ICAC: Arthur Sinodinos fronts corruption inquiry

Liberal Senator Arthur Sinodinos is appearing at the Independent Commission Against Corruption. He faces tough questions about what he knew, and when, as chairman of Obeid-linked company Australian Water Holdings.

Hello and welcome to the Herald's live blog from the Independent Commission Against Corruption in Sydney - the hottest ticket in town.

Liberal Senator Arthur Sinodinos, a former chairman of Obeid-linked company Australian Water Holdings, will take the stand at 10 am.

Just how did a squeaky clean Liberal icon become entangled in a corruption inquiry starring the now infamous Eddie Obeid and his sons? Read our primer here.

Get set for a dramatic morning.

The media have been lying in wait for Arthur Sinodinos for hours. I snapped this picture outside Corruption HQ in Sydney's Castlereagh Street at 8.30 am, when live crosses were already in full swing.

Well, that was unexpected. A relaxed Arthur Sinodinos, smiling broadly, just sauntered into the ICAC media room to shake hands.

The NSW Senator joked that he could make representations on our behalf - we're all NSW citizens, after all.

The sidelined assistant treasurer faces a less jovial time in the witness box.

He will be grilled about what he knew, and when, during his three-year stint on the board of Australian Water Holdings. The company was allegedly billing the state-owned Sydney Water for exorbitant expenses including limousines, luxury hotel accommodation and political donations.

The Herald's Corruption Scoop Kate McClymont snapped this photo of the impressive scrum outside ICAC.

Senator Sinodinos is in the box at ICAC, wearing a navy and red striped tie and looking slightly less cheery than he was in the media room a few moments ago.

"Are you Arthur Sinodinos?" counsel assisting the inqiury, Geoffrey "Rum Corps" Watson, SC, asks.

"Yes, I am," he replies solemnly.

"I was looking to build a business career, I'd turned my back on politics in '06," Senator Sinodinos says of his introduction to Nick Di Girolamo, a prominent Liberal Party fundraiser and associate of the Obeid family.

Di Girolamo was the chief executive of Australian Water Holdings.

Senator Sinodinos says the 2007 introduction was made by Paul Nicolaou, then the executive chairman of the Liberal Party's fundraising arm the Millennium Forum. Nicolaou is now the NSW head of the Australian Hotels Association.

Sinodinos has been in the ICAC witness box less than half an hour and things are getting pretty tense in here.

Watson asks the Liberal heavyweight if his $200,000 salary carried with it an implication he would be "closely and intimately involved in the affairs of the company".

The inquiry has heard Sinodinos was warned by a top bureaucrat he could be mixing with "dishonest company" on the Australian Water board, while an investor in the company claims he told Sinodinos the company was in dire financial straits in 2010 and racking up huge bills.

Sinodinos admits he didn't ask to see the company's books to see where its money was going. He read board minutes.

Sinodinos admits that the full-time chairman of the much larger Sydney Water was getting paid "around $100,000" a year when he was making $200,000 plus bonuses at infrastructure minnow Australian Water.

The top silk acting for Sinodinos, Tony Bannon, is making frequent objections to the questions.

Bannon covered himself in glory at ICAC last week when he called Australian Water investor Rod De Aboitiz a "smart arse" for referring to Sinodinos as the "former assistant treasurer".

Sinodinos is getting a proper grilling about the exorbitant expenses being charged by Australian Water to the public utility Sydney Water under a contract to roll out water and sewerage infrastructure.

ICAC has heard the company was stonewalling attempts by Sydney Water to inspect its books, which would have revealed the company was charging for limos, nights at the luxury Sofitel hotel in Cairns and donations to the NSW Liberals.

"What did you do as a director of the company to get to the bottom of this dispute?" a terse counsel assisting the inquiry, Geoffrey Watson, SC, asks.

"I participated in the board discussion," Sinodinos replies.

"What did you do beyond participating in the board discussion?" Watson presses.

"That was it," Sinodinos says.

Sinodinos is under pressure.

Counsel assisting is pressing him to explain what he did to get to the bottom of why costs at Australian Water - billed to Sydney Water - were "ballooning" when work was coming to an end. The Liberal Senator says he doesn't "know the full answer to that". 

