Howard fends off fresh ethanol allegations

Reporter: Heather Ewart

KERRY O'BRIEN: The row over ethanol producer Dick Honan's relationship with the Prime Minister - and the millions in Government subsidies that have been delivered to his company - escalated again today, with claims that even the Australian Embassy in Brazil had been co-opted to spy on Mr Honan's business competitors.

Under siege and facing his second censure motion in three days, Mr Howard was forced to delay his departure for New Zealand and China to deal with a fresh Opposition onslaught.

Labor is now accusing the Prime Minister of a giant cover-up over his dealings with the Manildra ethanol boss before the Government announced a subsidy package last September - one that would greatly benefit Mr Honan's company.

The Prime Minister continues to insist he did not have any improper discussions with the businessman, who is also a generous Liberal Party donor.

Heather Ewart reports on what's become a very complicated saga.

HEATHER EWART: The web becomes more tangled by the day.

In the House of Representatives this afternoon, fresh claims and counter-claims surrounding the background to the Government's ethanol subsidy package announced last September.

SIMON CREAN, OPPOSITION LEADER: This is a case again of a Government that's lied, spied and denied.

JOHN HOWARD, PRIME MINISTER: Apparently if a government is considering a policy change which is designed to protect the interests of an Australian industry, it has become some kind of political crime, Mr Speaker.

MARK LATHAM, OPPOSITION TREASURER: Well, Mr Speaker, how low can a Prime Minister go?

How low can a Prime Minister go?

TONY ABBOTT, EMPLOYMENT AND WORKPLACE RELATIONS MINISTER: What really counts - hair splitting about who met whom or protecting the jobs of Australian workers and supporting a good Australian industry?

HEATHER EWART: The Opposition smells blood.

Their attack no longer just centres on whether the Prime Minister misled the House last year over a meeting with a chief of ethanol company Manildra, Dick Honan.

It's now widened to the question of how much John Howard knew and when, before announcing a decision last September that would greatly benefit Manildra, a large financial donor to the Coalition.

For Labor, the ammunition keeps mounting.

PAUL MORETON, NEUMANN PETROLEUM: The way that it was managed smacks of brutal politics and very, very poor policy.

HEATHER EWART: Small petroleum companies, Trafigura and the Neumann Group, have gone public with their grievances.

Paul Moreton is the CEO of Neumann petroleum and sees his company as the victim of intense insider lobbying by Manildra.

PAUL MORETON: We were taken out of the game by the actions of the Federal Government.

With no warning, it turned what was a reasonable and commercial deal into a -- let's say a non-commercial deal and we had to extricate our serves from that fairly rapidly.

HEATHER EWART: To make some sense of all of this, we first need to look at the sequence of events that's led to today's Opposition charges of a Prime Ministerial cover-up.

On July 24, small fuel suppliers Trafigura Fuels and Neumann Petroleum started to look offshore for their ethanol after Trafigura refused to guarantee supply.

Eight days later the Prime Minister met Dick Honan, where according to documents obtained under Freedom of Information, competition protection and an ethanol fuel excise were discussed.

Later, in August, Trafigura and Neumann managed to secure a shipment of ethanol from Brazil and were preparing to move it to Australia.

But before the shipment left, the Prime Minister's own department asked its embassy to investigate the pending ethanol shipment.

A report was in Prime Minister and Cabinet three days later.

On September 12th, the Prime Minister announced the ethanol excise and subsidy package, with Manildra the big winner.

What's more, during the Opposition's censure motion, Simon Crean argued it was Manildra lobbyist and former Howard chief-of-staff, Bob Gordon, who gave the Government the tip-off about a Brazil shipment on its way.

SIMON CREAN: The possibility of fuel ethanol imports into Australia -- we have reliable advice from Brazil that a significant shipment of fuel ethanol from Brazil is scheduled to be delivered to Australia in September.

That's when the Government knew, Prime Minister, from your former chief of staff.

It wasn't just the spies in the embassy that were working on this.

It was your former chief of staff.

The Prime Minister nods.

He acknowledges it.

HEATHER EWART: The two companies involved in the Brazil shipment were given no advice the Government was about to change policy, despite all the questioning by embassy staff in Brazil.

PAUL MORETON: I think the whole situation is bizarre and, frankly, I've never heard of anything like this before ever happening.

HEATHER EWART: Ultimately, their ship headed to Switzerland as distressed cargo, and they've done a lot of money.

SIMON CREAN: What is fair and decent and transparent and open about such a process, Prime Minister?

JOHN HOWARD: Was Mr Honan lobbying?

Yes.

Do other businessmen and women lobby?

Yes.

Were Trafigura and Neumann disappointed with the decision?

Yes.

Were they economically affected by the decision?

Yes.

HEATHER EWART: But some are much bigger winners than others.

No surprise that Dick Honan was strongly defending the Prime Minister this afternoon.

DICK HONAN, MANILDRA GROUP: Prime Minister is an honourable man.

He's more honourable than his Opposition and I'm proud to be able to call him Prime Minister of this country.

As should the majority of Australians.

And he is not a liar, but I tell you now, certain sections of parliamentary people down there are liars.

HEATHER EWART: Whoever may or may not be lying here, by omission or otherwise, is difficult to tell.

But despite records showing the Prime Minister and Dick Honan did discuss protecting Australian ethanol producers from the cheaper Brazilian imports, Mr Howard insists they didn't go into detail.

JOHN HOWARD: The position is that on August 1, when I met Mr Honan, we did not discuss pending imports of Brazilian ethanol either generically or the specific Trafigura shipment.

HEATHER EWART: More confusion too today over the laying off of 50 staff at Manildra's plant in Melbourne.

In a bid to turn the tables back on Labor, John Howard's parliamentary hitman, Tony Abbott, outlined a letter from Dick Honan which accused Labor of being responsible.

TONY ABBOTT: In this Parliament, the Labor Party thinks that it's putting pressure on the Prime Minister.

But out in the real world they are hurting the ordinary workers who they say they are pledged to defend.

HEATHER EWART: But Dick Honan gave his workers a very different explanation, countered the Opposition.

NICOLA ROXON, SHADOW IMMIGRATION MINISTER: Is the Minister aware of this letter from the management to employees of Manildra Group's Altona plant, advising that job losses at that location were due to "legislative restrictions" which have recently been introduced, limiting the amounts of ethanol which is permitted in domestic fuel?

HEATHER EWART: The Prime Minister has now left on a trip to New Zealand and China, and the Opposition won't get another crack at him until late next week.

But John Howard is under mounting pressure to come clean, and it's the first time in many months Labor has come even close to leaving a mark on him.