I
conjure you by that which you profess—
Howe’er
you come to know it—answer me.
Though
you untie the winds and let them fight…
…
Even till destruction sicken,
answer
me to what I ask you.
Macbeth Act four, Scene one.
Three weeks
ago, on 16 October, the NIAA and NACC visited Groote and according to media
reports met with the Anindilyakwa Land Council (ALC). Following the visit, the
ALC board decided to dismiss their longstanding CEO, Mark Hewitt (link
here). This follows an ABC news article on 10 July (link
here) which quoted a spokesman for the NACC as confirming that it had
received a referral from the NIAA and was assessing the referral. It appears
(but is not certain) that the NIAA referral followed the May Senate Estimates
hearings where Senator David Pocock questioned the ALC CEO about his dual roles
as ALC CEO and as a Director of Winchelsea Mining, and summed up by commenting
that Mr Hewitt’s dual roles were a "pretty egregious conflict of
interest". According to the 10 July ABC news article, the Estimates
Committee was advised that some $16m in royalty [equivalents] were directed to
supporting the proposed Winchelsea mine.
Following the
CEO’s dismissal, there appears to have been a conspiracy of silence from all
involved. The ALC website has expunged all mention of Mr Hewitt but provides no
explanation for the Board’s decision. The NACC continues its policy of complete
silence until the results of its investigations are published. Minister
Malarndirri McCarthy appears to have issued no media statement apart from her
comments to the ABC (link
here):
"I
received a letter from the ALC chair informing me that at its meeting on
October 16, the ALC board resolved to terminate the employment of the ALC
CEO," Senator McCarthy said in a statement.
"Without
the trust of the Anindilyakwa people and other key stakeholders, the ALC cannot
properly achieve its mission of serving and advocating for the interests of the
Anindilyakwa people."
All we can take
from this is that the ALC Board lost trust in the CEO, but on what basis? The
question is important because it goes to the nature of the issues that were of
concern to the NACC and perhaps NIAA, and thus to the steps that need to be
taken to remedy those issues.
Ever since the
ANAO report into the ALC was published on 31 May 2023, the Government,
Indigenous Australians Ministers Burney and subsequently McCarthy, and the NIAA
have sought to downplay the issues which the ANAO report raised (for example by
always focusing on the recommendations of the ANAO report rather than the
myriad critical findings embedded throughout the report). They have also sought
to slow down any proactive engagement, and thus avoid taking action to ensure
the ALC was fulfilling its statutory obligations. In doing so, the Government
has allowed the ALC, heavily influenced by its former CEO, to continue to pursue
policies which are demonstrably at odds with normal standards of
accountability, and which inevitably disadvantage the land council’s
constituency, the traditional owners of the Groote archipelago.
To facilitate
this proactive disengagement, the Government has adopted a strategy of
intentional non-transparency. When interrogated, it invariably resorted to
obfuscation, opacity and has hidden behind justifications which do not stack up
under close scrutiny.
By deliberately
not saying anything except when it has no choice, it has sought to minimise
media attention by starving the issue of oxygen notwithstanding the fact that every
time an ALC rock is turned over, a scorpion emerges. It has deliberately
ignored the multiple concerns raised by numerous individuals including the 235 signatories
to the Parliamentary petition tabled in February 2024, the issues raised in the
SMH by Nick McKenzie and in the Saturday Paper by Ben Abbatangelo & Rachel
Hoffman, and by me in two detailed letters to the ministers. This strategy has
only worked because the Opposition has similarly adopted a studied position of
policy insouciance. The Opposition Shadow Minister, Senator Jacinta Price has
simultaneously argued for greater accountability of the land councils,
unsuccessfully moving to establish a parliamentary inquiry into land council
accountability, but failing to pursue in any substantive way the egregious
issues that have emerged at the ALC (link
here).
To date, the
Minister appears to be continuing with her strategy of proactive disengagement.
Meanwhile, while the NACC is focussed on determining whether there has been
corrupt conduct by any individuals (inevitably a highly legalistic and thus
narrowly focussed exercise), the potential for significant and ongoing financial
losses and/or financial harm to the traditional owners on Groote remains
unaddressed. These are two separate issues, and while they might overlap, it
is unacceptable in my view for the Minister and NIAA to use the NACC
investigation as the reason for doing nothing to mitigate the likely financial
harms arising from the convoluted lattice-work of conflicts of interest
that the ANAO uncovered in May 2023. Where is the public interest in waiting?
