorised by the National Council or National Executive
of the HSU in accordance with its rules. Dick & Smith Chartered
Accountants and Auditors for the HSU in an advice to Kathy Jackson National
Secretary set out the rules on 12th May 2008 and how they were
flaunted.
Prior to the relevant reporting period Mr Thomson engaged
Miss Chrislee Stevens and Mr Matthew Burke without any authorisation by the
National Council or National Executive as required by the Union rules.
The Dick & Smith advice identifies another $10,000 to
Dad’s in Education with two $5000 payments on 17th July 2007 and 18th
October 2007.
Prior to the relevant reporting time Mr Thomson had employed
Ms Chrislee Stevens and Mr Matthew Burke without the authority of the National
Council or National Executive. Dr Rosemary Kelly, a member of the HSU Finance
Committee testified to the FWA investigation that
“I didn’t know that they
were employed by the national office until after Craig Thomson had left. I was
not aware of their employment, it never went to national executive, it didn’t
go to finance committee, and I questioned the amount in the salaries, under the
salaries line, because it seemed to me the salaries were too high. I did a back
of the envelope on what I thought everybody was being paid and I thought,
“That’s funny, has a the national secretary got a salary increase, or what’s
happening with the salaries budget?” So I actually questioned that, I didn’t know
these two people were employed until afterwards.”[1]
In the relevant reporting time Miss Stevens worked for Mr
Thomson as the endorsed candidate and the value of her salary package in that
period was $32,000. Slater and Gordon at page 49 of their report, in paragraph
30 state
“The ACTU Circular
recommended that YR@W activities, whilst political expenditure would not be
characterised as a gift or donation to a political party or candidate. We again
concur. This is of course to be contrasted with:
(a)
Expenditure
directly contributed to an electoral campaign or to a political party; and
(b)
Union staff
working directly (during working hours) on the campaign of a particular
candidate for election or political party.
Both would be gifts
warranting disclosure under s305A and/or 305B.
Mr Burke left the employment of the HSU prior to Mr
Thomsons’s endorsement and went to work for the Dobell electorate “duty
Senator”, Senator Hutchins. Mr Burke kept his HSU credit card and made
purchases which could be gifts to Mr Thomson’s campaign as a candidate. His
services were made available to Mr Thomson by Senator Hutchins. This in itself
is not permitted but is still constituted a gift
As previously outlined none of this expenditure was
authorised by the HSU so the question must be asked who was the donor? If Mr
Thomson was the donor of gifts he improperly gained from the HSU, s)305B of
the Commonwealth Electoral Act relieves the candidate of filing a disclosure of
gifts return but requiring gifts to be included in his candidate/agent return.
Mr Thomson though his agent filed a nil return disclosing no gifts.
This money, which was in light of the myriad of evidence in
the total FWA report was either misappropriated or fraudulently acquired, means
it remained unreported to the AEC and the whole schema of the reporting and
disclosure obligations is avoided..
The AEC did not address any of these issues even though the
Minister asked the AEC to report on “any issues concerning the operation of the
Electoral Act which could be considered for possible remedy.”
The AEC analysis which only queried $17,014.88 of other
expenditure completely overlooked all of the above.
The current Funding and Disclosure Guide published by the
AEC for election donors points out the distinction between third parties
required to file a third party return of political expenditure and a donor.
Page 6 of the guidelines provides that the monetary threshold for disclosure
applies to the total value of all gifts or donations, meaning “all
donations, regardless of their value must be disclosed”.
The AEC guidelines may also capture additional electronic
transfers from the SGE Credit Union made during the reporting period (and
disclosed in the BDO Kendall Report) to Dad’s in Education, Central Coast Rugby
League totalling a further $49,067.32.
The Guidelines state donations made indirectly to a
candidate (during the disclosure period) must be disclosed. It is certainly
able to be argued that the donations to these entities in the disclosure period
were meant to benefit Mr Thomson as the Candidate.
Thus gift in excess of $100,000 to Mr Thomson either direct
or indirect in accordance with the BDO Kendall Report and the AEC Guidelines
should have been disclosed. But by whom?
A Third Party expenditure disclosure does not relieve
a person of the obligation to make a donor return unless that person is an
associated entity or candidate.
Up to May 2009 the AEC could have used its statutory powers
to do a Compliance Review pursuant to s)316 (2R) of the HSU National Office
believing it to be an associated entity.
Indeed it is important to note that the AEC did no
compliance reviews of Trade Unions with the exception of one of the HSU in late
November 2011 when they were embarrassed into it with the HSU supplying 3
returns (all late for 2010) going from a miniscule political expenditure return
to one showing $24 million dollars of expenditure. This in itself shows the AEC
knew they had the power to conduct Compliance Reviews on Trade Unions but
simply elected not to do so and elected to ignore the 2006 amendments to The
Electoral Act adding Trade Unions to the group to be supply returns and be
subject to compliance review.
The list of the 256 Compliance Reviews carried out from 2007
to 2012 are attached as Annexure B
The AEC was further derelict in its duty to carry out its
responsibilities under the Act by its failure to carry out any investigation of
HSU and its National Office despite knowledge in the press concerning payments
made to and/or on behalf of Mr Thomson within the reporting period.
