Why it pays to donate. Liberals come to the aid of troubled local shipbuilder

The Liberal Party-linked Perth shipbuilder Austal is in trouble. The company, chaired by long-time Liberal Party donor and supporter John Rothwell, built eight Cape Class patrol boats for what is now the Australian Border Force so badly that the Department of Home Affairs resisted making a final payment for them, prompting a savage 2018 national audit office review of the half-billion-dollar contract.

That report was so serious it prompted what passes for the Commonwealth integrity body, the Australian Commission for Law Enforcement Integrity (ACLEI), to stir into action and launch a high-powered investigation into the relationship between Home Affairs officials and Austal, which desperately needed payments from the government.

Austal is also under investigation by both the Australian Securities and Investments Commission (ASIC) and US authorities: in Australia over market disclosures in 2015 and 2016, and in the US over “a number of areas of the group’s US operations” relating to its US naval contract. The SEC investigation led to its Mobile, Alabama facility being raided by federal agents last year.

The company has tried to use legal privilege to prevent ASIC from obtaining large volumes of documents, but has admitted in its 2020 annual report about the investigations “it is possible that those proceedings could lead to civil or criminal penalties, damages, and / or suspension or debarment from future US Government contracts, which could have a material adverse effect on its consolidated financial position, results of operations, or cash flows.”

Material indeed: according to Austal’s 2020 annual report, it derives 77% of its revenue from its US contracts.

But luckily for Austal, the Liberals are in government.

Austal is an irregular political donor: it has lodged returns for five of the last 15 years. Occasionally it contributes a small amount to the Western Australian Labor Party, but it’s the Liberal Party that has enjoyed Austal’s largesse, particularly before the 2016 election when it gave $20,000 to the West Australian Liberals and nearly $40,000 to the federal Liberal Party.

According to Senator Rex Patrick, Austal has also adopted a habit many companies and both sides of politics have embraced in recent years: sponsoring and subscribing to political events that enable donors to talk to beneficiary politicians without having to disclose it under federal law.

Earlier this month, Patrick told a Senate estimates hearing “my understanding is that post 2015-16, Austal changed their strategy in terms of lobbying and making payments to the Liberal Party and the Labor Party. The method by which they did that was instead of accepting donations, members of parliament would attend dinners that were hosted by Austal and significant payments were made in respect of the price to attend”.

Patrick claims Scott Morrison, Mathias Cormann, Ben Morton (former head of the WA Liberal Party), Peter Dutton, Michaelia Cash, Linda Reynolds Simon Birmingham and Christian Porter all participated.

Austal is also represented in Canberra by Perth outfit FTI Consulting, which has a former state Liberal MP and former Coalition adviser on its staff.

In February this year, Porter replaced the outgoing head of the ACLEI, Michael Griffin, with Jaala Hinchcliffe, who immediately killed off Griffin’s high-level investigation of the Austal scandal at Home Affairs, in circumstances Fairfax’s Nick McKenzie has detailed.

Enter eminent economist Saul Eslake, who suggests that Austal may be about to receive some further help, this time from Tasmanian taxpayers.

Eslake was commissioned by Tasmanian Labor to examine the Tasmanian government’s recent backflip about the construction of two new Bass Strait ferries. In 2018 the Tasmanian Liberal government announced it would be replacing the current two Spirit of Tasmania vessels with two larger vessels to accommodate the growing passenger and freight traffic to and from the island state. At the time, the government of Will Hodgman said “there are no Australian shipyards with the capacity to build the new Spirits”.

The contract was set to be awarded to a Finnish company, until Scott Morrison — who was immigration and border protection minister while Austal’s Cape Class fiasco unfolded — intervened.

In July, the Tasmanian government, now led by Peter Gutwein, killed off the contract process and announced, after consultation with Morrison, that a “taskforce” would look at local building options.

Within four weeks, Austal had lobbed a bid for the contract — except that, contrary to the idea of a “local build”, Austal would make most of the vessels in the Philippines (Eslake also notes that “the ships’ engines, propellors, drive shafts, and other sophisticated electronic and electrical gear … would all be imported from Europe, since no one else has the relevant capabilities”).

Austal’s chances will be furthered bolstered by the fact that it is represented in Hobart by Font Public Relations, which is led by Brad Stansfield, a former senior Liberal staffer at state and federal level and key player in the Godwin Grech scandal, and Brad Nowland, a former Hodgman staffer. Austal has also taken to sponsoring fundraising events for the Gutwein government.

Eslake argues that the project is likely to either cost much more than anticipated, be significantly delayed, or the final product will underperform requirements — something Austal knows all about. He notes industry suggestions that what was supposed to be an $850 million contract could end up costing Tasmanian taxpayers over $1 billion.

What little work will be done in Australia would likely be done in Western Australia (allegedly by underpaid Filipino labourers), meaning Tasmanian taxpayers will in effect be subsidising West Australian jobs.

As Eslake notes, “while there might well be legitimate reasons for the Australian government to want to create jobs in another part of Australia, or to expand Australia’s manufacturing capabilities, why should Tasmanian taxpayers, or Tasmanian businesses, pay for it?”