Victorian government must tighten lobbying, financial interest rules

Victorian Assistant Treasurer Danny Pearson says he made an honest mistake in failing to disclose a potential conflict of interest over his ownership of shares in the Commonwealth Bank.

In 2021, Pearson was responsible for making the announcement that the Victorian government was ending its exclusive financial services contract with Westpac. Consequently, the government gave the work, believed to be worth about $120 million a year, to a panel made up of Westpac, NAB and the Commonwealth Bank. At the time, Pearson had owned Commonwealth Bank shares for a number of years.

Assistant Treasurer Danny Pearson says he held the shares for more than a decade.Credit:Luis Enrique Ascui

The state opposition subsequently obtained documents under freedom of information laws that showed Pearson had received at least seven briefings in 2020 and 2021 relating to the government’s banking contracts.

On Tuesday, Pearson said that while he had periodically declared the shares on the parliamentary register of members’ interests, he acknowledged his ownership had created the “potential for a perception of conflict of interest”. It had been an “oversight”, he said, and it had simply not occurred to him at the time. He said he had not been the “decision maker” in the tender process, which had been run by senior public servants, but apologised anyway.

A credible explanation, but not a particularly edifying one. Would that we all could just forget about a shareholding, like so much loose change down the back of the sofa. Pearson’s declaration does not make clear the size of the shareholding, and the government was not clarifying.

More concerning is how this episode speaks to our parliamentarians’ standards overall: whether Pearson’s mea culpa stems from an unfortunate one-off that just happened to be uncovered, or if it reflects a loose attitude to potential conflicts of interest in the Victorian government more widely.

Premier Daniel Andrews said he had assumed that Pearson had already put the shares in a blind trust, and if he hadn’t, would do so now as the appropriate thing to do. Had nobody checked Pearson’s register of interests before now?

That should not be the end of the matter. Blind trusts can themselves be problematic.

In theory, they allow somebody – an MP, a company chief executive – to make investments at arm’s length, with a trustee making decisions on the investor’s behalf to avoid conflicts of interest. However, integrity expert and former Court of Appeal judge Stephen Charles, KC, has said that, in his view, blind trusts are not a “real assistance” to protect ministers from conflicts of interest, real or perceived as “the ministers already know what the contents of the trust are and the shares they have in there”.

The Christian Porter episode also showed that questions can be raised about the relationship between the beneficiary of a blind trust and its trustee/s. The former attorney-general resigned from federal cabinet in 2021 rather than reveal who controlled the trust that had furnished legal fees for his defamation action against the ABC.

We observed at the time: “He says he had no access to information about the conduct and funding of the trust. From the public’s point of view, however, without knowing who gave him the money or the amount, it is impossible to know whether he has complied with the ministerial code of conduct.” In 2022, the Albanese government sought to crack down on such arrangements by tightening the ministerial code of conduct.

There are growing concerns, also, about the extent to which lobbying is regulated in Victoria following the revelations on Wednesday that former Labor minister Theo Theophanous had contacted ministers, advisers and bureaucrats on behalf of a Chinese-backed construction consortium, and instead of payment, had solicited donations and help in kind for his daughter’s 2018 state election campaign in the seat of Northcote.

Victoria’s Independent Broad-based Anti-corruption Commission (IBAC) found Theophanous had acted improperly while he was on the board of the Victorian Planning Authority. Acting Commissioner Stephen Farrow said the three-year investigation had shown there was a pressing need to reform Victoria’s donation and lobbying regulations to bring them into line with those in other states and territories.

The government has already said it supports the IBAC recommendations and is ready to make “any further necessary changes”. Given previous similar recommendations regarding lobbying rules, it should ensure it acts on this pledge.

The Pearson revelations, meanwhile, demonstrate it should also take a hard look at its ministerial code of conduct. If its ministers cannot be trusted to manage their shareholdings in a responsible way that avoids all real or potential conflicts of interest – as they are required – it may be simpler to follow the federal government’s lead and tighten the rules to bar them entirely from any investments other than those, such as industry super funds, over which they have absolutely no control.

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