Counsel assisting ICAC, Geoffrey Watson, SC, has set his default facial expression to "incredulous".

Sinodinos says that he doesn't remember Dr Schott telling him that Australian Water was running up whopping expenses bills, and that he might have been mixing with "dishonest" types.

"I don't remember her using the word dishonest," Sinodinos says.

"That's a pretty heavy word to use about people."

Dr Schott has said she may have used a different word to make her point clear.

Counsel assisting the inquiry, Geoffrey Watson, SC, is asking Senator Sinodinos pointed questions about his workload as a director of Australian Water Holdings.

He joined the board in 2008 and was getting paid $200,000 plus bonuses for what Watson reckons was about 50 hours' work a year.

Senator Sinodinos says he met with "cornerstone investors", sometimes "over a lunch", as well as attending board meetings.

"It seems to be that in a year you might be spending between 26 hours and 45 hours a year on Australian Water Holdings work, isn't that right?" Watson presses.

"Does that include travel time when the meetings were held at Bella Vista? There was an opportunity cost to that time," Senator Sinodinos pipes, a trifle indignantly.

The trip in the car would take "an hour and a half", he says.

Asked if he's added in investor meetings and the like in his tally of the hours, a droll Watson replies: "Absolutely. Wouldn't forget those."

Ooh, hello. Former Sydney Water boss Kerry Schott has discovered diary entries, tendered at ICAC today, which appear to back up her claims that she warned Sinodinos he could be mixing with unsavoury types on the board of Australian Water and that it was charging staggering expenses.

Her diary entries refer to a meeting on March 17, 2010.

Asked why Australian Water didn't hand over documents showing how it was spending Sydney Water's money, Sinodinos says: "Because the directors didn't want to."

He agrees the company had legal advice it could "withhold providing information to Sydney Water".

Counsel assisting ICAC, Geoffrey "Rum Corps" Watson, SC, is in full indignant flight. He says the directors could have chosen to be transparent.

"I was in favour of following the legal advice," Sinodinos says.

Scoop McClymont says it all, really.

Tempers are fraying. Sinodinos says "come again?" when asked a curly question.

"Will you concentrate!" counsel assisting ICAC, Geoffrey Watson, SC, fires back.

"You want to get back to work no doubt, Senator. So do I."

He agrees cash flow problems at Australian Water were serious "at times".

It's on. Counsel assisting ICAC, Geoffrey Watson, SC, asks Sinodinos what he thinks about Sydney Water picking up the tab for a $1.6 million salary paid to Australian Water director John Rippon.

"It depends what you're comparing it to," Sinodinos says.

"I'm going to compare it to what I'll call 'the real world,'" Watson shoots back.

Sinodinos says he joined in efforts at Australian Water to "shave" costs.

Counsel assisting ICAC, Geoffrey Watson, SC, points out the company was paying more than $100,000 for a corporate box at Olympic Stadium "when the tax man was going short".

Sinodinos agrees that is "troubling" but says he was unaware that the company had a box at the footy.

"Has it been news to you that the box was shared by Obeid Corporation?" Watson says.

"Yes," Sinodinos says.

Sinodinos says he was unaware Liberal lobbyist Paul Nicolaou, now the NSW chief executive of the Australian Hotels Association, was paid $5000 a month to lobby on behalf of Australian Water.

Asked if he ever saw "anything of any value" produced by Nicolaou's lobbying business Solutions R Us, Sinodinos says: "I can't recall any output."

What's all this, then? Sinodinos admits he is aware of Eightbyfive, a slush fund linked to former NSW Liberal energy minister Chris Hartcher.

But he says he was not aware that Australian Water had paid $183,342 to the fund in monthly instalments of $7333.

The inquiry has heard Australian Water chief executive Nick Di Girolamo arranged for Australian Water to make "regular payments" to Eightbyfive in exchange for favourable treatment by Mr Hartcher.

Eightbyfive was set up by Tim Koelma, a former adviser to Mr Hartcher, who resigned in April 2012 amid an investigation into the slush fund.

Sinodinos says he was unaware Australian Water donated $74,483 to the NSW Liberal Party while he was on the board.

"You deny knowing the company of which you were [then] deputy chairman was donating to the party of which you were treasurer?" counsel assisting the inquiry, Geoffrey Watson, SC, asks.

