· Charif Kazal’s role 33 Mr Kelly’s con¡ict of interest 34 Charif Kazal 34 Corrupt conduct 35 Section 74A(2) statement 36 Chapter 9: Alleged intimidation 37 Differing versions

ICAC REPORT� DECEMBER 2011

INVEST�IGAT�ION INT�O T�HE UNDISCLOSED CONFLICT� OF INT�EREST� OF A SENIOR EXECUT�IVE OF T�HE SYDNEY HARBOUR FORESHORE AUT�HORIT�Y

INVESTIGATION INTO THE UNDISCLOSED CONFLICT

OF INTEREST OF A SENIOR EXECUTIVE OF

THE SYDNEY HARBOUR FORESHORE AUTHORITY

ICAC REPORT DECEMBER 2011

© ICAC

This publication is available on the Commission’s website www.icac.nsw.gov.au and is available in other formats for the vision-impaired upon request. Please advise of format needed, for example large print or as an ASCII file.

ISBN 978 1 921688 28 7

© December 2011 – Copyright in this work is held by the Independent Commission Against Corruption. Division 3 of the Copyright Act 1968 (Cwlth) recognises that limited further use of this material can occur for the purposes of “fair dealing”, for example study, research or criticism, etc. However if you wish to make use of this material other than as permitted by the Copyright Act, please write to the Commission at GPO Box 500 Sydney NSW 2001.

Level 21, 133 Castlereagh Street Sydney, NSW, Australia 2000

Postal Address: GPO Box 500, Sydney, NSW, Australia 2001

T: 02 8281 5999 1800 463 909 (toll free for callers outside metropolitan Sydney) TTY: 02 8281 5773 (for hearing-impaired callers only) F: 02 9264 5364 E: [email protected] www.icac.nsw.gov.au

Business Hours: 9.00 am - 5.00 pm Monday to Friday

© ICAC

The Hon Don Harwin MLC The Hon Shelley Hancock MLAPresident SpeakerLegislative Council Legislative AssemblyParliament House Parliament HouseSydney NSW 2000 Sydney NSW 2000

Mr PresidentMadam Speaker

In accordance with section 74 of the Independent Commission Against Corruption Act 1988 I am pleased to present the Commission’s report on its investigation into the undisclosed conflict of interest of a senior executive of the Sydney Harbour Foreshore Authority.

I presided at the public inquiry held in aid of this investigation.

The Commission’s findings and recommendations are contained in the report.

I draw your attention to the recommendation that the report be made public forthwith pursuant to section 78(2) of the Independent Commission Against Corruption Act 1988.

Yours sincerely

The Hon David Ipp AO QCCommissioner

4 ICAC REPORT Investigation into the undisclosed conflict of interest of a senior executive of the Sydney Harbour Foreshore Authority

Chapter 4: Events leading up to the first UAE trip 16

How the trip came about 16

Purpose of the trip 16

Who invited Mr Kelly? 16

Who invited Mr Kelly: conclusions 19

Karl Kazal’s involvement 19

Chapter 5: The May 2007 trip 22

Who paid Mr Kelly: the evidence 22

Who paid Mr Kelly: findings 25

What was done on the trip 25

Chapter 6: Between trips 27

The joint venture 27

Mr Kelly’s work on the joint venture 27

Mr Kelly’s work at the SHFA 29

Chapter 7: The January 2008 trip and aftermath 30

Mr Kelly’s work at the SHFA 30

A job offer 30

Deletion of email address and emails 31

The falling out 32

Summary of investigation and results 6

Results 6

Recommendation that this report be made public 7

Chapter 1: The investigation 8

How the investigation came about 8

Why the Commission investigated 8

Conduct of the investigation 9

The public inquiry 9

A note on the evidence 10

Chapter 2: Sydney Harbour Foreshore Authority (SHFA), Andrew Kelly and others 11

The SHFA 11

Andrew Kelly 11

Charif Kazal 11

Karl Kazal 12

Rodric David 12

Chapter 3: The Kazal leases 13

The Kazal tenancies 13

Other interactions 15

Contents

5ICAC REPORT Investigation into the undisclosed conflict of interest of a senior executive of the Sydney Harbour Foreshore Authority

Chapter 8: Conflict of interest? Findings and section 74A(2) statement 33

Mr Kelly’s obligations 33

Charif Kazal’s role 33

Mr Kelly’s conflict of interest 34

Charif Kazal 34

Corrupt conduct 35

Section 74A(2) statement 36

Chapter 9: Alleged intimidation 37

Differing versions 37

The CCTV footage 38

Findings 38

Section 74A(2) statement 38

Chapter 10: Corruption prevention 39

Appendix 1: The role of the Commission 42

Appendix 2: Sections 8 and 9 of the ICAC Act 43


There was insufficient evidence to establish whether any action taken by Mr Kelly in relation to Kazal leases was, in fact, adversely affected by his conflict of interest.

Chapter 8 also contains a finding that Charif Kazal acted corruptly by holding out the prospect of employment in the UAE to Mr Kelly and paying him $11,170 for his flight and accommodation expenses arising from a trip to the UAE in May 2007, with the intention that these would tend to influence Mr Kelly to exercise his official SHFA functions in a manner favourable to Kazal business interests.

A statement is made pursuant to section 74A(2) of the Independent Commission Against Corruption Act 1988 (“the ICAC Act”) that the Commission is of the opinion that consideration should be given to obtaining the advice of the Director of Public Prosecutions (DPP) with respect to the prosecution of Mr Kelly for the common law offence of misconduct in public office in relation to his failure to declare his conflict of interest. As Mr Kelly is no longer a public official it is not necessary to make any recommendation in relation to the taking of disciplinary or dismissal action.

A statement is also made that the Commission is of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of Charif Kazal for an offence under section 87 of the ICAC Act of giving false evidence to the Commission that he never intended to settle Mr Kelly’s accommodation account for a trip to the UAE in May 2007.

Chapter 10 of the report sets out the Commission’s review of the corruption risks present at the time the conduct occurred.

One of the difficulties in the investigation was that the appropriateness and quality of tenancy decisions made by the SHFA were difficult to assess. This could lead to decision-makers acting on a conflict without a high risk of detection. The risk of detection is likely to increase where decision-making is controlled and there is limited opportunity for one person to make inappropriate decisions or to influence the decision-making process. The

This investigation by the Independent Commission Against Corruption (“the Commission”) concerned two allegations.

The first allegation was that from early 2007 to early 2008 Andrew Kelly, a senior executive of the Sydney Harbour Foreshore Authority (SHFA), acted in conflict with his official duties when dealing with Charif Kazal and members of the Kazal family in relation to properties at The Rocks, which were owned by the SHFA and leased to Kazal family businesses, at a time when Mr Kelly was, or anticipated being, involved with Charif Kazal and members of the Kazal family in private business.

The second allegation was that Charif Kazal sought to improperly influence the exercise of Mr Kelly’s official functions by holding out the prospect of Mr Kelly being involved with Charif Kazal and members of the Kazal family in a private business in the United Arab Emirates (UAE), and paid Mr Kelly for his expenses associated with a trip to the UAE in May 2007 intending thereby to influence Mr Kelly to act in a manner favourable to Kazal business interests when dealing with Kazal tenancies at The Rocks.

ResultsThe Commission found that Mr Kelly had a common goal with Charif Kazal to work towards the establishment of a joint venture business in the UAE which, if established, would financially benefit both of them. Mr Kelly had received $11,170 from Charif Kazal as payment for flight and accommodation expenses he had incurred in May 2007 when working towards the establishment of such a business. As such, Mr Kelly had a conflict of interest involving Charif Kazal, which could influence or appear to influence him in the discharge of his official SHFA duties when dealing with matters affecting the Kazal tenancies.

A finding is made in chapter 8 of the report that Mr Kelly engaged in corrupt conduct by deliberately failing to disclose his conflict of interest and continuing to deal with matters affecting Kazal tenancies.

Summary of investigation and results


Commission’s corruption prevention recommendations are designed to ensure the robustness of the decision-making process, thereby making it difficult to inappropriately influence this process.

The Commission has made the following recommendations:

Recommendation 1That responsibility, authority and accountability for heritage protection be located within a single, independent role with a commensurate level of seniority within the Sydney Harbour Foreshore Authority (SHFA).

Recommendation 2• That heritage considerations relevant to any

decision on SHFA properties should record the factors considered and the reasons for decisions, and full transparency be given to both the matters considered and the reasons for the decisions.

• That the SHFA includes heritage considerations as a standard component in all board papers and executive memoranda dealing with property and leasing matters.

Recommendation 3That the SHFA establishes a formal process that tenants are required to follow when applying for compensation on works they have carried out on SHFA properties (including a report prepared by suitably qualified professionals that documents the work undertaken, why it was necessary, and an itemised list of expenditure).

Recommendation 4That where a recommendation to the general manager and board of the SHFA would provide a significant client benefit, a comprehensive written business case is to be provided to the general manager and board by the responsible director.

These recommendations are made pursuant to section 13(3)(b) of the ICAC Act and, as required by section 111E of the ICAC Act, will be furnished to the SHFA and the responsible minister, being the minister for planning and infrastructure.

As required by section 111E(2) of the ICAC Act, the SHFA must inform the Commission in writing within three months (or such longer period as the Commission may agree to in writing) after receiving the recommendations, whether it proposes to implement any plan of action in response to the recommendations and, if so, of the plan of action.

In the event a plan of action is prepared, the SHFA is required to provide written a report to the Commission of its progress in implementing the plan 12 months after informing the Commission of the plan. If the plan has not been fully implemented by then, a further written report must be provided 12 months after the first report.

The Commission will publish the response to its recommendations, any plan of action and progress reports on its implementation on the Commission’s website, www.icac.nsw.gov.au, for public viewing.

Recommendation that this report be made publicPursuant to section 78(2) of the ICAC Act, the Commission recommends that this report be made public forthwith. This recommendation allows either Presiding Officer of the Houses of Parliament to make the report public, whether or not Parliament is in session.


This investigation concerned an allegation that from early 2007 to early 2008 Andrew Kelly, a senior executive of the Sydney Harbour Foreshore Authority (SHFA), acted in conflict with his official duties when dealing with Charif Kazal and members of the Kazal family in relation to properties at The Rocks, which were owned by the SHFA and leased to Kazal family businesses, at a time when Mr Kelly was, or anticipated being, involved with Charif Kazal and members of the Kazal family in private business.

The Commission also investigated an allegation that Charif Kazal sought to improperly influence the exercise of Mr Kelly’s official functions by holding out the prospect of Mr Kelly being involved with Charif Kazal and members of the Kazal family in a private business in the United Arab Emirates (UAE), and paid Mr Kelly for his expenses associated with a trip to the UAE in May 2007 intending thereby to influence Mr Kelly to act in a manner favourable to Kazal business interests when dealing with Kazal tenancies at The Rocks.

Corrupt conduct is defined in sections 8 and 9 of the Independent Commission Against Corruption Act, 1988 (“the ICAC Act”). These sections are set out in Appendix 2 of the report.

For the purpose of section 8 of the ICAC Act, the conduct alleged against Mr Kelly could constitute corrupt conduct as such a conflict of interest on his part could adversely affect, either directly or indirectly, the honest or impartial exercise of his official SHFA functions and therefore come within section 8(1)(a) of the ICAC Act and could constitute or involve a breach of public trust, and therefore come within section 8(1)(c) of the ICAC Act.

For the purpose of section 9 of the ICAC Act, the conduct alleged against Mr Kelly could fall within section 9(1)(a), on the basis that it could constitute or involve a criminal offence, namely the common law offence of misconduct in public office. Such conduct could also fall within sections 9(1)(b) and 9(1)(c) of the ICAC Act, on the basis that it could constitute a disciplinary offence and reasonable grounds for dismissal on the basis of misconduct.

For the purpose of section 8 of the ICAC Act, the conduct alleged against Charif Kazal could constitute corrupt conduct because such conduct could adversely affect the honest or impartial exercise of Mr Kelly’s official functions, and therefore come within section 8(1)(a) of the ICAC Act.

For the purpose of section 9 of the ICAC Act, Charif Kazal’s conduct, if established, could fall within section 9(1)(a) on the basis that his conduct could constitute or involve the criminal offence of offering a corrupt commission or reward pursuant to section 249B(2) of the Crimes Act 1900 (“the Crimes Act”).

How the investigation came aboutOn 14 July 2010, the Commission received a complaint alleging that Mr Kelly was involved in a business relationship with Charif Kazal and a Kazal family business at a time when, in his capacity as a SHFA officer, Mr Kelly was dealing with a number of issues arising from the leasing of SHFA properties to Kazal companies. A number of articles also appeared in the Sydney Morning Herald alleging Mr Kelly favoured the Kazals when dealing with their leases at the SHFA, and that Charif Kazal repaid Mr Kelly by favouring him with trips to the UAE and a high paying position of employment in a company in which Charif Kazal exercised some control.

Why the Commission investigatedOne of the Commission’s principal functions, as specified in section 13(1)(a) of the ICAC Act, is to investigate any allegation or complaint that, or any circumstances which in the Commission’s opinion imply that:

i. corrupt conduct, or

ii. conduct liable to allow, encourage or cause the occurrence of corrupt conduct, or

Chapter 1: The investigation


iii. conduct connected with corrupt conduct,

may have occurred, may be occurring or may be about to occur.

The matters brought to the Commission’s attention were serious. Public officials, and in particular those in senior decision-making roles, must avoid situations in which private interests can affect their public duties. Where conflicts of interest arise, it is vital that they are disclosed and managed effectively so that public officials perform their duties in a fair and unbiased manner and that their decisions are not affected by self-interest or private affiliations. The existence of such conflicts adversely affects public confidence in the integrity of public administration.

The Commission decided that, particularly as Mr Kelly was a senior SHFA officer at the time of the alleged conduct, it was in the public interest to conduct an investigation for the purpose of establishing whether corrupt conduct had occurred and to ascertain whether there were any corruption prevention issues that needed to be addressed.

The Commission’s role is explained in more detail in Appendix 1.

Conduct of the investigation During the course of the investigation, the Commission:

• issued six notices under section 21 of the ICAC Act (requiring the production of statements of information)

• issued 38 notices under section 22 of the ICAC Act (requiring the production of documents)

• executed two search warrants to obtain information

• interviewed and/or took statements from a number of persons

• conducted 11 compulsory examinations.

There was evidence that Mr Kelly had travelled to the UAE with Charif Kazal and others on two occasions for the purpose of exploring business opportunities which, if they eventuated, would involve a benefit to both Mr Kelly and Charif Kazal. The first occasion was between 26 May and 2 June 2007. The second occasion was between 16 and 26 January 2008. There was evidence that between the two trips Mr Kelly had prepared work to further a proposed business venture involving himself, Charif Kazal and others. Mr Kelly left the SHFA in early 2008 and eventually came to work for a company in the UAE in which Charif Kazal had indirect, part ownership. Mr Kelly had not declared any conflict of interest to the SHFA arising from his dealings with Charif Kazal. There was also evidence that Mr Kelly, in his capacity as an officer of the SHFA, had continued to deal with matters connected with SHFA property leased to a Kazal family business.

