Image for Will Tasmania be left as the last state without regulation of political donations?

Tasmania might soon be the only state in Australia without the regulation of political donations if the Victorian Government follows the recommendation of a recent Victorian Ombudsman’s report and introduces comprehensive r electoral reforms.

In a mid-November report the Victorian Ombudsman recommended the Andrews Government reconsider the recommendations of an April 2009 state parliamentary committee report which argued state-based laws were needed to ensure appropriate regulation and disclosure of political donations.

The recommendation followed an investigation by the Ombudsman into allegations that several Liberal Party councillors favoured the interests of development company donors.

The Ombudsman’s investigation found none of the allegations was substantiated and noted that it was legal for councillors in Victoria to accept donations from property developers. However, it argued the current federal disclosure regime had serious flaws.

Donors kick in

At the heart of the Victorian Ombudsman’s investigation was a whistleblower complaint against Geoff Ablett, the Mayor of Casey City Council in the rapidly-expanding south-eastern suburbs of Melbourne. (Ablett, a former Hawthorn Australian Football League (AFL) player in the 1980’s and 1990’s, is the younger brother of the legendary AFL footballer, Gary Ablett Senior.)

The whistleblower alleged that Geoff Ablett – a Liberal Party member – had “offered or been involved in offering favourable planning committee decisions” to a property developer in return for donations to his election campaign as a Liberal Party candidate at the November 2014 state election. It was also alleged that three other councillors had been complicit in the scheme.

The final report stressed that none of the allegations was substantiated and it was legal for councillors in Victoria to accept donations from property developers.

However, as three of the four subjects of the investigation were active members of the Liberal Party and both Ablett and the Deputy Mayor had been preselected as candidates in the November 2014 state election, the investigation shed light on the largely hidden world of Liberal Party fundraising. (The fourth councillor was an independent.)

In her report, Victorian Ombudsman Deborah Glass noted that in the case under investigation the two councillors were pre-selected as Liberal Party candidates seven months ahead of the November 2014 State Election but remained active members of the council, including on the council’s planning committee, until a fortnight before the election. They also received donations for their campaigns from several property developers with interests in the municipality.

The Ombudsman’s report also noted that one of the donors “… had 610 planning applications before the council over a two-year period, and made donations to the councillors’ political campaigns of $44,000 and $32,575 respectively.”

The fatal flaws in federal political donations disclosure

The Ombudsman’s report pinpointed a major flaw in the current federal political donations regime: it does not require registered political parties to reveal whether the funds from donors were ear-marked for – and delivered to – a specific candidate or campaign.

In her report the Ombudsman noted a request from a property developer for a $65,000 donation to be directed to two specific councillors “only came to light as a result of my office issuing a summons for these records.”

The investigation also revealed another flaw in the current federal disclosure law: that internal party transfers can obscure electors from being able to identify the real source of funds behind a specific campaign.

In order to properly investigate the complaint the Ombudsman issued a summons to the Victorian branch of the Liberal Party of Australia for the campaign accounts of the two pre-selected candidates. While the Ombudsman noted the candidates had received donations from individuals and corporate donors, it was the origin of “funds transferred from other Liberal Party accounts, both state and federal” which caused most difficulty.

The source of the tracing challenge, the Ombudsman’s report stated, was that Liberal Party records “do not name the original donor, only the Liberal Party entity from where they originate.”

The loophole is simple: a donor can donate to a state branch or the federal secretariat of the Liberal Party with a request it be earmarked for a specific campaign or state. If the donation is over the disclosure threshold – which stands at $13,000 this financial year – both the branch which received the funds and the donor are required to disclose the donation. The funds can then be transferred to another branch of the Liberal Party.

However, the ultimate recipient only needs to identify the other Liberal branch as the donor while the intermediary branch simply lists the donor as one amongst many. The effect is that the public disclosure record reveals no link between the donor and ultimate beneficiary.  (If the donation was below the disclosure threshold, no donor disclosure is required at all by either the donor or Liberal Party branches, in which case there is no benefit other than convenience in routing a donation through an intermediate branch.)

The same loophole allowed the Tasmanian Liberals to accept $30,000 in the 2014 financial year from two sections of the Liberal Party without having to reveal who the original donor was.

In its last political donations return to the Australian Electoral Commission covering the 2013-14 financial year, Sam McQuestin, the State Director of the Tasmanian branch of the Liberal Party of Australia, listed a $15,000 donation from the New South Wales Liberal Party’s Paterson Federal Electorate Conference (FEC) and another $15,000 donation from the Wentworth FEC.

In the NSW branch of the Liberal Party, a FEC comprises all those branches within the boundaries of a Federal electorate. The seat of Paterson is just north of Newcastle on the NSW central coast and held by Liberal Bob Baldwin while Wentworth is an inner city seat held by Prime Minister Malcolm Turnbull.

Tasmanian Times emailed McQuestin asking who the original source of these two donations was. He did not respond to the specific questions.

Since 2001 there has been as much as a further $145,000 in donations transferred from the Liberal Party of Australia’s national office to the Tasmanian Liberals. While one $7500 transfer was recorded as “unspecified” and another $15,000 amount reported as “other receipt”, the remainder were all reported as being donations.

