A very Sydney scandal
Continued from page 1 shares in a private exploration company with an uncertain future. The inquiry into possible corrupt conduct could make it difficult to sell the company or convert the exploration licence into a mining lease.
The corruption inquiry heard there were rumours that the family of Obeid was secretly involved in Cascade Coal, awarded one of the controversial exploration licences in a 2009 public tender run by the then resources minister, Ian Macdonald.
The possible involvement of the Obeids was troubling Graham Cubbin, a non-executive director of White Energy. Also worrying was that Cascade was owned by several White Energy directors, including Brian Flannery, Travers Duncan, John Kinghorn and John McGuigan, who were to be paid A$500m for a coal licence Cascade had bought from the NSW government for only A$1m.
Cubbin told the Independent Commission Against Corruption he had no idea who had valued Cascade at $500m in November 2010. The commission heard it had been valued at only A$25m earlier in the year.
Cubbin said he was assured by Cascade the Obeid family had no involvement in Cascade. The truth was the Obeids secretly owned 25 per cent of Cascade and they had negotiated with Cascade for a A$60m payout, having earlier tried to extract A$100m.
The Obeids’ former lawyer, Sevag Chalabian, told the commission of the elaborate lengths Richard Poole, an investment banker at Arthur Phillip and Cascade director, had gone to to hide the Obeids’ interest. Chalabian agreed with the counsel assisting, Geoffrey Watson, SC, that Poole was worried about the ‘‘whiff of corruption’’ if it became known the Obeids were in on the Cascade deal. The Obeids’ involvement could also result in the government cancelling the exploration licence.
The commission is investigating allegations Macdonald provided inside information to the family of then upper house MP Obeid, which allowed the Obeids to acquire holdings in two of the successful bidders for coal exploration licences.
The inquiry heard Eddie Obeid Jr ran messages between Poole and Chalabian over the payment of the first A$30m to the Obeid family, part of which was paid through Poole’s wife’s bank account.
Cubbin said he would have been ‘‘shocked and incredibly worried’’ if he knew the $30m was being paid to the Obeids to ‘‘sanitise Cascade Coal’’.
Instead, documents reveal Poole told Cubbin he was not aware ‘‘of any payments being made to Eddie Obeid or any entities associated with him or to other Labor Party politicians’’.
The inquiry also heard associates of Poole and McGuigan created a series of fake letters in 2008 pretending to be mining companies asking Macdonald to reopen the tender.
Macdonald did reopen the tender and Cascade won the Mt Penny exploration licence.
Neil Whittaker, a former chief executive of the National Rugby League, now an executive with White Energy, was grilled on Monday about signing one of these letters on the letterhead of a non-existent company.
Meanwhile, one of the Sydney investors, resources adviser Wayne Seabrook of Ironstone Capital, said he never expected to find his investment in this position. Other investors include property developer Denis O’Neil and his son Ned. Lawyers representing O’Neil’s company, Addenbrooke, have been given permission to appear before the inquiry and could seek to question witnesses.
The November group of investors’ 7.23 per cent stake was diluted earlier this year when Japanese group Nichi Gas bought shares in a new share issue.
A draft document setting out the terms of the 2010 capital raising said the money would be applied to ‘‘reduce third-party debt and creditors’’.
By that time, it had been well publicised that Obeid and his associates owned the land under Cascade’s Mt Penny coal licence.
‘A lot of them would be pretty upset they had put in money at a reasonable valuation.’