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BUILDING INDUSTRY 2000 PLUS LTD
CHAPTER 3.4
INTRODUCTION
1. Building Industry 2000 Plus Ltd (BI 2000) was incorporated in 2000 and has been
controlled by senior officers of the Victorian Branch of the Construction and General
Division of the CFMEU.
2. The company holds a number of annual functions, the success of which largely depends
upon employers in the construction industry paying substantial sums of money to attend
those functions. In addition, the company makes money through the sale of soft drinks,
snack foods and merchandise to CFMEU members and other workers. The evidence
suggests that neither the employers who pay to attend functions, nor the workers who
buy soft drinks and other products, appreciate that they are contributing towards the
financial success of BI 2000.
3. Initially established to raise funds for union electioneering, it does not appear that the
company’s funds have ever been applied for this purpose. The financial records of the
company are so poor that it is difficult to gain a clear picture as to how the company’s
money has been spent over time. In broad terms, the company has made a profit from
year to year and has accumulated vast cash resources (now in excess of $1 million).
Relative to the volume of cash accumulated over time, the use of its net profits has been
very modest – on average less than $11,000 per year has been spent over the last 5 years
for various charitable purposes.
4. Ultimately, the concerns in relation to the operations of BI 2000 are these:
(a) the governance of the company and its finances has been abysmal. There are
no records of directors’ meetings, financial records have been retained in a
haphazard manner, and the company’s accounts were not properly prepared or
161
reviewed or audited for some years. Numerous provisions of the Corporations
Act 2001 (Cth) and the company’s constitution have been breached;
(b) officers of the CFMEU have, through their positions as directors of BI 2000,
taken advantage of opportunities available to the CFMEU, not for the
advantage of the CFMEU, but for the advantage of BI 2000. In doing so they
have acted (and continue to act) in breach of their fiduciary and statutory duties
owed to the CFMEU and are liable to the CFMEU;
(c) BI 2000 is the alter ego of the CFMEU officers who breached their fiduciary
duties in this way, and has been the direct recipient of the funds raised in
consequence of the breaches of those fiduciary duties. As a result, BI 2000
holds those funds on constructive trust and is liable to account for those funds
to the CFMEU;
(d) BI 2000 makes a substantial amount of its money at the expense of the
CFMEU’s members (in the form of soft drink, snack food and merchandising
sales) and there is no, or no sufficient, disclosure of this fact to members;
(e) moneys raised by BI 2000 are held by it outside of the financial and
management regulations to which the moneys would be subject were they held
by the CFMEU. Given the poor financial and management controls displayed
by BI 2000, the fact that money is earned by taking advantage of CFMEU
opportunities, and the lack of accountability of directors of BI 2000 to
members of the CFMEU, this is a troubling and undesirable state of affairs. A
CFMEU national leadership with the interests of members at heart would not
tolerate it.
B THE COMPANY’S INCORPORATION, STRUCTURE AND CONSTITUTION
5. BI 2000 is a corporation whose liability is limited by guarantee. According to the
register maintained by ASIC, the company falls within a subclass described as ‘unlisted
public company – non-profit company’.1
1 Oliver MFI-1,16/9/14, pp 1-6A.
162
6. The company was incorporated on 24 July 2000 by Bill Oliver, Martin Kingham and
Albert Littler.
7. These men were senior officers of the CFMEU at that time. Mr Oliver held the position
of Victorian Branch Secretary for many years, retiring from that post in 2012.2 Mr
Littler was National Assistant President for a period up to his retirement in 2009,3 and
Mr Kingham was a former Victorian Branch Secretary and then Divisional Assistant
Secretary until 2010.4 Each was a director of BI 2000 upon its incorporation.
8. Mr Kingham and Mr Littler each ceased to hold the position of director of the company
on 18 January 2011. By that point, each had retired from the offices he held with the
CFMEU. They were replaced on the BI 2000 board by Mr John Setka (Secretary of the
Victorian Branch of the CFMEU and the member of the National Executive Committee
of the CFMEU), Ralph Edwards (President of the Victorian Branch) and Tom Watson
(former officer of the Victorian Branch).5 Mr Oliver continued to be a director of BI
2000 up to at least January 2013.
9. The registered office of the company is 500 Swanston Street, Melbourne. This is the
address of the Victorian Divisional Branch of the CFMEU.
10. Clauses 4 and 5 of BI 2000’s constitution make it clear that the company is a public
company limited by guarantee, that it must have at least one member, and the company
‘must not be carried on for the purpose of profit or gain of any Member.’6
11. An organisational search of the ASIC register7 does not reveal the identity of the
Members of the company. A copy of the application for registration of the company8
discloses that the Member of the company at the time of incorporation were Messrs
Oliver, Markham and Littler. The documents subsequently filed with ASIC in respect
of the company do not reveal any change in that membership.
