He was a Labor powerbroker, a kingmaker with an uncanny ability to bend people to his will. At the height of his power, Eddie Obeid could make and break Premiers. Now he finds himself at the centre of explosive corruption allegations that threaten his future, his family and the party that delivered him power.

Next on Four Corners, reporter Marian Wilkinson charts Eddie Obeid's rise inside Labor's most powerful faction, the New South Wales right. How did a Lebanese immigrant move from owning an ethnic newspaper business to become the most influential politician in the State?

Talking to Labor Party insiders - including senior political figures, staffers and public servants - Wilkinson examines the allegations made against Obeid and another former Labor minister, Ian Macdonald. With forensic detail, Four Corners lays out the details and timeline of alleged corrupt behaviour, setting it against the political events of the same period. The story reveals a party and a government being destroyed from within. It also makes it plain, as one former insider explains, that with Eddie Obeid flexing his power, the process of governing the State could be subverted for the benefit of a few.

"I formed the view when I left, that the Government was no longer acting in the public interest, it was acting in private interests, and if the public interest got a look-in it was purely by coincidence."

"The Enemy Within", reported by Marian Wilkinson and presented by Kerry O'Brien, goes to air on Monday 11th March at 8.30pm on ABC1. It is replayed on Tuesday 12th March at 11.35pm. It can also be seen on ABC News 24 on Saturday at 8.00pm, on ABC iview and at abc.net.au/4corners.

Transcript

"The Enemy Within" - Monday 11 March 2013

(Eddie Obeid making his way through a mob of journalists)

KERRY O'BRIEN, PRESENTER: Two politicians...

(Ian Macdonald walking through a similar media crush)

..one alleged secret deal, a party and a government hijacked.

HUGH McDERMOTT, PRESIDENT, NSW LABOR LAWYERS: We need to remove this cancer at every level of government.

JOHN FAULKNER, LABOR SENATOR FOR NSW: Labor's standing in the State of New South Wales has been very, very significantly damaged.

KERRY O'BRIEN: How the Labor Party allowed itself to be subverted from within.

Welcome to Four Corners.

This is a story in two parts based around the explosive evidence to the Independent Commission Against Corruption in New South Wales involving allegations against two State Labor politicians, Ian Macdonald and Eddie Obeid, and other members of Obeid's family, described in the hearings as the worse example of corruption in government since the days of the notorious Rum Corps.

That was nearly 200 years ago.

The first part of tonight's program concentrates on Obeid's extraordinary rise as a Labor Party kingmaker while keeping a low public profile, bending parliamentarians to his will and ultimately making and breaking premiers.

The second part delves, with forensic detail, into the allegations of corrupt behaviour with the potential to deliver hundreds of millions in windfall profits.

The most important question tonight is how it's possible for a government in Australia to be so manipulated from within to such an extent for so long.

It's a question that must be giving the Prime Minister Julia Gillard nightmares as she prepares for a massive backlash from New South Wales voters at the Federal Election in September.

Marian Wilkinson is the reporter.

(Commissioner David Ipp walks to the bench at an ICAC hearing, bows and sits down)

DAVID IPP AO QC, COMMISSIONER, NSW ICAC: Mr Watson?

GEOFFREY WATSON SC, COUNSEL ASSISTING: Yes, thank you

The importance of this investigation stems from the identity and rank of the public officials involved.

This public inquiry will be investigating whether corruption was involved. If it is corruption, then it is corruption on a scale probably unexceeded since the days of the Rum Corps.

In all, hundreds of millions of dollars are involved. Efforts were made to keep secret the involvement of a politician, and intricate measures were taken to conceal payments made to him and to his family.

ICAC has unpicked those, but the detail is exquisite.

(Eddie Obeid leaves ICAC and walks into a barrage of photo flashes and press microphones)

MARIAN WILKINSON, REPORTER: This is the politician who's the prime target of the corruption inquiry making history in New South Wales and around Australia - Labor's former right-wing powerbroker Eddie Obeid.

Until recently he could make or break premiers and cabinet ministers. Now he's facing allegations before ICAC, the New South Wales Independent Commission Against Corruption, that he and his family profited from a multi-million dollar criminal conspiracy against the state.

EDDIE OBEID: Excellent...

MARIAN WILKINSON: The unfolding revelations swirling around Obeid are tearing at the heart of the Labor Party, not only in New South Wales but federally.

BOB CARR, FOREIGN MINISTER: It's breathtaking, the wreckage that he has done - a single person who we saw as a... a marginal figure, someone lurking in the corridors, never to be taken that seriously, could produce this... Well there's something epic...

JOHN FAULKNER, LABOR SENATOR FOR NSW: I've been a pretty senior figure really in the New South Wales branch of the Labor Party. I've never met him, never spoken to him and I've never heard him make a public speech.

But regardless of all that, he ran the New South Wales Labor Party and ran Labor governments in New South Wales.

(Ian Macdonald exits the court through a huge press contingent)

MARIAN WILKINSON: The accused co-conspirator in this scandal is the former state Mines Minister and left-wing power broker Ian Macdonald.

Macdonald allegedly leaked confidential information to Obeid's son about a lucrative state coal exploration licence. He, like the Obeids, is denying the allegations and stonewalling investigators.

REPORTER (to Macdonald): Are you worried about the prospect of criminal charges?

MARIAN WILKINSON: But the denials are falling on deaf ears as the ugly details transfix Labor insiders.

JOHN FAULKNER: It's true I knew Macdonald for over thirty years. Everybody knows for that period of time I have been a strong political opponent of Macdonald.

