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Leaked documents reveal full picture of HSU carnage

The remnants of the Health Services Union’s collapsed East branch are being trawled by an administrator. Crikey can now exclusively reveal the full extent of the financial damage.

A cache of internal documents has laid bare the full financial catastrophe inside the remnants of the disgraced Health Services Union’s former East branch.

The summary of the true state of the HSU’s books, compiled by lawyers Slater & Gordon and accountants VJ Ryan & Co, and obtained by Crikey, shows that in the two-year period between the 2010 merger of the NSW, Victorian No. 1 and Victorian No. 3 branches and June 30 this year, over $7 million was wiped from the union’s asset base – from $8.7 million to just $1.6 million.

The deed poll documents starkly illustrate, for the first time, the full fiscal trainwreck that occurred in the aftermath of the tie-up. The NSW union (including an overlapping shell called the “NSW branch”) contributed $5.6 million in assets to the combined entity but emerged with just $1.3 million, according to a concise summary.

The Victorian No. 1 branch started with $2.1 million in assets, incurred $614,000 in losses over two years, and came out with $1.4 million. The smaller No. 3 health professionals branch started with $970,007, incurred losses of over $2 million and emerged with liabilities of $1.1 million.

A pre-merger balance sheet shows HSUEast in a comparatively healthy financial state, with millions of dollars in membership fees flowing into its coffers from the combined union’s then-50,000 low-paid members. The union, controlled by former ALP national secretary Michael Williamson, then ratcheted up its leverage ratio to borrow heavily against its property assets.

Federal Court justice Geoffrey Flick placed HSUEast and the HSU’s federal branch in administration in June, declaring the union had stopped functioning effectively. Administrator Michael Moore and two state-based deputies are now in the process of disentangling the entrails — re-allocating debts and revenue and demerging the three constituent parts — to prepare for fresh elections in early November.

Overall at June 30 this year, the combined union had total assets of $31,846,316 set against total liabilities of $30,226,160. But Crikey understands the amounts and splits are contested and are currently being thrashed out between current HSU officials and the administrator. For example, a separate demerger balance sheet puts the No. 3 branch’s current net assets at $347,788 and the No. 1 branch at $1.1 million.

A liabilities schedule to the deed poll and the demerger balance sheet show three major items of interest: a massive Commonwealth Bank loan of $17.3 million to the NSW branch, a $2.9 million “loan” allocated to the Victorian No. 3 branch from NSW and a loan from the No. 3 branch to the No. 1 branch of $297,788.

Last year the Commonwealth Bank facility was topped up by a further $6.2 million from $13.3 million. Some of that was to cover credit card debts.

Despite the bank’s status as a secured creditor, it expressed concern that the money might not be recovered and its lawyers are believed to have been keenly raking over the books as the administrator picks through the wreckage.

Kathy Jackson, who previously served as No. 3 branch secretary, claimed earlier this year that a $4.5 million mortgage had been taken out against the union’s previously debt-free South Melbourne premises. At the start of the period, the No. 1 branch had loans of just $125,399.

One HSU insider told Crikey the likely reasons for the dramatic decline in the organisation’s finances related to lost members, reckless expenditure and the payout of sacked officials. The NSW branch has believed to have lost 5000 members — from 35,000 before the merger to 30,000 this year. The Victorian No. 1 branch lost 3000 — from 15,000 to 12,000 and the No. 3 branch has gone from 5000 to 3500.

The proposed demerger balance sheet also contains some other surprises. Amazingly, the NSW union shows an amount of $5.7 million for a “defined benefit fund liability” — which senior HSUEast employees including Williamson were set to claim in retirement payments (defined benefits are lucrative retirement schemes provided in lieu of superannuation and provide a percentage of an average salary in retirement for life). A further $2.3 million is set aside for “employee entitlements” and well as a $1.4 million provision for redundancies. The branch lists $25 million in assets, mostly land and buildings.

Prior to his resignation in August, Williamson was earning just under $400,000 a year.

Also of interest is another seemingly inflated figure. The No. 1 branch — previously controlled by Jeff Jackson — owes the No 3. branch $297,788 for a “loan” incurred prior to 2010. This, according to the schedule, is:

… to be offset against any service fee payable by Vic No 3 Branch to Vic No 1 Branch under the Transitional Service Agreement to be entered into between Vic No 3 Branch and Vic No 1 Branch.”

