Operation Credo, Operation Spicer. These investigations by the NSW Independent Commission Against Corruption (ICAC) sent shockwaves through NSW politics in 2014. The political toll exacted included the resignations of Premier Barry O’Farrell, Liberal Party ministers Chris Hartcher and Mike Gallacher; and the withdrawal of four MPs from the Liberal Party—Chris Spence, Darren Webber, Marie Ficarra and Andrew Cromwell.
These ICAC investigations starkly exposed unseemly aspects of fundraising by the NSW Liberal Party. These included allegations of flagrant breaches of election-funding laws (including illegal solicitation of donations by Chris Hartcher in exchange for favoured treatment of the funders) and allegations of legal loopholes being exploited through the laundering of donations by the NSW Liberal Party via the federal branch of the Liberal Party and its associated entity the Free Enterprise Foundation. The Expert Panel on Political Donations, chaired by Dr Kerry Schott, reflected the views of many when it expressed ‘feelings of shock and disgust at the brazen way in which some candidates and MPs have apparently sidestepped political donations laws for personal and political gain’.
The NSW Labor Party wasn’t untouched by ICAC and its investigations. Four of its former state ministers have also been found by ICAC to have engaged in corrupt conduct: Tony Kelly, Edward Obeid, Joseph Tripodi and Ian Macdonald. The perceived corruption of the NSW Labor Party was a key reason for its eviction from office in the 2011 state election.
The ICAC investigations put the major NSW political parties on trial and they were found severely wanting. These investigations revealed individual and institutional failings. Indeed, there is a deep connection between both; the culture and practices of the major parties paved the way for the improper conduct exposed by the ICAC investigations.
There is a connection, first, between how candidates—and members of parliament—are selected, and the conduct of these representatives. This connection is powerfully noted by Senator John Faulkner, former federal special minister of state. In his address to the 2014 NSW Labor conference, Senator Faulkner condemned the system of preselecting Legislative Council candidates by its annual state conference, a system dominated by factional leaders (like Obeid), and pointedly observed:
Look who the current system has delivered.
Eddie Obeid—four separate ICAC investigations made corruption findings against him. He was preselected three times by this annual conference.
Ian Macdonald—three separate ICAC investigations made corruption findings against him. He was preselected three times by this annual conference.
Tony Kelly—also found by ICAC to have engaged in corrupt conduct. He was preselected three times by this annual conference.
There is a second and obvious connection between how the parties approach compliance with election-funding laws and the extent to which party candidates and parliamentarians abide by these laws. The breaches of election-funding laws alleged in the ICAC investigations did not occur in a context where the parties were scrupulously complying with these laws; on the contrary, they emerged from what the ICAC has characterised as a ‘culture of non-compliance’. From this perspective, illegal fundraising behaviour by particular parliamentarians was not the action of ‘rogue’ operators, but rather reflective of broader practices.
There is also a less apparent and more insidious failing emerging from the ICAC investigations. It concerns an apparently prevailing view among federal politicians that the corrosive role played by money in NSW politics is a distinctively NSW phenomenon, with the implication drawn that federal politics is free from such corrosion.
Two related premises underlie this view: one, that federal parliamentarians are cut from a different cloth to NSW parliamentarians; and two, that there is no evidence of corruption of the kind seen in New South Wales at the federal level. Neither premise bears the weight placed on it. The view that federal parliamentarians somehow have a stronger moral fibre than their NSW counterparts lacks credibility, especially given the integration of the major parties with strong cooperation between the federal and state branches, and the interchange and overlap of personnel.
This point is nicely illustrated by the case of Arthur Sinodinos. Sinodinos resigned as assistant treasurer of the Abbott government as a result of the ICAC investigations. His actions as chair of the NSW Liberal Party’s Finance Committee were examined, particularly when the committee decided to use an associated entity of the federal Liberal Party, the Free Enterprise Foundation, to receive donations from property developers. Donations of this kind were then—as now—banned in relation to NSW elections.
It’s true to say that there is an absence at the federal level of cases like those exposed through the ICAC investigations, but not too much should be made of this. After all, New South Wales has the strictest election-funding laws in the country. Donating practices that are perfectly legal in other jurisdictions are banned or severely restricted in New South Wales. Consider two examples. First, donations exceeding $5000 to a political party for its state election campaign are prohibited in New South Wales. In contrast there are no limits on the amount of donations at the Commonwealth level, with the federal Labor and Liberal parties regularly receiving donations of hundreds of thousands of dollars to fund their campaigns. Second, since 2009, donations from property developers have been banned in relation to NSW elections; with no such ban applying to federal elections, federal parties are legally free to accept property developer money in whatever amounts.
