The reclusive mining baron behind several major developments in Byron Bay has been named as one of seven directors of a mining company each of whom stood to make $60 million from a coal-exploration licence deal being investigated by the Independent Commission Against Corruption (ICAC).
Queensland coal miner and property developer Brian Flannery, the owner of the 88-hectare North Byron Beach Resort property (the old Club Med/Becton site), is also one of seven investors who own private company Cascade Coal and is the managing director of a much larger publicly listed miner, White Energy.
ICAC heard this week how Cascade Coal in 2009 acquired the mining rights over several Hunter Valley rural properties for $1 million then soon after tried to sell them to White Energy for $500 million, with each Cascade investor including Mr Flannery set to make $60 million when they sold.
But the deal collapsed after an independent White Energy director rang alarm bells over what counsel assisting the inquiry, Geoffrey Watson SC, described as an attempt to conceal the involvement of Labor powerbroker Eddie Obeid’s family in the deal ‘to mislead the other directors and owners of White Energy’.
ICAC is examining the circumstances that allowed Mr Obeid and his family to make a staggering $100 million from disgraced former mining minister Ian Macdonald’s decisions.
The Obeids had secret inside information on who would win the government tender, allowing them to partner with the successful bidder Cascade Coal and later to secure, through a web of companies, a $60 million payout from Cascade from the mining project.
The commission has heard how the Obeid family and associates used confidential information provided by Mr Macdonald to buy three rural properties at Mount Penny in the Hunter Valley, in a scheme which would return the family a $100 million profit once coal-exploration licences were granted for the area.
Late in 2008 Cascade Coal won the lucrative exploration tender for the area and in 2009 also agreed to buy the three rural properties for four times their purchase price, giving the Obeids and associates a profit of almost $26 million on that deal.
Mr Watson told the inquiry that ‘for an outlay of about $1 million, Cascade Coal had acquired rights which they were reselling for $500 million’.
He said this was in effect ‘a kind of “gift” of $500 million from us, the people of NSW, to the investors of Cascade Coal’.
The beneficiaries of this ‘gift’ were already ‘very wealthy men’, Mr Watson said.
According to reports on the hearings by the Sydney Morning Heralds’ Kate McClymont and Linton Besser, White Energy had set up an independent committee to examine the possible purchase of Cascade Coal’s only asset, the mining tenement in the Hunter Valley covering the properties bought off the Obeids.
But Mr Watson said the head of that committee, Graham Cubbin, a former senior executive at Consolidated Press, was lied to by Cascade in that he and the committee were told the Obeids had no involvement in the deal, when they had already been paid $30 million.
Mr Watson said Mr Macdonald was to have received ‘a substantial payment’ when the Cascade and White Energy deal was completed. The SMH report says Cascade is seeking other buyers for the Mount Penny tenement.
The background to the deal, according to the SMH, began when two of Cascade’s investors, lawyers John McGuigan and Richard Poole, met with Moses and Paul Obeid, the sons of Eddie Obeid in 2009 ‘hoping to make a deal of a lifetime’ for the seven ‘canny’ investors.
The SMH says the deal involved the Obeids and associates withdrawing their disguised bid for a lucrative coal-exploration licence at Mount Penny and in return, they expected a 25 per cent share in the project.
Cascade, according to the SMH report, agreed to the Obeids’ offer ‘because the family of the most powerful person in the Labor Party in NSW knew their bid was ranked first and Cascade Coal’s offer was second. With the Obeids out of the way, Cascade Coal would win.’
‘Thirteen days later, the department made it official: Cascade Coal would take the licence for Mount Penny for a paltry $1 million departmental fee.
‘As soon as Cascade won the licence, it began negotiating to sell it to White Energy, a company whose directors included five of the same seven men’, including Brian Flannery and fellow coal baron Travers Duncan, the chairman of White Energy.
‘Cascade wanted $500 million. While wearing both hats, these men negotiated between themselves to give each other a $60 million profit,’ Mr Watson told the inquiry.
Comment from Mr Flannery over the issue was unavailable at the time of going to press.
Mr Flannery’s major proposed development in Byron Shire is a resort with around 193 cabins at the old Byron Bay Beach Resort site, which will be determined by the state’s Planning Assessment Commission.
He paid $18.5 million early last year through his family company Ganra Pty Ltd for the 88-hectare prime beachfront site formerly owned by Becton and Club Med, which had existing approval for the resort, but with fewer cabins.
It also came with a hotel licence and Mr Flannery is proposing to relocate it to a tavern/bistro on part of the land closer to the Sunrise Beach estate. The bistro/drive-through bottleshop has already been approved.
Mr Flannery is also trying to establish a cultural events and festival site on the land, which Byron Shire Council will soon determine.
Sunrise Beach residents have formed an action group to raise awareness about the cumulative impacts of Mr Flannery’s three proposed developments.
According to a News Ltd report, Mr Flannery recently bought $27 million worth of Gold Coast property, including the Kirra Beach Hotel, since making $530 million from the $3.5 billion sale of Felix Resources to China’s Yanzhou Coal Mining in 2009.
The mining magnate is believed to have an estimated fortune of more than $600 million.