The minister the money and the mine. How a rotten deal was hatched

As waiters took orders for toasties and coffee at the Little Teapot Café in the sleepy coastal hamlet of Davistown, NSW, four men were discussing a deal as big as it was potentially rotten.

A businessman was seeking political backing from the NSW Liberal Party for a Chinese state-owned company to buy an Australian mine. They were not too fussy which one.

Former NSW mines minister Chris Hartcher departs ICAC after giving evidence in 2014.  Photo: Wolter Peeters

In return, the businessman was offering to funnel $2 million dollars to the party.

Last week, in a signed statement, the businessman outlined what happened at the café that day in 2012. He says he told the three Liberal insiders dining with him that he didn’t want the donations traced.

A heavy hitter

“Don’t worry,” one of the men told him, according to the businessman. “We have offshore accounts.”

Australia is in the midst of a fierce political debate about two interlinked issues confronting the Turnbull government.

The first is the need for a federal anti-corruption commission, which has been promised by Bill Shorten but is viewed warily by the Coalition. The second is the challenge posed by the intersection of local politics, donations, and foreign interests, including those linked to the Chinese government.

Chris Hartcher Photo: Sasha Woolley

A heavy hitter

In March 2012, the businessman who later dined at the Little Teapot Cafe was approached by a wealthy Chinese broker who wrote that he was representing a “very large state-owned mining company in China”.

“They are interested in any metal mine (gold, iron, etc.) As long as the exploration is done,” the broker said in an email, obtained by Fairfax Media.

Ye Cheng, of Landbridge, and then trade minister Andrew Robb andMinister for Resources, Energy and Northern Australia, Josh Frydenberg in 2015.  Photo: Glenn Campbell

Fairfax Media has identified the Chinese company – which has subsidiaries in Australia – but is not naming it.

In 2012, this company had up to $700 million ready to spend in Australia, having purchased a $400 million mine a few years earlier.

In another email, the firm’s broker queried if Australian politicians could “release info” about mines that could be bought, “or introduce us to the mine owners?”

The Australian businessman says that, to answer this question, he spoke to a longstanding contact in the NSW branch of the Liberal Party. His contact, an active figure in the party who has worked on several campaigns, offered to connect the Chinese company with then energy minister Chris Hartcher.

But, the contact had said, this could not be done for free.

“What is in it for the party?” the businessman quotes his Liberal contact as saying.

After consulting with the Chinese broker, the businessman says he offered his Liberal contact up to $2 million in donations. He also says he cautioned that the donations should only be discussed face to face: “no phone calls, no emails”.

The Liberal figure had responded: “It will be fine. I will take care of it.”

In April 2012, the businessman emailed the Chinese broker to update him.

“My [Liberal] contact … has confirmed he has made arrangements with the government people,” the email says. “The Minister has already pencilled in a meeting.”

The email goes on to say: “The Minister is Christopher ‘Chris’ Hartcher, New South Wales Minister for Minerals & Resources. He’s a heavy hitter in State politics.”

Offshore accounts

The businessman told Fairfax Media that his Liberal contact, who did not respond to calls from Fairfax Media, arranged a meeting at the Little Teapot Café, in Mr Hartcher’s then electorate of Terrigal, with two other Liberal Party insiders to discuss the potential deal.

“I said, ‘Listen guys, I am not touching any of the money,’ ” the businessman says he told the trio.

He says he was assured the funds could be received without detection, including via offshore accounts. He also says he was told that “Chris Hartcher knows what is going on but there is plausible deniability”.

The emails confirm that after the Little Teapot meeting, the Liberal contact bypassed bureaucrats and staffers and arranged a meeting directly between the businessman, Mr Hartcher and a senior public servant at NSW Parliament House. Emails record the meeting being held in late May 2012, and detail a promise from Mr Hartcher to personally meet the Chinese officials behind the proposal.

“The minister has his finger on the pulse of the whole mining industry … His time is very precious, and [he] needs to know how serious your people really are. After an initial meeting, he would place your people directly in contact with the sellers,” one email says.

It is tempting to disregard the businessman’s account, given it happened years ago and ultimately fizzled out with neither a mine purchase nor a donation.

