Kennett's blind spot
February 14, 2010
The revelation that Premier Jeff Kennett
negotiated a $250 million property deal with his wife's
brother-in-law is
the latest example of him failing to understand the issue of
conflict of
interest. Michael Rodd, the managing
director
of real estate firm Richard Ellis, should never have been brought in
to
help Rino and Bruno Grollo sell the new SECV headquarters.
At the time, Finance Minister Ian Smith was playing hardball,
threatening
to tear up an outrageous $646 million 20-year lease on the building
signed
by the former Labor Government in early 1991. Bruno Grollo says three or four financial institutions were prepared
to pay
more than the Government's final offer of $250 million, but they
were
scared off because Mr Smith was refusing to pay rent. The hiring of Mr Rodd's firm
was not
surprising, especially given that it had acted for the Grollos on
the
earlier $135 million sale of Shell House.
However, when it became clear that the Government was the only
potential
buyer of the SECV headquarters, the Premier and his wife's
brother-in-law
should have run a million miles from the negotiations.
Instead, they stayed involved.
To this day the Grollos quite rightly harbor deep grudges about the
tough
negotiating tactics of Mr Smith.
Threatening to legislate a contract out of existence if a building
were not
sold to the Government at a rock-bottom price is a pretty outrageous
abuse
of power. Having a "cowboy" minister refusing to pay rent on or buy a
building in which $250 million of family money was tied up was a
huge
problem. It was restricting the Grollos ability to tender for big projects
such as
the permanent casino, which it subsequently won a few months later.
When Mr Kennett does respond
he will
doubtless argue that the outcome he engineered with his "can-do"
fix-it approach to running the state saved the taxpayers bucketloads
of
money. But that is not the point. He and his wife's brother-in-law chose to
ignore
a massive conflict of interest.
Mr Kennett was approached by
Bruno
Grollo and Mr Rodd after it
was clear
they were getting nowhere with Mr Smith who was offering $150
million. During negotiations the Valuer-General decided the building was
worth
$40-50 million without the lease and $275 million with it. So on the
Government's own numbers, Mr Kennett's
intervention saved $25 million, but Mr Grollo says he had other
offers as
high as $330 million. Ironically, the Grollo's got their $250 million in cash just one day
before
Mr Kennett and his wife
officially
opened the Rialto observation deck on July 19 last year.
Mr Grollo stresses this was totally coincidental.
The SECV deal is not the only instance in which Mr Kennett has tolerated apparent conflicts
of
interest.
It was inappropriate for Mr Kennett
and his good friend Ron Walker to sanction the application of Mr Kennett's son Edward for an
unprecedented
$7000 basketball grant from the Crown casino. This would be deplorable at any time, but to do it right in the
middle of
sensitive negotiations between a Cabinet sub-committee chaired by Mr
Kennett and Crown over extra
gaming capacity
makes it totally unacceptable.
Similarly, his Government tolerated Andrew Peacock being chairman of
Transurban's bid committee for the $1.7 billion City Link project
when he
is one of Mr Kennett's best
friends. Mr Kennett appears to
have a major
blind spot over the issue of commercial conflicts.
While not suggesting any form of corruption here - and while on the
subject
of declaring interests, I worked in his office as a press secretary
for 18
months until June 10 last year - he continues to display a basic
misunderstanding about conflict of interest. He should not be involved in making any decisions that affect Ron
Walker
because he is both a close personal friend and the Federal Treasurer
of the
Liberal Party. At the very least he should resign from the casino sub-committee of
Cabinet, admit the $7000 Crown sponsorship deal was wrong and adhere
to the
same code of conduct which he expects public servants to follow.
This would demonstrate he has a clear understanding about conflict
of
interest and the public could then focus on his significant
achievements in
government.
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