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Joint Committee on Electoral Matters
21/09/2011
Funding of political parties and election campaigns

EDGMAN, Mr Brad, Director, Funding and Disclosure Section, Compliance, Australian Electoral Commission

KILLESTEYN, Mr Ed, Electoral Commissioner, Australian Electoral Commission

PIRANI, Mr Paul, Chief Legal Officer, Australian Electoral Commission

Committee met at 09:30

CHAIR ( Mr Melham ): I declare open the fifth public hearing of the Joint Standing Committee on Electoral Matters inquiry into the funding of political parties and election campaigns. The committee heard from the Australian Electoral Commissioner and representatives of the AEC when it commenced its hearing program for this inquiry in August. Today the committee will hear again from the AEC representatives to further discuss aspects of Australia's political funding and disclosure system and options to improve upon current arrangements. Welcome.

The committee has received a supplementary submission from the Australian Electoral Commission. You have previously appeared before the committee for this inquiry. Can I have a resolution that supplementary submission 19.2, which is in everyone's papers, be received into evidence? Mr Somlyay seconds. It is resolved in favour.

Do you wish to make any opening remarks before I hand over to questions.

Mr Killesteyn : No, but I also note that yesterday we tendered some further information requested by the committee in relation to analysis of donations and political expenditure.

CHAIR: That is what I just dealt with. The earlier submission, 19.1, has been received already.

Mr Killesteyn : Thank you.

Mrs BRONWYN BISHOP: I want to begin by saying that this additional information that you have sent us is totally inadequate. There are none of the union donations to the Labor Party listed in here at all. There are no records of the donations to the Greens. There is no record of Mr Windsor giving donations to other candidates. All that information has to be provided to this committee to make any sense out of this stuff. I will put that right up front.

I note today, for instance, there has been yet another reversal of the Health Services Union return, where there disclosure has gone from $222,000 to $16 million. This is the point I want to begin my questioning with today. I have gone back through the answers to questions that you, Mr Pirani, and you, Mr Killesteyn, have been giving since 2009 to the estimates committees. I note that again and again you say 'it is under control', 'we are thinking about it' and 'we are looking at it' and yet at no stage have you used your coercive powers under the act.

I want to begin with the proposition that you said, when concerns were raised, you asked the union to have a look-see to see if they had actually disclosed everything they should. They came back to you and said: 'We'll get Slater & Gordon to have a look. They'll engage an accountant and they'll tell us.' What sort of investigation is this? Since when do you go to the DPP for legal advice instead of presenting them with a brief for prosecution. First question: back in 2009 you were saying, Mr Pirani, that you were watching what was happening at the Fair Work Act tribunal. You were not using any of your own powers. I want to know what investigation the AEC did with regard to this matter itself and why it did not use the coercive powers. I do not want to hear the answer that you did not know which person, because the act clearly gives you the opportunity to name anyone you like.

CHAIR: Mr Pirani will be allowed to answer the question uninterrupted.

Mr Pirani : The issue the Australian Electoral Commission had before us was that, the first time I was asked questions, my recollection was that there was only one article from the Sydney Morning Herald written by Mark Davis. The issue became whether there was sufficient evidence for us to have reasonable grounds to use the coercive power in section 316(3) of the Commonwealth Electoral Act. The investigative powers that we have are limited in our ability use them by us having to have reasonable grounds before we can use the coercive powers. Part of the other problem that we had was that there was no direct evidence of what the allegations and the amounts involved were; therefore, there were issues about who had the actual reporting obligation. That was the first issue we were dealing with.

The second issue is why we went to DPP. By the time that we went to DPP—my recollection is that it was May 2010—there had been a range of additional articles, matters raised in parliament, a letter that we had received in relation to the matter et cetera, and we were still in the situation where we had no direct evidence that would enable us to have sufficient reasonable grounds to issue a 316 notice. Also, the return that was lodged by Ms Kathy Jackson on behalf of the Health Services Union was lodged on 13 October 2009, and that had a range of information in it including the fact that the Health Services Union national office was not an associated entity and, therefore, it had different reporting obligations and we could not use our wider powers that we have under section 316(2).

Mrs BRONWYN BISHOP: Tell me why the national secretariat of the HSU was not an associated entity.

Mr Pirani : Because it had no voting rights in relation to being affiliated with the ALP and there was no direct evidence that the national executive of the Health Services Union met the requirements in subsection 287(1) of being an associated entity.

Mrs BRONWYN BISHOP: So you say that the only test for being an associated entity is having voting rights?

Mr Pirani : No.

Mrs BRONWYN BISHOP: What else is a requirement for being an associated entity?

Mr Pirani : The requirements for an associated entity are that it is an entity that is controlled by one or more registered political parties. That is paragraph A. Paragraph B is that the entity operates wholly or to a significant extent for the benefit of one or more registered political parties. C—

Mrs BRONWYN BISHOP: This is section—

Mr Pirani : Section 287(1): definition of an 'associated entity' on page 314.

Mrs BRONWYN BISHOP: I've got it.

Mr Pirani : We had no evidence at that stage that the national office of the Health Services Union was an associated entity. I had been operating under a misapprehension, certainly—and I acknowledge that—that up until probably the middle of 2009 the national office of the Health Services Union probably was an associated entity, but that got cleared up when we got advice in relation to how it was separate from each of the other branches of the Health Services Union, which were registered with Fair Work Australia, and the operation of section 244 of the Fair Work (Registered Organisations) Act 2009.

Mrs BRONWYN BISHOP: Tell me the date that you discovered that you had been operating under a misapprehension that it was not an associated entity. What date did you suddenly discover that was wrong?

Mr Pirani : It was certainly by October 2009.

Mrs BRONWYN BISHOP: Okay. So in May of 2010 you told Senator Ronaldson, when he asked:

Can I take you to our discussion last estimates about the member for Dobell, Mr Thomson, and the matters surrounding him. Has the AEC finalised its consideration?

You said:

No. The matter has been referred, though, to the Director of Public Prosecutions for advice. That was done in early May. A whole range of material was sent there as well. However, I also note the media report in today’s Age, at page 8, by Mark Davis, which indicates that our colleagues at Fair Work Australia have apparently recently made the decision …

Why did you seek advice from the Director of Public Prosecutions and why did you not seek legal advice in the ordinary way that ordinary people and departments would do?

