The Vast Majority

Transcript of the published episode, checked against the episode script. Where the voice slipped on a word, the script's word is used. Figures are written as numbers. Spot an error? Email auditthismedia@gmail.com.

00:00 A new shape on the map

In 2008, a new shape appeared on the map of New South Wales.

A coal exploration area, in the Bylong Valley, a few hours north west of Sydney.

They called it Mount Penny. Years later, the minister responsible was asked, at a public inquiry, how he knew where to put it.

He said, “I’m pretty good at geography.” The shape mattered. Because in this state, the coal under the ground does not belong to whoever owns the paddock on top of it. It belongs to the state. Which is to say, it belongs to you.

And a licence to go looking for it is worth a fortune.

When Mount Penny was granted, it covered, in the words of the state’s own corruption commission, “the vast majority” of a cattle property called Cherrydale Park. And all of the two farms next door.

Cherrydale Park had been bought, the year before, by a trust belonging to the family of one of the most powerful men in New South Wales politics. A man who had once been the minerals minister himself.

Four years later, at a public hearing, a lawyer put a confidential map from the minister’s office in front of that man’s son. And asked him how it had come to be sitting in the family’s office.

And he said, “It might have been drawn by Jesus Christ.”

The minister went to prison. So did the father. So did the son.

The family received $30 million. And not one dollar of it has ever come back.

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01:38 1906: the minister nobody could convict

A hundred years before any of that, there was a man called Paddy Crick.

From 1901 to 1904, he was the New South Wales Minister for Lands. Which meant he decided who got to use the Crown estate. The public land.

In 1905, a judge named William Owen was made a royal commissioner, to examine how the Lands Department was being run.

Here is what Owen found. The minister had been overruling his own officials. Not once, or twice. In 35 separate applications, the department advised against granting a lease, and the minister granted it anyway.

The commissioner suspected bribery. He worked out that the minister had been taking half of a land agent’s fees. Fees of nearly £16,000.

And then nothing happened. The minister’s finances were, in the words of the record, contorted. Heavy betting. For cash. The land agent’s firm had been lending him money. And when he faced criminal charges, it was impossible to prove, beyond reasonable doubt, that he had acted corruptly.

The charges failed. He resigned his seat on 6 December 1906. Five days later, his own parliament expelled him anyway.

The following August, the Supreme Court struck him off as a solicitor.

And a year after that, to the day, he came back from an afternoon at the Rosehill races, had a massive haemorrhage, and died. 46 years old. No will.

So. A royal commission could describe exactly what a minister had done with public land, and nobody could prove it.

The story you are about to hear is the other one. The one where they proved it. Where a commission proved it, and then a judge proved it, and then a court of appeal agreed, and then the High Court of Australia agreed.

03:28 The farm

Wait and see what difference that made.

Start with the farm. Because everything in this story happens on top of it.

The Bylong Valley sits east of Mudgee. Cattle country. Good pasture, a creek, sandstone ridges. A church. A general store. A cricket team.

Cherrydale Park was the property everybody in that valley knew.

A tax adviser named John Cherry had spent 10 years building it, and when it sold, a newspaper described what he had made. Several hectares of gardens. More than 2,000 roses. An artificial lake. A compound of houses and cottages.

In late 2007, it sold for $3,650,000. The buyer was a company called Locaway, acting as trustee for a family trust.

The family was the Obeids. The father, Eddie Obeid, sat in the New South Wales upper house.

Years earlier, he had been the state’s minister for mineral resources. Hold on to that.

The commission would later find that the reason the family bought the place was straightforward.

“The predominant purpose behind its purchase... was to provide a place for Edward Obeid Senior to enjoy his retirement.”

He said as much himself, to a newspaper, in 2010. That it was “truly remarkable”. That “the minute I walked in there, I thought... this is where I want to retire.”

Around the same time, two neighbouring properties changed hands. Donola. $600,000. Half of it beneficially owned by members of the same family.

And Coggan Creek. $3.5 million, on the commission’s figures. Bought by a company whose owner had agreed to hand the family 30 per cent of any profit on it.

Three farms. $7,750,000. Now, there is one more thing about the sale of Cherrydale Park, and you need both halves of it.

Years later, at the public inquiry, John Cherry gave evidence about a conversation he said he had with Eddie Obeid at the time. About the coal that everybody in that valley knew was down there.

He said he told him to leave the licences alone.

He said Obeid told him that he wanted to use his influence while he could.

And he said this. That Eddie Obeid may have done many stupid things. But this was “the quintessence”.

That is one man’s evidence, about one conversation. The commission’s finding is the other half. That the farm was bought as somewhere to retire.