Frankly I found his behaviour to be odious and improper.

(Camera taking multiple snaps of Obeid as he speaks to someone in a car)

MARIAN WILKINSON: Eddie Obeid wielded political power deep inside New South Wales Labor governments for over a decade, while at the same time his family built up a hidden maze of lucrative businesses.

But until now, few knew the scale of his power or his family's wealth. ICAC put Obeid in its sights after his sons used the coal exploration licence issued by Macdonald to extract millions of dollars from investors, including Macdonald's best mate, Greg Jones.

(Phone ringing, recording of phone conversation)

(Transcript of phone conversation appears on screen)

EDDIE OBEID: Hello?

GREG JONES: Eddie?

EDDIE OBEID: G'day Greg.

GREG JONES: I need to tell you a few things. The boys are acting a bit stupidly here. But anyway, we need commonsense to prevail here, my son. But um...

EDDIE OBEID: Why don't you talk with them?

GREG JONES: Well I can... can they, where are they?

EDDIE OBEID: Yeah call them, they're at Birkenhead.

GREG JONES: Alright I'll give Mo a call and I'll catch up with them tomorrow.

EDDIE OBEID: Yeah catch up with them, it's not a problem.

(Camera takes multiple snaps of Eddie Obeid's son Moses)

MARIAN WILKINSON: Mo or Moses is Eddie Obeid's son, a pivotal figure in the alleged conspiracy who was caught here on phone taps arguing over with Jones over the deal.

(Recording of phone conversation)

MOSES OBEID: Mate if he thinks he's going to come in and fucking tell us, after five minutes to midnight, that sorry and fuckin' it's all off, mate he's got another fuckin' thing coming.

GREG JONES: He never said that!

MOSES OBEID: Mate, he did.

MARIAN WILKINSON: From his impressive family home in Sydney's Hunters Hill, Eddie Obeid still tells Four Corners he never abused his political office for self interest.

Indeed, in an interview with Four Corners back in 2009, he drew the line between self interest and political duty.

(Excerpt from Four Corners, 2009)

EDDIE OBEID: Well, eh... look, everyone in politics acts in self-interest. I think anyone that tells you otherwise would be a liar. But there's a limit to what that self-interest should consist of when it comes to issues belonging to the whole state.

MARIAN WILKINSON: But the story of Eddie Obeid is about self interest. And it raises disturbing questions about why the Labor Party would hand over immense power to a man whose values were built on making money and controlling fiefdoms.

(Shots of a mountain village in Lebanon)

Eddie Obeid was not born to wealth or power. His old village Matrit in Northern Lebanon, was as poor as most after the war.

(A digger shifts the rubble of old stone houses in the small village)

These days Eddie Obeid is spending big money here, re-building his parents old house in grand style.

(Exterior shots of a large new house)

Everyone knows Eddie Obeid is a powerful man in Australia and in Matrit.

MATRIT MAN (in Arabic): You can say he's the village leader. No one has more status and standing in the village, he's like the head of the village.

(Picturesque shots of village boys and a pony)

MARIAN WILKINSON: Obeid left here when he was just six years old. But he learnt it was not just in Lebanon where money and power go hand in hand.

(Old black and white photographs of Eddie Obeid as a newspaperman)

JOE KHOURY: El Telegraph was a newspaper in Arabic language serving the community. Well, Eddie start with us 1974. We stay until '85 together and then we split.

He come to the newspaper for power. He want power. Without the newspaper, he wasn't anywhere.

(Marian Wilkinson and Joe Khoury having lunch together)

MARIAN WILKINSON: Joe Khoury was Eddie Obeid's business partner in the old days. Together they put Sydney's famous Arabic newspaper El Telegraph on the map.

He watched as Obeid forged his early ties with New South Wales Labor.

JOE KHOURY: They do a lot of favour to the Labor Party. Most of them...

MARIAN WILKINSON: Tell us about that.

JOE KHOURY: Most of them, most of them free - most of the ads are free.

MARIAN WILKINSON: Who was his contact in the Labor Party?

JOE KHOURY: I think... I know it's Graham Richardson is one, was the powerbroker I know. Graham Richardson, he's very powerful in the Labor Party.

MARIAN WILKINSON: How close was Eddie Obeid with Graham Richardson?

JOE KHOURY: Very close. It was because by coincidence I went one Saturday morning to the press and I seen Eddie and Graham Richardson with a tracksuit together having coffee.

You know, it's mean when two gentlemen with a tracksuit Saturday morning, non-working days, what they doing there together? Was a friend, of course.

(Photo of Graham Richardson and Eddie Obeid at a formal dinner)

MARIAN WILKINSON: Graham Richardson, Labor's legendary powerbroker, formed a deep friendship with Obeid that would span three decades.

In the early days, Obeid lobbied Richardson on behalf of local developers and became a fixture at Labor fundraisers.

BOB CARR, NSW PREMIER, 1995-2005: I remember he did a very big Lebanese fundraiser in about 1988. So he must've been... He must've been a personality but some time he emerged from the semi-darkness and began to get a special prominence.

(Interior of the New South Wales Parliament)

MARIAN WILKINSON: Obeid, with Richardson's backing, was installed as a member of the New South Wales Parliament's Upper House.

(Applause as Bob Carr mounts a stage after the 1995 NSW election)

BOB CARR: New South Wales has a majority Labor Government.

MARIAN WILKINSON: In 1995, when Carr became New South Wales Premier, he discovered Eddie Obeid was already a force in Labor's parliamentary party.

Carr's Cabinet had agreed on a sweeping reform to combat police corruption. But he was stunned to learn Obeid was leading the caucus revolt against it.

