THE Independent Commission Against Corruption has launched an inquiry into Cessnock City Council's negotiations to recover a $400,000 roadworks debt after the $19 million collapse of companies related to Chinese-affiliated company Hightrade.
ICAC's inquiry into the controversial and secretive negotiations comes after Department of Local Government director-general Garry Payne launched a separate investigation following articles in The Herald. Other issues of concern have been raised with both authorities.
Mr Payne confirmed this week the council quoted $330,000 for roadworks in Lovedale Road outside the Crowne Plaza in August 2006, but invoiced Hightrade $550,000 when the work was finished two months later.
Companies related to Hightrade, including the company which had contracted the council, collapsed only weeks after the work was completed.
In September last year, Hightrade offered $250,000 as "full and final payment" of the debt in a letter headed "Dear Bernie" to general manager Bernie Mortomore, from former general manager Col Cowan, representing Hightrade.
The letter was obtained from the council after a freedom of information application.
But by February this year an unidentified Hightrade executive had negotiated with Mr Mortomore to pay the council nearly $400,000 "out of his own pocket".
Councillors were not aware of the agreement until after phone calls from The Herald about the debt several weeks ago, and a question without notice to Mr Mortomore.
Mr Payne confirmed the debt appeared in the council's 2006/07 annual report in June 2007.
"It was difficult to find, but it was there," he said.
The payment by the unidentified executive is despite Mr Cowan's recommendation to Hightrade not to pay some of the money because the claims had not been substantiated. In an interview Mr Mortomore agreed "some of our documentation was poor".
Mr Cowan said Hightrade negotiated with the council, even though it was not legally required to pay any debts from its liquidated affiliated companies, because "they don't want to get offside with the council and the community".
Hightrade "has a number of land parcels in the Hunter Valley they want to develop", Mr Cowan said.
Another Hightrade representative, Ed Mazzoni, last week confirmed a that proposed university for Chinese students was no longer going ahead.
At least four people have spoken with ICAC in the past three weeks, including former council senior project officer Peter Gogarty, who resigned from the council late last year because of concerns about the handling of matters including the Hightrade payment, and the removal of two council directors.
"It took a huge toll on me, and in the end when it was all done and dusted I decided I didn't want to work there anymore," Mr Gogarty said.
He left without having a job to go to.
ICAC has also spoken with at least two current council staff.
Mr Payne received a report from Local Government Department investigators on March 20. He would consider the report and any possible action this week.
Questioned about the unusual and secretive nature of the debt repayment for a Herald article several weeks ago, Mr Mortomore declined to name the Hightrade executive and said: "I don't give a bugger who pays us the money, as long as it's paid."
Asked to comment about the statement, Mr Payne said it was "obviously a concern where money comes from".
"I think process is as important as outcome on anything, and particularly when you're a public authority," he said.
Cessnock Mayor John Clarence declined to comment on the Hightrade matter, referring calls to Mr Mortomore. He said Mr Mortomore had conceded to councillors that he "could have chosen better language" than "I don't give a bugger who pays us the money".
Mr Mortomore declined to comment.