Senator ROBERT RAY —During every federal election there is always an urban myth that goes around. The one that had the most currency with me was that the New South Wales Senate ballot paper was of such a size that a lot of people put them in the outer envelope rather than the inner envelope and that suddenly 12 per cent of all electors were doing it. Mr Gray, did you get any feedback as to that at any stage? Is there any currency to that story at all?

Mr Gray —There is some currency to that story. There were some occasions—frankly, not just in those areas where the ballot paper was extremely large—where we found that people
placed the Senate ballot paper in the outer envelope and the House of Representatives ballot paper in an inner envelope. It was double enveloped as you know. That did give rise to some comments. As to the frequency with which that occurred, it certainly was not in the vicinity of the sort of percentages people were suggesting. I cannot give the exact percentages. Statistics are still being developed. They will be given to the joint standing committee.

Senator ROBERT RAY —We will actually be able to quantify it?

Mr Gray —We will seek to give such statistics as we do have and I believe that we can identify the fact that, on the basis of the evidence that we will be able to give, it was not anything like some reports suggested in the early parts of the election.

Senator ROBERT RAY —I think I will leave my colleagues on that committee to pursue that with you. The second question I had is one, I suppose, of interpretation. Members of parliament are given the right under the Electoral Act to enrol in the electorate of their choice?

Mr Dacey —It is the electorate of their residence or the electorate which they represent.

Senator ROBERT RAY —Sorry, so if a House of Representatives member does not live in their electorate, can they enrol for that electorate?

Mr Dacey —That is correct.

Senator ROBERT RAY —And a senator if they choose can pick a—

Mr Dacey —They can choose to enrol somewhere else in the state.

Senator BROWNHILL —Just on that issue, you said `an electorate that they represent or that they live in'. If you are a candidate, can you register in an electorate that you are going to stand in?

Mr Dacey —No, a candidate must be registered for the address at which they live.

Senator ROBERT RAY —Candidates cannot. That is partly the reason of my question.

Senator BROWNHILL —I just wanted that to be clear on the record.

Senator ROBERT RAY —So if I am a member for a particular seat and I do not live in that seat and I get enrolled in a seat that I represent, am I forced to leave that seat if I run for another seat but my term is still running? Do you want me to go over that again?

Mr Dacey —Yes, please.

Senator ROBERT RAY —It is not actually a hypothetical; it actually happened.

Senator BROWNHILL —I do not think he is going to be elected, by the sounds of it.

Senator ROBERT RAY —He was. Let us say theoretically you were the member for Chisholm and you were endorsed for the seat of Casey—just theoretically—would you still have an entitlement to stay on the Chisholm roll until election day because you are not yet the member for Casey?

Mr Dacey —That is my understanding of the legislation, Senator.

Senator ROBERT RAY —Maybe David Brownhill would like to explain why he transferred back to the safe Liberal seat of Kooyong on 1 September and deprived Mr Vlahos of a vote. Do you have an explanation for that?

Senator BROWNHILL —No.

Senator ROBERT RAY —Thank you.

Senator BROWNHILL —That is quite an irrelevant question; it is quite incorrect.

Senator ROBERT RAY —It is accurate, though, and it stinks.

Senator FAULKNER —I have some questions that I would like to ask about the Greenfields Foundation. I want to establish a time line in relation to this particular issue. Can the AEC confirm that Mr Ron Walker gave the NAB Managing director, Don Argus, a verbal guarantee of Liberal Party debt in 1992?

Mr Edgman —We are not positive of the date that Mr Walker gave his verbal guarantee to the bank, but we do have on the public record information from the Liberal Party that he had made a verbal guarantee.

Senator FAULKNER —Is the date important in this instance, in the view of the AEC?

Mr Edgman —In terms of Mr Walker giving a guarantee, it is of no consequence under the Electoral Act.

Senator FAULKNER —Is it true that the NAB requested title to Menzies House as a security against the overdraft of approximately $6 million in, I think, June 1994?

Mr Edgman —That is the information that we have, yes, Senator.

Senator FAULKNER —Is it true that on 5 March 1995 Mr Walker provided Don Argus with a personal written guarantee of the Liberal Party's overdraft in lieu of the title to Menzies House?

Mr Edgman —I believe that is correct, yes.

Senator FAULKNER —But has the AEC been informed of that?

Mr Edgman —It was informed as part of the Liberal Party's disclosures.

Senator FAULKNER —Are you aware that the Liberal Party overdraft rose to around $10m in June of 1995?

Mr Edgman —I believe that was the case, yes.

Senator FAULKNER —Are you aware that on 5 July 1996, Mr Walker advised Mr Robb, the then Federal Director of the Liberal Party, that he repaid $4.65 million of the Liberal Party's debt to the NAB and transferred ownership of the debt to the Greenfields Foundation?

Mr Edgman —I am not positive of the date, but, yes, I think that that is correct.

Senator FAULKNER —I do think the date is accurate. I appreciate the information you are able to provide. I think you had your first formal communication with the Greenfields Foundation requesting an annual return as an associated entity and I think that letter went off on 24 December 1997.

Mr Edgman —That is correct.

