Opposition finance minister Andrew Robb took aim at the country's $400 billion-plus industry super fund sector today, saying there was a stench that had its roots in a cultural problem inside the unions and the ALP.
Robb made the comments as new allegations emerged that Electrical Trade Union (ETU) Victoria union state secretary Dean Mighell was under investigation over the sale of his union's majority stake in a financial advisory company, Southern Alliance Financial Services, allegedly at a price well below its market value.
It also comes as the industry fund for ETU members, the $3.5 billion Energy Industries Superannuation Scheme (EISS), is trying to sell its third party administrator FuturePlus as well as its stake in Chifley Financial Services. The Australian Workers Union bought one third of Chifley in June 2010 after EISS and Unions NSW sold down their 50 per cent stakes.
Chifley has returned more than $11 million in profit dividends since 2005. These profits are shared with its stakeholders Unions NSW, EISS and AWU. The AWU is in the process of buying EISS's remaining 33 per cent stake.
The AWU's initial 33 per cent purchase of the profitable Chifley followed the release of the Joint NSW parliamentary committee recommending banning union dues for campaign purposes.
The EISS became enmeshed in controversy when APRA raised concerns over structural changes and executive departures at FuturePlus, which is EISS' administration arm.
The Audit Office of NSW said in an audit opinion of EISS published last year that the fund might have to provide funding to FuturePlus to remain compliant and that trustees might have to consider a merger of the super fund to ensure an efficient structure.
"EISS may need to provide funding to FuturePlus to support infrastructure investments to comply with the proposed Stronger Super regulatory reform," the NSW auditor-general said.
The fund's arrangements also triggered a lawsuit last year when Dean Mighell lodged a statement of claim in the Federal Court seeking the repayment of $1.8 million from Bernie Riordan, who at the time was NSW secretary of the ETU. The lawsuit centred on the fees Riordan collected as a director of the EISS, FuturePlus and Chifley Financial Services. The claim was withdrawn in February and curiously, a month later, Riordan was appointed a commissioner of Fair Work Australia.
In March, Riordan resigned from the union and a month later resigned as chairman of Futureplus. He was on the board of EISS since 1998 and chairman of the investment committee since 2002. He resigned last year.
Since the introduction of Fair Work, super funds are written into industrial awards. This means retail funds find it almost impossible to get default fund status. Not so for industry funds.
The country's compulsory super industry turned 20 last year. It has a lot to be proud of in terms of helping Australians amass so much personal wealth. But in the interests of its owners, vested interests should take a back seat and let the industry live and thrive in the 21st century.
As Robb said today: "They run fast and loose with other people's money and it is a continuing saga of mismanagement with a smell about it," he said.
"It doesn't help that you have the minister with a union and industry fund background who has ignored recommendations for change that in the corporate world would see this as legitimate calls for change."