But the emails confirm the meeting with Mr Hartcher occurred and suggest the promise of donations, rather than the potential for a mine purchase, got the Liberal Party to open Mr Hartcher’s door.

Mr Hartcher also has form.

In 2016, an investigation by the NSW Independent Commission Against Corruption – which was never privy to the Little Teapot proposal – found Hartcher had a “significant role” in operating a political slush fund to collect unlawful donations from property developers.

The final ICAC report recommended the Director of Public Prosecutions consider charging Hartcher, who left politics in 2015 with larceny. No charges have yet been laid. Contacted for a response, Mr Hartcher said: “Thanks very much for your call. I don’t have anything to do with Fairfax. Goodbye.”

The businessman says he decided to contact Fairfax Media and signed a statement in light of the intense debate in Federal Parliament about how to deal with donations made to gain improper access or influence over public officials.

The issue has come to the fore again in connection to donations from businessmen linked to Beijing and questions about whether they have been acting (like many businesses) to advance their own corporate interests, those of a foreign power or, as most donors insist, simply to participate in the democratic process.

Donations, though, are not the only way to get access to the political class.

A different deal, but more questions

In September 2015, ten months before billionaire Chinese businessman Ye Cheng placed Australia’s former trade minister Andrew Robb on a yearly retainer of $880,000, Mr Ye travelled to Adelaide for a meeting with local officials over a different deal.

It was a busy time for Mr Ye, who was finalising his purchase of a long-term lease of the Darwin port. The port deal placed Mr Ye, who is close to the Chinese government and is a member of a Beijing-endorsed political body, under fierce scrutiny.

It also caused a diplomatic spat between Australia and the US amid claims the deal could give Beijing control over an important asset. The remarkably generous retainer Mr Ye gave Mr Robb sparked a fresh round of headlines when it was revealed last year.

But it was not until January this year that Mr Ye’s dealings in South Australia became public, via a short state ombudsman’s report that generated no coverage outside the state.

In September 2015, Mr Ye had travelled to South Australia to meet a delegation of local and state government officials. During a meeting in Adelaide, Mr Ye asked a senior public servant responsible for attracting investment to South Australia if the pair could conduct some business on the side.

As state development agency official Jing Li later told the Ombudsman: “Mr Ye wanted me to do some deals for him. I declined because I am a public servant.”

But an elected official at the Adelaide meeting was more amenable.

Andrew Lee was a restaurateur before being elected mayor of the town of Mount Gambier in late 2014, when he vowed to use his position to increase Chinese investment in the region.

“I would like to perhaps bring a delegation to visit China in the coming months, to showcase what we have for them to invest,” Cr Lee said.

Cr Lee first met Mr Ye while on a government delegation to China in April 2015. When Mr Ye headed to Adelaide in September 2015, the pair met again. This time the forum was a meeting hosted by public servant Jing Li.

A few days later, Jing Li and Cr Lee accompanied Mr Ye on a regional tour to scope potential investments near Mount Gambier.

The Rymill winery in the Coonawarra caught the billionaire’s eye.

A ‘gentleman’s agreement’

Several weeks after this, Cr Lee claims he struck a “gentleman’s agreement” with Mr Ye that would see the mayor receive a benefit worth more than half a million dollars if he helped Mr Ye buy the Rymill Winery.

This handshake agreement appears striking on several fronts, including Cr Lee’s ability to morph seamlessly from mayor to winery broker. Cr Lee has no obvious experience selling agribusinesses. For this deal, he wouldn’t need it. The winery had been on the market for months and the Rymill family was eager to sell.

Also eyebrow-raising is what Cr Lee was given for his help.

A commercial property broker told Fairfax Media that brokers usually take a cut of under 1 per cent for a mid-size deal. “If we get 2 per cent for a $13 million property, we are jumping up and down,” he says.

When the Rymill Winery was sold to Mr Ye for $13,275,000, Cr Lee was given a 5 per cent stake worth more than $660,000.

One local government official who spoke to Cr Lee about the deal says not only does his role in it stink, but that the Ombudsman’s inquiry released this year lacked rigour.