Senator FAULKNER —And that was the first formal communication that the AEC had with Greenfields?

Mr Edgman —It was the first communication of any sort with the foundation.

Senator FAULKNER —I believe that on 15 January 1998, Mr Tony Bandle, on behalf of Greenfields, responded to your earlier communication, basically stating that Greenfields was not an associated entity and therefore, in his view, he did not need to supply any further information to the AEC?

Mr Edgman —That is correct.

Senator FAULKNER —I think that on 2 February 1998 the Liberal Party's annual return to the AEC revealed that the debt to the NAB had fallen from $6,762,773 1995-96 to $158,305?

Mr Edgman —Yes, 2 February was when those disclosures were made public.

Senator FAULKNER —And that also made clear that the Liberal Party then owed $4,650,000 to a new creditor, which was, of course, the Greenfields Foundation?

Mr Edgman —Yes, Senator.

Senator FAULKNER —On 25 February last year you said at a meeting of this Senate estimates committee that you believed—I do not want to put words in your mouth—that the AEC did not have the authority to go behind a foundation on the basis of suspicion alone, and you really had to wait and hope that information would be revealed through the Liberal Party compliance audit?

Mr Edgman —That is right, yes.

Senator FAULKNER —Then on 10 March 1998 the AEC funding and disclosure report, which was tabled in both houses of the parliament, did highlight the sorts of problems that the AEC was having in investigating potential associated entities. I think that is fair to say, Mr Gray, is it not?

Mr Gray —Yes, it is.

Senator FAULKNER —Back again here on 3 June last year, Mr Edgman, you informed us that the Liberal Party compliance audit was due to be concluded in the next week?

Mr Edgman —That is correct, yes.

Senator FAULKNER —On 23 July 1998, we had what I would describe as the Walker[hyphen]Greenfields donation revealed in the Australian Financial Review ; I do not necessarily expect you to recall that, but you may.

Mr Edgman —I did read the article, yes.

Senator FAULKNER —I know you keep a weather eye on all of these things. On 24 July, you may be aware that the Labor Party received legal advice that without paying a commercial rate of interest, the Greenfields loan comprised a gift under the Commonwealth Electoral Act. That advice went on to say that failure to disclose represented and constituted a breach of section 314 of the act?

Mr Edgman —I saw reports to that effect, yes

Senator FAULKNER —Then we had a situation on 30 July 1998 when the Liberal Party amended its AEC annual return acknowledging the Walker transfer of debt, for want of a better description, and there was a report that the AEC was considering an investigation of the Liberal Party for breach of the Electoral Act.

Mr Edgman —The amendment that the Liberal Party put into its return was as a result of the compliance audit that you referred to earlier.

Senator FAULKNER —Then on 1 February this year, we were made aware that the annual returns of the Liberal Party that have just been released showed that the Liberal Party had repaid only another $100,000 of their loan to the Greenfields Foundation?

Mr Edgman —Yes, that is correct.

Senator FAULKNER —That is in a nutshell as I understand these events, most of which we discussed, as you were probably all too painfully aware, at the previous estimates committees hearings; we have discussed some of it in considerable detail. I wondered if, in what I have outlined to you, there were any other communications between the AEC and the
Liberal Party or the AEC and the Greenfields Foundation that had occurred that you might be able to inform the committee about?

Mr Edgman —Yes, you referred earlier to the report following the 1996 election on funding and disclosure. There was a recommendation in there that the Electoral Commission was seeking powers for further investigation of organisations that it thought may be an associated entity. Those powers were sought because, as you were alluding to, we were in some instances at the mercy of the cooperation of organisations, because there was no information available to us on the public record, and unless we had strong grounds for believing it might have been a breach, we had no powers of investigation of an organisation. We have now been granted those powers, as you would be aware, in the Electoral and Referendum Amendment Act 1998 that was passed just before the election, which does now allow us to serve a notice on an organisation for the purpose of trying to ascertain whether it is an associated entity and has that disclosure obligation. Those organisations have a 14[hyphen]day period in which they can lodge an appeal to the three[hyphen] person Electoral Commission, if they think the notice is unwarranted. We served one of those notices on the Greenfields Foundation in mid January—15 January.

Senator FAULKNER —Had that been in the public arena previously?

Mr Edgman —No. We tend not to make public comment on our inquiries or whether we are conducting any—or not conducting any, for that matter.

Senator FAULKNER —So you have served notice under what section of the act on the Greenfields Foundation?

Mr Edgman —It is now section 316(3A). There have been a few amendments to that section.

Senator FAULKNER —I assume that there is also a capacity for you to serve notices on other organisations that you believe might be associated entities? I do not want to necessarily have them named, but are there also other entities that you have served notices on?

Mr Edgman —There are no others at this stage that we have served notices on, but that is not to say that there will not be more.

Senator FAULKNER —Can you explain to the estimates committee why the decision was made to serve notice on the Greenfields Foundation?

Mr Edgman —I guess our inquiries in this area have been ongoing and with this new power that was granted to us just before the election, we have not had an opportunity since then to exercise it and we thought that this was a case where that notice would be useful for us to be able to look at all the functionings of the organisation, to be able to determine whether it does or does not, in the opinion of the Electoral Commission, meet the act's definition of an associated entity. There is little information—or next to no information—on the public record, apart from what is in the disclosures.

