Ian Macdonald arrives at the ICAC inquiry. Photo: Nick Moir
IAN MACDONALD's business partner, who is considered a ''crucial witness'' in a corruption inquiry is understood to have checked himself into a mental-health centre.
John Gerathy, the business partner and lawyer of disgraced former minister Ian Macdonald, has told the Independent Commission Against Corruption he is ill and unable to give evidence.
The Herald has learnt that Mr Gerathy, who was due to appear this week, has told investigators he will not be well enough to attend.
Unwell ... John Gerathy. Photo: Kate Geraghty
The inquiry is investigating allegations that Mr Macdonald, as resources minister, subverted a government coal tender for the financial benefit of his friend and colleague Eddie Obeid. Mr Obeid and Mr Macdonald are both former ALP upper house members.
It was revealed that Mr Gerathy, who has a business called Bagman Properties, has bankrolled Mr Macdonald to the tune of more than $550,000.
Counsel assisting the inquiry, Geoffrey Watson, SC, said Mr Gerathy was a ''crucial witness'' and that it was his handwriting on documents that showed intimate knowledge of the proposed sale of Cascade Coal to publicly-listed company White Energy.
Mr Gerathy's document noted that the Obeids, codenamed ''The Irish'', were to receive $60 million and that Mr Macdonald was to receive $4 million from his friend Greg Jones's $60 million share of Cascade. ''This matches perfectly with the deal done by the Obeids with Cascade, did you know that?'' Mr Watson asked Mr Macdonald. When he said he did not, he was asked how would his partner Mr Gerathy know about it and not him. ''John often had many businesses and operated completely and utterly independent of me. I'm not, I don't live in his pocket,'' Mr Macdonald said.
Financial records show that Mr Gerathy, who was appointed by Mr Macdonald to the Wine Council and the Homebush Motor Racing Advisory Board, has been making regular payments into Mr Macdonald's' bank account totalling $450,000. He repaid a $100,000 debt of Mr Macdonald's.
Six days after the ICAC issued Mr Gerathy with a notice to produce records of financial dealings with Mr Macdonald, a caveat appeared on Mr Macdonald's property registering the money as a loan.
''Do you see any connection between the two? It seems a bit fishy doesn't it?'' Mr Watson asked. ''Oh, it's not fishy,'' replied the former minister.
Mr Watson suggested once the Cascade sale came through, Mr Gerathy would be repaid ''and you'd be rolling in clover''. Mr Macdonald denied it.
Mr Gerathy appeared briefly at the ICAC last year when he was caught by the corruption inquiry arranging for a former clerk to remove the file of Tianda Resources from his previous law firm.
The inquiry heard damaging evidence that after Mr Macdonald appeared at a private sitting of the commission last September, he immediately rang Mr Gerathy, his good friend and business partner.
''Did you attempt to retrieve this file from Shaw Reynolds shortly after being told by Mr Macdonald that he had been called here and had been giving evidence?'' Mr Watson asked Mr Gerathy at the time.
''Not, not, that is not my recollection, Mr Watson,'' Mr Gerathy answered.
The file was that of his former client, Hong Kong-based businessman Alan Fang, of Tianda Resources. Mr Fang recently told the inquiry that both the Obeids and Mr Macdonald discussed doing a coal venture before Mr Macdonald called for the tenders.
Mr Gerathy's former law partner told the inquiry last year that as soon as he discovered Mr Gerathy's conveyancing clerk had beaten him to the Tianda file, he demanded it be returned immediately. When he opened it, crucial documents were missing.
Mr Gerathy, who denied removing any material from the file, was told he would be recalled to the witness box, but because of his illness that now seems unlikely to occur.
Mr Macdonald will return to the witness box on Thursday.