“Labor, Labor, Labor, Labor, Labor”. This is a direct quote from the epic interview of Barnaby Joyce by Patricia Karvelas on ABC Radio last week. As is, “Labor, Labor, Labor, Labor”. Michael West reports on the unfolding #Watergate saga.
Amid no less than 52 mentions of the word Labor (see correction below) in one interview – and nine Penny Wongs – Barnaby Joyce managed to side-step the question on 25 occasions of who received the $80 million cash from Watergate, the water rights deal bearing his signature; cash which found its way to unknown investors in a Caymans Islands company founded by Angus Taylor.
What have Barnaby Joyce and Angus Taylor said about the deal, and what have they not said?
We will get to the odyssean interview with Barnaby in due course. First to Angus Taylor, as his interviews with Chris Kenny on Sky News Fran Kelly on and RN Drive with Fran Kelly are more recent.
Taylor has kept a low public profile since the story broke. We still don’t know who got the $80 million though and Taylor has still has not been asked this question in a live interview.
Apart from door-stops, Taylor’s first interview on the subject was with Sky host Chris Kenny:
.@AngusTaylorMP on Eastern Australia Irrigation: I didn't play any part in the setting up of the structure of the company. I was focussed on the agricultural operational side of it. The structure is a very common practice.
— Sky News Australia (@SkyNewsAust) April 28, 2019
CHRIS KENNY: EAI … you helped set it up, and it was based in the Cayman Islands. Now the only reason you would do that is, isn’t it, to reduce your taxation liabilities?
ANGUS TAYLOR: Well Chris, I didn’t play any part in the setting up of the structure of the company, that was done by others. I was focussed on the agricultural, operational side of it. But look the structure is a very common practice…
What Chris didn’t ask Angus was: who are the beneficiaries of EAI? Who received the taxpayers’ $80 million?
While Angus stepped down as a director of the Caymans company in 2013 before he entered Parliament he ought to have some idea who the shareholders are because he founded the company and his fellow directors remained on the board after he stood down in 2013.
CHRIS KENNY: But you helped set it up …
ANGUS TAYLOR: I should be very clear here Chris, I never had an interest in that company, nor did my family members, and I concluded any association with it before I entered the Parliament …
.@AngusTaylorMP on Eastern Australia Irrigation: I never had an interest in that company, nor did any of my family members. I concluded any association with it many years before those buybacks.
— Sky News Australia (@SkyNewsAust) April 28, 2019
It may seem an unusually fine hair to split – that he set the company up but played no part in the “setting up of the structure of the company” but it is conceivable the structuring was done by his lawyers. What is inconceivable is the next line, that the Caymans structure was designed to make investors pay tax in Australia.
ANGUS TAYLOR: It’s a common practice and designed to insure that investors pay tax in the countries where they live … it’s used by many Australian super funds, Australian Super, CBUS, Rest.
It’s an arrangement that makes sure that investors pay tax where the investor lives.
Is Taylor asserting that this Caymans’ structure was designed to ensure tax was appropriately paid in Australia? More likely, he is alluding to one of the reasons people invest in the Caymans; that is, to avoid paying double tax. Tennis stars, for instance, are often domiciled in Bermuda and other havens. As they make their earnings in different jurisdictions, these earnings are penalised by double tax unless funnelled to a zero tax jurisdiction such as the Caymans.
Eastern Australian Agriculture, the Australian subsidiary of Eastern Australia Irrigation in the Caymans had no such reason to benefit from sending its earnings to the Caymans, nor did its Australian investors. They could have just paid tax here. Who would have benefitted then? Foreign investors, perhaps interests associated with Lord Roborough and other EAI directors because their investments would not have been subject to tax in Australia.
As to the Caymans is “common practice” claim, Angus Taylor’s company is different to the Future Fund and the industry funds he cites. In these cases, we know who the beneficiaries are. The Future Fund and the industry funds publish accounts and disclose their beneficiaries, that is, public servants, fund members and so forth.
Eastern Australia Irrigation does not issue public accounts. These are a secret.
The point missed by Sky, is that this deal appears designed for secrecy as much as tax; designed to get money out of the country to beneficiaries unknown. The fact that both Barnaby Joyce and Angus Taylor have declined to identify the beneficiaries only lends fuel to the fires of speculation.
Angus Taylor backed up with an ABC interview with Fran Kelly. The same talking points were canvassed: investing in the Caymans is “very common practice”, the super funds do it; he and his family personally had no interest in EAI.
FRAN KELLY: As a co-founder and director of this company (EAI) presumably you received fees at the time. How were these fees paid …?
ANGUS TAYLOR: I was a consultant and was paid consultant fees. Now I never had an interest in the company, or any related company, or any of my family members …
I didn’t receive a benefit from these water buy-backs, indeed I wasn’t aware of them at the time …
Again, Taylor was not asked if any associates, or associated entities, held an interest in the company via trusts or other vehicles. He was not asked who the beneficiaries were, who did get that $80 million.