Senator FAULKNER —I appreciate the problem, I genuinely do. You have indicated that that has not been made public before tonight. It would be obviously competent if the Greenfields Foundation or someone else wanted to make it public, I suppose. But you are saying that it has not been made public by the AEC and you are not aware of it being made public by anyone else?

Mr Edgman —I am not aware of it being made public by anyone else.

Senator FAULKNER —Can the notice be tabled for the benefit of committee members?

Mr Cunliffe —It has not been the AEC's practice to reveal the content of these sorts of documents in the past, and it would not be our wish to do so on this occasion. Potentially this, along with many documents that are in this particular section, 316—depending on the further steps and what happens in the future—could lead to a number of actions. One possibility, for instance, is that they may lead to criminal penalties in the event of certain circumstances. They certainly have penalty provisions within the legislation. In the nature of usual investigation approaches, it is not the usual course of the AEC or other investigation authorities to, if you like, rehearse those in the public arena.

Senator FAULKNER —I appreciate the point that you make to me, and by and large I accept it. I just suppose in this particular case, given that it is a new provision in the act, this is the first time such a notice has been served on an entity. In a sense, I suspect there is an element of breaking new ground in this. I just do not know that there is an enormous amount of experience in relation particularly to a notice under this section of the act. That is the only reason I ask the question. While I accept the spirit of what you say to me, this is in a sense groundbreaking. Is that fair to say?

Mr Cunliffe —The particular subsection is new, but there is a series of other subsections within the provision which similarly involve the potential for an investigation into various players. I suppose you can describe it as groundbreaking because it is a new subsection, but it is one of many on another view within the section.

Senator FAULKNER —A notice has never been served before on a suspected—that is my spin, but I would stick with it—entity that the AEC wishes to investigate further because of concerns that it may be an associated entity. I am trying to put that without any political spin at all. So, in that sense, this is new. This has never happened before.

Mr Cunliffe —I accept that, Senator.

Senator FAULKNER —Yes, that is the point I am making. The other point in relation to release would be this: that is, on occasions the AEC has provided information to the estimates committee. I think the AEC has been generous wherever it could, not only during the period that Labor has been in opposition but also during the period when the coalition was in opposition. I believe that you have genuinely tried to provide that sort of information if it is possible. That is the other element I think is reasonable to put on the table.

Let me move on from that. Apart from that development, Mr Edgman, I assume there is no other oral or written communication between the AEC and the Liberal Party about Greenfields or the AEC and Greenfields, whether it be regarding the Liberal Party's compliance audit, issues relating to Greenfields or amendments to annual returns—whatever it might be. I just want to make clear that that is the only part of the paper trail that before tonight I was not aware of that might be useful for me to know about.

Mr Edgman —That would be right, Senator. After the conclusion of the compliance audit last year, there has been no other correspondence with the party or with the foundation on this topic until this notice was served.

Senator FAULKNER —Can you give me the date of the last compliance audit into the Liberal Party please?

Mr Edgman —We issued our report on that audit on 28 July 1998.

Senator FAULKNER —It is the reporting date, in a sense, that is significant, is it not?

Mr Edgman —The reporting date is the significant date, because that is when, in effect, the audit is finalised.

Senator FAULKNER —That means the next compliance audit is due by?

Mr Edgman —We have moved to more of a risk based approach with our auditing. That should see the federal and national secretariats of the major parties receiving a lot more frequent coverage than had been the case in the past. In the past, it was once every three years. It is now likely to be an annual event.

Senator FAULKNER —An annual event?

Mr Edgman —Yes, Senator. That is what we are aiming for.

Senator FAULKNER —So that would involve all the major political parties?

Mr Edgman —Yes. Certainly all the national secretariats of the major parties.

Senator FAULKNER —You say that it is likely to be an annual event. When is it likely that you will be able to move to the annual compliance audit? I am not going to hold you to it, but can you give me a ballpark indication of when we are likely to have the next compliance audit into the Liberal Party? Around 12 months after July 1998? Will it take a bit longer to get this new annual compliance audit process into place? What are you thinking? I am not going to hold you to it, Mr Edgman.

Mr Edgman —I realise that, Senator. Frankly, I am not sure exactly when it is programmed for. It could be any time this calendar year. I would expect that it is more likely to be in the second half of the year.

Senator FAULKNER —Thank you. Have you had much oral communication contact with the principals of the Greenfields Foundation?

Mr Edgman —No, Senator.

Senator FAULKNER —Have you had any?

Mr Edgman —I have had some, yes.

Senator FAULKNER —Could you let the committee know what that involved?

Mr Edgman —We have had some communications with Mr Bandle, who is the trustee of the foundation, in his capacity also as trustee as the Free Enterprise Foundation, which is an associated entity which is subject to audit by us. In fact, we have had dealings with Mr Bandle from some years before when he was a partner with KPMG. We have had no oral dealings with Mr Bandle since last year.

Senator FAULKNER —Have you had any oral communication or dealings with the Liberal Party officers or officials about the Greenfields Foundation?