The terms of that agreement are expected to be made public soon.

Last week, Williamson was arrested on 20 charges of hindering police after he allegedly directed associates to destroy incriminating documents when NSW Police from Strike Force Carnarvon moved on the union in May. A criminal probe is also continuing inside the Victorian fiefdom previously controlled by Kathy Jackson and ex-husband Jeff Jackson.

The full Temby report into the NSW union, released in July, alleged millions of dollars in overpayments to contractors, including $3.12 million provided over four years (and probably millions more over the last 15 years) to printer Communigraphix to produce the union magazine. Communigraphix also provided credit cards to Williamson and former HSU national secretary-turned independent MP Craig Thomson.

Williamson, a former ALP national president, infamously employed four members of his immediate family in well-paid HSU jobs.

25
  • 1
    GeeWizz
    Posted Friday, 12 October 2012 at 10:04 pm | Permalink

    What staggers belief is that the members haven’t yet had legal representation to sue the proverbial off those who have been clearly ripping them off to fill their own pockets.

    As we can assume the Labor love-in friendly lawyer groups who couldn’t care less about union members aren’t going to help I think it’s time Lib aligned law agencies do some pro-bono work and get these people their money back. There are some scumbags who will go to the big house for this but members should get their money back first.

    I would also call for the entire union to be rolled up. The corruption runs to deep and even those pretending to be representing members now are just the same old Labor boys club we’ve come to know.

  • 2
    Patriot
    Posted Friday, 12 October 2012 at 10:54 pm | Permalink

    If a corporation behaved the way these union gangsters and thugs do we’d never hear the end of it from the lefties. It’s hard not to reach the conclusion that today’s left is deeply concerned about the lot of shareholders but couldn’t give a stuff about workers. Bizarre.

  • 3
    shepherdmarilyn
    Posted Saturday, 13 October 2012 at 6:46 am | Permalink

    Patriot, ever heard of AWB? SEcurency? Alan Bond, Christopher Skase?

  • 4
    Patriot
    Posted Saturday, 13 October 2012 at 11:10 am | Permalink

    Sure, that’s exactly my point. You сrap on about those sort of things endlessly but look the other way when unions defraud their members. Bond, Skase, etc. burnt investors and creditors. The unions are taking from the lowest paid workers.

  • 5
    Thteribl
    Posted Saturday, 13 October 2012 at 4:59 pm | Permalink

    Manufacturing firms, construction companies, financial advisers, Banks, churches, airlines, trade unions, foreign aid “charities” … no double checks and honest audits and you can bet it is only a matter of time before some sticky paw gets into the money bucket. I can tell you lots of stories. The HSU is no particular cause for self-righteous indignation.

  • 6
    Demas
    Posted Saturday, 13 October 2012 at 7:23 pm | Permalink

    @Patriot: This is typical of the LIE_beral apologists. We of the so-called left totally condemn all corruption and lawlessness, but what we detest is the constant hypocritical cry of - the unions are ruining the country - when in actual fact it is Corporations/Banks that are ruining the lives of ordinary people/shareholders (some of whom have committed suicide when they lost all their money), as in the collapse of ‘STORM Finacial’ as well as ruining the economies of entire countries eg. Iceland. And what about all the companies that go broke and leave Super & other entitlements unpaid. Taxpayers pick up the tab.

    But the best example of this LIE_beral hypocrisy was when Frazer & Howard in 1980 set up the Costigan Royal Commission to enquire into criminal activities in the Painters and Dockers Union. With the intention of ruining the reputations of all Unions. — - BUT surprise, surprise, its enquiries led away from union activities towards BIGGER CRIMES of “bottom of the harbour” tax evasion schemes. This involved the asset-stripping of companies to avoid tax liabilities and was facilitated by criminals among the Painters and Dockers but WAS ORCHESTRATED AND BENEFITTED SOME OF THE WEALTHIEST INDIVIDUALS IN THE COUNTRY. Remember GOANNA? He was reputed to be the then richest man in Australia. Which of the filthy rich were prosecuted? None? It was Malcolm Turnbull that defended the richest man in Australia then. (Google it you might learn something).

