This article is part five in a series. For the full series, go here.
Minister for Employment Stuart Robert is one of the federal Parliament’s wealthiest MPs but it is impossible to know where his money is invested. His parliamentary disclosure of interests is little more than a blank page, with his assets now said to be in a blind trust.
But there are plenty of authorities who doubt that a blind trust is the rolled-gold solution to stop a potential conflict of interest.
Is a blind trust all it’s cracked up to be?
A blind trust works on the premise that a politician has no line of sight to the assets in the structure and has no idea if or how his or her political decisions affect those assets, typically shares.
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Former Queensland integrity commissioner Dr David Solomon told Crikey that there were two basic issues: how long the trust has been in existence and what the instructions are to the trustee.
“If I set up my blind trust today and declare it then I know full well what investments are in it. You can also have different instructions to the trustee in terms of the risk profile you want for your investments,” he said.
Back in 2012, Solomon, along with clerk of the Queensland Parliament Neil Laurie, issued some public advice for incoming premier Campbell Newman that blind trusts had “a poor record” and had not proven to be effective as an accountability mechanism.
“Blind trusts are, by their nature, an anathema to regimes of public disclosure,” they concluded.
Formidable Queensland corruption investigator Gary Crooke QC, one-time head of the National Crime Authority and also a former Queensland integrity commissioner, told a Victorian government inquiry in 2009 that blind trusts did not always work in practice.
“A blind trust is well and good if it is a blind trust. A blind trust just means you do not know what the heck is in it,” he said. “You see a lot of people go into a blind trust and they put the very shares they are holding into that blind trust. It then becomes a seeing trust, because they know exactly what is in it.”
A study by federal Parliament in the late 1990s concluded there was “a strong case” for the view that a private blind trust could be “a façade behind which the conflict of interest can survive due to the difficulty of creating a ‘truly blind trust’ of assets of all types in the hands of trustees”.
The study entertained the idea that a blind trust might have more chance of working if it was administered by an independent official.
Melbourne Law School Professor Katy Barnett told Crikey that the effectiveness of the trust depended on its terms.
“It also depends on the reliability of the trustee,” she said.
Pros and cons
In 2007 then-opposition leader Kevin Rudd’s wife Therese Rein placed her extensive shareholdings into a blind trust as a way of managing potential conflicts of interest.
In a letter to the registrar of parliamentarians’ pecuniary interests, Rudd detailed how the trust would operate. It would be managed by independent trustees. Legal title in the investments would be vested in the trustees and Rein would retain sole equitable interest. The trustees could buy and sell shares on Rein’s behalf.
“The trust deed contains binding instructions prohibiting the trustees from notifying Ms Rein, as the beneficiary, as to the purchase, holdings or disposal of the specific contents of the trust,” Rudd wrote.
“The trustees are authorised to provide only such information to the beneficiary as is required for the proper administration of her taxation affairs, such as for instance the total value of holdings and the value of franking credits.”
In a well-known case outside politics, a blind trust proved ruinous for businessman Graeme Samuel who placed his assets in the hands of trustees to avoid potential conflicts after he was appointed to run the Australian Competition and Consumer Commission. Samuel truly had no control over a key investment, which lost tens of millions of dollars in value.
The federal government v the rest
When he became prime minister, Scott Morrison signed off on a statement of ministerial standards which permitted ministers to manage conflicts of interest by establishing a blind trust, rather than disposing of their assets altogether.
According to the ministerial statement the blind trust needs to have “appropriate legal and accounting certification”, though precisely what that means is not clear.
In response to a request from Crikey, a spokesman for Robert declined to supply any details, saying only that “minister Robert complies with the register of members’ interests and statement of ministerial standards”.
Reviewing other parliaments in Australia shows that the federal government has the least transparent regime. Most states require at the very least the detail of who administers the blind trust, and the address of the trustee.
ACT Parliament — which deals in budgets a fraction the size of the Australian government — demands that members provide a description of the blind trust and the name and address of the person who manages it.
Victorian Parliament’s register of interests for members of the legislative council, for example, has a dedicated entry for blind trusts “under which [members] hold a beneficial interest or in which you are the trustee and a member of your family holds a beneficial interest”.
Members need to supply the following information:
- Description of the blind trust
- Name of the person who manages the blind trust
- Address of the person who manages the blind trust
Next: A massive overreach — and a shocking beat-up