Mr Edgman —No, Senator.

Senator FAULKNER —I want to be clear on this. Mr Gray, what is the reason the AEC would serve a notice under section 316(3A) of the act? Perhaps you can explain to me what your view is of the status of the Greenfields Foundation that has led the commission to serve a notice under that section.

Mr Gray —We have, as Mr Edgman has said, had ongoings inquiries into the status of the Greenfields Foundation. We have yet to make a determination as to whether or not it is an associated entity within the meaning of the definition given under the act. We have yet to satisfy ourselves one way or the other. The purpose of seeking additional information under the new provisions of the act is to provide us with an opportunity to satisfy ourselves one way or the other.

Senator FAULKNER —But this means at this stage you are not satisfied with the Liberal Party and Greenfields' statement that it is not an associated entity?

Mr Gray —My understanding is that the statement in relation to the Greenfields Foundation has been made by a trustee representing the other trustees of that foundation indicating their view as to whether or not it is an associated entity.

Senator FAULKNER —But you have not accepted that view—

Mr Gray —No, we have not.

Senator FAULKNER —Because you have issued a notice under the act.

Mr Gray —That is right. Because we have yet to determine one way or the other our view as to whether or not it is an associated entity.

Mr Cunliffe —It is important to stress that the provision avoids any need to form a preliminary view. On the face of it, it was inverted explicitly to allow us to reach a view and to seek material documents or to go through various other steps to enable us to make the decision.

Senator FAULKNER —Yes, but this was a decision of the AEC. That is correct, is it not?

Mr Cunliffe —Of an authorised officer.

Senator FAULKNER —Yes, of an authorised officer of the AEC. Let me be clear: you were not invited by the Greenfields Foundation, I assume, to serve notice on it.

Mr Cunliffe —It was our decision, Senator.

Senator FAULKNER —It was your decision. You were not invited by the Greenfields Foundation. You were not invited by the Liberal Party of Australia or anybody else.

Mr Cunliffe —There was no need for that particular invitation.

Senator FAULKNER —No, but it is important to make the point. It is your decision.

Mr Gray —Yes, it is. It was our decision.

Senator FAULKNER —That is the key issue. Does that mean that you will be looking at issues like the one that I questioned Mr Edgman and other officers about at the last estimates hearing, establishing whether or not the $100,000 payments were interest payments on the loan and presumably whether the loan was being repaid on commercial terms. Can you say to the committee yet whether that will form part of your investigations?

Mr Cunliffe —Senator, I do not think we are in a position to pass judgment about the exact issues. What we will be attempting to do is test, on the basis of the material that is provided to us, whether the statutory definition of an associated entity is met or is not met. We go back to that rather than to any individual issue. You will know that the legislation provides that definition in terms of what the statute states an associated entity is.

Senator FAULKNER —I heard an ABC radio journalist quote a spokesman of the AEC. This is why I raise it at the estimates hearing. The journalist quotes the AEC as saying:

. . . on the available facts, Greenfields has met its disclosure obligations. . . . There is nothing in documents to say what the terms and conditions of the loans are and that until the commission has further information through, for example, a compliance audit, the commission believes Greenfields has fulfilled its disclosure obligations.

The journalist goes on to state:

So has a compliance audit been done? The Electoral Commission says it can only audit groups if they've lodged a return, and Greenfields itself hasn't lodged one.

This may well be a very accurate reporting of the commission's views. I do not particularly want to put you on the spot, but is that an accurate representation of what the AEC was saying?

Mr Hallett —I was the spokesman who was quoted, and I was quoted accurately. The difficulty for us, as Mr Edgman has just said, is that we do not normally telegraph what we are doing, particularly with audits or investigations of particular groups or individuals. There was a fair bit of media interest in this last week, as you would be well aware. Following discussions with Mr Gray, Mr Edgman and other senior officers, the view that we had at that time was correct, and I was quoted correctly. But there was a lot that we could not say because, as I say, we do not normally telegraph what we are doing.

Senator FAULKNER —I appreciate that. During the Liberal Party's compliance audit, are you in a position to be able to tell me whether the AEC asked questions, as you said you would, about the terms and conditions of the Greenfields' loan? I am not sure whom to direct that question to.

Mr Edgman —Senator, we normally keep the dealings of our audits confidential between us and the parties for reasons that you could well imagine. Of course, we did look at the loan, being as sizeable as it is, to see whether everything had been fully disclosed by the party.

Senator FAULKNER —Were you able to ascertain if the loan was being repaid at a commercial rate or if it was a gift?

Mr Edgman —What we did ascertain as part of that investigation, which is now on the public record, is the fact that it was not a loan made by Greenfields to the Liberal Party; it was a debt that had arisen out of the party's obligation to indemnify Mr Walker for his payment of a guarantee.

Senator FAULKNER —You did not buy that one, did you, Mr Edgman?

Mr Edgman —I have no grounds to not believe that to be the case, Senator.

Senator FAULKNER —So what you were informed is—and this is the most recent spin we have had—that this is a debt in the view of the Liberal Party. You asked for details about the loan, the commercial rates of interest, whether it is a gift—whatever might have been the line of questioning from the AEC—and the response was that it is a debt.

