Part 4 Winning on Welfare Street

A week before Christmas in 2014, Centennial Property Group (CPG) auctioned affordable housing on Welfare Street as separate lots without being in possession of the title or the property having been subdivided.

Although I am yet to get to the bottom of how the deal was organised, such a property deal is unusual. Assuming it is legal, it must have been carefully constructed.

According to their website, the CPG team promise to use their "extensive industry contacts" to identify properties at the "right price" that will guarantee a maximum return. They assure potential property investors that CPG partners invest their "own balance sheet" in every deal. In other words, the partners have 'skin in the game' although, as explained previously, the identity of those whose 'skin' will benefit from the sale of the publicly owned homes is secret.

Every new CPG investment has a detailed plan with an "exit strategy", which in this case included evicting as many long term tenants as quickly as possible, followed by an auction held five weeks after the deal was completed with the NSW government. At this stage, the deal seems to have been spectacularly successful, making nearly $5 million for the investors.

The contract with the purchasers required the sort of solicitor who could develop what CPG calls its "creative solutions" to "tricky problems" such as how to deal with existing protected tenants who had been assured by owner Sydney Park Olympic Authority (SOPA) that there were no plans to evict them.

CPG found the right man in Lands Legal's solicitor director Sevag Chalabian.

Chalabian has a long history of investment in the property, liquor and mining industries. He has been involved in everything from small business locker franchises to a divorce advice website to uranium exploration in Niger and gold mining in the Kimberley. He currently has a strong involvement in a technology security company with international connections. He declined to "make any comment" for this story.

Chalabian and ICAC

Chalabian will be a familiar name to those who have been following NSW ICAC closely for the last few years. From 2009, he was the lawyer for notorious ex Labor Minister and powerbroker Eddie Obeid and his five sons. He brought to the Obeids a keen understanding of how to hide investments through complex trustee company arrangements.

Chalabian originally worked for Phillips Fox. In 2004, he was a founding director of Lands Legal.

Lands Legal Solicitor Director Sevag Chalabian (https://www.linkedin.com/pub/sevag.chalabian/13/411/50b)

Even before he gave evidence before ICAC in 2013 and 2014, Chalabian's knowledge of carefully structured investments and tax minimisation had been the subject of several media reports.

During the period when he formed Lands Legal in 2004, he was promoting the tax advantages of lawyers using company structures rather than the more traditional partnership. He was quoted by the Australian Financial Review as recommending companies because partnerships were under scrutiny by the Australian Tax Office. He explained that at Lands Legal, solicitor-directors received salaries so that the rest of the profits could be distributed as dividends to family trusts, which were shareholders in the business. Such income splitting helps lawyers avoid higher tax brackets.

Two years later, Chalabian was in the news again in relation to a strange one dollar company called Australian Royalties Corporation (ARC) which bought shares in public company Aztec Resources at a time when it was a battling a takeover. SMH's Michael Evans was trying to find out who was behind ARC and its sole owner and director Sarkis "Sam" Gabrielian, a 28-year-old Chatswood cafe manager who had mysteriously managed to purchase $17 million worth of shares in Aztec.

Chalabian who was "authorised" to speak for ARC made a statement that ARC was a "trustee" for another privately held company called "Australian Royalties Trust". Evans wrote:

Chalabian said he was "in a meeting" when we called. Unfortunately, we (SMH) didn't hear from him again.

So Evans spoke to a director of Aztec Peter Bilbe:

ME: So who are the people to whom he's (Bilbe) just given $17.5 million or an 7.5 per cent stake of his company?

Bilbe: I don't personally know who they are, it's a private company. We've got confidentiality agreements in place. I'm not at liberty to disclose who they may be.

ME: Did you deal with the "attorney" Sevag Chalabian?

Bilbe: He's obviously been provided with a power of attorney to sign on behalf of ... [pause]. We've been dealing with their advisers.

ME: Who is Mr Chalabian representing?

Bilbe: Don't know.

ME: Whom were you negotiating with?

Bilbe: Their advisers and they in turn were maintaining very close contact with their client.

ME: Did you deal with the ARC director Mr Gabrielian?

Bilbe: Don't want to make any comment one way or the other.

ME: Have you met him?

Bilbe: I don't have any comment.

Despite Evans efforts, the shares remained a mystery. There were many similar questions I would liked to have asked about the identity of the investors in CPG and Welfare Street but unfortunately neither Chalabian or Rosenberg were available.

Now to NSW ICAC.

Hiding Obeid assets

In 2013, Chalabian was called to give evidence to the NSW ICAC Inquiry into an allegedly corrupt deal in which then Labor Minister Ian McDonald had granted a mining license to Cascade Coal on land owned by another ex Labor minister and powerbroker Eddie Obeid and his family. Chalabian admitted that in 2010 he had assisted the Obeids to create a complex series of fronts and trusts to disguise a $60 million payment which the family expected to receive from Cascade Coal.

Under cross examination at ICAC, Chalabian agreed that he knew that the "sole purpose" of the secrecy arrangements was to disguise the Obeid's involvement in order to allay concerns that the granting of the coal mining license involved corruption.

Chalabian told ICAC he charged $420,000 for the job, most of which had been paid. His duties involved attending meetings at the offices of Eddie Obeid and his sons Moses and Paul.

