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DANIEL:

From Schwartz Media, I’m Daniel James. This is 7am.

This week, Nine newspapers published detailed allegations of widespread corruption, criminal infiltration and a gamut of other nefarious activities within the ranks of the CFMEU.

Stories of underworld figures trading their leather for hi-vis, bikie helmets for hard hats, all in order, it is alleged, to get a slice of the biggest pie of all: taxpayer funded projects.

The scandal has set off a wave after wave of ramifications. Who knew what when? And what it all means for some of the largest infrastructure projects this country has ever seen.

Today, Martin McKenzie-Murray on the fallout from the scandal and its potential ramifications.

It’s Friday, 19th of July.

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DANIEL:

Martin, Australia's highest profile union, the Construction, Forestry and Maritime Employees Union, the CFMEU, has been thrust into the spotlight, this time against its will, with a range of allegations of corruption and other nefarious activities relating to organised crime. It's a story almost as big as some of the egos involved. What's happened?

MARTIN:

So last Friday, the head of the Victoria, Tasmania CFMEU branch, John Setka, announced his resignation.

Audio excerpt — John Setka:

“I'm stepping down as the secretary of this union as of tonight. I'm just sick of all the stories. I'm sick of all the false allegations and I'm sure the members are too. So hopefully by me stepping down, it'll actually stop some of these just malicious and false accusations.”

MARTIN:

He was pre-empting a series of, kind of, squalid revelations revealed by several Nine reporters.

Audio excerpt — Nick McKenzie (60 Minutes):

“A once proud union that defends the rights of workers on the take and in bed with criminals.”

Audio excerpt — Guest 1 (60 Minutes):

“It's rotten to the core. You've got standovers going on, extortion going on, contracts being awarded that shouldn't be awarded.”

MARTIN:

It involves the kind of intimate infiltration of organised crime, especially bikies, into the CFMEU. Their use as security and shop stewards – something that's caused immense resentment and sometimes fear amongst CFMEU officials. A kind of cosy network of kickbacks – that is secret arrangements with builders to favour contracts. And I think significant to all of this as well, is its implications for the Victorian government and its ambitious Big Build.

Audio excerpt — Guest 2 (60 Minutes):

“Take, for example, the Big Build that goes on here in Victoria. They're going to do some building or construction somewhere. Contract will go out, the usual people will apply. There'll be pressure from within, the other companies won't get a look in. You’ve got to be with the CFMEU.”

MARTIN:

And then there's John Setka’s personal behaviour as well.

Audio excerpt — Nick McKenzie (60 Minutes):

“What message was that sending?”

Audio excerpt — Guest (60 Minutes):

“Well, I think the message is quite clear. And that was: you speak out against us, we know where you are. We can get to you. We know where you live.”

MARTIN:

Now, Setka is a man who for a long time has denied, I mean, countless allegations of his own capacity for thuggery and vindictiveness. And even amongst those inside the union who knew what was coming and knew how severe the allegations were that would be raised, were still surprised at Setka’s resignation. So accustomed were they to his pugnacity, his stubbornness, his ability to survive any number of scandals.

DANIEL:

So, as you said, in light of these allegations, the once immovable John Setka resigned, effective immediately. What other fallout has there been?

MARTIN:

It's been considerable to say the least. Where to begin? Interestingly, the CFMEU’s national secretary, Zach Smith, he became very, very anxious and wanted to pre-empt any federal intervention. He does this by coming out earlier this week and saying that the national branch would assume administrative control of the Victorian branch and he goes on a media blitz.

Audio excerpt — Patricia Karvelas:

“Zack Smith is the national secretary of the CFMEU and our guest. Zach Smith, welcome.”

Audio excerpt — Zach Smith:

“Good morning Patricia.”

MARTIN:

Now, this was kind of this desperate hail mary pass, I think, to pre-empt whatever federal intervention might occur, including the nuclear option of total de-registration of the union. And what transpires is Zach Smith effectively humiliating himself, attempting to hold two irreconcilable positions. So one is that the allegations are so severe, the degradation of the union so great, that it requires this dramatic intervention of the national branch, assuming administrative control.

Audio excerpt — Zach Smith:

“Well, as part of this administration, I'm in the process of standing up an investigative process to investigate any allegations, to test them. And obviously, if there's any wrongdoing found, people will be removed from our ranks.”

