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The author of a scathing report into CFMEU corruption has accused underworld figure Mick Gatto of using dummy directors to control a web of labour hire and traffic management companies to infiltrate Victoria’s $109 billion Big Build program and systematically evade tax.
Appearing before the Queensland inquiry into the CFMEU, Geoffrey Watson, SC, accused the co-owners of M1 Trades and Labour Group, Michael Portia and Tony Paragalli, of working for Gatto and profiting from his powerful connections to the CFMEU.
Watson told the inquiry that M1 Group was “conceived by an act of corruption”, when it allocated 25 shares to Gatto because its firms were unable to obtain an enterprise bargaining agreement from the CFMEU. This was confirmed in an affidavit by Portia.
“It’s a pretty damning point because they are saying we need this underworld figure, standover man, fixer to get a building business up and going,” Watson told the inquiry on Friday.
Gatto, who remains the subject of an investigation by the federal and state police, has previously denied ownership of M1 Group companies, or any wrongdoing related to the businesses.
Watson told the commission that Gatto had siphoned more than $1 million out of the companies, which had large contracts for traffic management on state government infrastructure projects.
Simon Wilson, KC, acting for M1 Group, insisted the companies were always under Paragalli and Portia’s control, noting Gatto’s alleged involvement was never reflected in documents filed with the corporate regulator.
Watson told the hearing that was because Gatto did not abide by requirements to file such material.
“Are you basing this on the idea that Gatto fills out forms accurately for ASIC? Because if you are, you’re making a terrible mistake. I’m basing it on facts, things that demonstrate his ownership or control,” Watson said.
He also accused Gatto of attempting to conceal his involvement in one company by transferring ownership to another company controlled by his daughter Sarah Awad.
During a series of tense exchanges, Wilson repeatedly attempted to discredit Watson’s Rotting from the Top report and branded the renowned corruption-buster as an “engineroom of inference and speculation”.
Watson cited one company as a “classic tax dodge model” that attempted to evade a $13 million tax debt, while other M1 Group businesses had traded while insolvent or engaged in illegal phoenix activity.
“If you’ve done the kind of work that I’ve been doing for two decades, it sets off alarm bells because in the building industry, this is classic phoenixing, where one company collapses owing tax debt and someone else takes over,” he alleged.
In March, this masthead revealed Victoria’s Labour Hire Authority had taken steps to cancel the labour hire licence of an M Group subsidiary. However, no action has been taken and the firm retains its licence.
Under cross-examination, Watson conceded his report should not have stated that Gatto was the sole owner of M1 Group.
“I should have acknowledged that it’s probable that Paragalli and Portia also own part of it, but he (Gatto) certainly controls them,” he told the inquiry.
“I’ve also received private correspondence saying that they’re going to sue me, and they kept getting the company names mixed up. In their own affidavit, they confused the M Group company names. That’s exactly what this sort of morass of M Group companies is designed to do, and they trick themselves.”
Watson said he stood by his claims about M Group.
“More than ever, it is my view that all the evidence points to Mick Gatto controlling the M Group companies,” he said.
He also took aim at the Victorian government over suggestions he walked back his findings, during an at-times fiery appearance.
Watson said criticism of his report from senior government figures, including recently deposed premier Jacinta Allan had challenged his integrity.
Allan and her ministers had repeatedly claimed Watson had resiled from his explosive finding that CFMEU wrongdoing could have added 15 per cent to the cost of Victoria’s signature $100 billion Big Build program.
Responding to a question from counsel assisting the inquiry Patrick Wheelahan, KC, Watson told the hearing he took umbrage at Allan’s public comments noting nobody from the government had sought further insight from him.
“They were bitterly critical remarks. It’s hard to read them as being any less than they were suggesting I made it up,” Watson said.
“Nobody from the Labor Party has contacted me at all to discuss that. They made those statements to the press without asking me anything about how I arrived at the report, what I’d done to achieve the report, nothing.”
He noted Gatto had used the government’s criticisms when defending himself publicly against Watson’s allegations.
“You know what he picked up to criticise the report? The words which were being used against me by the premier of Victoria, the police minister, and the attorney-general.
“He used their words against me. I hope you never find yourself in that position. It was just awful. The police minister even had the temerity to say, if I had a problem, why didn’t I go the police. Oh, by the way, police minister, did you? Because if you had, you would have found out from your police force that I was going to them every week.”
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