BOB CARR: Eddie was there and the message from it was... we nearly had that knocked off in the Caucus, a cabinet position nearly defeated on the floor of the parliamentary party.

And that was really a message, as it was explained to me later from Eddie, that 'if I'm not in your Cabinet, I'll be causing as much mischief in the Caucus room and the way out is to have me installed in the Cabinet'.

(Shot of a young Tripodi at a Grains Board hearing)

MARIAN WILKINSON: One key to Obeid's growing power was his ally Joe Tripodi, a notorious branch stacker and newly elected MP.

HUGH McDERMOTT, PRESIDENT, NSW LABOR LAWYERS: Joe when he was in Young Labor and when he took over as Secretary was probably one of the best numbers men that I've ever seen and probably ever will see.

He was smart. He knew how to influence people, how to recruit people into the Party.

Eddie was very wealthy. He was a master at manipulation and between the two of them they had a lot of support from key individuals in the Party office but also in the State Parliament - and within key trade unions.

MARIAN WILKINSON: Hugh McDermott worked closely with Tripodi securing seats in Sydney's outer suburbs for Labor's right-wing faction, but he became disturbed by what he saw.

HUGH McDERMOTT: It began to transform from something that was fairly idealistic or um... ethical in some respects, 'cause it was, to a base where it was about power and influence and fiefdoms.

It had nothing to do with core Labor values, as we talk about them, nothing to do with helping working people or making, you know, New South Wales a better place.

It was about ownership. It was about money. It was about control. And what happened is that if you spoke up against such things, if you questioned how certain numbers or branch stacking happened, they got rid of you. Simple as that.

MARIAN WILKINSON: By the late nineties Labor's seats in the New South Wales Parliament were increasingly dominated by the Obeid-Tripodi faction. They were set to become the deciding power in the Labor Caucus.

BOB CARR: A Member of Parliament could be someone who's insecure, who's nervous, who's lonely - and all of a sudden at the door of their office is Eddie.

And Eddie says, 'You've got a future in this place. You ought to be- you ought to be the next vice chairman of the Road Safety Committee! We can get it for you... but you've got to vote with us on other things'.

(A woman walks down a beach with her dog)

MARIAN WILKINSON: Tranquil Terrigal Beach on the Central Coast of New South Wales became the unlikely setting for Obeid's political power plays.

(Beachside view of Obeid's former house at Terrigal)

For years he owned a beach front house here and hosted so many meetings for right wing MPs and union officials, his faction was notoriously dubbed 'The Terrigals'.

HUGH McDERMOTT: You were invited to go to that, only, right? Only invite-only. And pretty much Eddie Obeid and Joe ran it, and they basically made decisions on what would happen at these Terrigal meetings - what would happen in the Government, who would get what positions.

So people often when they went into Parliament, if they hadn't got the endorsement of the Terrigal group already, they certainly sought it if they wanted to have a future career.

NATHAN REES, NSW PREMIER, 2008-2009: Fifty per cent plus one of that faction, provided that faction binds, gives you control of the whole Caucus, in a sense.

So that was a model that worked for the Terrigals. It was a sausage machine type arrangement - get in line, do as you're told, you'll be onto a committee, chair a committee, parliamentary secretary, minister.

That's how they sought to operate. Didn't always get there, but that's how they sought to operate.

MARIAN WILKINSON: By the time Carr was elected for his second term as Premier in 1999, Obeid had the numbers in Caucus to demand a position in the Cabinet.

(Eddie Obeid being sworn in to Cabinet, 1999)

EDDIE OBEID: I Edward Moses Obeid, being chosen and admitted of her Majesty's executive council in New South Wales, do solemnly swear that I will be- I will to the best of my judgement at all times...

BOB CARR: In those days, the Cabinet was elected by the parliamentary party. And it was clear that because of all this, all this work, all this ingratiation, all this organisation, he was at the top of the list of those from the Terrigal faction.

So he was going to be elected. He was going to be elected. And I saw this as something I'd have to live with for one term but he wouldn't get more than one term as a minister and would have to be closely watched in a minor portfolio.

(Obeid speaking at Glennies Creek Mine in a hard hat)

EDDIE OBEID: It's a great pleasure for me to be here today, opening a new mine which creates initially 25 jobs.

MARIAN WILKINSON: As Minister for Mines and Fisheries, Obeid spruiked his pro-jobs, pro-business profile but it was his own business interests that would soon rock the government.

(Mining truck roars off)

EDDIE OBEID (speaking to Upper House): As a Member of Parliament I have never had a conflict of interest. I have not made any deliberate or wilful omissions regarding my pecuniary interest statements...

MARIAN WILKINSON: Under the rules of the New South Wales Parliament Minister Obeid was suppose to fully disclose his personal financial interests.

His political opponents found scores of undeclared shareholdings and directorships. He became the first minister ever called before the Parliamentary Ethics Committee over his pecuniary interests.

HELEN SHAM-HO: Evidence showed that he had made 154 errors in his disclosure.

His explanation was that it is because of his accountant who made the mistakes, not him.

MARIAN WILKINSON: Helen Sham-Ho was the Independent Chair of the Ethics Committee. She says her tough draft report on Obeid was watered down by the Labor majority and he escaped unscathed.

HELEN SHAM-HO: Oh they had to protect their Labor Party member. They had to protect a minister of the government, which I can understand but it's wrong.

MARIAN WILKINSON: But Carr's third election victory finally gave him the power to dump Obeid from Cabinet.

BOB CARR: He protested vehemently. He said it would a terrible loss of face, loss of honour, to be expelled from my ministry.