The public inquiryAfter taking into account the information that had been gathered during the investigation and each of the matters set out in section 31(2) of the ICAC Act, the Commission determined that it was in the public interest to hold a public inquiry. In making this determination, the Commission had regard to the following considerations:

• the risk of undue prejudice to the reputation of Mr Kelly, relevant members of the Kazal family and others

• the seriousness of the conduct under investigation

• there was cogent evidence that supported the allegations

• the public interest in exposing the relevant conduct was not outweighed by any public interest in preserving the privacy of the persons concerned.

The Hon David Ipp AO QC, Commissioner, presided at the public inquiry. Robert Newlinds SC acted as Counsel Assisting the Commission. The public inquiry


was conducted over eight days from 25 July to 3 August 2011. Mr Kelly, Charif Kazal and 11 other witnesses gave evidence.

At the conclusion of the public inquiry, Counsel Assisting the Commission prepared submissions setting out the evidence, and the findings and recommendations the Commission could make based on the evidence. These submissions were provided to all relevant parties. The Commission also wrote to relevant parties setting out further details of findings that were under consideration by the Commission. The Commission received submissions in response that were taken into account in preparing this report.

A note on the evidenceDuring the course of the public inquiry, important witnesses, including Mr Kelly, Charif Kazal and Rodric David (whose evidence affected both Mr Kelly and Charif Kazal) admitted that in dealings with prospective UAE business partners they lied in regard to relevant issues at one time or another or made false representations. Several relevant documents were deliberately created to bring about a false impression. There had also been a falling out between Mr David, on the one hand, and the Kazals and Mr Kelly on the other hand. Accordingly, the Commission has approached their evidence and the documentary evidence with caution. Rather, the Commission has paid particular regard to facts that are irrefutable or are common ground or cannot be challenged as well as overall probabilities.


The SHFA The SHFA was constituted as a corporation by the Sydney Harbour Foreshore Authority Act 1998 (“the SHFA Act”), which commenced on 1 February 1999. The Darling Harbour Authority was amalgamated with the SHFA on 1 January 2001. In April 2011, the SHFA became a division of the NSW Department of Planning and Infrastructure.

The SHFA owns and manages property at The Rocks and Darling Harbour. It leases property at The Rocks to commercial businesses.

Robert Lang was the chief executive officer of the SHFA from July 2003 to July 2008. Mr Kelly was one of four executive directors who reported directly to Dr Lang.

Andrew KellyBetween 1986 and 1999 Mr Kelly was employed in various roles in local government. Between May 1999 and December 2000 he was the director of business services for the Darling Harbour Authority. After a short stint in private business as a consultant, he was appointed to the position of SHFA executive director, business and financial services. He held this position between August 2001 and September 2004, when he was appointed to the position of executive director, tenant and asset management services (TAMS).

As executive director, TAMS, Mr Kelly’s duties included negotiating and dealing with leases between the SHFA and its tenants, property maintenance and capital works improvements. He also undertook project management services in which he ensured delivery of capital works projects.

From about April 2007, responsibility for dealing with day–to-day tenant management issues, collection of rent and overdue payments became the responsibility of Debra Dawson, who was initially the SHFA’s general manager, The Rocks and Circular Quay. Her position was later

renamed director, The Rocks and Circular Quay Precinct. Mr Kelly had responsibility for managing leases, renewing leases and negotiating new leases. Ms Dawson, however, did not have delegated authority to make decisions. She could only make recommendations. Approval of her recommendations rested with Mr Kelly and the chief executive officer of the SHFA.

After leaving the SHFA in April 2008, Mr Kelly was eventually employed by a UAE company called International Property Services UAE. That company was in turn owned by two other companies, 4N Property LCC and IPS Cayman Islands Ltd. The latter company was, in turn, owned by another Cayman Islands company, Emergent Capital Ltd, which was, in turn, owned by two other companies, KTC LCC and a company owned by Mr David. KTC (the letters of which stand for Karl, Tony and Charif Kazal) LCC is a Kazal company, of which Charif Kazal holds half the shares.

Charif Kazal Charif Kazal was not a director of any of the Kazal companies that had leases with the SHFA. Nevertheless, in the period under investigation by the Commission, it was primarily he who dealt with Mr Kelly and other SHFA officers if any issues arose in relation to the Kazal tenancies at The Rocks. Charif Kazal also had dealings with Mr Kelly in his capacity as the president of The Rocks Chamber of Commerce.

Charif Kazal was employed as operations manager of Australian World Trading Pty Ltd, a company owned by his brother, Karl Kazal, and which featured in the Commission’s investigation. It provides consultancy services to people considering setting up new businesses. In September 2008, Charif Kazal became a shareholder in KTC LCC, through which he indirectly had an interest in International Property Services UAE, the company with which Mr Kelly ultimately found employment.

Chapter 2: Sydney Harbour Foreshore Authority (SHFA), Andrew Kelly and others


Karl Kazal Karl Kazal is the director and secretary of Kazal Bros Pty Ltd and Oxs Pty Ltd, and a director and secretary of La Mela Pizzeria Pty Ltd. Each of these companies leased premises at The Rocks from the SHFA. Karl Kazal told the Commission that Charif Kazal generally dealt with the SHFA in relation to matters arising from the leases and kept him informed of important issues. He was aware that Mr Kelly was the person in charge of leases at the SHFA and that Charif Kazal dealt with him with respect to Kazal company leases at The Rocks.

Karl Kazal is also a director and secretary of Australian World Trading Pty Ltd. It is to be distinguished from Australian World Trading LCC, which is registered in Dubai and is run by his brother Tarek (also known as Tony) Kazal.

Rodric DavidMr David was interested in exploring business opportunities in the UAE. He visited the UAE with Mr Kelly, Charif Kazal and others to explore those opportunities. He has been involved in a number of businesses, including a number of companies under the Parkview name. Between 1998 and January 2008, he was a director of Parkview Group (Australia) Pty Ltd, an integrated construction and development company. Between 2005 and December 2007, he was a director of Parkview Property (Australia) Pty Ltd. Between February 2007 and January 2008 he was a director of Parkview Constructions Pty Ltd which was involved in the building and construction industry. In July 2007, he became director and secretary of a company that, in October of that year, was renamed Davids Group Pty Ltd (“Davids Group”). This company was then used by Mr David as a vehicle for exploring joint venture business in the UAE.


This chapter sets out a brief description of dealings between the SHFA and various Kazal businesses leading up to Mr Kelly’s first trip to the UAE in May 2007. Mr Kelly’s involvement in Kazal tenancy matters after May 2007 is dealt with in chapters 6 and 7.

Three points clearly emerge from considering the dealings leading up to May 2007. The first is that there were a number of issues affecting properties leased by Kazal businesses that required consideration, negotiation and resolution by the SHFA. The second is that, although Charif Kazal was not a director of any of the Kazal companies that leased the relevant premises, it was nevertheless he who dealt with the SHFA in relation to the issues affecting the leased premises. The third point is that Mr Kelly, as the SHFA person in charge of tenancies, was one of the SHFA officers involved in attempts to resolve the issues and as such, necessarily, had dealings with Charif Kazal. It was common ground that both dealt with one another on a regular basis with respect to various issues concerning SHFA properties leased to Kazal businesses.

This chapter also examines a number of other interactions between Mr Kelly and Charif Kazal, including ones that were not related to SHFA business.

The Kazal tenanciesThe Commission examined Mr Kelly’s involvement with four Kazal tenancies. These involved properties at 91, 99, 100 and 135 George Street, The Rocks.

The Commission is aware that there was speculation that Kazal business interests were unfairly favoured by the SHFA. The Commission did not investigate in depth whether or not Kazal business interests were unfairly favoured by the SHFA. This is because, in relation to the investigation that the Commission did carry out, there was no cogent evidence that Kazal business interests were unfairly favoured. The focus of the Commission’s investigation was on the allegations set out in chapter 1 of this report.

91 George Street – the Guylian Chocolate CafeIn 2004, the SHFA granted a 10-year lease of these premises to Steve Costi Seafoods Franchise Pty Ltd. At this time, the ground floor of the premises was approved for use as a fish cafe, including the retail sale of fresh and cooked fish. Two other levels were approved for use as commercial offices.

The lease was assigned with the SHFA’s consent to Costi’s Fine Fish Cafe Pty Ltd. In November 2006, the shares in Costi’s Fine Fish Cafe Pty Ltd were transferred to Kazal Bros Pty Ltd. On 21 March 2007, the SHFA entered into a Deed of Consent to Deemed Assignment of Lease, agreeing to the deemed assignment to Kazal Bros Pty Ltd.

In February 2007, Kazal Bros Pty Ltd requested a change of use from a fish cafe to a Thai restaurant. The fish cafe was operating at a loss and had been closed. Kazal Bros Pty Ltd had ceased paying rent to the SHFA, thereby falling into arrears. A handwritten entry in Mr Kelly’s notebook on 7 May 2007 recorded that he advised an executive meeting on that date that the proposed change of use should not go to the SHFA Board for consideration until the rental arrears were paid.

On 8 May 2007, Kazal Bros Pty Ltd requested approval for an additional permitted use to allow “all things chocolate”, a five-year extension of the lease in exchange for fitting out the premises, and rent-free occupancy from 1 February 2007 until four months after development application approval. The SHFA had not received any development application as of 8 May 2007. Apart from concerns over the proposal for rent abatement, SHFA documents also reveal concerns about the proposal to extend the use of the premises to the sale of “all things chocolate”, as that could jeopardise ongoing negotiations with another party for a concept chocolate shop elsewhere in The Rocks and the lack of any supporting market valuation to demonstrate market rent being achieved with the proposed change of use.

Chapter 3: The Kazal leases


An internal email of 16 May 2007 from Ms Dawson to another SHFA officer indicated that she had spoken with Charif Kazal and advised him that, in order to consider any change of use, extension of the lease term and the rental abatement request, it would be necessary to obtain a market valuation of the property based on the proposed change of use. These matters remained unresolved at the time of Mr Kelly’s first trip to the UAE.

99 George Street – The Rocks CafeThe lease for these premises expired in February 2005. Kazal Bros Pty Ltd sought a new lease with a 10-year term with two additional five-year option periods, and proposed a substantial upgrade to the premises costing about $1.5 million. It requested that it be given a 12-month rent-free period, followed by a six-month period in which it would pay half rent in order to cover the cost of some of the proposed upgrade works, which it claimed were the responsibility of the SHFA as lessor.

In March 2005, Mr Kelly and two other SHFA officers recommended to the SHFA Board that the board approve a 10-year lease with one additional five-year option, and a rent-free period only during fit-out to be capped at six months. The rent-free period had an estimated value of $59,000 and was intended as compensation for base building works, which were the SHFA’s responsibility and would include an element of structural maintenance. It was also recommended that the lease contain a turnover clause whereby the SHFA would receive 10% of gross sales above $1.4 million, thereby increasing the SHFA’s income from the premises as the business grew. It appears that the recommendation was accepted by the SHFA Board.

On 1 June 2006, Charif Kazal, in his capacity as general manager of The Rocks Cafe, wrote to Dr Lang advising that estimates to date were that $1.7 million would be spent on work, a large proportion of which was to undertake base building works, which he submitted could be argued were the SHFA’s responsibility. He requested that the SHFA consider providing assistance towards the project by way of a lease extension and a rent-free period. By letter dated 22 June 2006, Dr Lang responded asking for the provision of invoices identifying what work had been done in order to make an informed assessment of the request. Relevant documentation was duly supplied.

By December 2006, the SHFA had been unable to assess all claims made by Kazal Bros Pty Ltd but Brian Cock, assets and facilities manager, TAMS, had assessed some of the claims and calculated the costs to be borne by the SHFA at $114,820. In an email dated 18 December 2006 to Mr Cock, Dr Lang authorised payment of this amount and advised that, if additional costs were identified that related to structural works, they should be paid by the SHFA.

In a memorandum dated 29 December 2006 addressed to Mr Kelly, however, Mr Cock advised that he had re-assessed the claim based on a quantity surveyor’s estimate of the claims and excluding unauthorised and non-structural work. He revised the amount payable from the originally estimated $114,820 to $59,881.20. He claimed that the tenant had undertaken unauthorised major building work, and had included a claim for $235,000 of capital works for which it had already been compensated by way of an extended lease term.

In a memorandum dated 2 January 2007 to Dr Lang, Mr Kelly recommended the SHFA take a pragmatic approach and compensate the tenant by making a payment of $335,060. The recommendation was made on the basis that, “...works should be performed by the lessor (base building generally and structural per our own policy) that in this instance did not occur as insufficient analysis of the works proposal occurred prior to the Board approval being obtained (which was driven by an expired lease) such that it should have been identified as a project requiring the Authority’s involvement for managing base building and the tenant doing the fit-out thereafter”. He noted that a number of new services and equipment were covered by the recommended payment, which would improve the tenant’s business and thereby be likely to increase the SHFA’s revenue as a result of operation of the turnover clause in the lease, would add value to the building, and would have a useful life beyond the lease term that would benefit the SHFA.

After considering the matter and taking advice from other SHFA officers, Dr Lang approved Mr Kelly’s recommendation. Dr Lang wrote to Charif Kazal on 3 January 2007 enclosing a cheque for $335,060 (plus GST). Charif Kazal responded by letter dated 18 January 2007, advising that the payment was appreciated but asking for reimbursement of the balance of the building works costs. Dr Lang responded by letter dated 13 February 2007 that the SHFA would not make any further payment.

100 George Street – La Mela Pizzeria Pty LtdIn October 2005, the SHFA Board approved a 20-year lease of these premises to La Mela Pizzeria Pty Ltd to commence on 1 April 2006 with a 12-month rent-free period. It also approved a proposal for the SHFA to carry out base building works of a structural nature and other essential services estimated to cost in the order of $2 million. However, ministerial authority, which was required before the lease could be granted, was not sought and, therefore, no lease was entered into at that stage.

By August 2006, it had become apparent that further expenditure would be needed to carry out the necessary base building works. Discussions were held with the

CHAPTER 3: The Kazal leases


proposed tenant as to what revisions it would require to the proposed lease in return for it contributing towards the SHFA’s capital spend obligations. A number of options were discussed, including the granting of a full hotel licence and the proposed tenant taking a lease over the entire building.

In that month Mr Kelly prepared a summary of what had occurred. The summary contained a recommendation to the SHFA Board to grant a 20-year lease on the whole of 100 George Street to La Mela Pizzeria Pty Ltd. The recommendation was approved by the SHFA Board.

On 1 February 2007, Mr Kelly sent an email to Charif Kazal attaching a copy of his August 2006 summary and recommendation in order to assist the Kazal lawyers to expedite finalisation of the lease agreement.

135 George Street – Amo Roma RestaurantIn December 1996, Oxs Pty Ltd obtained an assignment of the lease for these premises. In March 1997, a fire caused the SHFA to regain vacant possession to undertake refurbishment. As part of the refurbishment, the building’s power supply was upgraded.

In 2006, the restaurant operating at the premises experienced problems with electricity supply capacity. Disagreement arose as to whether the SHFA or the tenant was responsible for paying to increase this capacity. Charif Kazal contended that it was the SHFA’s responsibility to ensure the electricity supply was adequate for the use of the premises as a restaurant. Some officers within the SHFA contended that it was the tenant’s responsibility.

Based on a quote it obtained, the SHFA estimated the likely cost of fixing the problem at just over $33,000.

