Is domestic corruption alive and flourishing in Australia?

December 2021  |  SPECIAL REPORT: WHITE-COLLAR CRIME

Financier Worldwide Magazine

December 2021 Issue

Australia believes that corruption does not exist in the country, or if it does, it tends to be limited to certain areas of state government activities, particularly associated with land and property developments and the allocation of public funds for partisan political purposes (known in Australia as ‘pork-barrelling’). Despite fraud being a significant concern for Commonwealth public procurement, Australia still lacks a robust, proactive, national integrity or anticorruption commission.

Such agencies have existed for many years in each Australian state, often referred to as Independent Commissions Against Corruption (ICAC) or crime and corruption commissions. While certain investigations have resulted in legitimate criticisms of how these agencies behave, they play an invaluable role in society: holding those with commercial and political power (in and out of public office) to account for their use, or misuse, of public revenue and public trust.

The Australian government has, for a long time, resisted the need for a robust, independent agency that might hold Commonwealth public servants, politicians and their staff to account, in the use and misuse of public office or of public revenue. Rather, the Commonwealth preferred to rely on a patchwork of oversight agencies, which have, in practice, limited reach and almost no public awareness of their existence or role. Serious questions arise as to why Australia’s national government is so reluctant to establish a robust independent anticorruption agency to promote public integrity. Regrettably, it is no longer enough for politicians to say “trust me”, as the public rarely seems to do so.

While the conservative media and their supporters praise state ICACs for investigating the misconduct of current and former Labor politicians, most notable, the current Victorian premier and his union relationships, and, separately, members and associates connected to Edward Obeid, a former New South Wales (NSW) politician, they decry investigations into popular right wing politicians – particularly the former NSW premier, Gladys Berejiklian, who voluntarily resigned once the NSW ICAC announced public hearings into her conduct associated with the grant of public monies to organisations in the electorate of a NSW politician (who was, at the time, her undisclosed partner).

Then, in South Australia, in the space of 24 hours during October 2021, parliament unanimously, and without debate, stripped its state ICAC of a range of powers, which directly cut across ongoing investigations into the conduct of various state politicians. This article explores some of these issues.

Australian states have had independent ICACs for many years. Overall, they have performed a valuable service to the community, identifying and investigating allegedly improper conduct, including misconduct that may amount to corrupt conduct or a breach of trust or public office. The policy underlying ICACs is to investigate conduct and inform public servants of where integrity and accountability have failed and to promote reform to avoid such conduct in the future.

It is not for an ICAC to prosecute an individual for any specific criminal offence. That duty lies with the statutory offices of state Directors of Public Prosecutions (DPPs). Recent criticisms of ICAC in NSW have focused on a too frequent use of public hearings, characterising them as “anti-rule of law star chamber inquisitions”, resulting in unjustified and maybe irreparable damage to public reputations and in some circumstances, inappropriate behaviour in the conduct of investigations and the long delay in completing investigations.

In December 2018, the Australian government published a consultation paper for a new Commonwealth integrity commission. Following a limited public consultation process, and in answer to attempts by independent senators in the Australian Senate to introduce a Private Member’s Bill for a more robust ICAC style, Federal Integrity Commission, in November 2020, the government published an exposure draft Commonwealth Integrity Commission Bill 2020.

Under the Integrity Bill, the proposed Commonwealth Integrity Commission (CIC) will report to the attorney general and will be subject to oversight by an independent inspector general and a Parliamentary Joint Committee. Funding in the 2019-2020 Commonwealth Budget was allocated at about AU$106m to establish the CIC. While the final form of the CIC may vary (subject to political negotiations in parliament), the current Integrity Bill provides for two divisions.

First, a ‘law enforcement integrity division’ incorporating the existing structure, jurisdiction and powers of the Australian Commission for Law Enforcement Integrity (ACLEI) would supervise a limited number of Commonwealth law enforcement agencies which exercise significant coercive powers. Second, a ‘public sector integrity division’ would have general jurisdiction over public service agencies, departments and Commonwealth corporations together with parliamentarians and their staff. The structure of the CIC is be administered by a commissioner with two divisional deputy commissioners.

The law enforcement division can compel production of documents, exercise questioning and inspection powers, enter and search premises and seize evidence, hold hearings (public or private), make formal recommendations and arrest individuals. The public sector integrity division can compel protection of documents, exercise questioning and inspection powers, and make formal recommendations, yet cannot arrest individuals, cannot enter or search premises, cannot seize evidence and cannot hold public hearings.

The threshold tests for referrals and what constitutes ‘corrupt conduct’ are limited. Public sector corruption can only be investigated if an identified criminal offence has been or is being committed. In contrast, with the law enforcement division, corrupt conduct includes a range of offences and ‘corruption of any other kind’, not limited to a criminal threshold for an identified offence.