I was extremely sleep deprived after a drawn out election campaign and his protests at having to leave the Cabinet were to me like a dentist drill or fingernails on a blackboard.

And it went on for a long time and... until in absolute frustration and desperation I did something I'm not proud of and I've never done it in any other circumstance. I picked up this Chairman Mao jar in which I had pencils and pens and just flung it across the room.

It shattered against the bookcase, leaving an indentation which I think is there in Barry O'Farrell's office to this day - a little memorial to the mental stress and strain of extracting Eddie Obeid like a tooth from the Cabinet.

MARIAN WILKINSON: Obeid lost the battle with Carr but not the war. Within two years his dominant Terrigal faction used their power to choose the new Premier to replace Carr.

(Morris Iemma walking to greet media outside Parliament)

Morris Iemma, a founding member of the Terrigals, won their ringing endorsement.

REPORTER: How are you feeling?

MORRIS IEMMA, NSW PREMIER, 2005-2008: Oh... elated, elated. It's the greatest day of my life.

MARK AARONS, FORMER ADVISOR TO PREMIER MORRIS IEMMA: I think that there was a belief that they could have more influence, more presence, more access to Morris Iemma. And I think that that has probably been proven correct in the years that Morris Iemma was the premier.

HUGH McDERMOTT: You can't necessarily control the decision making processes but certainly you can control who becomes Premier, who becomes key ministerial positions, and key positions of power within the Parliament - and to be honest, in the entire New South Wales Government.

MARK AARONS: The Premier's inner group of advisors would be the advisory group, and by this stage of course Eddie Obeid was a humble back bencher.

I was quite shocked to see him sitting around on the lounges during these advisory meetings. I was also quite shocked at how easy it was for him to walk into the Premier's office without any appointment or any notice, even.

BOB CARR: I'm sure that Morris Iemma, a very decent and honest figure, would reflect that it was a cardinal mistake to allow Obeid that special status and privilege. And people who then ran the State ALP machine were making a terrible mistake to confer some special status on him.

For what reason? What could he deliver? What qualities could he bring?

MARIAN WILKINSON: Carr had understood before he resigned that Obeid would not serve another term in the Upper House. But the New South Wales Labor Party endorsed Obeid for another eight years.

(to John Faulkner) Why would head office defy a Premier to re-endorse someone like Eddie Obeid?

JOHN FAULKNER: Because Obeid was running the show.

MARIAN WILKINSON: Simple as that?

JOHN FAULKNER: Simple as that.

MARIAN WILKINSON: At the height of his power, Eddie Obeid spoke softly but carried a very big stick.

(Excerpt from Four Corners 2009)

MARIAN WILKINSON: You and Joe Tripodi are called the Praetorian Guards of the Right.

EDDIE OBEID: Well, look that-that's... You can call me whatever you want to call me. The fact is that…

MARIAN WILKINSON: That's not true?

EDDIE OBEID: No, no, it's not true at all. We uh... we uh... We have our friends in Caucus who are prepared to listen to our wisdom and our analysis of situations.

And remember, members of Parliament are interested in their own future and what's in it for them and we help them achieve that through sensible negotiations and through sensible planning.

So in that way, you do acquire friends. They will listen to you.

(Moses Obeid walks through a press mob)

MARIAN WILKINSON: While Eddie Obeid took care of politics in New South Wales , his sons led by Moses were taking care of business.

But in business, Moses Obeid had a reputation as a sharp, aggressive operator.

ROBERT DOMM: Um fast talking, smart - bit spivvy in the way he conducted himself. You know, he was very reluctant to sign a contract.

So there was an imperative on my part to get him signed up to a formal legal contract and try to lock him into it. The fact that he prevaricated for a period of time in signing it didn't impress me particularly much.

MARIAN WILKINSON: Robert Domm was chief executive of Sydney City Council back in 2002 when he personally negotiated with Moses Obeid over the so-called Smartpole.

ROBERT DOMM: Smartpole essentially is a sophisticated telegraph pole that allows a number of functions to be added to it - you know, street signage, lights, banners, cameras - all that sort of stuff.

MARIAN WILKINSON: The City Council gave Moses Obeid's company Streetscape a license to manufacture the Smartpoles. But from the beginning the City was ripped off.

ROBERT DOMM: Well, in my experience he commenced to breach the contract as soon as it was signed. He didn't pay the first fifty thousand dollar- or said he couldn't afford to pay the first fifty thousand dollar license payment.

So I was particularly unimpressed after having spent months getting him to sign this agreement for him to say as soon as it was signed he couldn't afford to honour it.

MARIAN WILKINSON: The City ultimately did go to court after it discovered the Obeids had secretly sold thousands of Smartpoles overseas in complete breach of their licence. The City was awarded $12 million in damages but Moses Obeid is still fighting the outcome.

(Robert Domm and Marian Wilkinson looking up at a Smartpole)

ROBERT DOMM: Great idea, great bit of intellectual property, shame that the city hasn't been able to get its fair share of the financial rewards from developing it in the first place.

MARIAN WILKINSON: After leaving the City, Robert Domm went to work as a senior public servant for the state Labor Government. He was not surprised to see the Obeids finally brought before ICAC.

ROBERT DOMM: I mean, I formed the view when I left in 2010 that the Government was no longer acting in the public interest. It was acting in its private interests and in its political interests, and if the public interest got a look-in, it was purely by coincidence.

(Shots of the ferry wharves at Circular Quay)

MARIAN WILKINSON: The Smartpole court case lifted the lid on a maze of hidden Obeid family businesses - among them, a secret interest in several lucrative café leases granted by the state Labor government.