Of course, the
Government might argue that it set up the ‘independent review’ undertaken by
BellChambersBarrett. This was sheer diversion to cover up inactivity. Ministers
and the NIAA persisted in claiming the review was ‘independent’ notwithstanding
that its recommendations were negotiated with and approved by the ALC (and
implicitly its CEO Mr Hewitt who is now implicitly not trusted by the ALC and
presumably the NIAA), notwithstanding that’s its drafts were commented upon and
thus influenced by the NIAA Integrity Unit (and by implication the Minister),
and importantly, notwithstanding that its terms of reference were limited to
the implementation of the narrowly framed ANAO recommendations, and did not
canvass broader or more recent issues. And of course, the ANAO report was
itself limited by the ANAO’s remit to the operations of the ALC per se, whereas
the complex flows of royalty distribution finance extend beyond the ALC to at
least 12 corporations established under the CATSI Act, and over which the ALC
exerted considerable influence if not actual control, thereby bypassing the
intent of the Land rights Act to place individual distributions and investment
decisions outside the purview of the land councils. The CATSI legislation
itself falls under the Minister’s responsibilities.
Taking the
commentary above as context, I propose to make some high-level observations on likely
future developments and the necessary next steps in relation to the ALC.
The first set
of observations relate
to the case for undertaking a truly independent and transparent forensic
audit of the ALC’s distribution of royalties and royalty equivalents. The
ALC has leveraged these processes to allocate substantial (but as yet
unquantified) financial resources to (a) retail outlets which do not appear to
be independent of the ALC and its staff, and which may be shifting significant
amounts of money to private individuals; (b) to request the Anindilyakwa Mining
Trust (AMT) to transfer $41m to ARAC, a CATSI corporation which appears to have
been effectively controlled by the ALC, but whose financial statements do not
record the receipt of the payment which the AMT made; and (c) to effectively
subsidising the infrastructure and other associated investments necessary to
establish the Winchelsea mine which was / is effectively controlled by private
investors and the former Chair and former CEO of the ALC (it is not clear if
the Directors Winchelsea Mining have changed since the death of the former
Chair and the dismissal of the ALC CEO; if they haven’t, then this in itself is
a problem). The import of this subsidisation is in effect to grant funds to the
interests which control Winchelsea Mining; yet analysis of the ALC’s own
submission to the EIS suggests that the proposed mine will not be commercially
viable (link
here).
Even were these
alleged financial misallocations to be found to involve corrupt conduct by the
NACC, it would not fix the problem. What is required is a forensic audit to
understand where the funds have been allocated and on what basis as the
precursor to taking action to methodically unwind the arrangements that have
been established to facilitate the misallocations. A forensic audit is thus the
essential first step towards both addressing the conflict of interest and other
problematic issues that have been allowed to develop within the ALC and to understanding
whether it will be possible to recoup any misallocated funds. Moreover, delays
will inevitably lead to an increase in the quantum of funds at risk of
misallocation.
Perhaps more
importantly, a forensic audit is an essential step in redesigning the ALC’s
strategic financial strategy for the medium-term future given that the South32
mine is scheduled to close sometime in the early 2030s, with the almost
immediate cessation of what is a significant financial flow to the Groote
community. The sheer magnitude of these flows — which emanate from Commonwealth
appropriations — to what is a relatively small population, which as has been
previously pointed out (link
here and link
here) is paradoxically suffering from extraordinary levels of disadvantage,
suggests that the Commonwealth itself has a responsibility to put in place a
transition strategy of some kind. Again, the first step in doing so would be to
understand just where the royalty and royalty equivalent financial flows have
been allocated. It should not need to be said, but I will repeat it: the mere
undertaking of a forensic audit is essentially a core regulatory oversight
task, and it will not inevitably and adversely impact any ongoing
investigations. Indeed, the reverse is more likely to be the case: it is likely
to assist the investigation of potential legislative and accountability breaches,
and it is possible that new lines of investigation in relation to corruption or
criminal behaviours will emerge.
The second observation relates to the potential
consequences of the current royalty distribution arrangements on Groote
unravelling. There is more at stake here than an issue of whether an individual
or group of individuals associated with the ALC have engaged in criminal activities
or corrupt conduct. Notwithstanding the rhetorical hype that is often
promulgated, the population on Groote are among the most disadvantaged citizens
in Australia (link
here). The reasons are complex and are not merely a matter of access to
income. What is clear however is that the complexity and artificiality of the
current financial arrangements on Groote are such as to exacerbate the risks of
seriously negative social and cultural impacts from an erratic and haphazard unwinding
of the current royalty distribution arrangements. The possibility of violence
cannot be discounted. The implementation of any reform process will need to be managed.
