Union accused of links to organised crime

4 February 2014

The Australian Broadcasting Corporation (ABC) has shown a documentary exposing links between officials of the Construction, Forestry, Mining and Energy Union (CFMEU) and criminal gangs.

A joint investigation by ABC and Fairfax Media has presented what researchers say is evidence of illegal dealings between union leaders, construction firms and organised crime.

The research team used secret recordings and gained access to bank records, police intelligence files and testimony from whistleblowers to paint a picture of illegal activity on Australia’s building sites.

Among the allegations made in the programme were:

  • Companies connected to major crime figures won contracts on private and government projects, including Victoria’s desalination plant and the A$6bn ($5.3bn) Barangaroo harbour redevelopment in Sydney.

  • Labour hire companies paid members of the underworld and union officials to arrange contracts for building projects, even though some of those companies had become infamous for failing to pay workers their full entitlements. According to the Sydney Morning Herald, a labour hire company run by Sydney and Melbourne crime figures won CFMEU endorsement despite owing union members more than A$1m in unpaid wages and entitlements.

  • Danny Berardi, a Victorian CFMEU organiser, had properties he owned renovated by two construction firms in return for arranging work on Melbourne construction sites. The breach of secret commission laws carries a penalty of up to 10 years in prison. Berardi resigned from the union last Monday.

  • Construction firms bribed union officials to help them win work. In a secretly recorded conversation, one building industry figure told a colleague that he had given cash bribes and other inducements to several members of the CFMEU’s hierarchy in the state of Victoria, along with lower-level shop stewards.

  • Two Victoria labour agencies, KPI and MC Labour, hired criminal figures and friends and relatives of union officials in return for help getting contracts on building projects, including a US$2.7bn Wonthaggi desalination plant south-east of Melbourne. It is alleged that a number of outlaw motorcycle gang members and their friends were given jobs at the plant.

  • Three members of the Comancheros biker gang tried to extort money from the national president of the Master Builders Association over a disputed debt.

The Network

The CFMEU has 140,000 members, making it one of Australia’s largest unions. It is a target for organised crime because it is able to pressure large builders to use certain subcontractors by threatening industrial action, or guaranteeing that a project will be strike-free.

The union is also in a position to force the subcontractors to pay bribes in return for union recognition, as union endorsement is all but essential for labour hire, traffic management, scaffolding and crane companies that want to bid for work packages on large projects.

A view of Sydney harbour

The programme team focused on the set of business dealings carried out by George Alex, a convicted criminal and businessman with links to biker gangs, underworld bosses and union officials.

Alex is the owner of a labour hire company that has won contracts in Victoria and New South Wales, including a US$1.5 billion, 60-storey hotel casino project at the Barangaroo development.

It is alleged that union figures helped Mr Alex obtain those contracts, despite the fact he has become notorious for running "phoenix" companies, which go into receivership then resurface under a different name.

In Victoria, it is alleged that Alex employed Melbourne underworld figure Mick Gatto to negotiate with the unions and obtain work for his labour hire companies.

The Reaction

Barry O’Farrell, the premier of New South Wales, said the accusations of corruption at Barangaroo, Australia’s largest urban construction site, should be investigated by police.

"Matters like this are of serious concern, not just to the state government but also to the construction sector," he said, but added that it was important to remember that only about 50 of the 600 workers at the site were involved in the allegations. "It appears to be a limited involvement by very colourful characters," the premier told reporters last week.

The homepage of the CFMEU’s website today contained a message from John Setka, the secretary of the union. In it, he claimed that ABC and Fairfax investigation is "rumour and hearsay beaten up as news".

He said: "The federal government wants you to have fewer rights and for employers to have more power. This is their agenda, plain and simple. But they can’t say that outright so they come after the union instead, throwing up all sorts of allegations time after time."

The website also shows a video of Dave Noonan, the union’s national secretary, in which he warns that Australians they should "have their bullshit detectors finely tuned as they are bombarded with anti-CFMEU propaganda".

Allegations of wrongdoing in Australian construction are not new. In 2001, the Australian government set up a Royal Commission to investigate the industry. This did not find specific instances of corruption, but concluded that the industry was characterised by a general "lawlessness", including unlawful strikes, intimidatory conduct, kickbacks, tax evasion and underpayment of workers.

To watch ABC’s secretly filmed footage, click here.

Story for GCR? Get in touch via email: [email protected]

Latest articles in Markets