Annexure C is the correspondence received by the committee
relating to the filing of returns between the AEC and the HSU National Office
and Mr Ken Fowlie of Slater & Gordon demonstrating failure on behalf of the
AEC to act in a timely way. It is interesting to note that in his email to Ms
Jackson, Mr Pirani, the Chief Legal Officer of the AEC only becomes insistent
when he flags that he will be questioned at Senate Estimates and his salutation
to Miss Jackson the then National Secretary becomes Kathy rather than the
previous Ms Jackson (Annexure D). The AEC’s failure to act means no action can
now be taken because 3 year limitation period has elapsed.
Table of Comparisons between positions of AEC, Labor/Greens and the
Coalition
|
AEC “measure” |
Committee recommendation
Labor/Green |
Coalition position |
|
1.
Reconsideration of the
appropriate level of disclosure threshold |
Recommendation 1
The Committee recommends
that the disclosure threshold be lowered to $1,000 and that the CPI
indexation be removed. |
Coalition opposes
It should be noted that no
evidence was taken on the disclosure threshold issue and therefore cannot be
relevant to this inquiry or its recommendations. The Coalition members of
JSCEM do not agree with the reduction in the disclosure threshold, noting
that it strongly increases compliance costs for political parties, third
parties and individuals and will lead to potential intimidation of small
donors.
Evidence exists that prior
to the lifting of the threshold intimidation did in fact occur. Donors to
non-Labor parties were harassed and intimidated by union bosses and Labor
Party heavies.
Coalition members of the
committee also note that this recommendation, allegedly based on the
transparency desired by the Government majority of the Committee does nothing
to deal with two issues that are specifically relevant to this inquiry.
Evidence was received about
the use of credit cards by Mr Thomson, including for substantial cash
withdrawals. Coalition members of the Committee highlighted the threat posed
by the use of credit cards in the Dissenting Report into the 2011 inquiry[2].
There are no records of
what this money was used for. Even if only part of the more than $100,000 was
utilised for Mr Thomson’s campaign, this would represent a substantially
greater threat to transparency than a donation of little more than $1000. The
refusal of the ALP or Greens to address this gaping loophole brings into
question the claimed commitment to transparency as opposed to a disclosure regime
that provides a political advantage.
|
|
2.
Introduce administrative
penalties for objective failures (such as failing to lodge on time) |
Recommendation 2
The Committee recommends
that the Commonwealth Electoral Act 1918 be amended, as necessary, to make
offences classified as ‘straightforward matters of fact’ subject to
administrative penalties issued by the Australian Electoral Commission. The
issuance of an administrative penalty should be accompanied by a mechanism
for internal review. |
Coalition is opposes
This recommendation, which
seeks to grant more power to the Australian Electoral Commission. The
Coalition remains steadfast in its belief that the Australian Electoral
Commission should not be granted additional powers until such time as they
can demonstrate they are prepared to use the powers already given to them.
Furthermore, Coalition
members believe that ‘straightforward matters of fact’ is too broad. Before
Coalition members support the institution of administrative penalties, the
specific list of offences for their application needs to be considered, as
well as appropriate penalties and the threshold for consideration of more
serious charges.
|
|
5.
Abolish ‘associated
entities’ and establish a third party scheme similar to Canada and the UK |
Recommendation 3
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to improve the
clarity of the definition of ‘Associated Entity’.
Changes could include:
Defining ‘controlled’ as
used in section 287(1)(a) to include the right of a party to appoint a
majority of directors, trustees or office bearers;
Defining ‘to a significant
extent’ as used in section 287(1)(b) to
include the receipt of
a political party of more than 50 per cent of the
distributed funds, entitlements or benefits enjoyed and/or services
provided by the associated
entity in a financial year; and
Defining ‘benefit’ as used
in section 287(1)(b) to include the receipt
of favourable,
non-commercial arrangements where the party or its
members ultimately receives
the benefit. (paragraph 3.104) |
Coalition opposes
This recommendation whilst
opposing the AEC measure to abolish associated entities does not include
provisions to ensure that all Trade unions together with each branch of each
union and each national office are clearly defined as an associated entity.
This issue was highlighted in evidence given.
Evidence given showed the
AEC believed the national office of the HSU was an associated entity until 27th
May 2009, when it accepted a simple denial that it was from the ALP Assistant
National Secretary reversing his advice of the 10th March 2009
that the HSU National office was an associated entity.
This is yet another example
where the AEC did not use its available powers; does not act in a timely way
and simply wants to abolish the provision to give itself less work.
An amendment in the above
terms in required.
The Labor/Green suggested
amendments which does nothing to change the current legislation which creates
an incentive for political support to be directed through national offices
whereby such support is not disclosed under the associated entity regime.
This should be addressed as a matter of urgency so that all constituent
bodies of a trade union affiliated to a political party are covered by the
associated entity disclosure regime.
|
|
7.
Require the electronic
lodgement of all returns to the AEC (with power for the Electoral Commissioner
to grant some exceptions) |
Recommendation 4
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to require the
electronic lodgement of returns with the Australian Electoral Commission. The
Electoral Commissioner should be able to grant exemptions to this requirement
in limited circumstances. |
Coalition opposes
The Coalition believes this
should only apply to political parties and associated entities, which would
include all branches of Trade Unions as defined under the Registered
Organisations Act. |
|
8.
Require the period of
retention of records in sections 317 and related offence in section 315
(2)(b) be increased to seven years |
Recommendation 5
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to increase the
period for the retention of records in section 317 and related offence in
section 315(2)(b) to seven years. |
Coalition opposes
This recommendation is
opposed by the Coalition as it would be out of kilter with the three year
prosecution period and the electoral cycle.
