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ICAC report into Eddie Obeid and Ian MacDonald

ICAC report into Eddie Obeid and Ian MacDonald

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Published by Latika M Bourke
ICAC report
ICAC report

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Published by: Latika M Bourke on Jul 31, 2013
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08/07/2013

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13

ICAC REPORT Investigation into the conduct of Ian Macdonald, Edward Obeid Senior, Moses Obeid and others

(“Monaro Mining”), one of the companies that was to be
invited to lodge EOIs, that, in the event of Monaro Mining’s
bid for a Mount Penny exploration licence being successful,
Voope Pty Ltd (“Voope”), a company associated with the
Obeid family and Mr Brook, would acquire 80% of the
shares of Monaro Coal Pty Ltd (“Monaro Coal”), Monaro
Mining’s subsidiary. The Obeid family benefcially owned
88% of Voope and Mr Brook owned 12%. The Commission
broadened its investigation to examine whether Mr
Macdonald was responsible for Moses Obeid receiving this
confdential information.

Monaro Mining submitted six bids for exploration licences,
including bids for an exploration licence over the Mount
Penny and Yarrawa mining allocation areas.

The Commission discovered that the EOI process was
reopened so that Cascade Coal Pty Ltd (“Cascade”),
and other parties, could participate. The Commission
then broadened its investigation to ascertain whether Mr
Macdonald had directed the process to be reopened in
order to improperly favour Travers Duncan. Mr Duncan
had interests in a number of coalmining companies,
including Cascade. The Commission examined whether
Mr Macdonald or anyone else had provided Mr Duncan
with confdential information concerning the decision to
reopen the EOI process as well as confdential information
concerning a NSW Department of Primary Industries (DPI)
document on proposed coal allocations. The Commission
also investigated whether Mr Duncan made that confdential
information available to his co-investors in Cascade.

The Commission discovered that a series of complex
transactions had occurred with respect to Monaro
Mining’s rights to the bids it had made. Monaro Mining frst
transferred the beneft of its bids to its subsidiary, Monaro
Coal. Voope then acquired Monaro Coal’s shares. Monaro
Coal thereupon changed its name to Loyal Coal Pty Ltd
(“Loyal Coal”). Thus, the Obeid family and Mr Brook,
through Voope, held the rights to the bids that previously had
been made by Monaro Mining.

The Commission learned that Loyal Coal (as the
successor to Monaro Mining) had been determined
by the tender EOI Evaluation Committee, set up to
examine the bids, to be the successful tenderer in regard
to the Mount Penny and Glendon Brook tenements, with
Cascade being ranked second in both instances.

On 5 June 2009, Cascade entered into an agreement
with Buffalo Resources Pty Ltd (“Buffalo Resources”).
Cascade thereby undertook that, in the event it was
successful in its bid for the Mount Penny exploration
licence, it would enter into a joint venture agreement
with Buffalo Resources. By that joint venture agreement,
Cascade undertook to bear the expenses of exploration.
Buffalo Resources, in return for contributing “intellectual
property”, became entitled to receive 25% of the profts
earned by the joint venture.

Monaro Mining requested that all exploration licences
to be issued to it, be issued instead to its nominee, Loyal
Coal.

On 9 June 2009, Loyal Coal withdrew its bids for the
Mount Penny and Glendon Brook exploration licences.
On 19 June 2009, exploration licences for these areas
were awarded to Cascade.

Loyal Coal was granted an exploration licence over
Yarrawa. Voope acquired Loyal Coal. The circumstances
under which Voope acquired an interest in Loyal Coal,
and under which the Yarrawa exploration licence was
awarded to Loyal Coal, were also investigated by the
Commission.

The Commission broadened its investigation once more
to examine whether Mr Macdonald or anyone else
provided any member of the Obeid family, or persons
associated with Cascade, with confdential information
indicating the rankings of the respective tenderers for the
Mount Penny tenement and, in particular, confdential
information to the effect that Monaro Mining was ranked

14

ICAC REPORT Investigation into the conduct of Ian Macdonald, Edward Obeid Senior, Moses Obeid and others

frst for the Mount Penny exploration licence, and Cascade
was ranked second.

The Commission then discovered that there had been
several complex transactions involving entities controlled
by the Obeid family and Cascade (and the investors in
Cascade). These transactions culminated in an agreement
between two “cleanskin” companies; one benefcially
owned by the Obeid family and the other by investors
in Cascade. These agreements had the effect that the
Obeid interest was removed from Buffalo Resources in
consideration for $60 million, of which $30 million was
paid to the Obeid interest. The Commission proceeded to
investigate these matters.

Finally, the Commission obtained evidence that the
investors in Cascade had commenced negotiations to
sell their shares in Cascade to White Energy Company
Ltd (“White Energy”) for $500 million but they were
concerned about the Obeid involvement in the creation of
the Mount Penny tenement, or the joint venture relating
to it, becoming public knowledge. There was evidence
that the Cascade investors feared that, should the Obeid
involvement become public knowledge, there was a risk of
two things occurring. First, the independent shareholders
in White Energy might not go through with the purchase
and, secondly, the state government might investigate the
creation of the Mount Penny tenement (and might set it
aside) or might refuse to grant a mining lease. There was
evidence that the Cascade investors, accordingly, took
steps to ensure that the Obeid involvement remained
hidden. The Commission proceeded to investigate these
matters.

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