Corrupt conduct over Mount Penny tenement: ICAC’s verdict

After months of investigations, almost 100 witnesses and many memorable moments, the Independent Commission Against Corruption has found Ian Macdonald, Eddie Obeid and Moses Obeid as well as a number of associates engaged in corrupt conduct, referring the matter to the Director of Public Prosecutions.

The ICAC this morning released its findings on Operation Jasper which investigated allegations former NSW mining minister Macdonald rigged a coal tender process in 2008, awarding an exploration licence in the Bylong Valley which benefited the family of former Labor powerbroker Eddie Obeid.

It is unclear how big a windfall the Obeids stood to gain if the Mount Penny coal mining tenement was to go ahead, but Commissioner Ipp’s report estimates it to be between $50 million and $100 million.

ian-macdonald-2.jpgThe Commission's report found Macdonald misused his ministerial power by leaking confidential information to members of the Obeid family.

The ICAC’s report said Macdonald was “an unsatisfactory witness” during the inquiry, accusing him of giving “deliberately untrue evidence”.

“The Commission came to a view that Mr Macdonald was tailoring his evidence to fit the evidence of other witnesses, and attempting to concoct an innocent explanation to explain away damning facts,” the ICAC stated.

“In many instances, Mr Macdonald demonstrated an unwillingness to answer direct questions. He attempted to avoid answering direct questions if answering the questions could do him harm.

“Overall, the Commission came to the view that it could not rely on any of the evidence of Mr Macdonald, save where it involved an admission against interest or where it was corroborated by evidence the Commission regarded as reliable."

The corruption watchdog also said both Eddie Obeid Sr and his son Moses Obeid engaged in corrupt conduct by participating in the agreement with Macdonald.

The Mount Penny tenement covers the majority of the Obeid family property, Cherrydale Park as well as two neighbouring properties which were either partly owned by the Obeids or their associates.

Obeid Sr was a parliamentary colleague of Macdonald's and the ICAC reports the exploration licence substantially increased the value of all three properties.

Eddie-Obeid.jpgCommissioner Ipp labelled Obeid Sr as an “unimpressive” and “aggressive” witness, stating: “The Commission would be hesitant in accepting his evidence on any contentious issue”.

“He gave evidence on some important issues which…the Commission regarded as deliberately untrue,” the report stated.

“The Commission regarded his repeated attempts to distance himself from the Obeid family businesses as deliberately false, and merely an attempt to construct a defensive position between him and some of the issues that lie at the heart of this inquiry.

“It was plain that, if he felt that an honest answer could damage his position, he simply evaded providing an answer."

Releasing a statement through his lawyers today, Obeid Sr rejected the findings and said he will be consulting with his legal team.

"I regret to have to say that it was as I anticipated – given the animosity of both counsel assisting and the Commissioner during the hearing phases," the statement said.

‘‘I reject the assertions by the Commissioner that I acted in any way that could amount to corrupt conduct. It will be necessary for me to consult my legal representatives before any detailed response is to be published, but I wish to make it clear that I reserve my right to seek judicial review in respect of the adverse findings.’’

The report found Macdonald also acted corruptly when he decided to reopen the expressions of interest (EOI) process for mining exploration licences in order to favour mining heavyweight Travers Duncan, who he also provided with confidential information – namely a “Proposed NSW Coal Allocations" document.

The Commission revealed that the EOI process was reopened so Cascade Coal, in which Duncan had an interest, could participate.

During the investigation Duncan launched action in the NSW Supreme Court seeking to quash ICAC proceedings.

Cascade was awarded the Mount Penny coal exploration licence and moved to enter into agreements with Bylong Valley land owners to purchase the properties at about four times their market value.

The deal was subject to a mining lease being granted.

The Obeids purchased Cherrydale Park for $3.65 million but under the agreement with Cascade, they were expected to receive $17 million.

Coggan Creek was bought for $3.5 million and was due to be sold for $14 million, while Donola had been purchased for $600,000 and was to be sold for $2.4 million, ICAC stated.

Cascade also entered into a mining joint venture agreement with Buffalo Resources, an Obeid family associated entity, whereby Cascade granted to Buffalo a 25 per cent interest in the Mount Penny joint venture.  

By the time Cascade investors sought to strike a deal with the White Energy Company to sell the Mount Penny asset for $500 million, a number of reports had emerged the Obeid family was involved.

A whiff of Obeid involvement in the public sphere had some Cascade investors concerned the deal would fall over, and so a plan was hatched to extract the Obeid interest.

Coal & Minerals Group, a company owned by a Cascade investor and his family, agreed to pay Southeast Investments Group, an Obeid entity, $60 million for its 25 per cent stake in the Mount Penny tenement.

At the time of ICAC’s public inquiry $30 million of the $60 million had been paid.

In lieu of the remainder the Obeid family took up Cascade share capital.

The ICAC has now referred the matter to the DPP to consider pursing criminal charges against Obeid Sr, Moses Obeid, Macdonald, Duncan, Richard Poole, John Atkinson, and John McGuigan.

Commissioner Ipp also suggested attempts were made to mislead the ASX.

"There was evidence before the Commission of attempts by some directors of White Energy to evade a request from ASX for information concerning the calculation of Cascade’s capitalised mining costs. There was other evidence that a false announcement was made to ASX concerning the reason for terminating the proposed arrangement between White Energy and Cascade," the report stated.

Greens MP John Kaye has called on Premier Barry O'Farrell to cancel Cascade Coal's Mount Penny exploration licence.

“The Mt Penny coal mine is now officially mired in corruption. Approval should be withdrawn and the development abandoned,” he said.

Prime Minister Kevin Rudd today sought to distance the federal Labor party from the ICAC’s findings saying he was “disgusted” with the revelations.

“Anyone who is responsible for corruption, for illegal behaviour, should face the full force of the law,” Rudd said

Opposition leader Tony Abbott labelled today as a “black day” for the Labor party, saying the findings are “damning”.

The ICAC is also investigating circumstances surrounding the allocation of the Doyles Creek coal exploration tenement.  The Operation Acacia verdict over allegations a training mine was approved by Macdonald without tender, despite his office advising against the decision, are due out next month.

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