CHECK AGAINST DELIVERY

ROYAL COMMISSION INTO TRADE UNION GOVERNANCE AND CORRUPTION

HEARINGS COMMENCING 4 AUGUST 2015

CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION

FUND RAISING by the CFMEU in the ACT and NSW

COUNSEL ASSISTING OPENING STATEMENT

The evidence to be called at the hearings commencing today continues the Commission’s inquiries into the CFMEU.

At the recent hearings involving the CFMEU in Canberra, the Commission heard evidence in relation to the apparent intimidation and coercion of employers into signing Enterprise Bargaining Agreements with the CFMEU, in the format of the CFMEU standard form EBA.

As foreshadowed at the beginning of the recent Canberra hearings, one explanation for the CFMEU applying coercive pressure to employers to sign a CFMEU standard form EBA is that significant commercial benefits flow to the CFMEU under the terms of each EBA. In other words, the form of enterprise agreement propounded by the CFMEU prescribes minimum wage conditions and other entitlements for workers – but the agreement also facilitates financial benefits for the union itself. This issue will be explored in detail over the next three weeks in relation to both the ACT and NSW.

Case Study: CSI/CETW and other entities and the CFMEU ACT Branch

The first case study concerns the CFMEU, Construction and General Division, ACT Branch, and in particular some terms which recur in the standard form EBAin the ACT.

In particular three clauses of the EBA will be examined by the Commission, relating to payments:

  1. for training;
  2. to a charity; and
  3. in respect of income protection insurance.

On the face of these clauses, these payments are for entities which have no connection to the CFMEU either structurally or financially.

However, inquiries conducted by the Commissionreveal what would appear to be a close structural and/or financial connection between these entities. Ultimately it would appear that the CFMEU ACT branch benefited financially from the entry into the EBA containing these clauses to the extent of hundreds of thousands of dollars in the 2013 and 2014 calendar years.

That the CFMEU was expected to benefit financially to this large extent was not apparent from the terms of the EBA. Indeed, the question arises as to whether the setting up of complex structures in relation to these three areas - training, contribution to a charity and income protection - was done deliberately to hide the CFMEU’s involvement in and/or connection with the entities or structures set up to provide these services. The Commission acknowledges that trade unions may have a legitimate need to raise funds in order to remain viable and provide proper services for their members. However, issues including conflict of interest, lack of accountability, lack of transparency and possible third line forcing contrary to the Competition and Consumer Act 2010 (Cth) appear to loom large in these arrangements in the ACT. The Commission’s Discussion Paper dated 19 May 2015 includes discussion of, and seeks submissions in relation to, a number of these issues.[1]

The training clause

What appears to be the standard EBA clausein relation to training provides that “It is agreed that a training program will be developed and delivered by the approved training authority”. The “approved training authority” is defined as Construction Employment Training Welfare Ltd (CETW) as trustee for Creative Safety Initiatives (CSI) Trust. For convenience, this arrangement will be referred to as CETW/CSI.

CETW was registered as a company in July 2010. Between July 2010 and March 2014, the directors were Dean Hall, Jason Jennings and Jason O’Mara. Those three men were and are, respectively, the Secretary, President and Assistant Secretary of the CFMEU, Construction and General Division,ACT Branch. Jason Jennings is also the CEO of CSI. In March 2014, whilst Dean Hall stayed as a Director, Mr Jennings and Mr O’Mara were replaced by Stephen Brennan and Robert Docker. A chart of company structures has been prepared for ease of understanding, and I will make that available now to be placed on the screen.

CETW/CSI was and is an organisation running training programs, for a fee, for the building and construction industry. On its website it describes itself as an ACT based organisation committed to a continuing focus on improving safety standards in the building and construction industry. It offers a large range of courses including Occupational Health and Safety Training, Drug and Alcohol Awareness, Asbestos training and many others.

