Gina Rinehart's company, Hancock Prospecting Pty Ltd, was behind a $150,000 payment to the Liberal Party, transferred via a third party, and not declared by the mining giant by the November 17, 2022 deadline.
An ABC investigation has uncovered a series of payments, which a leading barrister and anti-corruption expert believes is a "scheme" to bypass political donation laws.
The ABC understands payments made to the Liberals by the Sydney Mining Club followed a funding deal struck by Hancock chief financial officer Jabez Huang and SMC chairman Julian Malnic.
The money was transferred to the Sydney Mining Club by Hancock Prospecting, but not disclosed with their declared donations that year. After questions from the ABC, Hancock said it had now fixed a "deficiency" in their disclosure.
The Liberal Party formally acknowledged it received a total of $144,000 from the mining club, but Sydney Mining Club has not declared the payments. Experts say the transactions expose a possible "loophole" in the laws covering political donations.
The revelations raise serious questions about how much Australians know about who is funding our political parties, and whether existing laws are strong enough.
'Julian was very clear'
Hancock Prospecting paid Sydney Mining Club $190,000 for what both parties described in separate emails as a "sponsorship" in May and July 2021.
The Sydney Mining Club kept $40,000, and passed $150,000 to the Liberal Party by way of a membership to its business forum, the Australian Business Network — which a Sydney Mining Club staffer said was part of its arrangement with Hancock.
Platinum sponsorship of the Sydney Mining Club costs $40,000.
An email between two Sydney Mining Club employees at the time, seen by the ABC, noted the money was not to be transferred to the club's "high interest account" because "150k will be going straight out to the liberal party".
When approached by the ABC, one of the employees said she no longer worked for the club, but that chairman Julian Malnic made it "100 per cent clear" the arrangement was made at the request of Hancock Prospecting's CFO, Jabez Huang.
"Julian was very clear that the money was coming from Hancock and it was to be passed on directly to the Liberal Party. It wasn't that it was coming in sort of discretionary, to be spent, you know, as the mining club saw fit."
The former staffer understood Mr Malnic's contact at Hancock was Mr Huang, and said although Mr Malnic was not dealing with Hancock chairperson Gina Rinehart, Malnic "did mention at the time that, 'Gina trusts him'."
Hancock's funding was never publicly announced by either company, and Hancock was not promoted alongside sponsors online or at Sydney Mining Club events, even though Hancock's contribution dwarfed payments by existing sponsors.
'Hancock is not a sponsor': Malnic
Declarations of donations made in the 2021-22 financial year were due in November last year, and published on the AEC's transparency register on February 1, 2023.
Hancock Prospecting declared two donations worth a total of $24,500 made by its subsidiary, S Kidman and Co, to the South Australian branch of the Liberal Party.
After the ABC asked Hancock Prospecting detailed questions about its arrangement with Sydney Mining Club, Hancock updated its donor declaration — providing a one-line statement:
"Hancock has become aware of a deficiency in disclosure, and has already rectified it with a disclosure."
The AEC confirmed to the ABC that Hancock Prospecting had amended its donor declaration.
At the time of publication though, the update has not been published on the AEC site and it is unclear what payments the company has now declared.
In an earlier conversation with the ABC, Mr Malnic denied the $150,000 the Sydney Mining Club paid the Liberal Party came from Hancock Prospecting.
"That's not correct … Hancock is not a sponsor of the Sydney Mining Club," Mr Malnic said.
He said the money paid to the Liberal Party did not come from a particular source but rather from "across the sponsorship".
But following that interview — and after the Liberal Party had publicly declared Sydney Mining Club's $144,000 payment — Mr Malnic sent an email to sponsors, telling them the club had not used their money for political donations.
"We are [a] member of the Australian Business Network which is run by the Liberal Party," Mr Malnic wrote.
"Membership of this is not funded with a single cent of sponsorship funds. You need to know that. This would be way beyond our ethical standard … Nothing can be higher than the integrity of what we do in representing and standing up for the Australian mining industry."
How the deal unfolded
May 20, 2021: Hancock Prospecting CFO emails Sydney Mining Club Chairman Julian Malnic. "Hi Julian, Thank you for speaking with me today about the proposed sponsorship of the Sydney Mining Club by Hancock Prospecting Pty Ltd … As discussed, the sponsorship invoice should be addressed to [Hancock Prospecting Pty Ltd].
June 10, 2021: Sydney Mining Club invoices Hancock Prospecting for $190,000 for "Corporate Membership".
June 29, 2021: Hancock Prospecting Pty Ltd remittance advice shows payment of $190,000 has been made to Sydney Mining Club.
July 1, 2021: Sydney Mining Club employee sends email noting "$150k will be going straight out to the liberal party".