In November 2006, Mr Kelly briefed Dr Lang on the issue. Dr Lang decided to offer to pay half the costs of the upgrade, up to a maximum of $20,000 (inclusive of GST). A letter to this effect was sent to Charif Kazal on 13 November 2006.

Other interactionsIn addition to dealing with Charif Kazal with respect to Kazal business tenancy issues, Mr Kelly also dealt with him on behalf of the SHFA in Charif Kazal’s capacity as the president of The Rocks Chamber of Commerce.

Mr Kelly also had a number of personal dealings with Charif Kazal. While it was not suggested in the public inquiry that these dealings gave rise to a conflict of interest, they are important as they assist in demonstrating that, by late 2006, the nature of the relationship subsisting between Mr Kelly and Charif Kazal had moved beyond purely professional dealings associated with SHFA business.

By 2006, it had come to Mr Kelly’s attention that his employment contract with the SHFA would not be renewed. He started to make enquiries about finding employment elsewhere, including in Dubai, one of the seven United Arab Emirates. In September 2006, as part of his efforts to find work, he emailed Charif Kazal copies of his CV to pass on to his brother Tony Kazal, so that Tony Kazal could provide it to his contacts in Dubai who might be interested in employing Mr Kelly.

Mr Kelly also sent Charif Kazal an email in September 2006 about a news article he had seen that he thought might be of interest to Charif Kazal in order “...to consider if you can attract the right investors wanting to spend big dollars to get in on major club/gaming/property redevelopment”.

Other email correspondence between Mr Kelly and Charif Kazal in September 2006 concerned a request from Charif Kazal for Mr Kelly to assist a relative who was studying law to gain work experience with a law firm. Mr Kelly made enquiries with a friend in a Sydney law firm and arrangements were made for the relative to meet representatives of the firm. Mr Kelly reported back to Charif Kazal on the outcome of the meeting and what advice his friend had offered to assist the relative to obtain suitable work experience.


As part of its consideration of whether Mr Kelly had a conflict of interest, the Commission examined how the May 2007 trip to the UAE came about, the purpose of the trip, and who invited Mr Kelly.

This chapter also examines whether Karl Kazal was involved in pursuing any business proposals in the UAE involving Mr Kelly.

How the trip came aboutMr David told the Commission that in March 2007 he had a meeting with Karl Kazal and Charif Kazal at which time they suggested to him that Parkview consider tendering for construction of the Al Falah community project in the UAE. This project involved construction of a new community comprising residential buildings, schools, hotels, a shopping mall and hospital. Mr David understood that the Kazals had contacts in the UAE who would be useful in furthering opportunities to become involved in the project and that if Parkview did become involved then Australian World Trading Pty Ltd (AWT), a Kazal company, would also be involved.

Mr David had ongoing discussions with a representative of the UAE developer, Aldar Properties. He decided to travel to the UAE to meet the representative to further explore the possibility of becoming involved in the project. In discussions with Charif Kazal about the project, the latter raised the possibility of also exploring property management opportunities in the UAE. It was agreed that these opportunities would also be explored when visiting the UAE. It was also agreed that a UAE company, to be called Parkview LLC, would be established to look after both construction and property management in the event such work was obtained in the UAE.

Purpose of the tripThere was no dispute on the evidence that the purpose of the trip was to explore possible joint venture business opportunities in the UAE. These business opportunities were essentially twofold. The first was in the area of construction and development, in which Mr David’s companies had expertise. The second was in the areas of property management (including facility management) and real estate sales. Mr David’s companies lacked suitable expertise in property management.

Mr Kelly, who was interested in working in the UAE, hoped that if any joint venture came off, it would lead to a job for him in the area of property management, this being his area of expertise. Charif Kazal wanted to be involved in any business venture that might ensue, as that would give him an opportunity to benefit himself independently from his family’s business interests. He knew that if any proposed business venture got off the ground, he would have an ongoing role that would financially benefit him. Mr David wanted to see if there were potential business opportunities that might benefit the Parkview group of companies.

Who invited Mr Kelly?There was dispute as to whether Mr Kelly was invited on the trip by Mr David or Charif Kazal.

Mr Kelly told the Commission that he was contacted by Mr David and asked to meet with him and Charif Kazal. At the meeting, he was told that Mr David was considering setting up a business in the UAE that would involve construction and property management. Mr David told him that Charif Kazal was working as a consultant to provide introductions in the UAE and asked if he would come to the UAE so that his expertise in property management could be used. As he understood it, he was being invited by Mr David, who did not have any dealings with the SHFA, and Charif Kazal’s role was limited to acting as a consultant. Thus, he did not consider that his attendance on the trip or any work

Chapter 4: Events leading up to the first UAE trip


recall the identities of the six people referred to in the email, but that they did not include Mr Kelly. He said that at the time he sent the email there had been discussions within Parkview in which numerous people had been put forward as possibly going on the trip. He adamantly denied that Mr Kelly was going as part of the Parkview contingent.

In order to resolve the conflicting evidence, the Commission examined the preparations made for the trip. These included the preparation of correspondence, setting up email addresses, producing business cards and creating a business profile document for distribution in the UAE.

The 12 April 2007 letterAs part of the preparations for the trip, Mr Willoughby approached a business associate who worked for Chesterton International (NSW) Pty Ltd (“Chesterton”) to ascertain whether the Chesterton brand name could be used when approaching developers in the UAE to sell residential apartments. Chesterton is an international real estate brand. Being able to use its brand name would have obvious benefits in doing business in the UAE. He said he reported back to either Mr David or one of the Kazal brothers that there was a possibility of using the Chesterton name.

On 12 April 2007, Charif Kazal, in his capacity as general manager of AWT, wrote to Chesterton. The letter is on AWT letterhead. Although the letter was not signed by Charif Kazal, there was no dispute that it was his letter. It expresses AWT’s interest in securing a three-month option for a Chesterton’s master franchise covering the UAE, while undertaking “due diligence”. The letter sets out details of “our team” and names the members as Karl Kazal, Mr Willoughby and Mr Kelly. The letter clearly represents Mr Kelly as part of AWT.

Charif Kazal told the Commission that it was “poor judgment” on his part to have held Mr Kelly out as having something to do with AWT. He denied that Mr Kelly was, in fact, part of the AWT team. He said the letter was written at Mr David’s request.

that he might do in the UAE would create any conflict of interest in relation to his position at the SHFA.

Charif Kazal also claimed that Mr David invited Mr Kelly on the trip. Charif Kazal denied that he invited Mr Kelly.

Mr David denied meeting with Mr Kelly about going to the UAE or inviting Mr Kelly on the trip. He said he was told by Charif Kazal in May 2007 that Mr Kelly would be coming. He understood Mr Kelly was involved with, and represented, AWT.

There was some evidence that, as of 24 April 2007, Mr David was not expecting Mr Kelly would be going to the UAE.

On that date, Mr David sent an email to Charif Kazal, Karl Kazal and Anthony Touma, a director of Parkview Constructions Pty Ltd. In the email, he noted that a meeting would be arranged in Abu Dhabi on 27 May and that, “our team is [Anthony] Touma and Rodric David and [Clinton] Willoughby”. He asked whether the team would also include Karl Kazal and Charif Kazal. No mention was made of Mr Kelly. Charif Kazal responded by email later that day that both he and Karl Kazal should be included. Once again, no mention was made of Mr Kelly. Mr Touma also responded that Emile Tabet, another director of Parkview Constructions Pty Ltd, should also be included.

The reason for Mr Touma and Mr Tabet going was that each had expertise in construction, which would be of direct relevance to any construction opportunities. Mr Willoughby, a director and shareholder of Parkview Property (Australia) Pty Ltd, had expertise in selling residential apartments, which would be of relevance in pursuing real estate sales opportunities in the UAE.

Mr David sent an email to the Aldar Properties representative on 8 May 2007, advising that six people, none of whom was named in the email, would be meeting with Aldar. Mr Kelly was, of course, one of the six people who went on the UAE trip. In his evidence to the Commission, however, Mr David said that he could not


CHAPTER 4: Events leading up to the first UAE trip

Mr David said that he only became aware that any approach had been made to Chesterton when speaking with Mr Willoughby in mid-May 2007.

Mr Kelly told the Commission that he was aware approaches were being made to Chesterton but was not aware of the details of those approaches. He could not recollect any awareness that Chesterton had been advised that he was a member of the AWT team but thought it unlikely as he would have objected if he had known.

Mr Willoughby recalled seeing the letter and believed that it was accurate, as he understood at the time that both Charif Kazal and Mr Kelly were part of the AWT team.

Ultimately, the approach to Chesterton failed as it appears that Chesterton was already operating in the UAE and, therefore, had no interest in offering any UAE franchise to AWT.

The 27 April 2007 draft letter The Commission recovered a document from an AWT computer. It is a draft letter dated 27 April 2007 from Charif Kazal, in his capacity as general manager of AWT, to Rabih Karam of SEBA LLC, a UAE business. It notes that SEBA LLC has existing and future developments that require expertise in property management, sale and leasing, and facilities management, and offers the expertise of “our team of professionals” to provide “an unrivalled level of real estate service in the UAE”. Once again, Karl Kazal, Mr Willoughby and Mr Kelly are nominated as members of “our team”.

Charif Kazal again claimed that the letter was written at Mr David’s request and that Mr Kelly was not part of any AWT team.

Mr Kelly said he could not recall being aware of the contents of this letter in April 2007. On his evidence, the letter falsely represented him as part of the AWT team. He said, however, that, unlike the similar reference to him in the letter of 12 April to Chesterton, he would not have objected to the reference to him as a member of the AWT team in this letter. That was because the letter was being sent to the UAE. Mr Kelly drew a distinction between including false information in documents to be used in Australia, which he regarded as unacceptable, and including false information in documents to be used in the UAE, which he apparently regarded as acceptable.

Mr Kelly’s AWT email addressCharif Kazal arranged for Mr Kelly, Mr David and Mr Willoughby to have AWT email addresses. He said he did so at Mr David’s request, as AWT was being used to open communications with Chesterton and SEBA LLC.

Mr Kelly said his AWT email address was created so that anyone at SEBA LLC or Chesterton could contact him. Arrangements were made so that any emails sent to Mr Kelly using the AWT email address would be directed to his home email address. He agreed with the proposition that he wanted people, who were writing to and receiving emails from him, to think that he had some official involvement with AWT.

He told the Commission he could not recall if he knew about the email address before or after the trip. He certainly knew about it by 2 June 2007 because on that date he sent an email to Charif Kazal advising that, “...the email sent during the week to my AWT email address has not forwarded to my home email address”.

Mr Kelly’s AWT business cardsAWT business cards were created for Mr Kelly, Mr David and Mr Willoughby sometime prior to the trip. Charif Kazal denied this meant that Mr Kelly was part of the AWT team. Once again, he said this was done at Mr David’s request.

Mr David denied requesting any AWT business cards. He did, however, receive AWT cards containing his name, although no position with the company is indicated on the card. The card also contains an AWT email address for him. Mr David recalled that Mr Kelly had a similar card, which he distributed during one of the meetings in the UAE.

The Parkview profileOne of the documents created for the purpose of the UAE trip was a profile of the Parkview Property Group, which could be handed out to interested parties in the UAE by way of background. Various versions of this document were obtained by the Commission.

Some versions described Mr Kelly as a director of the facilities management team and falsely described Charif Kazal, Karl Kazal and Mr Willoughby as members of the board of directors. Other versions included Mr Kelly as a member of the board of directors. All versions clearly indicated that both Mr Kelly and Charif Kazal were engaged in the Parkview business.

Mr Kelly was aware that the profiles gave the impression that both he and Charif Kazal were involved in the same business but claimed this was one of the falsehoods contained in the profiles. He said he did not object to what was being done because the profile was intended for distribution in the UAE, not Australia.

Mr David was aware that a profile was prepared containing false information and conceded that he had approved the document, although he denied being


Kazal could give it to his UAE contacts who might be interested in employing Mr Kelly. The CV noted that Mr Kelly considered himself “...ideally suited to roles like Chief Operating Officer or Director of a substantial Property Management portfolio...”.

Charif Kazal and Mr Kelly flew together to the UAE. This is consistent with Mr Kelly having been invited by Charif Kazal.

In considering the issue of who invited Mr Kelly, the Commission also takes into account its finding, set out in the next chapter, that it was Charif Kazal who paid Mr Kelly for his UAE flight and accommodation expenses. The inference to be drawn from this is that Charif Kazal did so because Mr Kelly went to the UAE at his invitation and was his responsibility.

The Commission is satisfied that Charif Kazal invited Mr Kelly to participate in the trip to the UAE and did so because he needed Mr Kelly’s expertise in order to develop possible business opportunities in property management.

One other matter arises from the conclusions that Charif Kazal was the primary mover behind the decision to explore property management business opportunities, and that he invited Mr Kelly to participate in the trip. Mr Kelly participated in the trip because he understood that, if a property management business venture resulted, then he would obtain employment in the UAE with that business. He claimed this understanding came from what Mr David told him before the trip. Mr David denied this. It is more probable that Mr Kelly’s understanding came from discussions with Charif Kazal. Charif Kazal needed Mr Kelly’s expertise in order to attract potential UAE interest, which would lead to the establishment of a new business for him. He knew Mr Kelly wanted to work in the UAE. He would be able to get Mr Kelly’s ongoing assistance by holding out to him the prospect of future employment with any business venture that might eventuate from his work. The Commission is satisfied that Charif Kazal told Mr Kelly that if he went on the trip and participated in the work necessary to establish a property management joint venture in the UAE then Mr Kelly’s reward would be employment with that joint venture.

Karl Kazal’s involvement There was considerable doubt as to the extent to which Karl Kazal was involved in pursuing the business proposals. On the one hand, he told the Commission that he decided not to become involved. On the other hand, there was other evidence indicating that he was involved.

Mr David said Karl Kazal was involved in the initial meeting when the Al Falah project was discussed. He was nominated as a member of “our team” in Charif

involved in its drafting. He also conceded that the profile was intended to deceive people with whom he intended to do business in the UAE. He claimed the information in the profile was representative “...of the company we were seeking to create”.

Who invited Mr Kelly: conclusionsThe letter of 12 April 2007, the draft letter of 27 April 2007, the AWT business cards and the creation of AWT email addresses all support the conclusion that it was Charif Kazal who was the primary driver of exploring property management business opportunities in the UAE.

It is significant that the only correspondence concerning approaches to Chesterton and SEBA LLC is from AWT and not from any of Mr David’s companies. The letter of 12 April 2007 to Chesterton seeks a franchise for AWT, not Parkview. Parkview is not mentioned in the letter of 27 April 2007. The Commission is satisfied these letters were prepared by, or at the direction of, Charif Kazal. The inference is that it was Charif Kazal, through AWT, who was the primary mover in relation to exploring opportunities outside the areas of property development and construction.

The two letters nominate Mr Kelly and Mr Willoughby as part of the AWT team. This is because Mr Kelly had requisite experience in property management and Mr Willoughby had experience in real estate sales. Mr David, Mr Touma and Mr Tabet were not nominated because they did not have experience in these areas. Their expertise lay in the area of construction. Mr Kelly and Mr Willoughby were also given AWT business cards and email addresses. Mr Touma and Mr Tabet were not provided with either of these. Once again, this was because they were irrelevant to any discussions involving property management and real estate. Mr David was, of course, given both an AWT business card and email address. This is explicable because any presentation to, and communication with, UAE businesses concerning property management or real estate would necessarily involve him as one of the joint venture partners.

