Unions royal commission: The past’s grip on Shorten

Unions: you’ll be the judge

Malcolm Turnbull has taken a hammer to Bill Shorten’s political future. That hammer comes in the form of Dyson Heydon’s incendiary report into union corruption.

When the Prime Minister interrupted the nation’s Christmas holidays on Wednesday to release its findings he declared it was an opportunity for Bill Shorten. It was an opportunity, he said, for the Opposition Leader to show leadership and get on board a comprehensive clean-out of the dysfunctional labour movement.

But it turned out to be much more than that. Turnbull was setting up the Coalition to fight an election on union reform and laying a political trap to wedge Shorten over his trade union links.

Heydon’s six-volume final report on the two-year inquiry released on Wednesday detailed “widespread” and “deep-seated” corruption within the union movement, presenting the most compelling account yet of the structural and cultural problems besetting the Labor Party.

The depth of the commission’s findings brings into question the viability of the ongoing nexus between Labor and the union movement — a unique relationship of which Shorten is the pre-eminent political embodiment.

Releasing the report last week, the Prime Minister and Attorney-General George Brandis sought to hold Shorten to account as an agent of the union movement for his part in the practices uncovered in Heydon’s report.

“This is an opportunity for Mr Shorten,” Turnbull said. “A test of his leadership. And he should seize it and rise to the occasion and recognise that it’s the interests of his members that is at stake here; the interest of ordinary working men and women of Australia who have been so let down by so many officials of the union movement.”

Turnbull made clear he intends to fulfil the Abbott legacy on workplace relations by using the report to pressure the Senate into passing legislation stalled there.

The government will seek to strengthen its Registered Organisations Bill to oversee unions and employer bodies and will reintroduce the Australian Building and Construction Commission legislation in the first sitting week — measures designed to wedge Shorten and expose his weakness in acting against trade unions.

The response has done much to appease party conservatives and strengthen the case for an early election. Tony Abbott, who this week demanded Heydon’s findings be respected, tells Inquirer it is “good the Prime Minister has responded strongly”.

“We are willing to fight, we are willing to fight an election on this,” Turnbull says. “If this is not passed … if we cannot get the passage of this legislation through the Senate, then in one form or another it will be a major issue at the next election.”

The warning to the Senate has not gone unnoticed, with crossbench senators already raising the prospect of a double-dissolution election. What the report gives Turnbull, though, that Abbott never possessed, is the power to apply potentially fatal pressure to Labor if it attempts any meaningful resistance to the government’s measures.

In the joint press conference held by Turnbull, Brandis and Employment Minister Michaelia Cash, the spin was ostensibly positive — the Prime Minister used the word “members” 31 times in an appeal to ordinary workers, telling them “we want you to get a fair deal” — but there was also a clear threat. Brandis raised the possibility that Shorten could yet be implicated in further criminal investigation into the Australian Workers Union.

When counsel assisting the commission submitted its finding on the AWU in November, the royal commission issued a statement at the same time to say there was no submission that “Mr Bill Shorten may have engaged in any criminal or unlawful conduct”.

Shorten had been “cleared of wrongdoing” and, indeed, Heydon’s report does not refer Shorten personally for any breach of civil or criminal law.

However, the union he ran as national secretary of the AWU from 2001 to 2007, and as Victorian secretary from 1998 to 2006, attracted the most referrals by Heydon for further investigation of 14 possible breaches of criminal and civil laws, considerably more than the militant construction union.

Brandis pointedly remarked it was “notable” that Shorten was the AWU leader during the period when most of the union’s 14 alleged breaches of criminal and civil laws occurred. And he went further still as he revealed that Taskforce Heracles, the police taskforce attached to the royal commission, would be funded to continue investigating referrals.

“I can’t eliminate the possibility that Taskforce Heracles in pursuing those inquiries may uncover other matters that are appropriate to pursue and refer to the DPP,” Brandis said. “Whether those investigations by the Victorian police, by the Victorian DPP, disclose matters that touch directly on Mr Shorten is a matter that awaits to be seen.”

Labor has dismissed Brandis’s comments as a “smear” and proof the government funded the trade union royal commission “to try to attack their political opponents”. Responding on Twitter a day after the report was handed down, Shorten signalled he was ready to fight an election on industrial relations. “Bring it on,” he said.

The Heydon report concluded that a 2004 enterprise agreement with cleaning business Clean­event, signed by Shorten, was “not a good one” for mostly casual employees who lost entitlements including penalty rates.

In December 2006, a Work Choices-era agreement was finalised that removed several award conditions as well as penalty rates for permanent and casual workers. Shorten had ultimate responsibility for the deal as national secretary under the AWU’s rules. The 2006 agreement was then controversially extended in 2009 by his successor as state secretary, Cesar Melhem, through a memorandum of understanding, leading to casuals being up to 19 per cent worse off compared with the award at ordinary rates of pay.

Revelations that a side deal was also struck under which the union would receive a payment of $25,000 a year — recorded as “membership fees” — and an annual list of employee names handed to the union to inflate its membership numbers sparked outrage in the community.

While Shorten had already left the AWU for parliament when some of the worst elements of the Cleanevent deal arose, Turnbull nonetheless brandished the scandal to damage Shorten’s credibility during question time last year.

