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Tuesday, 25 March 2014
Page: 2042

Senator RHIANNON (New South Wales) (21:36): The New South Wales disease of dodgy deals for mates is not just confined to Labor. The coalition, only three years after coming into government, have a spate of Liberal MPs caught up in investigations at the Independent Commission against Corruption. While the corrupt activities of MPs hold a particular interest, we should not let that overshadow the analysis of the cooperation between the major parties that has delivered a weak legislative and regulatory framework that provides very little protection against corruption. The slippery slope can be seen in Sydney with a disturbing rush to commercialise public assets and exclude the public from publicly owned crown land in New South Wales.

Tonight, I wish to draw attention to a series of actions by the Crown Lands Division of the New South Wales Department of Trade and Investment as a result of which a perpetual crown lease of land to the Paddington Bowling Club was transformed over two years into a commercial 50-year lease to property development company CSKS Holdings. This valuable open space land, which is currently occupied by Paddington Bowling Club, is on the edge of Trumper Park, a park in Sydney's inner east. Residents and local councillors have been trying to preserve this land for public recreation and community use for about eight years.

Many issues of concern arise out of this matter. Some of these are: lack of consultation by Crown Lands with local stakeholders, including Woollahra council; secret negotiations to initially sell and, more recently, lease land to CSKS Holdings, a company whose past and present directors have a long history of controversial and failed land deals and developments; an apparent failure of due diligence by Crown Lands, which is supposed to protect the public interest; a failure of corporate regulation; the handling of the club's receivership by well-known liquidator Andrew Wily; and, most recently, the use by the developers of a defamation threat to suppress public exposure of these matters.

The matter also involves two people who were involved in a Crown Lands scandal over land on Sydney's Pittwater in the dying days of the Labor government in March 2011. In December 2011, Tony Kelly and Warwick Watkins, Minister for Lands under Labor and ex-chief executive of New South Wales Land and Property respectively, were found by ICAC to have acted corruptly. Watkins later pleaded guilty for attempting to mislead ICAC. Kelly was not charged but he is now involved in another ICAC inquiry. During the period leading up to the New South Wales 2011 election that brought the O'Farrell coalition government to power, Kelly and Watkins were also involved in actions relating to the Paddington land.

A number of people who met with Labor ministers and then Registrar-General Watkins to raise their concerns about the land were surprised by the apparent determination to press ahead with decisions that favoured the Sanchez interests. A decision by Kelly, advised by Crown Lands officers, to add part of a public street as an access way to the site considerably enhanced the site's development potential. Later, the lease was also transferred from a perpetual one to a commercial 50-year one. This all occurred under the Labor government.

After the election, despite the cloud over the ex-minister and Watkins, the new Deputy Premier in New South Wales and Minister for Trade and Investment Andrew Stoner allowed the transfer of the Paddington Bowling Club lease to CSKS Holdings. This occurred in late 2011, when even a basic public record check would have revealed problems with both the management of the club and the business affairs of CSKS director Christian Sanchez. I will return to this aspect later.

Minister Stoner later granted approval for CSKS to mortgage and develop the land. I understand he may be having a change of heart. I read in the Wentworth Courier on 12 March that, after a request from Woollahra councillors Andrew Petrie and Katherine O'Regan, Minister Stoner has now agreed to review the decisions around this lease. I trust that this will be a thorough review involving independent people who were not part of the original decisions. Local MP Independent Alex Greenwich and Greens Councillor Matthew Robertson have also called for an inquiry along with the local residents group, Friends of Quarry Street. I congratulate them on their efforts to protect the community's interest.

I first raised questions about the Paddington Bowling Club back in 2008 when I was a member of the New South Wales Legislative Council. An inquiry had been held into the affairs of the Paddington Bowling Club and the actions of a number of people, including Christian Sanchez's father Michael, whose company is Woollahra Gardens, and the company's administrator, well-known liquidator Andrew Wily, to gain control of the club's affairs. Woollahra Gardens later changed its name twice and is now the company CSKS Holdings. Frequent changes of directors, shareholders and names are characteristic of Sanchez's companies that make it hard for interested citizens to track responsibility for corporate actions.

This inquiry had been set up after the Minister for Lands Tony Kelly, advised by Crown Lands officers, had secretly agreed in 2006 to sell the land to Paddington Bowling Club, which in turn agreed to pass it to Woollahra Gardens. Sanchez's aim was to use the land for property development. The transaction was only prevented when Woollahra council officers discovered the approved sale and informed councillors of what was happening. The council, which should have been consulted in the first place, vigorously opposed the sale. After pressure from the mayor, Councillor Andrew Petrie, the then local member of parliament Clover Moore and others, licensing police carried out a four-month inquiry and recommended that the director of liquor and gaming establish an inquiry with judicial powers. While the inquiry was asked to investigate possible corruption, it only had powers to make findings of fact, leaving it to state law enforcement authorities to decide what action to take.