As can be seen from the chart, Dean Hall and Jason O’Mara were directors of an earlier incarnation of CETW/CSI - which was a company called Creative Safety Initiatives Pty Ltd. They were directors of that company between 2010 and 2012. Another company, the Canberra Tradesmen’s Union Club Community Fund Ltd (CTUCCF) was the sole shareholder of CSI Pty Ltd. The directors of CTUCCF, as can be seen from the chart, include Dean Hall, Jason O’Mara and Jason Jennings. CTUCCF is the ultimate holding company of Construction Charitable Works Limited (CCW), to which I will come in a moment.

CETW/CSI is the training organisation which employers are bound to use, for a fee, for their training needs under the training clause in the EBA, including (for example) training for a compulsory white card (an entry level industry recognised induction course) for all new employees. The Commission will be enquiring into questions involving conflicts of interest, lack of transparency and possible third line forcing so far as the CETW/CSI arrangement is concerned. It will inquire into the need for changing CSI Pty Ltd as the company providing the training to a more complex arrangement involving a trust.

The donation clause of $1.00 per weekto CCW

Another clause in the CFMEU negotiated EBA is one which requires $1.00 per week per employee to be donated to Construction Charitable Works Ltd (CCW). The terms of the clause containing this requirement has changed over time, but the donation component appears to be consistent.

Between January 2010 and June 2013, Dean Hall and Jason O’Mara were directors (with others) of this company. Mr O’Mara ceased his directorship in June 2013, but Mr Hall continued in that role. Jason Jennings is the CEO of CCW as well as CSI.

As can be seen from the chart, and as noted above, the ultimate holding company of CCW is CTUCCF, the members of which are the Woden Tradesmen’s Union Club Ltd and the Canberra Tradesmen’s Union Club Ltd. Dean Hall, Jason O’Mara and Jason Jennings are on the board of all these three companies.

Analysis by the Commission’s forensic accountants shows that a management fee of over$200,000 was paid by CCW to CETW/CSI in each of the 2013 and 2014 calendar years. The Commission will explore what work was done to earn this large fee charged by CETW/CSI for payment by this charity. The Commission will also be enquiring into questions involving conflict of interest and transparency so far as the CCW arrangement is concerned.

The “Income Protection Insurance” Clause

Also included in the EBA, is a clause under the heading “Income Protection Insurance”. It provides that the Company shall “affect [sic]an agreed Income Protection insurance policy for Employees” covered by the EBA. Depending on the particular agreement, the clause goes on to provide either that the terms, conditions and benefits provided by the agreed insurance policy will be provided by BUILT-PLUS or that “[t]he terms, conditions and benefits provided by the agreed insurance policy must be equal or better than that provided by BUILT-PLUS.” “BUILT-PLUS” is the marketing name for a product set up by Jardine Lloyd Thompson Australia Pty Ltd known as the JLT trusts or JDT arrangements. Companies who have entered into the standard form EBA have become party to a JDT arrangement – a managed investment scheme administered under a discretionary trust arrangement. In the Product Disclosure Statement, it was stated that the scheme was established to “help manage the Members’ risk of personal accident and sickness, which occur outside of working hours and for which Statutory Worker’s Compensation benefits are not payable”.

What is not apparent from the clause in the EBA but is apparent from the Scheme Rules and the Product Disclosure Statement is that the scheme is not insurance, because one element of the arrangement involves the Trustee’s absolute discretion. In other words, there is no guarantee that any money will be paid to every worker covered by this scheme.

What is also not apparent from the clause in the EBA is that the “promoter” of this scheme is CETW/CSI. A promoter’s fee is payable each year, the rate of which depends on the level of cover taken out. The Commission’s forensic accountants have determined that CETW/CSI was paid over $200,000 in promoter’s fees in 2013 and 2014. What, if any, promotional work was done to earn this large fee will be explored this week.

