Money for Nothing?
Lobbyist Frank Dunlop told the Planning Tribunal in Ireland that his phone would “walk off the desk” with calls from candidates seeking money as soon as a general election was called.
There are analogies with Australia.
For years the heavy reliance of both major Australian political parties on developer donations has been known. One developer (Jeff McCloy) memorably told the New South Wales (NSW) Independent Commission against Corruption he felt like a “walking ATM”.
Both givers and recipients have insisted that nothing is expected and nothing is given in return for these donations, and it has been impossible to disprove this “money for nothing” proposition. Instead it has been suggested that donations are simply a way of “participating in the political process”.
The Courts: donations as communication
The notion that donations are simply a way of “participating in the political process” reflects US Supreme Court jurisprudence, which has elevated donations to the status of “speech” and forbidden US legislatures to act to prevent anything short of “quid pro quo” corruption.
The Australian High Court followed the US Supreme Court part of the way along this path, characterising donations as a form of “political communication”. An attempt to confine donations to voters (as is the case in Canada) was successfully challenged in the Australian High Court by Unions NSW, on the basis that this was an unreasonable imposition on an “implied freedom of political communication” .
A recent challenge by McCloy to the constitutional validity of the pre-existing NSW ban on donations from property developers (in place since 2009), and caps on the amount of donations (in place since 2010), was however unsuccessful in both respects. The High Court rejected the US Supreme Court’s reasoning that governments may only limit political communication to prevent quid quo pro corruption. It confirmed that the prevention of both corruption and undue influence are valid reasons for legislatures to restrict political donations, and that in the final analysis, the Australian constitution must be interpreted to serve the interests of democracy. This should come as a great relief to Australian citizens.
Proving quid pro quo
Anti-corruption agencies with strong investigative powers (including the power to undertake covert operations) have uncovered what many suspected was the truth, both in Ireland and Australia.
There is now firm empirical evidence in both countries of cases in which donations from the property development sector have in fact had “strings attached”. Something was expected of public officials in return, whether explicitly stated or not, and that something was some form of rezoning or development approval, or an action that cleared the way for these approvals.
The reality of donor influence has been admitted in the public statements of some donors and some recipients in Australia, most recently in the submissions for the plaintiffs in the McCloy case in the High Court. This evidence is backed up by research in the field of psychology. A donation, like any gift, tends to activate the very human urge to reciprocate. The resulting cognitive bias may be genuinely unconscious, but it is real, and potent.
The Planning Tribunal
In Ireland the Tribunal of Inquiry into Certain Planning Matters and Payments (the “Planning Tribunal”) ran from 1997 to 2008 in Ireland, and made its final report in March 2012. It found 14 separate rezonings that had been influenced by corrupt, improper or inappropriate payments in the form (or guise) of political donations. The Tribunal made adverse findings against public officials from George Redmond, Dublin’s Assistant City and County Manager, right up to a Taoiseach, Bertie Ahern.
The approach taken by the Tribunal is encapsulated in a passage from its final report. The Tribunal found that the developer Owen O’Callaghan had provided his lobbyist Frank Dunlop with large amounts of cash (IR£80,000 in 1991 and IR£73,500 in 1992) and that most of this money was paid to councillors to ensure their support for the rezoning of land at ‘Quarryvale’:
“The Tribunal considered that such payments were always corrupt from the perspective of Mr Dunlop and Mr O’Callaghan, and were often (although not always), corrupt from the perspective of the recipients”.
Having considered an enormous amount of evidence, the Planning Tribunal developed a set of principles relating to payments to local councillors, covering both givers and recipients. These principles are summarised below.
In the eyes of the Planning Tribunal it was “probably corrupt” for a developer/landowner to pay money to an elected councillor, where:
(a) the developer/landowner was, or was likely to be, or to become, the subject of a decision by the County Council in which the councillor was an elected public representative;
(b) the councillor would be entitled to exercise the right to vote, or to otherwise act, in relation to such a decision.
Depending on the circumstances, however, the payment might alternatively be classed as “improper” or “inappropriate”. The Tribunal’s concept of improper or inappropriate payments corresponds with the concept of “undue influence”.
