17 June 2016
by James Robertson

Parakeelia disclosure failure raises questions as Liberals scramble to adjust 'clerical error'

Former Liberal Party treasurer Ron Walker.

The Liberal Party is scrambling to contain the fallout over taxpayer-funded cash injections from its software company Parakeelia, amid allegations it failed to inform the corporate regulator of changes to company shareholdings for 15 years due to a "clerical error".

Appropriate arrangements to transfer this shareholding will be made in due course

Parakeelia has emerged as a significant threat to the Coalition after revelations that state and federal Liberal MPs direct part of their taxpayer-funded allowances towards the company, which in turn paid money into the accounts of the Liberal Party.

Liberal MPs pay $2500 a year in allowances to Parakeelia, with state MPs collectively chipping in more. The Liberal Party-owned company has paid more than $1 million into party accounts over recent years.

Labor on Wednesday demanded the Auditor-General investigate the scheme, calling it a "washing machine". But Opposition Leader Bill Shorten was on Thursday faced with revelations Labor MPs had sent their software allowances directly to the party before 2014, raising questions about Labor's own receipt of taxpayer money.

Melbourne businessman Ron Walker has told Fairfax Media he resigned his 98 per cent shareholding in Parakeelia in 2002 – and that Prime Minister Malcolm Turnbull should have assumed his role in the controversial company when Mr Turnbull took over as the party's treasurer.

But ASIC reports show Mr Walker was still listed as a 98 per cent shareholder in Parakeelia Pty Ltd as of Wednesday afternoon.

"That's impossible," Mr Walker said in an interview late Wednesday. "I was assured that I had resigned. I relinquished all other directorships.

"Malcolm took over from me. He succeeded me as federal treasurer of the party. He assumed all responsibilities I had on that day."

Under the Corporations Act, companies must inform ASIC of changes to their shareholders within 28 days. Breaches carry a maximum of fine of about $10,000.

In a subsequent phone call, Mr Walker said the Liberal Party was scrambling to correct the error.

"[The letter] was never sent to ASIC – clerical error," Mr Walker said. Mr Walker said Liberal Party federal director Tony Nutt was "taking care of the legal side to make sure a letter is sent to ASIC tomorrow".

The Liberal Party did not respond to questions about whether this lapse amounted to a breach of the Act.

"Mr Walker believed that he had ceased to be a shareholder," a spokesman said. "Mr Walker is a shareholder. Appropriate arrangements to transfer this shareholding will be made in due course."

The Liberal Party said Mr Turnbull was never a director or shareholder when serving as party treasurer from 2002 and 2003.

The shares are non-beneficial and held in trust for the Liberal Party.

Mr Walker's allegation appears to contradict a statement made on ABC radio by government frontbencher Scott Ryan on Thursday that "Parakeelia has complied with every rule".

Labor stepped up its attack on Parakeelia on Wednesday, with Mr Shorten calling for the Auditor-General to investigate what he declared a "scam".

But Coalition MPs hit back on Thursday, pointing out that Labor MPs have directed their allowances to the party to pay for licences for its custom-built software.

"If Bill Shorten wants to complain about it, as he started to yesterday, he should explain why, when he was leader, the Labor Party used to pay it directly to the Labor Party," Senator Ryan said.

Labor says it does not own its software developer, Magenta Linas, and that its software "operates at a net cost" to the party. However, Labor MPs do use part of their taxpayer-funded allowance to pay for licences from the party, which buys them from the company.

Mr Shorten said the ALP did not own Magenta Linas and "we are not recycling like the Liberal Part washing machine taxpayer funds into the bottom line of profits of the Liberal Party".

When asked to rule out that any donations had been made to Labor, he said: "I don't know every transaction they've had at the state level". Fairfax Media was unable to identify any entry related to the firm in state Labor branches 2014-15 returns.

Federal Labor's disclosure returns show two amounts relating to Magenta Linas in 2014-15, one for $1018 described as an "other receipt" and one for $13,300 described as "non-financial".

Andrew Navakas from Magenta told Fairfax Media via email that the smaller amount was for sponsorship for an ALP IT conference. The larger amount was paid by the ALP to the firm for an outstanding invoice.

Fairfax has previously reported Mr Walker's shareholdings in Parakeelia. In 2007, then federal director Brian Loughnane described Mr Walker's ongoing involvement in the company as an "oversight" and said he would discuss with Mr Walker removing him from the company.

Mr Walker used the same words and blamed former director and outgoing MP Andrew Robb for his continued involvement.

The Liberal Party has said it will co-operate with any investigation by the Auditor-General.