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Issue #1633      April 2, 2014

AWH inquiry

History of Labor and Liberal corruption

The NSW Independent Commission Against Corruption (ICAC) inquiry into Australian Water Holdings (AWH) has revealed the involvement of senior members of both the Liberal and Labor parties in the company’s allegedly corrupt activities.

Eddie Obeid.

In the 1990s, the former NSW Labor government signed an interim agreement to cover AWH’s costs in managing water supply infrastructure works.

However, the company’s directors wanted to enter into a far more lucrative public private partnership agreement (PPP) with the government to carry out new works in Sydney’s north-western suburbs, and they expected a Labor faction led by Eddie Obeid to bring this about.

But the premier, Morris Iemma, was not on side. Therefore, according to one witness, in July 2008 Obeid and Joe Tripodi engineered the downfall of Iemma, and later of his successor Nathan Rees, who bitterly opposed Obeid. AWH then expected to be awarded the partnership if the government managed to force Sydney Water, the water supply authority, to drop its opposition to the deal.

Enter the middleman

In October 2008 the Obeid group sought Liberal Party support for the PPP by offering Arthur Sinodinos, then treasurer of the Liberal Party’s NSW branch, a seat on the AWH board, for a fee of $200,000 per annum. Under a “gentlemen’s understanding” he would also receive a five percent holding in the company, with an extra 2.5 percent if the PPP was implemented.

In 2009 Dr Kerry Schott, director of Sydney Water, warned him about dishonest members of the AWH board, and told him the company was making exorbitant expense claims.

In May 2010 an AWH investor also warned Sinodinos the company was in serious debt, its directors were paying themselves exceptionally high salaries, it couldn’t pay its tax or employees’ superannuation and was in danger of insolvency.

The Obeid group then secretly bought a 30 percent stake in AWH, with part of the proceeds from the sale of the Hunter Valley mining lease, which has been the focus of another ICAC inquiry.

By then AWH was in dispute with Sydney Water over $2 million in costs. In October 2010, referring to Dr Schott, an AWH director remarked “if only the bitch was gone”.

ICAC was also investigating claims that “administration costs” for which the company had billed Sydney Water, included fees for chauffeur-driven limousines and more than $75,000 in donations to the Liberal Party.

Former Labor Minister Michael Costa later testified that although the company had limited resources and scope of operation, three of its executives were paid at least $650,000 per annum. Since the early 1990s the company’s monthly bills had rocketed from $200,000 to $600,000.

In 2010 AWH contributed more than $43,000 to the Liberal election campaign, and allegedly made payments totalling $183,000 to “Eightyfive”, an alleged slush fund company owned by Tim Koelma, formerly a staff member of former NSW Liberal Energy Minister Chris Hartcher’s staff.

In November 2010 Sinodinos was appointed AWH board chairman and non-executive director. He was still honorary treasurer for the NSW Liberals, but after the November 2010 federal elections he was criticised for poor fund-raising efforts. However, the next month AWH contributed $30,000 to Liberal funds.

Meanwhile, cabinet Minister Joe Tripodi sought the approval of new premier Kristina Kenneally for a cabinet minute that implied support for the PPP, and said she “didn’t need to worry about the Liberals kicking up a fuss” about it, because Liberal members were involved in AWH.

However, she smelled a rat and wisely rejected the document. It is now said to have been doctored by Tripodi and fellow minister Tony Kelly (both Obeid allies), to express support for the partnership.

The Liberals take over

In 2011 Sinodinos became president of the NSW Liberals, and in March that year the Liberal/National coalition won the state election. A number of people with Liberal connections were subsequently retained as lobbyists by AWH, including Liberal powerbroker Michael Photios,

In July 2011 Nick di Girolamo, AWH Chief Executive, gave orders for Sinodinos to receive the extra 2.5 percent stake in the company that had been conditional on it receiving the PPP, the estimated value of which was then $1.2 billion. Sinodinos’ stake in the company was then estimated to be worth $20 million.

However, Dr Schott and the NSW Finance Minister opposed the partnership deal. In August Di Girilamo sent an angry text message to Premier Barry O’Farrell, and in September an AWH policy document outlined a strategy for a campaign against Sydney Water.

Di Girolamo suggested meeting shock jock radio host Allan Jones to “discuss AWH’s difficulties”, and Koelma is alleged to have drafted a letter making false allegations against Sydney Water management.

Di Girolano claims that in October 2011 O’Farrell’s chief of staff Peter McConnell said O’Farrell “wanted to move on a public private partnership” and that he (McConnell) would “fix” matters and sort out Sydney Water’s “attitude”.

O’Farrell later assured Di Girolano he wanted to proceed with an assessment of the partnership, but “It seems to be disrupted by incapable bureaucrats”.

In November 2011 Sinodinos relinquished his AWH holdings and entered federal parliament, filling a casual Senate vacancy. Costa took over as AWH chairman, allegedly for an annual fee of $150,000.

In January 2012 the government awarded AWH a 25-year contract to carry out the Northwest Sydney water works. It was a much less lucrative deal than the partnership would have been but it has still drawn accusations of corruption.

Last April Di Girolano sold his shares in AWH, and in September Sinodinos was appointed Assistant Federal Treasurer.

The growing stench

Hartcher resigned last December after ICAC raided his electoral office. Both Koelma and Hartcher have been accused of soliciting payments for political favours.

Last year, federal treasurer Joe Hockey paid back $11,000 in electoral contributions he had received from AWH, and this year he repaid another $22,000. Last week the Liberals repaid another $75,000 in AWH electoral contributions.

Sinodinos denies he knew about the contributions. Abbott denies he was warned about Sinodinos’ involvement with AWH, and has publicly defended him, but two weeks ago Sinodinos stepped aside as assistant federal treasurer.

Sinodinos and others will front the AWH inquiry this week, and an inquiry into Eightyfive will commence in April. The AWH and Hunter Valley mining lease inquiries are revealing evidence of corruption on a staggering scale. And there’s much more to come out.

As Sinodinos said last week after declaring he would be exonerated, “Watch this space”!

Next article – Notes from a Brigadista in Cuba (Part 2)

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