Kevin Rudd's role in insulation batts debacle revisited

KEVIN Rudd's direct knowledge of serious risks to public safety in the deadly $2bn home-insulation debacle will be examined in a new legal action.

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KEVIN Rudd's direct knowledge of serious risks to public safety and other major policy defects in the deadly $2 billion home-insulation debacle will be examined in a new legal action by 65 companies that lost more than $100 million.

The decision of the Home Insulation Industry Action Group yesterday to instruct its Sydney solicitors, McLaughlin & Riordan, to launch formal proceedings has come at the worst possible time for the Prime Minister, in the middle of an election campaign, following scathing findings by a Queensland coroner last month and by the Auditor-General in 2010.

Part of the legal action comprises documents, obtained by The Australian, that include statements by company managers who relate the precise words allegedly used by Mr Rudd, ministers Peter Garrett and Craig Emerson and senior bureaucrats.

Peter Stewart, the Brisbane-based chairman of the action group, said he and others were taking the action now because they no longer had confidence in the Rudd government's earlier pledges to treat them fairly in an internal process involving compensation for "defective administration". He said a policy and planning shambles meant hundreds of businesses and thousands of jobs in the industry were wiped out, along with the savings and retirement prospects of operators who went into debt to participate in the program.

Mr Rudd's spokesman declined to answer The Australian's questions, but said in a statement last night: "The Prime Minister has offered a very deep and personal apology to the families. To respond to losses experienced by businesses, the government established the Insulation Industry Assistance Package of up to $500,000 per business or applicant, and the Insulation Assistance Package of up to $3000 for workers affected. Given the questions are raised in the context of a legal matter it would be inappropriate to comment any further."

Mr Stewart, 65, accused Mr Rudd of being disingenuous for hiding confidential documents and briefing notes that the Prime Minister and cabinet received when safety and other risks were obvious and being stressed by experienced industry figures.

"It is very difficult for us not to hold Kevin Rudd directly responsible," Mr Stewart said.

"It becomes more obvious when we know that he still refuses to release the most important documents. We believe that Peter Garrett (the former minister in charge of the program) was left carrying the can for Mr Rudd.

"The government ignored advice from its own specialist consultants and from industry groups before the commencement of the scheme.

"It then failed to properly administer and monitor the program ... unscrupulous operators were invited in, resulting in extremely unsafe practices with tragic results."

Mr Stewart said law firm McLaughlin & Riordan would seek "compensation for commercial losses suffered by members resulting from the creation, administration and sudden termination of the Home Insulation Program in 2009 and 2010".

A legal letter from the firm's partners to the government and seen by The Australian states: "Some of our clients are bankrupt, some are in liquidation or other form of administration, and it is fair to say that most of them are in dire financial straits."

The home insulation scheme was launched in early 2009 by Mr Rudd who wanted it to generate economic stimulus, support jobs and small business, and improve the energy efficiency of homes.

Its initial budget was $2.8bn, but within weeks an internal risk-assessment, commissioned from law firm Minter Ellison, had identified "19 extreme and high level risks" that without mitigation would adversely affect the delivery of the scheme.

The risks, including fraud and safety, were not properly mitigated and four installers died in five months. In early 2010, tens of millions of dollars were spent making homes safe again, while the scheme was abruptly closed.

The legal documents quote named public servants, including a senior figure in Mr Garrett's department who allegedly asked one of Mr Rudd's top aides: "Is there any way of delaying this scheme while we sort installer training, safety standards - that sort of thing?"

The Rudd aide's reply is quoted as: "The Prime Minister wants it started now and it's very difficult to argue with a Prime Minister with a 76 per cent approval rating."

In another alleged conversation, a department project officer discloses to a company representative: "We expect houses will burn down."

A company operator, Matthew Hannam, states that he told one of the key public servants: "You're going to kill people if you let (untrained) installers in from outside the industry."

The public servant allegedly replied: "It's all about jobs. We understand there may be injuries."

Mr Rudd said in Canberra in February 2010: "We know we stuffed up and we want to fix it. We're going to look after you. Hold on to your workers."

Last month, the then Queensland coroner Michael Barnes, in formal findings over the deaths of three of the young installers in Queensland, criticised the Rudd government for rushing the insulation program in a costly bid to stimulate the economy after the global financial crisis.

He found that the safeguards and the steps taken to identify risks were miscalculated and inadequate, and that problems were remedied in a piecemeal fashion and "often only when an installer died".

Opposition spokesman for climate action and environment Greg Hunt said last night: "It is completely unacceptable that Mr Rudd continues to refuse to release all of the 10 known warnings he received. In light of the findings of the Queensland coroner, this is a matter of the highest public duty and responsibility to be open and honest with the public. It is time for Mr Rudd to release what he knew, when he knew it and why he didn't act on it."

Mr Stewart said the 65 companies involved in the group legal action were out of pocket for more than $100 million after being encouraged and assured by the Rudd government about the insulation program in early 2009 and its sustainability for as long as its initial $2.8bn allocation was available.

"Many of them borrowed money, purchased large amounts of stock, leased additional factory space and purchased equipment. Our members employed staff and contractors to cope with additional demand," he said.