Mr Edgman —Yes. Since the Liberal Party made its amendment to its 1996-97 annual return—

Senator FAULKNER —Yes, I have seen that.

Mr Edgman —What is disclosed in that return we have confirmed as being the case, which includes the fact the party received an amount of $4.65 million from Mr Walker, which was then applied against the current debts of the party.

Senator FAULKNER —During the audit you are able to establish things like the quantum of the loan and the like. I do not like using this terminology `debt' because I think it is semantic mumbo jumbo from the Liberal Party, deliberately misleading. Are you able to deal with issues like quantum?

Mr Edgman —Yes, we can look at all those relevant issues to form an opinion as to whether full disclosure has been achieved.

Senator FAULKNER —Is it technically possible, at the end of an inquiry after the serving of notices under section 316(3A) of the act, that a full compliance audit on Greenfields could be a possible outcome?

Mr Gray —If the information led us to believe that it was an associated entity, it would then have certain compliance obligations. It is our task to ensure that those who have such obligations fulfil them.

Senator FAULKNER —The first step is that it would have certain disclosure obligations. Would it be fair to describe that as the first step?

Mr Gray —The first step is to come within the view as to whether or not it falls within the definition.

Senator FAULKNER —I appreciate that. But if that view were reached—and I appreciate that this is hypothetical—you would have both disclosure and compliance obligations effectively. I think that is fair to say, is it not, Mr Gray?

Mr Gray —Yes, I believe that would be the case.

Senator FAULKNER —Can you help me with this issue of the definition or issue of loans versus debts? I hear what Mr Edgman tells me. As I said, I read the spin, which was a new one, from the Liberal Party. Anyway, can you give me the definition, as far as the Australian Electoral Commission is concerned, of a loan and a debt, please?

Mr Gray —What I would like to say in response to you is that our inquiry is ongoing. It is involving and could involve the AEC seeking advice on just those sorts of issues. I think that until or unless we received legal advice of a kind that was competent I am not sure that it would be appropriate for me to try to even suggest to you what the definitions of loan versus debt is. We are starting to talk about guarantees. We are talking about loans versus debts and so on the complexity of which ought not to be underestimated and, as a consequence, will be part of our ongoing inquiries. These matters are complex, and I do not think it would assist the committee for officers or me, off the top of our heads, to try to draw distinctions between the two types of payments.

Senator FAULKNER —I appreciate they are complex. I agree with you, Mr Gray. They certainly are complex. Some people might even deliberately try to make these matters as complex as possible. It is not beyond the realm of possibility. Have you sought legal advice? Obviously, I will not ask you for the legal advice, but you make the point about legal advice. At this stage have you sought legal advice on these definitional issues of loans and debts and the other consequences that flow from them?

Mr Gray —We have not sought formal legal advice in relation to the matters of loan and of debt because we are still seeking as much information as we can so that when we seek such advice it is based on the greatest degree of detailed information we can secure. We are in that process at the moment.

Senator FAULKNER —I did not quite get that one on board. What I asked was: had you yet sought legal advice?

Mr Gray —The short answer is no.

Senator FAULKNER —Thank you. I appreciate the rest of what you said. When was the first time the new word `debt' appeared in relation to the Greenfields Foundation and these moneys that appear in the Liberal Party's return? When were you apprised first of a change in the terminology from loan to debt?

Mr Edgman —I guess it has probably always been known as a debt on the disclosure form. The act requires parties to list all their outstanding debts. So at no stage has there been a disclosure claiming that the debt was a loan. Those debts that could be listed on a party's
return as at 30 June can also include unpaid accounts as at year end, for instance. So it is all unpaid accounts and outstanding debts and unpaid loans—any money owed, in effect.

Senator FAULKNER —I see. It might be useful for you to take this question on notice. I accept it is complex. I accept you will probably need to gain some legal advice on this, but when you have seen your way through some of these complexities and able to provide the committee with some advice, I would appreciate understanding the conclusions that you have come to. Could you take that on notice?

Mr Gray —The conclusions being in respect of definitions of loan and debt?

Senator FAULKNER —Yes, definitions of loan and debt and what the consequences of those definitions might be. I would have thought you would be able to provide us with an interpretation of how the provisions of the Electoral Act apply to loans and debts. I think what you are saying to me is that you are not able to do that. Is that fair?

Mr Gray —I am wondering whether it is the committee wanting a legal opinion that ought not to seek that legal opinion or whether you would want to see what advice is given to the AEC.

Senator FAULKNER —I do not want to see your legal advice. I would like you to provide us with any further detail of what the implications of these definitions might mean for the Electoral Act and your responsibilities in relation to the administration of the Australian Electoral Commission, particularly your disclosure provisions. I would appreciate that being provided to us. I accept, Mr Gray, that we do not ordinarily ask questions on notice quite as vague as that, but I do not think we have any alternative given your comment to me in answer to a question just a moment ago.

Mr Gray —As you said, once we have worked our way through some of those issues and had the benefit of advice, I will see what it is we are able to inform you of in respect of the distinctions on loan and debt and its impact on our administration.