Both are on the record. This episode is not going to ask you to choose.

05:54 The minister

Because what happens next does not depend on which one you believe.

“I am not a crook.” That is Ian Macdonald, under questioning, at a public inquiry, in May 2013.

He had sat in the New South Wales upper house for 22 years. Nobody elects you to a seat in that chamber. You are elected to the whole state. He arrived in 1988 and left in 2010, and in between he held 15 separate ministerial appointments.

Agriculture. Fisheries. Primary industries. Energy. State development. Natural resources. And twice, mineral resources. Which is the portfolio that decides where the coal areas go.

His final ministry, for the last 12 weeks of his career, was Minister for Major Events.

Asked at the inquiry how he knew where to put a coal release area on a map, he said this.

“I’m pretty good at geography. I’ve often done my own research.”

Asked about the nickname the press had given him, he supplied it himself. “Sir Lunchalot.”

Asked about the meals, he said that if he had paid for every meal he ate while in parliament, he would have gone very broke, very quickly. He accepted $800 restaurant bills, run up while staying at the Obeids’ ski lodge.

None of that is what he was convicted of. Nobody ever alleged he took a cent out of Mount Penny. Not one dollar.

This is what the commission found that he did. “Entering into an agreement with Edward Obeid Senior and Moses Obeid, whereby he acted contrary to his public duty as a minister of the Crown... by arranging for the creation of the Mount Penny tenement.”

And “by providing Moses Obeid, or other members of the Obeid family, with confidential information.”

07:36 How you open a coalfield

He did not sell a decision. He sold the shape of a map.

To understand what that is worth, you have to know how the state hands coal out. Two minutes, and then we can go.

The state owns the coal. When it decides to let somebody look for it, the department carves out an allocation area. Companies are invited to put in expressions of interest. The department assesses them. The minister signs the licence.

Two things make that honest. The boundaries are drawn on geology, not on who owns the paddock.

And everybody bidding is told the same things, at the same time.

In June 2008, there were two meetings with the minister. 4 June, and the 6th. The commission treats those two days as the hinge of the entire story.

In September, the department called for expressions of interest over three areas. Mount Penny, Glendon Brook and Yarrawa. Not an open tender. Invitation only.

In November, the process was reopened. 11 areas this time. More companies invited in. The commission found the minister did that to favour one particular investor, and that he handed that investor a confidential document.

The title of the document was “Proposed New South Wales Coal Allocations.”

And when Mount Penny was granted, its boundary covered the vast majority of Cherrydale Park. All of Donola. All of Coggan Creek.

Now. Be careful here, because this is the part that gets told wrong.

Nobody has ever established who physically drew that boundary, or on what day. There is no document showing a minister with a pen and a fence line.

What the commission found, and what a court later proved beyond reasonable doubt, is narrower. And worse.

That the minister agreed with two men that he would use his office to bring that coal area into existence.

09:14 The bid that lost on purpose

And then he did.

So the coal area exists, and it sits on the family’s farms. That alone is worth money, because somebody has to pay you to come onto your land.

But the real money is in the licence. And you cannot hold the licence. You are not a mining company.

Unless, of course, you own one. The commission found that the family got hold of confidential information identifying which companies were about to be invited to bid.

Then they took a hidden stake in one of them.

One of the invited companies put in a bid for Mount Penny. And there was an arrangement that if it won, most of its coal business would pass to another company. The Obeid family beneficially owned 88 per cent of that other company.

So if that bid won, the family owned most of the winner.

That bid ranked first. Then, in June 2009, a different company, Cascade Coal, did a deal with a company the family had an interest in.

Four days later, on 9 June, the front runner withdrew its bid for Mount Penny.

The front runner. Withdrew. 10 days after that, on 19 June, the licence was awarded to Cascade.

And the family’s interest went into the winner anyway. Now, one paragraph this episode has to say plainly, and says once.

Cascade Coal is a company. The commission made findings about individual people on that side of the deal. Four of those findings still stand. One was set aside by the courts, and the commission failed to have it reinstated. And of all of them, not one was ever charged with any offence. The Director of Public Prosecutions took no action on the matters the commission referred.

A corrupt conduct finding is not a criminal conviction. So this episode names none of them.

10:54 What a shape on a map is worth

Three men were convicted in this story. You have already met all three.

Add it up. First, rent. Once the licence existed, the company had to pay the landholders for access to the land.

$14,875 a month, for Cherrydale Park. About $14,000 a month for Coggan Creek.

About $3,000 a month for Donola. Second, the farms themselves. The commission found Cascade had agreed that if a mining lease was ever granted, it would buy those three properties at four times their market value.

