Sinodinos and the $20 million deal

Issue 
Eddie Obeid and Arthur Sinodinos.

The parade of ALP politicians before the latest NSW corruption inquiry has given way to a cross-party merry-go-round. As the Independent Commission Against Corruption calls the tune, Liberal Party luminaries are now on the carousel.

Liberal Senator and Assistant Treasurer, Arthur Sinodinos, has stood down from his ministerial position after being called to give evidence before the NSW corruption watchdog.

As the evidence has so far unfolded from a number of witnesses, Sinodinos was told before he became chairman of Australian Water Holdings (AWH) that the cashflow and costs of the company were out of control and there were serious concerns about its solvency.

Despite having no revenue at the time, the 10 employees at the company were paid grossly inflated salaries and were living the high life on company expense accounts.

AWH’s fortunes rested on winning a contract with the NSW government-owned Sydney Water to lay water and sewerage pipes.

With the NSW government certain to change from ALP to Liberal, Sinodinos was hired in 2010 by AWH for his political connections to “open doors”. He has to be the best paid doorman on the planet. For 100 hours work each year he collected $200,000.

One of the doors that Sinodinos managed to open was that of the safe in the NSW Liberal Party office where donations from AWH were gratefully received. One month after Sinodinos became chairman of AWH in November 2010, the company donated $30,000 to the state Liberal Party. Another $45,000 followed.

Sinodinos was treasurer of the NSW branch of the Liberal Party from 2009 to 2011 yet claims he cannot remember the donations. And, of course, he had no knowledge of the fact that the donations were being back-billed to Sydney Water, so it was actually the NSW taxpayers who were funding the Liberal Party.

Sinodinos stood to make $20 million from AWH if a deal between the company and Sydney Water came to fruition. The corrupt ALP powerbroker Eddie Obeid had a “secret” 30% stake in AWH.

Sinodinos said he was “shocked and disappointed” when he found out about the Obeid financial interest. Perhaps he failed to notice that Eddie Obeid Jnr had been employed alongside him for three years at AWH. Or maybe he just forgot.

Corrupt politicians and findings of corruption are nothing new in NSW. Nor are the sources of corruption hard to find. It is just a matter of following the money trail. Find the most profitable opportunities for capital accumulation from the state’s resources and you’ll discover who is prepared to bribe who and for what. Property developers have been an enduring source of corrupt activity and so too has the mining sector. They continue to be so.

One question that arises is whether the coalescing of both the ALP and the Liberal Party around the economic doctrine of neoliberalism has any connection to the cross-party rise of corrupt activity in recent times?

How buyers and sellers should behave in the marketplace was spelled out in the early 19th century by the English political economist, David Ricardo, who elevated the principal of “buyer beware” above the rule of law. He argued for the right of publicans to sell diluted beer if they could get away with it.

More recently, Paul Treanor has argued that neoliberalism is a social and moral philosophy and not just about economics. What follows from this is that neoliberalism is an ethic capable of acting not only as a guide to all human action, but substituting for all previously held ethical beliefs.

Market exchanges become an ethic in themselves. In this exchange every actor operates in their own interest. If this involves a little puffery, some sleight of hand here, a bit of creative accounting there, this is to be expected. Indeed it is to be anticipated, because everyone is making sure of the maximum possible return. It is an ethic which denies the possibility of a conflict of interest.

This certainly appears to be the case with AWH chief executive and prominent Liberal Party member Nicholas Di Girolamo, who was paid $250,000 just for signing a contract that came with an annual salary of $1.1 million. The company credit card allowed him $15,000 a month in expenses.

Di Girolamo managed to persuade two of his old schoolmates from St Patrick’s School in Strathfield, which he attended with Eddie Obeid Jnr, to put a couple of million into AWH. They are among a group who are now suing the directors for misleading and deceptive conduct.

They might find it heavy going. The Australian Securities & Investments Commission (ASIC) has just released a report that says Australia is too soft on corporate crime. ASIC chairpersonn Greg Medcraft is concerned that penalties are not as large as the proceeds of financial wrongdoing, which means that they can operate as an incentive rather than a deterrent. The maximum civil penalty for financial fraud is $200,000. It hasn’t changed since it was introduced in 1992.

Nor are there any non-criminal laws relating to disgorgement — the removal of gains made by a person involved in financial wrongdoing. Medcraft is reported to have repeatedly raised this issue with the federal government in recent months but apparently is yet to receive a response. Perhaps he raised it with Arthur Sinodinos.

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