Senator FAULKNER —Mr Crosby and the Liberals keep on saying that Greenfields has never loaned them any money, yet they have a debt to them. I want to know whether there is a difference and are there any implications of a difference under the Electoral Act.

Mr Gray —We have taken it on notice.

Senator FAULKNER —Mr Crosby said in a recent interview:

A loan is when you give me money; a debt is what I owe you. We owe a debt to the Greenfields Foundation. We're paying that debt off as best we can, given our circumstances, and we're fully reporting that.

Has the AEC yet come to a view on any interpretation of that particular piece of creative analysis from Mr Crosby?

Mr Gray —No, we have not come to a view other than that is precisely what has been disclosed by the secretariat of the Liberal Party; namely, that they have a debt, that they have paid it back at a particular amount or quantum and that that has been disclosed in the most recent disclosures made by the party.

Senator FAULKNER —One assumes that, when a gift is forgiven, it becomes a loan. That is an assumption I make. Is that reasonable?

Mr Gray —I don't know that that is reasonable. They are the sort of assumptions that I am not making at this stage, nor is the AEC, until we are much better informed as to some basic
information and, secondly, as to the legal interpretations that might be placed in relation to those actions.

Senator FAULKNER —When you do it, I hope you will not limit yourself just to the issues of loans and debts because I think there is a very important issue there in relation to gifts. I think it is either a gift or a loan; I am jolly sure it is not a debt.

Mr Gray —Senator, you are entitled to make your assumptions, but I can't act upon those assumptions. I have to ensure that we have as much information as we can possibly glean through the authority that is given us by the act, and we are in the process of securing more information. We take it particularly seriously and, with some considerable diligence, we will pursue our obligation to ensure that there is full disclosure in relation to those organisations and parties who have that obligation.

Senator FAULKNER —When you say you have not sought legal advice yet, Mr Gray—I assume that is either internal or external; is that right?

Mr Gray —External to the AEC?

Senator FAULKNER —External to the AEC, yes, either from the Attorney-General's Department or?

Mr Gray —We do not have a legal branch within our own AEC. Our legal advice in the main comes via either the Attorney-General's Department or the DPP. When I was talking about legal advice, I was talking about those agencies.

Senator FAULKNER —So, by definition, if you seek legal advice effectively it has to be external?

Mr Gray —Yes.

Senator FAULKNER —I am surprised, I thought you had a very small facility for some internal advices.

Mr Gray —No, we do not. We seek our legal advice externally.

Senator FAULKNER —Thank you for that. The timing on when you might seek legal advice, is that something that you have given some consideration to, Mr Gray?

Mr Gray —No, I think that results more from such information as we may receive. As I say, these are ongoing inquiries. The legislation sets out a process which has to be followed, gone through. It is in the light of such information as we get as to when we may proceed to seek legal advice.

Senator FAULKNER —Is it true that debt arises either from financial services—say, a loan—or where goods or services have been provided; is that correct?

Mr Edgman —That is correct. The act covers instances of gifts in kind.

Senator FAULKNER —So what has Greenfields provided to establish this debt?

Mr Edgman —On the information we have, Greenfields has actually been assigned the debt from Mr Walker. So the debt arose by way of an obligation of the party to indemnify Mr Walker for his payment under a guarantee. He has transferred that debt—as I understand is open to him or to any other organisation under the law to assign that debt to a third party—to the Greenfields Foundation in this case.

Senator FAULKNER —But if it is a financial service, it is in the form of a loan, isn't it?

Mr Edgman —I am not quite sure of your definition as to `financial service'. I might be getting out of my depth here in trying to—

Senator FAULKNER —I asked what was the good or service. What service or good has Ron Walker provided to make this a debt rather than an interest[hyphen]free loan—and, of course, don't forget that goods and services are disclosable.

Mr Edgman —The original loan was a facility that the Liberal Party had with the National Australia Bank. On the information that has been disclosed, Mr Walker provided a guarantee over that loan and, as a guarantor, he had a legal obligation to come good with his guarantee if it was called in. On the information we have, Mr Walker did pay that guarantee. My understanding is that the party then has a legal obligation to indemnify him so that the service he is provided, I suppose—if you could call it a service—is that he is being held to the guarantee that he gave over the loan of the party.

Senator FAULKNER —You see, Mr Gray, I would not want the AEC to get conned by the Liberal Party. I think that would be a terrible thing. I want to refer you to question on notice No. 2709 which is answered in the House of Representatives Hansard on page 3657 where Mr Andren asked a question of the Minister representing the Special Minister of State. Mr Fahey answered part (4) of the question in these terms:

The terms of the loan made by The Greenfields Foundation to the federal secretariat of the Liberal Party are, at this stage, unknown to the Australian Electoral Commission. The terms and arrangements of this and any other significant loans will, however, be examined by the Commission during its audits of all political parties.

There is the Minister for Finance and Administration in the House Hansard in answer to a question on notice, which one assumes Mr Fahey would have taken a bit of notice of. It is really game, set and match, isn't it? I just do not want the AEC to be conned on this.

Mr Cunliffe —Can I ask the date of that response?

Senator FAULKNER —It is 25 May 1998.

