Labor finances in crisis as $1m ICAC bill looms

Auditors working for NSW Labor have serious concerns about the dire state of the party’s finances.

Incoming NSW Labor general secretary Bob Nanva.

Auditors working for NSW Labor have outlined serious concern about the dire state of the party’s finances, in part because of an ­expected $1m legal bill from an ongoing corruption investigation into allegedly illegal donations.

NSW Labor has already had to forfeit the $100,000 donation at the centre of the ICAC inquiry, said to have been sourced from Chinese billionaire property developer Huang Xiangmo and handed to party officials in a plastic shopping bag.

It has also paid out $700,000 to former general secretary Kaila Murnain, who stepped down over the scandal.

The warning by auditors HLB Mann Judd is said to detail a serious cash flow problem that is leading to speculation the party may have to raise union affiliation fees or another MPs’ levy to pay for the mess.

The party is already charging state MPs to pay a $250,000 donation it received from convicted murderer Ron Medich to the Electoral Commission.

As the man anointed the incoming general secretary, Bob Nanva, prepares to take over the party and former attorney-­general Michael Lavarch conducts a review into the nature of the general secretary’s role and the culture of the party for federal Labor leader Anthony Albanese, it appears the party’s problems go even wider.

The dire state of the finances might explain why when announcing last week the resignation of general secretary Kaila Murnain, which incurred a $700,000 payout that included $450,000 in legal fees, party president Mark Lennon also announced that the party wanted to sue its former lawyers Holding Redlich over accusations it was negligent in not dealing with the $100,000 alleged illegal donation from Mr Huang.

“The party is actively considering seeking the recovery of all its costs related to the (ICAC) ­inquiry, including the sum payable to Ms Murnain, under its insurance policies and from its previous lawyers,” Mr Lennon said last week.

The NSW Electoral Commission has also raised the spectre of potentially withholding public funding from the party in the wake of the scandal at ICAC.

A NSW Electoral Commission spokeswoman said: “The Electoral Commission will continue to monitor the ICAC inquiry closely.

“The commission assesses the eligibility of each claimant prior to making a public funding ­payment.

“Eligibility to receive public funding is governed by the provisions of the Electoral Funding Act 2018.”

After the Liberal Party was hit by scandal over illegal donations at ICAC in 2014, it had hundreds of thousands of dollars withheld from it.

Then prime minister Malcolm Turnbull ended up donating more than $1m of his own money for the 2016 federal election campaign.

After Ron Medich was convicted of murder, Labor MPs’ levy to the party was increased from 4 per cent of their parliamentary salary to 6 per cent to help boost the coffers.

Former general secretary Sam Dastyari had promised to pay back the donation if Medich was convicted.

The Australian understands NSW Labor has advice that its legal challenge to Holding Redlich would be unlikely to succeed.

It is understood a claim against Holding Redlich would focus on alleging “negligence” or “lack of due diligence” by the firm and its national managing partner Ian Robertson, who dealt directly with party officials.

Senior lawyers familiar with such cases were sceptical about success. They said a professional indemnity clause in the firm’s contract would include an “out” clause — separate to any possible negligence — covering illegal activity on Labor’s side as the client.

A senior Labor lawyer said he expected Holding Redlich’s insurer to vigorously defend the firm against any claim, with the onus on NSW Labor to prove damage.