The inquiry was completed in 2008 and, along with Clover Moore, I was concerned that its report had not been made public and no action had been taken on its findings in relation to past actions or to present further damage to the club or the local community. In answer to my questions in the New South Wales Legislative Council, the then minister for liquor and gaming told me that authorities were still examining the report to see what action could be taken. While nothing was ever publicly announced, and to the disappointment of New South Wales police officers who had carried out the original investigation, it would seem that no action was taken. What is even worse, it would appear that many of the actions uncovered in the original investigation, including poor administration of the club and frequent licence breaches, were allowed to continue. The inquiry findings included a failure by the receiver, Andrew Wily, to investigate the validity of an approximate $1 million club debt for which the inquiring commissioner found there was no evidence. Despite this finding, the loan stayed on the books of the club and was used to keep the club in receivership until Crown Lands finally transferred the land from the club to CSKS Holdings at the end of 2011. However much money the club earned, it was always in debt.

There were also findings that showed that Michael Sanchez's relatives set up companies that benefited from lucrative contracts with the club. His company, owned by son-in-law Marcus Levy, who was also appointed secretary manager of the club, was paid $1.3 million over four years. After the inquiry, Wily agreed to pay him even more. A company earned by Sanchez's daughter Vanessa was paid $686,737. There was also evidence that a business called Quarry Bistro was established at the club without any written agreement or commissions paid to the club. All the income from food sales went to Quarry Bistro. The current director of CSKS Holdings, Christian Sanchez, was, at different times, a director of Quarry Bistro.

While Marcus Levy was earning a high salary at the club, he and Michael Sanchez were becoming involved in the hotel trade. Michael Sanchez was reported by TheSydney Morning Herald to be vying with businessman Michael McGurk to buy the Crest Hotel in Kings Cross at the time when McGurk was shot in 2009. While the sale to Sanchez never occurred, Levy and Vanessa Sanchez were managers of the Crest Hotel bar during this period. The family also took up interest in the Allawah Hotel and the Lansdowne Hotel in Chippendale, where they were reported to be introducing poker machines. Andrew Wily is now liquidating the Sanchez hotel company, Benchmark Hotels. The Sanchez family property company, Benchmark Australia, is still registered, but an Australian Securities and Investment Commission search revealed that it has no directors.

The Sanchez families were not the only ones whose actions raise concerns. There are serious concerns that need to be answered about whether the club was deliberately kept in administration by liquidator Andrew Wily until Crown Lands agreed to transfer its lease for $1 to CSKS Holdings at the end of 2011. This was one of the longest administrations in corporate history. During this period, annual meetings were not always held and financial accounts were filed late or, as in the last three years, not at all. It is hard to see how this could justify not holding registered club meetings required by law. Surely members would want to know about these negotiations. Was the real intention to hide the negotiations from club members, the public and the council? Residents of Paddington had enduring concerns about the way the club was being conducted and lodged many complaints, some of which were upheld. It has been reported that several residents felt intimidated after receiving visits from people associated with the club after they had made complaints.

This is not the first time that questions have been raised about the conduct of Andrew Wily, who was deregistered as a liquidator for several months in 2003 after he was found by the Companies Auditors and Liquidators Disciplinary Board to have failed to carry out his duties properly in the external administration of six different companies. In those cases, too, minutes and reports had not been filed. Serious allegations about Wily were included in a speech by Senator John Williams in September 2011. Senator Williams spoke of complaints that Wily had appointed a litigation fund that appeared not to exist and had agreed to pay it $3.3 million for doing nothing. In one matter, Wily had consumed millions of dollars in fees in money paid to others. Wily had employed Vaucluse resident and standover man Jim Byrnes. I note that Senator Williams told the Senate that he received a threatening letter from a solicitor warning him against giving the speech. Needless to say, he ignored it. After the speech, Wily told TheAustralian that he denied all allegations. Wily was a close associate of Leon Nikolaidis, a solicitor who was jailed for fraud in 2008. Nikolaidis and Michael Sanchez were also business partners and involved together in a property development in Camden. Christian Sanchez was also involved as a director in this development company, providing guarantees for loans. The venture eventually failed.

Another figure that has played a key role is Brian Kirk, who represented the club and the Sanchez family interests in negotiations over the land. He was a long-term business associate of both Wily and Sanchez. Kirk has been President of the Paddington Bowling Club since 2004 and remains so today. According to evidence given to the inquiry, Kirk and unnamed consultants continued to negotiate directly with Minister Kelly, even after the sale plan had been called off. Details of these negotiations have never been made public, as some parts of the evidence were given in closed hearings. As a planner, Kirk has been involved in a number of other developments with the Sanchez family. He is a planning consultant on a current CSKS Holdings development proposal for the Paddington Bowling Club site.