But he did say that he concluded my relationship with the company, as with my other consulting clients, before I entered the Parliament.
This response may have been inadvertent on Taylor’s behalf. He may have been referring to consultancies relating to EAA, the Australian subsidiary of EAI. This may get tricky for the Energy Minister because searches show that he was a director of the consultancy firm Centaurus Partners from 2004 to 2015, a firm he part-owned and founded. He entered Parliament in 2013.
This disclosure does not appear to have been made on the parliamentary Interests Register.
The financial press galloped to the rescue of Taylor and Joyce this week. While very good stories on Watergate were written by Peter FitzSimons and Neil Chenoweth in the Fairfax press – and although Anthony Klan at The Australian broke new ground on Twitter (the newspaper must have spiked his stories) – both the Murdoch press and the AFR ran conspiracy theories as well.
One story in The Australian attempted to argue that a report this journalist wrote for GetUp! 18 months ago – and disclosed – was evidence of a Labor Party, GetUp! plot against the Coalition government. Likewise a story by Aaron Patrick in the AFR claimed the whole thing was “fake news” concocted on Twitter by Ronni Salt, Jommy Tee – electric HiLux Owner, yours truly, journalist Margo Kingston along with Alex Turnbull and Simon Holmes-a-Court.
What these newspapers don’t seem to accept is the water buy-backs program is designed to help farmers and the environment, not line the pockets of investors in a tax haven. That this was an extravagant use of taxpayers’ money, quite possibly worse. And until we know the identity of those who benefitted from the $80 million payment, the story will remain unresolved, a mystery.
Neither did these stories lend any weight to the investigative work by Anne Davies and The Guardian and Maryanne Slattery and Rod Campbell at The Australia Institute who had earlier shone the torch on the irregular water rights transactions.
The challenge for Angus Taylor and Barnaby Joyce is that they can solve this mystery. As minister at the time, Barnaby Joyce was responsible for the deal. He surely has a responsibility to know, and to disclose, who got the $80 million. Simply to splash a record water rights payment the way of unidentified people via the Caribbean seems incredible.
Taylor does not have that responsibility. But he has knowledge. We can take it on face value that he, personally, did not have a financial interest in EAI, the Caymans company, but as he founded this company in 2007 and was a director until 2013 he surely must have some idea who is behind it.
He did step down as a director four years before the water transactions in 2017. Still, it would be highly unusual for somebody to set up a company in the Caymans, or anywhere for that matter, and not ensure that any associates or related parties had any financial interest. There would be no point.
It seems that he is addressing this question by saying he did not do the “structuring” of the company. That was somebody else. Indeed, in a strange story in the AFR yesterday, again penned by Aaron Patrick claiming a plot by anti-Coalition activists, the law firm Ashurst was identified as being behind the structuring.
“We are further instructed that he (Angus Taylor) has not received any benefit of any kind for the sale of any water or land owned by EAI or any associated company and we are not aware of any matter which would cause us to doubt the accuracy of these instructions.”
“Mr Taylor, who has previously denied investing in the company, said he did not want to add anything to the Ashurst statement. Ashurst was responsible for setting up the corporate entities to own the farms while Mr Taylor found the farms, valued them and wrote a plan to make them profitable, according to a person involved in the business.”
This reporter has failed to find Ashurst mentioned anywhere in the statutory documents of EAA. In any case, it would appear to be a red herring because it is the directors of a company which are responsible by law for the activities of a company.
— The Project (@theprojecttv) April 29, 2019
Time now to parse the spectacular interview of Barnaby Joyce by ABC RN Drive presenter Patricia Karvelas where the former minister for water made a number of bizarre claims, the first of this was to say that, despite him having no hand in the deal, “we” bargained the price down by almost half.
BARNABY JOYCE: This water was purchased because it was. We started at $5000 bucks, we ended up $2,700. It was the best price we could get.
The evidence for this claim appears thin on the ground. In their report, That’s Not How You Haggle, Maryanne Slattery and Rod Campbell from The Australia Institute, note the Department actually haggled the price up, not down:
“The vendors originally insisted on $2,200 per megalitre. But after negotiation, the Government paid a higher price – $2,745 per megalitre. Worse, the water has no legal status outside the farm gate and shouldn’t be counted towards the water recovery target.”
Despite the water buy-backs program being a Federal Government responsibility, Joyce mentioned the Queensland Government ten times during the interview in an effort to assert it was their responsibility:
JOYCE: I didn’t want to buy it. It was recommended to me by the Queensland Labor Government.
KARVELAS: So let me ask the question. Who were the shareholders? Barnaby Joyce, let’s just, let’s just calm down and answer this question. Who were the shareholders of Eastern Australia Irrigation when it received the $80 million?