2 Bill Oliver, MFI -1,Tab
3 Oliver MFI-1, 16/9/14, pp 275-276.
4 Bill Oliver, MFI -1,Tab
5 Oliver MFI-1, 16/9/14, p 2.
6 Oliver MFI-1, 16/9/14, p 16.
7 Oliver MFI-1, 16/9/14, pp 1-6A.
8 Oliver MFI-1, 16/9/14, pp 7-9.
163
12. The objects of the company are set forth in clause 7 of the constitution.9 They include:
(a) assisting any member of the CFMEU or other trade union to campaign for and
be elected to a position in any trade union, local government, State or Federal
election;
(b) financially supporting any associations, charities, clubs, political parties or
other organisation associated with the trade union movement;
(c) promoting and supporting the aims, objects and activities of any trade union or
similar organisation;
(d) promoting and supporting the aims, objects and activities of the Australian
Labor Party, Australian Democrats or any other political party or organisation,
or any group endorsed by or associated with the Australian Labor Party which
is supportive of the labour or trade union movement or their philosophies;
(e) acting in conjunction with any trade union or other organisation for the
purposes of carrying out the objects of the company;
(f) advancing and lending money to any trade union, political party, group,
association or other organisation as may be determined by the directors of the
company;
(g) promoting the welfare of trade union members;
(h) assisting any person in need who is or has been a member of any trade union,
the widows, children and immediate relatives dependent on them;
(i) issuing appeals and collecting money and goods and organising concerts,
functions, raffles, exhibitions, games of chance, sport events, entertainments or
fund raising activities of any kind for the purpose of raising funds for carrying
out the objects of the company;
9 Oliver MFI-1, 16/9/14, p 17.
164
(j) soliciting and receiving voluntary contributions and using those contributions
and any income from them for the purpose of carrying out the objects of the
company; and
(k) pursuing any of the objects of the company set out in clause 7 and exercising
any of the powers of the company set out in clause 8 in undertaking any action
in furtherance of those objects powers.
13. Mr Oliver accepted that the company was established for the purpose of raising money
to fund the election campaigns of CFMEU Victorian officials, including himself and the
other members of the company.10 This is the first object of the company noted above.
14. However, as already noted, the company could not be operated for the gain or benefit of
Mr Oliver and the other members. In this regard, the establishment and operation of BI
2000 was misconceived from the outset. Mr Oliver said that he had never even turned
his mind to this issue11 – that is, as to whether the primary purpose of the company was
something permitted by the company’s own constitution. This evidences a troubling
lack of regard for proper corporate governance from the very outset.
15. The company’s powers are described in clause 8 of the Constitution. They are extensive,
and generally of a kind one would expect to find in the constitution of most
corporations. However there is a limitation on those powers, in that the company:
shall not support with its funds any activity or endeavour to impose on or procure to be observed
by its members or any regulations or restrictions which, if an object of the Company, would make
it a trade union in the meaning of the Workplace Relations Act 1996.
16. The company’s constitution also contains some familiar governance provisions. Among
other things, it provides that:
(a) the business of the company is to be managed by the directors, who may
exercise all of the powers of the company except any powers that the law or
the constitution requires the company to exercise in general meeting (cl 23,
misnumbered cl 1);
10
Bill Oliver, 16/9/2014, T:9-10. 11
Bill Oliver, 16/9/2014, T:11.46.
165
(b) subject to various stated exceptions, a director who has a material personal
interest in a matter being considered at a meeting of directors must not vote on
the matter or be present while the matter is being considered (cl 28);
(c) the directors may pass a resolution without a meeting if all directors entitled to
vote have signed a document containing a statement that they are in favour of
the resolution (cl 30);
(d) a directors’ meeting may be called by a director giving reasonable notice to the
other directors (cl 31);
(e) the company must keep minute books in which it records, within one month,
proceedings and resolutions of directors’ meetings, and resolutions passed by
directors without a meeting (cl 75);
(f) the company must ensure that the minutes of the meeting are signed by the
chair of the meeting or the chair of the next meeting a reasonable time after the
meeting, and must ensure that the minutes of the passing of a resolution
without a meeting are signed by a director within a reasonable time after the
resolution is passed (cl 75).
C BASIC GOVERNANCE ISSUES
17. It is no exaggeration to say that the management of BI 2000 has been in a state of
disarray for some considerable time.
18. The Commissioner issued notices to produce12 to the company and its auditors requiring
it, and them, to produce, among other things:
(a) papers, minutes and agendas for any meeting of the directors of the company
and any resolutions of directors;
(b) the company’s accounting books; and
(c) statements of account in respect of the company’s bank accounts.
12
Oliver MFI-1, 16/9/14, pp 33-55.
166
19. While the company did produce some documents in response, it produced no minutes of
board meetings, and only a small number of disorganised bank account statements. The
lack of documentation, and the disorganised state of what was produced, was to provide
a telling first indication of the company’s lack of governance.
20. To begin with, it is not clear precisely who the directors have been, and over what time
period. In this regard, Mr Oliver is recorded in the ASIC register as one of the directors
of the company.13 At one point he gave evidence that he remains a director of the
company.14 However shortly after giving that evidence, he stated that he thought he had
resigned in early January 2013, but the paperwork was never lodged. He said he filled
out a resignation form but did not know what happened to it, other than that it had been
given to an accountant to lodge.15
21. The state of the directorships from time to time was not made clearer through any
directors’ minute book, of the kind the directors of the company were obliged to keep in
order to record the events at directors’ meetings.16 This is because the directors never
bothered to keep one,17 in contravention of perhaps the most rudimentary principle of
corporate governance. The directors’ negligence caused the company to breach s251A
of the Corporations Act 2001, which obliges the company to keep appropriate minutes
of meetings and resolutions.
22. Directors’ meetings were, it would seem, not the subject of any degree of formality. Mr
Oliver said that they would be held in the corridor, or over a cup of coffee, ‘in a lift’ or
‘in the pub’. No notes would be taken18. Mr Oliver seemed to think ‘mental notes’
would suffice.19
23. In terms of the company’s financial statements, correspondence from the company’s
auditor indicated that as at 8 April 2014 the directors of the company had failed to
ensure that the financial statements of the company had been completed for the financial
years ended 30 June 2011, 2012 or 2013, in that they had not prepared a statement of
cash flows for the company for any of those periods. This contravened the requirements
13
Oliver MFI-1, 16/9/14, p 2. 14
Bill Oliver, 16/9/2014, T:6.11. 15
Bill Oliver, 16/9/2014, T:6.16-30. 16
Oliver MFI-1, 16/9/14, p 30, cl 75. 17
Bill Oliver, 16/9/2014, T:12.23. 18
Bill Oliver, 16/9/2014, T:12-13. 19
Bill Oliver, 16/9/2014, T:13.41.