Donors often argued that payments could not be corrupt because they did not change the recipient’s actions, but this claim was either rejected or made no difference to the Tribunal’s overall view of them:
“The Tribunal did not consider it necessary that the recipient was actually influenced by the payment or even aware of the payer’s intention to influence him or her for the payment to be corrupt on the part of the payer”.
The principles applied by the Planning Tribunal in the case of the recipients of donations were:
a) It is corrupt to solicit or accept money from a developer/landowner, specifically in return for exercising his/her vote (or for undertaking any other act open to him/her to take in his/her role as a councillor);
b) It is corrupt for a councillor to exercise his/her vote in the expectation of a payment of money;
c) It is inappropriate, improper or corrupt to solicit or accept money from a developer/landowner, where it is known, believed, expected or suspected that land in which they have an interest is (or is likely) to be the subject of a rezoning/planning decision, in respect of which the councillor has any role.
In addition to being inappropriate, improper or corrupt (depending on the circumstances), the Tribunal regarded soliciting or accepting a donation in the above circumstances:
a) compromises the councillor’s disinterested performance of his/her duties as a councillor; and
b) constitutes an abuse of a councillor’s public office.
As in the case of donors, the Tribunal did not regard it as necessary that recipients could be shown to have actually changed their vote, to justify a corruption finding. The Tribunal did not however make findings of corruption against recipients unless they were aware that a donation was intended to influence them, and it accepted that “this level of conscious awareness by councillors in receipt of payments was not always present”.
The Tribunal did not set out a separate set of principles in relation to payments made to politicians at the national level, such as the IR£25,000 given by developer Owen O’Callaghan to Liam Lawlor TD during the November 1992 election campaign. Rather it made a number of findings broadly consistent with the application of the same principles it applied to the local level.
In this context it was unable to ascertain whether or not some of the hundreds of thousands of pounds acquired by Bertie Ahern, for which he had no sensible explanation, came from Owen O’Callaghan. Dunlop admitted he had paid IR£25,000 to someone at Powers Hotel in September 1993, but his memory uncharacteristically failed him, and he could not tell the Tribunal the name of the recipient.
Corruption and undue influence
Too often the critical question of donor influence is muddied by arguments about whether or not particular behaviour constitutes corruption. These arguments in turn spark debate about the presence or absence of a proximate and explicit connection between a donation and a particular outcome: a “quid pro quo”.
The inadequacy of the quid pro quo approach is starkly evident in evidence before the Planning Tribunal.
Whether or not behaviour constitutes corruption is a question of significance in terms of the possibility of sanctions against individuals. The issue for the integrity of planning systems is not however confined to corruption. It is the broader question of donor influence that has been brought into sharp focus by the work of anti-corruption agencies in Australia and in Ireland.
Points on a continuum
Corruption and undue influence are best thought of as sitting at different points on a continuum; with legitimate influence at one end, corruption at the other, and undue influence somewhere between the two. Maintaining the integrity of planning systems requires attention to undue influence, not just to behaviour that is clearly corrupt, and sometimes criminal (such as bribery).
The point at which influence on a public official becomes “undue influence” is hard to pinpoint, but that point has certainly been passed if money, including a political donation, has been paid to a person with influence over a decision affecting the donor. It has also been passed if a donor pays an intermediary to gain preferential access to decision makers.
In the McCloy case High Court Justice Gageler summarised the plaintiffs’ principal argument as an argument that caps on donations and prohibition of developer donations restricted political communication by ‘removing the preferential access to candidates and political parties which would otherwise come to those who have the capacity and incentive to make large political donations’. He continued:
“… The argument is as perceptive as it is brazen. It goes to the heart of the mischief to which the provisions are directed”. Justice Gageler concluded:
“…the elimination of preferential access to government which results from the making of political donations is a legitimate legislative objective. More than that, the elimination of that form of influence on government is properly characterised as a compelling legislative objective”.
The damage done
The cases revealed by the Planning Tribunal show that corruption and undue influence made a real difference to the location, density, and type of urban development in and around Dublin in the period in question. Ireland has been forced to demolish isolated and uncompleted “ghost estates” built in the rush of speculative development from 1995 to 2005. Some will be returned to farmland.