The Commission is satisfied that Charif Kazal was the primary mover behind the decision to explore property management business opportunities.

Apart from Mr Kelly, no one who went on the trip had experience in property management. Mr Kelly’s presence was, therefore, vital to demonstrate to any potential UAE joint venture partner that the Australian side of the proposed joint venture had the requisite level of expertise. It was in Charif Kazal’s interest to ensure that Mr Kelly participated in the trip. He was also aware that Mr Kelly was interested in working in the UAE because Mr Kelly had previously given him his CV so that Tony


Kazal’s letter of 12 April 2007 to Chesterton, and the draft letter of 27 April 2007 to SEBA LLC. He was referred to as a member of the Parkview board of directors in the Parkview Property Group profile and copied into various emails relating to the proposed business venture. Mr David confirmed, however, that the information about Karl Kazal that was contained in the profile came from Charif Kazal, and that he never spoke to Karl Kazal about that information or his inclusion in the profile.

Mr David said he always understood Karl Kazal would have an ongoing role in the project, and that he was never told Karl Kazal did not want to receive information on the project. Initially, he said that he could not recall whether Karl Kazal attended any meetings after the first trip. Later in his evidence, he claimed that Karl Kazal had attended numerous meetings after the May 2007 trip. There was no evidence to substantiate this claim.

Charif Kazal said that Mr David wanted Karl Kazal’s name on the Parkview Property Group profile for added credibility in the UAE, where Karl Kazal was well known. Charif Kazal said he provided his brother’s biographical details for the profile without his brother’s knowledge. He said Karl Kazal was unhappy when he found out what he had done and said he did not want to be involved.

Karl Kazal told the Commission that he was introduced to Mr David by Charif Kazal. They discussed using his name and contacts in relation to business opportunities in the Middle East. Initially, he was supportive but sometime after the discussion he changed his mind and decided not to become involved. He told Charif Kazal he did not want to be involved and not to use his name. He was not sure if he also told Mr David.

Karl Kazal received a number of emails concerning the proposed business venture. These included an email of 17 April 2007 from Mr David to Charif Kazal and him, advising that they needed to organise a trip to Abu Dhabi to further discussions about involvement in the Al Falah project. He was copied into an email dated 23 April 2007 from Mr Willoughby to Richard Fiddes, in which Mr Willoughby enquired about obtaining a three-month option for a UAE franchise, while conducting due diligence on real estate opportunities. The email nominated Mr Kelly and Karl Kazal as members of the team. Karl Kazal told the Commission he did not read emails to do with the proposed business venture as he was not interested in it.

An email of 11 May 2007 to Mr David from Nadine Burch, who worked for Charif Kazal, refers to a request by Charif Kazal for a Parkview business card to be produced for Karl Kazal. Karl Kazal said he received the business cards but never used them.

Karl Kazal said he became aware of the trip to the UAE when he received a telephone call from his brother, Tony

Kazal, in the UAE advising him that Mr David, Mr Kelly and Charif Kazal were in the UAE. He did not think it appropriate for Mr Kelly to be involved because he knew Mr Kelly was working for the SHFA at the time and was involved in dealing with matters arising from Kazal leases. He said that when Charif Kazal returned to Australia, he told him he thought it was inappropriate but Charif Kazal told him that the arrangements had been suggested by Mr David. He denied that his view that Mr Kelly’s involvement was inappropriate caused him, when giving evidence to the Commission, to try to distance himself from any knowledge that Charif Kazal had a business arrangement with Mr Kelly from May 2007.

There was other evidence of Karl Kazal’s possible involvement. In 2008 Karl Kazal, Charif Kazal and Tony Kazal acquired a Cayman Islands shelf company which, it was intended, would join with a company owned by Mr David to undertake any joint venture in the UAE. The company was named KTC LCC. The letters KTC stand for Karl, Tony and Charif.

Karl Kazal told the Commission that he never wanted to be involved in KTC and did not want any shares. Mr David on the other hand said that Karl Kazal told him KTC would be the AWT vehicle for the joint venture and he, Karl Kazal, would be chairman of the company.

A share transfer form dated 4 September 2008 evidences the transfer of the share held by the shelf company shareholder to Karl Kazal. A signature purporting to be that of Karl Kazal appears on the form as transferee. An additional 49 shares were allocated to him and 50 shares to each of Charif and Tony Kazal. Share transfer certificates dated October 2008 evidence the transfer of Karl Kazal’s shares to Charif Kazal and Tony Kazal. Signatures purporting to be those of Karl Kazal appear on these forms as transferee.

Karl Kazal agreed with the proposition that, if he was to be believed that he did not want to be involved with KTC, he would not have signed any document by which he acquired shares in that company. He was then shown the share transfer form dated 4 September 2008. He denied that he had signed the form, and said that what purported to be his signature was a forgery.

Charif Kazal gave evidence the following day. He said he wrote Karl Kazal’s signature on each of the share transfer forms and that he did so without his brother’s permission.

In 2008, Jefford Hilder was the executive general manager of Davids Group. He was involved in arranging for the transfer of the Cayman Islands shelf company to the Kazals. He initially gave evidence that he saw Karl Kazal sign the share transfer form by which one share was transferred to him and the forms transferring his shares to Charif Kazal and Tony Kazal. This occurred in October

CHAPTER 4: Events leading up to the first UAE trip


2008 in Abu Dhabi when Charif Kazal and Tony Kazal were also present. Mr Hilder understood that Karl Kazal still wanted to be involved in any joint venture but had transferred his shares for taxation reasons.

Charif Kazal was then recalled. He maintained that he, and not Karl Kazal, had signed the forms and that Karl Kazal was not present when this occurred. He quibbled, however, at the description of what he had done as forgery. Despite claiming to remember signing the forms, he said he could not recall when or where he signed them or whether he signed them at the same time.

Having refreshed his memory by reference to other documents, Mr Hilder gave further evidence that the forms had been signed at different times. He said that the two forms transferring shares from Karl Kazal to his brothers were signed first. Karl Kazal signed the form by which one share was transferred to him by the shelf company shareholder on a later day. He initially maintained that he had seen Karl Kazal sign all the forms, however, when pressed, he conceded that he could not recall him signing on the second occasion.

Although there is evidence of Karl Kazal being sent emails concerning the proposed business venture, there is no evidence of him responding to the emails and there is no evidence of him initiating any emails or other correspondence on the subject or taking any active involvement in the project. He did not travel to the UAE in May 2007 or January 2008 when the various business opportunities were being explored. Given Mr Hilder’s confusion about when the KTC LCC transfer forms were signed and whether Karl Kazal was present on both occasions, and Charif Kazal’s claim that he signed his brother’s name to the transfer documents, the Commission cannot be satisfied that these documents were in fact signed by Karl Kazal.

Although the evidence establishes that Karl Kazal was involved in initial discussions with Mr David about possible joint ventures in the UAE, the Commission is not satisfied that Karl Kazal had any ongoing involvement or that he was involved in the planning of the May 2007 trip.

Estimated cost of construction work – $100,000

Estimated cost of construction work – $205,262

Difference

Development application $593 $1,045.84 $452.84

Construction certificate $637.50 $816.45 $178.95

Building inspection $55 $220 $165

Occupation certificate $308 $308

Total $1,593.50 $2,390.29 $796.79

Table 1


The issue in dispute was whether the money to repay Mr Kelly’s credit card debt came from Mr David or Charif Kazal. If, as Mr Kelly claimed, he was paid by Mr David that would support his claim that he travelled to the UAE at Mr David’s invitation in order to assist Mr David to explore business opportunities. Payment by Charif Kazal, however, would give rise to an inference that he had gone to the UAE at Charif Kazal’s invitation.

Mr Kelly’s evidenceMr Kelly denied having any arrangement whereby Charif Kazal reimbursed his expenses. He claimed Mr David told him he would organise the flight ticket and accommodation, for which Mr Kelly would pay, and that Mr David would subsequently reimburse him.

He told the Commission he gave Mr David a copy of his hotel bill on the day he paid it at the Emirates Palace hotel, and either gave him a copy of his flight bill at the same time or earlier. Mr Kelly checked out of the Emirates Palace hotel and paid his bill on 1 June 2007. He could not have given a copy of any bills to Mr David that day as Mr David had left for China on 31 May. A stamp in Mr David’s passport confirms he left the UAE on that day.

Mr Kelly said that some time after returning from the UAE, he went to Mr David’s office. Mr David gave him a white sealed envelope, which contained cash to cover his expenses. He left Mr David’s office without counting the money. No receipt was asked for or provided and there was no other paperwork to record the payment. He then went home, taking the money with him. He recalled being at the bank on some subsequent occasion when he used the money to clear his credit card account. He was unable to explain why, if he received one cash payment from Mr David, he made deposits on two separate days.

Mr David, Mr Touma, Mr Tabet, Mr Willoughby, Mr Kelly and Charif Kazal travelled to the UAE on 26 May 2007. Mr David, Mr Touma, Mr Tabet and Mr Willoughby flew together. Mr Kelly and Charif Kazal flew together on a different flight from those who flew with Mr David. This chapter examines how Mr Kelly came to be paid for his travel and accommodation costs.

Who paid Mr Kelly: the evidenceMr David paid for accommodation for himself, Mr Touma, Mr Tabet and Mr Willoughby using his corporate credit card. He also used his corporate credit card to pay for airfares for himself, Mr Touma, Mr Tabet, Mr Willoughby and Charif Kazal. These expenses were ultimately met by Parkview Group (Australia) Pty Ltd. AWT subsequently reimbursed Parkview Group (Australia) Pty Ltd for the cost of Charif Kazal’s airfare. Mr Kelly paid for his own return flight and accommodation. On 25 May 2007, his credit card was charged $8,558.55 for the return flight and, on 1 June 2007, his credit card was charged $2,603.58 for accommodation at the Emirates Palace hotel.

ANZ Bank records show that two cash payments were made to discharge this credit card debt. One payment of $5,000, made up of $50 notes, was made on 18 June 2007. The other payment of $6,170, made up of one $20 note and the balance in $50 notes, was made on 20 June 2007. Jason Johnson, an ANZ Bank manager, gave evidence that the records showed that on both occasions the teller had typed the account number into the bank computer. This indicated that either the person making the payment did not have the account card or that the magnetic swipe on the card did not work. He confirmed it was not necessary to have the account card in order to make the payment. Payment could be processed if the person making the payment had the account number or a copy of the credit card statement. This means that the payments could have been made by someone other than Mr Kelly, provided that the person had Mr Kelly’s name and account details.

Chapter 5: The May 2007 trip


Charif Kazal’s evidenceCharif Kazal said he never intended to pay Mr Kelly’s expenses and denied doing so.

On 23 May 2007, three days before departing for the UAE, Charif Kazal sent an email to a person at the Emirates Palace hotel. The email is reproduced on page 24.

There are two important points about this email. The first is that Mr David, Mr Touma, Mr Tabet and Mr Willoughby are grouped together on the basis that their expenses should be invoiced to Parkview Pty Ltd. This is consistent with what actually happened, namely that Mr David met the accommodation expenses of himself, Mr Touma, Mr Tabet and Mr Willoughby. The second point is that Charif Kazal and Mr Kelly form a distinct group whose expenses would be met by Charif Kazal.

After being shown this email in the public inquiry, Charif Kazal claimed that he had not intended to pay for Mr Kelly and had only indicated AWT would pay Mr Kelly’s account so that Mr Kelly could get the corporate rate. He said that Mr David was going to pay for Mr Kelly. If that was correct, Mr Kelly would have been able to get any corporate rate by being booked under the Parkview name. When this was pointed out to Charif Kazal, he agreed that the explanation he had given the Commission made no sense. Nevertheless, he maintained that that was his reason for requesting Mr Kelly’s invoice be made out to AWT. The Commission rejects his explanation.

There was also evidence that Charif Kazal sought to provide Mr Kelly with an airline ticket. Charif Kazal had previously won a voucher for two business class tickets on an airline that flew to the UAE. The time for using the tickets was due to expire prior to 6 May 2007. He attempted, unsuccessfully, to have the expiry date extended. In the meantime, however, he offered one of the tickets to Mr Kelly. He told the Commission that the offer to Mr Kelly was on the basis that Mr Kelly would pay him for the ticket. He denied he offered Mr Kelly the ticket because he had agreed to meet Mr Kelly’s expenses.

Mr David’s evidenceMr David denied reimbursing Mr Kelly for the cost of his flights and accommodation. He described as “extraordinary” any suggestion that he would have paid cash to Mr Kelly. He explained that his company did not deal in cash. Claims for reimbursement of expenses were dealt with by providing a copy of the relevant credit card statement or invoice to the company’s chief financial officer with an expense reimbursement form. The chief financial officer would then charge the expense to a job.

Cameron Champion is the chief financial officer for the Parkview group of companies. He provided a statement to the Commission. He said that the finance division of Parkview coded and referred to the expenses associated with the UAE trip as the “Dubai UAE project”. The costs were paid by Parkview Group (Australia) Pty Ltd. Company records show the payments for Mr David, Mr Touma, Mr Tabet and Mr Willoughby as well as the payment for Charif Kazal, and the subsequent reimbursement of that payment by AWT. Mr Champion searched company records but could not find a record of any payment to Mr Kelly.

It was put to Mr David by Mr Kelly’s counsel that because Mr David knew that Mr Kelly worked for the SHFA he would not have wanted to create any written record of payment to Mr Kelly. Mr David rejected this suggestion. There was no evidence that Mr David had, or contemplated having, any dealings with Mr Kelly in his capacity as a SHFA officer. That he was not concerned about creating a written record is demonstrated by the fact that he used his credit card to pay for Mr Kelly’s airfare on the second trip in January 2008. The Commission is satisfied that there was no reason for Mr David to disguise from his company or anyone else any payment to Mr Kelly for going to the UAE.


CHAPTER 5: The May 2007 trip


on the same flight is consistent with Charif Kazal having organised their flights. If Mr David had organised Mr Kelly’s flight, then it would be expected that Mr Kelly would have flown on the same flight as Mr David and his party.

If Mr David had agreed to pay Mr Kelly’s expenses, there is no reason for him to have hidden the fact by not including Mr Kelly among those for whom he paid using his credit card, and ultimately having them included as a recorded expense in the Parkview Group (Australia) Pty Ltd accounts. The expenses Mr David did incur on the trip were properly recorded and entered into the company’s accounts for accounting and taxation purposes. It is improbable that, if Mr David had agreed to reimburse Mr Kelly’s expenses, he would have done so by way of a cash payment that was not recorded in his company’s records.

Conversely, there was good reason for Charif Kazal to want to hide the fact that he was paying Mr Kelly for his expenses. As the person who dealt with Mr Kelly at the SHFA he knew that it was, at the very least, inappropriate for him to be involved in any private business venture with Mr Kelly or to recompense him for his expenses associated with investigating any such business venture. A record of payment to Mr Kelly from AWT would not only compromise Charif Kazal but would also compromise AWT. If the SHFA found out about the payment, it would be expected that further enquiries would be made that would lead, at the very least, to Mr Kelly being removed from having any dealings with the Kazal leases. Such complications would be avoided by paying cash to Mr Kelly.

