The Arthur Sinodinos affair

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Here’s a nice little video from Geoff Winestock at the AFR explaining the hot water rising around Assistant Treasurer Arthur Sinodinos.

This is a bad enough look for the Government but add in Mr Sinodinos’ very public proposal to gut FOFA reforms, which have been described elsewhere as favouring the same big banks for which Mr Sinodinos has previously worked, and this takes on the outline of a systemic question about the integrity of a legislative process that allows the free movement of public servants between government and big business.

Whether or not that is the case here I don’t know but in economic terms such an outcome is called “regulatory capture”, when the regulated exercise undue influence over the regulator.

Anyways, here is Michelle Grattan at The Conversation calling for Mr Sinodinos to stand aside:

Tony Abbott is publicly backing Arthur Sinodinos remaining in situ but it would be better for the Assistant Treasurer to stand aside while the ICAC inquiry is on.

That would meet the requirements of both propriety and politics. It would serve the interests of the government and probably of Sinodinos himself.

As a minister Sinodinos is in a sensitive area which covers a range of financial legislation, making him a bigger political target until his name is cleared.

The opposition is demanding he give the Senate a full explanation of his role in Australian Water Holdings – of which he was a director and then chairman – a company that had financial links with the notorious Obeids.

It is raising questions about the statement he made to the Senate last year on his involvement. Sinodinos declines to make another statement, simply saying he’ll appear at the Independent Commission against Corruption’s inquiry, which is into “allegations of corrupt conduct involving public officials and persons with an interest in Australian Water Holdings”.

“Watch this space,” he told the Senate on Tuesday, using one of his favourite phrases – he declared he would be vindicated in terms of what he’d said previously.

ICAC heard this week from counsel assisting the commission, Geoff Watson, that the true role in AWH of Sinodinos, who also held senior offices in the NSW Liberal organisation, “was to open lines of communication with the Liberal party”.

As an AWH director he received an annual $200,000 for about 100 hours of work a year, and stood to gain an estimated $10 million to $20 million if a deal was reached with Sydney Water (in fact there was no deal in his time).

Watson said that “it’s presently difficult to offer observations on the conduct of Mr Sinodinos”, noting “he has other involvements” which would come under scrutiny in another inquiry.

Those comments left Sinodinos in limbo, as far as the inquiry is concerned.

Abbott is adopting from the start of his administration the stance that John Howard, after sacrificing a number of frontbenchers on the altar of propriety, later took up: sandbag anyone under attack or question.

Abbott has already done this with Assistant Health Minister Fiona Nash, in trouble over the behaviour of her (now former) chief of staff. The Nash affair received limited attention.

Sinodinos is another matter. He’s a more important political figure and being caught up substantively in an ICAC investigation is always serious.

From Abbott’s point of view, Sinodinos standing aside would get the matter as much as possible out of the political debate (though not necessarily out of the headlines, as the evidence comes) until the situation becomes clear.

And it would be a protection for Abbott if things did not go as he hopes and Sinodinos confidently predicts. The worst thing for Abbott would be to have to cut Sinodinos loose at some later point during the inquiry.

That Sinodinos is so highly regarded in government and Liberal circles makes it harder for Abbott – loyal by nature – to be tough- minded about what should be done.

From Sinodinos’ own point of view, standing aside would make sense. It would remove him from the immediate political firing line. He could say he did not want the affair to be a distraction, and it would be seen as doing something for the team. (On the other hand, it would have been better done immediately – delay complicates things.)

Standing aside is different from resigning. It is conceding nothing except the proprieties. If and when he got the all clear from ICAC, his ministerial job would be waiting.

Their pasts have put both government and Labor in awkward spots in the debate.

In opposition, the Coalition was quick to demand purity in relation to questions of propriety. Now it’s a different story.

On the other hand, Labor in power excused its own on the ground that due process should play itself out. It’s notable that Bill Shorten has not called for Sinodinos to stand aside. He knows Labor double standards would be made the issue.

Asked whether he retained “full confidence” in the Assistant Treasurer, Abbott told parliament: “The short answer is yes.”

He went on to say it was important to maintain “the highest possible standards in our public life” and stressed that “people should be in public life to serve our country and not themselves”.

