ICAC finds corrupt conduct over Mount Penny tenement
Wednesday 31 July 2013
The NSW Independent Commission Against Corruption (ICAC) has found that Ian Macdonald, the Hon Edward Obeid MLC (Edward Obeid Sr), Moses Obeid, Travers Duncan, John McGuigan, John Atkinson, John Kinghorn and Richard Poole engaged in corrupt conduct in relation to their actions involving the Mount Penny mining tenement in the Bylong Valley.
The Commission's report, Investigation into the conduct of Ian Macdonald, Edward Obeid Senior, Moses Obeid and others, released today, finds that the conduct Mr Macdonald engaged in included entering into an agreement with Edward Obeid Sr and Moses Obeid whereby he acted contrary to his public duty as a minister of the Crown by arranging for the creation of the Mount Penny tenement to benefit Edward Obeid Sr, Moses Obeid and other members of the Obeid family, and also by entering into an agreement with Edward Obeid Sr and Moses Obeid whereby Mr Macdonald acted contrary to his public duty as a minister of the Crown by providing Moses Obeid or members of the Obeid family with confidential information to benefit Edward Obeid Sr, Moses Obeid and other members of the Obeid family.
Mr Macdonald also acted corruptly by deciding to reopen the expressions of interest (EOI) process for mining exploration licences in order to favour Mr Duncan, and by providing Mr Duncan with confidential information, being the document titled "Proposed NSW Coal Allocations", and advice that the process for EOIs in coal release areas was to be reopened.
Edward Obeid Sr and Moses Obeid engaged in corrupt conduct by entering into the above agreements with Mr Macdonald, whereby Mr Macdonald acted contrary to his public duty as a minister of the Crown as described above.
Mr Duncan, Mr McGuigan, Mr Atkinson, Mr Kinghorn and Mr Poole engaged in corrupt conduct by taking steps to conceal the Obeid involvement in the Mount Penny tenement with the intention of deceiving relevant NSW Government public authorities or officials as to that involvement.
The report notes that in February 2011, the Commission received an allegation by a private individual that confidential information regarding the 2008 public tender for the awarding of the Mount Penny tenement had been "leaked" to members of the Obeid family. The ICAC initially examined decisions made by the then minister for primary industries and mineral resources, Ian Macdonald, to create a mining allocation area for coal exploration, known as Mount Penny, and to issue a coal exploration licence for the area.
The Mount Penny tenement, as granted, covered the vast majority of an Obeid property known as Cherrydale Park as well as all of two other nearby properties, Donola and Coggan Creek, which were part-owned by the Obeids or associates of theirs. Edward Obeid Sr was a parliamentary colleague of Mr Macdonald's. The grant of the Mount Penny exploration licence had the effect of substantially increasing the value of the three properties.
The Commission discovered that the EOI process was later reopened so that Cascade Coal Pty Ltd, a company in which Mr Duncan had an interest, and other parties, could participate. The Commission is satisfied that Mr Macdonald's motivation for deciding to reopen the EOI process for exploration licences was to favour Mr Duncan, so that companies with which Mr Duncan was associated would be able to submit EOIs.
Cascade was ultimately awarded the Mount Penny coal exploration licence after a company associated with the Obeid family agreed to withdraw its bid. Cascade entered into agreements with the owners of Cherrydale Park, Coggan Creek and Donola whereby Cascade in effect agreed вЂ“ subject to a mining lease being granted вЂ“ to purchase those properties at four times their market value.
The Obeids had purchased Cherrydale Park for $3.65 million but under the agreement with Cascade, they were due to receive $17 million. Coggan Creek had been purchased for $3.5 million and was to be sold for $14 million, while Donola had been purchased for $600,000 and was to be sold for $2.4 million. Cascade also entered into a mining joint venture with Buffalo Resources Pty Ltd, an Obeid family associated entity, whereby Cascade granted to Buffalo a 25% interest in the Mount Penny joint venture.
By the time the investors in Cascade wanted to enter into a deal with the White Energy Company Ltd to sell their asset for $500 million, there had been some public discussion about the Obeid family's involvement in the Bylong Valley. The investors in Cascade came to a view that the transaction would founder if it ever emerged that the Obeids had been or were involved. The means of extracting the Obeid interest was through the introduction of two new "cleanskin" companies, Southeast Investments Group Pty Ltd, an Obeid entity, and Coal & Minerals Group Pty Ltd, a company owned by a Cascade investor and his family. Under the terms of their agreement, Coals & Minerals agreed to pay Southeast Investments $60 million for its 25% interest. At the time of the public inquiry held as part of this investigation, $30 million of the $60 million had been paid. In lieu of the other $30 million, the Obeid family took up a substantial part in the share capital of Cascade. There was evidence that, in the event a mining lease is granted over the Mount Penny coal allocation area, their interest could be worth as much as between $50 million and $100 million.
The Commission is of the opinion that consideration should be given to obtaining the advice of the NSW Director of Public Prosecutions (DPP) with respect to the prosecution of Mr Macdonald, Edward Obeid Sr, Moses Obeid, Mr Duncan, Mr McGuigan, Mr Atkinson and Mr Poole for various offences.
The Commission will also furnish to the Commonwealth DPP evidence that may be admissible in the prosecution of Mr Duncan, Mr McGuigan, Mr Kinghorn and Mr Atkinson for offences under the Corporations Act 2001.
There was evidence before the Commission of the financial benefits accrued to the Obeid family as a result of the corrupt conduct the ICAC has found to have been engaged in by Edward Obeid Sr and Moses Obeid. The Commission has provided relevant information to the NSW Crime Commission for such action as the NSW Crime Commission considers appropriate, and has also disseminated relevant information to the Australian Taxation Office for such action as it considers appropriate.
There was evidence of possible breaches during the public inquiry of the Corporations Act 2001. The Commission will disseminate relevant evidence to the Australian Securities and Investments Commission for such action as it deems appropriate. The ICAC will also bring to the attention of the Australian Stock Exchange evidence of attempts by some directors of White Energy Ltd to evade an ASX request for information concerning the calculation of Cascade's capitalised mining costs, along with other evidence that a false announcement was made to ASX concerning the reason for terminating the proposed arrangement between White Energy and Cascade.
Media contact: ICAC Manager Communications & Media, Nicole Thomas, 02 8281 5799 / 0417 467 801