In particular, Coalition
members restate their previous concern about the burden upon the many
thousands of volunteers who engage in the political process, often absent of
professional support that would facilitate the maintenance of records for
such an extended period of time.
|
|
9.
Insert a new offence for a
person who fails to make records to enable complete and accurate disclosure |
Recommendation 6
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to insert an
offence for a person who fails to make records to enable complete and
accurate disclosure. |
Coalition supports
The Coalition agrees with
this recommendation as it would have covered Mr Thomson’s period as National
Secretary of the HSU and his failure to keep records as evidenced by the BDO
Kendall and Slater and Gordon Reports. |
|
10.
Increase relevant criminal
penalties that are fraud related
(eg. Knowingly providing
false and misleading information in a return) |
Recommendation 7
The committee recommends
that the penalties in relation to offences that are classified as more
‘serious’ should be strengthened along the lines proposed in the Commonwealth
Electoral Amendment (Political Donations and Other Measures) Bill 2010. Fraud
related offences should
be treated as serious
offences for the purposes of the Commonwealth
Electoral Act 1918. |
Coalition opposes
There has been no
definition of the term ‘more serious’ |
|
11.
Require more frequent
reporting of relevant expenditure and receipts |
Recommendation 8
The committee recommends
that the Australian Government introduce a six-monthly disclosure reporting
timeframe, as outlined in the Commonwealth Electoral Amendment (Political
Donations and Other Measures) Bill 2010. |
Coalition opposes
The Opposition is opposed
to this recommendation, which would provide a significant regulatory burden
on political parties and associated entities.
Furthermore, no evidence
was adduced in this inquiry |
|
13.
Review the ‘disclosure
period’ and ‘election period’ in relation to disclosure obligations and new
candidates who are seeking pre-selection |
Recommendation 9
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to extend the
disclosure period for new candidates to 12 months prior to pre-selection or
nomination, whichever is earlier. |
Coalition opposes
Unnecessary regulatory
burden.
The requirement to extend
the disclosure period for candidates to 12 months prior to preselection or
nomination would impose a massive compliance cost on individuals as well as
political parties.
Even more concerning, it
could act as a disincentive for people to decide to nominate or participate
in the political process.
This recommendation fails
to acknowledge or understand that many people would not be in a position to
comply with such a requirement, despite their best efforts in all good faith.
Occasionally, a by-election
is warranted by virtue of the sudden resignation or death of a member of the
house. A candidate who was not expecting to nominate for office may then
simply not be able to comply with this requirement as, despite them having
been politically involved, they may not have expected to nominate and
therefore may not have maintained the necessary records.
If this requirement was to
serve as a disincentive for someone to nominate it would be an indictment of
our electoral administration that we allowed such a provision to have this
effect.
This represents a complete
over-regulation of the activities of candidates to no demonstrated good
purpose.
|
|
14.
Increase the coercive
powers of the AEC to enable it to act as a regulator in relation to matters
under Part XX of the Electoral Act |
Recommendation 10
The committee recommends
that the Australian Government clarify, and where needed strengthen, the
coercive powers of the Australian Electoral Commission to determine the
extent of an individual or organisation’s disclosure obligations and to
investigate whether reporting obligations under Part XX of the Commonwealth Electoral Act 1918 have been met. |
Coalition opposes
The Opposition is opposed
to this recommendation, The Coalition members note that there are currently
sufficient powers already granted to the Australian Electoral Commission and
there is no evidence that such current powers are being utilised. The
Coalition in general is opposed to granting the Australian Electoral
Commission additional powers, until the Commission is prepared to use the
powers they currently have. |
|
15.
Expand the categories of
‘electoral expenditure’ that are to be disclosed to include campaign staff,
premises, office equipment, vehicles and travel |
Recommendation 11
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to expand the categories
of ‘electoral expenditure’ as set out in section 308(1), to cover additional
relevant items including campaign staff, premises, office equipment, vehicles
and travel. |
Coalition opposes
This is unnecessary as
these items are already covered. |
|
16.
Deem registered political
parties to be bodies corporate for the purposes of Part XX of the Electoral
Act |
Recommendation 12
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to provide that
registered political parties be deemed bodies corporate for the purposes of
Part XX of the Act. |
Coalition opposes
No evidence was tested as
to the fairness of this provision or any unintended consequences. It would
penalise volunteers which is an essential part of Australian political life.
The principle of mutuality
is time honoured within Australian political life and would once again favour
Labor and the unaffected unions which lie outside such a definition. |
|
17.
Introduce provisions with
greater certainty about who has the relevant reporting obligation |
Recommendation 13
The committee recommends
that the Commonwealth Electoral Act
1918 be amended to introduce
provisions with greater certainty about which position or individual has
relevant reporting obligations within political parties, associated entities
and third party organisations. |
Coalition opposes
Provisions already exist
and it is the responsibility of the AEC to act upon them. This however they
are ever reluctant to do.
The AEC is always looking
for someone else to do their work. |
|
3.
Provide that financial
penalties be offset against public funding entitlements (perhaps combined
with the AEC withholding a small percentage of such entitlements for a period
of twelve months following the election. |
Not supported |
Not supported |
|
4.
Require the compulsory and
timely auditing of all records held by registered parties (and party units),
candidates, third parties etc, by independent auditors (do not include
donors) |
Not supported |
Not supported |
|
6.