ZENON MICHNIEWICZ, FORMER PUBLIC SERVANT: Yeah, I was really taken aback, absolutely. I mean I-I can't believe it.

MARIAN WILKINSON: Zenon Michniewicz was the senior public servant overseeing the café leases at Sydney's Circular Quay.

ZENON MICHNIEWICZ: The web of deceit was very, very extensive and very deep and we certainly were not aware of at all in the slightest that, ah, that Mr Obeid was either directly himself involved or through his family was involved.

(Aerial shot of Circular Quay with the Harbour Bridge in the background)

MARIAN WILKINSON: café leases here are valuable real estate, earning New South Wales taxpayers good money. That's why a decade ago the State's corruption watchdog supported putting the leases back on the market after five years.

But Eddie Obeid took up the case of one café owner and heavily lobbied against this.

ZENON MICHNIEWICZ: What transpired was of course that we were not allowed to proceed.

MARIAN WILKINSON: The Ministers who stopped the leases going back on the market were Michael Costa and Eric Roozendaal.

(Shot of Obeid in Chamber with Costa and Roozendaal)

Costa justified it, saying they wanted a common approach to leases across Sydney Harbour. The ministers were unaware of the Obeid family secret interest in the leases until it was revealed in the Sydney Morning Herald.

The public servant handling the issue at the time is still angry.

ZENON MICHNIEWICZ: What we as public servants are in the business of is trying to maximise the value to the public of their assets.

By not doing so, we are first of all directly costing the public purse millions of dollars and secondly, we are subverting a process that has been established to maintain and assure that the public gets value from their assets.

By not doing so, we are breaching our position and the faith of the public that we are here to serve.

(Obeid walks briskly along the street with his entourage)

REPORTER: Mr Obeid, are you worried that your empire will crumble today?

EDDIE OBEID: Far from it...

MARIAN WILKINSON: But it is one epic deal potentially worth almost $100 million that now threatens to be the undoing of Eddie Obeid.

The evidence about this deal, gathered over months by ICAC, has led Obeid, his son Moses, and the former Mines Minister Ian Macdonald facing disturbing allegations of corruption, deceit and abuse of power.

(Screen splits to show Moses Obeid, Eddie Obeid and Ian Macdonald)

(Aerial shot of picturesque countryside)

The trail of evidence begins here in the Bylong Valley, four hours northwest of Sydney on a lush property called Cherrydale, one of the most beautiful in the Valley, its gardens and homestead fashioned as a labour of love.

(Montage of shots of Cherrydale's fields and gardens, with fountains and pergolas)

Cherrydale's former owner was a tax advisor to Kerry Packer. He's now retired on the Gold Coast.

MARIAN WILKINSON: John Cherry? Marian Wilkinson from Four Corners.

JOHN CHERRY: Oh, so Happy to meet you. Do come in- do come in. Meet the wife and dogs...

MARIAN WILKINSON: He recalls selling Cherrydale to Eddie Obeid back in late 2007.

JOHN CHERRY: Eddie Obeid was the front man and he was the person I was dealing with but I found him unctuous and ingratiating and uh... If I can put that on a simpler plain, shaking hands with him was like shaking hands with jelly.

MARIAN WILKINSON: What did he tell you about why he wanted this property?

JOHN CHERRY: Well... He was going to run some goats. He was going to plant some olives. He was going to have a milking cow, um… and generally enjoy himself.

MARIAN WILKINSON: So it was to be his retirement property, he said?

JOHN CHERRY: Yes, yes, yes. I think probably some of his Labor colleagues would visit him from time to time, sort of move away from Terrigal and gather at Bylong.

MARIAN WILKINSON: Did he ever mention coal to you?

JOHN CHERRY: Never.

MARIAN WILKINSON: But Eddie Obeid did talk about coal with Mines Minister Ian Macdonald just months after buying Cherrydale.

(Obeid shot from the back talking to Ian Macdonald in Parliament)

In May 2008, at a café next door to Parliament House, Obeid arranged for his son Moses to meet Macdonald.

Moses Obeid told ICAC that the meeting here with Macdonald was simply to find out whether his father's beautiful retirement farm would be jeopardised by a future coal mine.

But within days of this meeting Macdonald fired off an unexpected request to his staff. He wanted information about all coal reserves in the area around Mount Penny, which happened sit right next to Cherrydale.

(Interior of Ian Macdonald's office)

A few weeks later, Cherrydale was included in a new coal exploration tenement created by Macdonald's department.

(Mines Department map of Cherrydale Park and its surrounds, including the properties Donola and Coggan Creek, in relation to the Mt Penny Coal Exploration Licence 7406)

And by extraordinary coincidence, the Obeids' friends began buying up two more farms bordering Cherrydale. All sat inside the new exploration area.

When ICAC began its hearings, Counsel Assisting wanted to know how the Obeids knew of the Government's confidential plans.

(Excerpt from ICAC hearing)

GEOFFREY WATSON SC: By at least June 2008 the Obeids were aware that an exploration licence would be issued over Cherrydale Park. This was three months before the public announcement.

MARIAN WILKINSON: When ICAC raided the Obeid's business office in Sydney's Birkenhead Point, they found a copy of the confidential Mines Department map showing the boundaries of the coal exploration licence.

No-one could explain how it got there.

The Obeids planned to sell the farms for four times their value to the mining company that won the exploration licence. But according to ICAC's Counsel Assisting, this was just the start. The Obeids wanted much more.