MARTIN:

On the same hand, in the same breath, Zach Smith celebrates John Setka and says his legacy will be an admirable one. He proposes John Setka as a working class hero and, unsurprisingly, the journalists – there was a particularly humiliating interview on the today show with Karl Stefanovic – they ridicule him.

Audio excerpt — Karl Stefanovic:

“So essentially, you're taking the I know nothing defence?”

Audio excerpt — Zach Smith:

“Well, well that's not a that's not an accurate reflection.”

Audio excerpt — Karl Stefanovic:

“It defies belief that you didn’t know any of that.”

Audio excerpt — Zach Smith:

“Wait a second. Let's be very clear on this, right? You're putting words into my mouth.”

MARTIN:

Now, the other kind of transparent absurdity here is that he asserts that the union itself can investigate itself.

Audio excerpt — Karl Stefanovic:

“How, in any reasonable world, can you be trusted, in any credible way, to conduct your own inquiry into your own union's alleged corruption?”

Audio excerpt — Zach Smith:

“Well, like I said, this investigation will have independence. This investigation will draw out, draw in outside expertise and legal advice and outside scrutiny, to get to the bottom of any allegations.”

Audio excerpt — Karl Stefanovic:

“How Independent?”

MARTIN:

Now this is laughed at. It's laughed at, in fact, by the federal government. Tony Burke, the employment minister and workplace relations minister, begins the process of appointing an independent administrator. What's more, he asks the Australian Federal Police to investigate the union.

Audio excerpt — Tony Burke:

“The General Manager of the Fair Work Commission is the best person placed to take this action. The action does have a series of complexities under the Fair Work Act, a series of various conditions that the General Manager is currently taking advice on.”

MARTIN:

Elsewhere, the New South Wales Premier and Victorian Premier, disavow the CFMEU. They say that they will not be accepting any donations from them. Victoria Police says it's undertaking several investigations, including one into Derek Christopher, who was a, sort of, protege of John Setka’s and his presumptive successor.

DANIEL:

So the fallout has been far and wide. What about the union itself? You've been speaking to people within the union, what's been their reaction?

MARTIN:

There's a pretty, I mean, for some weeks now, I've been speaking with a considerable number of union officials and members, both current and former. There's been a consistent theme that their emotions are intensely conflicted. They have gratitude for the journalists who've done this great reporting. There's some relief that this extreme and dramatic public exposure has happened. There's some fear from whistleblowers of vengeance, of revenge. There's also great kind of shame and sadness at the degradation of their union and there's also a lot of exhaustion. I mean it really... I don't think I can overstate this, that the intensity of conflicted emotions that members are feeling now is really considerable, as well as the uncertainty about kind of what comes next and how reform might occur, if at all.

But there's also this bitter incredulity that it has taken journalists, and not any number of law enforcement agencies or governments or statutory bodies to do this. The reporting has been immense, necessary, impressive, but the dubiousness of the CFMEU, the funk of corruption, the infiltration of organised crime, is one of Victoria's worst kept secrets.

DANIEL:

After the break, the tight links between the CFMEU and the Victorian Labor Government. How close is too close?

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DANIEL:

At the heart of a lot of this activity in Victoria in particular, Marty, has been the activity around what Victoria calls the Big Build. What is the Big Build? What are the projects involved and how has the CFMEU inserted itself as a player in these massive projects?

MARTIN:

The Victorian Labor Government's signature was this greatly ambitious infrastructure project: roads, tunnels, rail networks, and the CFMEU is formally affiliated with the Labor Party. It comprises a part of the Labor's left faction. As such, it has an influence in pre-selections, it can influence policy. It's also a substantial donor to the Labor Party. In fact, in 2022, the CFMEU was the largest donor to Daniel Andrews’ re-election campaign. In the same year, it donated about $1 million to the Federal Labor Party. In August last year, there was the funeral for John Setka’s father, who himself was a construction worker. The underworld figure Mick Gatto, who Setka often used as a kind of fixer or negotiator, publicly expresses his condolences to Setka. Now, on the other end of the spectrum of authority in Victoria, Jacinta Allan, the premier, before becoming premier, was infrastructure minister. She's married to a former CFMEU union boss, pays her fealty and attends the funeral. So I think in just that one day, this funeral, you have this neat demonstration of Setka’s influence. But the Victorian Labor Government's not wanted the CFMEU’s obstruction. It has not wanted its ambitions thwarted by industrial action and as a result, the Labor Party has kind of turned a blind eye.