JOYCE: That is a question for the people who purchased it. It is water Patricia.
Karvelas put to Joyce questions around the identity of the Cayman Islands shareholders, in various forms, on 25 occasions. To no avail.
KARVELAS: I’ll ask again because you’re just not answering the question. Do you know who the people are who made the profits?
JOYCE: I know now Patricia, but at the time it is, it is, do you want to do, are you taking them to a confession or do you want the water?
This suggests the minister, at the time, did not know upon whom he was bestowing $80 million. In any case it was Labor’s fault.
JOYCE: At that time was the minister, I was following a Labor Party Greenie deal which is what they want.
KARVELAS: Okay. So did you try to find out where the money would go?
Barnaby Joyce it is the job of the Minister to ask questions so, who are the people who benefited here? Are they shareholders in Eastern Australian Irrigation?
JOYCE: The people who have benefitted…
KARVELAS: In the Caymans …
JOYCE: Are the Culgoa floodplain and Narran Lakes which were the environmental assets we were sending water to.
The Government’s been buying up water at record prices, leading to millions of dollars flowing to offshore tax havens. But now, two of our top pollies are facing questions over just who is making a fortune off our water.@HamishNews and @MichaelWestBiz bring you this report pic.twitter.com/5UTH1NHJzR
— The Project (@theprojecttv) April 18, 2019
KARVELAS: So can you identify who the people who made the profits are?
JOYCE: Well that is not relevant because …
KARVELAS: It is relevant it’s actually key to the story.
JOYCE: You don’t, you don’t ask the question.
Here the former minister appears to be saying that, although he and his department deploying $80 million of taxpayers’ money to buy water rights, it didn’t matter who they were buying them from, who the seller was.
KARVELAS: Why not. Why didn’t you ask that question?
JOYCE: Because you [are asking] whether they got water to sell. You’re not asking about what clothes they wear. You’re not asking about who they’re married to. You’re asking whether they have water to sell and that is the question that matters.
KARVELAS: Okay, so you didn’t ask and you didn’t know where the profit would go?
By this point, Barnaby had only mentioned the Labor Party 14 times. Then he ramped it up, claiming it was their recommendation, also saying, correctly, “they bought the water first”.
What he failed to say was that the Queensland Government had recommended his department buy the water but their recommendation was to buy the properties as well as the water.
KARVELAS: So is that what you’re arguing that because you in your argument it happened before it should happen again. Is that your justification?
JOYCE: No I’m what I’m saying, Patricia is the Labor Party did it first.
KARVELAS: So you think it’s irrelevant if the money is going to beneficiaries in the Cayman Islands
JOYCE: It is just as relevant for Penny Wong. It is just as relevant for Tony Burke. It is just as relevant to the Australian Labor Party as it is to me.
Indeed, the Labor Party when in government had purchased water from EAA, as had the Coalition later. That money, via interest payments on loans from EAI, presumably flowed back to the Cayman Islands. So Barnaby does have a point. What he fails to mention is that – despite four unsolicited approaches from EAA to the Labor government to sell water rights via a no-tender deal, which were knocked back – the Department agreed to buy water in an open tender and a deal was done.
KARVELAS: If you’re just tuning in, Barnaby Joyce who was the Agriculture and the Water Minister who signed off on these deals is my guest. The valuation of these entitlements doubled a year before the sale. Why did the value suddenly increase?
JOYCE: I’ve got no idea, Patricia.
KARVELAS: Did you try to find out?
JOYCE: Oh Patricia, we have got people who paid a hell of a lot of money to go out and determine that and then they refer that back to the Minister. I do not go out and purchase the water. I do not even determine the vendor. I do not determine the price.
KARVELAS: So if it suddenly doubled a year before the same way as Minister say why?
… Okay so you did, so we’ve got the first yes here. So you did ask questions …
JOYCE: I always ask questions as whether…
KARVELAS: Tell me what those questions were and what were the answers?
JOYCE: Well this was a fair price and the best negotiated.
Not only did his department appear to haggle the price higher in favour of the vendor, paying more than they had originally asked, but there are serious questions over the modelling of the water valuations.
The so-called Overflow Land water licences (OFL) were modelled on data from 1922 to 1995. It is extremely odd that the most relevant years, the subsequent 20 years, were not modelled to come up with this valuation.
KARVELAS: And what was the justification, what did they say was the reason behind it doubling?
JOYCE: Well Patricia I imagine it would be because there’s not other people want to sell it to us cheaper.
It would have been far easier and more appropriate to test the market by having an open tender process.
KARVELAS: Okay do you know who they are now?
JOYCE: Maybe state governments are just not up to the job.
Again, it is not the responsibility of the state government to conduct these water transactions. Then the interview came back to beneficiaries.