July 5-13, 2021: $150,000 transferred from Sydney Mining Club to the Liberal Party's Australian Business Network in seven separate transactions.
June 5, 2022: Sydney Mining Club employee emails other staff: "Hancock Mining have committed to another three years ongoing with the same arrangement as last year. At this stage no banner required and they're to be referred to as corporate sponsors".
July 6, 2022: Hancock Prospecting Pty Ltd remittance advice shows a second payment of $190,000 has been made to Sydney Mining Club.
August 5, 2022: Sydney Mining Club transfers $150,000 to the Liberal Party's Australian Business Network.
November 17, 2022: Deadline for declarations to the AEC of any donations made in the 2021-2022 financial year.
February 1, 2023: Transparency Register reveals Liberal Party declared $144,000 received from the Sydney Mining Club and no donor declarations by Hancock Prospecting or the Sydney Mining Club.
February 2, 2023: ABC submits detailed questions to Hancock Prospecting Pty Ltd and Sydney Mining Club about the arrangement.
February 4/5, 2023: According to AEC, Hancock Prospecting amended its donor declaration "over the weekend" — on February 4 or 5, 2023.
February 6, 2023: Hancock Prospecting sends a statement to the ABC: "Hancock has become aware of a deficiency in disclosure, and has already rectified it with a disclosure."
Mr Malnic has not responded to further written questions by the ABC.
The ABC can reveal the arrangement between the Sydney Mining Club and Hancock Prospecting has occurred twice.
In addition to the $190,000 paid by Hancock to the club in 2021-22, Hancock paid another $190,000 to the club in the 2022-2023 financial year.
The ABC has seen evidence that over that period, the Sydney Mining Club paid a total of $300,028 to the Liberal Party.
The second payment to the Liberal Party is not required to be declared until later this year.
Emails seen by the ABC show the Sydney Mining Club believed Hancock Prospecting planned to continue the arrangement for another two years, making it a $760,000 deal over four years.
Geoffrey Watson SC, a barrister, former counsel assisting ICAC and director of the Centre for Public Integrity, said the contributions were a "huge amount".
"In Australian political terms, that's really put that right up in the top bracket," Mr Watson said.
The $300,000 transferred to the Liberal Party in the past two years via this arrangement is more than the total Hancock Prospecting Pty Ltd has declared in all political parties since 1988.
Geoffrey Watson SC told the ABC he believed the arrangement between SMC and Hancock was "wrong" and "ridiculous".
"This is just merely a scheme under which you avoid the impact of the crummy federal election funding laws," he said.
Did the Sydney Mining Club need to declare a donation?
Under federal law, a donation or "gift" to a political party is defined as something given to the party, without enough value being received in return — when the donor did not receive value for their money.
Any donation above $14,500 must be declared by both the political party and the donor.
While legal experts Graeme Orr and Geoffrey Watson were both critical of donation laws and the AEC's role in enforcing them, in this instance where three parties were involved, they had different views about who needed to declare what.
The Sydney Mining Club paid a membership subscription to the Liberal Party's business forum and fundraising arm — the Australian Business Network.
By law, that payment does not need to be declared if the Sydney Mining Club received value for money — something described as "adequate consideration".
The Liberal Party would not confirm the cost of membership to the Australian Business Network, or exactly what businesses get for it, but members are typically invited to exclusive lunches and get access to MPs — including ministers and the prime minister when the party is in government.
According to Mr Malnic, the AEC advised the Sydney Mining Club that the payment did not fit the definition of a donation.
The AEC denied this when contacted by the ABC, and said: "The AEC provided Mr Malnic with the definition of a gift under [the electoral act] and advised him that he would need to make his own determination as to whether the transaction in question met that definition."
Mr Malnic did not respond to written questions asking whether he considered the company had received value for money for its $150,000 contribution.
The University of Queensland's Professor Graeme Orr, an expert in Australian electoral law, said if the money was not a gift, that raised several questions.
"They're doing this in a way that makes business people feel like, 'oh, we're not giving the money away, we're getting something back in return'," he said.
"If you're getting something in return, is that something access to the senior politicians?
"That in itself is corrupting of the system of representative democracy."
The AEC told the ABC it does not investigate whether membership subscriptions should be declared as donations, and that it is left up to the contributors and the parties to decide.
"It is not for the AEC to proactively research and determine adequate value for money for subscriptions across the full, extensive range of disclosures made to us. If the entities involved determine that the full monetary transaction is appropriate value for the services a subscription provides then it is excluded from the definition of a 'gift'," the AEC said.
Geoffrey Watson SC was scathing of the AEC's approach.
"If the AEC is not trying to find out whether or not something is a gift, then they're just not doing their job," he said.
"Subscriptions by major organisations which then go to the political party … of course they're donations," Mr Watson said.