The Commission is satisfied that Charif Kazal paid Mr Kelly $11,170 to cover the cost of his airfares and his accommodation expenses. The Commission is also satisfied the payment was part of the reward Charif Kazal promised Mr Kelly in return for Mr Kelly agreeing to work towards the establishment of a joint venture business in the UAE.

What was done on the tripDuring their stay in the UAE, Mr David and the others met with representatives of Aldar Properties to investigate the possibility of being involved in construction of the Al Falah project. They also met representatives of SEBA LLC, with a view to discussing the possible development of a property management business. A number of properties were inspected. Although no final agreements were reached, it appears that at the end of the trip consideration was still being given to involvement in both areas.

Apart from being reimbursed for his accommodation and airfares, Mr Kelly said he did not expect to receive any payment for going to the UAE. He explained that he regarded his participation in the trip as a type of job interview. If he proved his abilities and the trip led to the establishment of a business in the UAE, then he expected

Agnieska Kazal’s involvementOn 15 July 2011, prior to the public inquiry, Charif Kazal gave evidence in a compulsory examination. During the course of his examination, he was asked whether he reimbursed Mr Kelly for his costs or arranged for someone else to do so or whether Mr David reimbursed Mr Kelly.

At the public inquiry, Charif Kazal told the Commission that after the compulsory examination he had gone home and told his wife that he had been asked questions about a payment made to Mr Kelly. He claimed that his wife then recalled an occasion on which she had been given money by Mr David to bank into Mr Kelly’s account. In light of this claim, it was necessary for the Commission to take evidence from Mrs Kazal.

Agnieska Kazal is married to Charif Kazal. She claimed that one day in June or July 2007, before she was married to Charif Kazal, she was waiting for him in the AWT offices. Mr David, whom she had met on a couple of occasions, came in looking for Charif Kazal. When she told him that Charif Kazal was not in he gave her an envelope, which he told her contained money and asked her to bank it for him. The envelope had writing on it which included the name “Kelly” and possibly the name of the bank and the details of the account into which the money was to be paid. She subsequently went to a branch of the ANZ Bank and deposited the money. She could not recall the amount. Although she received a receipt from the bank she did not give it to Mr David. She did not tell Mr David she had paid the money into the account and did not tell Charif Kazal what she had done.

Mr David denied giving her any money or having met her until later in 2007.

It is improbable that Mr David would have given any money to Mrs Kazal to bank into Mr Kelly’s account. If he had wanted Mr Kelly to receive money he could have arranged to meet him to give him the money directly or could himself have paid the money into Mr Kelly’s account.

Mrs Kazal’s evidence is not supported by either Mr David or Mr Kelly. There is no documentary evidence in support of her account. Her version of events is inherently implausible and is rejected by the Commission.

Who paid Mr Kelly: findings Charif Kazal’s email of 23 May 2007 clearly shows he regarded himself and Mr Kelly as being in a separate group from the others, and that he would be responsible for his and Mr Kelly’s accommodation costs.

His offer to provide Mr Kelly with one of the vouchers he had won for a business class ticket is consistent with him taking responsibility for Mr Kelly’s flight arrangements and expenses. The fact that he and Mr Kelly flew together


together in the same business, and that he and Mr Kelly had a common goal to assist Mr David in establishing a successful business.

to get a job in that business. He baulked at accepting that he was engaged in some sort of consultancy role as that would have constituted secondary employment, for which he needed, but did not have, Dr Lang’s consent.

Mr Kelly attended meetings. He had at least one dinner with Charif Kazal and had drinks with him.

While in the UAE, Mr Kelly and Mr Willoughby prepared a budget that set out an estimate of costs for a business. The budget included salaries of $350,000 for each of Mr David, Mr Kelly, Mr Willoughby and Charif Kazal. Although the budget clearly identified that Charif Kazal would be paid a $350,000 salary, Mr Kelly claimed that the amount was not a salary but remuneration for Charif Kazal providing a consultancy service by way of introducing contacts. He explained that the term “salary” was used because “...it’s far simpler to just have it all listed as salary rather than creating strange, you know, by-lines of consultancy fees and things like that that just confuse people”. He denied the use of the term “salary” reflected his understanding that Charif Kazal would have a job in any business that was established. He agreed, however, that at the time he prepared the budget it was his understanding that, if a joint business was established, then Charif Kazal would be a part of the joint venture in some form, and he expected that both he and Charif Kazal would be handsomely remunerated. He agreed with the proposition that they were, therefore, acting with a common interest to get such a business established.

On 30 May 2007, Mr Willoughby emailed a copy of the budget to Charif Kazal. Charif Kazal told the Commission he had not been part of the discussions leading up to the creation of the budget but it was emailed to him for his opinion before it was provided to SEBA LLC. He agreed he understood at the time that, if the business venture was established, it would generate something in the order of $350,000 for him and a similar amount for Mr Kelly. He agreed that both he and Mr Kelly would have an ongoing involvement in the business, that they would be working


this joint venture company as NEWCO UAE. It would be owned equally by the new Davids company and the Kazal family entity. NEWCO UAE would hold a 49% shareholding in the joint venture company to be established with SEBA LLC, which would employ Mr Kelly.

Charif Kazal agreed that Mr David kept him informed of what was happening. He also agreed that he hoped to obtain some ownership in the proposed joint venture, whether by shares or otherwise. He denied, however, discussing this with Mr Kelly.

Mr Kelly continued to understand that if the latest proposed business venture eventuated then not only would he be employed by the business venture but that Charif Kazal would also have some paid involvement in the business. They, therefore, continued to have a common interest in establishing the business venture.

Mr Kelly’s work on the joint ventureAs of June 2007, much work needed to be done to determine whether any joint venture would proceed and, if so, on what terms. Mr Kelly attended a number of meetings and remained in communication with Charif Kazal and Mr David.

The work that needed to be done was identified in an email Mr David sent to a SEBA LLC representative on 4 June 2007. Charif Kazal and Mr Kelly were copied into the email. Mr Kelly’s copy was sent to his AWT email address. The email advised that:

As discussed we are drafting a ‘Road Map’ that we can collaboratively work on to achieve Seba’s goals. Included in this we will compile a Memorandum of Understanding for our joint venture as well as a preliminary list of questions which will help set the direction of our ‘Road Map.’ Of particular importance as we compile this information will be the creation of the Business Plan which will detail the expectations of the joint venture.

Mr Kelly was involved in some of this work.

In between returning from the first UAE trip in June 2007 and participating in the second UAE trip in January 2008, Mr Kelly undertook work for a proposed joint venture with SEBA LLC. He also continued his work at the SHFA. This included further involvement in consideration of issues concerning the Kazal Bros Pty Ltd lease of 91 George Street.

The joint ventureDuring the May 2007 trip, the possibility of establishing joint venture enterprises with Aldar Properties and SEBA LLC was explored. After returning from the UAE, Mr David had further communications with the Aldar Properties representative but by late July 2007 the Parkview board had decided against proceeding further. That left a possible joint venture with SEBA LLC initially involving management of SEBA LLC properties but with the prospect of expanding to manage properties in the Middle East and North Africa. Mr David now took a more direct role in pursuing this joint venture proposal.

Initially, the proposed joint venture with SEBA LLC was to involve another Parkview entity, Parkview Cerberus Pty Ltd, establishing a company in the UAE that would then join with a Kazal company, AWT UAE LLC, to form Parkview UAE Holdings LLC. Parkview UAE Holdings LLC and SEBA LLC would jointly own the proposed facilities management company, which would be called Parkview Property Management LLC. That company would then manage SEBA LLC properties.

The board of directors of Parkview Cerberus Pty Ltd eventually decided not to pursue any joint venture proposal. Mr David remained interested in establishing a joint venture. He decided to leave Parkview and establish a new company, Davids Group. In an email to Charif Kazal dated 7 November 2007 he explained that he proposed Davids Group would establish a new Australian facilities and strata management company, which would enter into a memorandum of understanding with SEBA LLC. The new company would also enter into a joint venture company in the UAE with a Kazal family entity. He referred to

Chapter 6: Between trips


would mean that the Davids Group profile would show Mr Kelly as being involved in the company.

At the public inquiry, Mr Kelly claimed that, as with the Parkview Property Group profile, any suggestion in the Davids Group profile that he was involved in the company would be false. It is true that Mr Kelly held no shares in the company, was not a director and was not employed by Davids Group. The profile was, however, intended to reflect and represent to potential UAE partners what was intended to be the case. While (depending on which company vehicle Mr David and Charif Kazal intended to use to effect any joint venture) Mr Kelly might not end up being employed by Davids Group, it is clear he understood he would be employed in the joint venture.

In his 18 December 2007 email to Mr David, which he had copied to Charif Kazal, Mr Kelly suggested taking a property manager with them to the UAE and noted there were people he could potentially head hunt later “...but I can’t afford to break cover and discuss SEBA with anyone just yet so I can’t supply a body...”. At the public inquiry, he explained that he wanted to keep his involvement confidential because if the proposed business venture did not eventuate it might cause “complications”. He denied he was concerned about Dr Lang finding out about what he was doing and dismissing him. The Commission does not accept this denial.

Mr Kelly told the Commission that he considered his continued involvement in work for the proposed joint venture was still part of his job application, and as such did not represent secondary employment. This was because unless the business proposal eventuated “there was no job to offer”. Mr Kelly’s evidence on this point shows a lack of candour. He was not being interviewed for a job. He had a clear interest in ensuring that a joint venture was established, as that would lead to paid employment. In order to bring about the joint venture, he did work and provided advice. As a senior public servant, he would have well understood that secondary employment can involve paid or unpaid work, and that what he was doing involved secondary employment for which he required Dr Lang’s permission.

Mr Kelly’s reluctance to “break cover” or to seek Dr Lang’s consent to his secondary employment is explained by a desire to keep what he was doing secret from the SHFA. This is because, as he conceded in his evidence, he knew that if Dr Lang found out that he was involved with Charif Kazal in pursuing private business opportunities in the UAE, at the same time that he continued to be involved in dealing with issues arising from Kazal leases with the SHFA, he would be dismissed.

On 5 June 2007, Mr Kelly sent an email to Mr David, Mr Touma, Mr Tabet, Mr Willoughby, Charif Kazal and Karl Kazal. He apologised for not being available during normal business hours and set out his available times for meeting. He suggested sending a spreadsheet of questions, “prepared last week”, to enable preliminary planning to occur. Mr David responded to this email the next day. Mr David advised the meeting would focus on planning the “Road Map”, which would lead to creation of the business plan. He suggested that Mr Kelly and Mr Willoughby should “bang heads” to compile a list of questions to give to SEBA LLC. Mr Kelly was involved in completing the list, which, it appears, was sent to SEBA LLC.

As envisaged in Mr David’s email of 4 June 2007, a draft memorandum of understanding between Parkview Group Australia Pty Ltd and SEBA LLC was prepared. It noted that it was the intention of the parties to form a joint venture company in the UAE to undertake property management, facilities management and valuation services. On 2 July 2007, Mr David sent an email to Mr Kelly and others, including Charif Kazal, advising that he had sent the draft memorandum of understanding to the SEBA LCC representative, and had obtained the details of lawyers in the UAE. Mr Kelly responded to this email later that day. He set out suggestions for two questions for the lawyers. The first involved ascertaining details of relevant UAE legislation. The second concerned licensing requirements. Mr David included these suggestions in an email he sent to the UAE lawyers on 6 July 2007.

Mr Kelly was also involved in the planning of a second trip to the UAE for the purpose of doing due diligence on SEBA LLC.

On 18 December 2007, Mr David sent an email to Mr Kelly advising him that Charif Kazal was in the UAE and had met the SEBA LLC representative, who wanted the matter to progress, and had requested a meeting in the UAE in January to process the due diligence. Mr Kelly responded by email later that day. He advised that:

I’ve done due diligence to acquire a small company in less time but there’s a lot to look at in this instance including physically seeing each site to know what we are dealing with. I’m scheduled to return to work on Monday 4 Feb 08. I have booked flights due to availability from 15 Jan returning 26 Jan so you have 10 working days.

He noted that he was confident of being able to do a financial analysis “...if we get real numbers to actually review” and that the “main thing for me is access to their Property database, financials and any leases...”. He also suggested that the Parkview Property Group profile be used to create an equivalent Davids Group profile (by this time Mr David had set up Davids Group Pty Ltd). This

CHAPTER 6: Between trips


others. Having reviewed the relevant paperwork, however, he said he could not find anything to suggest that Mr Kelly had been inappropriately influenced in authorising the recommendations being put before the SHFA Board.

Charif Kazal sent Mr Kelly an email on 17 August in which he copied an email and attachment from a SHFA officer concerning the premises at 135 George Street. The letter referred to a dispute concerning outstanding invoices and noted that the matter would be referred to another SHFA officer. While there was no evidence of Mr Kelly taking any action on this matter, it does demonstrate that Charif Kazal remained in contact with Mr Kelly in relation to Kazal tenancy matters.

Mr Kelly’s work at the SHFAAs set out in chapter 2, by early May 2007 Kazal Bros Pty Ltd had requested the SHFA consent to a change of use for the premises at 91 George Street. It had also sought a five-year extension to the lease in return for fitting-out the premises and rent-free occupancy from 1 February 2007 until four months after development application approval. At the time, rental was in arrears. Prior to the trip to the UAE, Mr Kelly had been of the opinion that any consideration of change of use should not go to the SHFA Board until the rental arrears were paid.

In his evidence to the Commission, Charif Kazal agreed that Mr Kelly’s opinion as to what should happen to the premises at 91 George Street would carry weight within the SHFA. He denied, however, that it therefore suited him at the time to ingratiate himself with Mr Kelly.

Charif Kazal signed a letter to the SHFA dated 4 July 2007, again requesting the SHFA consent to the change of use. The letter was on Kazal Bros Pty Ltd letterhead. In the letter, he also requested the lease be extended to a period of 15 years, with six months rental relief from the date of development approval to cover the fitting-out costs, and that the SHFA consent to the granting of a liquor licence.

In July 2007, a document addressing this request was prepared for consideration by the SHFA Board. A copy of Charif Kazal’s letter of 4 July 2007 was attached to the document. Mr Kelly was one of four SHFA officers who signed this document on 18 July 2007, under the heading “Authorised”. The document recommended the board approve the request for change of use to a chocolate retail/cafe and restaurant, the surrender of the current 10-year lease, the granting of a new 10-year lease commencing on 20 September 2007, and a rental abatement of $96,358 (being the equivalent of six-months’ rent) subject to approval of a development application for a chocolate retail/cafe and the lessee providing a written undertaking that no further rent abatement or relief or other concessions would be sought. The document noted that the lessee was in rental arrears to the equivalent of two-months’ rent.

The recommendations were considered and approved by the SHFA Board at its 25 July 2007 meeting.

Mr Kelly told the Commission he did not prepare the document. He agreed, however, that by signing it he was authorising the recommendations to be made to the SHFA Board. He signed the document because he had no objections to the recommendations and because he did not consider he had any conflict of interest.

Dr Lang considered the recommendations and board decision to be based on appropriate commercial considerations. He was not aware in July 2007 that Mr Kelly had recently gone to the UAE with Charif Kazal and


Consent for the application...”, subject to a number of issues being addressed. He emailed a copy of the letter to each of Karl Kazal and Charif Kazal. The email advised, “should you have any queries in relation to the contents of this letter, please do not hesitate in contacting either Niall Macken or myself ”.