Mr Pirani : The normal protocol in the AEC has been that, when matters involve criminal allegations, we seek advice from the appropriate agency who undertakes such prosecution work, and that is the DPP.

Mrs BRONWYN BISHOP: The DPP is there to prosecute. It is clearly set out in the prosecution policy of the Commonwealth. It is to receive a brief from you and to make a judgment whether or not there is enough evidence for it to prosecute. It is not there to give you advice. Why did you not even go to the Australian Government Solicitor?

Mr Pirani : The normal protocols—

Mrs BRONWYN BISHOP: I do not mind about them.

CHAIR: You asked the question. Allow him to answer.

Mrs BRONWYN BISHOP: Tell me why it is the normal protocol.

Mr Pirani : It was established before I arrived in the AEC that the normal protocol has been for matters involving allegations of criminal conduct to be referred to the DPP in Canberra for legal advice, and that is what was done.

Mrs BRONWYN BISHOP: And did you receive legal advice?

Mr Pirani : Yes.

Mrs BRONWYN BISHOP: Where is it?

Mr Pirani : That matter has been the subject of a claim of public interest immunity by the Special Minister of State.

Mrs BRONWYN BISHOP: I bet it has. When did you receive this advice?

Mr Pirani : My recollection is that it was in July 2010. The exact date is on an answer that was given in response to a question from Senator Ronaldson at Senate estimates in February this year.

Mrs BRONWYN BISHOP: And why have you not used your coercive powers?

Mr Pirani : The reason I gave earlier was that we had no reasonable grounds based on the material that was before us at the time and, therefore, our coercive powers could not have been used. Since the three-year limitation period lapsed in March this year, there was no basis for us to use those grounds.

Mrs BRONWYN BISHOP: Have you ever used the coercive powers?

Mr Pirani : I certainly have not.

Mrs BRONWYN BISHOP: Could you give me your definition of 'reasonable'?

Mr Pirani : There is case law on the 'reasonable grounds' test. I would have to take that on notice.

Mrs BRONWYN BISHOP: I would have thought you would know that by heart.

CHAIR: I am not interested in what you thought. Ask a question. That is your role. Let the witness answer. It is what he thinks that matters, not what you think. You have an opportunity to write that in the report.

Mrs BRONWYN BISHOP: He is unable to tell me what he thinks. So you have told us here that you did not have reasonable grounds. You have told us that you were wrong in your decision as your understanding that the national office of the HSU was not an affiliated entity. You got that wrong. You have sought advice because that was what was done. You never even thought to think outside, that this may also be wrong. Now you do not know the definition of 'reasonable'. You tell me you have some advice or written evidence.

Mr GRIFFIN: Is there a question here?

Mrs BRONWYN BISHOP: There is indeed. So why would you not use your coercive powers when on the record in the media there are documents which have been produced showing the goings-on that are clearly in breach of what is in your jurisdiction? You have made no investigation at all.

Mr Pirani : At the time we went to DPP and certainly by the time of the three-year limitation period there were no documents in the public domain concerning the allegations.

Mrs BRONWYN BISHOP: You are not trying to tell me that between now and the period when you now argue, because it is too late to lay a charge for a measly penalty of a thousand bucks or whatever it is, you can no longer use your coercive powers, yet you have been on notice since 2009? That period ran up until 2011. You did nothing to investigate these matters despite the fact that Mark Davis did put out on the public record photographs of documents. You never even sought to obtain those documents.

Mr Pirani : There were no documents in the public domain in relation to the allegations involving the member for Dobell. There were certainly media reports in relation to that. There were copies of documents that were published in the News Limited publications earlier this year after one of their reporters apparently got access to the Supreme Court file.

Mrs BRONWYN BISHOP: Isn't it interesting that a journalist can get access to material and you cannot. That material was then available. Did you ask the journalist if you could see those documents?

Mr Pirani : No.

Mrs BRONWYN BISHOP: Why?

Mr Pirani : I had discussions with the solicitors for Fairfax on two occasions. We had lengthy discussions about the requirements of the Electoral Act. I invited them to provide me with any documents, but at that stage the defamation proceedings were still on foot and they declined to provide me with any documents.

Mrs BRONWYN BISHOP: After those defamation proceedings had ceased, you had a conversation in a letter you wrote to me that you had had a discussion with Steve Lewis. Was it with you or was the conversation with Mr Killesteyn? In that conversation you said you would love to see any more evidence if you had any. What sort of investigation is that?

Mr Pirani : I cannot use my investigating powers given the three-year limitation period has ceased.

Mrs BRONWYN BISHOP: This was before it ceased.

Mr Pirani : No, it was not. My discussion with Mr Lewis occurred earlier this year after March; therefore, the period had already ceased in relation to those matters.

Mrs BRONWYN BISHOP: Let's go through the time line. 8 April 2009—

CHAIR: Mrs Bishop, can you please tell the committee how this is relevant to the current terms of reference for the committee? You are becoming extremely specific here. We are not talking about the generality which might impact on the committee's recommendations. You are going into a specific matter, and I cite parliamentary privilege resolution of the Senate on 25 February 1988:

A chairman of a committee shall take care to ensure that all questions put to witnesses are relevant to the committee's inquiry and that the information sought by those questions is necessary for the purpose of that inquiry.

I am prepared to allow latitude to a point, but the specificity of some of this, quite frankly, is not relevant to this inquiry. It is relevant to other matters.

Mrs BRONWYN BISHOP: To the contrary. I will answer specifically why it is relevant to this inquiry. We are looking into the question of the adequacy of disclosure provisions, whether there should be caps on donations and whether there should be caps on expenditure, and all of this is pivotal on the AEC being a body that be relied upon to ensure that proper disclosure is made. I am looking at the efficacy of the AEC on its record at being able to ensure that the relevant material required to be disclosed under current law is so disclosed and showing, as the proceedings go on, that there are so many ways in which the disclosure laws can be circumvented—presumably by just giving someone a credit card—that the whole system needs to become more rigorous. The AEC, with all the $300 million allocation it gets, shows that it does not know how to use its powers. This is very relevant to whether or not the AEC, as the body that is pivotal to any of this legislation, is up to doing the work.