Establish the requirement that
electoral expenditure can only come from specific and dedicated campaign
accounts into which all donations must be deposited that have been nominated
to the AEC and which can be ‘trawled’ by the Australian Transaction Reports
and Analysis Centre (AUSTRAC) |
Not supported |
Not supported |
|
12.
Reintroduce requirements
that campaign committee expenditure is to be reported separately from the
state party unit and specifically covers the election period for each
division. |
Not supported |
Not supported |
Introduction
The basis of the reference to the Committee by the Minister was
fundamentally flawed as the AEC at the time of writing its analysis, did not
have, nor had ever seen or had access to the Slater and Gordon BDO Kendall
Report which is an intrinsic part of the FWA Report. The AEC could not have in
good faith analysed the report as they did not have it all. Further, in these
circumstances should not have purported to have analysed the report and still
further their failure to advise the committee that they had not seen the whole
report is reprehensible.
It remains unknown whether the Minister was in possession of the whole
report and only gave some of it to the AEC or whether he had not himself
received the whole.
The FWA Report was fundamentally a report into the actions and
behaviour of Craig Thomson as National Secretary of the Health Services Union,
a person seeking pre-selection from the ALP and then as a candidate for Dobell.
Coalition
members of the Joint Standing Committee on Electoral Matters note once again
that most of the so called measures put forward by the AEC and the Labor/Greens
recommendations flowing therefrom are solely to serve the interests of the
Australian Labor Party, the Greens and particularly the trade union bosses. This
is particularly evident in relation to the proposed lowering of the donation
disclosure threshold from $11,900 to $1000, which will significantly impact the
ability of individuals to give donations to Coalition Parties without being
exposed to intimidation and harassment.
The
Coalition has grave concerns with the current system and the way in which the
AEC administers the Act. It is shown to have advantaged the Labor Party by
refusing to use its powers to conduct compliance audits of Trade Unions and indulge
particularly the HSU National Office, by not using its powers to investigate
non compliance and only strongly seek compliance when the Legal Officer writes
he will get questioned in Senate Estimates. See annexures D of correspondence
between Mr Pirani (AEC) and Miss Kathy Jackson.
In
evidence Mr Nassios the author of the report, stated on 22nd August
2012 in answer to a question from Mrs Bronwyn Bishop concerning the relevance
the Slater and Gordon BDO Kendall Report “that was the basis of the commencement
of the investigation. It’s detailed a number of the issues that we needed to
look at”
The
Coalition believes in participatory democracy and that individuals should be
allowed to contribute to the political process, however, the proposed reduction
in the disclosure threshold will greatly hamper the ability of individuals and
firms to contribute. Neither the evidence heard by the inquiry, nor the
submissions have shown there to be any cause for concern of donations under the
current threshold, the problem not addressed is dealing with the failure of the
AEC and dishonesty of the Thomson case.
This
shows that the need for the Coalition’s recommendation for a dedicated fraud unit
within the AEC is very much needed. The Coalition is particularly concerned
about the evidence heard during the inquiry of the circumvention of electoral
laws through the use of union credit cards by Mr Thomson.
Coalition members also
note the issue about election campaigns being funded by tax deductible
donations given to unions and special interest groups. At present, individuals
are allowed to claim a deduction of up to $1500 for donations to political
parties or individual candidates; however, trade unions spend millions on
election campaigns and receive much of their funding from tax deductible
membership fees, not subject to the $1500 cap. Similarly, groups such as the
Australian Conservation Foundation and Greenpeace also receive tax deductible
donations, and then spend money on political campaigning, putting them at a significant
advantage over political parties whose donors have limited tax deductibility.
The Coalition believes this issue should be examined further.
The AEC and Craig Thomson – the real problem
The Committee took
evidence from the Australian Electoral Commission on the 16th July
2012, after receiving the reference from the Special Minister of State. The
Committee hearing was allowed sixty six minutes to question the Australian
Electoral Commission.
The Committee only became
aware that the AEC had not been given the complete FWA Report on that date. The
missing Slater and Gordon BDO Kendall report is integral to the FWA Report
authored by Mr Nassios holding a delegation from the General Manager of FWA to
investigate the allegations made.
The HSU National Office
engaged Slater and Gordon (solicitors) to investigate allegations, swirling in
the media and particularly in the Sydney Morning Herald in articles written by
Mark Davis showing the acquisitions and expenditure of Union funds by Craig
Thomson, the Member for Dobell between the years of 2002 and 2007 being the
time he was employed as the National Secretary of the HSU. This included cash
withdrawals of several hundred dollars a time, every few days, totally
$101,000, $13,700, which was during the disclosure period.
The allegations arose from
material which became available as a result of Mr Thomson suing the Sydney
Morning Herald for defamation relating to the claims that he had spent Union
funds on prostitutes and on his campaign to win the seat of Dobell.
The court case was in fact
dropped by Mr Thomson prior to it going to trial with Mr Thomson having to pay
the legal costs and receiving no money from the defendant in settlement of his
claim for damages despite his statements that the claim was settled implying he
received compensation, which he did not.
He also failed to disclose
in his pecuniary interest register that the ALP paid his legal fees of now
admitted $150,000, which he was required to do so.
Mr Thomson’s constant
statement that he has done nothing wrong is not borne out by the findings of
the FWA Report and is resonant of his Party Leader, Julia Gillard’s claims
regarding her AWU related indiscretions, when a partner at Slater and Gordon,
she claims to have done nothing wrong.