Chalabian and Australian Water Holdings

Chalabian's clients and impressive business contacts in the property and resources industries stretch across both Labor and Liberal parties. After the LNP government was elected in March 2011, he became a business partner of Liberal party fundraiser, lobbyist and chief executive of Australian Water Holdings (AWH) Nick Di Girolamo.

Chalabian was again called to give evidence into ICAC's Inquiry into allegedly corrupt dealings between the NSW government and AWH in a bid for a $100 million private-public partnership with Sydney Water. He told ICAC that he was involved in organising legal arrangements for the Obeid family's large secret investment in AWH. This legal job was done at a time when the Obeids were hoping to make even more money out of water than coal by controlling a privatised NSW water industry.

Wallarah 2 coal mine

In March 2012, Di Girolamo became the official lobbyist for the controversial Wallarah 2 coal mine in the Hunter Valley.

While in opposition, Premier Barry O'Farrell and Resources and Energy Minister Chris Hartcher had promised Wallarah 2 would not go ahead. At a 2009 rally opposing the mine, O'Farrell, wearing a T-shirt bearing the slogan "water not coal", had famously proclaimed, "the next Liberal-National government will ensure mining cannot occur here ... no ifs, no buts. A guarantee."

One month after the election, Di Girolamo sent Premier Barry O'Farrell a $3000 bottle of 1959 Penfolds Grange Hermitage to his Roseville home as a gift. O'Farrell wrote a note to Di Girolamo, thanking him for the gift. He later lied to ICAC about receiving the wine. This led to his resignation as Premier in April last year.

In June 2012, Chalabian comes into the picture again when he and Di Girolamo jointly establish an unusual company called Anconna Holdings. Not long afterwards, the then Treasurer Mike Baird signed off on Di Girolamo's appointment to a $100,000 job on the State Water Corporation board.

Chalabian and Di Girolamo continued to work together at Anconna Resources until June 2013.

Another Anconna Resources shareholder was Tinnette Koelma. After the LNP government was elected in March 2011, her husband Tim Koelma had worked in the office of Resources Minister Hartcher. Koelma resigned in March 2013 over allegations that he had a managed a slush fund for Hartcher which was used to hide illegal political donations.

After he resigned, Koelma also joined Chalabian and Di Girolamo at the Anconna Resources offices in Sydney's CBD. Tim did research for Di Girolamo who was lobbying the Premier Barry O'Farrell and others for LNP government approval of the Wallarah 2 coal mine. Contrary to O'Farrell's original promise, the NSW Planning Assessment Commission allowed the mine application to proceed and last year gave it approval.

Chris Hartcher resigned as Minister for Resources and Energy in December 2013 after ICAC raided his office. He stood aside from the parliamentary party in February 2014 after ICAC commenced investigating allegations of illegal LNP donations. He is resigning from parliament before the 2015 election.

SMH tweet from ICAC
Directors of Anconna Resources Pty Ltd

What did Anconna Resources actually do ?

ICAC investigations narrow down to key issues. The connections between some of the events mentioned above, including the role of Anconna Resources, remain unclear.

In April last year, Kate McClymont and Michaela Whitbourn reported in the SMH:

According to the Italian Chamber of Commerce, of which Mr Di Girolamo is the chairman, "Anconna Resources is an Australian-based resources company with substantive links to business and government throughout Australia...Anconna's role is to guide "foreign investors through the process of investing in Australian resources projects".

But in a statement to Fairfax Media, Mr Girolamo said "Anconna Resources was established to provide consulting services to the resources and mining industry in Asia. It has not traded and I am no longer a director nor shareholder."

Di Girolamo resigned as a director from Anconna at the end of 2012. Chalabian continued as a sole director until he quietly wound up the company at the end of 2014 at about the same time as the Welfare Street deal was clinched.

Chalabian's 'premier' home

Chalabian has been directly involved in attempting to remove the long term tenants in Welfare Street.

While he may not live in the luxury of CPG principal Lance Rosenberg or his backers, Chalabian himself lives very comfortably.

At the time he was hiding money trails for the Obeids, Chalabian and his family lived in a very big home in Remuera St in Willoughby on Sydney's North Shore. The home included four double bedrooms and huge living areas. It was advertised as a premier home "on an incredibly rare 910 square metre level parklike block", almost as rare, one might suggest, as secure affordable private housing in Sydney's West. In March 2012, the home sold for $2.9 million.

A corporate lawyer just acting on instructions

ICAC found Chalabian to be a reliable witness. No corruption finding has been made against him and this article does not intend to convey that the Welfare Street deal is corrupt or anyone involved has acted illegally.

Rather, Chalabian's career provides an insight into the role corporate lawyers play in doing business in NSW.

His involvement in trying to move long term tenants from Welfare Street was driven by the desire to increase the resale value of the homes for CPG and its secret investors.

Solicitors like Chalabian are highly skilled in the often secret processes through which governments hand over their assets.

In my view, decisions to transfer public assets over to private control and exploitation should be transparent. The interests of those who benefit should be identified and public. This applies to the sale of the public homes at Welfare Street, just as it did to AWH , Coal Cascade and Wallarah 2 Coal mine.

6 Remuera Rd Willoughby sold for $2.9 million in 2012

Note: If you would like to give me any information about the Welfare Street matter please contact me on wendybacon1@gmail.com. In accordance with the MEAA code of ethics, I strive for utmost accuracy. If you see any factual error, please let me know using comments or email.