Cherrydale Park. Bought for $3,650,000. Due to receive $17 million.

Coggan Creek. Bought for $3.5 million. To be sold for $14 million.

Donola. $600,000. To be sold for $2,400,000. $7.75 million of farmland. On paper, worth $33 million.

And third, the cash. The family held a 25 per cent interest in the Mount Penny venture, and they were bought out of it. For $60 million.

By the time of the public inquiry, $30 million of that had been paid.

Two things about that $30 million, and both matter. It did not come out of the state treasury. It came from the mining venture. What the public lost here was not a cheque. It was the process. It was a piece of the state’s own coal, handed out by a minister, to a family.

And it should have been bigger. The commission found that if a mining lease had ever been granted, that interest could have been worth between $50 million and $100 million.

It never was. And the reason why is the strangest paragraph in the entire report.

The investors in Cascade were negotiating to sell the company on. $500 million.

And they were worried, the commission found, about the Obeid involvement in the creation of the tenement becoming public knowledge.

Because if it did, two things might happen. The buyer’s shareholders might walk away.

12:52 The room

And the state government might investigate. They were right about the second one.

In November 2012, the Independent Commission Against Corruption opened a public inquiry. It sat for 45 days. The commissioner was David Ipp.

And for the first time, all three of them had to sit in a room and answer.

Moses Obeid was shown a map. A confidential map from the minister’s office, showing potential mining areas at Mount Penny, which had turned up in the family’s office. He could not explain how it got there. He denied getting it from the minister.

And then he said the line that is still, 13 years later, the most famous sentence of the whole affair.

“It might have been drawn by Jesus Christ.” His father did not enjoy it either. To the barrister questioning him, Eddie Obeid said, “I have spent more money than you have made in your lifetime.”

Asked about a $1.5 million transaction, he said, “I don’t know.”

Asked whether it looked shonky, he said this. “No. You haven’t asked the right people to explain it. I can’t explain it. But I don’t believe it looks shonky. I don’t believe my family does anything shonky.”

And then, in July 2013, the commissioner published his report. And he dealt with all three of them, in order, in three short paragraphs.

This is a commission’s own assessment. Of its own witnesses.

The minister. “Mister Macdonald was an unsatisfactory witness. In some instances, the Commission has come to the view that Mister Macdonald gave deliberately untrue evidence.”

The father. “Edward Obeid Senior was an unimpressive witness. The Commission would be hesitant in accepting his evidence on any contentious issue.”

And the son. “Moses Obeid was an unreliable witness... willing to lie or mislead... whenever it suited his purpose.”

The report found all three had engaged in corrupt conduct.

And then it stopped. Because that is where a corruption commission’s power ends. It can find corrupt conduct. It cannot find you guilty of anything.

14:55 Thirteen years

For guilty, you need a court. That took another eight years.

The commission opened its public inquiry in November 2012. It reported in July 2013.

And then the criminal case took eight more years to reach a verdict.

The trial was heard by a judge sitting alone, without a jury. Justice Elizabeth Fullerton. It ran about a year. The reporters who sat through it counted 38 witnesses, and 6,000 pages of exhibits.

None of the three men gave evidence. On 19 July 2021, she convicted all three of conspiring to commit wilful misconduct in public office.

The Crown had particularised eight separate acts of misconduct. Five of them came down to one thing. The duty a minister has to keep the state’s confidential information confidential.

Three months later, she sentenced them. And the orders are worth hearing in the court’s own words, because of the dates on the end of them.

“Ian Macdonald. Imprisonment for nine years and six months, commencing on 21 October 2021. Non-parole period, five years and three months. Eligible for release to parole on 20 January 2027.”

“Edward Obeid. Imprisonment for seven years. Non-parole period, three years and 10 months. Eligible for release to parole on 20 August 2025.”

“Moses Obeid. Imprisonment for five years. Non-parole period, three years. Eligible for release to parole on 20 October 2024.”

Ian Macdonald is still in custody. He has also been convicted in a separate matter, which this episode does not go into.

They appealed. In October 2023, the Court of Criminal Appeal dismissed all three appeals.

They appealed again. And on 4 February this year, the High Court of Australia unanimously dismissed the lot.

Their last argument is worth understanding, because the answer to it is the whole shape of this crime.

They said the prosecution had never alleged the minister agreed to do any particular act. No specific decision. No named licence. Just an understanding that he would use his office for them, when the time came.

And the High Court said, yes. That is exactly right.

And it is still a crime. The agreement itself was the offence. Even though, in the court’s words, “it was not known, and could not be known, at the time the agreement was made... what particular acts” the minister would undertake.

They did not have to know what he would do.

They only had to agree that he would do it.