"Yes," Sinodinos replies.

But he says he was "aware that members of the company would attend [political party] events from time to time".

Counsel assisting ICAC, Geoffrey Watson, SC, goes in for the kill. He suggests to Sinodinos that his judgement was "blurred" because he stood to make a substantial personal benefit from his position at Australian Water.

Sinodinos denies it.

Watson is ratcheting up the pressure on Sinodinos.

The Liberal Senator says that a deal for him to take 5 per cent of the shares in Australian Water "never proceeded, it never eventuated".

He said he "mischaracterised" an arrangement when he told the Sydney Morning Herald he had a "gentlemen's agreement" with Australian Water chief executive Nick Di Girolamo for him to hold shares for Sinodinos.

He claimed he was "on the run, under pressure from a journalist".

Asked if he would "stake [his] credibility" on his evidence, Sinodinos says: "Yes."

He is shown a February 2013 letter in which his lawyers write to Australian Water that Sinodinos "relinquishes his rights to a 5% shareholding in AWH, which he is entitled to".

"I wanted to distance myself from the company. That is the basis of this letter being written," Sinodinos tells the inquiry.

The inquiry adjourns for lunch.

And here is a summary of the morning's proceedings from Kate McClymont and Michaela Whitbourn:

Liberal Senator Arthur Sinodinos has come under fire at ICAC for failing to investigate how a company he chaired, the Obeid-linked Australian Water Holdings, was billing exorbitant costs to the state utility Sydney Water.

Giving evidence at the commission on Thursday morning, the stood-aside Federal Assistant Treasurer said he was unaware the company paid almost $75,000 in donations to the Liberal Party.

"You deny knowing the company of which you were [then] deputy chairman was donating to the party of which you were the treasurer?" counsel assisting the inquiry, Geoffrey Watson, SC, said.

"Yes," Senator Sinodinos replied.

The commission is investigating claims the family of corrupt former Labor minister Eddie Obeid owned a 30 per cent stake in Australian Water and stood to make up to $60 million from a partnership with the state government.

The 57-year-old senator frequently fell back onto the phrase "I don't recall" when giving his evidence.

Dressed in a navy pin-striped suit, with his Order Of Australia medal pinned to his chest, Senator Sinodinos nervously chugged his way through several litres of water during his almost three hours in the witness box. He is yet to finish his evidence.

Senator Sinodinos also claimed to be unaware that as of September 2011, the company was in such dire financial straits that it had to go to the family of Mr Obeid for a $400,000 cash injection in order to keep the Australian Tax Office at bay. Senator Sinodinos claimed that, at the time, he was "transitioning" to the Senate. However, he agreed with Mr Watson that he was still a director and therefore owed the company and its shareholders a duty of care.

On several occasions Mr Sinodinos's barrister, Tony Bannon, SC, stated that the current proceedings were not an "insolvency" examination nor was it an inquiry into director's duties.

Senator Sinodinos said he could not recollect the then chief executive of Sydney Water, Kerry Schott, warning him in 2010 that he could be keeping "dishonest" company on the board of Australian Water.

"I don't remember her using the word dishonest," Senator Sinodinos said.

"That's a pretty heavy word to use about people."

The inquiry has heard the company paid $183,000 to a slush fund linked to former NSW Liberal energy minister Chris Hartcher in exchange for favourable treatment by Mr Hartcher.

Senator Sinodinos said he was unaware of the payments.

The former Liberal Party president came under pressure when asked about his workload at Australian Water, where he was paid $200,000 plus bonuses.

"It seems to be that in a year you might be spending between 26 hours and 45 hours a year on Australian Water Holdings’ work, isn't that right?" Mr Watson asked.

"Does that include travel time? There was an opportunity cost to that time," Senator Sinodinos replied.

He also faced heated questioning about an agreement for him to take 5 per cent of the shares in Australian Water.

He said the deal "never proceeded" but was shown a letter from his lawyers in February 2013 in which they said he had relinquished his right to the shares.

"I wanted to distance myself from the company. That is the basis of this letter being written," Senator Sinodinos said.

The inquiry continues.

Our live coverage will resume at 2pm

ICAC resumes after lunch. Sinodinos is sitting quietly in the witness box, waiting for counsel assisting ICAC, Geoffrey Watson, SC, to start questioning.