167
of AASB 101, and thus constituted a breach of s296 of the Corporations Act. The
consequential failure to produce financial statements was a breach by the company of
s285A of the Corporations Act.
24. BI 2000’s auditor also indicated that, in the absence of completed financial statement,
the audit/review engagements for those years were on hold.20 The failure to conduct a
review or audit of the financial statements each year constituted a breach by BI 2000 of
s285A of the Corporations Act.
25. The above breaches of the Corporations Act by BI 2000 were the product of the
negligence of its directors in the administration of the company’s affairs. Mr Oliver, the
man who had been a director of the company throughout at least two and a half of those
financial years (and many more before that), said he was not even sure who, on behalf of
the company, was responsible for providing instructions to the auditor, and that he
himself had never spoken with the auditor.21 No explanation for the lack of compliance
with corporate record keeping and auditing has been proffered.
26. Serial breaches of the Corporations Act by BI 2000 and the directors’ continual
derelictions of duty in the management of the company has been, by any measure,
alarming. It is an entirely unsatisfactory state of affairs for a company holding over $1
million in assets.
D HOW THE COMPANY RAISES MONEY
27. According to its recent financial reports,22 BI 2000 generates income from six principal
sources, and has had a long and successful history of doing so. Those sources are:
(a) the ‘Grand Final Breakfast’ event, an annual fundraising activity;
(b) the ‘golf day’, another annual fundraising activity;
(c) the ‘race day’, another annual fundraising activity;
(d) commissions from sales to CFMEU members of products from vending
machines;
20
Oliver MFI-1, 16/9/14, p 57-58. 21
Bill Oliver, 16/9/2014, T:19.27-34. 22
Oliver MFI-1, 16/9/14, pp 73-174.
168
(e) the sales of merchandise to the CFMEU; and
(f) interest earned on investments made with funds so raised.
28. The documents obtained by the Commission demonstrate that, for at least the last four
financial years, these various activities have together generated annual revenues of
between about $230,000 and $327,000 (with the volume of revenues increasing each
year).
D1 Grand Final breakfast
29. The Grand Final Breakfast event, as its name suggests, is a breakfast function held at a
public venue on the morning of the day of the AFL grand final in Melbourne. There are
typically over 600 attendees.
30. According to the profit and loss statement for the company for the year ended 30 June
2013,23 that event generated revenue of $90,873 in that year alone. Similar amounts
were raised in earlier years (eg. $101,109 in the financial year ended 30 June 2012;
$99,705 in the financial year ended 30 June 2011; and $70,871 in the preceding
financial year).24
31. Although the function is paid for and organised by BI 2000, there is no doubt that it is
presented under the banner of, and must be well understood to be hosted by, the
Victorian Branch of the Construction Division of the CFMEU. The name of the union
is used heavily for the purposes of promoting the event, and the persons within BI 2000
who present as the face of the company are, as earlier mentioned, the most senior figures
in the Victorian Branch.
32. In this regard:
(a) the Grand Final Breakfast is referred to on the CFMEU website.25 In a page
devoted to the retirement of Mr Littler from the National Executive in 2009, he
is described as having been a ‘legendary fund raiser’. The page also states that
‘the annual AFL Grand Final Breakfast, which has been going for 11 years and
23
Bill Oliver, MFI -1,Tab 10 24
Oliver MFI-1, 16/9/14, pp 82, 93, 103. 25
Oliver MFI-1, 16/9/14, p 275A.
169
draws 620 people, is just one of his achievements.’ There is no mention made
of the fact that the funds are raised not by the CFMEU, but instead by and for
BI 2000;
(b) the letters of invitation that are sent out each year begin by stating that BI 2000
‘together with the CFMEU are again organising this year’s Grand Final
Breakfast’;26
(c) the fliers and order form for tickets that are sent out each year state that the
events is being presented by BI 2000 ‘together with CFMEU’;27
(d) the tickets that are sold state that the function is presented by BI 2000 and
‘CFMEU Construction Division’;28
(e) the published programmes state that the event is from BI 2000 ‘together with
CFMEU’ and others, and record that the thank you address is given by
CFMEU officials (typically Bill Oliver);29
(f) according to the running sheet for one year, the thank you address was
followed by a recital of the anthem ‘Power in the Union’.30
33. The fact that the event is, in almost every respect, considered a CFMEU function is well
illustrated by fact that suppliers for the event frequently bill the CFMEU for services
provided (although BI 2000 receives and pays those bills).31
34. Mr Setka, the Secretary of the Victorian branch, sent out correspondence on CFMEU
letterhead and signed by him as ‘State Secretary CFMEU – C&G Division’ thanking
sponsors for agreeing to sponsor the event.32
35. There is no question that those who are invited to attend this event well know and
understand that it is being run, ultimately, by the senior executives of the Victorian
Branch. Not only is the CFMEU name prominent on all the promotional literature, but
26
Oliver MFI-1, 16/9/14, p 277. 27
Oliver MFI-1, 16/9/14, p 278. 28
Oliver MFI-1, 16/9/14, p 280. 29
Oliver MFI-1, 16/9/14, p 281. 30
Oliver MFI-1, 16/9/14, p 281. 31
Oliver MFI-1, 16/9/14, p 342. 32
Oliver MFI-1, 16/9/14, p 356.