17:37 Where the money went

$30 million. Three convictions. 13 years from the first public hearing to the last appeal.

So how much has come back? Nothing. To understand why, you need one passage from the commission’s report. And it is not about anything illegal at all.

The commission found that the family’s wealth came back to one principal trust fund. That each member of the family had their ordinary living expenses paid through the trust. That mortgage repayments on a house were made through the trust. That the lease repayments on a car were made through the trust.

And that no important family business decision was taken without reference to the father.

Now hold that next to what the New South Wales Crime Commission wrote in April last year, after examining, for the second time, whether it could confiscate anything.

“The Commission’s investigation could not identify Obeid Senior as the sole legal or beneficial owner of relevant assets... insofar as he held no interest in property in his own name.”

It could not trace the money from the mining proceeds through to the final distributions, because of what it called “complex and sophisticated trust and other corporate structures.”

It said proceedings would be possible. But that the outcome would be very uncertain. And unavoidably expensive.

And it concluded that “the further pursuit of the matter... is not in the public interest.”

That is the second time it has reached that conclusion. The first was a decade ago.

So there was never anything to seize. Not because the money disappeared. Because the man at the centre of it did not own anything in his own name.

Now count what it cost to find that out. Because this is the bill nobody adds up.

A public inquiry that sat for 45 days. In its annual report that year, the commission said that this inquiry and one other could not have been undertaken without a special top up from the state. $3.2 million.

A criminal trial that ran about a year, in front of a Supreme Court judge.

An appeal to the Court of Criminal Appeal. Then an appeal to the High Court of Australia. Both dismissed. Both defended, on the prosecution side, with your money.

Two separate investigations by the Crime Commission into whether anything could be got back. The second one concluded that trying would be, in its own words, “unavoidably expensive.”

So the public paid to work out that it would cost the public too much to get the public’s coal money back.

And one more group nobody thinks about. Every other company that was invited to bid for Mount Penny, and did so honestly, was bidding without the one thing the family had obtained. The list of who had been invited.

That is the real number. Not $30 million. $30 million, plus 13 years of the state paying to prove it.

20:17 The valley

13 years of process. Three convictions. And not one dollar has come back.

Here is the last thing. And it is the part nobody tells you.

Nobody ever mined Mount Penny. It was an exploration licence. No mining lease was ever granted. Not one tonne of coal ever came out of it.

In January 2014, six months after the commission reported, the New South Wales Parliament passed an Act that cancelled it. Mount Penny, and two other licences, struck out by a line of legislation. No compensation payable.

The bill was introduced, as it happened, by the Minister for Roads and Ports. And he said this. “The taint of corruption affecting the licences cannot be removed... by their simply paying to the State some portion of the profits they otherwise stand to make.”

And he said the greatest form of sovereign risk is the risk of corruption. The risk that corrupt public officials will distort public processes.

But read the Act itself, and there is one line that goes further than any speech.

“The State is not liable... and is taken never to have been liable.”

Parliament did not just cancel the licence. It legislated that the whole thing had never happened.

Except in the valley. Because while this was grinding through the courts, a Korean power company arrived in Bylong, with nothing whatsoever to do with any of it, and spent about $700 million buying 13,000 hectares of the place. Farms. Houses. Paddocks. It wanted to build a coal mine.

In September 2019, the Independent Planning Commission refused it. The company challenged that in the Land and Environment Court, and lost. It appealed, and lost. It went to the High Court, which would not hear it. February 2022.

So there is no mine. And there is not much of a valley either. Not the one that was there.

When the ABC went back last year, the church was in disrepair. The general store was locked, with a sign still on the door saying it would reopen in July 2021. The polling booth was gone. The cricket team was gone. The company that owns most of the land leases it out to a grazing business.

One farmer, 80 years old, said the valley had “not really had a very happy life... in many ways.”

In May last year, the state quietly extended two exploration licences over that country, until early 2027.

And then in March this year, six weeks after the High Court finished with the three of them, the New South Wales Government announced its coal policy for the next 25 years.

“The Government will not consider proposals for new standalone greenfield coal mines.”

So the kind of coal area that Ian Macdonald brought into existence, over three farms, one of them bought as somewhere to retire, could not be created today. By anybody. Corruptly, or honestly.

In the first episode, nobody asked. In the second, nobody went and looked.

In the third, it said so on the payslip. This time, everybody looked. A commission sat in public for 45 days. A judge sat for a year. A court of appeal dismissed them. The High Court of Australia dismissed them again. Three men were convicted. Two of them are already out on parole.

13 years. Three convictions. A valley with the lights off.

And of the $30 million, not one dollar has come back.

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