While the law enforcement division appears reasonably robust with the CIC able to initiate its own investigations, the public sector division has flaws which have been widely criticised. These include that no corrupt findings can be made against a parliamentarian or public servant, and no public hearings can be held to examine the conduct of parliamentarians or members of the public sector or indeed, anyone outside the public sector (the public or private commercial interest who might dishonestly or improperly seek to influence or attempt to influence the public decision-making process). There is also no provision for a referral from the public or a whistleblower for public sector misconduct. The CIC can only act on an authorised referral, not on its own initiative (unless the CIC becomes aware of public sector corruption during an existing permitted corruption inquiry).

These features make the proposed CIC significantly different and in the eyes of many commentators, a significantly weaker body than state-based ICACs. A number of senior retired judges with considerable experience in investigating public sector corruption have been very critical of the proposed CIC model. The late Hon. David Ipp QC, a former NSW ICAC commissioner and appellate judge, was reported in the media as saying the CIC was the “kind of integrity commission that you would have when you don’t want to have an integrity commission…it creates a wall behind which corrupt public officials can hide…(and was and is)…like a colander – it would be really good to make rice in it, it’s got so many holes”.

The regime appears inconsistent with protecting whistleblowers, forcing them to report agency misconduct to the agency itself or some other body without the protection of any independent body. Geoffrey Watson SC, a leading criminal senior counsel involved in some of the pioneering work by the NSW ICAC (and subjected to significant litigation by aggrieved former politicians challenging his conduct as counsel assisting ICAC) is equally scathing, saying the proposed CIC has “fundamental flaws” some of which were “so obvious as to be laughable”.

On 21 October 2021, The Centre for Public Integrity published an analysis of the Integrity Bill as it might impact the Commonwealth public sector as against each state and territory ICAC-style agency. The Centre concluded that the proposed CIC would, if established in its current form, be the weakest and least effective integrity agency in the country, it would be ineffective in investigating or exposing corruption in government and the public sector, and it required urgent amendment if it was to be fit-for-purpose.

Other commentators have been critical of the NSW ICAC model through extensive public hearings. They support the limited role of public hearings, preferring to leave the examination of public corruption behind closed doors to protect individual reputations. However, there is considerable criticism for having one set of accountability rules for public officials (the law enforcement public officials) and another less transparent set of accountability rules for parliamentarians, the public sector and their staff. There appears to be no justification in principle for treating them differently and it raises legitimate concerns as to why politicians want themselves, their staff and the public sector to be treated differently from law enforcement agencies.

On 20 October 2021, independent senator Rex Patrick introduced the Australian Federal Integrity Commission Bill 2021 and the 2021 Bill Explanatory Memorandum in the Australian Senate. This Bill is promoted by independent politicians in answer to the widespread criticisms of the Integrity Bill. In the Second Reading Speech, the senator noted that “questions of integrity have plagued this Parliament”. Independent politicians are seeking to negotiate support from both the opposition Labor Party and government members unhappy with the Integrity Bill. It remains to be seen what occurs.

To illustrate the problems arising from the Integrity Bill, on 21 October 2021, the NSW Supreme Court convicted and sentenced Edward Obeid, his son Moses Obeid and a former NSW minister, Ian Macdonald, to significant terms of imprisonment for conspiracy to commit wilful misconduct in public office, in misusing their positions for personal gain (see R v Macdonald; R v Edward Obeid; R v Moses Obeid (No 18) (2021)).

Their conduct involved a conspiracy to benefit from a rezoning of rural land with a view to permitting development opportunities and for substantial gain (up to AU$30m) to be secured by the conspirators. It is doubtful the initial NSW ICAC investigation into the conduct of these former politicians and business associates could take place under the Integrity Bill, given the limited facts known to ICAC before it commenced its long investigation. Interestingly, there has been very little, if any criticism, of ICAC for its role in these matters save from the players themselves.

It is, however, abundantly clear that the public dislikes politicians and their associates (seeking to influence the public administration of revenue) protecting themselves from independent scrutiny. As the rather acerbic website Crikey observed on 22 October 2021, “the discretionary allocation of public funding — in the view of politicians across the political spectrum, the very core of democracy — remains a process riddled with partisan and, perhaps, personal self-interest, rather than a rigorous process of determining the public interest in the use of precious taxpayer funds”.

Whatever reforms are promoted, they ought to have at the forefront a robust system of investigation and holding those exercising public power or seeking to exercise influence on public decision making, to account for conduct that is or may be corrupt (broadly defined). To do otherwise is to potentially stain the integrity of the Australian political system and lessen the public trust in those elected or appointed to public office. That is not in the best interests of a democratic process that values integrity, transparency and accountability. It is hoped a more robust CIC is ultimately established as a body that generates respect from the community and enhances, not diminishes, integrity.

 

Robert Wyld is a consultant at Johnson Winter & Slattery. He can be contacted on +61 (419) 337 557 or by email: robert.wyld@jws.com.au.

© Financier Worldwide

BY

Robert Wyld

Johnson Winter & Slattery

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