Ms Gillard remains
dependant of the vote of Mr Thomson to retain the position of Prime Minister
and the payment of his legal fees by the ALP’s is significant because it
prevented this debt making him bankrupt and thereby losing his seat under s44
of the Constitution.
Some of the findings in the BDO Kendall Report
BDO Kendall being a firm
of forensic accountants and the accompanying report from Slater and Gordon
found that Mr Thomson had done plenty that was wrong.
It also made findings as
to what disclosures Mr Thomson and the HSU should have made to the AEC in
relation to the 2007 election and the election of Mr Thomson to the seat of
Dobell.
The Slater and Gordon, BDO
Kendall Report specifically found that amounts totalling $21,906.77 marked with an asterisk in the schedules forming part
of that report. The Chair along with the ALP and Green Members of the Committee
has censored part of this schedule.
The report also showed
that from 2002 till his resignation, Mr Thomson without any authorisation of
the National Executive of the HSU withdrew $101,000 out in cash and as shown by
the affidavit of solicitors for Fairfax allegedly spent thousands of dollars on
prostitutes. Miss Stevens and Mr Burke were put on the payroll by Mr Thomson to
raise his profile through work in Dobell, without authority of the National
Executive. After his endorsement their services were a gift and required
disclosure which was not done.
The Coalition finds that
the inquiry of the Joint Standing Committee on Electoral Matters does not
fulfil the request of the Minister.
The misconduct of union
officials is not a new concern and the Opposition would like to use this
opportunity to note that this particular investigation is on an issue that
first occurred during the 2007 election campaign but the severity of the issue
was only raised in 2009. Three years later the Government and the AEC are still
running the same agenda to avoid proper scrutiny of the actions of the HSU
National Office, the inactions of the AEC in failing to use their powers to
obtain information from the HSU. In this time there has been forensic
accounting investigations, subsequent investigations, media speculation and now
an inadequate analysis by the AEC and credit union.
Terms of reference used by the committee
The BDO Kendall Report, commissioned by Mr Fowlie of Slater and Gordon
at the behest of Mrs Kathy Jackson, was the report that triggered the
investigation by FWA[3]. The forensic accounting
report on the HSU by BDO Kendall outlines and identifies the spending of the
HSU National Secretary, Mr Thomson, his staff, Chrisalee Stevens and Mr Matthew
Burke, and the statements of their credit cards.
Letter from Kathy Jackson, HSU to Ken Fowlie, Slater & Gordon dated
11 December 2008
This letter, which has been censored and only partly
released into the public domain by the Committee through Labor’s use of its
majority on the Committee to censor the letter is particularly informative as
it outlines the detailed concerns of the HSU itself with the behaviour of Mr
Thomson.
On page 2 of the letter, Ms Jackson specifically highlights
the risk to the HSU of the undocumented and potential political expenditure by
Mr Thomson and Mr Burke and Ms Stevens that is required to be disclosed.
Furthermore, in her request to Mr Fowlie, Ms Jackson specifically requests
advice regarding:
“f. Whether it is possible to
determine the total sum of Union funds expended on Mr Thomson’s campaign to win
the seat of Dobell in the 2007 Federal election and if so what sum?
g. What other expenditure in
the year 2007 was properly characterised as political expenditure which the
Union is obliged to declare to the AEC?”
These
concerns by the HSU itself regarding its inability to determine whether
information was available to comply with disclosure requirements highlight the
scandal that surrounds this expenditure and undermines the conclusions arrived
at by the AEC given the lack of records available.
They also
highlight the need for the AEC to have taken urgent and decisive action in
investigating this matter. This letter in full is annexed in full as Annexure E
to this dissenting report.
As minutes tabled with this report will show at the
meeting held on the 22nd August 2012 the Chairman used the
Government control of the Committee censor the Slater & Gordon BDO Kendal
Report claiming that the information was outside of the terms of reference. The
terms of reference are stated below.
The
Australian Electoral Commission (AEC), in its analysis of the Fair Work
Australia report into the Health Services Union National Office (FWA report),
identified a number of areas for consideration to address limitations in the Commonwealth
Electoral Act 1918.
The
committee will examine the AEC analysis of the FWA report and the list of possible measures for reforming the Commonwealth Electoral
Act.
The Minister’s letter to
the Committee made it quite clear that he wished the Committee to consider
analysis of the FWA Report. On the 16th May 2012 The Special Minster
of State wrote to the Joint Standing Committee on Electoral Matters. Contents
of the Ministers letter is below.
As the Committee may have
noted I wrote to the electoral commissioner on the 8th May 2012
seeking his advice on whether or not there had been any failures to comply with
the provisions of the Commonwealth Electoral Act 1918 (Electoral Act) as
disclosed by the information recently published Fair Work Australia Report into
the Health Services Union National Office (FWA Report). The Commissioner has
developed a detailed analysis of the FWA report and this advice is now publicly
available from the Australian Electoral Commission.
At the time, I also sought
advice from the Electoral Commissioner on any issues concerning the operation
of the Electoral Act which could be considered for possible remedy.
I refer the Electoral
Commissioners analysis and the list of matters to the Joint Standing Committee
on electoral Matters for its consideration.
As the Minister had requested that the committee analyse the AEC Report
which was to be an analysis of the FWA report into the HSU National Office and
Mr Thomson the Coalition believes that this should include the time period in
which Mr Thomson was the HSU National Secretary and the Labor Candidate for
Dobell.
No proper understanding of the FWA Report can be had without reading
the Slater & Gordon BDO Kendal Report.
