24 March 2016
by Geoff Winestock

Liberals lose $4.4m for operating an illegal slush fund

The Liberal Party has been refused access to $4.4m in government campaign funding after the NSW electoral commission ruled it operated a huge, illegal slush fund during the 2011 state election campaign.

A dispute panel of the NSW Electoral Commission chaired by Keith Mason, a former NSW Appeals Court Judge, rejected a Liberal Party request on Wednesday for access to the cash arguing the NSW Division of the Liberal Party was still refusing to supply details of donors who made payments of $787,000 via the Free Enterprise Foundation.

The panel based its decision on evidence from the Independent Commission Against Corruption's inquiries in 2014 into Liberal campaign donations. The panel said the Free Enterprise Foundation was "used by senior officials of the Liberal Party and an employed fund raiser to channel and disguise donations by major political donors some of whom were prohibited donors." Donations by property developers were then banned under NSW law.

The report said it looked at evidence gathered by ICAC of involvement "in the arrangements touching the foundation" of senior party officials on the finance committee including Senator Arthur Sinodinos who was then party treasurer.

The decision is a blow to Liberal party finances in the lead up to the Federal election and raises questions for all partiesabout the use of trusts linked to parties to conceal donors. The panel rejected the Liberal Party's claim that the Free Enterprise Foundation was a charity.

ICAC has been prevented by a series of legal challenges from releasing its own findings on the epic inquiry into NSW political donations which resulted in the resignation of 10 MPs including premier Barry O'Farrell over a gift of wine.

The Electoral Commission said it had offered the Liberal Party the opportunity to make a full disclosure of donors for the 2011 election campaign but decided to freze access to the $4.4 million because the Liberals had not complied. The Liberal Party said it was reviewing the decision.