Illustration: Rocco Fazzari
One of the reasons Arthur Sinodinos was central to John Howard's prime ministership for nearly a decade was his sane, objective judgment. Even in a crisis.
He had to apply it to his own personal career crisis this week. On day one, he was inclined to fight on. But it depended a lot on what happened on day two. Day one had been bad enough. All the newspapers had splashed with news from the NSW Independent Commission Against Corruption.
After leaving his post as Howard's chief of staff and before entering the Senate, Sinodinos had been paid handsomely to chair a dubious company, Australian Water Holdings.
The chairman's salary of $200,000 for the equivalent of a few weeks' work a year would not be out of line with the pay of chairmen of major companies, but AWH had only 10 or so employees.
Further, Sinodinos had been offered a bonus, potentially worth $10 million to $20 million, if he'd succeeded in winning the company a contract from the NSW government.
The dollar figures were eye-catching, but that was not all. The company was part-owned by Eddie Obeid, the former minister in the NSW Labor government, the spider at the centre of a web of Sydney corruption. There was more. AWH was making big donations to the NSW Liberal Party, which was in power at the time; Sinodinos was treasurer and then president of the NSW Liberal Party at the time.
AWH had hired him "to open lines of communication with the Liberal Party," according to counsel assisting the ICAC, Geoff Watson.
It was big news not only because Sinodinos was assistant treasurer of Australia, but because he is a respected, almost revered, figure in the Liberal Party as a power-whisperer.
Even Labor was tentative in its initial attack. That was partly because it was awkward for Labor to draw too much outrage from a Liberal's association with Obeid, a former Labor politician. Many more Labor members had much closer relationships with Obeid.
But it was also because Sinodinos is well-regarded across the political spectrum as a decent man, a political straight-dealer with a keen policy brain and a lot of political acumen. He seemed an unlikely crook.
In Parliament, Opposition Leader Bill Shorten asked Prime Minister Tony Abbott three questions about the Sinodinos situation, but the Prime Minister declared full confidence in his assistant treasurer and gave him a character reference: "Senator Sinodinos has served our country long and faithfully as a Treasury official and as the chief of staff to a PM as well as a member of this Parliament."
The story got a lot of play on TV and radio all day. Sinodinos retained his famous calm in a crisis. No one had made any allegation against him; not the counsel assisting, who'd said it was "presently difficult to offer observations" on his conduct; and not the Labor Party.
Sinodinos had denied any wrongdoing, denied knowing that Obeid was part-owner of the company at the time he was chairman, denied knowing of the company's donations to the Liberals.
Sinodinos avoided the media but told colleagues: "If they think I'm going down by guilt by association or smear, sorry, they're going to have to have a bit more than that." But he knew that evidence was not the deciding factor in measuring his tenure as Australia's assistant treasurer. There are two critical factors in deciding whether a government will try to "tough out" a crisis or crumple.
One is the interference factor. Does a scandal generate so much political noise and media attention that it blocks the "clear air" that a government needs to transmit its chosen messages to the public? Second is duration. A government will tolerate noisy static, even heavy interference, for a day or two, sometimes even a week or two, depending on its degree of confidence.
But, ultimately, a government will yield to the need to get its message out. Even before this week, we'd seen two examples, one successful piece of brazenly tolerating the intolerable and one failed attempt at "toughing it out," in the short life of the Abbott government. First was the travel expenses story. The government tried to tough out the outrage over unjustifiable expenses claims by MPs, including Abbott himself. The MPs repaid the expenses. But when it continued to dominate political news after two weeks, it announced a review of the system and the story went away.
But the government did get away with the Fiona Nash scandal, so far at least. Nash, the Assistant Minister for Health, was shown to have hired a food industry lobbyist as her chief of staff. He pulled down a healthy food advisory website, defunded a valuable drug and alcohol advocacy group, and shut the minister's door to the country's leading public health groups.
