Mr Probity … Rory O’Connor. Ian MacDonald awarded to his friend John Maitland (below) a “training mine” at Doyles Creek worth millions of dollars.
Nanjing Night Net

Recipient … John Maitland.

MEET ”Mr Probity”. For two decades Rory O’Connor was routinely called upon to sprinkle holy water over some of the most contentious decisions of the NSW Labor government.

A probity auditor provides an independent opinion on the integrity of a project and, as the former Labor government’s preferred probity auditor, Mr O’Connor was engaged to cast his ethical eye over hundreds of government deals and tenders to ensure they were conducted fairly and properly. But now a number of those transactions have come back to haunt the ALP.

In November the Independent Commission against Corruption will open its biggest public inquiry yet into allegations that senior Labor ministers misused their positions to deliver multimillion-dollar benefits to their associates via corrupt coalmining tenders.

In 2010, one of these coal deals received Mr O’Connor’s blessing. There is no suggestion that he has acted dishonestly in relation to any of his audits or conduct, but his role in the affair will raise questions about the independence of government-commissioned probity audits and their ability to protect the public interest.

The lease in question was issued by the disgraced former mining minister Ian Macdonald to his good mate John Maitland in 2008. It turned Mr Maitland from a union boss into a multimillionaire.

Although Mr Macdonald had breached government guidelines, ignored his department’s advice and failed to put the licence to tender, Mr O’Connor’s probity review found nothing wrong with the minister’s actions. ”On the basis of our work performed it would appear that the then minister acted within the powers afforded to him,” Mr O’Connor wrote in August 2010.

The Labor government seized on the report as a vindication of Mr Macdonald’s actions. But the damaging headlines continued. Once the Liberals took power, a second opinion was obtained from lawyers at Clayton Utz.

Their report, which was tabled in Parliament, found Mr O’Connor had not been sufficiently diligent and had given scant regard to the gross conflict of interest at the heart of the deal. ”We do not consider that the [O’Connor] report was the result of a robust investigation into the matters at hand.”

The report also found Mr O’Connor ”did not draw attention to the fact that the minister [Macdonald] exercised a discretion which was contrary to the guidelines and also contrary to the express advice of his department”.

Mr O’Connor said Clayton Utz acknowledged in their report that ”they did not have access to the briefing papers and instructions provided to me, which obviously also limited the extent to which they were in a position to assess my work”. He said: ”I do not understand there to be any suggestion of any deliberate wrongdoing on my part.”

A Herald investigation has unearthed a long trail of controversial government decisions that have received a tick from Rory O’Connor. The softly spoken Irishman has sat in judgment over the awarding of the state’s biggest private sector contracts (the Epping-Chatswood railway and the desalination plant among them) and has probed a long string of government scandals.

It was Mr O’Connor to whom the Opposition Leader, John Robertson, turned when he was criticised for hiring Labor mate David Tanevski to handle the sale of the picturesque union-owned holiday cottages at Currawong. At the time Mr Robertson was head of Unions NSW. There was an even greater outcry when it emerged that Mr Tanevski’s business partner, property developer Allen Linz, was the buyer.

Although ICAC found nothing untoward in the dealings between Unions NSW and the buyers, Mr O’Connor failed to report that apart from Mr Linz and Mr Tanevski being partners in one company, Mr Linz also owned 50 per cent of Mr Tanevski’s broking company – a fact easily unearthed by an ASIC company search.

Mr O’Connor also made no mention of the fact that the buyer (Mr Linz), the broker (Mr Tanevski) and the seller (Mr Robertson) were all former business partners.

Mr O’Connor concluded Mr Tanevski and Mr Linz’s business relationship had not been disclosed but said there was ”no provision in the agreement” for such a disclosure. He told the Herald last week he was unable to explain these anomalies as he no longer had access to his ”working files”.

”What I can recall and again confirm is that I am confident that the team involved carried out the work in good faith,” he said.

Mr O’Connor’s reports have often been used to deflect criticism. From the fiascos of the Sydney Olympics – the siphoning of tickets for the rich and unproven allegations that Sydney bribed IOC associates to get the Games – to the decision to allow Cabcharge and other taxi networks to keep $35 million worth of taxi plates they never paid for, Mr O’Connor has been the man to whom Labor turned.

Once a senior partner at Deloitte, and now running his own company, O’Connor Marsden, he and his team boast they have done thousands of jobs for governments because of the high standing in which Mr O’Connor is held by the bureaucracy. Senior figures say he understands the need to protect a client’s reputation while still offering tough advice.

Such is his dominance in the field that to many he was known simply as ”Mr Probity”. ”He does come in and try to advise people in different situations with competing demands … doing the right thing, getting public value from the deal but also trying to protect the reputation of the organisation,” one senior bureaucrat said.

Asked if Mr O’Connor became viewed as a man who would sign off on contentious issues after being issued narrow terms of reference, the same source said: ”I hold him in high regard, but I am inclined to agree he has been used in that way.”

In 2004, when Greg Robinson, the former boss at Sydney Water, wanted to hand a $40,000 contract to a former work colleague, Mike Chiodo, without going to tender, he called Mr O’Connor. The contract was for the compilation of a terrorism preparedness review. Mr O’Connor agreed to an arrangement whereby his then firm, Deloitte, would ostensibly be awarded the contract on the condition it would subcontract the job to Mr Chiodo. This contract, along with two others, later put Mr Robinson in hot water.

Mr O’Connor said he had ”no reason” to believe Mr Chiodo had any relevant conflict of interest. ”Mr Robinson recommended Mr Chiodo on the basis of his relevant expertise,” he said.

Two years later, Mr O’Connor signed off on a lease to a multimillion-dollar heritage property in The Rocks that was awarded without tender by the Sydney Harbour Foreshore Authority to the Kazals, a politically connected Sydney family. The Kazals already had a lease for a small area in the building for a pizza parlour but the more extensive lease allowed them to turn the property into a multi-level nightclub.

Mr O’Connor’s report found it was ”difficult to envisage how another provider would be able to generate the same level of synergies for the property”, and gave the process a tick. He couldn’t have known at the time, but the SHFA official who commissioned him, Andrew Kelly, was about to hop on a jet with Charif Kazal on a junket to the Middle East. While an ICAC investigation made no adverse findings regarding the lease, it ruled Mr Kazal and Mr Kelly had a corrupt relationship.

Mr O’Connor said he told SHFA to seek a separate opinion on commercial risks, and that his advice ”simply summarises information given to me in the course of the project and my understanding of that information, and gives sound advice as to how to manage probity risks”.

”My advice does not suggest any commercial outcome and therefore the suggestion that an outcome was predetermined by SHFA management and followed in my advice is completely erroneous,” he said.

The director-general of the Department of Finance, Michael Coutts-Trotter, told the Herald yesterday he would review O’Connor Marsden’s work for the state government, from feedback provided by agencies.

”We will seek a review of O’Connor Marsden’s work and factor that in to a consideration of their place on the [NSW probity services] panel.”

Robert Waldersee, an executive director at ICAC, believes that while probity auditing in general can be a tool to prevent graft, it presents ”a moral hazard”.

”Managers who contract probity advisers may well believe that they have discharged all their probity duties,” he said in an interview last year. ”Believing they are no longer accountable for corruption, managers may reduce their own efforts. Corruption prevention is outsourced to contractors rather than probity contractors supplementing prevention efforts.”

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