Liberal Party denied NSW Electoral Commission funding over donations scandal

With a federal election looming, the NSW Electoral Commission has denied the Liberal Party $4.389m in public funding.

A spokesman for Arthur Sinodinos, pictured, would not comment on the move and said it was a matter for the NSW Liberal Party.

The Liberal Party has been dealt a body blow with a federal election looming after the NSW Electoral Commission denied the party $4.389m in public funding because of a scandal about illegal developer donations being accepted for the 2011 NSW election.

The decision of the NSW Electoral Commission is a major blow to the biggest branch of the Liberal Party, and comes after the Independent Commission against Corruption revealed that the Free Enterprise Foundation had been used to funnel what would otherwise have been illegal donations to the NSW Division.

Although the Free Enterprise Foundation gave $878,000 to the Liberal Party for the 2011 NSW election, the Electoral Commission has decided not to pay the Liberal Party any money it would otherwise be entitled to under NSW election law until it disclosed all details of the 2011 donations

The Liberal Party did receive public funding for the 2011 NSW election campaign, but the Electoral Commission has decided to claw back the money by denying it money it would otherwise be entitled to for the 2015 NSW election.

The decision of the Electoral Commission will raise questions about the conduct of senior Liberal Party officials at the time, including the then Liberal Party treasurer and president Arthur Sinodinos, the current Turnbull government Cabinet Secretary, who stood aside as Tony Abbott’s Assistant Treasurer during the ICAC inquiry. Senator Sinodinos was never a person under investigation by the ICAC.

The decision means the Liberal Party will have to take legal action in the NSW Supreme Court to get its public funding, or disclose the details of the 2011 donations.

The $4.4m is just the start of the NSW Liberal Party problems. The Electoral Commission has decided to deny the party any public funding until it discloses the true source of its funds for the 2011 election campaign.

In addition to being reimbursed for the money it spends on election campaigns, the party receives about $2.8m each year in administrative funding, which it relies on to pay staff and run its ongoing operations.

The Electoral Commission said that as of yesterday, the Liberal Party would receive no further public funding, saying it had not sufficiently responded to the Commission questions since February.

“The party will remain ineligible until it discloses all reportable donations in relation to its 2011 declaration.”

The NSW Liberal Party said last night it was reviewing the Electoral Commission’s decision. A spokesman for Arthur Sinodinos would not comment on the move and said it was a matter for the NSW Liberal Party.

The Electoral Commission chairman Keith Mason QC said: “Integrity and public confidence in the electoral system is vital … the party declaration concealed rather than disclosed the statutory information. Parties seeking public funding must play by the rules.”

Despite a legal opinion from the Crown Solicitor, which advised the Free Enterprise Foundation was a discretionary trust which was legally able to wash donations, the Commission said the ICAC inquiry had revealed facts which meant this opinion was no longer valid.

It said that the Free Enterprise Foundation was not a validly constituted charitable trust, and therefore did not have the legal authority to exercise it discretion to make donations.

During the ICAC inquiry, counsel assisting the ICAC Geoffrey Watson questioned officials from the Free Enterprise Foundation about whether it was really a discretionary trust, and how often they had exercised that discretion not to funnel money through to the Liberal Party.

The Electoral Commission said it had reviewed the evidence from the ICAC, and from other sources. It said: “In truth, the foundation had been used by senior officials of the [Liberal} party and an employed party fund raiser to channel and disguise donations by major party donors, some of whom were prohibited donors.

“No disclose of the requisite details for those major donors has been made by the party despite the party having been requested to remedy the deficiency.”

The decision indicates the NSW Electoral Commission is taking a far tougher stance after an inquiry by a panel of experts headed by Dr Kerry Schott last year recommended that it be given new powers to enforce electoral law.