Abbott pointed out that the ICAC investigation “is relating to a company, not to any particular individual”.

But this was a company of which Sinodinos was a director and later chairman, a pivotal position.

If he was ignorant of some things, like the Obeid family’s financial connection, surely he should not have been. He ought to have been suspicious of being paid such a large sum for not doing a lot. Given his dual company and party roles, he should have spotted donations to the Liberals on the way out of the company or the way into the party. These donations, now being returned by the NSW Liberals, were extracted by the company’s CEO from Sydney Water as “expenses”.

In the Senate, the opposition on Tuesday ran into brick wall, with several of its questions to Sinodinos ruled out of order. The Liberals gloated – silly Labor, getting caught out under the standing orders. But ordinary people know these matters are issues of substance that must, eventually, be properly and fully explained. So, of course, do the Liberals.

David Llewellyn-Smith

Comments

    • So a company that is substantially owned by the Obeids paid $10k to Ponzi Joe?

      Why am I not surprised?

  1. Until recently I thought Sinodinos was one of the better politicians on the conservative side, but after the FoFA amendments and now this he’s right down there with Christopher Pyne and George Brandis.

    • Until recently I thought Sinodinos was one of the better politicians

      Seriously?? I knew about a year ago that Sinodinos is a slimy character. You really need to follow the NSW ICAC proceedings more closely, preferably via Kate McClymont’s reporting in the saner, non-rent-seeking section of the Sydney Mining Domain (aka SMH).

    • Until recently I thought Sinodinos was one of the better politicians on the conservative side

      Really? I always knew he was a bit slimy, he WAS Howard’s Chief of Staff after all..

  2. It’s always disheartening to have faith that our politicians have sidelined self interest for the interests of the community tested.

    I tend to think this is not something that can be left to faith.

    Pressuring the top, and the broader body of the political party, to ensure that all is in order is one approach.

    One idea is an annual hearing whereby a jury decides on the level of pension for all past politicians for next year.

    Their choices are 1 the minimum weekly wage, 2 average weekly earnings, and 3 a much higher amount.

    The hearing hears all corruption allegations, and a review of the long term consequences of previous government decisions.

    When the system comes into force all current ex politicians would have their pension entitlements subject to the jury decision.

    Any redistribution within the total pension pool can be done by the politicians themselves but the total cannot be changed.

    • Yes, something like that is required.

      Having regard to the grime covering both major parties there is an opportunity for someone like the Greens (or someone else) to position themselves as the party who takes integrity in public administration seriously.

      The main parties appear to place politics ‘and whatever it takes’ before integrity every chance they can.

      • They should all get charged for treason at the end of each election period. If they have acted in the best interest of the country they don’t get shot.

        simple.

  3. One wonders how the shareholders of a what is little more than a glorified plumbing company could hope to make multi millions in profits supplying water to new subdivisions in north west Sydney.

    Surely, that is a business where there is no shortage of competition to drive down price and profit margins.

    Another piece in the puzzle of how servicing new land with basic services costs an arm and a leg in NSW.

    It might be a good idea to have ICAC works its way through the entire history of the process of bringing new to market over the last 20 years in NSW festooned with inflated servicing charges.

    There may be an army of skeletons just waiting to burst free.

    And look at the general landbanking, supply constricting and profit maximising practices lead by state agencies.

    • +1 at the heart of this corruption is the vast sums of money extorted from the population by the politico housing complex.

      • +1 spot on aj.

        Please bear with me as I quote two passages from Michael Hudson’s “The Bubble and Beyond”. In doing so, I hope to encourage every reader here — and especially the many who respond vociferously to every MB article concerning unaffordable Oz real estate — to obtain a copy and read it for themselves.

        Why?

        Because then, more of you might come to share my view on Usury as the root cause of all economic ills.