In her statement to the Commission, Ms Dawson, SHFA director, The Rocks and Circular Quay Precinct, said that at the time she was concerned that Mr Kelly had signed off on the landowner’s consent without resolving the issue of provision of a disabled toilet. The lessee had applied for additional seating at 91 George Street, which would normally require the provision of a disabled toilet. She raised this issue with Mr Kelly by way of email dated 6 March. He responded that he did not consider it was an issue as the provision of a disabled toilet could be made a condition of any development application approval.

A job offerBy letter dated 7 March 2008, Mr David offered Mr Kelly the position of general manager of International Property Services UAE. As such, he would be responsible for the overall management of the company. He was offered a salary of $200,000 per annum while domiciled in Australia, and $300,000 per annum and an allowance of $60,000 once domiciled in the UAE.

Mr Kelly accepted the offer on 10 March 2008. On the same day, he wrote to Dr Lang giving one-month’s notice of his resignation from the SHFA. He advised that he had accepted the position of general manager with International Property Services in the UAE, but did not provide any other details of his new position or who else was involved in the business. No mention was made of Charif Kazal’s involvement.

As at March 2008, International Property Services UAE did not exist as a legal entity. It was intended that it would be the vehicle for a facilities management joint venture between IPS Cayman Islands Ltd, which would

Mr David, Mr Kelly, Mr Willoughby, Charif Kazal and two others, James Frawley and Ashley Palm, travelled to the UAE in January 2008. Mr Frawley and Mr Palm were invited by Mr David. The purpose of the trip was to undertake due diligence on the proposed joint venture with SEBA LLC.

Mr David arranged payment of everyone’s travel and accommodation expenses. There was no need for Mr Kelly to organise or pay for any flights or accommodation.

While in the UAE, Mr Kelly attended a number of meetings, dinners and social events. Given that the proposed joint venture concerned an area in which Mr Kelly had experience, it was natural that he played a fairly central role.

Mr Kelly made no declaration of any conflict of interest to the SHFA in relation to his attendance on this trip.

Charif Kazal agreed that, while in the UAE, he worked with Mr David. He reluctantly conceded that he also worked with Mr Kelly.

The trip was successful, and steps were taken on the return to Australia to pursue the joint venture arrangement in the UAE.

Mr Kelly’s work at the SHFAOn 5 February 2008, shortly after returning from the UAE, Mr Kelly sent an email to SHFA officers concerning three outstanding land owner consents (LOCs) to the lodgement of development applications. One of these was for the premises at 91 George Street. The email asked the recipients to “...do whatever is required to ensure each of these LOCs are in a position for sign off at next Monday’s LOC meeting (or earlier if possible)...”. The email called for a resolution supported by recommendation as soon as possible to either approve or refuse land owner consent.

By letter dated 6 March 2008, addressed to Karl Kazal, Mr Kelly advised that the SHFA “...hereby grants Landowner’s

Chapter 7: The January 2008 trip and aftermath


Mr Colnan attended to this request. For technical reasons, Mr Kelly still appeared in the global email address listings on Ms Burch’s computer. She emailed Mr Colnan about this. He emailed a response, explaining that Mr Kelly’s listing would be deleted once the server had performed its automated clean up maintenance. Ms Burch responded by email asking how long this would take and advising, “I have someone in the office that wishes all traces of Andrew Kelly to disappear from our system”.

Ms Burch worked part-time for the Kazals. She said her request to Mr Colnan emanated from Charif Kazal. She understood that he wanted to delete Mr Kelly from the AWT global address listing. She was also instructed to delete emails concerning the UAE project from all the office computers, except that used by Charif Kazal. Although she did this, she said that hard copies of the material remained on office files.

Charif Kazal agreed that he asked Ms Burch to delete Mr Kelly from the AWT global email address listing. He initially claimed this was because Mr Kelly’s AWT email address was no longer being used. Later in his evidence, he claimed he gave the instruction for “privacy reasons” because if the email address remained in the global email address listing anyone who had access to an AWT computer would be able to see it.

Charif Kazal did not deny asking Ms Burch to remove any information from AWT computers. He said he could not recall issuing such an instruction.

The Commission is satisfied that Charif Kazal instructed Ms Burch to arrange to have Mr Kelly removed from the AWT global email address listing and to delete emails concerning the UAE project from all except his computer. The Commission is satisfied he issued these instructions because he wanted to keep his dealings with Mr Kelly secret so that the SHFA did not find out that they were involved in a business venture.

own 49% of the shares, and a UAE company called 4N Property LLC, which would own 51% of the shares. Some of the directors of the latter were also directors of SEBA LLC. It was intended that its first project would be to manage a worker’s residential complex in Abu Dhabi. While International Property Services UAE was being established, Mr Kelly’s wages were paid by Davids Group.

Mr Kelly understood that IPS Cayman Islands Ltd was, in turn, owned by a company called Emergent Capital Ltd, which was in turn equally owned by two Cayman Islands companies, one owned, or controlled by, Mr David and the other being KTC LCC.

Although Mr Kelly only accepted his new job on 10 March 2008, he had sent a letter dated 3 March 2008 to Mr Frawley offering him a position as general manager of facilities management. He signed the letter as general manager of International Property Services UAE. He told the Commission he backdated the letter at Mr David’s request so that Mr David could charge costs to the joint venture. He said he signed the letter in November 2008.

Deletion of email address and emailsIt will be recalled that Mr Kelly was given an AWT email address. Emails sent to him at that address were automatically forwarded to his home email address.

Craig Colnan is the co-owner of Bluefly IT Solutions, a business that provided information technology support services to AWT between 2006 and 2008. In his statement to the Commission, Mr Colnan recalled receiving an email from Ms Burch of AWT on 25 February 2008 requesting him to urgently delete Mr Kelly from the AWT global email address listings and his forwarding email address. Global email address listings contain email addresses that can be automatically selected by a sender of an email who does not know the email address of the intended recipient. Anyone viewing the AWT global address listings would be able to see that Mr Kelly had an AWT email address.


The falling outBy 2010, the relationship between Mr David, on the one hand, and Mr Kelly and the Kazals, on the other hand, had completely broken down. Mr Kelly was no longer employed by International Property Services UAE. Litigation involving Mr David and the Kazals followed the breakdown of their relationship. Mr Kelly provided an affidavit to assist the Kazals in their litigation with Mr David. This falling out was taken into account in assessing the evidence of these parties.


a written declaration of a conflict of interest citing his ongoing business relationship with Charif Kazal:

...as he is the President of The Rocks Chamber of Commerce and a lessee of other properties in The Rocks. As such an external party may construe this as giving rise to a conflict of interest in my capacity managing this current negotiation of an Agreement for Lease for 100 George Street.

There was no dispute that Mr Kelly had not declared any conflict of interest arising from his trips to the UAE and the work he did towards establishing business opportunities in the UAE. The central issue for determination was whether Mr Kelly had such a conflict of interest.

Charif Kazal’s roleMr Kelly claimed that Charif Kazal went on the May 2007 trip to the UAE as Mr David’s paid consultant to provide introductions to persons of interest in the UAE. He, initially at least, rejected any suggestion that Charif Kazal was there to explore the possibility of being involved in any joint venture business. He claimed, therefore, that no conflict of interest arose between his SHFA work and his involvement in the UAE venture.

Mr David denied that Charif Kazal’s only role was to introduce him and his team to people in the UAE. He said that Charif Kazal was primarily there to explore business opportunities. Charif Kazal did not regard himself as merely a go-between to arrange introductions. He clearly wanted to be part of any business opportunity that might eventuate. He said, however, that he never told Mr Kelly that he hoped to have an ownership stake in any such business.

The Commission has found that Charif Kazal was the primary mover behind the decision to explore property management business opportunities in the UAE. He invited Mr Kelly to participate in the May 2007 trip. He paid Mr Kelly $11,170 to cover the cost of his airfares

This chapter examines Mr Kelly’s obligations as a SHFA officer and sets out the Commission’s findings and recommendations with respect to his involvement and that of Charif Kazal in the matters canvassed in chapters 4–7 of this report.

Mr Kelly’s obligationsAs a public official, Mr Kelly had a duty to avoid or report conflicts of interest. A conflict of interest arises when a public official is influenced, or could be perceived to be influenced, by a personal interest in carrying out his or her public duties.

Mr Kelly’s SHFA employment contract required him to act ethically and maintain high ethical standards. The Code of Conduct and Ethics for Public Sector Executives is referred to in the contract. Clause 2.1 of the code requires executives to avoid real or apparent conflicts of interest. Clause 8.2 requires the written disclosure of any potential conflict between personal interests and official duty.

Mr Kelly was also subject to the SHFA code of conduct, which came into operation on 17 April 2007. It defines a conflict of interest as “...a situation where an employee could be influenced, or could be perceived to be influenced by, a personal interest in carrying out their public duty”. It notes that possible conflicts of interest include “any financial or personal interest that could directly or indirectly influence or compromise you in performing your duties” and “secondary employment that compromises the integrity of you or the Authority”. The code of conduct requires a person to notify his or her supervisor “if a conflict exists or may exist” and notes that a failure to do so may constitute grounds for disciplinary action and possible dismissal. It also requires permission from the chief executive officer before undertaking a second job or engaging in private work.

Mr Kelly did not dispute that at all times he knew he was under an obligation to disclose any conflict of interest and that the question of perception of bias was as relevant as that of actual bias. Indeed, on 21 June 2006, he submitted

Chapter 8: Conflict of interest? Findings and section 74A(2) statement


of employment if a business were established, his conflict of interest was substantial.

Mr Kelly should have declared his conflict of interest to Dr Lang as soon as the conflict arose, and in any event no later than when he was invited by Charif Kazal to go on the May 2007 trip to the UAE. He did not do so because he knew, if he told Dr Lang about the trip, then Dr Lang would have told him not to go and he would miss an opportunity of being employed in the UAE. He also knew that, if he ignored Dr Lang’s instruction and went on the trip, then Dr Lang would dismiss him. Thereafter, he was careful to ensure that no one at the SHFA learnt of his personal involvement with Charif Kazal because if Dr Lang found out what he had done he knew Dr Lang would dismiss him. Mr Kelly deliberately failed to disclose his conflict of interest because he knew that his continued involvement with Charif Kazal in relation to the UAE project, on the one hand, and his continued involvement in matters affecting the Kazal leases, on the other hand, was contrary to his duties as a SHFA employee and because he wished to avoid the adverse consequences to him, which he knew would flow from such a disclosure.

Charif KazalCharif Kazal was the prime mover behind the decision to explore property management business opportunities in the UAE, and invited Mr Kelly to go to the UAE in May 2007 and to work both during the trip and thereafter towards establishing such business opportunities. He held out to Mr Kelly the prospect of getting employment in the UAE with any joint venture business that resulted from Mr Kelly’s efforts. He also paid Mr Kelly’s expenses associated with the May 2007 trip.

One of the reasons he did this was because he needed Mr Kelly’s expertise. That does not preclude Charif Kazal from having other motives. The Commission also considered whether Charif Kazal held out the prospect of employment to Mr Kelly and reimbursed him for his travel expenses in order to influence Mr Kelly to act favourably on issues affecting the Kazal tenancies at The Rocks.

Charif Kazal knew Mr Kelly would be attracted by an offer of employment in the UAE, particularly if that involved the management of a property portfolio.

As a result of his dealings with Mr Kelly at the SHFA, he knew that Mr Kelly made decisions and recommendations that affected the Kazal tenancies and could, therefore, have an impact on their profitability. Just prior to the 26 May 2007 trip to the UAE, Kazal Bros Pty Ltd had requested SHFA approval for an additional permitted use for the 91 George Street premises, a five-year extension of the lease and a rent-free period. Within a few days of returning from the UAE, Charif Kazal sent a letter to the SHFA

and accommodation expenses. He offered Mr Kelly employment in any business that might be established in the UAE. The Parkview Property Group profile, prepared for the May 2007 trip, shows that both Mr Kelly and Charif Kazal were involved in the business. Although the profile contained lies about positions held by various people, Mr Kelly understood that it was meant to be representative of the company intended to be established. Mr Kelly, himself, eventually acknowledged that, from the time of the May 2007 trip to the UAE, he and Charif Kazal were working towards a common goal of getting a business up and running in which both would be remunerated. That understanding is clearly evidenced by the draft budget Mr Kelly helped prepare on the first UAE trip.

After returning from the UAE in June 2007, Mr Kelly continued to be involved with Charif Kazal and others in working towards the establishment of a joint venture business. This included travelling with Charif Kazal and others to the UAE in January 2008 to undertake due diligence work for the proposed venture. All this time he understood that, if the business was established, both he and Charif Kazal would benefit. When Mr Kelly accepted employment with Mr David, he knew that the company for which he would ultimately work would be indirectly part-owned by Charif Kazal.

The Commission rejects Mr Kelly’s assertion that he believed Charif Kazal was only acting as a consultant to Mr David. The Commission is satisfied that, at all relevant times, Mr Kelly understood Charif Kazal was centrally involved in work to establish a joint venture business in the UAE in which, if established, Charif Kazal would have a significant ongoing role. The Commission is satisfied that Mr Kelly worked towards the establishment of a joint venture business on the understanding that, if it were established, both he and Charif Kazal would benefit financially from their respective roles.

Mr Kelly’s conflict of interestMr Kelly had a common goal with Charif Kazal to work towards the establishment of a joint venture business in the UAE, which, if established, would financially benefit both of them. He had received $11,170 from Charif Kazal as payment for flight and accommodation expenses he had incurred in May 2007 when working towards the establishment of such a business. As such, Mr Kelly had a personal interest involving Charif Kazal, which could influence, or appear to influence, him to act partially in the discharge of his official SHFA duties when dealing with matters affecting the Kazal tenancies.

Given his senior position, the nature of the role he played at the SHFA, the payment of $11,170 made to him by Charif Kazal, and the substantial reward he would receive by way

CHAPTER 8: Conflict of interest? Findings and section 74A(2) statement


Mr KellyMr Kelly’s conduct in deliberately failing to disclose his conflict of interest and continuing to deal with matters affecting Kazal tenancies is corrupt conduct. This is because his conduct could adversely affect, either directly or indirectly, his impartial exercise of his official functions (when dealing with Kazal tenancy matters) and, therefore, come within section 8(1)(a) of the ICAC Act. His conduct could also constitute or involve a breach of public trust on his part (when dealing with Kazal tenancy matters and deliberately failing to disclose his conflict of interest) and, therefore, come within section 8(1)(c) of the ICAC Act.

Mr Kelly’s conduct falls within section 9(1)(a) of the ICAC Act because his conduct could constitute or involve the common law criminal offence of misconduct in public office. This offence is part of the criminal law of NSW. The elements of the offence have most recently been considered in R v Quach (2010) 201 A Crim R 522. Redlich JA (with whom Ashley JA and Hansen AJA agreed) said that the elements were as follows:

(1) a public official;

(2) in the course of or connected to his public office;

(3) wilfully misconduct himself or herself, by act or omission, for example, by wilfully neglecting or failing to perform his or her duty;

(4) without reasonable excuse or justification; and

(5) where such misconduct is serious and meriting criminal punishment having regard to the responsibilities of the office and the officeholder, the importance of the public objects which they serve and the nature and extent of the departure from those objects.