Audio excerpt — Jacinta Allan:

“I have zero tolerance for this sort of behaviour. I've asked the Labor Party's National Executive to move to immediately suspend the construction division from the Victorian Labor Party.”

MARTIN:

There's this kind of familiar pattern that occurs following public scandal, and its politicians express faux shock and condemnation and surprise, but the possibility of deniability is utterly, utterly implausible.

DANIEL:

Politically, of course, this is manna from heaven for the federal opposition in particular. How are they capitalising on Labor's closest historical ties to the CFMEU, and what are they saying about how this looks for Labor?

MARTIN:

Yeah, there's unsurprisingly an amount of political theatre at the moment. That said, the opposition have very substantial, legitimate criticism of the Labor party. The Labor party's affinity with the CFMEU is well established. The bit of political theatre that is a little frustrating is the status of the ABCC, the Australian Building and Construction Commission, which the Albanese government dissolved last year. And it was conceived as a kind of watchdog of the construction industry. Now, the Liberal Party at the moment are saying that the dissolution of the ABCC is proof of Labor's indifference to corruption in the industry. The problem with that argument is that the ABCC did exist for a number of years during John Setka's 12-year reign. So I'm not quite sure what the ABCC was for, if not to investigate the allegations that have been aired by Nine in the past week.

DANIEL:

Again, it goes to the incredulity around how it took the fourth estate state to air these allegations. The Workplace Relations Minister, Tony Burke, has said that there will be an independent investigation. How much confidence do you have in the integrity of that investigation and its chances of finding any wrong doing?

MARTIN:

I think we might have some confidence now and the reason I say that is that a certain threshold has been crossed now. So I think there's been plausible deniability for a long time. There's been years of wilful ignorance, but courtesy of the great reporting of the Nine reporters, a public threshold has now been crossed. And I think coming with that is a public expectation of substantial intervention. So the independent administrator will be appointed, the Fair Work Commission will make an application to a court for that. There's a certain kind of formal disavowal now from the Labor Party about the CFMEU. So, look, in short, I think we can have some confidence. But to reflect again, the frustrated members who internally have been attempting to fight corrupt forces within their union, it shouldn't have taken this long, and it shouldn't have been wholly dependent upon journalists.

DANIEL:

And so, Marty, finally, what does this all mean for the future of the CFMEU itself and its workers? Do you think it will survive and what are the ramifications for the building industry in particular if it doesn't?

MARTIN:

Well, Tony Burke has now ruled out de-registration, which is a great relief to many. But as I said before, I've been having lengthy conversations with a large number of officials, and I often ask them about reform, what it might look like and how likely it might be. And there's great uncertainty about that. There's a mix of optimism and pessimism. This is a union, certainly in Victoria, that has been assiduously stacked with loyalists. So if you remove them, you're removing most people. There's also great fear of retribution. There's some pretty serious people involved in these allegations. And so that kind of fear helps retard reform, some union officials say. So there's enormous uncertainty at the moment. I'll tell you what one official told me yesterday, they said it's at best two or three years away. That is the proper reformation of this union, such as its degradation at the moment.

DANIEL:

Martin, thank you for your time.

MARTIN:

Thank you.

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DANIEL:

Also in the news today...

Foreign Affairs Minister Penny Wong says Israel’s operations in Gaza, quote, “must stop”, after some of the fiercest bombardments in months have killed hundreds of civilians. In a series of posts to X, Wong reiterated Australia’s support for an immediate ceasefire and condemned operations “including many near schools”.

UNRWA says that 70 per cent of its schools have been bombed, with around 95 per cent of those being used as displacement shelters at the time of their attack.

And,

A nervous J.D. Vance took the stage at the Republican National Convention for the first time as Donald Trump’s running mate, in front of a crowd of supporters sporting ear bandages in a tribute to Trump.

It comes as President Joe Biden tests positive for COVID, amid reports from both the New York Times and CNN that he has become more receptive to calls to drop out of the race.

7am is a daily show from Schwartz Media and The Saturday Paper.

It’s produced by Kara Jensen-Mackinnon, Cheyne Anderson, Zoltan Fesco, and Zaya Altangerel.

Our senior producer is Chris Dengate. Our technical producer is Atticus Bastow.

Sarah McVeigh is our head of audio. Erik Jensen is our editor-in-chief.

Mixing by Travis Evans, Atticus Bastow, and Zoltan Fecso.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

I’m Daniel James, this is 7am. See you next week.

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