Watson is getting straight to it. Was Sinodinos appointed to the Australian Water Holdings board to assist the company politically?

"I came on board for a number of purposes," Sinodinos says.

He tells the inquiry he had amassed an "extensive array of business and political connections" since the late 1980s.

Sinodinos admits it was "extremely serious" that Australian Water was unable at times to pay its superannuation.

But he denies he was aware the company had to borrow $400,000 from the Obeid family to pay its tax.

"When was that?" he pipes.

"In September 2011 - when you were chairman of the company, Senator Sinodinos," Watson says contemptuously.

We've been waiting for this moment. Counsel assisting, Geoffrey Watson, SC, is asking Sinodinos about his conversation with Rod De Aboitiz - the witness his barrister called a "smart arse".

He agrees De Aboitiz, a baby-faced former chief financial officer at Rothschild Australia, met him in May 2010 to talk about Australian Water.

Sinodinos denies De Aboitiz told him the company was racking up huge expenses including donations to the NSW Liberal Party, of which Sinodinos was honorary treasurer.

"I don't remember him raising donations," Sinodinos says.

He claims the only thing that "stuck in his head" from the conversation was that one Australian Water director was getting paid a staggering amount.

"It's possible the figure was discussed but I can't sit here and say for sure that was the case," Sinodinos says.

Now we're onto another ticklish subject: former NSW Labor treasurer Michael Costa.

Costa told the ICAC last week he did due diligence before he joined the Australian Water board in November 2011, replacing Sinodinos as chairman.

He said he was "horrified" at the staggering salaries being paid to company executives, including Obeid associate and prominent Liberal Party fundraiser Nick Di Girolamo.

Asked if he also did due diligence before joining the board, Sinodinos said he expected to learn about the company after he signed on the dotted line.

Costa is said to have played a ''positive role'' at AWH in trying to clean up its financial mess. He told the inquiry he felt like "that bloke in the Pulp Fiction movie, Winston Wolfe" - a sharply-dressed fixer and cleaning specialist.

Well, that clears that up. Sinodinos says he didn't reveal to the O'Farrell government that he stood to make up to $20 million if it agreed to a partnership with Australian Water Holdings because it had nothing to do with the "merits" of the proposal.

"I think they would have understood officers of the company would have benefited," Sinodinos says.

Sinodinos says he was aware that Liberal powerbroker Michael Photioswas on a monthly retainer of $5000 to lobby for Australian Water at a time when it was struggling to pay its tax.

"I saw it as a short term arrangement," Sinodinos says.

He says a proposal - later abandoned - to give Photios a $1 million bonus "on financial close of PPP" was not appropriate.

Watson has finished his robust questioning of Sinodinos.

Now other legal eagles are cross-examining him, starting with Sydney Water's formidable brief Bruce Oslington, SC.

Daniel Feller, SC, the barrister for disgruntled shareholders in Australian Water including Rod De Aboitiz (the financial whizz branded a "smart arse" by Sinodinos' silk) is on his feet and questioning the Liberal heavyweight.

Incidentally, De Aboitiz is suing Sinodinos, former NSW Treasurer Michael Costa and other current and former directors of Australian Water in the Federal Court to recover his investment in the company. The directors are fighting the claims.

Sinodinos' barrister Tony Bannon, SC, suspects the legal eagle acting for Rod De Aboitiz is asking questions aimed at his Federal Court case rather than the ICAC inquiry.

"It's no secret there are other proceedings on foot," Commissioner Megan Latham says. "I don't want this to start unravelling into a general free for all."

Sinodinos admits he reassured De Aboitiz in May 2010 about his concerns about financial issues at Australian Water.

His evidence suggests he did very little.

Sinodinos' own barrister, Tony Bannon, SC, is up and questioning his client.

Unsurprisingly, this is the friendliest exchange at ICAC all day.

Sinodinos tells his own barrister that he was making assiduous efforts to attract "cornerstone investors" to Australian Water but it was "chicken and egg": the company needed a public-private partnership with the government.

On the thorny subject of his $200,000 salary, Sinodinos says he "hoped in a business sense I was a door-opener".