Last week, he again demanded Shorten answer for his conduct as leader of the AWU over deals under which low-paid cleaners were “sold out”.

“He can argue all of that if he likes, but he won’t persuade anybody because his members, ordinary working men and women, members of the AWU, were sold out. There’s no way you can describe it in any other fashion,” he said.

In the face of this assault and the wider findings of dysfunction and corruption displayed in the Heydon report, Shorten must respond politically in a make-or-break election year.

A former High Court judge, Heydon does not hold back in detailing the extent of the union challenge in tackling corruption. His final conclusions are sure to be echoed for years to come in debates engaging the central arguments for union reform.

“It is clear that, in many parts of the world constituted by Australian trade union officials, there is room for louts, thugs, bullies, thieves, perjurers, those who threaten violence, errant fiduciaries and organisers of boycotts,” he said. “The misconduct exhibits great variety. It is widespread. It is deep-seated.”

Yet, despite its five publicly available volumes, the report remains an incomplete picture, with Heydon noting his findings barely penetrated the murky underbelly of the union movement. “It would be utterly naive to think that what has been uncovered is anything other than the small tip of an enormous iceberg,” he warned. “These aberrations cannot be regarded as isolated. They are not the work of a few rogue unions, or a few rogue officials.”

Heydon’s final report made 79 recommendations and proposed consideration of legal action against 93 individuals and entities, of which 43 qualified for further criminal investigation.

Dozens of unionists were caught in his dragnet, among them Melhem, who is now a Victorian Labor MP, and former Health Services Union national secretary Kathy Jackson.

National Union of Workers NSW chief Derrick Belan, and former Queensland Construction Forestry Mining and Energy Union head David Hanna lost their jobs during the inquiry and have been referred for further investigation to the authorities.

Shorten’s problem, beyond his personal involvement as former AWU leader, is that he appears trapped between two conflicting imperatives: the need to satisfy the expectations of unions outraged by the Heydon report while also meeting the demands of a concerned public hungry for new curbs on union power.

The Heydon findings place him at the heart of a sick culture as the leader of a union that stripped entitlements from workers, inflated membership numbers and struck sweetheart deals with employers.

“These … themes together paint an unattractive picture of a union concerned not with its role as the instrument through which to protect the interests of its members but with self-interest — interest in itself and its officials as a self-perpetuating institution — an institution more concerned with gathering members than servicing them,” Heydon noted of the AWU.

Shorten is a natural child of the union movement who used his position to successfully nurture and realise his political ambitions, drawing on his power base to remove Kevin Rudd in 2010, then reinstall him three years later to replace Julia Gillard.

He emerges from the pages of the Heydon report as a key player, linked to some questionable enterprise agreements, side deals and opaque transactions with employer groups aside from the Cleanevent scandal.

“Mr Shorten has got to answer for this,” Turnbull declared. “He can be part of an exercise of reform … or he can pretend that there’s nothing wrong, that everything’s fine, that all of these practices were OK.”

The report also links Shorten to other transactions, including the payment by joint venture Thiess John Holland of about $300,000 to the AWU for the $2.5 million EastLink road project in Melbourne. The project opened ahead of schedule and under budget in June 2008.

Heydon found the “genesis of the agreement” came from a proposal by Shorten in 2004 to have an organiser dedicated to the project and concluded that, under arrangements then finalised by Melhem, the union went on to receive “corrupt” payments disguised through false invoices.

Heydon made clear he accepted arguments the funds were intended to secure favour or promote industrial peace and referred the matter to the Victorian Police Commissioner and Director of Public Prosecutions.

The report also noted Shorten’s receipt of a political donation from labour hire service provider Unibuilt to take on a manager, Lance Wilson, to his 2007 election campaign as having been facilitated in “curious” circumstances. The report says Shorten personally “procured” the arrangement and “obtained an advantage”, although it accepted there was no evidence it was “improper or unlawful”.

It was only in the days leading to his appearance before the royal commission in July that Shorten declared the payments for Wilson, saying that “periodically campaigns do update their information”. In his report, Heydon says the limitation period for any potential prosecution has expired. “In these circumstances, no finding is made,” the report says.

Given the risks of political inaction over the report, Shorten attempted to pre-empt the commission’s findings by appealing directly to Turnbull in a letter sent before Christmas urging him to consider a series of separate measures to improve union governance. The bid is an attempt to ensure he is not trapped by the report in an election year and, in the letter, he linked the need for union reform to greater transparency of political donations, proposing a reduction in the disclosure threshold form $13,000 to $1000.

Shorten has indicated he is also willing to defend his record in standing up for Australian workers and to paint Turnbull as intent on smashing union power.

“We want to stamp out any criminality in unions, corporations or anywhere else,” he told The Australian. “We will look at serious and sensible suggestions to improve governance. As minister it was me that took the step to put administrators into the HSU which uncovered many of the problems within that union. And as Labor leader, I have announced a series of measures designed to provide further improve governance of unions.”

Shorten says “at the core of the Liberals and their political ideology” is a desire to “destroy the ability of unions to effectively represent workers”, allowing them to rip away pay and conditions such as penalty rates.

Whether this argument and his alternative proposals to clean up unions will be enough for Shorten to deflect the pressure from Turnbull ahead of this year’s election will be put to the test in coming months.