CHAIR: You have just made the point that I have been making. You are entitled to ask questions in terms of the general about where there are deficiencies, where there can be improvements and where in the past there may well have been deficiencies. I am saying to you I do not believe the specificity of some of your questions relate to the general inquiry. Continue.

Mrs BRONWYN BISHOP: I am sorry. If you are trying to cover up this question—

CHAIR: There is no cover up. You are getting more time. This is not Senate estimates. I have already said to you that you will have the bulk of time. I have no problem. But I am telling you—and you know I have a legal background, so I am able to interpret Senate standing orders—you can go to the generality—

Mrs BRONWYN BISHOP: Well so am I. I can go to the specifics. You cannot have a discussion of general without the particular. I am ready to go. Let's look at the time line.

Mr Killesteyn : The AEC does not receive $300 million in appropriation.

CHAIR: Thank you.

Mrs BRONWYN BISHOP: Correct me. What is it?

Mr Killesteyn : I have provided evidence on this before. Our appropriation on an annual basis is about $120 million. In an election year it doubles to approximately $220 million, most of which is for election processes.

Mrs BRONWYN BISHOP: Good. Okay. It is $120 million a year and $220 million for an election year. So the timeline: this is going specifically to the question of whether or not you had reasonable grounds and should have been able to form that view. On 8 April 2009 the article 'Doubts over disclosure of poll fund' reported in the Sydney Morning Herald thatunion credit cards were being used to spend $104,000 on Craig Thomson's political campaign for Dobell—directly relevant to you. On 9 April 2009 Mr Thomson denied he misused the work card. In 2009 there was a probe into union finances after escort payments. Presumably the escort payments did not have anything to do with his election campaign. Mr Turnbull, as Leader of the Opposition, said the AEC should investigate the allegations on the spending on the Dobell campaign. So the Leader of the Opposition has called on you to do an investigation. On 10 April 2009 Senator Brandis calls for police to investigate the Labor MP after there were disclosures in the estimates hearings. On 11 April 2009 the call for a fraud probe was rejected. A spokesman for the Special Minister of State, Mr Faulkner, said the AEC would make its own decision about whether a formal investigation was required. So it is squarely with you, the Special Minister has said.

Going back to 8 May 2009, there was the article 'Commission not told of spending on MP's campaign', a report in the Sydney Morning Herald that showed allegations that the HSU spent $53,000 on Mr Thomson's campaign for Dobell, which included—and this is very important—payments to The Entrance Print from May to November 2007 totalling $12,647, which was made on Craig Thomson's MasterCard and paid for, as we know, by the HSU.

Mr Pirani : What was that date again?

Mrs BRONWYN BISHOP: This is 8 May 2009.

Mr Pirani : I am certainly not aware of any article of that date that referred specifically to that printing expense.

Mrs BRONWYN BISHOP: I will find it for you. It is in the Sydney Morning Herald and, in that article, it showed a payment for $7,253.17 made to Australia Post in July 2007 by electronic transfer funds from the HSU SGE Credit Union account. In other words, the HSU directly paid the Australia Post bill during the election campaign for Mr Thomson. There was a Payment on Nova Radio for $2,739 on Mr Thomson's union MasterCard on 12 October 2007. There was a payment to Central Coast Radio on 12 November 2007 for $14,647.60 made by the HSU by electronic funds transfer. So the union directly paid that bill for the election campaign of Mr Thomson. $7,900 was paid to Cumberland Newspapers in 2006 on an HSU national office Diners Club card. These are all payments that are made in respect of Mr Thomson's campaign, not disclosed. Photographs of that documentation were showed and clearly made available. I confirm that you made no attempt to contact that journalist and ask for those documents.

Mr Pirani : I will confirm my previous evidence that in the articles I read from Mark Davis I do not recall there being any specific amounts mentioned. There were certainly no photocopies of documents. No, I did not speak to the particular reporter, but on at least two occasions I did speak to the lawyers for Fairfax.

Mrs BRONWYN BISHOP: Here is a copy of the article. I would have thought that an indication that these documents were available would have been a reason for you to be reasonably concerned.

On 29 May in the Sydney Morning Herald the AEC said it had asked the HSU to advise it of the outcome of an investigation into whether it disclosed spending on Mr Thomson's campaign. So you asked the union which is the subject of all this media attention and questioning to investigate themselves to tell you if they had really done the right thing. You never asked Mr Davis, who I think now works for a minister in this government, whether or not you could have access to those documents. Seeing them never triggered in your mind that this was reasonable grounds to use your powers?

CHAIR: You have put a number of matters on the record. We will allow Mr Pirani to comment.

Mr Pirani : I have no recollection of seeing any documents relating to expenditure that was incurred by the member for Dobell. The reporting obligation was on the Health Services Union, not on the member for Dobell. The reporting obligation, therefore, rested with the person who occupied the position of President of the Health Services Union at the relevant time. That was Ms Kathy Jackson. Yes, I had several contacts with Ms Jackson and with the lawyers who were acting for the Health Services Union about putting in returns concerning what was alleged to have taken place in Dobell and expenditure that had been incurred on behalf of the national office of the Health Services Union.

CHAIR: Can you clarify the period that you had that contact? You can come back to it.

Mr Pirani : Certainly it was after the first article by Mark Davis appeared. My recollection is that that was in April 2009. There was a range of correspondence between me, the lawyers and also Ms Jackson that led up to the return being lodged on 13 October 2009.

Mrs BRONWYN BISHOP: On 16 June 2009 a report in the Sydney Morning Herald titled 'Credit card cloud hangs over MP', an independent audit by BDO Kendall was conducted into the Health Services Union's finances but not made publicly available. On 20 October 2009, Mr Pirani, you told the Senate estimates hearings that they were essentially not interested in the findings of the BDO Kendall report:

The issue is whether we have reasonable grounds to require the production of evidence that shows a contravention of the act. The BDO Kendall report in itself would not provide us with any additional evidence in relation to the contravention of the act.

How would you know that if you did not see the report?

Mr Pirani : Because I needed actual evidence of what had been expended as electoral expenditure that was disclosable under the act.

Mrs BRONWYN BISHOP: How do you know that was not in that report if you did not see it?

Mr Pirani : Because the report, as I understood it, dealt with issues of whether there were adequate records being maintained by the Health Services Union concerning expenditure.