    What is really detestable is this constant cry about corruption in the Unions when these Union officials are just stupid rank amateurs. The real crooks are in the corporations where the money available to steal runs in the BILLIONS. ENRON & Madoff, Lehman Brothers, Goldman Sachs, come to mind. Apart from Madoff how many of those criminals have gone to jail or even prosecuted?

  • 7
    Suzanne Blake
    Posted Sunday, 14 October 2012 at 11:35 am | Permalink

    The decline in Union membership in Australia will not stop and this makes it quicker.

  • 8
    Hamis Hill
    Posted Sunday, 14 October 2012 at 4:07 pm | Permalink

    Borrow heavil-y against property assets” and then splurge the money away?
    Isn’t that what a notorious former leader of the NSW Liberals did on properties in Joe Hockey’s seat of North Sydney?
    Why is it different when a liberal does the same thing?
    Shouldn’t it be worse?
    I mean what do you expect from the Labor Right?
    Were they not all schooled in corruption,literall-y, in their special non-state schools?
    How could they know any better?
    But the Liberals are supposed to be paragons are they not?
    Is not the betrayal greater from those born to lead than when replicated by gutter snipe Labor rightists fighting to bring the system, stacked against them, down by hook or by crook? ( the inferiority complex a special gift of their exclusive, poor me, victim of sectarian bigotry education where criminality is taught as a form of revenge)

  • 9
    Patriot
    Posted Monday, 15 October 2012 at 1:06 am | Permalink

    Left-on-left catfight:

    GREENS Leader Christine Milne accused Julia Gillard of hypocrisy over her accusations that Tony Abbott was a misogynist, after a derogatory Twitter attack against her by a Labor senator.

    Admitting the Greens had made a deliberate decision to stay out of the gender war between the government and the Coalition, Ms Milne admitted the PM undermined her own attack against Mr Abbott as being sexist last week by protecting Peter Slipper. And she warned the PM she would now be forced to stamp out sexism in her own party.”

    Reeow!

  • 10
    Doug
    Posted Monday, 15 October 2012 at 1:26 pm | Permalink

    You might want to note that Defined Benefits schemes are not ‘provided in lieu of superannuation’ they ARE superannuation, and were very common before the introduction of compulsory super under Keating.

    With the no disadvantage tests they continue to this day in things like the old (and now closed) Commonwealth Superannuation Scheme, Victorian Hospitals Superannuation and some Defence Schemes.

    So to describe it as ‘in lieu of’ is misleading. Even a quick Google throws up multiple defined benefit schemes.

    http://australia.gov.au/topics/economy-money-and-tax/superannuation/government-superannuation-schemes

  • 11
    bluepoppy
    Posted Monday, 15 October 2012 at 2:55 pm | Permalink

    I admit I am no accountant or financial whiz but why would a union have to borrow against it’s assets. It is not a corporation but a membership organisation. It only has to pay wages/employee costs, office expenditure, travel, member supports and basic running costs. Did the HSU make political donations during this time?

    Even accounting for the fraud and rorting (and maybe I am missing something) but how an earth can a union lose money?

  • 12
    shepherdmarilyn
    Posted Monday, 15 October 2012 at 4:24 pm | Permalink

    And Bernadette O’Neill claims she is starting charges against Thomson based on a report the so-called investigator won’t stand by and was found to be a flawed and specious report while these thieves are left unmolested.

    What is the statute of limitations on civil IR claims anyway?

  • 13
    shepherdmarilyn
    Posted Monday, 15 October 2012 at 5:03 pm | Permalink

    BAsed on a report that was found to be seriously flawed, with few facts contained because the investigator did not do his job Bernadette O’Neil still claims she can bring civil charges against Thomson?

    She is a seriously deluded woman.