170
those invited are either employers in the construction industry who have to deal with the
CFMEU on work sites, or representatives from other trade unions. All of the
individuals from the employers and other unions know who they are, in substance,
dealing with. It is the CFMEU and its officers.
36. In this regard, the employer invitees include major companies such as Baulderstone
Hornibrook and Brookfield Multiplex, along with a large number of smaller sub-
contractors.33 The list of attendees from other unions is also extensive. The Plumbers
Division of the CEPU, the Electrical Division of the CEPU, the ASU, the Maritime
Union, the AMWU and other unions all participate.
37. It is clear that the primary means by which BI 2000 is able to attract custom to this event
is by reason of the fact that its directors are senior officers of the Victorian Branch of the
CFMEU. That is what draws the attendance of those invited to the event.
38. The invitees to the event are told, repeatedly, that ‘the beneficiary’ of the event is the
Doxa Youth Foundation (Doxa), a charity that gives special attention to the needs of
disadvantaged young people.
39. This statement is misleading. The primary financial beneficiary of the event is BI 2000.
It retains all of the profits from ticket sales. All Doxa receives is the proceeds of a
raffle. So for example, the 2011 Grand Final Breakfast generated a profit of about
$30,000 for BI 2000,34 and it retained the whole of that sum. Separately, a raffle was
held during that Grand Final Breakfast and the amount raised ($4,700) was donated to
Doxa.
40. Mr Oliver did not tell any invitee or sponsor for the Grand Final Breakfast that the real
beneficiary of the event was BI 2000.35
D2 The golf day
41. The annual golf day also generates significant revenue, although on a smaller scale (eg.
$49,000 for the year ended 30 June 2013, $27,545 for the year ended 30 June 2012,
33
Oliver MFI-1, 16/9/14, pp 284-285. 34
Oliver, MFI-1, p 307. 35
Bill Oliver, 16/9/2014, T:40.42-41.3.
171
$30,091 for the year ended 30 June 2011 and $59,285 for the year ended 30 June
2010).36
42. The documentation for the golf day events tells a very similar story to the documents
produced in respect of the Grand Final Breakfast. No real attempt is made to disguise
the fact that this event is, in substance, being promoted by the senior officials of the
Victorian Branch of the CFMEU.
43. In this regard:
(a) judging from the documents produced in relation to the 2011 event, the
Secretary of the Victorian Branch of the CFMEU writes, on CFMEU letterhead
and in his capacity as State Secretary, to various people inviting them to
participate in the golf day and act as one of the sponsors.37 Each sponsor pays
$2,000 and receives, in return, signage rights at a particular hole on the course
for the day;
(b) the sponsors are typically employers in the construction industry, such as
Baulderstone, Brookfield Multiplex, Westfield Design and Construction, a
range of sub-contractors, and a number of other entities with close associations
with the CFMEU, such as Cbus and Slater & Gordon;38
(c) the registration forms for those wishing to attend and play golf on the day state
‘CFMEU together with Building Industry 2000 Plus Ltd presents’ the golf
day;39
(d) the programmes for the event identify that a CFMEU executive welcomes
attendees to the dinner that immediately follows the golf day, and the sponsors
are thanked by BI 2000 and CFMEU – Construction & General Division’40.
44. The records in relation to the golf day conducted in 2013 identify that the income
received from sponsors for the event totalled $75,450, and the expenses were
$23,539.52, resulting in a profit of $51,910.48.
36
Oliver MFI-1, 16/9/14, pp 82, 93, 103, 118. 37
Oliver MFI-1, 16/9/14, p 382. 38
Oliver MFI-1, 16/9/14, p 387. 39
Oliver MFI-1, 16/9/14, p 384. 40
Oliver MFI-1, 16/9/14, p385-386.
172
45. As with the Grand Final Breakfast, it is clear that the primary means by which BI 2000
is able to attract custom to this event is by reason of the fact that its directors are senior
officers of the Victorian Branch of the CFMEU.
D3 The race day
46. The financial reports tell a similar story in relation to the annual race day (eg. $41,136
for the year ended June 2013, $59,598 for the year ended June 2012, $63,410 for the
year ended 2011 and $49,229 in the year preceding that).41
47. The day appears to serve two purposes. First, it operates as a BI 2000 fund raiser, and
various unions and other parties act as financial sponsors, and in return have a race on
the day’s card named after them, and also have a catered lunch. Second, the race day is
advertised to the CFMEU membership, who receive free family admission for the day.
48. As with the Grand Final Breakfasts and the golf days, the race day is also promoted as a
CFMEU event.
49. The fact that there is a very substantial blurring of the line between the CFMEU and BI
2000 is well illustrated by the terms of the agreement with the Moonee Valley Racing
Club for the 2011 race day event.42 The agreement identifies the counterparty as
‘CFMEU Building Industry 2000’, and in the execution clause, Mr Oliver, both State
Secretary of the Victorian Branch of the union and director of BI 2000, signs for neither,
and instead signs for that non-existent entity. The schedule to the agreement identifies
the event as the ‘CFMEU Race Day’.
50. It is clear that BI 2000 owes its financial success to the fact that its directors are officers
of the CFMEU and are able to arrange functions and attract attendees by reason of their
positions as officers of the CFMEU.