(Excerpt from ICAC hearing)

GEOFFREY WATSON SC: The Obeids negotiated to take a substantial share of the mining company which won the Mount Penny exploration licence.

MARIAN WILKINSON: Moses Obeid allegedly used inside information from Macdonald to secretly secure the family's share in the company.

GEOFFREY WATSON SC: Although the Obeid family disguised their interest in this transaction, ICAC investigations have been able to uncover it.

MARIAN WILKINSON: But before the coal deal could fly, Eddie Obeid suddenly found his political power under serious challenge.

(Morris Iemma walking upstairs to a Caucus meeting in 2008)

In September 2008 Premier Morris Iemma, crashing in the opinion polls, turned on the Terrigals. He sacked Obeid's chief allies Joe Tripodi and Michael Costa from Cabinet.

(Morris Iemma climbs a stage to address a press conference, 2008)

Their reaction was swift. The Premier was forced to fall on his sword.

MORRIS IEMMA: I wasn't going to serve as the head of a Cabinet that was being foisted on me. And I wanted change and that was not going to be possible, so I tendered my resignation.

MARIAN WILKINSON: Obeid would later admit it was a test of strength between the Premier and the Caucus, where he still held sway.

(Excerpt from Four Corners 2009)

(to Eddie Obeid) He wanted to just choose his Cabinet...

EDDIE OBEID: Well, it's not the way...

MARIAN WILKINSON: ..like Kevin Rudd had done.

EDDIE OBEID: I'm sorry, but we don't do that here in the state. The Premier has the role to allocate the portfolios but Caucus decides on the ministry line up and there's nothing in our Caucus rules that allows a Premier to just simply sack a minister.

(Nathan Rees at a V8 Supercar rally)

MARIAN WILKINSON: With Labor in crisis, Obeid re-asserted himself by agreeing to back a young raw left-winger, Nathan Rees, as the new Premier.

REPORTER: Do you like your V8 Supercars, Premier?

MARIAN WILKINSON: Rees re-appointed Macdonald as Minister for Mines, a decision would bitterly regret.

(Greg Jones walking surrounded by reporters)

Macdonald would now open the way for a new player to enter the secret coal deal with the Obeids - a company linked to his closest friend, the V8 Supercar promoter Greg Jones.

(sound of cameras clicking)

MARK AARONS: I think that it would be fair to say that despite the fact that Ian McDonald had a series of good friends, none was ever as close as Greg Jones.

MARIAN WILKINSON: A former political staffer with Macdonald in the 1980s, Jones had gone on to make a fortune in business.

(Aerial shot rushing in over skyscrapers)

Jones' mates from the big end of town were investors in a company called Cascade Coal. They included his old partner in RAMS home loans, John Kinghorn and a banker, John McGuigan. Joining them was mining entrepreneur Travers Duncan.

(Split screen showing John Kinghorn, John McGuigan and Travers Duncan)

In June 2009, Cascade Coal was awarded the coal exploration licence by Macdonald's department.

ICAC uncovered that within months of Cascade Coal securing the exploration licence, a company associated with Greg Jones lent Minister Macdonald $195,000.

Jones also admitted he gave Macdonald another $30,000 in gifts and cash. Macdonald could not recall the latter. But both denied the loan or gifts had anything to do with the granting of the exploration licence.

Mark Aarons explores Macdonald's role in a piece for the latest Monthly magazine.

MARK AARONS: I think it's a logical extension of their friendship and of their characters that it would not even enter their mind that they were doing something wrong when the Minister was receiving money at a time when he knew, it is alleged, that he was going to be making decisions that could profit his close friend - not just by a few hundred thousand dollars but by tens of millions of dollars.

(Ian Macdonald at a mine site)

IAN MACDONALD: I have to put on safety glasses...

MARIAN WILKINSON: By November 2009, Macdonald's colleagues were still completely in the dark about the Obeids' coal deal. But stories about Macdonald's abuse of office were alarming Premier Nathan Rees, who decided to sack him.

NATHAN REES: Mr MacDonald no longer enjoyed my confidence, is probably the most straightforward answer. There had been a string of expenditure issues that had become public that were unsavoury...

(Nathan Rees taking the podium at the State Conference 2009)

MARIAN WILKINSON: Rees also knew he also had to take on the Terrigals. He sought the support of the New South Wales Party to pick his own Cabinet.

NATHAN REES: I seek this authority for one reason and one reason alone - so that Labor leaders present and future can appoint Cabinets in which the people of New South Wales have full confidence.

(Applause)

That triggered a reaction. I could almost hear the Blackberries going off behind me as I said it.

I knew that making that move entailed personal risk, that was um... But it was my considered view that it was a risk worth taking.

(Cameras click at a press conference as Nathan Rees climbs the stage)

MARIAN WILKINSON: Rees was doomed, but on his way out he publicly exposed Obeid's power broking.

NATHAN REES: Should I not be Premier by the end of this day, let there be no doubt in the community's mind - no doubt - that any challenger will be a puppet of Eddie Obeid and Joe Tripodi.

MARIAN WILKINSON: The new Premier, Kristina Keneally, was backed by Obeid and the Terrigals. But she denied being their puppet.

(Kristina Keneally speaking in Parliament)

KRISTINA KENEALLY, NSW PREMIER, 2009-2011: Let me be absolutely clear about this: I am nobody's puppet, I am nobody's protégé, I am nobody's girl!

MARIAN WILKINSON: Many were unconvinced.

(Ian Macdonald climbs the stairs in Parliament House)

REPORTER: Ian is there any hope for you?

(Macdonald shrugs)

MARIAN WILKINSON: Keneally restored Macdonald as Mines Minister, a move she too would regret when she was forced to sack him over an expenses scandal the following year.