He says he wasn't brought on board as a "second chief financial officer", chief executive or political lobbyist.

The witness list for tomorrow at ICAC has been updated. We had been expecting to hear from former NSW Liberal minister Chris Hartcher's one-time adviser Tim Koelma.

He is no longer appearing tomorrow, but a string of Liberal lobbyists who were paid handsomely by Australian Water to talk about sewerage pipes and drains will be up, including Australian Hotels Association NSW chief executive Paul Nicolaou and party powerbroker Michael Photios.

ICAC adjourns, six and a half hours after Liberal Senator Arthur Sinodinos entered the witness box. His evidence is finished, no doubt to his relief.

There are indications the inquiry will run until the end of next week. It was originally expected to finish on Friday.

That concludes our live blog. Thank you for reading.

ICAC is shown a July 2010 chain of emails between the office of the then NSW Opposition Leader Barry O'Farrell and Sinodinos when he was deputy chairman of Australian Water.

Pete McConnell, O'Farrell's then chief of staff, agreed to write a letter from O'Farrell supporting Australian Water's plan for a lucrative partnership with the then Kenneally Labor government.

"Comrade," McConnell writes. "I have a letter from BOF to [Australian Water CEO] Nick Di Girolamo on my desk...Can you let me know what things you want covered and what form of words."

Sinodinos quips McConnell was adopting the language of the Liberal Party's lefty "enemies". He agrees he used his political connections "to raise a matter".

The Liberal Senator says the final letter was "appropriate...from Barry's perspective".

Former NSW Liberal Premier Nick Greiner gets a nod at ICAC.

Australian Water Holdings notes suggest he was willing to support the company by stating publicly that it was set up to be a competitor to Sydney Water.

Asked if Greiner's endorsement would have given Australian Water a "political advantage", Sinodinos says: "Or just a normal advantage".

"It's not just going down to the local fish and chip shop and asking for support," counsel assisting ICAC, Geoffrey Watson, SC, retorts.

"This is a former premier of NSW."

Watson is making the point Sinodinos was using his political connections to benefit Australian Water.

Nick Di Girolamo, Obeid associate and chief executive of Australian Water Holdings, asked Sinodinos in a May 2011 email to ring "BOF" (that's Premier Barry O'Farrell to the great unwashed) to lobby for the company.

Di Girolamo wanted O'Farrell and then Finance Minister Greg Pearce to direct Sydney Water to negotiate for a public-private partnership with Australian Water.

The inquiry has heard that could have made the Obeid family a cheeky $60 million.

Sinodinos says he didn't think it was appropriate to call the premier. He did speak to Pearce, who subsequently complained he was being "over-lobbied" by Australian Water.

Di Girolamo later got a meeting with O'Farrell and Pearce.

"There was pressure being brought to bear on senior Liberal Party politicians, do you agree?" Watson asks.

"Well representations were being made, yes," Sinodinos says.

Sinodinos admits he knew crooked Labor powerbroker Eddie Obeid's youngest son Eddie junior was employed by Australian Water's Queensland operation.

He also says he met John McGuigan, who was found corrupt in a previous ICAC inquiry into a coal deal linked to the Obeid family, to discuss his potential investment in Australian Water.

Sinodinos says he was unaware the Obeids invested $3 million in Australian Water. The family insists the money was a loan but ICAC says the family were "secret stakeholders" in the company.

Counsel for Eddie Obeid, former Media Watch host Stuart Littlemore, SC, is on his feet and questioning Sinodinos.

Commissioner Megan Latham laughs at one point, before apologising and insisting she wasn't laughing at him.

"You never even laugh at my jokes, Commisioner!" Littlemore rejoins.

Latham says that Sinodinis is "anxious to finish today" but his own lawyer still has to question him. ICAC typically adjourns at 4 pm.

We're back on the delicate matter of former Sydney Water boss Kerry Schott.

She was referred to as a "bitch" in an email sent to Sinodinos - a term also favoured by Eddie Obeid, apparently - because she was blocking a PPP between Australian Water and Sydney Water.

"I condemn it. I think it's awful," Sinodinos says. "It doesn't reflect very well on the people who said it."

The story ICAC: Arthur Sinodinos fronts corruption inquiry first appeared on The Sydney Morning Herald.

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