D4 Vending machines
51. The documents gathered by the Commission establish that BI 2000 has contracts or
arrangements with a number of companies that supply drink and snack food vending
41
Oliver MFI-1, 16/9/14, pp 82, 93, 103, 118. 42
Oliver MFI-1, 16/9/14, p 441.
173
machines to building sites43. The workers on the sites, being CFMEU members,
purchase products from those machines.
52. The contracts or arrangements that BI 2000 has with the vending machine companies
confer upon the vending machine companies the exclusive right to install and operate
the machines on sites controlled by the CFMEU and sell products through the machines
for particular prices, in return for which they pay a commission to BI 2000 equal to a
percentage of the revenues from the products sold through the machines.44
53. The documentation in relation to the vending machines provides yet another illustration
of the blurry line that exists between BI 2000 and the CFMEU. One contract
contemplates BI 2000 entering into the contract as agent for the CFMEU. Another
identifies the customer as CFMEU, and Mr Oliver signed as secretary.
54. One of the principal vending machine companies with whom BI 2000 transacts business
is Coca-Cola Amatil (Aust) Pty Ltd. The commission paid by that company to BI 2000
was 20% of sales.45
55. Substantial revenues are raised this way. The draft profit and loss statement for the year
ended 30 June 2013,46 for example, records the receipt of revenues totalling $122,331.
Receipts for the previous year in respect of this activity totalled $65,177. Similar
revenues were generated in the years prior to that.47
56. Three points may be noted in relation to the arrangements between BI 2000 and the
vending machine companies.
57. First, BI 2000 does not incur any expense in order to earn the commission through the
vending machines.48 Every cent of commission represents profit.
58. Second, BI 2000 has no right, control or interest of any kind in any of the work sites on
which the vending machines are located. The CFMEU has the relationship with the
43
Bill Oliver, 16/9/2014, T:51.37-41. 44
Oliver MFI-1, 16/9/14, p 512. 45
Oliver MFI-1, 16/9/14, p 512. 46
Oliver MFI-1, 16/9/14, p 82. 47
Oliver MFI-1, 16/9/14, pp 82, 93, 103. 48
Bill Oliver, 16/9/2014,T:53.5.
174
sites,49 in that its members are working in those locations. The opportunity to place
vending machines on these sites exists solely because of the relationship, such as it is,
between the CFMEU and the sites.
59. Indeed it is important to note that, in an agreement executed by Coca-Cola and BI 2000
in relation to the vending machines on 22 April 2008, BI 2000 was expressly referred to
as the agent of the CFMEU.50 A subsequent agreement dated 1 September 2011 is stated
to be between Coca-Cola and the CFMEU directly, and is signed by Mr Oliver as
secretary of the union51. Not surprisingly then, the remittance advices from Coca-Cola
and others are often addressed to the CFMEU, not BI 2000.52
60. The third point to observe is that, in circumstances where a substantial proportion of the
price paid by workers to purchase food and drink from the machines goes to BI 2000 by
way of commission (20%), it follows that if BI 2000 was to waive that commission,
workers would be able to purchase that food and drink for a substantially lower price
than would be the case if BI 2000 did not insist upon the payment of commission.
Alternatively BI 2000 could have donated any commission earned back to the CFMEU
for the benefit of its members.
61. There is no evidence to suggest that the workers on these sites who purchase food or
drink, and in particular CFMEU members, have any idea that, at the end of the day, a
substantial portion of the price they pay for the products they consume goes into the
coffers of a company controlled by union officers.
D5 Merchandise
62. A new source of income appears to have emerged for BI 2000. Documents produced by
the company to the Commission demonstrate that, since about August 2013, BI 2000
has been purchasing merchandise from various clothing and accessory suppliers and on-
selling this merchandise to the CFMEU. The CFMEU sells the stock and then remits
the revenue, minus a 10% commission/handling fee, to BI 2000. BI 2000 for its part
issues a tax invoice to the CFMEU for the amount of the remittance.53 It would appear
49
Bill Oliver, 16/9/2014,T:52.1-8. 50
Oliver MFI-1, 16/9/14, p 512. 51
Oliver MFI-1, 16/9/14, p 516. 52
Oliver MFI-1, 16/9/14, p 536. 53
Oliver MFI-1 Volume 3, 16/9/14, pp 77-89; Ralph Edwards, 16/9/2014, T:63-64.
175
that prior to August 2013, this stock was sold by the CFMEU to members directly and
all profit made would presumably flow to members.54
63. In some cases the merchandise is sold for a massive mark-up – 100% or more. In other
cases the mark up is more modest. The net overall effect is that both BI 2000 and the
CFMEU are making substantial profits at the expense of members and workers through
the sale of CFMEU merchandise. Most members would have little or no idea that the
funds being raised through the sales of this merchandise do not get paid to and
monitored by the CFMEU for the benefit of members, but are instead placed into the
hands of a separate company controlled by CFMEU officers, being a company with
whom the members have no relationship and whose objects are different.
D6 Interest
64. As a consequence of its various fundraising and other activities, the company has
generated substantial financial assets – in excess of $1 million. According to the draft
financial statements for the year ended 30 June 2013,55 the company held almost
$500,000 in a range of bank accounts, together with a term deposit investment worth
$542,418. The picture painted in the financial statements for the preceding years is
substantially the same.
65. Given the existence of these assets within the company, interest is a not insignificant
form of revenue. It contributes between about $20,000 and $30,000 each year.
E USE OF CFMEU STAFF TO ORGANISE BI 2000 AFFAIRS
66. It is clear that the directors of BI 2000 have, over the years, made extensive use of the
resources of the CFMEU in order to manage the businesses of BI 2000.