But just one month before Macdonald's sacking, his role in the Obeids' coal deal was threatening to break wide open in Parliament.

(Ian Macdonald speaking in Question Time 2010)

IAN MACDONALD: Let us make it very clear. I had no discussions about who owned land within the Mount Penny area. The first I learnt of it was when I read it in the Fin Review, I think, in an article late last year.

And in terms of those other issues, I think if anyone sees that there is anything untoward, they can take it to the appropriate spot.

(Sound of cameras clicking as Moses Obeid walks down a street)

MARIAN WILKINSON: The Obeids' involvement in the coal deal threatened to become a full blown scandal. The Cascade directors wanted them out. They paid the Obeids $32 million to go and promised more.

But ICAC phone taps picked up bitter haggling between Greg Jones and Moses Obeid.

(Moses Obeid stops walking and looks directly at the camera)

(Recording of phone conversation)

MOSES OBEID: From where we're sitting it looks like someone's fuckin' playing games and we're just... We're just...

GREG JONES: Oh... your guy's an idiot. Fuck! Your fuckin' guy's mad!

OBEID: Why's that?

JONES: Oh, I think he's missing the whole fuckin' point. I don't think you've got any idea what we've been through.

OBEID: Mate, we don't see it that way, Jonesy.

(Macdonald smiles woodenly at the camera, surround by a horde of reporters)

MARIAN WILKINSON: Macdonald would also later be accused of asking Jones for $4 million as his cut of the coal deal - an allegation both would strenuously deny in ICAC.

(Screen splits to show Greg Jones as well)

The secret deal between the Obeids and the big end of town finally unravelled in part because of a simple tip-off to the Australian Stock Exchange.

(Excerpt from a White Energy promotional video)

VOICEOVER: White Energy is an Australian coal company that is listed on the ASX...

MARIAN WILKINSON: In November 2010, the publicly listed company White Energy announced to the stock exchange it was buying Cascade Coal for $500 million. Cascade's only asset was the coal exploration licence issued by Macdonald's department for $1 million.

The announcement caught the attention of an astute mining engineer who happened to own shares in White Energy.

MITCH GEDDES: I saw the uplift from one million dollars acquisition to a $500 million expectation and to me I thought 'This is a parallel universe. I cannot... I cannot understand such a massive uplift in a year'.

MARIAN WILKINSON: It troubled Geddes that several directors of Cascade Coal also sat on the board of the public company White Energy, including John Kinghorn and John McGuigan.

MITCH GEDDES: So there was a small window of opportunity for investors such as myself to take a close look at the supporting documents, and that's when I discovered there were glaring holes in what they were presenting worthy of asking questions.

MARIAN WILKINSON: So what did you do?

MITCH GEDDES: Well, my response was to put together an email with six questions, which I directed to the ASX.

MARIAN WILKINSON: And did you do that anonymously?

MITCH GEDDES: I did.

MARIAN WILKINSON: The Stock Exchange asked questions and so did the independent director of White Energy. The $32 million paid to the Obeids by Cascade was discovered and the deal blew up.

ICAC phone taps caught the angry recriminations of the Cascade investors.

(Phone rings)

(Recording of phone conversation)

(Stills of the three men appear on screen as they speak)

GREG JONES: It's just absurd. Since when do fucking accountancy firms comment on fucking political party's policy? You know? It's like...

JOHN McGUIGAN: I'll tell you mate, it's just appalling behaviour.

JOHN KINGHORN: We've just got to get there and then we'll chop this arsehole's head off.

(Exterior of Parliament House)

MARIAN WILKINSON: Since the new coalition government came to power in New South Wales, it has supported a far reaching investigation into the scandal by ICAC.

The fallout now threatens to cripple Labor, not only in New South Wales but at the next Federal Election.

JOHN FAULKNER: Labor's standing in the State of New South Wales has been very, very significantly damaged by the revelations at ICAC and it would be very surprising if that didn't have an impact federally.

MARIAN WILKINSON: Those who fought Eddie Obeid's influence for years inside the Labor Party are now backing sweeping reform as the only path back to power.

HUGH McDERMOTT: The people who are reforming the Party, the people who are basically cutting out this cancerous growth are committed to do it and have the power to do it.

NATHAN REES: We don't have a choice. If we don't reform the culture of the party, then we will be rendered politically irrelevant in a very near term.

KERRY O'BRIEN: For the record, Ian Macdonald resigned from the New South Wales Parliament in 2010 after a previous scandal and Eddie Obeid resigned the following year.

Four Corners did approach the key players featured in the ICAC investigation but all declined an interview.

ICAC Commissioner David Ipp will deliver his final report at the end of July, barely a month before September's Federal Election.

Next week on Four Corners, why no one from Wall Street has been prosecuted after the Global Financial Crisis. Until then, good night.

END OF TRANSCRIPT

Background Information

KEY CORRESPONDENCE

Response from Cascade Coal | 25 Feb 2013 - Read Cascade Coal's response to the allegations before ICAC, sent to Four Corners by John Kinghorn, Chairman Cascade Coal Pty Ltd. Letter 1 [PDF 95Kb] | Letter 2 [PDF 269Kb]

NEWS, MEDIA AND OPINION

Senior Labor figures point fingers over Obeid | ABC News | 11 Mar 2013 - Senior Labor figures have spoken out bluntly about the Independent Commission Against Corruption (ICAC) investigation into former powerbroker Eddie Obeid, saying the scandal is doing immense damage to the party. By Marian Wilkinson and Mario Christodoulou.

