NSW Premier Mike Baird says the Liberal Party must reveal the details of political donors hidden through the Free Enterprise Foundation ahead of the 2011 state election.
The NSW Electoral Commission has ruled the donations breach state electoral laws, and is refusing to pay the Liberals $4.4m in public funding until the party coughs up details of the donors.
Baird said he told the party’s state director on Thursday that the NSW Liberals must comply with the direction.
“They (the NSW Liberals) have done the wrong thing. It is unacceptable. The party should be beyond reproach in relation to these matters,” Mr Baird told reporters in Sydney.
“It’s very clear that it looks like we have done the wrong thing, so we have to cop it on the chin, and we need to get on with it.
“My full expectation is that the Liberal Party will comply fully with the Electoral Commission and just get on with whatever punishment they think is deserved.”
The commission withheld $4.4m in public funding from the state branch of the Liberal party for refusing to disclose some political donations in a decision that will place heavy pressure on the looming federal election and could lead to staff retrenchments.
The landmark decision from the three panel members of the commission, chaired by the former NSW court of appeal president Keith Mason, said the commission would not pay $4.4m of funding claims from the party after finding it failed to disclose all reportable political donors in 2011.
The Liberal party’s lawyers had flagged that the party would appeal to the supreme court if the commission ruled against it.
The decision is linked to disclosures by the Free Enterprise Foundation but is likely to have ramifications for the federal election, according to correspondence from the party’s lawyers.
The Free Enterprise Foundation is one of a number of associated entities of the Liberal party that receives political donations from donors, which is in turn passed on the NSW Liberal party. This process meant that the identity of some donors could be concealed.
The entity came to attention in 2014 from the Independent Commission Against Corruption, which heard that the foundation was being used to funnel donations from property developers, which had been banned in NSW since 2009.
The commission’s inquiry drew on the Icac investigations that it said found there were “significant breaches” of donation laws, and found that it should have declared a series of donations from the source of those who provided them to the Free Enterprise Foundation. It gave the party an opportunity to amend its declaration in February 2016 but it did not do so.
Mason said: “Integrity and public confidence in the electoral system are vital. The election funding and disclosure scheme promotes campaign finance transparency. This party declaration concealed rather than disclosed the statutory information. Parties seeking funding must play by the rules.
The Free Enterprise Foundation also plays a role in funding the Liberal party for the purposes of federal political campaigns, as does the NSW branch of the party. While the funding has been withheld by the NSW authority, correspondence from the party’s lawyers to Mason on 23 March indicate it could have implications for the federal election.
“If the balance funding is not received by 30 April 2016 our client will be forced to take emergency measures, the most likely of which will be forced retrenchment of staff,” wrote a SWAAB Attorneys partner, Michelle Harpur.
“You are also aware that there will be a federal election this year, perhaps as early as 2 July 2016, placing further pressures on our client’s financial position, and our client require provision of the funding or the balance funding as a matter of urgency.”
The findings have also drawn scrutiny from Labor, which has raised Arthur Sinodinos’ role as the state party’s finance director and treasurer at the time.
The shadow special minister of state, Brendan O’Connor, called on Malcolm Turnbull to stand down Sinodinos, who was appointed as cabinet secretary after standing aside as assistant treasurer.
“This is a test for Malcolm Turnbull,” he said on Thursday. “He should stand down the cabinet secretary, and he should request that the cabinet secretary explain in full his role in the establishment of the Free Enterprise Foundation.”
“His role in dealing with the donations, and indeed the Liberal party itself needs to disclose the details, not just to the NSW Electoral Commission but to the NSW public and the Australian public.”
The office of the prime minister, Malcolm Turnbull, would not comment on the issue.
The commission’s decision could also have broader implications for political fundraising across political parties. Its finding that the associated entity was essentially acting as an agent for political donors could potentially lead other parties to be made to make further political disclosures.
The commission found that the Free Enterprise Foundation was never a charitable trust. Instead, it said that for a number of donations reported by the party from the Free Enterprise Foundation that the entity was “in truth acting as agent for the donors”.
A spokeswoman for the NSW Liberal party said: “We are currently reviewing the NSW Electoral Commission statement.”
Additional reporting by Australian Associated Press