A question of conflict
Stephen Mayne
February 14, 2010
Should a top law officer make decisions on a firm he has shares in?
The row over the Solicitor-General and BHP shares is mainly a
question of
perception, says Stephen Mayne
The case of Victorian Solicitor-General Douglas Graham, QC, and his
BHP
shares is the latest example of an avoidable conflict
of interest. On the surface it looks like a pretty open and shut case. Mr Graham
presumably knew he had an interest in companies with almost $1
million
worth of BHP shares when called on to decide whether to recommend
contempt
action against the company. Attorney General Jan Wade, who also holds 700 BHP shares, apparently
found
out about his shareholding only last week.
If Mr Graham did not disclose it earlier to her or to another
appropriate
person, we can ask why didn't he. If he did not, it would be a pretty clear breach of the public
service code
of conduct, which would be all the more surprising given that Mr
Graham is
a well-regarded and highly intelligent lawyer.
While things such as Peter Costello's wife holding 200 shares in
Commonwealth Bank are too small to be relevant, a link to almost $1
million
worth of BHP shares is highly relevant. However, BHP is a $35 billion company. Its Ok Tedi mine in Papua New
Guinea
is important, but the contempt ruling was only one step in a long
legal
battle between the Big Australian and the 35,000 landowners which
was
eventually settled earlier this year. BHP shares fell 16 on the day it was found guilty of contempt -
something
later overturned when it was realised the law firm Slater &
Gordon
could not bring contempt action under new Victorian law.
Mr Graham himself probably stood temporarily to gain the opportunity
of
making only a few hundred dollars from his decision, hardly
something that
should cost him his job. And nobody is suggesting that his advice was in any way influenced
by his shareholding.
But conflicts are usually
about
principle and perceptions. They generally fall into the categories
of
personal, commercial and political, or a mixture of the three. Then there is the question of personal opinions creating conflicts. Some people argued that after
Justice Frank Vincent publicly criticised the coercive powers of the
NCA,
he should not have sat on the John Elliott trial. Clearly, conflicts can emerge at many levels, but
the
ultimate test is usually the standards set by the company or
government you
work for.
In the case of Mr Graham, the state Opposition is questioning
whether he
breached the code of conduct which says such interests have to be
declared
to a superior. His interest dwarfs Mrs Wade's holding of 700 BHP shares and is
something
that should have been disclosed under the code if it was not. However, both Mrs Wade and Mr Graham potentially have a bigger conflict over the $1 billion-plus legal
dispute between the Kennett Government and the Esso-BHP joint
venture over
who pays the Federal Government's resource rent tax on Bass Strait
gas.
This fight has already cost the parties more than $100 million in
legal
fees over six years and it is not appropriate that the two top legal
officers on the state's side have shares in the opposition.
After all, the BHP contempt case was arguably just a case of
interpreting
the law. The tax fight is one of Australia's biggest ever commercial
disputes which will materially affect BHP and Victoria's financial
position. Jan Wade herself has a mixed record when it comes to conflict of interest. She ruled herself
out of
making decisions on the Elliott trial because he was a former
president of
the Liberal Party. Yet she also allowed the Premier to put her in a position whereby
she and
her office, including Mr Graham, make decisions about contempt of
court
charges relating to politicians.
Clearly it was not in Mrs Wade's interest for charges to be laid
against
the Premier when he looked to be seriously in contempt for attacking
the
NCA during the Elliott trial. As the debate about conflict
of
interest rages throughout parliaments across Australia, the
politician with
one of the most controversial "records ", Premier Jeff Kennett,
remains above the fray. While Jim Short and Brian Gibson resigned over minor indiscretions,
Mr
Kennett has survived a long list of arguably very large commercial,
personal and political conflicts. While Mrs Wade ruled herself out of the Elliott trial because of a
political connection, Mr Kennett has not ruled himself out of
business
dealings with Federal Liberal Party treasurer Ron
Walker, who is also one of
his
closest friends.
Mr Kennett is still chairman of the casino sub-committee which deals
with
Crown, and he has seen off his various perceived conflicts over KNF, the SECV headquarters
deal and his
share dealings under the Victorian code of conduct.
The only answer for someone who aspires to high office is to rid
yourself
of all potential conflicts.
Don't
deal with your friends and don't make decisions on companies you own
shares
in.
Then the debate could move back to some of the real issues affecting
the
public interest.
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