KARVELAS: Do you know who they are now?
JOYCE: Maybe the Queensland Labor Government who recommended this to us. The Queensland Labor Government – Labor Labor Labor Labor Labor – Government who recommended this to it. Are you saying they are incompetent….
KARVELAS: Do you know who the beneficiaries are now? Are they any associates … I am asking you a question?
KARVELAS: Do you know who the beneficiaries are now? Are there any associates? Who are they? Tell me who they are?
Finally, after Karvelas had put various forms of the $80 million question to Joyce, she hit a mini-jackpot
JOYCE: I’ve heard it’s a Trust Account in the Cayman Islands there. That’s what the Queensland Labor Government should have told me, shouldn’t they?
A trust account could mean one of two things. Barnaby Joyce could have been referring to the trust account of a lawyer acting on behalf of EAI or to EAI itself is trustee for a trust.
KARVELAS: Are any of these beneficiaries associates or anybody in the Government?
JOYCE: The Queensland Labor Government – Labor Labor Labor Government – recommends this to us the same Federal Labor Government that bought water off this crowd before the Queensland Labor Government – Labor Labor Labor …
Word count on Labor now up to 44.
KARVELAS: Do you know who these beneficiaries are and are they any associates of anybody in the Government?
KARVELAS: Can you answer the question?
KARVELAS: Documents obtained by The Guardian under Freedom of Information show that Tony Reid who’ Angus Taylor’s business associate and a former director of the EAA was involved in assessing the volume of water the company was selling.
JOYCE: So I’m going to help you out because you’re ducking and weaving and try and help you out.
KARVELAS: No I’m actually being quite clear. Did you know your office dealt with him directly?
KARVELAS: Did the fact that Angus Taylor was listed originally as establishing this company pique your interest?
JOYCE: I believe firmly that there is absolutely nothing untoward about the actions of Mr Taylor. But if you want to go further with that the best person to interview is Mr Taylor not me. Because I am Mr Joyce.
KARVELAS: I know who you are. Have you or anyone connected to you ever received or been entitled to any financial benefits? Just answer the question.
The interview then went to the issue of water valuations.
KARVELAS: Experts have argued that these entitlements have little value because it’s water from overland flooding. One minute let me finish my question. You keep talking over me. Overland flooding that may only happen once in a decade. What was the benefit of buying entitlements that weren’t going to be available most of the time?
JOYCE: I don’t agree with that. I mean if if you if water is if water is sent back the environment is sent back to the environment where it comes from is really not relevant.
This claim is at odds with expert evidence that river water is more valuable than OFL water.
KARVELAS: Because I do need to finish and complete sentences. Many documents are redacted. Why are there so many redactions and do you support them being released?
JOYCE: Patricia how the hell would I know the answer to that I’m a back bencher now, how would I know the answer to that question now?
KARVELAS: What is your view do you think I should be released for in the interests of transparency?
JOYCE: The Labor Party were the first people to buy water off this vendor the Labor Party, the Labor Labor Labor Party were the first people to buy this off it’s been recommended by the Queensland Labor Party.
JOYCE: … delivered water into the river. They should ask the questions of why they bought $300 million, we’re talked about 80 here, $300 million worth of water off Twynam Pastoral Company – $300 million worth of water off one person. Johnny Kahlbetzer.
The Kahlbetzer transaction struck under Labor was the biggest deal by dollar value but the EAA deal was the most expensive per litre of water. Moreover, there are serious questions as to whether the water from EAA’s farms in southern Queensland, Clyde and Kia Ora, actually flowed to the environment. Some believe it did not exist at all.
Karvelas then pressed Joyce as to whether the documents relating to the EAA deal should be released publicly. They are heavily redacted. Joyce stonewalled.
KARVELAS: So just one more time should the redacted documents be released?
JOYCE: Well I don’t, Patricia you’re saying it’s like saying do you believe that Mrs Smith should vacuum her living room …
The epic interview ended with more questions, unanswered questions, about the beneficiaries in the Cayman Islands. There is no suggestion here that Angus Taylor or Barnaby Joyce were EAA beneficiaries. But they must know, or be able to find out, who or what entities did get the money.
This is taxpayers’ money. The Government is stewards of our money. It does not belong to them and they have a responsibility to be transparent.
As long as the $80 million question remains unanswered by our elected representatives, #Watergate will not go away.
As for the claim by Prime Minister Scott Morrison in defence of the deal – “These arrangements were conducted at complete arm’s length from any ministers”, this sits at odds with emails obtained under FOI which show Barnaby Joyce, while minister, instructed staff to keep him in the loop regarding the EAA deal.
The calculation in this story of 52 mentions of the word “Labor” is short. It was made from a transcript rather than by listening, again, to the interview. Correspondents have touched base and said the number is actually 66. michaelwest.com.au apologises to readers for this error.
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Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.