WAS it illegal? Was it controversial? Or was it both?
These were the questions occupying the minds of the independent directors of White Energy who were worried about their company's $500 million offer to buy Cascade Coal, whose only asset was an exploration licence which had possibly been corruptly acquired.
John Kinghorn ... invested in Cascade Coal.Credit: Andrew Quilty
A corruption inquiry heard there were rumours that the family of Labor powerbroker Eddie Obeid was secretly involved in Cascade Coal, which had been 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.
Another worrying factor was that Cascade was owned by several of the directors of White Energy, including Brian Flannery, Travers Duncan, John Kinghorn and John McGuigan, who were to be paid $500 million for a coal licence that Cascade had bought from the NSW government for only $1 million.
Mr Cubbin told the Independent Commission Against Corruption he had no idea who had valued Cascade at $500 million in November 2010.
The commission heard it had been valued at only $25 million earlier in the year.
Mr Cubbin said he was assured by Cascade that 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 $60 million payout, having earlier tried to extract $100 million.
The Obeids' former lawyer Sevag Chalabian told the commission of the elaborate lengths Richard Poole, an investment banker and a Cascade director, had gone to to hide the Obeids' interest.
Mr Chalabian agreed with the counsel assisting, Geoffrey Watson, SC, that Mr 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 inquiry heard.
The commission is investigating allegations that Mr Macdonald provided inside information to the family of then upper house MP Mr Obeid which allowed the Obeids to acquire holdings in two of the successful bidders for coal exploration licences.
The inquiry heard Eddie Obeid jnr ran messages between Mr Poole and Mr Chalabian over the payment of the first $30 million to the Obeid family, part of which was paid through Mr Poole's wife's bank account.
Mr Cubbin said he would have been ''shocked and incredibly worried'' if he knew the $30 million was being paid to the Obeids to ''sanitise Cascade Coal.''
Instead, documents reveal Mr Poole told Mr 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 Mr Poole and Mr McGuigan created a series of fake letters in 2008 pretending to be mining companies asking Mr Macdonald to re-open the tender.
Mr Macdonald did re-open the tender and Cascade went on to win the Mount Penny exploration licence .
Neil Whittaker, a former chief executive of the National Rugby League, and now an executive with White Energy, was grilled on Monday about signing one of these letters.
His letter to Mr Macdonald's department had a ''dummy letterhead'' using the name of a non-existent company but Mr Whittaker said he didn't know the purpose was to fool the government.