Australia Corruption Probe Says Ex-Ministers Be Charged

Two former New South Wales state ministers, accused of corruption in the awarding of coal licenses, should be criminally charged, an inquiry said.

The Independent Commission Against Corruption today recommended to the public prosecutor that former Labor party mining minister Ian Macdonald and his predecessor Eddie Obeid be charged with conspiracy to defraud after Macdonald awarded a coal-exploration license covering Obeid’s land. Both men had denied any wrongdoing in their testimony.

The inquiry heard that Obeid’s family stood to make more than A$100 million ($90 million) from inside information on the coal-exploration licenses, while one lawyer said the corruption was of a scale not seen since the early 1800s when the so-called Rum Corps regiment controlled the former prison colony’s economy. The investigation has caused a backlash against the Labor party in Australia’s most-populous state, where Prime Minister Kevin Rudd must shore up support if he is to win elections due by Nov. 30.

“This issue has damaged Labor’s brand in New South Wales and therefore its election prospects federally,” said David Burchell, a professor of humanities and political analyst at the University of Western Sydney. “There’s no kind of light show that Rudd can perform that can magically make the party’s image problem in the state go away quickly.”

Zero Tolerance

Rudd told reporters today that he had been “disgusted by what I have seen before ICAC,” adding “anyone responsible for corrupt behavior should face the full force of the law.”

Rudd, who challenged and defeated Julia Gillard on June 26 to reclaim the federal Labor leadership, intervened in the running of the New South Wales branch of the party, saying on July 4 that there will be zero tolerance of corruption.

The commission regarded evidence Obeid gave on some important issues as “deliberately untrue,” Commissioner David Ipp wrote in the report. “The commission regarded his repeated attempts to distance himself from the Obeid family business as deliberately false.”

The license was granted to Cascade Coal Pty. in 2008, according to the inquiry. Five investors in the company should be charged with fraud, the commission recommended.

Coal Exploration

Macdonald, then Minister for Primary Industries, opened a number of areas in the state for coal exploration and issued licenses, according to transcripts from the inquiry. Among them was the Mount Penny Exploration license, which covered an area located on top of a farm that had been purchased by a trust controlled by Obeid’s family, Geoffrey Watson, the lawyer assisting the commissioner, told the inquiry.

“The practical effect of Mr. Macdonald’s decision has been to confer massive cascading profits upon Mr. Obeid and his family,” Watson said.

The value of the family farm quadrupled, giving the Obeids a profit of more than A$13 million, Watson said, as well as a profit of A$1 million to A$4 million Obeid would have made from taking part in the purchase of adjacent properties. In addition the Obeids bought a stake in Cascade, which they agreed to sell in 2010 for A$60 million.

“They outlaid A$200,000 to recover A$60 million,” Watson said.

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.