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The Sydney Morning Herald's Linton Besser and the Incomparable

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The Sydney Morning Herald's Linton Besser and the Incomparable Exposed: Obeids' secret harbour deal Date May 19, 2012 Linton Besser, Kate McClymont The former ALP powerbroker Eddie Obeid hid his interests in a lucrative cafe strip. Moses Obeid. Photo: Kate Geraghty FORMER minister Eddie Obeid's family has controlled some of Circular Quay's most prominent publicly-owned properties by hiding its interests behind a front company. A Herald investigation has confirmed that Mr Obeid and his family secured the three prime cafes in 2003 and that for his last nine years in the upper house he failed to inform Parliament about his family's interest in these lucrative government leases. Quay Eatery, Wharf 5. Photo: Mick Tsikas For the first time, senior officials and former cabinet ministers Carl Scully and Eric Roozendaal have confirmed Mr Obeid's intervention in the lease negotiations for the quay properties, including seeking favourable conditions for the cafes, which the Herald can now reveal he then secretly acquired. Crucially, when the former NSW treasurer Michael Costa had charge of the waterfront, he put a stop to a public tender scheduled for 2005 that might have threatened the Obeids' control over two of the properties. Mr Obeid was the most powerful player inside the NSW Labor Party for the past two decades, and was described in 2009 by the deposed premier Nathan Rees as the party's puppet-master. Eddie Obeid. Photo: Jon Reid The Arc Cafe, Quay Eatery and Sorrentino, which are located in blue-ribbon positions on or next to the bustling ferry wharves at the quay, are all run by a $1 company called Circular Quay Restaurants Pty Ltd. On paper, the Circular Quay company is owned by John Abood, Mr Obeid's brother-in-law. However, the Herald has obtained a sworn statement from Mr Obeid's son Moses that was tendered in Court of Appeal proceedings that lists among his $11.3 million assets a $700,000 share of ''Circular Quay Restaurants''. At the Court of Appeal earlier this year, Moses Obeid inadvertently confirmed the long-rumoured involvement of the Obeid family in the restaurants, which was masked by using a discretionary trust. ''The Circular Quay Family Trust owns numerous Circular Quay restaurants,'' Moses Obeid said in his affidavit. All the units in that family trust are owned by another family trust - the Obeid Family Trust No. 2, he stated. Eddie Obeid's other son, Paul Obeid, testified in March this year that: ''In our trusts we have, there [are] nine brothers and sisters, there's two parents and 30 grandchildren.'' A confidential 2007 document from a separate Obeid company seeking government contracts, which was also tendered in the proceedings, noted that the Obeid connection ''provided access to government'' and that it was a big plus ''being able to get to the right person first time''. But the downside was ''media attention and speculation''. It was suggested that this could be avoided by ''the possible remove (sic) of Obeid family name through the use of a discretionary trust''. Previously, when the waterfront leases were still held by the Obeid associate and former Labor Party donor Tony Imad, Carl Scully had rejected an extraordinary request from Mr Obeid to have the leases extended. In the run-up to the Olympics and as part of a plan to remodel the quay, the wharf leases were to be renewed. But Mr Scully sought approval from the Independent Commission Against Corruption specifically to ensure there would be no probity issues. The ICAC gave an opinion that it approved based on the fact that the leases were strictly for five years and were then to be put to a public tender. "But shortly after this process was concluded, Eddie Obeid requested that I give a five-year extension to the lease on the concession held at Circular Quay by a Tony Imad," Mr Scully told the Herald. "I flatly refused this request on the spot without even bothering to get departmental advice. ''I advised Eddie that this whole drawn-out process had been ticked off by ICAC at every step of the way and that there was no way I was going to revisit it. This was not well received and for the first time Eddie became quite angry. I was somewhat surprised at the reaction as for me it was just another policy matter I took a firm stand on." Mr Scully said that "it was only after I left politics that an allegation was made to me that Eddie had at the time in question a direct commercial interest. If the allegation is true, then it would explain the overreaction to my decision but would still leave me feeling very disappointed