So, as a result of these three clauses in the EBA, and as can be seen from the chart, CETW/CSI, receives money for

  • training (in part as a result of being the approved training authority in the EBAs);
  • management fees from CCW; and
  • promoter’s fees from the JDT trust scheme.

CETW/CSI, in turn, distributes its annual surplus to theincome default beneficiary. The income default beneficiary of the trust is, effectively,theCFMEU – ACT. In 2013, the CFMEU –ACT received over $390,000 from CETW/CSI. In 2014, it received over $790,000. It would appear that these amounts went into the general revenue of the union.

Given it is the union that benefits financially to a large extent from these clauses being included in the standard form EBA, it is clear that issues of conflict of interest, transparency, accountability and possible third line forcing are important issues to explore.

Case Study: Building Trades Group – Drug and Alcohol Committee (BTG – D&A Committee) (NSW)

The Commission will also be inquiring into two matters relating to this entity and the CFMEU Construction and General Division, NSW Branch.

The first matter involves a payment of a substantial amount of money from an employer to the BTG – D&A Committee, the vast majority of which flowed to the “CFMEU fighting fund”. The Commission will be inquiring intothe reason or reasons that money was paid. Again, issues of conflict of interest, transparency and accountability will be explored.

The second matter involves a clause in CFMEU NSW standard form EBAs between 2004 and 2012. In 2004, the clause in question provided for $1.00 a week per employee to be paid by the employer to an administrator nominated by the BTG-D&A Committee to assist with the provision of drug and alcohol rehabilitation and treatment services/safety programs for the building and construction industry. By 2005, the amount provided for in the clause had increased to $2.00 a week.

For many years, the BTG D&A Committee conducted a number of programs directed towards drug and alcohol safety. It obtained NSW Health grants between 2004 and 2014 to conduct a number of drug and alcohol programs. It also obtained grants from Workcover to run drug and alcohol safety programs in NSW TAFEs. The BTG-D&A Committee was also closely associated with the running of Foundation House in Rozelle in Sydney. This was set up by the Construction Industry Drug and Alcohol Foundation (CIDAF) which was established in 1994. For a lengthy period of time, Trevor Sharp acted as the co-ordinator of both the BTG D&A and CIDAF.

The Commission will focus on why between 2004 and 2012, only roughly half of the money obtained from the donations arising from the clause in the EBA was sent by the BTG D&A to the CIDAF for Foundation House. It will inquire as to why the other half was sent from the BTG D&A to the CFMEU NSW general revenue account, first directly, and later (from 2005) indirectly, via an intermediate holding account. The Commission will further inquire as to why the employer representatives of CIDAF were of the viewthat CIDAF was receiving all of the EBA clause money for Foundation House.

Again, it is clear that issues of conflict of interest, transparency and accountability are important issues to explore in this context. In addition, the circumstances in which the money was obtained by the CFMEU give rise to additional issues including potential breaches of trust and obtaining money by deception.

Case Study: U-Plus/Coverforce

A further case study the Commission will be looking at in the upcoming weeks involves a clause in the NSW standard form EBA relating to top up insurance cover. This clause involved a true insurance scheme (unlike the discretionary JDT arrangement found in the ACT standard form EBA) called “UPlus”, operated first by Coverforce Pty Ltdand later, from mid 2013 by U-Plus Pty Ltd a company owned by Coverforce and the CFMEU NSW.

In NSW, employers paid premiums under the U-Plus scheme out of which large sums of commission weredistributed between Coverforce and the CFMEU NSW. The scheme has evolved over time from 2003 to date, over which period several millions of dollars of commission was received by the CFMEU NSW. Again, issues of conflict of interest, transparency and accountability arise.

Case Study: Committee to Defend Trade Union Rights

A short case study will examine a payment of $7 million in 2005 from the CFMEU NSW Branch Construction and General Division to a body called the Committee to Defend Trade Union Rights. Among other things the reason for the CFMEU making this payment will be investigated.

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[1] See Discussion Paper, Chapter 7.2