        Please forgive any typos. They will be mine; I’m typing by ref. to my Kindle (my italics, bold emphasis added) —

        The Symbiosis between the Financial, Insurance and Real Estate (FIRE) Sectors

        As the Industrial Revolution gained momentum, economists anticipated that banking and finance would be absorbed into the industrial system. The attention of economic theorists still remains focused on industrial technology and innovation, and the population shift from agriculture to urban industry. Textbooks (and lobbying exercises) depict bankers as extending credit to enable industrialists to build new factories and employ workers to produce more goods. Loans do not become problematic, but can be paid out of profits generated by the capital investment they finance [Op8: sound familiar, HnH?]. This appealing story is used to plead for special tax treatment for financial institutions on the ground that their credit creation adds to economic welfare. Interest is deemed as tax-exempt expenditure, even when corporate raiders use predatory credit.

        Yet the symbiosis that has emerged over the past century has been primarily between financial, insurance and real estate sectors. The great bulk of assets in modern economies — and hence, collateral for bank loans — has been real estate. Some 70% of commercial bank lending in the United States and England [Op8: and Australia] takes the form of mortgage credit. The estimated market value of real estate exceeds the depreciated value of all the plant and equipment in the entire United States. Loan officers know that the bulk of growth in their bank’s loan portfolio will consist of mortgage loans. The more rapidly such credit is created, the more funds are channeled into new mortgage financing to bid up the price of real property, making such lending appear self-justifying, at least in the short and intermediate run.

        Of the properties financed, land (the value of the site) typically represents about half the total, and all of the capital gain when the property is sold. And the great bulk of depreciation (capital consumption allowances) is reported in the real estate sector. This is because when an industrial machine wears out, it usually must be scrapped in order to keep up with the pace of technological advance. But buildings can be depreciated over and over again, thereby shielding their owners from income-tax liability (especially inasmuch as their interest charges are tax deductible). The upshot is that the tax system (especially in the United States) is much more favorable to real estate than to industry. It is easier to borrow against real property, and the total returns (after-tax earnings plus capital gains) are higher.

        The finance industry has fought to support special tax breaks for real estate, recognizing that the money freed from the tax collector will be available to pay interest. Political contributions and lobbying efforts by real estate owners are followed by those of the financial sector, overshadowing those of manufacturing. Yet in lobbying for cuts in capital gains taxes, both the real estate and financial industries (backed by the insurance industry) present these gains as accruing to industry as a result of innovation, as if this typified modern capitalism…”

        ****

        “The business plan of finance capital is to expand interest and amortization charges to the point where they absorb all disposable consumer income over and above essentials, all business cash flow and real estate rent over and above break-even costs, and government revenue over basic police and other necessary functions.

        And then the economy collapses! How else can matters end when debt obligations grow exponentially as interest charges mount up? Debts grow at compound interest, swollen by penalties on arrears. Unpaid bills are added onto the debt balance, until foreclosure time arrives, transferring property to creditors under distress conditions. Vulture funds clean up.

        The dynamic has happened before…”

        ****

        Every MB reader (and blogger) should study Hudson’s tome. Then you’ll come to see why Usury — the bankers bread and butter — is the core problem.

        http://michael-hudson.com/books/the-bubble-and-beyond/

      • One more passage, quite apropos to recent articles and discussion threads on MB re the monetary system, BoE “revelations”, etc:

        “Instead of mobilizing savings to fund new means of production, today’s banking system merely is loading the economy’s assets down with debt. What seems to be occurring is functionally akin to the pre-industrial mode of lending. The difference is that pre-industrial usury was dominated by individual family members, but the new post-industrial debt system is occurring on a large, corporate scale. It has merged with industry primarily to the extent that the financial sector has gained control of the economy’s manufacturing companies, treating them like real estate to squeeze out as large a rentier income as possible and then sell the companies off for a capital gain.”

      • Thanks Op8 – 2 fantastic quotes…

        Once you see the damage of the ubiquitous usury industry its impossible to unlearn the knowledge and you see the world through the lens that is the impact of the usury industry.

    • +1 How can we build a new residential land development system that is more resistant to this corruption and extortion?

    • In Australia it always seems to come full circle to this same issue, namely that every stage of the housing development process costs 3 to 5 times the price for equivalent function in other similarly developed countries. Over the last 2 years I have been through a full real estate project development in Texas so I have a good idea of whats possible when all the parties involved are focused on efficiently delivering their stage of the project.