Tasmanian Times unsuccessfully sought clarification from McQuestin as to whether the “unspecified” and “other receipt” amounts were donations.

In the case of the donations from the Wentworth FEC and the Paterson FEC, the donor names – at best – may be among the 67 donors listed in the NSW Liberal Party’s return. If however, the original donors contributed below the $12,400 threshold for that year, no disclosure is required.

The donations transfer loophole is a two-way street: in 2013/14 the Tasmanian Liberals donated $40,000 to the Liberal Party of Australia’s national office and $13,750 to the NSW Liberal Party.

All the return (p.4) to the AEC from the Liberal Party’s federal secretariat and its (p.4) NSW branch return discloses is that it received the amounts from the Tasmanian Liberals. As there were no single donors of $40,000 or $13,750, the origin of the donations is untraceable as far as the public is concerned.

Donations and democracy

The Victorian Ombudsman rejected the complaint against the councillors and explicitly stated that her investigation “did not substantiate that these donations were either made, or received, for any improper purpose.”

However, she also noted the difficulty of gathering sufficient evidence to be able to prove any connection between donations and possible favourable decisions.

Glass noted in her report the correlation of a donation made immediately after a favourable planning decision may be “strong circumstantial evidence.” However, unless there was additional evidence, this alone was “unlikely to substantiate that improper conduct has occurred.”

While Glass wrestled with the evidentiary standards required to connect the dots between a political donation and a financially-induced decision, Justice Stephen Gageler from the High Court of Australia had traversed similar territory.

In October 2015 Gageler was a judge sitting in a case in which lawyers for New South Wales property developer Jeff McCloy argued the NSW legislation banning donations from property developers breached the Constitution. (McCloy has featured prominently in the Independent Commission Against Corruption’s (ICAC) investigation named Operation Spicer focussing on political donations to the NSW Liberal Party.)

In his judgment – in which he upheld the validity of the legislation, rejected McCloy’s case and awarded costs against him – Gageler wrote:

“Corruption is perhaps more readily recognised than defined. One universally recognised form of corruption, however, is for a public official to receive money in a private capacity in circumstances calculated to influence the performance of the official’s public duties … Although there might be favours without payment and payment without favours, the basic human tendency towards reciprocity means that payments all too readily tend to result in favours. Whether the causal sequence is that of payment for favours or that of favours for payment, the corrupting influence on the system of government is little different.”

At the heart of the Operation Spicer investigation are allegations that – while donations from property developers were banned – then-Liberal politicians accepted donations and then didn’t disclose them as required by NSW law.
In Victoria donations from property developers are legal so no laws were broken when the two   Casey City councillors accepted the donations at the centre of the Ombudsman’s investigation.

However, Glass’s report raised substantial questions about whether donations from property developers should be allowed. It also raises pointed questions about why it was impossible to easily identify the origin of donations to candidates’ political campaigns for a seat in State Parliament.

Glass argued the Victorian Government should reconsider the introduction of state-based legislation including strict donor disclosure laws. She wrote in her foreword:

“There can be little doubt that the lack of transparency in political donations and the lack of limitations on who can make those donations in Victoria creates an environment in which allegations of improper conduct can flourish. Whether they are substantiated or not, whether such allegations are legitimately made or are made for political mischief-making as is often claimed, is not the point. Ultimately, they create a perception that politicians can be bought, which reduces public trust in government.

Equally, this lack of transparency can leave political candidates exposed to unfair allegations that they have received donations for improper purposes. Shielding the state election process from a mire of allegations and hearsay is in everyone’s interests – voters, candidates and parties.”

What it means for Tasmania

The Ombudsman’s report – even though based on an investigation into a purely Victorian issue – has significant implications for Tasmania.

Unless the Turnbull Government breaks with the Federal Liberal Party’s 30 year-long resistance to lowering the donor disclosure threshold, the Victorian Government may well introduce its own political donation reforms and ban donations from property developers.

In which case, Tasmania would be left as the only state without its own donation disclosure thresholds.

With over $12 million dollars in income to the Tasmanian Liberal Party over the last decade from undisclosed sources because of weak federal electoral laws, the Hodgman Government faces an acute choice.

Does it follow the trend towards greater transparency when it comes to political donors? Or does it defend secrecy in the hope that there are no Tasmanian equivalents of the scandals which have been scrutinised by NSW’s ICAC?

If, as Glass argues, the absence of effective donor disclosure “reduces public trust in government”, the Hodgman Government may well come to rue having done nothing to end the secrecy which shields many political donors from public scrutiny.

The State Director of the Tasmanian branch of the Liberal Party of Australia, Sam McQuestin, wrote in an email to Tasmanian Times the party “fully complies with its legal obligations in relation to donations and disclosure and our Members of Parliament must comply with our strict Fundraising Codes.” Even so, the Hodgman Government should have nothing to fear from ensuring far greater transparency than is currently the case in Tasmania.

Bob Burton is a Hobart-based Contributing Editor of Tasmanian Times.

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EARLIER in this series of articles on TASMANIAN TIMES ...

• December 14: Who are the invisible major donors behind the Tasmanian Liberal Party?

• October 29: What happens if a major political donor doesn’t disclose?

• October 28: Who’s a Liberal donor gonna call? Rentbusters!

• October 27: The private pathology industry emerges as major Tasmanian Liberals donor