The Crooks Who Could Bring Down Labor


In many ways, Edward Moses Obeid OAM represents much of what is best about the Australian Labor Party. Born in a village in Lebanon, Obeid’s family came to Australia shortly after World War II and settled in Redfern, which in the 1950s was a hardscrabble existence. Diligent and family oriented, Obeid was the classic material of the post-war Labor Party.

He went into local politics, leveraging ethnic community council networks to rise through the ranks of the ALP factional system. By the time Bob Carr won office in 1995, Obeid was already a fixture in the New South Wales upper house, the traditional home of factional warlords. He would eventually become minister for mineral resources in Carr’s second term.

Somewhere along the way, something went very wrong for Obeid and the ALP in New South Wales. The party that once gloried in a talent base representing the "cream of the working class", in Kim Beazley Senior’s famous phrase, is starting to look like the ruling class cabal of a third-world dictatorship.

Obeid, the self-made man from Redfern, is now embroiled in a corruption scandal "on a scale probably unexceeded since the days of the Rum Corps" according to ICAC’s senior counsel, Geoffrey Watson SC.

Obeid is accused of benefiting from decisions made by the former resources minister, Ian Macdonald, to open the Bylong Valley for coal mining. The Obeid family, it turns out, owned farms in the Bylong Valley. They also owned shares in a mining company, Cascade Coal, which was granted coal exploration licences by Macdonald. When the Obeids sold their properties in the exploration area, they made $13 million. When they sold their shares in Cascade, they made $60 million — for an initial outlay of only $200,000. It’s nice work, if you can get it.

Obeid’s political career was not crowned with legislative glory. When he retired from the New South Wales Legislative Council last year, he listed building sub-contracting reform as his signature achievement.

But as a factional operator, Obeid has been singularly successful. Along with Joe Tripodi, Obeid formed his own sub-faction of the New South Wales Right, commonly known as the "Terrigals", after Obeid’s house in Terrigal where the first meeting is said to have been held. With a talent for organisation and a long memory for services rendered and favours returned, Obeid was able to marshall the numbers in the right factions of the New South Wales ALP. That made him one of the most powerful men in the entire party.

Obeid used his power to make and un-make premiers. His faction’s role in the anointment of Morris Iemma to succeed Bob Carr is well known, as was his role in the downfall of Nathan Rees. But it was his relationship with Ian Macdonald that appears to have been his most lucrative.

As Morris Iemma told the Commission this week, Macdonald and Obeid were long-term collaborators. Former planning minister Frank Sartor called them "kindred spirits". Macdonald’s decision to grant the mining leases to small companies was not taken to Cabinet, and appeared specifically designed to prevent big mining companies like BHP Billiton from using their vast wealth to snap up the leases. Instead, the lease went to companies that the Obeids had a stake in.

Yesterday and today, ICAC heard evidence from lawyer Chris Rumore, who numbered three of Obeid’s sons among his clients. Evidence shows the Obeids told him about mining leases in the Bylong Valley, several months before the public announcement of the tender by the New South Wales government. The information was obviously of great potential value — after all, the Obeids were seeking to buy a farm that sat inside the lease — but it was known only to upper echelons of the department, and in Macdonald’s office.

The Obeids also tried to cover their tracks by using $2 shell companies, trusts controlled by friendly lawyers, and by changing the name of the farm. Now it’s all starting to unravel, piece by malodorous piece.

The evidence already presented looks damning for the Obeids and for Macdonald, who has an unseemly history of corruption allegations of his own. Nor is it exactly a good look for the Australian Labor Party.

But if it looks bad now, just wait. The current hearings are expected to run for months, probing all sorts of potential misconduct in the executive of the New South Wales government under Labor. If it keeps going in this fashion, the current scandal may in time rival the Fitzgerald Inquiry into corruption in Queensland in the 1980s, in terms of its significance and political impact.

Politically, this can’t be good for Labor, but things are already about as bad as they can get for the ALP at the state level in New South Wales. The previous government, wracked by internal dissent and increasingly scandal-prone, was widely loathed when it was finally thrown out of office in the bloodbath of 2011. The next state election is not until 2015, and the Coalition has a massive majority that it should easily defend.

But there will be a federal election next year, in which New South Wales will again prove a crucial battleground. There are big political risks in the current investigation for Julia Gillard. State corruption scandals do not typically spill over into the federal sphere, but the problem for federal Labor is that some of the same people who served in the New South Wales government are on Gillard’s front-bench, including Carr himself. Senior New South Wales factional figures served in the Rudd and Gillard governments, such as Mark Arbib (now working for none other than James Packer). The current revelations about Obeid and Macdonald are bad enough, but who knows what else ICAC could turn up?

Underneath Labor’s perception problems is a structural crisis that goes to the party’s heart. The factional system and the internecine warfare it institutionalises has never been attractive to voters.

For a start, many citizens tend to dislike it when the person they voted for is turfed out by his own party for no obvious reason except factional warfare. But as long as factional aggrandisement was merely a system for distributing political alliances, it could be justified on the grounds of pragmatism and necessity. Now we have explosive evidence that names factional bosses as the architects of massive and entrenched state corruption. That’s a much more serous charge.

The way that the New South Wales factions have operated in the last decade or so has always contained the seed of dangerous corruption and malfeasance. If, as the current ICAC hearings seem to indicate, running a faction has also become the pathway to amass huge personal wealth directly from holding high political office, then Australia is a much less free and fair nation than many of us assume.

Ben Eltham is New Matilda's National Affairs Correspondent.