This bears out what geographer Peter John Perry predicted more than twenty years ago:
“For such are the geographies of almost everywhere: the rationale of corruption is after all to make a difference; the bribe is paid to ensure that things are made or located differently from what the law or even a narrow view of the market intended. Corruption acts alongside or within a matrix of other legitimate forces to shape our geographies and we ignore it our intellectual peril”.
If the planning system loses the ability to direct development to appropriate locations, at the right time, with the necessary services in place, this has physical and financial consequences for cities and regions; and for the people who live in them.
In the long run it also has consequences for democracy. The proper functioning of the democratic system is threatened by failure to deal adequately with the elevated risk attached to donations from the development industry.
The conflict of interest perspective
When considering how best to address the potential for donations to lead to undue influence as well as corruption, the conflict of interest perspective is useful. The Planning Tribunal’s concern for the disinterested performance of official duties reflects this perspective.
From a conflict of interest perspective it is the objective circumstances surrounding the making of a donation that count. There is no need for the fraught task of unlocking the inner workings of people’s minds to discern their motives. Elected representatives are placed in a position of serious conflict of interest if they or their parties become reliant on donations from industries highly dependent on government decisions. The development industry is such an industry.
The decisions made under planning systems and related systems are of high value. There is discretion in the making of planning rules, and often a degree of “flexibility” in applying them.
In the McCloy decision, High Court Justice Gordon noted:
“The value of land is peculiarly tied to governmental decisions relating to such matters as zoning and whether or not particular development applications are approved. These governmental decisions often involve State and local government officers in an individualised, discretionary decision-making process”.
Justice Gageler observed:
“The problem is not merely theoretical. The unfortunate experience in New South Wales has been one of exploitation of influence leading too readily to the corruption of official conduct”.
The conflict of interest perspective is capable of dealing with undue influence as well as corruption. It does not suggest personal culpability where that is not warranted (although sometimes, of course, it is). There is no basis for wounded feelings such as those expressed in the plaintiffs’ submissions to the High Court in the McCloy case, which portrayed the NSW ban on donations from property developers as:
“…an attempt to prevent socially undesirable persons from being seen to contaminate political parties and candidates with their influence”.
Transparency is not enough
Political donations regimes need to decisively address the conflict of interest created by donations from the development industry, to lessen the risk of corruption and undue influence. Declaring them is a grossly inadequate response.
The philosophy behind the disclosure approach is that “sunlight is the best disinfectant”, a quote taken from the work of American jurist Louis D Brandeis (1913,1914.). Australian legal academic Joo-Cheong Tham (2010) rightly calls this mantra “a snappy, but overstated case”.
Having examined the position in both Australia and Ireland, I have concluded that planning systems cannot co-exist with a weak political donations regime and retain their integrity.
It is not usually seen as sufficient for significant conflicts of interest to be dealt with simply by declaring them. A donations regime that goes no further than requiring the disclosure of donations is a weak political donations system. In a rare instance of upholding a complaint, Ireland’s Standards in Public Office Commission found it was remiss of Councillor Oisín Quinn to declare an interest in a building whose viability for high-rise development was to be changed by resolutions he was promoting in Dublin City Council but not to absent himself from the vote. The illogicality of such a position had entirely escaped the Council’s ethics officer who had advised such a course.
Greater public disclosure since the 1980s served a very useful purpose in Australia; it exposed the fact that Australia’s major political parties had become reliant on donations from the property industry, with the liquor and gambling industry not far behind. Transparency had revealed a potentially large problem, but of itself could do nothing to correct it.
A period of more muscular action began in New South Wales, in 2009 under Labor Premier Nathan Rees. Since 2009 property developers have been “prohibited donors” under the Election Funding, Expenditure and Disclosures NSW 1981. Donations from other groups highly dependent on government decisions – tobacco, liquor and gambling industry entities – were prohibited in 2010.
Still more muscular was Premier O’Farrell’s subsequent attempt to follow Canada’s lead, and confine donations to individuals on the electoral roll. Since there are many industries apart from the development industry dependent on government decisions, and government contracts, this comprehensive approach has much to recommend it. That approach fell foul of the High Court in Unions NSW.