Mr Cunliffe —I think it is probably important to point out that it precedes the amended return of the Liberal Party which identifies that, in fact, Greenfields was not the source of the funds but Mr Walker was.

Senator FAULKNER —Hang on, what it predates is that shonky piece of rewriting of history and that little bit of what I described as `mumbo jumbo' from the Liberal Party to try to con a few people that the gift or the loan has somehow now been redefined and changed into a debt just so the Liberal Party can sleaze and slime its way around the disclosure provisions of the act. I do not expect you to respond to any partisan comment I make on this—I understand you will not. I just wanted to point out to you that there in the House Hansard is Mr Fahey using the terminology.

If we really want to get technical about it, I refer you to a speech made by Mr Fahey on the second reading of the Electoral and Referendum Amendment Bill 1997 in the House of Representatives on 24 March 1998—it is on page 1424—where he says:

Most of the members opposite in making their contribution made the made some comments with regard to allegations with respect to loopholes in the disclosure provisions covering associated entities. There is nothing at this time to suggest that there is any loophole in the disclosure provisions. Where a loan is made to a political party on commercial grounds from whatever source, there is no financial benefit being derived. However, if a loan is made on favourable, non-commercial grounds, then the lender may well fall within the Electoral Act's definition of an associated entity and may be required to furnish comprehensive disclosure returns to the Australian Electoral Commission. I can assure honourable members that evidence provided in respect of the Greenfields Foundation—to which I note honourable members have made reference—clearly indicates that there is a commercial basis for that, and the Electoral Commission has no reason to doubt from information provided anything to the contrary.

This is pretty stark stuff. This again from the Minister for Finance and Administration in a debate on the second reading of the Electoral and Referendum Amendment Bill 1997 in the House of Representatives.

I do want you to take those sorts of issues into consideration: a question on notice, a speech on the second reading. How do you respond to Minister Fahey's remarks? He is the minister who introduced and took the Electoral and Referendum Amendment Bill through the parliament. Was he wrong? Was Mr Fahey misleading the parliament when he said a loan was a loan on both occasions?

Senator Ellison —Senator Faulkner, I don't think the officers can comment. I think you have made your point and they will take that on board. I know what you are saying—that in their inquiry you want them to be cognisant of this point you are raising—but I don't think they are in a position to comment either way on what you are saying. I don't think you would be asking them to comment on something which might prejudice their current ongoing inquiry. If we can just take that comment, and they will note it.

Senator FAULKNER —You can ask Mr Fahey if he was wrong for me or you can take it on notice. Was he wrong when he said that the loan was provided on a commercial basis?

Senator Ellison —There is an ongoing inquiry, and that is the situation here. I think you have made your point, but the officers really cannot comment. I certainly could not either—

Senator FAULKNER —We do not know whether they can comment or not, Senator Ellison. We have not give them an opportunity to comment. You have said they cannot comment. I do not see why they cannot have a crack at this one, have a bit of a flash outside the off stump—why not?

Mr Gray —Senator, I don't think that we do want to comment beyond what we have already said in relation to ongoing inquiries. The points you have made and the issues you have raised are not new to us. We are aware of the various reports and the comments made by various people on the public record, but our inquiries are proceeding under various sections of the act. They are ongoing; they have yet to be concluded; and, given that, I think we have pushed the envelope to its limit. I think that we have been as open as we believe we should be in respect of this particular matter and the ongoing inquiries.

Senator FAULKNER —I hear that, Mr Gray, and I think you understand why I raised these issues. I hope they form part of your consideration as you look at these matters. I think they are important as part of the parliamentary record. I feel a bit like a soldier in the Franco-Prussian War here but I will bat on—but I will not be batting on for too long. I will make sure that we all go home relatively quickly.

CHAIR —I am pleased to hear that.

Senator FAULKNER —In a previous estimates committee hearing I think the AEC said:

We are not empowered to go behind the trust, the foundation or any other organisation to collect information to make our independent judgment at the time as to whether it is an associated entity or not.

Mr Edgman was quoted in the Sydney Morning Herald in February this year as saying:

Because the Greenfields Foundation has no disclosure obligation under the law, unless we have some grounds for believing there has been a breach, we've got no right to go and require them to provide us with that sort of detail . . . Without those terms and conditions, it's really speculation . . . we can only administer the Act that we've got.

What I understand you to be saying to us tonight is as a result of last year's amendments to the act in the parliament. Really, to some extent, that situation is reflected in those public
comments, and I am not arguing their accuracy or veracity in any way. But, to some extent, that situation has changed. You are really saying that the AEC finds itself, if you like, more empowered than previously in relation to this.

Mr Gray —That is true. In fact, we are more empowered. The amendment is in direct response to the issues we had raised earlier in the report following the 1996 election. We are now empowered. We are using those authorities and power under that subsection to seek additional information.

Senator FAULKNER —What would happen if the Greenfields Foundation refused to cooperate with the commission after the serving of this notice?

Mr Gray —They have a step of review in the event that they seek to challenge the issuing of the notice. They may do so by reference to the commission—that is, the three person commission. The act provides for a final decision to be taken in relation to that review by the three person commission.