Mrs BRONWYN BISHOP: The report was not made public, so how did you know what was in the report?

Mr Pirani : I did not know what was in the report.

Mrs BRONWYN BISHOP: So how can you tell me that that is what was in it?

Mr Pirani : I could not tell you what the contents of that report was.

Mrs BRONWYN BISHOP: So how can you then tell a Senate estimates committee that it would not assist if you did not know what was in it?

Mr Pirani : I needed prima facie evidence to get the reasonable grounds to use the coercive powers. The question that was being asked of me at the time was whether we had obtained the BDO Kendall report and why we had not obtained it. My understanding at that time was that that report had been done for a specific purpose and had been provided to Fair Work Australia as part of their investigation.

Mrs BRONWYN BISHOP: How did you know that?

Mr Pirani : From discussions that I had with Fair Work Australia.

Mrs BRONWYN BISHOP: So you can have a discussion with Fair Work Australia but you did not seek any legal advice yourself as to what reasonable grounds would be and whether you should exercise those powers?

Mr Pirani : The issue of our coercive powers was a matter that I did obtain legal advice on in the context of the request to DPP.

Mrs BRONWYN BISHOP: So the DPP you thought was an adequate source at all times. You never sought any other legal advice?

Mr Pirani : That is correct.

Mrs BRONWYN BISHOP: Extraordinary. Mr Killesteyn, you went on to say:

I can give you one assurance and that is that this matter will receive priority, notwithstanding that the amounts are relatively small in the context of other electoral expenditure. But it will receive priority. That is my assurance to the committee.

How did you fulfil that promise to the estimates committee?

Mr Killesteyn : I have maintained ongoing discussions with Mr Pirani on this matter. Mr Pirani is the chief officer responsible for these matters. We have had discussions each week to ensure that the matter is being progressed. I am satisfied about the process that has been conducted.

Mrs BRONWYN BISHOP: And that is your idea of giving this idea priority.

Mr Killesteyn : I am not quite sure what evidence you want, but the fact is the matter is under constant discussion in the AEC and constant discussion between me and Mr Pirani to ensure that all the processes are put in place. That is my idea of priority and I am satisfied with that.

Mrs BRONWYN BISHOP: These powers have never been used. They have never been tested. You have never sought independent legal advice. You have never made a prosecution. It seems to me that the intent of the parliament when this act was passed was to give you power to make investigations. Australia was swarming with evidence of misdeeds. Kathy Jackson is a very brave and courageous woman; I take my hat off to her. But she seems to be fighting as a one-man band. You could have asked her for information.

Mr Pirani : Yes, I had several discussions with Ms Jackson where I did ask her for any documents in their possession and when I could expect the reports. That was the whole nature of my contact with her in the period that went from May 2009 through to 13 October 2009.

Mrs BRONWYN BISHOP: It is now 2011. This has been going on for two years with no use of your powers. you just said to Ms Jackson that you were awaiting the reports that she had commissioned, but you did not ask for them.

Mr Pirani : It was within her purview to provide me with the reports at the time I asked her for any documentation. Mrs Bishop, one of the problems was that my understanding of the way the BDO Kendalls report had been obtained was that it had been obtained by the solicitors acting for the Health Services Union.

Mrs BRONWYN BISHOP: Slater and Gordon.

Mr Pirani : Indeed. Part of the problem that we have with our coercive powers is that we do not override legal professional privilege. The Daniels Corporation case is the one that deals with the coercive powers of government agencies to obtain records. So the issue that I was confronted with was that I could not force the production of the BDO Kendalls report. We understood that it had been provided to Fair Work Australia as part of their investigation into what was taking place. The powers that I had in 316(3) did not override legal professional privilege. So I was left with the situation that I was asking for cooperation from the Health Services Union national office. I felt I was obtaining that from Ms Jackson. She even provided me with a copy of a letter that she had sent to Slater and Gordon concerning what she was asking them to do on behalf of the union. The documents were obtained and the returns were provided to us on 13 October 2009, which dealt with the reporting obligation of the national office of the Health Services Union.

Mrs BRONWYN BISHOP: You never asked Ms Jackson for those reports?

Mr Pirani : I asked for any documents and any other assistance she could provide.

Mrs BRONWYN BISHOP: Did you ask for the reports?

Mr Pirani : I do not recall asking specifically for those reports. Certainly in the email correspondence I do not recall specifically asking for the BDO Kendalls report.

Mrs BRONWYN BISHOP: We will go now to 23 October 2009—election spending record a year late. A report in the Sydney Morning Herald: 'HSU failed to submit its return for 2007 election until one year after the submission date.' This was submitted on 13 October 2009, which the committee at the time was looking at. On 9 February 2010, you told the senate estimates committee that, 'the three major sets of allegations were from the articles of Mark Davis in the Sydney Morning Herald, which we have gone through in detail.' That is you presumably saying you have looked at the three sets of reports from Mark Davis, but you do not recall seeing the reference to all the documents which he had in his possession. You then said:

We have examined them in relation to the two main provisions of the act: firstly, the definition of ‘gift’ in section 287(1) and, secondly, the exemption provision in relation to both donors and candidates reporting amounts that they have received and given under section 304(5) …

That raises the question, doesn't it, of whether or not an amount that is said to be for one purpose can be used for another? Supposing, for instance, the $100,000 that was given to Mr Thomson to allegedly pay his legal fees for his discontinued legal action, which was paid to him after he put in a DA for $100,000 to extend his house—and the ALP money was allegedly given to him to stop him going bankrupt and losing his seat—was money that was actually paying off a few other debts. How would you now that it could have pertained to his election expenses? How would you find that out?

Mr Pirani : We would have to wait until a donor declaration or a candidate declaration was required to be lodged with us. Of course, that period has not taken place yet.

Mrs BRONWYN BISHOP: Supposing the declaration comes in and, as is on the disclosure statement, it is $100,000 to pay legal expenses, would you accept that?

Mr Pirani : Until or unless we had some reason to doubt it, yes.

Mrs BRONWYN BISHOP: It is very difficult for you to see what is a reasonable doubt. There is evidence all around you. You are drowning in it, but you cannot have any reasonable concerns.