The central role played by intermediaries is unmistakable. Lobbyists involved in securing and disbursing political donations, in tandem with lobbying decision-makers, feature in investigations in Ireland and in Australia. Indeed it seems that one of the ways to become a highly successful lobbyist has been to demonstrate your prowess at bringing in donations for the people you intend to lobby.
In the WA case of Whitby, Brian Burke, a former Premier of Western Australia, and his business partner Julian Grill wanted a particular public servant, Gary Stokes, promoted. Stokes was amenable to a rezoning request opposed by his Department. Grill was close to the Minister in charge of the Department, Bowler, and had run his campaigns in 2001 and 2005. In an intercepted conversation with Grill, Burke said of Stokes:
“One of the big things is to convince Bowler that he’ll be our bloke there and get Bowler to promote him”.
The CCC was satisfied that Burke and Grill duly attempted to influence Minister Bowler to remove the head of the Department and appoint Stokes.
In the worst of all possible worlds, political lobbyists occupy official positions in political parties. The prospects of both elected officials and candidates depend to a greater or lesser degree on the goodwill of a party head office dominated by the task of fundraising.
Tom Gilmartin knew this. His instincts took him first to two Ministers (Bertie Ahern and Pádraig Flynn) and then to the Head Office of Fianna Fáil to seek redress when he faced demands for money from Liam Lawlor TD, and from Councillor Hanrahan. According to a Bank of Ireland Manager, Sheeran, in whom Gilmartin confided shortly after making the payment:
“His primary object in making a donation to Fianna Fáil was to try and ensure that the people that were putting obstacles in his way for whatever reason, because they weren’t being paid money or were looking for money, would be admonished or disciplined or eliminated by the Fianna Fáil party”.
In NSW third-party lobbyists (and the individuals they engage to undertake the lobbying for them) are expected to “keep separate from their lobbying activities any personal activity or involvement on behalf of a political party” (NSW Lobbyists Code of Conduct 2014 clause 13).
Prosecutions: Analogies between Australia and Ireland
In Ireland, the Planning Tribunal’s findings of corruption were numerous, but successful prosecutions have been thin on the ground. This has been widely seen as a failure of the Tribunal to achieve much, despite its length and considerable expense.
Only Dunlop served time for corruption. Ray Burke and Liam Lawlor did spend time in jail, but for tax offences and contempt of the Tribunal respectively. Lawlor died in a car crash in Russia before any further charges could be laid against him.
Criticisms based on a perceived lack of prosecutions have also been levelled at the NSW ICAC. To some extent this reflects a lack of understanding that the responsibility for prosecutions sits with the DPP, not the ICAC. More fundamentally, though, it is not appropriate to judge the success of anti-corruption agencies solely, or even primarily, in terms of criminal prosecutions. They are there to expose the truth. It falls to others to serve up the just deserts.
In recent days, the NSW Electoral Commission has decided that the Liberal Party of Australia (NSW Division) is not eligible for payment of its current claims for about AUD$4.4 million in public funding, because it failed to disclose the identity of all major political donors in its 2011 declaration. Oral and documentary evidence from Liberal Party officials and agents from the Free Enterprise Foundation provided to ICAC in the course of its Operation Spicer Inquiry led the Electoral Commission to conclude that there were significant breaches of election funding laws.
Whether or not there are findings of corruption followed by prosecutions of individuals, it cannot sensibly be said that the efforts of the ICAC have come to naught. Nor is that a justifiable conclusion in Ireland. Ireland’s Criminal Assets Bureau has clawed back millions of euros from corrupt individuals and tenaciously continues to do so. In NSW the Criminal Assets Recovery Act 1990 allows for the same form of redress.
Law reform is another key outcome. The Planning Tribunal drew attention to the inadequacies of Irish law in relation to official corruption. The Criminal Justice (Corruption) Bill now in its final stages in Ireland gives effect to some of the Tribunal’s recommendations, and to several international agreements relating to corruption.
If all else fails, the levying of hefty tax bills and prosecution for tax evasion is an outcome that should not be sniffed at. It was, after all, tax offences that finally brought down the seemingly untouchable American gangster Al Capone.
RECOMMENDATION 1 Prohibit political donations from the property development industry, at all levels of government.
RECOMMENDATION 2 Prohibit political donations from political lobbyists, and bar lobbyists from official positions in political parties.
