House of Representatives Committees


| Joint Standing Committee on Electoral Matters

Navigation: Previous Page | Contents | Next Page

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.

Expenditure by Electronic Transfer from SGE Credit Union Account
 

 

 

 

 

 

 

 

 

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.

 

 

 

 

 

Response regarding Mr Thomson's expenditure 

extract of HSU Rules
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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:

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.

extract from 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

 

Navigation: Previous Page | Contents | Next Page

Back to top

Facebook LinkedIn Twitter Add | Email Print
Back to top