Nash had breached the government's ministerial code of ethics, and she misled the Senate about her chief of staff's conflict of interest. But the chief of staff, Alastair Furnival, resigned, Abbott expressed confidence in the minister, and the story ran out of puff.
Nash remains in the ministry, although she is a much-diminished figure and has earned herself a demotion at the first ministerial reshuffle.
What about culpability as a factor? This is a big one with lawyers but a subsidiary point in politics. A clear-cut admission of a major crime would be a pathway to an immediate resignation. But otherwise it's all shades of grey.
Sinodinos surveyed the newspapers on day two. He was front-page news again. He turned on Sky News to find it was reporting his story as its lead.
When Labor senator Penny Wong got to her feet at 9.30am and tried to move a motion demanding Sinodinos be brought into the chamber to explain himself, he realised Labor was increasing the pressure.
As he became the subject of heated debate that completely occupied the Senate for hours, he re-rated his prospects of toughing it out.
The level of interference was rising and day two was obviously going to carry into another day, probably another week, and quite likely even longer. He weighed the pros and cons by phone with Howard and knew what he had to do for the sake of the government. About 11am he went to see his leader.
He told Abbott he was considering his position. The Prime Minister told him that, if he wanted to stay in the trenches and fight, he'd support him.
But Sinodinos could see that, as he told colleagues, "it looks like you're giving into pressure, but at the end of the day, what matters are the externalities". That's the economist in him talking. He meant the costs external to him, the cost to the government. "It's a pragmatic decision about giving the government clear air," he said.
Three hours later, just as Labor was about to mount a question-time assault on Abbott over the Sinodinos case, the assistant treasurer announced that he would be stepping aside during the ICAC inquiry: "I do not want this sideshow to be an unnecessary distraction to important work of the government which I am proud to serve."
It was the right decision. ICAC has since raised fresh questions about Sinodinos's involvement with AWH. An investor in the company, Rod de Aboitiz, a former chief financial officer for the investment bank Rothschild, told the ICAC on Thursday, the day after Sinodinos stood aside, that he'd raised concerns with Sinodinos at the time he'd been a director.
The company had too many costs, including annual pay to the directors and 10 staff of a total of $4.5 million. "Arthur, you know that solvency is a big issue for a director," he claims to have told Sinodinos. This was a warning that the company was in danger of collapse.
The response from Sinodinos? "He did not dispute any of my facts, he didn't articulate a plan, he just comforted me." He'd told de Aboitiz that "the board was on top of it".
The most potentially damaging evidence from de Aboitiz, however, was that he said he'd emailed Sinodinos his annotated copy of the company accounts showing overdue bills: "For a start there was $20,000 owing to the Liberal Party." Sinodinos has denied knowing of any donations.
Another overdue account was a company called EightbyFive. This company was a Liberal Party-related slush fund. According to evidence before the ICAC, it was operated by Tim Koelma, a staff member of Chris Hartcher, former energy minister in the O'Farrell government. This is also the subject of an ICAC investigation.
AWH paid $183,000 into this slush fund at the time Sinodinos was either chairman or deputy chairman of AWH, documents before the ICAC show.
Sinodinos relinquished his entitlement to any AWH shares when it was revealed publicly that Obeid was part-owner. He was shocked at the revelation, he said. But there seem to have been enough signs early on that AWH was trouble. What happened to the famous Sinodinos judgment? Was it overcome by the lure of big dollars?
He has pointed out to colleagues the irony that "I'm being pilloried for being paid $200,000 and for not getting the deal and for not getting $20 million''. The contract that AWH craved from the NSW government was instead delivered by Sinodinos's successor at AWH, Michael Costa.
At the very least, Sinodinos's involvement with AWH showed poor judgment. The ICAC will eventually deliver findings on whether he was guilty of anything worse. His act of judgment this week means that his personal crisis will not become Abbott's.
Peter Hartcher is the political editor.