Mr Kelly’s omission to declare a conflict of interest was wilful. His omission was serious, particularly having regard to his position as a senior public official and the responsibilities he had in connection with the Kazal tenancies at The Rocks.

His conduct could also constitute or involve a disciplinary offence and, therefore, come within section 9(1)(b) of the ICAC Act and could constitute or involve reasonable grounds for his dismissal and therefore come within section 9(1)(c) of the ICAC Act.

requesting SHFA consent to the change of use, extension of the lease period, rental relief and consent to the granting of a liquor licence. Although the letter was not addressed to Mr Kelly, Charif Kazal knew that, as the SHFA person in charge of tenancies, Mr Kelly’s opinion on these matters would carry weight within the SHFA. Indeed, Mr Kelly was one of the SHFA officers who successfully recommended that the SHFA Board approve the change of use request, a rental abatement of $96,358, and the granting of a new lease.

Charif Kazal would have reasonably anticipated that it was likely other matters would arise from time to time where Mr Kelly’s input would be important to a resolution favourable to Kazal interests. There is evidence that Mr Kelly was instrumental in speeding up consideration of land owner consent for the 91 George Street development application, and that he granted the necessary consent.

Charif Kazal’s cash payment to Mr Kelly for the May 2007 trip, his instructions to remove Mr Kelly from the AWT global email address listing, and his instructions to delete emails concerning the UAE project evidence an intention to keep his business dealings with Mr Kelly secret from the SHFA. These actions are consistent with a desire on his part to protect Mr Kelly’s position at the SHFA so that he would be able to act favourably towards Kazal interests.

The Commission is satisfied that Charif Kazal held out the prospect of employment in the UAE to Mr Kelly, and paid him $11,170 for his May 2007 flight and accommodation expenses, with the intention that these would tend to influence Mr Kelly to exercise his official SHFA functions in a manner favourable to Kazal business interests.

Corrupt conductCorrupt conduct is defined in sections 8 and 9 of the ICAC Act. These sections are set out in Appendix 2.

Three steps are involved in determining whether or not corrupt conduct has occurred in a particular matter. The first step is to make findings of relevant facts. In making findings of fact, the Commission applies the civil standard of proof of reasonable satisfaction, taking into account the decisions in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 and Neat Holdings Pty Ltd v Karajan Holdings (1992) 67 ALJR 170 at 171.

The second step is to determine whether the conduct, which has been found as a matter of fact, comes within the terms of sections 8(1) and 8(2) of the ICAC Act. The third step is to determine whether the conduct also satisfies the requirements of section 9 of the ICAC Act.



criminal proceedings for an offence under the ICAC Act.

Mr KellyEvidence would be available from Dr Lang and SHFA records of Mr Kelly’s obligation to report any conflict of interest and his failure to do so. Evidence would be available from SHFA records of Mr Kelly’s involvement in decisions affecting Kazal tenancies, particularly those decisions affecting the premises at 91 George Street. As to Mr Kelly’s involvement with Charif Kazal in working towards a common goal of establishing a joint venture business in the UAE, it is unlikely that Charif Kazal would provide any evidence. There would, however, potentially be other evidence available, including the documentary evidence referred to in this report, the evidence of Mr David and the evidence of the others who went on the two trips to the UAE.

The Commission is of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of Mr Kelly for the common law offence of misconduct in public office in relation to his failure to declare his conflict of interest.

As Mr Kelly no longer works at the SHFA, no issue arises as to the taking of disciplinary or dismissal action against him.

Charif KazalThe Commission is not of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of Charif Kazal for an offence under section 249B(2)(b) of the Crimes Act. This is because the Commission does not consider there is sufficient admissible evidence to make out the elements of the offence.

At the commencement of his evidence in the public inquiry, Charif Kazal was asked whether it was ever his intention to settle Mr Kelly’s accounts in relation to his airfare and accommodation in relation to the May 2007 trip to the UAE. He responded “No”. His email of 23 May 2007 clearly evidences his intention to settle the account for Mr Kelly’s accommodation.

The Commission is of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of Charif Kazal for an offence under section 87 of the ICAC Act in relation to his evidence that he never intended to settle Mr Kelly’s accommodation account for the May 2007 UAE trip.

Charif KazalIn holding out the prospect of employment in the UAE to Mr Kelly and paying him $11,170 for his May 2007 flight and accommodation expenses, with the intention that these would tend to influence Mr Kelly to exercise his official SHFA functions in a manner favourable to Kazal business interests, Charif Kazal’s conduct is corrupt. This is because such conduct could adversely affect, either directly or indirectly, Mr Kelly’s impartial exercise of his official functions (in his dealings with Kazal tenancy matters) and therefore come within section 8(1)(a) of the ICAC Act. His conduct falls within section 9(1)(a) of the ICAC Act because it could constitute or involve an offence under section 249B(2)(b) of the Crimes Act of corruptly giving an agent (Mr Kelly) a reward, the receipt or expectation of which would tend to influence the agent to show favour to any person in relation to the affairs or business of the agent’s principal (the SHFA).

Section 74A(2) statementIn making a public report, the Commission is required by the provisions of section 74A(2) of the ICAC Act to include, in respect of each “affected” person, a statement as to whether or not in all the circumstances, the Commission is of the opinion that consideration should be given to the following:

a. obtaining the advice of the DPP with respect to the prosecution of the person for a specified criminal offence

b. the taking of action against the person for a specified disciplinary offence

c. the taking of action against the person as a public official on specific grounds, with a view to dismissing, dispensing with the services of or otherwise terminating the services of the public official.

An “affected” person is defined in section 74A(3) of the ICAC Act as a person against whom, in the Commission’s opinion, substantial allegations have been made in the course of or in connection with the investigation. The Commission is satisfied that, in respect of the matters canvassed in chapters 4–7, Mr Kelly and Charif Kazal come within the definition of “affected person”.

In considering what statement to make under section 74A(2)(a) (prosecution), the Commission takes into account the availability of relevant admissible evidence.

Both Mr Kelly and Charif Kazal gave their evidence subject to a declaration made pursuant to section 38 of the ICAC Act. This means that their evidence cannot be used against them in any subsequent criminal proceedings other than



that I needed to recoil my head away from him”, and told him that he knew Mr Hammond and others were “part of this”. He told the Commission that although Charif Kazal did not mention the Commission, he assumed that he was referring to the public inquiry. Mr Hammond claimed that, when he put his hand on the door handle in order to open the door to leave the room, he was initially prevented from doing so by Charif Kazal. He said that when he did leave the room he noticed another man, who he had previously seen with Charif Kazal, standing near or across the doorway, who moved away from it as he walked out of the room. That man was subsequently identified as Jimmy Kazal, one of Charif Kazal’s brothers.

A short time later that day, Mr Hammond spoke with a Commission lawyer and relayed the conversation to the lawyer who made a handwritten note of what he said. The note records that Mr Hammond believed Charif Kazal was menacing. Mr Hammond made a written statement dated 1 August 2011 in which he claimed that Charif Kazal “...was menacing and intimidating in his manner and words towards me”. He also gave oral evidence to the Commission.

Charif Kazal also provided a written statement to the Commission. Both he and Jimmy Kazal gave evidence about the incident. There was no dispute that Charif Kazal asked Mr Hammond to speak with him or that they did so in a room off the Commission’s reception area. There was a dispute as to precisely what was said and done. Charif Kazal denied that he sought to intimidate Mr Hammond or that he had attempted to prevent Mr Hammond from leaving the room. Jimmy Kazal denied that he had stood outside the room to keep a lookout to make sure no one noticed that Charif Kazal and Mr Hammond were in the room or to warn Charif Kazal if anyone else approached the room.

Importantly, there was disagreement about whether Charif Kazal had mentioned Mr David when speaking with Mr Hammond.

The handwritten note made by the Commission lawyer records what Mr Hammond said he was told by Charif Kazal. There is no reference to Charif Kazal mentioning Mr David. The note

This chapter deals with an allegation made during the course of the public inquiry that a friend of Mr David, Michael Hammond, was intimidated by Charif Kazal on Commission premises on the afternoon of Friday, 29 July 2011.

An allegation that anyone attending the Commission was intimidated by a witness was, of itself, serious. It was also claimed, however, that knowledge of what occurred had caused Mr David severe stress and anxiety. It was suggested that what had occurred between Charif Kazal and Mr Hammond was meant also to intimidate Mr David, who had commenced his evidence on that day and who was scheduled to continue to give evidence the following week. If what was said or done by Charif Kazal in his discussion with Mr Hammond was designed in any way to intimidate Mr David, then such action could involve an offence under section 93 of the ICAC Act. That section makes it an offence for a person to use, cause, inflict or procure, or threaten to use, cause, inflict or procure, any violence, punishment, damage, loss or disadvantage to any person for or on account of the person assisting the Commission or giving evidence before the Commission.

Differing versions Mr Hammond is a close personal friend of Mr David. He also knows Charif Kazal socially. He attended the public inquiry on Friday, 29 July 2011 for the purpose of supporting Mr David.

At 3:38 pm, the public inquiry was adjourned to continue the following week. Mr Hammond left the hearing room and waited in the Commission’s reception area for Mr David to join him.

Mr Hammond told the Commission that, while waiting for Mr David, he was approached by Charif Kazal who asked to speak with him. They went into a small room off the Commission’s reception area. Mr Hammond claimed that Charif Kazal stood very close to him, “...inside what I consider to be a person’s personal space”, glared at him, held his hand up to Mr Hammond’s face, “...close enough

Chapter 9: Alleged intimidation


CHAPTER 8: Conflict of interest? Findings and section 74A(2) statementCHAPTER 9: Alleged intimidation

FindingsUnlike Charif Kazal, Mr Hammond was a credible witness and the Commission accepts his evidence as to what was said and done by Charif Kazal. Although there was no reference to Mr David in the near contemporaneous handwritten note made by the Commission lawyer, the Commission accepts Mr Hammond’s explanation that he did not see the note until the public inquiry and, if he had been given a chance to review it, he would have corrected it to include reference to Mr David. The Commission is satisfied that he felt menaced and intimidated by Charif Kazal’s manner.

Based on the evidence of the CCTV footage, the Commission is not satisfied that Jimmy Kazal remained outside the room to warn Charif Kazal of anyone else approaching. The CCTV footage clearly shows that that when a person walked towards the room he made no movement to warn Charif Kazal or to place himself between the person and the room. He said that he was waiting for Charif Kazal’s legal representative. That is consistent with the CCTV footage, which shows that as soon as the legal representatives emerged from the hearing room he knocked on the door and motioned towards them.

Section 74A(2) statementFor the purpose of this chapter, both Charif Kazal and Jimmy Kazal are affected persons.

The Commission is not of the opinion that consideration should be given to obtaining the advice of the DPP with respect to the prosecution of either Charif Kazal or Jimmy Kazal for any offence under section 93 of the ICAC Act. While the Commission has accepted that Charif Kazal made reference to Mr David in his conversation with Mr Hammond, it has done so by applying the civil standard of proof of reasonable satisfaction. This is the requisite standard for the making of factual findings by the Commission. The standard of proof to be applied in criminal cases is that of beyond reasonable doubt. Given that the Commission lawyer’s record of Mr Hammond’s account did not make reference to Mr David, it follows that the criminal standard of proof cannot be satisfied in regard to establishing whether the intimidating conduct was aimed at Mr David.

records, in part, that Charif Kazal said, “I just want you to know that I know you are a part of this. My informants tell me that there is you, Judi Hauseman and Linton Besser and that you are all part of this”. In his subsequent written statement, however, Mr Hammond recited a slightly different version of the conversation. He claimed that Charif Kazal said, “My informants tell me that you are part of this. There’s you, Rod [Mr David], Judi Hauseman and Linton Besser”. When giving evidence in the public inquiry, he maintained that Charif Kazal had mentioned Mr David in this context.

Charif Kazal denied mentioning Mr David in such a context. He claimed that he told Mr Hammond, “I have heard that you and Judy Hauseman, Linton Besser and Greg Moses from the Sydney Morning Herald were behind all the articles to defame my family. Is that a fact?”.

There was a number of other discrepancies between Mr Hammond’s account of what was said and that of Charif Kazal. None of these is of any significance.

To assist in ascertaining what had occurred, the Commission reviewed its closed circuit television (CCTV) footage of its reception area. The interior of the room in which the discussion occurred was not monitored by CCTV.

The CCTV footageThe CCTV footage shows Mr Hammond seated in the reception area, with Charif Kazal standing about 10 metres away. Charif Kazal was then joined by Jimmy Kazal. They remained standing but facing in Mr Hammond’s general direction. Charif Kazal then hailed Mr Hammond with a gesture of his right arm and nodding of the head. Mr Hammond walked up to Charif Kazal and Jimmy Kazal. Charif Kazal, followed by Mr Hammond, then entered a room off the reception area. Charif Kazal closed the door. Jimmy Kazal moved away from the door and stood near the opposite wall, about three metres away. A person passed between Jimmy Kazal and the room but he made no movement towards the door at that stage. A little while later Jimmy Kazal walked towards the office. Two men, who are Charif Kazal’s legal representatives, then entered the reception area from the hearing room. They walked towards the reception entrance, passing Jimmy Kazal on the way. Jimmy Kazal then knocked on the door and motioned towards the two men. He then joined them at the reception entrance. The CCTV showed that, when the door opened, Mr Hammond and Charif Kazal were standing near the doorway talking and gesticulating mildly with their right hands. They both left the room, Mr Hammond going first. Both walked to the reception entrance where they appeared to have a short conversation with some of the people there. All except Mr Hammond then left.


quality of the final decision. In the case of the SHFA, there were wide gaps in some of these controls. This resulted in it being difficult to determine whether a decision was made subject to an undisclosed conflict of interest.

Structural separation of heritage preservation and commercial interestsDr Lang acknowledged the internal tension between those responsible for generating income and placing tenants, and those charged with protecting some of the most significant heritage property in Sydney. He stated that, “the regulatory side did want to, to perhaps be a little bit more of the policeman than other parts of the organisation would, would prefer”. Dr Lang told the Commission that there could be a considerable difference of opinion, indeed conflicting opinions, between the units.

Poor control of the contributions from competing areas provides an opportunity to act subject to a conflict of interest. If the opinion of the heritage side can be downplayed, for example, then a decision to favour a tenant by overlooking heritage conditions may appear legitimate. In a tightly controlled decision-making process, such conflicting imperatives would be structurally separated to ensure that one individual or group would not suppress the contribution to the decision-making process of the other.

Far from structurally separating commercial and regulatory imperatives, at the time of events that were the subject of this investigation, the structure had merged the imperatives into a single body. The leasing unit, regulatory unit, assets and facilities management unit, heritage unit, and debt recovery function were all in the tenant and assets management services (TAMS) division under Mr Kelly’s direction. The property unit was also within the TAMS until March 2007.

Despite the inevitable differences of opinion stemming from the competing imperatives, the structure placed all matters concerning new and renewed tenancies, property maintenance, property management (until about April 2007),

In most instances, an undeclared conflict of interest is very difficult to detect. Preventing a public sector employee from making a decision that favours a friend, supplier, client or themselves by focusing efforts on the detection of undeclared conflicts of interest, is very hard to achieve. Prevention is more likely if the decision-making is well-controlled, and if there is limited opportunity for one person to make inappropriate decisions or to influence the decision-making process inappropriately without detection.

