First Super co-chair and former CFMEU boss Michael O’Connor has stepped down from his role at the helm of the $4.5 billion industry super fund after the prudential regulator took legal action against him.
APRA on Friday said it has commenced proceedings in the Federal Court against O’Connor, alleging that he breached director covenants by approving a CFMEU employee to have a full-time role at the fund and paying little heed to fees paid by the fund under the arrangement.
O’Connor is a well-known figure in the labour movement as a former national secretary of the Construction, Forestry and Maritime Employees Union (CFMEU). He is the brother of Labor frontbencher Brendan O’Connor, who currently serves as Minister for Skills and Training in the Albanese government. Michael O’Connor disclosed on national television in 2014 that former Prime Minister Julia Gillard was an “ex-girlfriend”, while Gillard described him as one of her “closest confidants” in her maiden speech to Parliament in 1998.
His decades-long ties to the CFMEU led him to First Super, which – as a profit-to-member fund for the paper, pulp, furniture and joinery and timber industries – is affiliated with the manufacturing division of CFMEU, which nominated O’Connor to the board and of which he is still divisional secretary, according to APRA.
The manufacturing division is separate from the CFMEU construction division, which is facing serious allegations of misconduct and corruption, including alleged organised crime links.
Laws introduced by the Albanese government last month effectively forced the construction and general division into administration with Coalition support. The manufacturing division is allowed a member ballot to decide if will break away from being a part of the CFMEU.
Disqualification directive
APRA’s case revolves around a contract between First Super and the CFMEU for member and employer services (MESC contract), which concluded last year.
The regulator claims that O’Connor approved a CFMEU employee to have a full-time role under the MESC contract, was aware of their ongoing work for the CFMEU but “directed or approved” it.
APRA also alleges O’Connor did not inform or seek approval from First Super for the employee to keep the CFMEU work, or seek to reduce the fees payable by First Super under the MESC contract.
It claimed O’Connor failed to “act honestly, exercise the same degree of care, skill and diligence” that is expected from a super entity director as outlined in the SIS Act.
“APRA is seeking declarations and penalties against Mr O’Connor in relation to the alleged contraventions,” APRA said in a statement to the press.
“APRA is also seeking orders disqualifying Mr O’Connor from acting as a responsible officer of any corporate trustee or superannuation entity for a period determined by the court.”
It was also alleged that O’Connor negotiated the extension of the MESC contract on behalf of CFMEU, while in a position of conflict.
In a statement on its website, First Super announced that O’Connor has voluntarily stepped down until the court proceedings are determined.
In an arrangement understood to be highly unusual in super fund governance, O’Connor shares the chairship of the trustee board with an employer director, Mike Radda, who was nominated by the Australasian Furniture Association.
Profit-to-member funds are ordinarily chaired by a single individual, and most commonly an independent candidate, including the eight largest ones. Some experts and critics, however, have questioned the independence of some of these chairs, especially former treasurer Wayne Swan, who chairs the CFMEU-linked Cbus ostensibly as an independent while concurrently serving as national president of the Australian Labor Party.
A handful of smaller industry funds, including CareSuper, Mine Super and Vision Super, maintain a single chair nominated by either members or employers.
Cbus contagion
First Super is the latest super fund to be dragged into the scandal surrounding the CFMEU administration. Three employee-representatives directors left the board of United Super, trustee for $94 billion construction industry fund Cbus, last month as part of the administrative process.
As first reported by Investment Magazine, Cbus is now staring down a potential SIS Act breach itself if it cannot maintain equal representation and fill the three employee-nominated board vacancies previously occupied by CFMEU officials within 90 days.
APRA imposed additional license conditions on Cbus and Queensland-based BUSSQ last month, due to governance concerns stemming from the funds’ respective affiliation with CFMEU and CFMEU Queensland (a separate legal entity).
Both funds were asked to conduct an independent review of board governance and expenditure arrangements. BUSSQ is seeking a judicial review of the APRA action in court.
Meanwhile, the developments have fired up traditional enemies of the union-linked industry fund movement in an election cycle.
In a joint media release on Friday, Shadow Treasurer Angus Taylor, Shadow Minister for Financial Services Luke Howarth and Shadow Attorney-General Michaelia Cash called on the Labor government to “reveal what action they plan to take to ensure this behaviour is not systemic”.
“Superannuation is Australians’ money – not the fund managers’, not the government’s, and certainly not the union movements’,” the statement read.
“These allegations highlight the need for the government to retain the Coalition’s Your Future, Your Super reforms that delivered for Australians and strengthened safeguards for Australia’s $3.7 trillion in retirement savings.
“Any changes to these reforms would require substantial improvements in superannuation governance.”