Mr Pirani : Sorry, the test in the act for us to use our coercive powers is 'reasonable grounds'. It is not an issue about 'reasonable concerns'. We make evidence based decisions and the issue that I was faced with was that there were reports in the media but there was no documentation. There were no specific allegations. There were general comments about Coastal Voice and about his campaign fund. There was no distinction between the Your Rights at Work campaign, which was being funded by the Health Services Union amongst many other unions, and anything that was specifically for Mr Thompson, candidate for the seat of Dobell. Presumably, if the authorised officer had issued a statement which said you would want to see any documentation relating to the HSU's electronic transfer of funds of $14,647.60 on 12 November 2007 to the Central Coast Radio, you would have been able to do that.

Mr Edgman : I think it gets back to the issue that Mr Pirani was talking about which is the reasonable grounds test before being able to issue the notice.

Mrs BRONWYN BISHOP: There is ample evidence around that showed that at least $39,000 to $54,000 was spent on Mr Thomson's campaign in Dobell, which should have triggered your concern and would have triggered the use of these powers, otherwise we may as well delete them because they will never be used.

Mr Pirani : Mrs Bishop, at the time there was no specific evidence as to those amounts. My recollection is that the first time I saw those documents is when they were in the News Ltd publications and the Steve Lewis media report which set out those amounts. Even saying that there was still the issue that we had no prima facie evidence where that related to the Health Services Union campaign for Your Rights at Work as opposed to the election of Mr Thomson in the seat of Dobell.

Mr Killesteyn : Mr Chair, one thing we might do is go back and research the times at which these powers have been used and in the circumstances in which these powers have been used. My understanding from Mr Edgman is that they have been used on a couple of occasions. We are not aware of the precise detail. I think that would assist the committee.

Mrs BRONWYN BISHOP: That would assist me enormously because Mr Pirani said that they had not been used.

Mr Pirani : I said that they had not been used in the time I have been here, Mrs Bishop.

Mrs BRONWYN BISHOP: How long have you been there?

Mr Pirani : I joined the Electoral Commission in July 2007.

Mrs BRONWYN BISHOP: In all this time, in looking at the question of whether or not reasonable grounds were there, and it is not your decision to make; it is an ASO 6's decision to make. It is a joke.

Mr Edgman : We will go back and have a look at the circumstances.

Mrs BRONWYN BISHOP: Let us just look at the rest of timeline. On 27 May 2010 at an estimates hearing Mr Pirani admitted that the AEC did not have a lot of information. Well, you do not get it if you do not ask. 'I would not call it a brief'—this is what you sent to the DPP—'It does not have formal witness statements and matters like that'—because you never took any—'What it does have is a whole range of documentation. We have asked the DPP for advice in relation to the material we have.' What did you send to the DPP?

Mr Pirani : The material that was required by them.

Mrs BRONWYN BISHOP: What material? It says documentation.

Mr Pirani : That is correct.

Mrs BRONWYN BISHOP: What was the documentation?

Mr Pirani : Various returns, various other documents, appointments of agents and other material that we had.

Mrs BRONWYN BISHOP: What other material?

Mr Pirani : I would need to go back and go through the brief but there were newspaper reports, other documentations and searches that we had undertaken in relation to corporate entities and there were documents that have been filed.

Mrs BRONWYN BISHOP: On 22 February 2011 estimates hearings, Mr Pirani, 'He had referred both matters about Mr Thomson and the HSU to the DPP but noted the statute of limitations was approaching.' Mr Killesteyn said on 22 February 2011: 'The AEC was aware of the complaints against Mr Thomson and was very keen to state the time was almost up. Given that many of the events that are alleged to have occurred were in 2007 we are getting very close to the time period where, if further evidence were to come to light, we would want to be able to take any action at all.' What did you do between 22 February 2011 and the period when you could no longer bring an action against anybody?

Mr Pirani : I actually approached—

Mrs BRONWYN BISHOP: That is Mr Killesteyn's evidence.

Mr Pirani : Sorry.

Mr Killesteyn : One of the issues here with this whole case is that information has been coming out at various points in time. Our approach has been to react to that information as best we can, noting the limitations that Mr Pirani has already put forward in relation to what action we have available under 316 and our legal authority to pursue those matters. A lot of the information is contained in a whole range of documents, which are spread right throughout newspaper reports and other areas. As I said before, I am satisfied that this matter has been progressed in a proper manner on the basis of the information that we had available and on the basis of the information that we had power to request.

Mrs BRONWYN BISHOP: You are very easily satisfied. Did your designated officer ever have a conversation with Mr Killesteyn in that period? I will ask you, Mr Killesteyn: did you ever have a discussion with the designated officer between 22 February and that date?

Mr Killesteyn : As far as I am concerned, Mrs Bishop, the discussions that I had were with Mr Pirani.

Mrs BRONWYN BISHOP: But he is not the designated officer.

Mr Killesteyn : He is the chief legal officer.

Mrs BRONWYN BISHOP: But he is not the designated officer.

Mr Killesteyn : He is the chief legal officer and, as far as I am concerned, it is his area that is responsible for progressing this matter.

Mrs BRONWYN BISHOP: In hearing your evidence, I hear that you are satisfied. I am appalled. In this legislation, we as members of parliament gave you powers to carry out your fundamental duty. Yet what we are seeing is evidence that there are ways in which the laws can be circumvented. If you do not ask, there are no answers. So an easy way to get round disclosure provisions would be to hand out credit cards. They are never looked at by you. This only came to light because of Ms Jackson and a dispute. Otherwise, it would never have been known about. Now more people are coming forward wanting to talk about other union practices. You did not even give us the list of the union donations. I ask you to go back and consider how you ought to conduct the business of the AEC under this act.

CHAIR: Do you want to respond?

Mr Killesteyn : Mrs Bishop is entitled to her view.

Mrs BRONWYN BISHOP: So is the public.

Mr Killesteyn : That is fine. I am happy to stand by our record and the processes that we have adopted.

Mrs BRONWYN BISHOP: You have not got them.

Mrs BRONWYN BISHOP: It is appalling.

Senator XENOPHON: I want to put some questions on notice, which will take less than two minutes, and perhaps you can provide answers the next time that you are here or in writing. Firstly, going to the matters that Mrs Bishop has raised and the issue that Mr Pirani raised about the three year limitation period—and these questions are all to be taken on notice—has consideration been given to perhaps a six-year limitation period and also a period of greater than 12 months, perhaps two years, for those so-called lesser offences? Have you considered a strengthened expiable system where the onus of proof is not as great but which allows for enforcement?