This investigation demonstrated that the appropriateness and quality of tenancy decisions being made by the SHFA are difficult to assess. This leads to the opportunity for the decision-maker to act, subject to a conflict, without a high risk of detection. With regard to most SHFA decisions, the imperative of heritage protection competes with the imperatives of a commercial orientation. Within the commercial imperative, the demands of occupancy rates and financial return also sit in some degree of competition with each other.

With such competing imperatives, a decision to provide a concession to a tenant, while accepting some damage to the heritage of the building, may or may not be appropriate, depending on how the different imperatives are weighed. Analysis of the decision alone provides little indication of whether a person has acted in the interests of the agency or in the interests of an undisclosed, other interest.

Where the quality of the decision cannot be assessed, the focus of control typically switches to the integrity of the process that produces the decision. If control of the process of decision-making is robust, the opportunity for a single person to skew a decision is limited.

Three elements of control could reasonably be expected to be in place. First, at the centre of process control would be structural separation of the work concerning the competing imperatives (commercial return and heritage protection). Secondly, the process would ensure that all competing imperatives are considered by the decision-makers. Thirdly, each part of the process would bring to bear adequate expertise and guidance, providing some confidence in the

Chapter 10: Corruption prevention


The SHFA does report on its conservation management of properties, the heritage projects completed during the reporting period, and the numbers of heritage determinations made under delegation from the Heritage Council and under the Heritage Act 1988 (NSW). But heritage matters are not reported against a pre-determined KPI.

In essence, the KPIs represent strategic controls and associated incentives that orient management toward maintaining and improving occupancy rates over heritage protection. The controls do not encourage all competing positions to be considered. In such a control environment, recommendations that benefit a tenant at the cost of heritage are less likely to be challenged.

The following changes are recommended to the decision-making process to ensure all competing positions are considered:

Recommendation 2• That heritage considerations relevant to any

decision on SHFA properties should record the factors considered and the reasons for decisions, and full transparency be given to both the matters considered and the reasons for the decisions.

• That the SHFA includes heritage considerations as a standard component in all board papers and executive memoranda dealing with property and leasing matters.

Expertise and guidelines at key risk pointsAfter structural separation of competing imperatives is achieved and decision-makers have considered all relevant positions, additional control of complex and often unique business decisions can be achieved through the use of expertise and associated guidelines at key risk points.

With regard to the investigation, the need for expertise and guidance at certain points of the process was evident in the difficulty the SHFA had distinguishing between “structural works” and “lessee’s fit-out works”. Structural works are the responsibility of the SHFA and lessee’s fit-out works are the responsibility of the tenants. What constitutes structural works and lessee’s fit-out works on individual properties are negotiated under the terms of the lease.

In practice, however, this cannot be precisely quantified prior to work being undertaken, as refurbishment work may reveal structural flaws that are the SHFA’s responsibility to rectify. At the completion of the work for 99 George Street, Kazal Bros Pty Ltd submitted a claim

protection of heritage, debt recovery, rental concessions and abatements, and regulatory responses to infringements under the immediate control of Mr Kelly. Mr Kelly could make recommendations about these matters to the SHFA general manager and the SHFA Board. As a senior executive, Mr Kelly also attended board meetings and “spoke” to the recommendations, providing further opportunity to skew the decision-making process.

The organisational structure of TAMS conflated the SHFA’s regulatory and heritage protection roles and commercial performance. This resulted in a consequent weakening of control over the process of decision-making. The Commission considers the SHFA would have better control if the contribution of heritage protection within the decision-making process were to be structurally independent of the contribution of the commercial considerations.

Recommendation 1That responsibility, authority and accountability for heritage protection be located within a single, independent role with a commensurate level of seniority within the Sydney Harbour Foreshore Authority (SHFA).

Consideration of the competing positionsStructural separation of competing imperatives reduces the ease with which one competing position can be influenced or overridden by another. It does not ensure that the decision-makers consider all relevant factors. The SHFA’s key performance indicators (KPIs) primarily concern commercial imperatives. Commercial KPIs, in absence of heritage KPIs, effectively focus the decision-maker on the commercial imperatives over the heritage preservation imperative.

The SHFA’s primary KPIs are:

• Business effectiveness – this KPI includes proportion of rental and commercial vacancies at the end of the financial year, and the percentage of debt outstanding for 90 days or more as a proportion of yearly incomes.

• Customers and stakeholders – this KPI includes tenant sales turnover growth, customer enquiry response times, and information concerning expenditure and visits by international, domestic and local visitors.

• Financial performance – this KPI includes precinct earnings, property revenue growth, and percentage expenditure reduction on previous year.

CHAPTER 10: Corruption prevention


Recommendation 3That the SHFA establishes a formal process that tenants are required to follow when applying for compensation on works they have carried out on SHFA properties (including a report prepared by suitably qualified professionals that documents the work undertaken, why it was necessary, and an itemised list of expenditure).

Recommendation 4That where a recommendation to the general manager and board of the SHFA would provide a significant client benefit, a comprehensive written business case is to be provided to the general manager and board by the responsible director.

These recommendations are made pursuant to section 13(3)(b) of the ICAC Act and, as required by section 111E of the ICAC Act, will be furnished to the SHFA and the responsible minister, being the minister for planning and infrastructure.

As required by section 111E(2) of the ICAC Act, the SHFA must inform the Commission in writing within three months (or such longer period as the Commission may agree to in writing) after receiving the recommendations, whether it proposes to implement any plan of action in response to the recommendations and, if so, of the plan of action.

In the event a plan of action is prepared, the SHFA is required to provide written a report to the Commission of its progress in implementing the plan 12 months after informing the Commission of the plan. If the plan has not been fully implemented by then, a further written report must be provided 12 months after the first report.

The Commission will publish the response to its recommendations, any plan of action and progress reports on its implementation on the Commission’s website, www.icac.nsw.gov.au, for public viewing.

to the SHFA of approximately $440,000 for the costs of structural work plus a claim for compensation for what, in their view, they saw as capital improvements to the building.

There was significant and lengthy internal discussion and disagreement within the SHFA about the validity of the Kazals costs and claims. For example, Mr Cock, the SHFA’s assets and facilities manager, TAMS, assessed the compensation at $114,820 but later revised his estimate to just under $60,000.

No decision was made by the SHFA about this for several months. In a memorandum dated 2 January 2007, Mr Kelly eventually recommended to Dr Lang that $335,000 be reimbursed. In an email in regard to his recommendation, Mr Kelly said a decision had to be made because the matter had dragged on too long to the inconvenience of the Kazals, an issue that related to the SHFA’s KPI of “customers and stakeholders”.

This example clearly shows the secondary position of the heritage imperative, the variety of opinions within the organisation, and the use of the competing KPIs to defend a decision. But also apparent is an absence of expertise in the legal position of the agency and the business and engineering issues involved. Guidelines for decisions were equally absent, with the final amount of compensation seeming almost arbitrary. Effectively, a third element of control of the process of complex decision-making was weak; that is, the use of expertise exercised within guidelines.

The Commission notes the SHFA is taking the following steps to strengthen the roles of expertise and guidelines in the decision-making process:

• it intends to clarify, through special conditions of lease, that it will make no payments for unapproved works undertaken by a tenant

• it will seek legal advice as to whether the definitions and other relevant terms of the standard “lease memorandum” can be amended to make the distinction clearer between “structural works” and “lessee’s fit-out works”

• it will obtain legal advice in regards to claims for compensation where the amount exceeds $50,000.

In addition to the steps taken by the SHFA, the following recommendations address remaining points at which expertise and guidelines would strengthen control of the decision-making process.


Appendix 1: The role of the Commission

The role of the Commission is to act as an agent for changing the situation which has been revealed. Its work involves identifying and bringing to attention conduct which is corrupt. Having done so, or better still in the course of so doing, the Commission can prompt the relevant public authority to recognise the need for reform or change, and then assist that public authority (and others with similar vulnerabilities) to bring about the necessary changes or reforms in procedures and systems, and, importantly, promote an ethical culture, an ethos of probity.

The principal functions of the Commission, as specified in section 13 of the ICAC Act, include investigating any circumstances which in the Commission’s opinion imply that corrupt conduct, or conduct liable to allow or encourage corrupt conduct, or conduct connected with corrupt conduct, may have occurred, and cooperating with public authorities and public officials in reviewing practices and procedures to reduce the likelihood of the occurrence of corrupt conduct.

The Commission may form and express an opinion as to whether consideration should or should not be given to obtaining the advice of the Director of Public Prosecutions with respect to the prosecution of a person for a specified criminal offence. It may also state whether it is of the opinion that consideration should be given to the taking of action against a person for a specified disciplinary offence or the taking of action against a public official on specified grounds with a view to dismissing, dispensing with the services of, or otherwise terminating the services of the public official.

The ICAC Act is concerned with the honest and impartial exercise of official powers and functions in, and in connection with, the public sector of New South Wales, and the protection of information or material acquired in the course of performing official functions. It provides mechanisms which are designed to expose and prevent the dishonest or partial exercise of such official powers and functions and the misuse of information or material. In furtherance of the objectives of the ICAC Act, the Commission may investigate allegations or complaints of corrupt conduct, or conduct liable to encourage or cause the occurrence of corrupt conduct. It may then report on the investigation and, when appropriate, make recommendations as to any action which the Commission believes should be taken or considered.

The Commission can also investigate the conduct of persons who are not public officials but whose conduct adversely affects or could adversely affect, either directly or indirectly, the honest or impartial exercise of official functions by any public official, any group or body of public officials or any public authority. The Commission may make findings of fact and form opinions based on those facts as to whether any particular person, even though not a public official, has engaged in corrupt conduct.

The ICAC Act applies to public authorities and public officials as defined in section 3 of the ICAC Act.

The Commission was created in response to community and Parliamentary concerns about corruption which had been revealed in, inter alia, various parts of the public service, causing a consequent downturn in community confidence in the integrity of that service. It is recognised that corruption in the public service not only undermines confidence in the bureaucracy but also has a detrimental effect on the confidence of the community in the processes of democratic government, at least at the level of government in which that corruption occurs. It is also recognised that corruption commonly indicates and promotes inefficiency, produces waste and could lead to loss of revenue.


Appendix 1: The role of the Commission Appendix 2: Sections 8 and 9 of the ICAC Act

(f) theft,

(g) perverting the course of justice,

(h) embezzlement,

(i) election bribery,

(j) election funding offences,

(k) election fraud,

(l) treating,

(m) tax evasion,

(n) revenue evasion,

(o) currency violations,

(p) illegal drug dealings,

(q) illegal gambling,

(r) obtaining financial benefit by vice engaged in by others,

(s) bankruptcy and company violations,

(t) harbouring criminals,

(u) forgery,

(v) treason or other offences against the Sovereign,

(w) homicide or violence,

(x) matters of the same or a similar nature to any listed above,

(y) any conspiracy or attempt in relation to any of the above.

(3) Conduct may amount to corrupt conduct under this section even though it occurred before the commencement of this subsection, and it does not matter that some or all of the effects or other ingredients necessary to establish such corrupt conduct occurred before that commencement and that any person or persons involved are no longer public officials.

(4) Conduct committed by or in relation to a person who was not or is not a public official may amount to corrupt conduct under this section with respect to the

Sections 8 and 9 of the ICAC Act provide as follows:

8 General nature of corrupt conduct(1) Corrupt conduct is:

(a) any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the honest or impartial exercise of official functions by any public official, any group or body of public officials or any public authority, or

(b) any conduct of a public official that constitutes or involves the dishonest or partial exercise of any of his or her official functions, or

(c) any conduct of a public official or former public official that constitutes or involves a breach of public trust, or

(d) any conduct of a public official or former public official that involves the misuse of information or material that he or she has acquired in the course of his or her official functions, whether or not for his or her benefit or for the benefit of any other person.

(2) Corrupt conduct is also any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of official functions by any public official, any group or body of public officials or any public authority and which could involve any of the following matters:

(a) official misconduct (including breach of trust, fraud in office, nonfeasance, misfeasance, malfeasance, oppression, extortion or imposition),

(b) bribery,

(c) blackmail,

(d) obtaining or offering secret commissions,

(e) fraud,


disciplinary offence includes any misconduct, irregularity, neglect of duty, breach of discipline or other matter that constitutes or may constitute grounds for disciplinary action under any law.

(4) Subject to subsection (5), conduct of a Minister of the Crown or a member of a House of Parliament which falls within the description of corrupt conduct in section 8 is not excluded by this section if it is conduct that would cause a reasonable person to believe that it would bring the integrity of the office concerned or of Parliament into serious disrepute.

(5) Without otherwise limiting the matters that it can under section 74A (1) include in a report under section 74, the Commission is not authorised to include a finding or opinion that a specified person has, by engaging in conduct of a kind referred to in subsection (4), engaged in corrupt conduct, unless the Commission is satisfied that the conduct constitutes a breach of a law (apart from this Act) and the Commission identifies that law in the report.

(6) A reference to a disciplinary offence in this section and sections 74A and 74B includes a reference to a substantial breach of an applicable requirement of a code of conduct required to be complied with under section 440 (5) of the Local Government Act 1993, but does not include a reference to any other breach of such a requirement.

exercise of his or her official functions after becoming a public official.

(5) Conduct may amount to corrupt conduct under this section even though it occurred outside the State or outside Australia, and matters listed in subsection (2) refer to:

(a) matters arising in the State or matters arising under the law of the State, or

(b) matters arising outside the State or outside Australia or matters arising under the law of the Commonwealth or under any other law.

(6) The specific mention of a kind of conduct in a provision of this section shall not be regarded as limiting the scope of any other provision of this section.

9 Limitation on nature of corrupt conduct

(1) Despite section 8, conduct does not amount to corrupt conduct unless it could constitute or involve:

(a) a criminal offence, or

(b) a disciplinary offence, or

(c) reasonable grounds for dismissing, dispensing with the services of or otherwise terminating the services of a public official, or

(d) in the case of conduct of a Minister of the Crown or a member of a House of Parliament—a substantial breach of an applicable code of conduct.

(2) It does not matter that proceedings or action for such an offence can no longer be brought or continued, or that action for such dismissal, dispensing or other termination can no longer be taken.

(3) For the purposes of this section:

applicable code of conduct means, in relation to:

(a) a Minister of the Crown—a ministerial code of conduct prescribed or adopted for the purposes of this section by the regulations, or

(b) a member of the Legislative Council or of the Legislative Assembly (including a Minister of the Crown)—a code of conduct adopted for the purposes of this section by resolution of the House concerned.

criminal offence means a criminal offence under the law of the State or under any other law relevant to the conduct in question.

APPENDIX 2: Sections 8 and 9 of the ICAC Act

Level 21, 133 Castlereagh Street Sydney, NSW, Australia 2000

Postal Address: GPO Box 500, Sydney, NSW, Australia 2001

T: 02 8281 5999 1800 463 909 (toll free for callers outside metropolitan Sydney) TTY: 02 8281 5773 (for hearing-impaired callers only) F: 02 9264 5364 E: [email protected] www.icac.nsw.gov.au

Business Hours: 9 am - 5 pm Monday to Friday

· Charif Kazal’s role 33 Mr Kelly’s con¡ict of interest 34 Charif Kazal 34 Corrupt conduct 35 Section 74A(2) statement 36 Chapter 9: Alleged intimidation 37 Differing versions

Documents