  • 14
    Edward James
    Posted Monday, 15 October 2012 at 5:53 pm | Permalink

    While we squabble here and there about what is what, and how the separation of powers should be applied. The fact is political party members and supporters do not really want to know about natural justice. I am still waiting to meet any political party members who are willing to go public with their problem with their elected reps who insist on accommodating systemic corruption. Not one party member has ever challenged my often published allegations of systemic corruption. Even though there is no secret about my contact details. Edward James

  • 15
    Edward James
    Posted Monday, 15 October 2012 at 5:56 pm | Permalink

    i understand at this time 6 55 pm Civil charges have been brought against the independent Member for Dobell Craig Thomson. Edward James. Umina CBD

  • 16
    Edward James
    Posted Monday, 15 October 2012 at 6:01 pm | Permalink

    @ bluepoppy Posted Monday, 15 October 2012 at 2:55 pm | PERMALINK I expect williamson will answer your question. For me I cant understand why not one union member has filed a claim against the Union management. But then this shocking abuse has continued for years in the same way misgovernance has presided over us all! Edward James

  • 17
    shepherdmarilyn
    Posted Monday, 15 October 2012 at 6:34 pm | Permalink

    But how can they lay civil charges on Thomson based only on a report that was so bad it had to be investigated by KPMG and was found to be mostly bullshit.

    And what on earth does governance even mean, did he have to hold the hands of everyone?

    O’Neill is even filing claims that have no penalty for reasons that escape anyone with a brain.

    The so-called FWA investigation was a sick joke, why is O’Neill further embarrassing FWA with this bogus crap?

    Is she Abetz’s girlfriend for something because her statement made no sense at all.

  • 18
    zimmerman
    Posted Monday, 15 October 2012 at 7:00 pm | Permalink

    you tell ‘em Shep.We know exorbitant sums have have been pilfered from the lowest paid in the HSU…we just have to prove how Abbott did it.
    By the way the report was critised for not going in hard enough…nice dissembling there.

  • 19
    Doug
    Posted Monday, 15 October 2012 at 7:11 pm | Permalink

    Wasn’t there significant concern (raised in the KPMG report) that a senior office holder with FWA was the partner of the HSU’s Kathy Jackson? (That star turn at the IPA dinner, following on from ‘Superannuation largesse for Unions’).

    http://www.abc.net.au/news/2012-08-21/thomson-claims-vindication-after-report-savages-fair-work/4213408

    Seems to me like the HSU has been used as a private money-bank by various people, and now the finger pointing has reached a crescendo.

    There is a distinct smell to this one, and it is smelling about as fishy as Ashby and Brough.

  • 20
    Edward James
    Posted Monday, 15 October 2012 at 7:46 pm | Permalink

    It is depressing for me the way this is unfolding so slowly. If there is a success with the civil action Craig Thomson now without the overt dollar support of Labor may be bankrupted. But it may not happen soon enough to bring down the dysfunctional Gillard Labor government. Edward James

  • 21
    shepherdmarilyn
    Posted Tuesday, 16 October 2012 at 5:20 am | Permalink

    No Edward, the claims of bankruptcy are bullshit. Jeff Jackson had similar claims made and his maximum fine would be $22,000.

    FWA is just being ridiculous because their report was discredited by the AEC on election expenses for 2 elections so that is almost all the supposed rort.

    He has been cleared by 9 investigations so far so after wasting millions on complete bullshit O’Neill is now just being spiteful.

    There has indeed been a good deal of money siphoned from the members since 2008.

  • 22
    Suzanne Blake
    Posted Tuesday, 16 October 2012 at 9:30 am | Permalink

    How likely is it that Fairwork has deliberately botched its evidence, to allow Thomson to get off on technicality?

  • 23
    James Rooney
    Posted Tuesday, 16 October 2012 at 5:56 pm | Permalink

    Not very likely Suzanne Blake, when the Vice-President Lawler of Fair Work Australia is the partner of Cathy Jackson and was appointed by Tony Abbott. Oh yeah, and his father is a Liberal party old boy with strong ties to the catholic church.

  • 24
    izatso?
    Posted Tuesday, 16 October 2012 at 6:50 pm | Permalink

    ….. ooooOooh …. gettin’ the message SB …. ? wish you had’nt gone there now ? These shits are experts and they’re connected ……

  • 25
    Edward James
    Posted Wednesday, 17 October 2012 at 6:20 pm | Permalink

    Will Chris McCardle now representing Craig Thomson set the cat among the pigeons? Are allegations of corrupt conduct statute barred? Edward James

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