The Coalition objects vehemently to the removal, that is censorship, of
many parts of the Slater and Gordon BDO Kendall Report; the partial censoring
of the Letter dated 11 December 2008 from Ms Jackson to Mr Ken Fowlie of Slater
& Gordon and other annexures to the FWA Report.
The inquiry process of the committee
The Coalition
members of the committee found the process of inquiry to be poorly managed by
the Chairman. In particular, many documents particularly from the AEC were not
provided at the outset of the inquiry, and that they were only provided when
requested by the Coalition members of the committee. Further many of these
documents that were late, were presented after the AEC had testified and the Chairman
of the Committee has refused to have the AEC reappear before the committee a
final time prior to the writing of the report to allow legitimate questioning
of the AEC on matters which needed answers following receipt of additional
material.
During the process
of the inquiry the committee took evidence from representatives of Fair Work
Australia (FWA), Ms Bernadette O’Neill, General Manager and Mr Terry Nassios,
and the AEC, Mr
Brad Edgman, Director, Funding and Disclosure Section—Compliance, Australian
Electoral Commission, Mr Ed Killestyn, Electoral Commissioner, Australian Electoral
Commission and Mr Paul Pirani, Chief Legal
Officer, Australian Electoral Commission.
Throughout the collection
of evidence it became quite apparent that the FWA Report cannot be analysed
properly without access to the BDO Kendall’s forensic accounting report on the
National Office of the Health Services Union and the Slater and Gordon advice
on this report. This was provided to the committee members only after the
request from Mrs Bishop during evidence given by Bernadette O’Neil, General
Manager of FWA who took many questions on notice.
On the 6th July
2012 Mr Killesteyn testified that that the AEC had not seen the Slater &
Gordon BDO Kendal Report.
That the AEC did not request a copy of the BDO Kendall’s report, as
testified to by Mr Killesyteyn at the public hearing held on the 6th
July 2012. This is viewed by the Coalition as gross incompetence on behalf of
the AEC as it rendered it incapable of fulfilling the request of the Minister
to analyse a report, the totality of which they did not have.
In previous evidence the
AEC and Mr Pirani in particular argued that they could not use coercive powers
under section 316(3) of the Commonwealth Electoral Act 1918 to call for the
records of the HSU National Office as Mr Pirani did not believe the AEC had
reasonable grounds that there could be non-compliance. This is despite Mr
Pirani threatening to use these powers.
However further evidence
was adduced that showed that the AEC had done compliance reviews pursuant to
s316(2A) of the Commonwealth Electoral Act 1918 from 2007 to 2011 of 256
associated entities but none were trade unions as associated entities. In fact
not one compliance audit of a Trade Union was done until November 2011 when HSU
East was reviewed.
Coalition
members of the Committee are extremely concerned at the pattern of AEC audit
activity.
At the
hearing on the 22nd August, following a request by Coalition
members, the Commissioner tabled a list of audits undertaken by the AEC since
2007. This list comprised 256 audit activities – but only one of these involved
the AEC auditing a union, HSU East, and this only after extensive public debate
and comment about activities within the HSU.
Under
questioning from Coalition members, the Commissioner admitted that the AEC had
not focused on the activities of trade unions despite the substantial funds
they directed to certain political parties and the fact that many unions have
formal voting rights within the Labor Party.
Senator RYAN: This is a list comprising four to five
years of work. Given the sheer quantum of money involved in trade unions and
the role they play as associated entities on one side of politics, and given
that there has been a compliance issue with at least one—I do not know if there
are any more—don't you think that looking at this list and seeing the Dunkley
Blue Ribbon Club and the North West 200 Club, which would both contribute an
order of magnitude less than some of the larger trade unions in my home state
of Victoria, it looks slightly odd to people with an interest in compliance
that there is not a single trade union on this list? They are the largest
funders. They are larger than most corporate donors. Most of these associated
entities here would contribute zeroes less than a single large trade union.
Don't you think this is a flaw in the judgment you have exercised as to which
associated entities you audit?
Mr
Killesteyn: I think it is a fair question but, as I explained before, you have
for the unions another monitoring body, Fair Work Australia—
The
Commissioner defended the lack of the AEC audit activity with respect to trade
unions on two grounds:
- First, that Fair Work Australia performed an oversight role of
trade unions; and,
- Second, that the AEC did not have the resources to effectively
perform its role with respect to trade unions and that following the changes to
the associated entity regime in the 2006 amendments to the act, no additional
resources were provided.
Coalition members of the committee strenuously object to
both these statements. The AEC did complete 256 reviews in the period between
2007 and 2012, there is only one trade union listed, the HSU in 2011. In the
four year period identified the AEC did however complete two reviews of the
Lady Wilson Foundation (2008 and 2012), two reviews of the Violet Bobbin Trust
(2008 and 2010) and a review of the Blue and White Committee (2008). Mr Edgman,
Director, Funding and Disclosure Section, Compliance, Australian Electoral
Commission gave the reasoning for the choice of entities to assess as follows.
Senator RYAN: Given the quantum of money involved with trade unions,
as opposed to the Blue and White Committee of Victoria, which I have never even
heard of, is there a reason why there are no associated entity compliance
audits of trade unions on that list?
Mr Edgman: The reason that you will find a lot of smaller
associated entities on that list is that our approach is primarily to look at
political parties rather than associated entities.
Senator RYAN: There are a lot of associated entities there, though.