RECOMMENDATION 3 Introduce a presumption of corruption along the lines of that contained in the Irish Criminal Justice (Corruption) Bill: covering undeclared donations, exceeding allowable limits, by a donor who had or has an interest in the recipient “doing any act or making any omission in relation to his or her office, employment, position or business”.
RECOMMENDATION 4 Confine override provisions in planning systems to the variation of means, rather than ends. In NSW, this entails removing clause 4.6 (3) (b) from the Standard Instrument and requiring applicants to demonstrate consistency with objectives, in line with the assessment required by clause 4.6 (4) (ii).
RECOMMENDATION 5 Developing and drafting clear and robust objectives that function well when tested by override provisions should form part of the training of every planner.
Klosterman (1985) suggests that the “great debate” of the 1930s and 1940s between proponents of government planning and defenders of free markets and laissez-faire has never really ended:
Contemporary arguments for abandoning planning, reducing regulation, and restricting the size of government are generally accompanied by calls for increased reliance on private entrepreneurship and the competitive forces of the market. That is, it is often argued, government regulation and planning are unnecessary and often harmful because they stifle entrepreneurial initiative, impede innovation, and impose unnecessary financial and administrative burdens on the economy.
Challenges to the legitimacy of the planning system have intensified in the neoliberal era in which we still live. A recent example is the nomination of planning and zoning rules as one of three priority areas for review, in a review of competition policy in Australia. The Harper Report argues that:
Planning systems by their nature create barriers to entry, diversification or expansion, including through limiting the number, size, operating model and mix of businesses. This can reduce the responsiveness of suppliers to the needs of consumers.
A 2015 article in the Economist complains that:
London has strict rules preventing new structures blocking certain views of St Paul’s Cathedral. Google’s plans to build housing on its Mountain View campus in Silicon Valley are being resisted on the ground that residents might keep pets, which could harm the local owl population. Nimbyish residents of low-density districts can exploit planning rules on everything from light levels to parking spaces to block plans for construction.
The Economist sees an association between planning controls and higher house prices, arguing ‘many households are priced out of more vibrant places. It is no coincidence that the home-ownership rate in the metropolitan area of downtrodden Detroit, at 71%, is well above the 55% in booming San Francisco.’ The article contains the claim that:
… lifting all the barriers to urban growth in America could raise the country’s GDP by between 6.5% and 13.5%.
In Ireland, influential economist Colm McCarthy often argues that corruption of the planning process is rooted in Ireland’s anti-market fundaments: “Restrictive planning rules, which make planning permission scarce, are an ingredient in the corrupting of politics all over the world” (Sunday Independent, 2012).
Such views have been institutionalised too. For example, in his evidence in June to the Banking Inquiry the former chief economist of the Central Bank, Tom O’Connell, submitted that: “the demand mania for property took off against the background of restrictive zoning which limited the supply of housing: the inevitable result was huge property price inflation”.
On the other hand, the diagnoses and the prescriptions of neoliberal ideology are not universally accepted. There is strong public support for the regulation of development, for a variety of social, environmental, amenity and financial reasons. An attempt to add to the changes made to the NSW biodiversity offset scheme late in 2014 ‘the opportunity to reduce the value of the required offset if a project’s social or economic benefit is deemed significant enough’ was also fiercely opposed and eventually abandoned by the NSW State government.
Opinions will differ on whether or not it is appropriate to insist that planning regulations should work in the interests of “consumers”. Some might see themselves as citizens living in a society, not consumers living in a marketplace. Different perspectives and ideologies will produce different views of what constitutes “the public interest”.
So, while the Economist might have a problem with planning controls protecting views of St Paul’s Cathedral, Londoners and visitors might well regard views of Wren’s masterpiece as, literally, priceless. The Economist (2015) itself anticipates (and rejects) the retort: ‘give economists their way, and they would quickly pave over Central Park’.
Julie Walton BA LLB, MTCP, is qualified both as a lawyer and as an urban planner (MTCP). She served as a City of Sydney Councillor from 1991 to 1999 and was a Principal Officer at the Independent Commission Against Corruption, working in the Corruption Prevention Division. She is the University of Sydney’s Henry Halloran Trust’s practitioner in residence.