67. Maree Picton, Nicki Makris and other staff in the CFMEU office were given
responsibility for distributing flyers and other promotional material for the various BI
2000 fund raising events.56 They were responsible for collecting payments from
54
Oliver MFI-1 Volume 3, 16/9/14, p 10. 55
Oliver MFI-1, 16/9/14, pp 105-120. 56
Bill Oliver, 16/9/2014,T:28.23.
176
attendees and banking the proceeds into BI 2000’s bank account, and organising various
events, and liaising with vending machine operators and merchandise suppliers.57
68. Ms Picton retired from the CFMEU in about 2010, and has been retained since then by
BI 2000 to assist in organising its functions, carrying out work of the same kind that she
previously did for BI 2000 whilst employed by the CFMEU.58
69. The records in relation to the 2011 calendar year produced to the Commission indicate
that Ms Picton spent over 100 hours providing services of this kind. It is clear from this,
and the fact that she was performing services in 2011 of the same kind as she had
previously performed while still employed at the CFMEU, that she devoted a not
insubstantial portion of time to BI 2000 affairs as a CFMEU employee.
F UNCERTAINTY AS TO REVENUE FIGURES – AUDIT QUALIFICATIONS
70. In answer to a notice to produce issued by the Commissioner to the company’s auditor
since 2006 (Hayes Knight), the auditor produced correspondence addressed to the
Commissioner59 which indicated that:
(a) he had issued qualified audit reports to the company for each of the financial
years 2005-6, 2006-7, 2007-8 and 2008-9, the qualification arising due to the
fact that it was ‘impractical to establish adequate controls on cash collection’.
The audit report to the company in respect of the 2008-2009 financial year60 to
take an example, contained the following statement:
Cash receipt is a significant source of revenue for [the company]. [The company] has
determined that it is impractical to establish control over the collection of cash prior to entry
into its financial records. Accordingly, as the evidence available to us regarding revenue from
this source was limited, our audit procedures with respect to cash receipts had to be restricted
to the amounts recorded in the financial records. We are therefore unable to express an
opinion whether cash received by [the company] is complete.
(b) no audit had been conducted, and none was required, for the 2009-2010
financial year;
57
Bill Oliver, 16/9/2014,T:29.44, 43, 47, 49-51, 54. 58
Bill Oliver, 16/9/2014,T:63.6. 59
Oliver MFI-1, 16/9/14, pp 56-58. 60
Oliver MFI-1, 16/9/14, pp 71-72.
177
(c) his audit engagement for each of the following years (which was required) was
‘on hold due to financial report per Corporations Act 2001 is required to
disclose Statement of Cash Flows. Current status is awaiting re-signed copy of
financial report with Statement of Cash Flow’. He added that in respect of
each of those years ‘Review Report may be qualified due to there being no
practical procedures to establish adequate controls on cash collection’.
71. It is clear from these statements that there are questions as to the accuracy of the revenue
(and thus profit) figures disclosed in the financial reports and other records of the
company. These statements recognise the possibility that revenues (and profits) were
higher than has been recorded, and that cash received in respect of company events has
not found its way into the coffers of the company.
72. The evidence available to the Commission demonstrates that this is probably the case.
73. Take, for example, the Grand Final Breakfast held on 29 September 2012 at which:
(a) there were 55 tables, each sitting 10;
(b) 6 of those tables were occupied by sponsors, who in return for paying
particular sums of money, received not only a right to a table, but also a right
to be promoted as a sponsor of the event. Those sponsors paid a total of
$48,000;
(c) a table of 10 for ‘corporate’ attendees cost $2,200. There were 20 of these
tables, and as such $44,000 raised through sales of corporate tables;
(d) a table of 10 for attendees from various unions cost $1,200. There were 22 of
these tables, and as such $26,400 was raised through sales of union tables;
(e) $1,140 was raised through the sales of individual seats at tables;
(f) the ‘head table’ was occupied by CFMEU Victorian Branch officials of various
ranks along with their partners, including Bill Oliver, John Setka, Ralph
Edwards. David Noonan, National Secretary, also attended. None of these
individuals paid;
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(g) everyone else who buys a ticket to events such as this pays the purchase
price;61
(h) as a result, the total revenue for the event was $119,540.
74. This does not correspond with the revenue figure set out in BI 2000’s financial
statements. According to its profit and loss statement for the year ended 30 June 2013
(being the financial year in which the 2012 grand final event occurred), total revenues
for the event were $90,873.62 This is a discrepancy of in excess of 30%.
75. This is a graphic illustration of the fact that, by reason of the lack of controls over the
recording and banking of receipts, there are not insubstantial volumes of revenue
generated from the company’s activities which are entirely unaccounted for.
G HOW THE COMPANY SPENDS ITS MONEY
G1 The reported position
76. The company reports a net operating profit each financial year.
77. For the last several years, the reported net profit position has been as follows63:
Year-ended 30 June 2013 $37,240
Year-ended 30 June 2012 $105,940
Year-ended 30 June 2011 $112,488
Year-ended 30 June 2010 $50,033
78. There are a relatively small number of significant expenses recorded in the financial
statements of the company which represent, in large measure, the difference between the
company’s revenue and net profit position.
79. The two most substantial categories of expense are those described as ‘Marketing &
Promotional Expenses’ and ‘Donations’.
61
Bill Oliver, 16/9/2014,T:31.28. 62
Oliver MFI-1, 16/9/14, p 118. 63
Oliver MFI-1, 16/9/14, pp 128, 144, 158.
179
80. ‘Marketing & Promotional Expenses’ are in excess of $100,000 each year ($172,895 in
the draft 2012-2013 financial statement).64 These expenses appear to relate to the
hosting of the various fund raising events earlier referred to.