"If the AEC is excluding them, that's either because the statute isn't good enough or because the AEC is misinterpreting their own statute."
Professor Orr was on the same page. He said if a political party was making significant money out of the subscriptions, then those subscriptions fit the definition of "gift" under the law.
"The act is clear. If you're paying well above what might be the cost of producing these conferences or events, then that becomes a donation," he said.
Did Hancock need to declare a donation?
Hancock has now amended its donor declaration, though the details of the changes have not been made public.
The Commonwealth Electoral Act says that if one entity makes a gift to another entity with the intention that it "benefits" a political party, then it must be treated as a donation directly to that political party, and declared as such.
The two key considerations in that section of the act are "intention" and "benefit".
Hancock Prospecting did not respond to questions regarding its intention for the payments, nor whether Ms Rinehart knew about them.
But a former Sydney Mining Club employee claims Mr Malnic's instructions from Hancock's CFO were that the money "be passed on directly to the Liberal Party".
The AEC told the ABC the act did not define the word "benefit", and would not comment on whether Hancock was required to disclose the contribution.
Mr Watson said he believed the law required Hancock to declare the money it gave to the Sydney Mining Club as a donation to the Liberal Party.
"This in my book is directly caught by the weak federal funding laws and must be declared as a political donation. And quite frankly, it's transparent. That is what it is — it's a political donation," said Mr Watson.
Highlighting the complexities of interpreting Australia's disclosure laws, Professor Orr disagreed with Mr Watson.
He said the transaction made by Hancock Prospecting would only need to be declared as a donation if the money paid by the Sydney Mining Club was itself required to be declared.
Both Professor Orr and Mr Watson said that if there was a loophole in the law that allowed Hancock Prospecting not to declare the money as a gift, then the law needed to change.
"If this loophole is as wide as the election commission suggests it is, we really need to change the law," Professor Orr said.
"If this kind of payment is not a gift under the statute, then that is unintended — a loophole which the major parties are exploiting," said Mr Watson.
Did the Liberal Party need to declare it?
Beyond donations, political parties must declare other sums of money they receive as "other receipts" when they are over $14,500.
The money from the Sydney Mining Club was transferred to the Liberal Party in a series of instalments from July 5 to 13, 2021.
Under "other receipts", the Liberal Party declared it received $144,000 from the Sydney Mining Club, in six payments of $24,000. It did not declare the final $6,000, which was under the disclosure threshold of $14,500.
While it is not legal for donors to split up donations to avoid the disclosure threshold, the AEC told the ABC it was OK for political parties to do so with payments declared as "other receipts".
In a statement, the Liberal Party said it had "disclosed all payments made to it during the 21-22 financial year that were over the legislated disclosure threshold."
"The Liberal Party conducts its fundraising in strict accordance with the disclosure regime established under the Electoral Act," a party spokesperson said.
'A cartel of the major parties': Watson
There have been several bills before federal parliament over the years that have tried to widen the definition of "gift" in the Commonwealth Electoral Act to provide greater transparency over contributions to political parties.
The Greens' Banning Dirty Donations Bill 2022 is the only such bill currently before parliament.
It would require any subscription to a business forum operated by a registered party to be declared if it is over $1,000 per year.
It would also ban donations from miners and fossil fuel companies.
"Our concern is that the political system is awash with big money and it's awash with big corporates and often big polluters paying big money to get big outcomes for themselves," said Larissa Waters, the Greens' democracy spokesperson.
"Unfortunately, the big parties haven't wanted to turn off the tap of the money that bolsters their re-election campaigns. So we have been banging our heads against a brick wall for many years now," she said.
But she said she had "some optimism" the current government would make some reforms to improve transparency.
Labor said in a statement that its policy was to "reduce the disclosure threshold to $1,000 and introduce real-time disclosure".
Labor told the ABC that it "discloses all donations, subscriptions and amounts received above $1,000", but the following day the Sydney Morning Herald reported the party's NSW branch did not declare a $10,000 Sportsbet donation made on the eve of last year's election.
Independent senator Andrew Wilkie also previously proposed the Cleaning up Political Donations Bill, which lapsed in April last year after being voted down.
It sought to expand the definition of "gift" or "donation" in the act to cover contributions to fundraising events which are intended to promote a political party.
He plans to reintroduce the bill next week.
"I think I speak for many Australians when I say we just want to see reform. So, hopefully the government can pick up one of the bills and support it or perhaps take the ideas out of these bills and use them themselves," Mr Wilkie said.
Mr Watson said there was no motivation for the two major parties to change the laws to make these sorts of arrangements more visible.
"It's in the interests of the political cartel — Coalition and Labor — to keep these things in place," he said.
"The transparency of donors is fundamental because we want to see who was trying to gain the influence that one gets through a donation.
"If the current federal funding laws don't cover this, then they must be amended."