Bob Carr's selective memory on Eddie Obeid | ABC The Drum | 11 Mar 2013 - Former NSW premier Bob Carr downplays his association with Eddie Obeid by pointing out that he expelled the disgraced former politician from his cabinet in 2003, long before the events being investigated by ICAC. What the now Foreign Minister doesn't mention is the effort he went to in securing Obeid a ministry in 1995, writes Alex Mitchell.

Five big transactions found on money trail | SMH | 6 Mar 2013 - By following ''the money trail'' a forensic accountant has identified five main transactions made by the family of controversial Labor powerbroker Eddie Obeid using the proceeds of $30 million the family received from an allegedly corrupt coal venture. By Kate McClymont.

The king of the spivs | SMH | 17 Feb 2013 - The words packed all the power of a hunting rifle in the crowded hearing room high above Sydney's streets. ''Look, Mr Macdonald, what I really want to put to you is that in fact you're a crook.'' The accusation, from the lips of counsel assisting the Independent Commission Against Corruption (ICAC), Geoffrey Watson, SC, seemed to suck all the air out of the commission's gallery.

Macdonald tells ICAC coal claims are 'fantasy' | Australian Mining | 15 Feb 2013 - Former NSW resources minister Ian Macdonald has described claims that he rigged a 2008 coal tender to benefit the Obeid family as "fantasy".

Minister secretly controlled coal trading company | AFR | 11 Feb 2013 - Former NSW mines minister Ian Macdonald secretly controlled a ingapore coal trading company which was set up in May 2008 six days after he asked the mines department for information about coal tenements over a farm owned by Labor powerbroker Eddie Obeid.

MPs silent on links to Obeid | The Sunday Telegraph | 10 Feb 2013 - Eddie Obeid's grip on the ALP continues in Macquarie St, with MPs refusing to reveal their connections to the former powerbroker. And despite Opposition Leader John Robertson's pledge to reform the party and rid it of the factional players linked to Mr Mr Obeid, his offsider and former kingmaker MP Joe Tripodi is back in the corridors of power.

Opinion: Mr Robertson's new standards | The Australian | 5 Feb 2013 - Less than 24 hours after NSW Labor leader John Robertson announced reforms to help address the systemic cultural problems within the party that he leads, former NSW Labor Right powerbroker Eddie Obeid was asked at the Independent Commission Against Corruption if he had ever engaged in a criminal conspiracy to perpetuate a fraud on the people of NSW.

Opinion: Absolute power destroys Labor | The Daily Telegraph | 5 Feb 2013 - We will all know the Labor Party in NSW is serious about cleaning up its act when it appoints respected independent figures with the authority to take apart factional privilege and patronage. By Maxine McKew.

Media Release: A new standard for Labor | NSW Labor | 3 Feb 2013 - Any person found to have behaved corruptly will be expelled from the NSW Labor Party and factions will no longer be permitted to bind Members of Parliament, under changes announced by NSW Labor Opposition Leader John Robertson... Read the 'A New Standard' policy document here.

Moses Obeid and the ministers | AFR | 31 Jan 2013 - Moses Obeid said the disgraced former minister told him that the NSW Department of Primary Industries would open a tender for a coal exploration licence over land in the Bylong Valley near the Upper Hunter, where the Obeids owned a rural property.

Eddie Obeid: power beyond the premier | ABC The Drum | 17 Dec 2012 - During the previous NSW Labor Government, the chain of power didn't end with the premier. Quentin Dempster chronicles the history of New South Wales's Independent Commission Against Corruption and investigates the allegations that go to the heart of Labor and the role of powerbroker Eddie Obeid over the past 40 years. By Quentin Dempster.

Party elder John Faulkner urges ALP integrity reforms | The Australian | 4 Dec 2012 - Any member of the ALP's scandal-plagued NSW branch found guilty of corruption would be expelled from the party, parliamentarians freed from having to vote along factional lines and party rules subject to legal challenge under broad integrity reforms championed by Senator John Faulkner.

Exposed: Obeids' secret harbour deal | SMH | 19 May 2012 - Former minister Eddie Obeid's family has controlled some of Circular Quay's most prominent publicly-owned properties by hiding its interests behind a front company. By Linton Besser and Kate McClymont.

BACKGROUND READING

National Anti-Corruption Plan | Attorney-General's Department - The Australian Government is developing its first National Anti-Corruption Plan. This plan will position Australia to deliver a coordinated approach to fighting corruption.

Mate of the Union: How to corrupt a party | The Monthly Essays | Mar 2013 - Read The Monthly essay from Mark Aarons on "NSW Labor's crooked ways".

Day of the Terrigal | Australian Prospect | 15 Nov 2010 - We publish above, for the first time, a list of the factions and sub-factions of the NSW Parliamentary party. The most disturbing aspect of the chart above is the growth in power and influence of he group that has come to be known as "the terrigals". By Peter Botsman. Read more... [PDF 70Kb]

Full speech by Nathan Rees in response to NSW Labor leadership rumours | The Australian | 3 Dec 2009 - Read the full speech given by New South Wales premier Nathan Rees in response to rumours of a leadership challenge in the NSW Labor Party, in December 2009.

The short goodbye | SMH | 30 Jul 2005 - He's not tired. He's not bored. Bob Carr has simply decided it's time to go. David Marr writes.

WATCH RELATED FOUR CORNERS

Off the Rails | 5 Oct 2009 - How a war within the New South Wales Labor Party has destroyed the government's credibility and left the nation's biggest economy without the most basic services. Watch online. Includes extended interview with Eddie Obeid.