G2 Motor vehicle
81. On 31 May 2013 the company acquired a 2009 Holden ute from a Mr Rhys Ferguson
for $40,500.65
82. Subsequent to purchase of the vehicle, BI 2000 purchased the personalised numberplate
‘CFMEU 6’, and also had certain work performed on the car, including the installation
of signage, graphics and the supply and fit of LED lighting.66 The numberplate and
works together cost nearly $4,500.
83. Apparently this ute is now used for the purpose of selling the merchandise referred to
above.
G3 Donations
84. During the public hearing into BI 2000 on 16 September 2014 evidence was led in
relation to a number of donations made by BI 2000.67 The CFMEU indicated it would
provide materials in relation to all donations made, and those materials were
subsequently provided.
85. The documents produced to the Commission by the CFMEU indicate that in the last
four years BI 2000 made the following charitable donations:68
Year-ended 30 June 2013 $21,206
Year-ended 30 June 2012 $1,950
Year-ended 30 June 2011 $Nil
Year-ended 30 June 2010 $29,000
64
Oliver MFI-1, 16/9/14, pp 82, 93, 103, 118. 65
Oliver MFI-1, 16/9/14, pp 551-556. 66
Oliver MFI-1, 16/9/14, pp 558-567. 67
Ralph Edwards, 16/9/2014,T:69.15-27. 68
Voluntary Production by Building Industry 2000 Plus Limited on 16 October 2014.
180
86. The sum total of all of these donations over the past four financial years represents an
expenditure of about 5% of the average net cash assets of the company throughout that
period (that is, about $52,000 out of a sum in excess of $1 million).
87. These figures do not necessarily correspond to BI 2000’s financial statements produced
to the commission. For example, the profit and loss statements for the year ended 30
June 201069 and 30 June 201170 include a line item for donations of $43,480 and
$25,000 respectively. The fact of this discrepancy is yet another example of the
unsatisfactory state of BI 2000’s financial record keeping and reporting.
H MEMBERS’ BENEFITS AND AWARENESS
88. There is no evidence to indicate that any member of the CFMEU is aware of the fact
that BI 2000 operates these profit making ventures such that there exists a sum in excess
of $1 million available to be spent by senior officers of the Victorian Branch in
accordance with the terms of the company’s constitution.
I ASSESSMENT OF THE CONDUCT OF OFFICIALS
89. It remains to consider whether, in light of the facts described above, the duties of union
officers earlier identified (see section of submissions setting out legal principles re
officers’ duties) and any other relevant laws, the union officers who established and
directed BI 2000 have engaged in wrongdoing, and if so, the extent to which the existing
laws provide members with adequate protection and means of redress.
90. That question is answered in the affirmative.
I1 Breaches of fiduciary duty
91. BI 2000 is a fund raising organisation.
92. The objects of the CFMEU also plainly extend to and permit the raising of funds by it.
For example, under the rules of this registered organisation,71 its objects include:
(a) establishing a fund for the assistance and support of trade unionists (cl 4.4);
69
Oliver MFI-1, 16/9/14, p 82. 70
Oliver MFI-1, 16/9/14, p 93. 71
Oliver MFI-1, 16/9/14, pp 175-274.
181
(b) to establish a funeral and other benefits funds (cl 4.5);
(c) to raise money for the purpose of carrying on the objects of the union (cl 4.13).
93. The objects of the CFMEU in respect of which it may raise money include, amongst
other things, to improve, protect and foster the best interests of the union and its
members (cl 4.1), and to render legal and other assistance to members and the
advancement of members intellectually, morally and socially (cl 4.14).
94. Each of the directors of BI 2000 are (or in the case of Mr Oliver, were) elected by the
members of the CFMEU to hold office within the Victorian Branch of the union and to
exercise their powers and perform their duties for the union.
95. It was by virtue of their status as CFMEU officers, and the standing, power and
influence those positions gave them in the construction community, that they had the
opportunity to attract custom to the profitable BI 2000 fund raising events referred to
above.
96. That, of itself, is offensive. But it does not end there. Not only did they have an
opportunity to attract funds by virtue of their position, but they went very much further,
and actually used (by virtue of their position as CFMEU officers) the name and logo of
the CFMEU in order to promote the events in question, as well as CFMEU staff to assist
in the organisation of the events and the collection and banking of money. Yet the
money raised went not to the CFMEU, but to BI 2000.
97. Further, it was their position within the CFMEU, and the CFMEU’s own position in
relation to the presence of members on particular work sites, that gave these same
CFMEU officers the ability to negotiate the deals on behalf of BI 2000 (not the
CFMEU) with the vending machine operators described above. Again, all the money
was earned by BI 2000, not the CFMEU.
98. In these circumstances, each relevant officer of the Victorian Branch of the CFMEU –
that is, Mr Setka, Mr Edwards, Mr Oliver, Mr Kingham and Mr Littler – has used their
position as an officer of the Victorian Branch of the CFMEU to gain an advantage for
BI 2000 (and themselves as directors of that company able to decide how the money
earned by BI 2000 is to be spent) to the detriment of the CFMEU.
182
99. By accepting and continuing to hold positions as directors of BI 2000 in circumstances
where they were officers of the CFMEU, they were each in a position of conflict. The
duties they owed to BI 2000 conflicted with their duties to the CFMEU, and their
interest in sending the money in the direction of BI 2000 (where it would be less
regulated and more freely dealt with by them) was in conflict with the interests of the
CFMEU in receiving and closely regulating the same money in accordance with the
union’s rules.