Placing strong, conclusive weight on the absence of reported cases may very well reflect the mentality of ostriches—what we do not know does not exist. Moreover, the absence of exposed cases of corrupt conduct does not mean corruption is not a real risk. This point does not come from a cynical view of federal politics; rather, it rests on serious weaknesses in the federal laws for detecting corrupt and improper conduct in relation to political money. There is no federal anti-corruption commission or a body with strong investigative powers like ICAC to investigate suspected corruption. At the federal level, disclosure laws do apply to political funding. The laws are, however, extremely porous, due to an embarrassingly high disclosure threshold—only sums in excess of $12,800 per annum are subject to itemised disclosure. The result? Around half of the donations received by major parties at federal level are shrouded in secrecy, with no public information as to the donors of such money nor the amounts given. As a recent Australian Federal Police report on the political donations made by the Calabrian mafia observed, ‘It is difficult to identify any bribery in the form of political donations if the recording of those donations is limited.’
The wilful blindness goes further. NSW political parties are not the only ones in the country where a culture of non-compliance with election-funding laws flourishes. The Australian Electoral Commission, for one, has observed that a culture of evasion exists among some federal political parties, noting that ‘there has been an unwillingness by some to comply with disclosure; some have sought to circumvent its intent by applying the narrowest possible interpretation of the legislation’.
There are also regular fundraising practices relating to federal elections that undermine the health of Australian democracy—practices that are in large part prohibited in relation to NSW elections. These concern the sale of access to the leaders of major political parties, through events where businesses and lobbyists pay thousands of dollars in order to meet ministers and shadow ministers. As former Queensland integrity commissioner Gary Crooke has explained:
The usual strategy is for an organisation (usually a political party) to charge large sums of money for invitees to attend a function, promised that their subscription will earn them a right to speak to a decision-maker in their area of business or interest.
A recent, and controversial, example is the activities of the North Sydney Forum, a campaign fundraising body run by federal Treasurer Joe Hockey’s North Sydney Federal Electoral Conference. The forum provided members with ‘VIP’ meetings with Mr Hockey, frequently in private boardrooms, in exchange for annual fees of up to $22,000. Such fund-raising would be illegal if conducted in relation to NSW elections, given the amounts involved, but is permitted under federal election-funding laws.
This example, however, does not say much about the propriety of such fund-raising. Is there anything wrong with selling access to ministers and shadow ministers? Such fundraising practices are defended with the justification that they do not involve corruption in the sense of bribery and graft. This assertion is at the heart of Joe Hockey’s successful defamation action against Fairfax, which contends that the Fairfax publications covering the fundraising activities of the North Sydney Forum implied that Hockey was prepared to accept bribes to influence his decisions as federal treasurer—bribes that would be illegal under Commonwealth law.
Whatever the merits of this contention as a legal argument, this much can be said: equating corruption to bribery and graft reflects too narrow an understanding of political corruption. It is too narrow because it restricts political corruption to individual corruption, to cases where the gain is personal (e.g. the imputation that Hockey was personally prepared to accept bribes) rather than situations when the gain is more indirect, such as when donations go to party coffers. Such an understanding is restricted not only to cases involving individual corruption, but further confines it to a specific kind of individual corruption—quid pro quo corruption where the money paid is specifically designed to guarantee a particular outcome or decision.
It is perhaps appropriate to characterise this as a neoliberal view of political integrity. It is an understanding anchored in individualised notions of corruption and seems to restrict improper conduct to breaches of the law. Significantly, it is an understanding that permits market principles to govern electoral fundraising. As an illustration, North Sydney Forum provided for grades of membership priced at different levels in accordance to the number of events that the member could attend and how ‘select’ the event was (e.g. reception versus private VIP boardroom function).
There are serious difficulties with such a view of political integrity. As political philosopher Michael Walzer has cogently argued, there is a strong distinction between the economic and political spheres, with different norms and principles applying to each. So even if one strongly supports market principles being applied to the economic sphere, it does not follow that market principles should apply to the political sphere. A neoliberal economic agenda does not imply a neoliberal understanding of political integrity.
The distinction between political and economic spheres was well captured by the Canadian Royal Commission on Electoral Reform and Party Financing (referred to as the Lortie Royal Commission after its chair). In its report, the Lortie Royal Commission stated that:
the electoral process must not be equated with the economic marketplace. A fundamental and inherent feature of democratic rights is that, unlike economic assets, they are universally distributed. They are acquired and exercised freely without any monetary exchange, and they cannot be bought and sold.
Another serious difficulty, foreshadowed earlier, is the narrow view of corruption informing a neoliberal approach to political integrity. Two weaknesses are evident in this view. First, as Dennis Thompson explains, a focus on individual corruption (which requires personal gain and is associated with corrupt motives) neglects how corruption can be institutional through political gain and processes that have a tendency to undermine the democratic process.