Secondly, as an Independent senator, it seems to me that there is a discrepancy between the disclosure requirements of an Independent in terms of interests—which I am not suggesting should be in any way diminished—and the disclosure requirements of political parties. Any donation that I get, I have to notify within 35 days, which is quite a contrast to what political parties have to do. Is a more timely method of disclosure being considered?

Mr Killesteyn : The 35 days is not a Commonwealth requirement. That must be—

Senator XENOPHON: No, if I receive a donation of more than $300 I need to disclose that within 35 days under the register of interests for senators. Why is that we comply with that—which I am happy to do—when there appears to be quite a different time frame for political parties.

Thirdly, in relation to tests of coercive powers and the reasonable grounds test that Mrs Bishop has raised, as distinct from having a reasonable concerns test, could you provide more details about the case involving what was then the Trade Practices Act. Is there a flaw in needing a prima facie case when sometimes you need to use the coercive powers to establish whether there is a prima facie case in the first place? It is a bit like the pre-action discovery process in civil jurisdictions in civil litigation.

Fourthly, in relation to what appears to be a discrepancy in terms of access to politicians and to ministers at fundraising events, you do not feel that you are in a position to demand a donor return with the current definition of 'gift' in section 287 of the Electoral Act, not including payments made at fundraising activities. Could you take on notice whether you think that that is anomalous in the context of those events at which you have access to a minister, for instance, in terms of the general disclosure requirements.

Fifthly, on the whole issue of ongoing disclosure and the timeliness of the publication of that, what resources would the AEC need to ensure more timely disclosure—perhaps on a quarterly basis? Particularly during an election campaign, after the writs have been issues there could be substantial contributions or promises of contributions made to a political party or a candidate, whether an Independent or a party candidate. What resources would you need and what systems would you need put in place to ensure a much more timely disclosure, particularly in the course of a campaign? Thank you.

Senator RHIANNON: In the 2011 state election in New South Wales, for the first time parties and candidates had to operate under electoral expenditure caps. Mr Pirani, I was wondering if you have looked at how this worked. Did any compliance problems arise?

Mr Pirani : I might pass that to Mr Edgman, given that he has been present at some meetings at which, I understand, some issues have been raised.

Mr Edgman : One of the challenges with contemporaneous capping and bans and so forth and with later disclosure is that the AEC—or, in the case of New South Wales, the Election Funding Authority—does not necessarily become aware of breaches of those provisions until well after the event. For instance, if caps on election expenditure have been breached there is no evidence available to the administering authority for them to be aware of it and act on it at the time. It is always post the event.

Senator RHIANNON: There was an article in the Sydney Morning Herald that named three members of the National Party who may have breached the guidelines in terms of how they ran their election campaigns. Can you nominate in any way how we could track it so that if there were breaches occurring we could make that assessment before the election rather than some long time afterwards?

Mr Edgman : It would involve some intervention, I expect, of some other agency between the party or the candidate and the agency that they might be expending the funds with.

Senator RHIANNON: When you say 'another agency', do you mean an existing agency or that we would have to set something up?

Mr Edgman : It could be the Australian Electoral Commission or a separate agency could be set up or another agency within the Commonwealth could do it. For instance, with expenditure and donations it could be that in New South Wales and Queensland they are required to transact all their electoral donations and expenditure through a central account. It could be that that account has to be administered or held by a separate agency so that payments can only be made out of those accounts. That would mean that bills would have to be tendered on that account to that agency. There could also be requirements, for instance, for the major areas in which expenditure is made—such as the media and so forth—having to report to the AEC at the time that expenditure is incurred with them. In that way, it would be contemporaneous and having to provide that information would be out of the hands of the party or the candidate.

Senator RHIANNON: Thanks for that. That leads quite nicely into the issue of continuous disclosure. Thanks for the responses that you gave to some of our questions and that you sent in on the sixth of this month. I note that on continuous disclosure, question five, you said that you strongly favour it. How long do you estimate that it would take to set up such a system? I note that in response to some of the questions you said that you already have an e-returns portal. What is the degree of complexity? Other countries already have it. How quickly could we move to achieve this?

Mr Edgman : It would depend to some extent on how complex the system that is instituted for federal elections is. The e-returns portal was designed to take account of the potential for contemporaneous reporting. When it was built a year or so ago it was not hard coded to be able to cope with only annual disclosures and election disclosures. We were trying to be mindful of that and to make it more flexible and easy to amend. It is hard for me to say. I did not manage that original project. Based on how long it took to the e-returns portal built, I think six months would be an incredibly tight time frame that might be very hard to meet. It would probably be much safer to be talking about 12 months to have something up and readily available.

Senator RHIANNON: At what level would that be for donors and for everybody to get their material on there? That is what we are talking about.

Mr Edgman : The way the e-returns portal works at the moment is that people log on and submit their disclosure information through a secure log-on and that is then placed on the public record. That allows the AEC to be taken out of the equation. It can slow the process down, obviously, if we get large volumes of information that is provided to us in hard copy form and then we have to data-enter it with the inevitable concerns of errors and so forth. People can just log on, up-load the information and then it can be made available immediately.

Mr Killesteyn : The point I would make, too, about continuous disclosure is that there is an issue about what the AEC can provide by way of a conduit, if you like, for the information. The obligation on continuous disclosure is probably equally an issue for the donors and the parties because it feeds back into the capacity of those organisations to actually recognise the payments that need to be disclosed on a continuous basis, and that takes you into a discussion around the accounting mechanisms that those organisations have. So it is not just our issue.

Senator RHIANNON: It is not just your responsibility.

Mr Killesteyn : It is an issue for all the stakeholders in this particular area. So there may be some suggestions around whether, for example, particular dedicated accounts would need to be required to be set up in entities such as campaign accounts, through which moneys would flow, and then we could leverage other infrastructure that already exists, for example, through AUSTRAC, to allow that information to be reported and recognised very quickly.

Senator RHIANNON: Thank you for that. Because of the shortage of time, I would like to go to your response to question 6. This was about the problems of inconsistencies between donor and party returns not reconciling. How serious a problem do you believe this is, and do you have data that quantifies the degree of inconsistency between returns?