to say the least. If it is not true, then I would like the Obeid family to provide sufficient evidence or commentary to refute it". A source has confirmed to the Herald that it was the Obeids who paid $2.4 million via a bank cheque for the three cafes and then insisted on an arrangement whereby the restaurants' true owner could not be identified. The source said that under this arrangement Mr Abood would be paid a wage and receive 10 per cent of the profits of the company, and the remainder would flow to the Obeid family via one of its trusts. Other sources report that another of Eddie Obeid's sons, Damien, routinely collects the takings from the three restaurants in person. In 2004, Mr Abood denied he was a front for Mr Obeid, telling the Herald: ''Yes, I am his [Obeid's] brother-in-law, but no way he is involved … I have been here for three years and he has never had anything to do with this business.'' This week, Mr Abood, 56, conceded that the Obeid family had a major interest in the cafes ''but if you think any favours or anything's been done down there for them - definitely not''. ''The Obeids really haven't made any money down there, well we haven't. It's a disaster area,'' Mr Abood said. Banking documents tendered in Moses Obeid's recent court battle with the City of Sydney, in which he has been ordered to pay $12 million, show the Obeid Family Trust 1 made a $100,000 payment to Paul Maroon in October 2010. Mr Maroon is the general manager of Circular Quay Restaurants. In April this year, Mr Maroon signed a formal petition on behalf of the business to seek a further reduction in rent. Having obtained and then hidden his family's interest in the businesses, Eddie Obeid wielded his powers as leader of the dominant faction in the ALP to protect his investment. Most importantly, a competitive tender for the leases that was long scheduled for 2005 was quashed despite repeated pleas from NSW Maritime officials that it proceed. Confidential government documents seen by the Herald show this decision was made despite written advice from multiple probity advisers and the Independent Commission Against Corruption that recommended the public tender go ahead. Maritime's then boss, Chris Oxenbould, told the Herald Mr Costa did not want the tender to proceed, citing the fact that other agencies allowed leaseholders to keep their leases without facing public competition. ''Michael Costa was involved in the discussions around the [expression of interest] process and he made it very clear to me what his position was,'' Mr Oxenbould said. Mr Costa said: ''I don't have a recollection of it, and I'm not going to comment on it, and where you're heading is absurd.'' A former senior Maritime official overseeing commercial property, Zenon Michniewicz, told the Herald the minister refused to allow the leases to be put to the market. ''In 2005 I can say that the minister and the CEO [of Maritime] did not allow it to proceed,'' he said. When Mr Costa was replaced by Eric Roozendaal, a decision was taken by Maritime to not put any of the leases to tender, but to simply roll them over on a month-by-month basis. Mr Roozendaal told the Herald he did discuss the leases at Circular Quay with Mr Obeid when he was the minister. ''Issues with Circular Quay were raised with me by both Eddie Obeid and Michael Costa,'' he said. ''[But] at no time did any member of Parliament declare any interest to me in any properties at Circular Quay. ''I would say that if any MP raised an issue with me and had an interest they didn't declare, it would make me feel very uncomfortable.'' Internal NSW Maritime files show the rent on these Obeid-controlled properties actually decreased from the amount stipulated in the original leases, which were signed six years earlier. In 2006, for example, after negotiations over the rent, the state government took $89,000 less per annum from two of the cafes owned by the Obeid family than the government had intended in 2000. Mr Abood, who said he was a part-owner of the business, claimed the rent reductions had only come about ''because we were all going broke - everybody!'' In 2009, NSW Maritime issued new 10-year leases to the incumbents along the wharves - including to the Obeids' front company - and again without a competitive tender. The minister at the time was Joe Tripodi. Steve Dunn, the former chief executive of Maritime, told the Herald that Mr Tripodi was involved in deciding the matter but claimed it was the department - contrary to the wishes of Mr Tripodi - that decided not to put the leases out to a tender. Such long tenures are worth millions on the open market, and the leases also offered cheaper rent.
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