Victorian ministers breached codes in ‘shocking’ misuse of public funds to fuel branch stacking, Ibac finds

Two former Daniel Andrews government ministers breached parliamentary codes of conduct when they misused public funds to fuel a vast branch-stacking operation, an integrity investigation has found.

But the investigation by the Independent Broad-based Anti-corruption Commission and the Victorian ombudsman found there was not enough proof the former ministers had committed criminal offences to recommend prosecution

The probe uncovered the widespread misuse of public funds for political purposes, including a system of patronage in which jobs were awarded to those who controlled large numbers of Labor members and were loyal to the faction until June 2020.

The investigation report tabled in Victorian parliament on Wednesday made 21 recommendations, including that the government establish an independent parliamentary integrity commissioner, ban MPs from being able to employ family members in their electorate office, and create an offence that would make it unlawful for ministers to allow a person to perform party political work while employed in a publicly funded role.

The report outlines the conduct of those within moderate Labor, a faction led by the former Andrews government minister Adem Somyurek. It also provides further details of the premier Daniel Andrews’ evidence to investigators during a private examination, and notes that in 2020 the government had passed legislation making it harder for Ibac to hold such examinations in public.

Ibac and the ombudsman found that while branch stacking – the practice of large-scale recruitment of non-genuine members to influence the outcome of votes within Labor branches – was a common and longstanding practice, it found no evidence of misuse of public funds within other factions.

The Operation Watts report found Somyurek and his fellow former minister Marlene Kairouz committed multiple breaches of MP and ministerial codes of conduct but not necessarily criminal offences.

“Although other factions were undoubtedly engaging in branch stacking, and this practice has been a scourge for the ALP for many years, the blatant misuse of public resources by the ML (moderate Labor) faction was extraordinary and shocking,” the report said.

The ombudsman, Deborah Glass, and Ibac commissioner, Robert Redlich QC, said they had “carefully considered” whether the misconduct of Somyurek or Kairouz “constituted criminal offending that should be referred to the Director of Public Prosecutions”.

“Ultimately, the relevant offence calls for a value judgement about whether a breach of public trust is so serious that it merits criminal punishment.

“Reasonable minds might differ on this. There is also a weak legislative framework around the employment of electorate officers and the use of electoral allowances.

“Thus, although we consider the conduct to be egregious, the difficulties in proof are such that we cannot recommend prosecution.”

Kairouz stood down as a minister after an investigation by The Age and 60 Minutes into branch stacking was published in June 2020, while Somyurek was dumped from the ministry.

Somyurek denies wrongdoing

The report notes that Somyurek declined to provide a response when provided with a confidential draft copy of the investigation findings, saying he considered the process to be unfair as The Age had already published a story based on a leaked copy of the draft report.

But on 22 June he made a speech in parliament in which he denied doing anything wrong and claimed he had complied with legislation, custom and practice.

“This report sets out our reasons why those contentions must be rejected,” the report states, noting investigations were also continuing regarding the people who released the material to The Age “contrary to the law”.

The only submissions Kairouz gave after being provided a copy of the draft report referred to clarifications about an amount of money she was said to have paid to fund party memberships.

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The investigation involved the private examinations of 26 witnesses, the public examinations of seven witnesses, the analysis of data from more than 30 seized devices including mobile phones, computers, tablet devices and USBs, and the lawful interception of Somyurek’s telephone communications.

Somyurek said in his evidence that there were two reasons for branch stacking: to gain influence in the party and “cheat your way into parliament” or, if you were already a sitting member, “to see off people” who were trying to stack their way in. Somyurek, along with three other former state ministers, the former federal MP Anthony Byrne and a local councillor who had aspirations of becoming a state or federal MP, all admitted to paying for party memberships, in breach of party rules.

The report found MPs also regularly employed people in ministerial or electorate offices to reward factional operatives and ensure they could continue doing this work on the public purse.

Adem Somyurek and Marlene Kairouz were ministers within the government led by Daniel Andrews (pictured) Photograph: Darrian Traynor/Getty Images

Aside from the genesis of this employment, the actual factional work itself was often unethical: signatures were regularly forged on documents, the report found, including once on a form purportedly completed by a dead person.

While MPs within the faction were not found to have awarded government grants improperly to three community organisations with deep ties to the faction, it did find that members of the faction, including Somyurek, improperly sought to influence the grant process.

But, according to the report, this culture within the faction was not as bad as “a legislative framework that provides few, if any, consequences for abusing public resources and that allows such conduct to continue unchecked”.

Andrews’ evidence

Andrews’ evidence to the investigation, given in private, paints in broad brush strokes his understanding of factional work within the party – a dark art at which Somyurek and others have repeatedly claimed he excels.

The premier was asked about comments that an MP in the faction, Sarah Connolly, made in an intercepted phone call to Somyurek shortly before the 60 Minutes/Age story aired.

She responded to Somyurek when he said he did not know what was in the story but that it could be about branch stacking, misusing staff and paying for memberships: “Oh, God. Well, I mean, big fuckin’, that’s not, that’s not hardly a story.”

Andrews disputed that Connolly’s comments reflected an understanding in the party that the misuse of electorate officers was not an issue, saying he found the suggestion “very troubling” and “concerning”.

But the report found Andrews was aware of widespread recruiting of non-genuine members over the previous few decades and that people had paid for the memberships of others over a long period.

He also agreed that the practice was not limited to one faction and occurred “across the board”. Andrews is a member of the rival socialist left faction.

The premier denied any personal knowledge of or involvement in such practices, the report found, but was aware of such allegations through talk within the party, reviews, rule changes and from the time he worked at ALP head office.

“He made the distinction between having suspicions about people who might be engaging in the practice and having actual knowledge of specific people who engaged in such practices,” the report found.

“Andrews agreed that branch stacking was a serious problem and that it could amount to a corruption risk in the sense that it could lead to the misuse of taxpayer or public funds in the pursuit of factional activities.

“He agreed that elimination of branch stacking was necessary to eliminate the risk of corruption.”

Andrews also told investigators he disputed the account given by Somyurek of the so-called Red Shirts scandal. He did say, according to the report, that he had been aware of “the essence” of the scheme but had no concerns.

When asked if he was aware that it involved electorate officers doing party-political work, Andrews responded: “I was aware that it was about engaging staff to be involved in campaigning.

“My recollection is that at no point did I have a sense that what was being proposed was not in accordance with the rules or advice from Parliamentary Services. My memory of it is that it was – pooling arrangements have been part of parliamentary parties for quite some time, our party and others. I expect I viewed it in those terms.”

The response goes to a key part of ongoing Coalition criticism of the Andrews government in the lead-up to the November election: that Labor has spent its eight years in office embroiled in scandals, including multiple Ibac inquiries, several of which remain outstanding.