From 2007 onwards, Michael and Christian Sanchez were involved in another development, Crows Nest Retail in North Sydney. Kirk was again their planning adviser. This development also struck problems when residents and North Sydney Council raised objections. This led to a financial crisis for the Sanchez family at the end of 2011. These events were litigated in an action by Bankwest against Christian and Michael Sanchez and others for which judgement was issued against the Sanchezes in September 2012. The bank obtained orders that money from the sale of property that belonged to the bank had been paid into Christian Sanchez's bank accounts in breach of trust. Christian Sanchez and other members of the family were ordered to pay more than $2 million to the bank.

In 2013 Michael Sanchez became bankrupt. These improper deposits into Christian Sanchez's account occurred in the period leading up to the time when the Paddington land was transferred to CSKS Holdings and a mortgage was granted by the Commonwealth Bank over the property. These matters are still under investigation while Crows Nest Retail is being liquidated. Given all this, and more material that is on the public, legal and corporate records, it is hard to understand how the current New South Wales coalition minister, Andrew Stoner, could be advised by Crown Lands lawyers that he should transfer the Crown Lands lease to CSKS on 30 December 2011 and that the company should be allowed to mortgage and develop the land.

Questions about Michael Sanchez's business dealings are not new. There had been questions over Sanchez's property interests as early as 2002, when the Victorian Supreme Court found in relation to a development that Sanchez's evidence was unsatisfactory. It also found that there was a consensus amongst the project team that Sanchez should be removed in the 'sense that neither he or any interest associated with him should have ownership or a controlling interest'. In late 2011, an offer for CSKS Holdings to supply money to creditors was part of Michael Sanchez's negotiations with the banks as he staved off bankruptcy. In the end, the bank rejected Sanchez's offers and he became bankrupt.

In the light of court judgements at this time, it is even more astonishing that the minister and Crown Lands officers could continue to expect residents and concerned councillors to accept their description of CSKS Holdings as a 'private equity financier' of the club. Letters written on behalf of the minister continued to describe the transactions this way as late as February this year.

This affair raises serious questions about what due diligence is carried out when public assets are disposed of into private hands. This is especially serious at a time when so much public land in New South Wales is under threat. As current ICAC inquiries have shown, it is in the interface between public assets and services and private interests that so much corruption occurs. While deals are made behind closed doors and without proper oversight, public interest will be betrayed and, as New South Wales residents are learning, corruption can flourish whether the Labor Party or the Liberal Party are in power.

One might have expected the events that I have described tonight would have been reported by the media. But, apart from reporting during the inquiry, these events have not been covered. Much has been said about how the media business model that supports the private media sector is failing. As revenues have fallen so have staffing levels. I am concerned that, in this situation, many stories of public significance are not getting the attention that local communities deserve when public regulation and decision making fails. This leaves small groups struggling to get the attention of public authorities. Indeed, I am aware that other communities with similar stories have been unsuccessful in attracting even minor media attention.

In this case, the independent online publication New Matilda took up residents' requests for investigative journalist and non-practising lawyer Wendy Bacon to investigate the situation. However, three weeks ago, shortly after New Matilda had published the first in a series of stories about the actions of Crown Lands, the club and the dealings between them, both New Matilda and Bacon received letters from Sydney lawyer Tony Brooks. Brooks himself was earlier a director of CSKS Holdings and was a witness to the land transfer documents in 2011. He stated that his client would only agree not to sue for defamation if the article was immediately removed from the New Matilda website, never republished and the legal costs of his client, Christian Sanchez, were paid. In those circumstances, as a small publication with very limited resources, New Matilda removed the article. Luckily, Wendy Bacon has her own blog and is continuing to publish the story.

It strikes me that, at a time when people are arguing in the name of free speech and the government are repealing 18C of the racial vilification act after a group of Indigenous Australians were found to have been vilified by Herald Sun columnist Andrew Bolt, we might do well to turn our attention to how small community groups and publications are denied their right to free speech on a regular basis by more powerful vested interests threatening use of the defamation laws.

It is important that Paddington residents succeed in protecting the public interest in this crown land. Currently, CSKS Holdings has formed a small company to build a childcare centre on part of the Paddington Bowling Club. On a broader level, we need to put in place mechanisms to make sure that public land is set aside for the benefit of citizens and the environment and is not traded away by corrupt or weak MPs into the hands of profit makers. We need proper consultation and the application of due diligence to protect current and future generations, and the community needs a vigorous media to make sure many concerns about the disposal of public land are heard and investigated.