From Waters Edge to the deep end

EVERYONE agrees that the dinner attended by journalists and Peter Costello at the Waters Edge in June 2005 was tremendously good fun.

EVERYONE agrees that the dinner attended by journalists and Peter Costello at the Waters Edge in June 2005 was tremendously good fun.

"The Treasurer was upbeat," says Paul Daley, who writes for The Bulletin.

"The mood was definitely jolly," says Tony Wright of The Age.

Nobody can remember what they ate -- Costello is sure only that it wasn't chicken -- but all agree that wine was served.

"A few bottles were consumed," says Daley.

"There was drinking, but it was not excessive," says Michael Brissenden of the ABC.

"Nobody was drunk," says Wright. "It was just a good night."

And now it's come back to haunt them. The debate over who said what to whom -- and under what circumstances -- at the dinner has become the story of the week.

But in this Watergate (if you prefer, this WatersEdgeGate) it is the integrity of the journalists that has been called into question.

Instead of being a story about whether Costello wants to be prime minister -- and surely that's no longer a story -- it has become a story about the murky water in which journalists from the Canberra press gallery swim.

Laid bare for all to see is the gallery's dirty secret: it often knows much more than it reports.

Also, that politicians can reach into some newsrooms, put their hands on the levers and pull a story out of the public's gaze.

And, that some journalists believe that sources can be outed depending on the circumstances.

In June 2005, three journalists from the Canberra press gallery -- Daley and Wright, both of them were then working at The Bulletin, and Brissenden, from the ABC's 7.30 Report -- attended a "jolly" dinner at the Waters Edge, a restaurant was then owned by Wright's wife, Fiona.

The guest of honour was Costello, who was there with his press secretary, David Alexander.

The reporters went along believing the dinner was "on background", which normally means the information they gathered could be published, but not attributed to Costello.

"(There was) an understanding that everything was reportable," says Daley.

"At one point, the Treasurer said, 'Write what you like'."

Daley says Costello told the group he intended to challenge John Howard in April 2006 because "Howard can't win".

It was a great story and all three reporters intended to publish it.

"Costello left -- I'm guessing the time -- at around 10.45pm, maybe 11pm, he never stays late," says Daley. None of the trio had a notebook but Daley immediately got some paper from a waitress and started to take notes.

"We agreed to write down only what all three of us could clearly remember that he said," Daley says. "I remember that Alexander was a little surprised that the Treasurer had been so candid."

Daley says he shared a taxi home with Brissenden and Alexander. When he got home, he woke his wife, Lenore Taylor, to tell her about the dinner. Taylor, a Canberra journalist, yesterday rang Fran Kelly's ABC breakfast program to defend her husband.

"I remember the night in 2005 when he came home from this dinner," she said. "They were very excited about the story. (He said) they could quote it, assert it as fact, but not quote him directly."

At the time, however, she did not report it to her employer, The Australian Financial Review.

The day after the dinner, Daley and Wright went into the offices of The Bulletin with their red-hot story ready to roll. Daley says then editor-in-chief Gary Linnell (now news chief at the Nine Network) "junked whatever was the cover for that week, and started replacing it, presumably with a photograph of Howard and Costello".

Daley says he transferred the handwritten notes to his computer, copied them to his colleague, Wright -- but also to Brissenden at the ABC.

They then colluded on when to run the story to ensure neither scooped the other.

"We agreed that he (Brissenden) would run it on the Tuesday night, because we hit the streets on Wednesday morning," Daley says.

But then, at around 1pm, Alexander rang Daley "and said it was all off the record, 'You can't print any of that"'.

Wright says they discussed the matter with Brissenden and both news organisations -- the ABC and The Bulletin -- subsequently scrapped the story.

The question is: why? Why would three seasoned reporters -- Walkley Award winners among them -- agree to pull a story about leadership tension, one that they knew to be right because they had it from the horse's mouth?

It suggests a lack of courage, and Daley says: "In retrospect, I believe it was a mistake."

"I can't speak for what went on at the ABC, but we thought Costello would deny it or else claim it was off the record and that was going to be a problem. We decided it was best not to run it."

All agree they made a poor choice. Wright says: "I guess we came down on the side of caution."

Brissenden said "we all regret" taking the story "off the record".

"We did it. We said OK," he said. "It was a mistake."

Linnell, who as editor-in-chief would have had the final say, did not return a call from The Australian yesterday.

Brissenden says senior management at ABC news and current affairs were not involved in the decision to pull the story, saying it was "taken by me".

In the two years since, the reporters have continued to cover federal politics, including regular stoushes between the Prime Minister and his Treasurer, but the dinner was never mentioned again -- until this week.

The trigger was a story by Daley, published in The Bulletin, in which he said the Treasurer had long-held leadership ambitions and once believed the Prime Minister would lose this year's election.

The story did not cause a ripple when published on August 7.

Then, on Tuesday, the Treasurer's 50 birthday, he was asked about it, first on Channel Nine, then on Sky News.

Costello said: "I don't know where The Bulletin got that from, certainly not from me. I must say when I read some of these things I wonder where the journalists get them from. They generally speak to somebody who has spoken to somebody who was down the back of a pub."

It is important to note that in the August 7 article, Daley did not mention the dinner, and he did not say that Costello was his source. The agreement -- that the dinner was off the record -- had held.

But then, in Canberra on Monday afternoon, the trio of journalists got together and decided to out the Treasurer as one of the sources for Daley's article.

Brissenden fired the first shot, popping up on the 7.30 Report.

"I decided it had become too personal," he says. He wanted to leap to the defence not only of his friend but "of the profession".

"He (Costello) was basically saying that people (journalists) get their information from blokes in the pub," Brissenden says.

He resented having his "integrity" questioned.

"It's about honesty," he says.

Read a transcript of Peter Costello's press conference, watch Matt Price's video verdict and see Peter Nicholson's latest animation at www.theaustralian.com.au