This is a task that will inevitably require external support. As a coda to this
observation, I should emphasise that the risks of an unmanaged unwinding of
current financial arrangements are higher if the Commonwealth chooses to remain
inactive and disengaged. In my view, the Commonwealth now has no choice but to
engage with the complexity its lack of regulatory oversight has unleashed (see
below).
The third set
of observations relates
to the responsibilities of the Minister (and her predecessors) and NIAA
to oversight the operations of statutory corporations in her portfolio. The
scale and breadth of apparent maladministration; the quantum of the funds that
may have been misallocated; the complexity of the financial arrangements involved;
the convergence of public investment and private commercial interests, the
sensitivity of the social, environmental and economic issues involved, and the
extraordinary way in which much of this has developed and taken place in plain view
indicates that there has been an extraordinary and substantial regulatory
failure by the Commonwealth over a period going back to shortly after the
former CEO Mr Hewitt was recruited. To provide just one example, the advice he
gave to a previous Estimates Committee Hearing that he had a conversation with
former Minister Scullion where he advised him of his dual roles on the ALC and
Winchelsea Mining and assured him that there were arrangements in place to
manage the conflict is (if true) an extraordinary revelation. Mr Hewitt claimed
the subsequent Minister, Mr Wyatt, was also advised of the arrangement. These conversations
in themselves appear to be significant watersheds in the development of the
current royalty administration crisis, and yet appear to have elicited not one iota
of concern within the Ministers’ Offices, nor NIAA (assuming of course that they
knew of it; if they didn’t, what did NIAA do when they did become aware of the
conflicted roles?).
Fourth, and
finally, I make the
observation that the current policy of proactive disengagement has meant that
there is absolutely no information in the public domain regarding the current
state of management of a key statutory corporation within the Minister’s portfolio.
There are numerous legitimate questions that remain unasked and thus unanswered.
To take some at random: what is the status of Ms Liu, Mr Hewitt’s spouse
and a former employee of the ALC, who is /was actively engaged in the Royalty Shoppa
scheme, in the ALC Royalty Management Unit (and thus a range of associated CATSI
corporations), and in Winchelsea Mining? What is the status of the Chair of the
ALC Audit Committee? How is it that the Audit Committee failed comprehensively
over many years to identify and recommend the necessary changes to prevent the
crisis that has emerged? For that matter, where was the NAIA Audit and Risk Committee
in this whole process? Does the minister see these lapses as a problem and if
so does she intend to do anything about it?
What is the current status of the proposal for a mine on Winchelsea Island?
Who are the Indigenous members of the Winchelsea
Board following the dismissal of Mr Hewitt and death of the former Chair? Why
did AAAC, the corporation which owns 70 percent of Winchelsea shares not have a
single Director on the Winchelsea Mining Board? Has that been remedied recently?
More
fundamentally, why has the current Government pursued a deliberate policy of
proactive disengagement in relation to the operations of the ALC? How can
the public and the traditional owners of Groote be reassured that the Government
itself is not complicit in some way in what has transpired here?
The ALC and its
associated recipient CATSI corporations are in a state of crisis. A crisis that
no one wants to acknowledge, let alone seeks to fix. An apt metaphor would be a
commercial corporation operating while insolvent. The risk is that it will seek
to trade its way out of its financial crisis, and in the process, go bankrupt
with even greater losses. The solution is for the shareholders to appoint
insolvency specialists who can make an independent assessment and address the underlying
issues.
In the present
case, it is the Minister to whom this responsibility falls. To date, she has
given absolutely no indication that she is cognisant of the risks or prepared
to take the necessary action. She should immediately take action to appoint
a highly experienced independent administrator to the ALC with the authority to
oversee an independent forensic audit and to develop a pathway out of the
current crisis. This process will require full transparency to minimise the
risks of societal conflict on Groote, to ensure that those responsibility for
getting the ALC into its current morass are held accountable, and importantly
to maximise the chances that those who will be found to have suffered financial
losses or disadvantage are recompensed. This responsibility goes beyond one
individual and the possibility at some point in the future of a limited finding
of corruption or misfeasance in public office. And it goes beyond the ALC and its employees.
5 November 2024
