The files provide a case study of issues which are front and centre at Mr Morrison's drought summit and which are being examined by drought envoy and Nationals MP Barnaby Joyce: using taxpayer funds to help farmers deal with drought and questions about whether backroom favours or mismanagement are hurting drought-relief efforts. Loading Among the leaked files is a July 15, 2016 memo from a water authority lawyer summing up his view of Mr Schwarz's conduct after he joined hundreds of other farmers given cash incentives as part of Australia's largest water saving initiative, the Connections Project, and which aims to restore the Murray Darling water system. The lawyer stated that after Mr Schwarz received $850,505 in 2011 - divided into $473,000 for on-farm water-saving measures and $300,000 to buy a neighbouring property - he "failed to perform any of the obligations despite having received the payment … in full". "The Schwarzes have spent much of the ensuing period attempting to make a case that, notwithstanding they entered into the agreement and received payment, they should not be bound to perform," the July 2016 legal memo states.

Mr Schwarz said in a statement that "a number of external factors beyond our control" meant he had been unable to "carry out all of those works immediately". "Any remaining money has been held separately until required to complete the rest of the project. I have not had any request to return any money and GMW themselves say this matter is resolved." The leaked files also reveal that Mr Schwarz sought to call on his personal relationship with a controversial, high-ranking water official, Gavin Hanlon, and an unnamed "minister" to "support [his] cause". Mr Hanlon was a senior Victorian water official who was headhunted by the NSW government as its irrigation chief. He quit his NSW post in 2017 after revelations of questionable dealings with farm lobbyists, sparking an ongoing investigation by the NSW Independent Commission Against Corruption. Former Goulburn-Murray Water boss Gavin Hanlon.

A memo dated March 2016 from senior water official James Kellerman accused Mr Schwarz of getting money for nothing and then proposing a "highly irregular" plan to "enable him and his wife to return a fraction of the Connections incentive money in return for not having to carry out the extensive on-farm works agreed to in their contract". "In the 4½ years that have passed since their contract was executed and the incentive payment was made, the Schwarzes have not completed the on-farm works and the project was been unable to claim all of the water savings from the works agreed in the contract," Mr Kellerman's March 21, 2016 memo states. The leaked documents also raises major questions about the Connections Project, which is funded by the federal and Victorian governments, and whether it has failed to ensure tens of millions of dollars have been adequately managed. The project is run by Australia's biggest rural water corporation, Goulburn-Murray Water, of which Mr Hanlon was once managing director. Mr Schwarz, who is the Nationals candidate for the Victorian seat of Shepparton, owns a farm connected to the biggest irrigation network in Australia, stretching across the nation's south-east.

The leaked files suggest that the contracts that Goulburn-Murray Water have asked farmers to sign when it gave them Connections Project funds were flimsy and difficult to enforce. Concerns have been raised by farmers and water authority staff that certain irrigators have been favoured or funds wasted. In a statement to The Age, the water authority said that seven years after it gave Mr Schwarz the funds, the stand-off over their use had been "substantially resolved". It is understood that Mr Schwarz and Goulburn-Murray Water have agreed that he will use the funds for water savings, but no work has as yet been done. The files reveal intense frustration inside Goulburn-Murray Water, not only about Mr Schwarz's conduct, but the authority's inability to recoup taxpayer funds. A file written in April 2014 states that: "Peter told me on a number of occasions he would prefer to deal with higher GMW management and would not be accepting the agreement he had previously signed. Peter Schwarz. Credit:Chris Hopkins

"By way of background, Gavin Hanlon, after personal representations to him from Schwarz, instructed GMW staff to re-examine options and provide a recommendation to him. "At one point the Schwarzes drew on a personal relationship with GMW managing director, Gavin Hanlon, in an attempt to have the original agreement renegotiated," a 2016 memos states. Some of the files show that the water authority was worried Mr Schwarz was using water-saving subsidies to deal with his personal debts. "The customer [Mr Schwarz] is claiming the pressure from the bank led them to sign the legal agreement [to get water savings incentives] … so that they could get money in to cover debt repayments," a February 2015 file reveals. The same memo questions whether "the landowner's acceptance of payment without any intention of performing could be seen as unconscionable or perhaps even dishonest."