The Ombudsman never interviewed Mr Ye, which the local government official describes as “a staggering omission.” (Mr Ye did not respond to messages from Fairfax Media about this story).

The question of whether the Chinese billionaire hired Cr Lee because he was a mayor with connections to state public servants and others of influence, or, whether a benefit of $660,000 was fair consideration for buying an asset its owners wanted to offload, barely get a mention.

Mayors in China can have considerable local standing and power and are often cultivated by businessmen. This, too, is ignored.

More scrutiny

The Ombudsman’s report finds C Lee did not receive the $660,000 stake because he was mayor, although it acknowledges that “one reading of the facts” might lead to a different conclusion. The report ultimately clears Cr Lee, who declined to answer questions on Friday.

“I laughed when I read that report,” says the local government official.

In mid-2016, as Cr Lee was preparing to receive his stake in the winery, former federal trade minister Andrew Robb was preparing to receive his first consultancy payment from Mr Ye.

Like Cr Lee, Mr Robb has previously insisted the generous fee he is paid- $880,000 a year for an ambiguous consulting service- has nothing to do with any influence he still wields in Australian politics.

But where Cr Lee has at least faced some scrutiny from a state ombudsman, there is no federal integrity commission to test Mr Robb’s assurances.

Mr Robb’s consulting arrangement is under added scrutiny because of Mr Ye’s close ties to the Chinese Communist Party, which has a strategy of securing influence among overseas former and serving politicians. Mr Robb has angrily dismissed any suggestion he could be bought.

If Bill Shorten becomes the next prime minister, he’s promised the introduction of a federal ICAC that could scrutinise this claim.

Malcolm Turnbull says he is still considering whether to support an ICAC-type body, but insists that new laws to prevent foreign governments or their proxies from exercising undue influence in Australian politics, including via donations, will lead to much needed transparency.

The Little Teapot Cafe offer, and Mr Ye’s Australian dealings, suggest far more scrutiny, in whatever form, is needed when corporate interests, foreign money and politics collide.

 

Article originally published in the SMH 5th Feb 2018

Mr Hartcher also has form.

In 2016, an investigation by the NSW Independent Commission Against Corruption – which was never privy to the Little Teapot proposal – found Hartcher had a “significant role” in operating a political slush fund to collect unlawful donations from property developers.

The final ICAC report recommended the Director of Public Prosecutions consider charging Hartcher, who left politics in 2015 with larceny. No charges have yet been laid. Contacted for a response, Mr Hartcher said: “Thanks very much for your call. I don’t have anything to do with Fairfax. Goodbye.”

Bill Shorten is supporting a federal anti-corruption commission. Photo: Alex Ellinghausen

“Don’t worry,” one of the men told him, according to the businessman. “We have offshore accounts.”

Australia is in the midst of a fierce political debate about two interlinked issues confronting the Turnbull government.

The first is the need for a federal anti-corruption commission, which has been promised by Bill Shorten but is viewed warily by the Coalition. The second is the challenge posed by the intersection of local politics, donations, and foreign interests, including those linked to the Chinese government.

The truth about political donations: there is so much we don’t know

The $200m question: Who gave to the major parties in 2016-17?

Lobbying has also been shown to hamper competition from new companies and those just entering the market, by putting up barriers such as trade tariffs.

This means that companies often need to engage in political lobbying or risk ceding ground to competitors. Their competitors might have an opportunity to rig the rules of the game to their own benefit.

This can be seen particularly in the US, where the pharmaceutical and tech lobbies have been prolific in securing favourable regulations with regards to patent rules, net neutrality and government subsidy programs (such as with the cripplingly expensive subsidised drug scheme).

Rent-seeking and monopolies

Another problem with lobbying is that it often leads to “rent-seeking”. This is where companies (or people) attempt to generate wealth without creating any benefit for society (through grants, subsidies, or tax breaks, for example).

Through privatisation, rent-seeking has led to private monopolies in areas like major roads, electricity and water infrastructure.

The cost of rent-seeking can be hard to quantifiy. But research in Europe suggests that the cost of rent-seeking (due to income transfers, subsidies and preferential tax treatment) is approximately 7% of all economic output in the Eurozone area.

We get the Government they pay for