Mr Edgman: What happens is that when we choose the political
parties, we fold in the associated entities with those parties, for the reason
that quite often with the smaller associated entities their finances are linked
in with the party's. There are movements of money between them. They can have
money on deposit between each other, debts with each other. We do it because,
if we looked only at the party, we could not see the other flows and the debts
incurred. If we have done the party and we have done the associated entities
once in three years—because we work on a three-year cycle—and if we come out
believing that everything seems to be fine with the associated entities, we
have it within our discretion next time we do the party not to do all the
associated entities again.
Fair Work
Australia performs a different role for a different purpose. Its performance of
this or otherwise is completely irrelevant to the role of the AEC with respect
to the disclosure regime and audit activity. To use the activity of an unrelated
agency as an excuse for a failure to perform duties in a manner than appears
fair and balanced is simply not acceptable.
With respect
to the resources available to the AEC, Coalition members are concerned that the
AEC has effectively ignored the changes to the regime in the 2006 Act.
Senator RYAN: I am asking you to explain why on this
list there are myriad groups, including small ones made up of volunteers, that
contribute maybe in the order of tens of thousands of dollars in a good year,
yet the AEC has not seen fit to undertake a compliance audit of groups that
are, firstly, members of the political party that happens to be in government,
that have voting rights and that donate much larger sums of money. It is not up
to me to make an accusation. I think, given the weighting of this list, that it
is a very legitimate question to ask why no trade union has had a compliance
review undertaken. If the answer is that it is Fair Work Australia's job, then
fine—give us that answer. But I don't think you will find a good portion of the
parliament accepting it.
Mr
Killesteyn: No. What I am suggesting is that the amendments that were made in
2006 which brought in the unions raised our workload quite
considerably—threefold. So the practice that we have had in the basic approach
to determining who would be subject to a compliance audit has continued since
that time. The other point I would make is that the complexity of the financial
arrangements of the unions, where they are primarily reliant on member
contributions, is different from the complexity of financial transactions from
other organisations, where there is a greater risk in terms of being able to
track—
This
statement by the commissioner implies that the scale, scope and complexity of
unions compared to small, voluntary associations is a deterrent to undertaking
audit activity upon them. This is unacceptable in a regime that is expected to
apply the rules equally to all participants.
Coalition members of the committee remain extremely
concerned at the inconsistency in the application of the AEC’s audit powers.
The ongoing audit of small groups which raise and/or donate relatively trifling
sums, especially when compared to the millions of dollars paid and spent by the
union movement, and the lack of audit activity on these unions brings into
question the fair and transparent application and use of these powers.
Correspondence asked for but not received until after all
of the evidence had been taken showed that until May 2009 the AEC and the
Australian Labor Party both believed that the HSU National Office was an
associated entity within the meaning of sections 314EA section 314 AEB of the
Commonwealth Electoral Act 1918 as evidenced in the email from Mr Pirayni to Ms
Jackson (annexed to this report). Thus the AEC should have carried out a
compliance review of the HSU National Office within this period, but from
subsequent evidence it became clear it was the policy of the AEC not to do
compliance reviews of Trade Unions.
In March 2009 ALP
Secretariat reversed its advice that the HSU National Office was not an
associated entity. In May 2009 Ms Jackson advised that the HSU was not an
associated entity.
Mr Pirayni, who is the
chief legal officer of the AEC, simply accepted the statement from the Australian
Labor Party and then the trade union.
“Yesterday I had a
discussion with Mr Michael Williamson, who confirmed that the existing third
party political expenditure return that we have published only relates to the
NSW branch of the HSU and does NOT include any information about the National
Branch of which you are the National Secretary.
Similarly, the
associated entity returns that we have publish apparently do not include the
National Branch of your union
No doubt I will be
questioned at Senate estimates Hearings next Thursday 28 May on this matter and
would appreciate the opportunity to discuss this matter with you on a with-out
prejudice basis. I just want to be clear about what pro-active action you are
taking to address this matter (including the proposed timeframe) and to meet
the statutory reporting obligations contained in Part XX of the Act.”
From having seen this
email the opposition notes that the AEC in these circumstances would have been
able to use their powers to ascertain the information that was required and did
not. The associated entity report was due in October 2008.
Failure of the AEC to assess the BDO Kendall Report
The AEC was directed by the SMOS to assess the Fair Work Australia
investigation in to the HSU. The opposition notes that this document was not
provided in full when it was tabled in the Senate by Ms Bernadette O’Neill.
A glaring omission by the AEC in their report to the Minister is the
lack of any mention to the Slater & Gordon BDO Kendall Report. As already
stated the BDO Kendall Report was the report that triggered the FWA
investigation. In being such an influential piece of evidence the information
from the report was an inadmissible feature of the report.
The Coalition wish to have it noted that the role of this committee, as
denoted by the Special Minister of State, is to is to assess the analysis of
the AEC of the FWA report and their so called “measures”. The opposition
members of the committee find that the AEC failed dismally to properly assess
the report.
In doing so the Opposition notes that the AEC in fact could not even do
this properly. The accounting firm BDO Kendall’s mentioned 48 times on 30
different pages of the tabled report, of which 27 times relates directly to the
Report itself. That the AEC could fail to acknowledge the existence of such an
important document is incomprehensible to the opposition members of the
committee.
ELECTORAL MATTERS
COMMITTEE HANSARD July 6 2012
Mrs BRONWYN
BISHOP: The problem is this: the
Electoral Commission has looked at this report—by the way, did you look at the
BDO Kendalls report?