100. All of the monies raised by BI 2000 could have been raised by the CFMEU for the
benefit of its members. Yet they were not. Instead the opportunity was directed to BI
2000 and the funds were deposited into the bank account of BI 2000.
101. All of the monies raised by BI 2000 from vending machine commissions could have
been earned by CFMEU directly. Or alternatively, the CFMEU could have dealt with
the vending machine operators on terms which enabled members working on site to save
money when purchasing food and drink from the machines. Neither opportunity was
taken for the CFMEU and its membership. Instead the opportunity was directed to BI
2000, who made money at the expense of the CFMEU and its members.
102. Having regard to the high degree of the trust and confidence vested in Mr Setka and the
other officers of CFMEU, the use of their position and influence for the benefit of an
entity other than the CFMEU, and their behaviour in taking fund raising and other
opportunities available to the CFMEU and directing it to BI 2000 instead, constituted
and continues to constitute a serious breach by them of the fiduciary duties owed to the
CFMEU.
103. BI 2000 is the alter ego of the CFMEU officers who breached their fiduciary duties in
this way, and has been the direct recipient of the funds raised in consequence of the
breaches of those fiduciary duties. As a result, on application of the legal principles
described in Chapter 2.1 of these submissions, BI 2000 holds those funds on
constructive trust and is liable to account for those funds to the CFMEU.
104. It is no answer on the part of any of the directors to say that some of the objects of BI
2000 are similar to those of the CFMEU, or that the CFMEU may ultimately derive
some indirect or ultimate benefit from some part of the operations of BI 2000. Nor is it
any answer to say that some of the money raised was spent for noble purposes, as Mr
183
Ralph Edwards, a CFMEU official described.72 Nor would it be an answer to say that
BI 2000 exists in some small part for a noble purpose which cannot be achieved by the
CFMEU (even if that were theoretically the case).
105. This is because, the plain fact of the matter is that it is in the interests of the CFMEU
and its members to receive, directly, the whole of the profits derived from opportunities
of the kind presently being exploited by the union’s officers through BI 2000. It is in
the CFMEU’s interests, and those of its members, to have such finances closely
managed, regulated and audited within the union’s structure. It is not in CFMEU’s
interests for some other, plainly more loosely governed enterprise, to be able to receive
and deal with the money. The members have elected the officers of the union to achieve
these objectives, not others.
106. Ultimately the matters traversed above can be distilled into the following key
propositions:
(a) there is no good reason for the existence of BI 2000 if its objects are entirely
aligned with those of the CFMEU itself. It is not in the CFMEU’s interests for
it to exist and operate;
(b) if the objects of BI 2000 are different from those of the CFMEU, the officers of
the CFMEU who control it cannot, consistently with their fiduciary duties
owed to the union, use that company to pursue the revenue raising
opportunities described above. They are all opportunities available to the
CFMEU, and its officers are bound to ensure those opportunities are taken by
the union, not some other entity; and
(c) it is not open to the CFMEU or BI 2000 to contend that these approaches are
hyper-pedantic. The members of the CFMEU and those who set up BI 2000
have elected to create these distinct corporate structures. They cannot place
themselves above or outside the bodies of law which regulate distinct corporate
structures. If they see advantages in the courses they have pursued, they must
put up with the accompanying disadvantages.
72
Ralph Edwards, 16/9/14, T:69.20-70.34.
184
I2 Breaches of statutory duties
107. The union officers’ conduct in deciding to host the events as BI 2000 events rather than
CFMEU events, and to use the CFMEU relationship with work sites for the benefit of
BI 2000 rather than for the CFMEU, was all conduct ‘in relation to the financial
management’ of the CFMEU within the meaning of that expression in s 283 of the Fair
Work (Registered Organisations) Act.
108. In this regard, each officer had the power and duty to ensure that the opportunity was
taken by the CFMEU. The opportunities were available to the union. They were
financial opportunity. And they were able to be managed by the officers of the union
for the benefit of the union. The conduct of the individuals with respect to these
opportunities was, therefore, conduct in relation to the financial management of the
union.
109. For the same reasons as given above in relation to the breach of fiduciary duty, Mr Setka
and others improperly used their positions as union officers to gain an advantage for BI
2000 and themselves to the detriment of the CFMEU and its membership. In so doing
they contravened s 287 of the Fair Work (Registered Organisations) Act.
110. In addition, the success of the BI 2000 events depended upon Mr Setka and others using
information that they had obtained because they were officers and employees of
Victorian Branch (in terms of the identity of persons likely to be willing to sponsor or
participate in the fund raising events, and in terms of information as to the location of
particular CFMEU worksites for vending machines) in order to gain an advantage for BI
2000 and themselves to the detriment of the CFMEU and its members in contravention
of s 288 of the Fair Work (Registered Organisations) Act.
111. As earlier observed, the question of whether an officer has acted ‘improperly’ is to be
tested against the standard of conduct which a reasonable person, who had knowledge of
the duties, powers and authority of the officer and the circumstances of the case, would
expect of a person in the position of the officer.
112. Applying that test here, there is no doubt that a reasonable person, with knowledge of
the highly dependent nature of the relationship between a union and its officials, and the
vulnerability of the union and its membership to abuse of that relationship by officials,
185
would regard the taking of the commercial opportunities described above otherwise than
for the benefit of the CFMEU as improper. Any reasonable person would regard the
official as duty bound to undertake such activities for the CFMEU, not for some other
entity whose objects were not identical and whose corporate and financial governance
was considerably more relaxed and far more open to abuse.
186