      Maybe Dallas Texas sits at one extreme end of the housing efficiency curve, however it’s now clear to me that NSW (and Sydney in particular) occupies the other extreme. This is why I believe that a very deep long recession will ultimately prove to be the ONLY way out of the current malaise. Basically Australians need to relearn why efficiency is important in all parts of the economy.

      • Texas must be an extreme case. I checked out Realtor.com last week and a quarter acre block in Dallas was for sale for $5000. I thought my eyes were deceiving me and was so astounded I showed it to my wife. This is giving land away. What can be the explanation?

  4. moderate mouse

    In other words, Sinodinos is a slimy banker doing what they do. This stuff is BAU across the entire financial industry and everyone knows it. The charade is that they all act like this is an unfortunate misunderstanding and poor Arthur has been misled by ‘a couple of bad apples’. The reality is that its not a couple of bad apples, it’s a rotten crop.

  5. We read this sort of stuff and at first think, ‘good these guys might be held to account’.
    But really there is so much of this news and so little changes.

    The party political system is rotten, Obeid, Sinodinus etc (these guys are just the tip of the iceberg). The party system has been captured by the financial self interest of individuals.

  6. This stinks a lot worse than Slipper or Thompson, and yet Abbott stands behind him. One wonders just how much power Sinodinos wields within the Party, he was after all parachuted into that Senate seat with relatively little effort invested. The man’s entire career has seen the constant shift between political, public and private (banking) circles.

  7. Sinodinos may well have done nothing illegal because there are no laws requiring disclosure of interests in making representations to friends and aquaintances including in business and public administration about what a good company you chair and how it is hoping to win contracts.

    He has legal plausible deniability, but it is obvious he was influenced in that:
    1. He must have known he was being paid way over the odds for the size of company he was chairing and the work he was doing.
    2. He must have known he was expected to win highly valuable contracts for the company to get his share values up

    The size of the pot was simply so large that he would be expected to do what it takes to win the contracts that would make the shareholders richer. He wouldn’t have to do anything illegal, just be his persuasive self and let his power threaten those who blocked and reward those who assisted in making him rich.

    But being willing to be a director and chair of a private company and not knowing who were the major beneficial shareholders just shows how extraordinarily valuable the pot was to him.

    Eddie has extraordinarily insight into the human psyche of those who seek power and wealth.

    He has pyramided incredibly the power of an ethnic newspaper in a relatively small area into a quite large empire of influence and wealth.

  8. ceteris paribus

    I am nauseated by the selling of influence for astronomical gain from the common wealth, but as Explorer points out, it is often not illegal, or cetainly not provably so.

    What nauseates me even more is when such peddling of influence is associated with sanctimonious and punitive judgments about the poor, many facing overwhelming life circumstances beyond their control, who line up for modest public assistance to eat and shelter for another week.

    These dealers are not asked to like or even talk to the poor; they are just asked to let them exist.

  9. I have read elsewhere (although I do not know whether it is correct or not) that Sinodinos only stood to benefit by $20m from the proposed Sydney Water deal if he had accepted AWH shares he was offered. He did not accept the offer, so the purported benefit was hypothetical only.

    Anyone out there with more detailed knowledge of the truth or otherwise of this?

      • Fair enough, but I already knew that quite a few people have alleged this. I want to know if there is anything closer to the horse’s mouth.

        BTW, love Quentin’s final par “At the moment no National Party figures have been adversely named.” LOL

    • ONLY 20 million? This guy must have gone to bed at night with a warm glow enveloping him knowing that he had done an honest days work for an honest days pay. His one regret would be that he’d had to do some two weeks of lobbying for a lazy 200 grand.Guess what the average Aussie Battler must be thinking about this lot given that he was also Little ( Honest) Johhnies sidekick? The level of cynicism in the electorate regarding politicioans is well warranted.

  10. If Tony Abbot really says he admires the Key govt in NZ he should take a leaf out of his book.

    Key stood an MP down after it emerged he forked out on a dinner/drinks on the ministerial credit card when he shouldn’t have.

    Sinodinos should be stood down or voluntarily do so for the integrity of his party, and furthermore he should know this.