Chapter 4
Corrupting benefits
Subject / Paragraph /A – Introduction / 1
Reasons for outlawing corrupting benefits / 6
B – Existing Laws Regulating Corrupting Benefits / 11
Blackmail and extortion / 12
Secret or corrupt commissions / 14
Overseas approach / 19
C – Inadequacy of Existing Legal Framework / 29
D – Reform to Existing Legal Framework / 42
Disclosure of benefits made to registered organisations / 44
Corrupting benefits offence in relation to officers of registered organisations / 53
Prohibition on payments by employers to employee organisations or their officials / 58
A – INTRODUCTION
1. Paragraph (h) of the Terms of Reference required the Commission to inquire and report into:
any bribe, secret commission or other unlawful payment or benefit arising from contracts, arrangements or understandings between an employee association, or an officer of an employee association, and any other party.
2. A number of case studies examined whether such payments or benefits had been made. In particular:
(a) Chapter 3.2 of the Interim Report considered the legality of payments made by Thiess to the Australian Workers’ Union Workplace Reform Association Inc.
(b) Chapter 1 of Volume 2 of the Report examines payments totalling $3,200,000 by a number of employers in the maritime industry at the direction or request of the Maritime Union of Australia (MUA) or its officials. These included payments made to the MUA, payments made to a separate entity established by officials of the MUA and also a payment to a political candidate, who happened to be the Assistant Secretary of the Western Australian Branch of the MUA. The Chapter concludes that the payments were not made by employers completely voluntarily for legitimate purposes. They were made to secure industrial peace from, or to keep favour with, the MUA. In some cases the payments had to be made repeatedly.
(c) Chapter 6.2 of Volume 3 of the Report deals with Halafihi Kivalu, who was formerly a senior official and long-term employee of the ACT Branch of the Construction, Forestry, Mining and Energy Union (CFMEU). During the course of hearings in Canberra in July 2014, Halafihi Kivalu conceded receiving approximately $100,000 from two employers. He contends that these payments were gifts. Following his giving evidence a number of other employers came forward and made allegations concerning payments that they had made to Halafihi Kivalu. After the hearings Halafihi Kivalu was charged. The matter is presently before the criminal courts of the ACT. Accordingly no conclusions were expressed in this Report concerning the lawfulness of Halafihi Kivalu’s conduct.
(d) Chapter 7.2 of Volume 3 deals with the affairs of George Alex and Darren Greenfield. The principal issue addressed in Chapter 7.2 is whether cash payments were made to Darren Greenfield, an organiser with the CFMEU NSW, for favouring businesses associated with George Alex and Joseph Antoun. During 2013 regular cash withdrawals of $2,500 were made from a bank account held by a scaffolding business called ‘Elite’. These payments were referred to within Elite as ‘Union payments’. A substantial body of documentary evidence, principally text messages between George Alex and others, demonstrates that cash payments in the amount of $2,500 were made by George Alex and Joseph Antoun to Darren Greenfield.
(e) Chapter 7.3 of Volume 3 of the Report deals with donations and enterprise agreement. The central issue in this Chapter is whether the CFMEU NSW improperly obtained or managed donations from various companies. It has been found that a number of persons including persons within the CFMEU NSW may have committed a number of criminal offences against the Charitable Fundraising Act 1991 (NSW). This Report and all relevant materials have been referred to the Minister ministering the Charitable Fundraising Act 1991 (NSW) in order that consideration be given to conducting an inquiry pursuing to Division 1 of Part 3 of that Act into all of the CFMEU NSW’s practices concerning charitable fundraising.
(f) Chapter 7.4 of Volume 3 of the Report examines the payment in 2006 by the Thiess Hochtief Joint Venture operating the Epping to Chatswood Rail Project of $100,000 to the Building Trades Group Drug & Alcohol Committee. In truth, this was a disguised payment to the CFMEU NSW. The finding is that the payment may have been a secret commission in contravention of s 249B of the Crimes Act 1900 (NSW).
(g) Chapter 8.1 of Volume 3 of the Report makes findings that in 2013, David Hanna, then Secretary of the Builders’ Labourers’ Divisional Branch of the CFMEU in Queensland, received free work and materials in relation to his house at Cornubia from Adam Moore and Mathew McAllum, then employees of Mirvac. The finding made is that each of David Hanna, Adam Moore and Mathew McAllum may have committed criminal offences against the Criminal Code 1899 (Qld).
(h) Chapter 10.2 of Volume 4 of the Report makes findings that in 2010, the Australian Workers’ Union (AWU) Vic Branch and Cleanevent entered into an arrangement pursuant to which Cleanevent would make a payment of $25,000 per annum for three years to the AWU, in exchange for the AWU’s agreement to extend the operation of a Workchoices-era enterprise agreement beyond its nominal expiry date. The agreement to make the payment was recorded in a side letter that was not disclosed to the National Office of the AWU or to Cleanevent employees. The finding made was that Cesar Melhem and the AWU may have committed criminal offences of soliciting corrupt commissions in contravention of s 176 of the Crimes Act 1958 (Vic).
(i) Chapter 10.3 of Volume 4 of the Report concerns an agreement by the Thiess John Holland joint venture to make payments of $100,000 per year plus GST to the AWU Vic Branch over the life of a road construction project. The payments were made in accordance with falsified invoices that disguised the payments as being in respect of services that were, for the most part, not delivered by the AWU Vic Branch. The finding made was that Cesar Melhem and the AWU, and John Holland Pty Ltd and Julian Rzesniowiecki, may have committed criminal offences in relation to corrupt commissions in contravention of s 176 of the Crimes Act 1958 (Vic).