Mr Killesteyn : We think it is an important issue because it makes the process of matching between donor and recipient returns much more difficult if you have got an obligation on one party to aggregate below the threshold and on other parties the party returns where they only have to aggregate at levels above the $11,900 threshold. So matching becomes difficult. We cannot give any assurance at all that all donations have actually been disclosed. So I think it is serious from that perspective. If the committee is concerned about the importance of disclosure, then these sorts of issues need to be aligned between obligations between donors and recipients.

Senator RHIANNON: So you are recommending that it should be aligned and going in which direction—so there is consistency in terms of how donors do it or how the parties do it?

Mr Killesteyn : That then gets into a discussion about what the appropriate threshold is. I think generally there would be a view that the lower the threshold the better.

Senator RHIANNON: Just going back: do you have any percentage of the degree of inconsistency at the moment? Do you have any data on that?

Mr Killesteyn : We do not because it is hard to identify whether you have got a mismatch or not under the current disclosure provisions. That is exactly the same question that I asked of my people when we were putting this submission together: was there evidence that the disclosure obligations were not being met? The difficulty is: they are inconsistent; you cannot measure them.

Senator RHIANNON: In response to question 3, you said that no penalties have been issued in the last five years. What about the last 10 years or the last 15 years? Can you give some data on that?

Mr Killesteyn : We will take that on notice and do the research work.

Senator RHIANNON: You gave some interesting responses about the Commonwealth Director of Public Prosecutions that they have not pursued a matter for you. I was just interested in whether you could elaborate on that relationship. Do you see it as an issue of resources or more that it is just not a priority for them?

Mr Killesteyn : It is probably both, because they go hand in hand. But essentially what we are wrestling with are penalties that were set in 1984 and that have not been reviewed. Therefore, in comparison to other penalties, they are relatively low. That then takes you into a consideration with the DPP that, against all of the other matters that they are prosecuting, our matters appear relatively low priority from the perspective of public interest and what can be served. The other aspect is that in many of these cases the disclosure happens, albeit that it is not in compliance with the act. From that perspective, once the disclosure is made, there is a question as to whether there is a public interest in pursuing it any further. That is one of the reasons why we are suggesting that there needs to be a much greater proximity between the sanction and the disclosure obligation. One of the things that the committee ought to consider, as there is merit in considering it, is whether administrative penalties could be imposed by the AEC, particularly for things like late lodgement of returns. And these administrative penalties would escalate as the time between the obligation and the actual disclosure increases.

Senator RHIANNON: I will put my other questions on notice.

Mrs BRONWYN BISHOP: I want to go to the letter that you wrote to me, Mr Pirani, on 25 August. In that letter, in response to a letter that I wrote to you, you said to me:

During this Senate Estimates hearing I also indicated that the AEC had previously sought and obtained advice from the Commonwealth Director of Public Prosecutions (DPP) about this matter. At page 112 of the Hansard I indicated the DPP advice had concluded there was insufficient evidence available to satisfy the DPP that an offence had been committed and which could support a prosecution.

I take you to page 11 of the Prosecution Policy of the Commonwealth, chapter 3, 'The institution and conduct of Commonwealth prosecutions', 3.3:

The DPP does not investigate allegations that offences have been committed. Investigations are carried out by the Australian Federal Police (AFP) or another Government investigation agency or agency with investigative capabilities—

like you—

('investigative agency'). The DPP may provide advice to the investigative agency on legal issues during the investigation.

In other words, the practice that you have honoured in terms of seeking advice from the DPP is quite wrong. You will never get evidence unless you investigate. You have the investigative powers and you do not use them. I now go to the report by Mark Davis, which you say you do not remember seeing, in the Sydney Morning Heraldof 8 May 2009, 'Commission not told of spending on MP's campaign'. You managed to miss this. The report said:

TENS of thousands of dollars spent by the Health Services Union campaigning for the Labor MP for the Central Coast electorate of Dobell, Craig Thomson, has not been disclosed to the Australian Electoral Commission.

The Herald has obtained union credit card statements, ledger entries, electronic funds transfer records and invoices showing the HSU's national office spent at least $53,000 campaigning in Dobell for the federal election in 2007.

The HSU's NSW secretary, Michael Williamson—

the same man who was the President of the ALP, vice-president of the ALP, vice-president of the ALP in New South Wales who has now resigned from those positions and who is now under investigation—

confirmed yesterday that none of the national office spending was included in the disclosure of political expenditure lodged by the union's state branch.

Here are photographs of the documents that Mr Mark Davis said that he had. Although you were prepared to have a conversation with Mr Steve Lewis, which is what you told me in your letter, you do not see fit to have a discussion with Mark Davis. Do you prefer one newspaper reporter to another?

Mr Pirani : No, Mrs Bishop. The issue that I had was that the Steve Lewis article had details of the specific amounts involved. When I had the discussions with Fairfax lawyers, they were not prepared to provide me with any documents. I did not have a discussion—and I have said this before—with Mr Davis.

Mrs BRONWYN BISHOP: This is new evidence. You had discussions with Fairfax's lawyers? We have not heard about that before.

Mr Pirani : I said that to you earlier today.

Mrs BRONWYN BISHOP: I am sorry; I must have missed it. Could you repeat what you said.

Mr Pirani : I had two discussions with Fairfax's lawyers. The first one was in relation to when they first issued the AEC with a subpoena. I had quite a lengthy discussion with their lawyers about the types of documents et cetera that would be relevant to any investigation that we could undertake. I had a second one several months after. I cannot tell you the dates, but they were while the proceedings in the Supreme Court of New South Wales were still on foot.

Mrs BRONWYN BISHOP: On what date did you have those discussions?

Mr Pirani : I just said that I cannot tell you the dates other than that they were while the proceedings in the Supreme Court of New South Wales were still on foot.

Mrs BRONWYN BISHOP: So they would have been prior to the date of this article.

Mr Pirani : No, they were subsequent to the date of that article.

Mrs BRONWYN BISHOP: This is the article that you do not remember seeing.

Mr Pirani : No. As I said, Mrs Bishop, I do not remember an article that went through those specific details regarding amounts, a printing company, a radio station et cetera until I saw the article that was by Steve Lewis in the News Ltd newspapers. There were no specific allegations about those amounts in any of the articles that I recall. There were three articles in the Sydney Morning Herald that I recall, plus an editorial. There were no details of the actual amounts paid to specific companies for specific purposes.