Second, while corruption of public office clearly includes corruption through graft when the receipt of private funds directly leads to political power being improperly exercised in favour of contributors (e.g. bribery), it also extends to corruption through undue influence. Such corruption is much more insidious and constitutes a species of conflict of interest. Substantial political contributions tend to create a conflict between private interests and public duty. What results is the possibility that holders of public office will give undue weight to the interests of their financiers rather than deciding matters on their merits and in the public interest. In contrast with corruption through graft, corruption through undue influence does not require explicit bargains or that a specific act result from the receipt of funds. Rather, it arises when the structure of incentives facing public officials results in implicit bargains of favourable treatment or a culture of delivering preferential treatment to moneyed interests. As the Bowen Committee on Public Duty and Private Interest explained:
Conflict of interest generally differs from bribery because it does not require a transaction between two parties. It needs only one person, the officeholder possessing the interest in point. The distinction between bribery and this category … is that, whilst a benefit conferred as a bribe is directed to a particular transaction or series of transactions, gifts, hospitality or travel may be provided to create a general climate of goodwill on the part of the beneficiary. The ‘debt’ might not be called in for years or ever. (emphasis added)
With this broader definition of political corruption in mind, we can return to the issue of the sale of access by the major parties to ministers and shadow ministers for the purpose of lobbying. Such sale of access is an emphatic instance of what Michael Walzer characterises as a ‘blocked exchange’—where money is used to buy political power. The result is corruption through undue influence. The purchase of access creates a conflict between public duty and the financial interests of the party or candidate, resulting in some public officials giving an undue weight to the interests of their financiers rather than deciding matters in the public interest.
It is not only a narrow understanding of corruption that is problematic in a neoliberal view of political integrity. Equally problematic is the neglect of a cardinal principle of democracy—fairness. As the Canadian Supreme Court stated in Figueroa v Attorney-General (Canada), ‘electoral fairness is a fundamental value of democracy’. The Lortie Royal Commission was even more emphatic and considered fairness as ‘the pre-eminent value in the electoral process’.
The sale of access by the major parties is a straightforward instance of unfairness in the political process, with little doubt that it is the payment of thousands of dollars that secures superior lobbying opportunities. The unfairness involved in such access was highlighted by Gary Crooke when he rightly asked:
What, for example, of the developer who pays $3000 for a seat next to a minister responsible for making a decision about a contentious project in which the guest is involved? What of those objectors or other members of the community who are interested in the outcome of the decision? Are they being perceived to be fairly treated?
As Crooke observed, ‘it is the unspoken creation of an expectation of preferential treatment attending this, which will result in the inevitable conclusion by informed public opinion that the activity is untoward’.
There is another difficulty with a neoliberal view of political integrity that is less obvious. It concerns the responsibility of elected officials to safeguard the integrity of the democratic process. A neoliberal view arguably casts the responsibility primarily as a reactive one—to respond to the wishes of voters when there are concerns about integrity, as suppliers of political agendas would seek to match the demands of voters.
This is a limited understanding of responsibility. To be sure, elected officials should be responsive to the wishes of voters—that is a crucial aspect of democratic accountability and representative government. But the responsibility of elected officials is also affirmative, in that they should take proactive measures to protect the integrity of the democratic process. As the House of Lords in the Animal Defenders International case said, we would expect ‘our democratically-elected politicians will be peculiarly sensitive to the measures necessary to safeguard the integrity of our democracy’.
Do all these failings with money in politics contribute to a crisis in Australian democracy? Two notions or definitions of ‘crisis’ are relevant here. One highlights how a crisis is ‘a time of intense difficulty, trouble, or danger’; another signals the opportunity presented by a crisis, which is also ‘a time when a difficult or important decision must be made’.
Both senses of ‘crisis’ are present in New South Wales. The story of that state can be convincingly told as an account of the serious shortcomings of NSW politics. It can potentially be told as an (incomplete) opportunity for democratic renewal. As a result of the ICAC investigations, NSW Premier Baird commissioned the Schott Expert Panel on Political Donations. In addition, prior to the 2015 state election he committed to implementing forty-nine of the fifty recommendations made by the panel. If the Baird government follows through, the crisis that engulfed NSW politics may very well provide a turning point that strengthens the state’s democracy.
At the federal level, however, it is the first sense of ‘crisis’ that predominates—there is a crisis of democratic understandings leading to a failure to perceive any significant problem with political funding.
What then would be a way forward? The answer is perhaps right before us. There is currently a royal commission chaired by former High Court justice Dyson Heydon into trade union governance and corruption, focusing on the political funding practices of trade unions and their officials. A royal commission with a broad remit to examine all political funding practices—whether it be trade unions, businesses, political parties or parliamentarians—should be established.