(j) Chapter 10.5 of Volume 4 of the Report concerns three payments made by ACI of about $160,000 between 2003 and 2005 described as being made in respect of ‘Paid Education Leave’, and further payments of $5,400 between 2008 and 2012 described as being made in respect of ‘Membership yearly fees’. Findings are made in respect of the former payments that Cesar Melhem and the AWU, and Mike Gilhome, may have committed criminal offences in relation to corrupt commissions in contravention of s 176 of the Crimes Act 1958 (Vic).
(k) Chapter 10.6 of Volume 4 of the Report concerns six payments of $4000 made to the AWU in 2003-2004 by Chiquita Mushrooms. The finding was that these payments may have been corrupt commissions procured by Frank Leo and the AWU and offered by Chiquita Mushrooms in contravention of s 176 of the Crimes Act 1958 (Vic).
3. These case studies – which involved different unions in different states at different times – throw up two recurring and often overlapping patterns of conduct:
(a) A person – usually an employer of workers – makes, offers or agrees to make a payment or provide a benefit to a union, union official or to an entity associated with a union, in order:
(i) to avoid expressly or impliedly threatened conduct by a union or union official which, if it occurred, would be harmful to the person; or
(ii) to obtain a favour for the person in connection with the union’s affairs.
(b) A union official obtains or solicits a payment or other benefit for himself or herself, or the union or an entity associated with the union, in return for which the union official agrees:
(i) not to engage in threatened conduct which if it occurred would be detrimental to the person – usually an employer – from whom the payment is obtained or solicited; or
(ii) to provide the person making or agreeing to the payment or benefit with a favour in connection with the union’s affairs.
4. The legal characterisation of such payments or benefits given or received depends on the particular circumstances of the case. Some can be described, at least in ordinary language, as ‘bribes’, others as ‘secret commissions’, others as ‘blackmail money’, others still as payments for industrial peace.
5. These payments all have a tendency to ‘corrupt’ a union official, in the sense that they have a tendency to cause a union official to exercise improperly the official’s duties and powers, or have a tendency to cause a union official to act unlawfully. For the purposes of this Chapter, it is convenient to describe all such payments and benefits as ‘corrupting benefits’. Commonly, the benefit will be in the form of a payment of money. However, particularly in the construction industry, benefits can be provided in kind, such as the provisions of free building work or materials.
Reasons for outlawing corrupting benefits
6. At this point, it is worth summarising briefly a number of reasons why a democratic society claiming to be governed by the rule of law should adopt measures that seek to eliminate the giving and receiving of corrupting benefits.
7. First, the making of corrupting payments increases the cost of employers and other persons doing business, which consequently:
(a) where the cost of the payment is simply passed on, leads to an increase in prices for consumers; or
(b) where the cost of the payment cannot be passed on, acts as competitive disadvantage for the business making the payment.
These payments are inherently anti-competitive.
8. Secondly, corrupting benefits undermine the proper performance by union officials of their duties and responsibilities.
9. Thirdly, such payments reward and can entrench the power of dishonest union officials.
10. Fourthly, the seeking and making of corrupting benefits fosters a particular culture within the unions and their officials that seek, and the employers and their executives that confer, such benefits. It is a culture that is antithetical to the rule of law. Threatening and bullying behaviour by union officials is rewarded. Genuine safety and industrial issues are ignored to the advantage of employers. The payments reinforce a culture of unlawfulness within unions. They reinforce an attitude that union officials are above the law. They reinforce equivalent perversity amongst employers and their executives. If unchecked, the culture comes to taint and impact the wider society. Corruption becomes more normal in business to business dealings, in the dealings of business with bureaucrats, in the dealings of business with politicians, and in the dealings between citizens and institutions capable of conferring desirable privileges and positions like educational institutions and employers. Corruption distorts markets. It makes money, not work or talent, the passport to success. It may even creep into the dealings of litigants with courts. Eventually it pollutes every business, social and personal relationship.
B – EXISTING LAWS REGULATING CORRUPTING BENEFITS
11. Several existing legal provisions attempt to deal with the solicitation and making of corrupting benefits. The provision of a payment or benefit might in some circumstances give rise to a fraud-type criminal offence such as obtaining financial advantage by deception. However, the main relevant criminal laws are those concerning blackmail and secret commissions. There are also relevant rules of civil law.
Blackmail and extortion
12. Each State and Territory has legislation outlawing blackmail or extortion. For present purposes these are synonymous.[1] Although that legislation varies between jurisdictions, in substance it criminalises the making of an unwarranted demand with menaces. Thus, where a union official demands a payment or other benefit with menaces, which may include an express or implied threat of adverse action, the union official may commit the criminal offence of blackmail or extortion, if the demand is unwarranted.
13. Apart from the criminal liability, there is also considerable overseas authority that a person who threatens to do an unlawful act and thereby intimidates another into doing some act which causes that other person loss (e.g. making a payment) may be civilly liable for damages for the tort of two-party intimidation.[2] It does not appear to have been resolved whether such an action is available in Australia, although in 2014 the Victorian Court of Appeal reaffirmed the existence of the tort of three-party intimidation in Australian law.[3] Even if such a civil action for two-party intimidation did exist in Australia, instances of litigation are likely to be relatively uncommon: a person intimidated into making a payment or conferring a benefit is usually unlikely to have the inclination to commence legal action against the person doing the intimidating.
Secret or corrupt commissions
14. Each of the States and Territories have laws criminalising the giving or taking of what are variously described as secret commissions, corrupt commissions, corrupt benefits, corrupt rewards or bribes.[4] Until 2000, there was also a separate Secret Commissions Act 1905 (Cth) but that was repealed and replaced with more modern provisions dealing with ‘corrupting benefits’ in the Criminal Code (Cth).[5] However, the provisions in the Criminal Code (Cth) only deal with bribery of Commonwealth public officials and foreign public officials.