Corruption ‘cannot be ruled out’ in controversial Sydney land deal

The NSW Auditor-General has found misconduct or corruption cannot be ruled out in the state government’s controversial purchase of a highly contaminated parcel of land near Parramatta for a multibillion-dollar light rail project.

In a scathing report released on Tuesday,Auditor-General Margaret Crawford concluded that Transport for NSW carried out an “ineffective process” by failing to formally value the six-hectare site at Camellia,and assessing the cost of cleaning the land up,before buying it.

Her report followed an investigation by theHerald in November that revealed the government paid three times as much as the Valuer-General’s estimate for the land,which was bought for the Parramatta light rail project.

Cleaning up the six-hectare site at 6 Grand Avenue will cost taxpayers $107 million.

Cleaning up the six-hectare site at 6 Grand Avenue will cost taxpayers $107 million.Brook Mitchell

The property purchase for $53.5 million in mid-2016 delivered the previous owner – Sydney developer Billbergia – a $15 million windfall seven months after it had bought the site,which was worthless.

Taxpayers are now on the hook for an extra $107 million to clean up the site.

The Auditor-General said the agency was unable to show any evidence to justify “unconditional liability for contamination costs and risk” arising from the purchase.

Ms Crawford also found the agency did not have sound probity controls in place for the deal and decision-making was “rushed and poorly informed”.

An acting deputy secretary who approved the land purchase in April 2016 was also found not to have the authority to do so because it was done before the business case and funding was finalised.

The Auditor-General said Transport for NSW kept insufficient records of meetings,including attendees and discussions about price and conditions. She said details of phone calls with the owner of the land,property developer Billbergia,were not documented.

The report said the probity shortcomings continue to this day. “Internal policies and procedures to guide the transaction were,and continue to be,insufficient,” it said.

The land at 6 Grand Avenue in Camellia,and Transport Minister Andrew Constance.

The land at 6 Grand Avenue in Camellia,and Transport Minister Andrew Constance.

“As at the time of this audit,the policies and processes are largely unchanged for Transport for NSW,and the performance gaps identified in the 4-6 Grand Avenue transaction remain.”

Other concerns included Transport for NSW’s failure to obtain a formal valuation before completing the transaction. Instead,it commissioned a valuation on the day of settlement,despite knowing the site was contaminated.

“The lack of analysis and due diligence to support the level of financial offer and the approach to environmental contamination risk constitutes poor governance and ineffective administration,” the report said.

The Auditor-General has recommended the transport agency ensure an independent investigation be carried out by the end of the year to identify whether the deal was affected by “maladministration,fraudulent activity or misconduct”.

“[The agency’s] insufficient probity practices and gaps in documentation mean that we are unable to exclude the possibility that the transaction was affected by misconduct or corruption,” her report said.

Labor finance spokesman Daniel Mookhey said “heads must roll” given taxpayers had lost more than $130 million in the deal,while a property developer had walked away with millions of dollars in a “mega-profit”.

“The corruption risk at the[Transport] Minister’s department is still real. The same disastrous rules that lead to this disaster are still in force,” he said.

NSW Transport Minister Andrew Constance said he was disgusted by the report’s findings,and committed to adopting all recommendations. “I’m furious and disgusted at this … what’s gone on here is bloody unacceptable,” he said. “This has to be cleaned up.”

Mr Constance said an internal investigation by Transport for NSW would be finished before the end of the financial year,and the new frameworks would be “bulletproof”.

“One of the recommendations to me is to weed out anything that could be perceived to be systemic and that’s what I’ll be doing with the new secretary,” he said. “You will see in this report someone has acted outside of their delegated authority.”

Mr Constance also referred the deal to the state’s anti-corruption watchdog in November.

That referral to the Independent Commission Against Corruption came more than two years after questions about the Camellia land deal were first raised in State Parliament.

In a letter to the Auditor-General,Transport for NSW’s recently installed secretary,Rob Sharp,acknowledged the deficiencies found in the handling of the acquisition,and said a “number of continuing risks” could undermine public confidence in the agency.

“Transport for NSW is committed to making the necessary changes,” he said.

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Adele Ferguson is a Gold Walkley Award winning investigative journalist. She reports and comments on companies,markets and the economy.

Matt O'Sullivan is transport and infrastructure editor at The Sydney Morning Herald.

Tom Rabe is the WA political correspondent,based in Perth.

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