• The Royal Commission into Trade Union Governance and Corruption (“the Commission”) was established on 13 March 2014 by the former Governor General of the Commonwealth of Australia, Her Excellency the Honourable Quentin Bryce AC CVO.
• The Commission was a Royal Commission established by the Abbot Government to establish investigations into alleged financial irregularities associated with the affairs of Trade Unions.
• John Dyson Heydon AC QC was appointed as the Commissioner.
• The Commission publicly investigated some 75 case studies and conducted 189 days of hearings in Sydney, Brisbane, Canberra, Perth and Melbourne of which 155 were public hearings.
• More than 500 witnesses gave evidence in the public hearings. During its two year inquiry, the Commission issued more than 2,000 Notices to Produce for documents and other evidence to be provided.
• The Australian Workers Union, Construction, Forestry, Mining and Energy Union (“CFMEU”), Electrical Trades Union, Health Services Union and the Transport Workers Union were all unions named in the terms of reference.
• The Commission’s Terms of Reference included investigating:

1. the financial management of the unions;
2. the adequacy of existing laws regarding:
   1. integrity of financial management;
   2. accountability of officers to their members in relation to the use of funds or other assets;
3. whether the unions are used for any unlawful purposes;
4. the use of funds solicited in the name of a union; and
5. bribes, secret commissions and unlawful payments or benefits.

• The Commission also looked at the union’s relationship with large construction firms.
• Kreisson represented a significant international contractor at the hearing into the alleged corruption surrounding the Maritime Union of Australia in Sydney on 29 September 2014.

Interim Report

• Justice Heydon’s Interim Report was tabled in Parliament on 19 December 2014.
• Amongst other recommendations, the Interim Report made recommendations for certain individuals to be referred to regulatory authorities for further investigations, and questioning whether it be Civil or Criminal proceedings which should be commenced.
• In particular, the recommendations suggested:

1. criminal charges against a number of union members from CFMEU and the Health Services Union;
2. charges of blackmail against the Victorian AWU secretary and former Health Services Union National Secretary; and
3. charges against the CFMEU Queensland Secretary by ASIC.

• The Interim Report referred 26 people to 11 agencies including the Public Director of Public Prosecutions and the New South Wales Director of Public Prosecutions.

 

Slush Funds

• The Interim Report also focused on the use and operation of the union funds, in particular, the ‘slush funds’. The Commissioner noted that these slush funds:

1. are operating in a largely secretive manner;
2. not always voluntarily contributed to;
3. are not maintained with good record keeping; and
4. provide advantages to union office holders.

• The Interim Report also recommended fraud charges be considered against former Australian Workers Union officials, Bruce Wilson and Ralph Blewitt for the use of the secret slush fund in the 1990’s.
• One of the officials was the ex-boyfriend of a former Prime Minister. Justice Heydon said there were no grounds for prosecuting the former Prime Minister, but agreed with Counsel assisting, Jeremy Stoljar’s, submission that her conduct as a solicitor had been “questionable.”
• The former Prime Minister had undertaken legal work setting up the slush fund for the former Workers Union officials.
• Finally, the Interim Report recommended seven past and present Health Service Union officials should be considered for charges for their role in alleged right of entry scam.
• In August 2015, The Australian reported that 30 individuals had been referred to 11 agencies with possible charges and that 11 people had been referred to the Commonwealth Director of Public Prosecutions and 10 people to state DPP’s.
• Four arrests had been made by the police and allegations of illegality against nine unions had been uncovered with over 50 professional breaches of criminal and civil law identified.

Final Report

• Commissioner Heydon provided his Final Report on 28 December 2015. The Report comprised of six volumes, one of which was of a confidential nature and not publically available. The other volumes are available on the internet.
• Commissioner Heydon found that the corruption was wide spread and deep-seated. In particular, he found Australia’s trade unions welcomed:

“louts, thugs, bullies, thieves, perjurers, those who threaten violence, errant fiduciaries and organisers of boycotts.”

• He recommended a new national regulator with the same powers as the Australian Securities and Investments Commission (ASIC) be established to combat corruption in the trade union movement.
• The Final Report highlighted insufficient record keeping including false invoicing and destruction of documents.
• Committees failed to enforce rules and merely “rubber stamped” payments of large sums by employers to unions and influence peddling by means of the inflation of union membership figures.
• The Final Report recommended a toughing of financial disclosure rules, new civil penalties to bind workers and officials on financial provisions and a new criminal offence.
• On 30 December 2015, the Honourable Malcom Turnbull issued a statement stating:

“the government will reintroduce legislation in the first sitting week of 2016 to re-establish respect for the rule of law in the construction industry.

Leadership is required among unions, employer groups and political parties to ensure these important reforms are put in place”.

• A specialist interim working group of regulators will be established to deal with Civil Referrals made by the Commission.

Impact of investigation on the Construction Industry

• Construction companies including Thiess John Holland, Downer, Unibuilt and Winslow Constructions were referred by the Commission to Victorian police to be investigated for funnelling allegedly corrupt payments of up to $300,000.
• Commissioner Heydon slammed the undocumented payment of large sums of money by corporations to the Australian Workers Union and other trade bodies, saying that they:

“re-enforce a culture for unlawfulness within Unions”.

• In particular a senior executive of engineering service firm, Downer EDI, was referred to Victorian police for allegedly false counting of $25,000 paid to the AWU by the company.  In addition, a former Thiess John Holland manager was referred to police in regards to dealings with the AWU and Melbourne’s Eastlink project.
• There is no denying that the Commission has put the construction industry very much under the spotlight on its relationship between large construction firms and the unions.
• One notable development is the merger of the CFMEU and the Maritime Union of Australia to produce a union that may weld unprecedented power in the resources industry.

Superannuation

• Fallout from the Royal Commission has fuelled a huge debate on superannuation, trustee governance and selection of default super funds and trade union relationships with industry superfunds.
• Commissioner Heydon said,

“the CFMEU heavy membership at industry superfund CBUS would have influenced three fund executives to secretly release confidential information for the union’s benefit in a campaign against construction firm Lis-Con.”

• Three of CBUS’s staff are now all likely to face scrutiny from ASIC over the information leak and possible breaches of The Corporations Act.
• In light of other allegations of bribery and corruption in the construction industry, for example in Australian companies with offices in India and Indonesia, this may prompt a sea change ensuring that principals and contractors re-examine and be more vigilant about their relationship, dealings and, in particular, their financial dealings with the unions.
• It remains to be seen if this would have any impact on the unions, their influence and power and how they conduct their activities.

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.