Mr Killesteyn: We still have not had that made available to us.
In the public hearing held on 22nd August
Mr Nassios that the BDO Kendall’s report was the single most important piece of
information and that it was the completion of that document that triggered the
Fair Work Australia investigation into the HSU National Office.
ELECTORAL
MATTERS COMMITTEE HANSARD August 22 2012
Mrs
BRONWYN BISHOP: Did you
place a lot of reliance on that report?
Mr
Nassios: As I think I
answered last time, certainly that was the basis of the commencement of the
investigation. It detailed a number of the issues that we needed to look into.
Mrs
BRONWYN BISHOP: The AEC
has given evidence that the report they were given did not contain the Slater
& Gordon and BDO Kendalls reports. So the AEC's analysis—not, as Mr Thomson
referred to it in his speech in the parliament, an investigation; the AEC
deliberately said it was not an investigation; they said it was an analysis—did
not have access to that highly important report on which you based your report.
Did that surprise you? Would that surprise you?
Mr
Nassios: As I said to you
before, I cannot answer where that report has gone. As I say, unfortunately—or
fortunately, from my perspective—two days after I completed the report I
proceeded on leave. So I do not know.
Mrs
BRONWYN BISHOP: But the
Slater & Gordon and BDO Kendalls reports are fundamentally important to
your view?
Mr
Nassios: They were
certainly important. As I have explained, they were the catalyst, so to speak,
of a number of the issues—not all of the issues but certainly a number of the
issues, yes.
The AEC does not have the BDO Kendall report, nor has it been published
in full. There is information that requires scrutiny of the period.
The Coalition members of the committee draws attention to the letter
from Mr Fowlie to Mr Nassios on 16 June 2009.
Slater and Gordon did not provide the relevant findings to the AEC as
they concluded not to do so until after the FWA investigation was concluded.
Conclusion
The Coalition members of the Committee reject in total the
Report put forth by the Labor and Greens members of the Committee as it merely
compounds the falsehood that the AEC conducted a paper an analysis of the FWA
Report. The AEC was at all relevant times unable to analyse the said Report as
they did not have access to the annexures to the report which are integral to
the FWA Report, particularly the Slater & Gordon/ BDO Kendal Report and
also the interim report of the FWA delegate and all those annexures being the
equivalent of 3 boxes of evidence.
Mr Nassios, the author if the FWA Report stated the
importance of the report when questioned at the public hearing held on the 22nd
August 2012.
Mrs BRONWYN BISHOP: But the Slater & Gordon
and BDO Kendalls reports are fundamentally important to your view?
Mr Nassios: They were certainly important. As I have
explained, they were the catalyst, so to speak, of a number of the issues—not
all of the issues but certainly a number of the issues, yes.
This is to be compared with KPMG Labor/Green Report who did
have access to the whole Report including all the annexures when doing their
analysis of FWA and its report. It was confirmed by the General Manager of the
FWA Ms Bernadette O’Neil, that KPMG had such access.
It is essential to this dissenting report that the Slater
& Gordon/BDO Kendal Report be published in full. Together with all the
other annexures the majority report is nothing but a cover-up resulting in
information being withheld from the Parliament.
The
problem with Mr Thomson was not the monetary threshold for disclosure, it is in
fact that Craig Thomson did not disclose at all. The FWA Report including the
Slater & Gordon BDO Kendall Report and other annexures and transcripts
exposed him as having breached the Commonwealth Electoral Act 1918.
Annexures
The documents listed below are available in PDF however if you would like a copy in HTML please contact the Office of the Clerk Assistant (Committees) on 02 6277 4397.
Annexure
A
BDO
Kendall Schedule A (Pages 9-10/26 of the BDO Kendall Report.)
ATM
Cash Withdrawal Transactions Commonwealth Bank Mastercard – Mr Craig Thomson
Schedule
A covering the period 13th April 2007 24th November 2007.
Annexure
B
List of Reviews completed since 2007
Annexure
C
Correspondence between Mr Priani and Mr Fowlie.
-
From
Mr Pirani to Mr Fowlie Tuesday 4th August 2009 9:18am
-
From
Mr Fowlie to Mr Pirani Monday 10th August 2009 2:14pm
-
From
Mr Pirani to Mr Fowlie Tuesday 11th August 2009 10:14am
Annexure
D
Email
from Mr Pirani to Ms Kathy Jackson Wednesday 20th May 2009 1:44pm
Annexure
E
Letter
from Ms Kathy Jackosn to Mr Ken Fowlie, dated 11th December 2008
Annexure
F
Letter
from Elias Hallaj, Assistant National Secretary of the Australian Labor Party
National Office to Alan Page, Assistant Director Funding and Disclosure the
Australian Electoral Commission advising of the Labor Party’s Associated
Entities, which includes the HSU. 10 March 2009.
Letter
from Sue Sayer to Kathy Jackson 12 May 2012
Letter
from the AEC to Karl Bitar of the ALP 18 May 2009
Letter
from Kathy Jackson to Sue Sayer 26 May 2012
Letter
from Kathy Jackson to Paul Pirani 13 October 2012
Annexure
G
Letter
from Ken Fowlie to Terry Nassios 16 June 2009
Letter
from Ken Fowlie to Paul Pirani 30 June 2009
The Hon Bronwyn Bishop
MP
Shadow Special Minister
of State
The Hon Alex Somlyay MP
Deputy Chair – JSCEM
Senator Scott Ryan
Senator
Simon Birmingham