Senator FAULKNER —Have you seen or requested to see the trust deeds of the Greenfields Foundation?

Mr Edgman —We have seen the trust deeds of the foundation, Senator.

Senator FAULKNER —When did that occur, Mr Egdman?

Mr Edgman —That occurred in the middle of last year.

Senator FAULKNER —As a result of what?

Mr Edgman —As a result of the compliance audit we conducted of the Liberal Party.

Senator FAULKNER —As a result of the compliance audit of the Liberal Party?

Mr Edgman —That is right, Senator.

Senator FAULKNER —The Free Enterprise Foundation would be subject, as an associated entity, to the Liberal Party's compliance audit. I think that is right, isn't it?

Mr Edgman —Associated entities such as the Free Enterprise Foundation are separately audited.

Senator FAULKNER —Okay, they are separately audited. In relation to the Free Enterprise Foundation, can you let me know whether you found any reference to the Greenfields Foundation or similar contacts, postal addresses, payments, debts, et cetera? Are you able to inform us of any of those details?

Mr Edgman —In terms of the operations of the Free Enterprise Foundation and the Greenfields Foundation, they are separate entities and operate separate from each other. Certainly, on the disclosures that have been lodged with us, there are no transactions between the two foundations.

Senator FAULKNER —Has the ASC investigated whether Mr Walker's repayment of the Liberal Party's debt was made entirely with his own money? Do we know that about the so-called debt?

Mr Edgman —Senator, we are now talking about inquiries that have been ongoing for some time. I would not really want to comment on what we may or may not be currently inquiring into.

Senator FAULKNER —What about the circumstances under which he honoured his own guarantee? Is that the same situation?

Mr Edgman —Yes. Again, Senator, I would not want to comment one way or the other.

Senator FAULKNER —Where do we find ourselves now with section 305(3)(a)(v)? I would be interested in your interpretation of that section and how it might apply to Mr Walker.

Mr Edgman —Senator, section 305 is really looking at expenditure incurred for political purposes and is more related to election disclosure than annual disclosures.

Senator FAULKNER —The payment to the NAB was made by Mr Walker on the understanding that the NAB would then discharge the Liberal Party from any further liability. I think that is right, isn't it?

Mr Edgman —That is how a guarantee works as I understand it.

Senator FAULKNER —So there was a legal obligation on the NAB to do so, I assume.

Mr Edgman —Do you mean to discharge Mr Walker of his guarantee?

Senator FAULKNER —I just wondered how that particular section would apply when you read it in conjunction with paragraph (d) of the definition of disposition of property in section 287 which specifically includes the discharges of debts. It may be a difficult question for you to answer, but if you are unable to answer it tonight I might suggest that it is also something that might be worth having some of your legal advisers run their eyes over.

Mr Cunliffe —I think the particular provision of section 305 is limited in its operation to the election period.

Senator FAULKNER —But does Mr Walker have to furnish a return setting out all gifts which he received during the disclosure period that effectively reimburses him for the consequences of his having given the guarantee?

Mr Cunliffe —I am not sure that the set of circumstances you have painted is something we know to have been met. Perhaps you could put it into a hypothetical situation.

Senator FAULKNER —What I put to you was not hypothetical. But by all means put it into a hypothetical situation, if it will help.

Mr Cunliffe —There could be obligations on a person in certain circumstances under that provision which Mr Edgman can clarify. But I think your question involved some preliminary assumptions which, at least to me, were not clear in how the question was asked.

Mr Edgman —Certainly, if the point of your question is whether this is a matter that we would consider in this whole set of arrangements, then, yes, most definitely we would consider all possible disclosure obligations.

Senator FAULKNER —We might revisit that one at a later stage. Finally, I raise the issue of Greenfields as a charitable trust. I do not know whether you saw the article—you might have—in the Financial Review of 23 July 1998 in which Mr Bandle, the aforementioned trustee of Greenfields, was quoted as saying:

We are set up as a charitable trust and we have written cheques of approximately $80,000 to charities so far.

When you compare a number of donations totalling $80,000 to charities with, in my view, a gift or a loan on non-commercial terms of $4,650,000 to the Liberal Party, I just wonder how much credibility that has. How do we deal with that, given the issue of Greenfields, an associated entity, coming under the definition of operating `wholly or mainly to the benefit of a political party'? That surely is an open[hyphen]and[hyphen]shut case.

Mr Gray —If these things were open[hyphen]and[hyphen]shut cases, I am sure that we would give you a view right now. But none of these are open[hyphen]and[hyphen]shut cases. As I have said to you tonight, it is the subject of ongoing inquiry. We have sought additional information. Until we have that
information, we have not reached any conclusion on any of those issues—and I do not think we can, nor should with we.

Senator FAULKNER —But this one is really rich, isn't it? We are told $80,000 has gone to charities so far and in excess of $4[half ] million to the Liberal Party. I rest my case, Mr Chairman, and thank the commission for providing the answers to the questions.

CHAIR —That concludes questioning this evening. Minister, the committee will need to meet further, and we will advise you of the time of that next meeting. Thank you, Minister, and thank you Hansard .

Committee adjourned at 10.42 p.m.