Mrs BRONWYN BISHOP: Let me read further from the article by Mr Mark Davis of 8 May 2009:

Mr Thomson was the national secretary of the HSU. He entered Parliament after winning the seat from the Liberal Party.

The spending includes:

Payments to The Entrance Print from May to November 2007, totalling $12,647, made on Mr Thomson's HSU national office Mastercard.

I sent you copies of electioneering material that had been printed by that company when I wrote to you. The article continues:

A payment of $7253.17 to Australia Post in July 2007 made by electronic funds transfer from the HSU's SGE Credit Union account.

I read these matters out to you earlier in these hearings. How can you say that there were no details of the expenditure?

Mr Pirani : Because they did not indicate whether they were for the Your Rights at Work campaign that the HSU was conducting as opposed to some electioneering for Mr Thomson as the candidate in the division of Dobell.

Mrs BRONWYN BISHOP: I do not know how you can say that when he paid for the material that I sent you, which was clearly campaign material. It was readily available anywhere. That was paid for by the HSU's card.

Mr Pirani : Mrs Bishop, I had never seen those documents until you provided them to me with your letter.

Mrs BRONWYN BISHOP: I find that incredible to believe. You have told estimates committees again and again that you were keeping this under scrutiny. Mr Killesteyn has said that this was a matter of priority and that he was talking to you all the time and that it was going to be dealt with. The deadline was coming. Nothing; absolutely nothing. I will read the supplementary submission that you made to us—the last one that came in.

CHAIR: What page?

Mrs BRONWYN BISHOP: It does not really have page numbers. There is a heading.

CHAIR: Is that 19.2 or 19.1?

Mrs BRONWYN BISHOP: It says:

I refer to your letter of 17 August 2011 to the Electoral Commissioner in which you sought further information from the Australian Electoral Commission (AEC) on matters relating to the Committee's inquiry into the funding of political parties and election campaigns. I have been asked to reply to your letter on behalf of the AEC.

That is the letter. It does not have a date at the top; it might be at the back. It is from 6 September. On page 2 of that there is a heading of 'Providing false of misleading information during an investigation—subsection 316(6)'. That incurs a $1,000 fine, six months imprisonment or both. That is important. It says:

A person who knowingly provides false or misleading information during an investigation conducted by the AEC is punishable by a fine of $1,000 or imprisonment for six months or both.

The $1,000 may not be much, but six months in jail is. To have that happen, you would have to have an investigation. But if you do not have an investigation then you will not be prosecuting anyone, will you?

Then you say, 'How effective are they?' Your submission says:

A substantial limitation to the AEC taking any enforcement action in relation to non-compliance with the donation disclosure rules are that all the penalties involve criminal offences. Offences such as the failure to lodge a disclosure return or lodging an incomplete disclosure return are straightforward matters of fact and could be better enforced if they were administrative penalties.

We will come back to the HSU returns in a minute. It goes on:

The relatively low penalties that currently apply remain unchanged since the funding and disclosure provisions first came into effect in 1984.

And this is the bit that I really love:

The relatively low value of the penalties is indicative to the Commonwealth Director of Public Prosecutions (CDPP) that these transgressions are considered relatively minor and makes it difficult to justify that it is in the public interest to pursue such prosecutions having regard to the Prosecutions Policy of the Commonwealth.

That is the ultimate cop-out. So six months in jail is petty and not to be concerned with. And yet the HSU new return that has come in has gone from $222,000 to $16 million. And you did not investigate. And you did not read this article.

Mr Pirani : We are talking about a different return here. That return is the one from HSU East, which was lodged by Mr Gibson. Yes, we have sought an explanation as to how that change occurred. The first return was $22,000, Mrs Bishop, so it is even worse.

Mrs BRONWYN BISHOP: It is even worse.

Mr Pirani : It is even worse than what you said. It went up to over $16 million. We have asked the financial controller of HSU East who put in that return for the 2009-10 financial year to please explain.

Mrs BRONWYN BISHOP: As we know, HSU East is a combination of Victoria, New South Wales and the ACT branches of the HSU, involving Mr Williams.

Mr Pirani : It is not the national office of the HSU.

Mrs BRONWYN BISHOP: I did not say that it was. We are looking at the HSU as a union per se; we are looking at the effectiveness of the provisions to do with disclosure. You did not even give us the information about how much unions have given to the Labor Party, and I asked for all that information ASAP, plus the donations to the Greens and other people.

Mr Killesteyn : Thank you for clarifying the original request, Mrs Bishop. We will now pursue it. That detail was not in the original request.

Mrs BRONWYN BISHOP: Of course not. When we are talking about donations, we do not even think about $1.6 million to the Greens, do we?

Mr Killesteyn : Mrs Bishop, this is a lot of information that we have to explore. We will follow it through now that we have clarity on what you are after.

Mrs BRONWYN BISHOP: Good. I am really comforted by that.

CHAIR: Stick to asking questions; we do not need commentary.

Mrs BRONWYN BISHOP: I want you to confirm this one more time for me, Mr Pirani. I am going to give you a copy of this article. You tell me that you have never seen it and you were unaware of it. Can you confirm that it did not spike in your mind that this was reasonable grounds to take a look at this?

Mr Pirani : There were three articles from Mark Davis plus an editorial from the Sydney Morning Herald that I considered. I will have to take on notice whether this was one of the articles that I considered in the material that I examined.

Mrs BRONWYN BISHOP: Mr Chairman, there are more questions that I want to ask the AEC when we get that additional material from them. In the meantime, they might want to get some legal advice as to the meaning of 'reasonably', because I would expect you to be using your coercive powers to find out why a union put in a return of $22,000 and then an amended one for $16 million. If you do not think that that is reasonable grounds for using them, you need to find someone to tell you that it is.

CHAIR: I thank you for your attendance here today. If you have additional material, please provide it to the secretariat. Given the nature of the questioning today, if after looking at the transcript you think that there needs to be some further clarification or correction in terms of something that was misconstrued, please let us know. The way that questioning went, there is the odd chance that something was misconstrued. If not, fine.

Resolved (on motion by Mrs Bronwyn Bishop):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 22 . 44