The king of the spivs - The Age

Illustration: Michael Mucci

THE words packed all the power of a hunting rifle in the crowded hearing room high above Sydney's streets.

''Look, Mr Macdonald, what I really want to put to you is that in fact you're a crook.''

The accusation, from the lips of counsel assisting the Independent Commission Against Corruption (ICAC), Geoffrey Watson, SC, seemed to suck all the air out of the commission's gallery.

Ian Macdonald, the fellow being accused of skulduggery, was a cabinet minister in the New South Wales Parliament until 2010, when, having gained the sobriquet Sir Lunchalot, he resigned after a spot of bother concerning misuse of public funds.

He is no stranger to ICAC hearings. Last year the corruption commission inquired into his extracurricular habits allegedly paid for by a Sydney property developer and murder suspect, Ron Medich. Though no findings have been reached, he was accused of enjoying the services of an Asian prostitute as recompense for introducing investors to senior bureaucrats.

The man with whom Macdonald was now being accused of conspiring in an inside-knowledge coal mining scam worth tens of millions of dollars, Eddie Obeid, was also a former state Labor cabinet minister and the leader of a faction so powerful its very name - The Terrigals - struck fear into the heart of premiers.

Captivated Sydneysiders had queued for hours, as they have done for weeks now, to snap up scarce tickets for what has become the hottest show in their rollicking town, and the drama playing out before the lucky few has proved no disappointment.

Yet those in the public gallery in the corruption commission's headquarters in Sydney are far from the most interested observers as this extraordinary inquiry dips into a long-hidden world inhabited by powerful figures in the NSW branch of the Labor Party, huge piles of unexplained dollars and deals allegedly brokered behind closed doors.

Three hundred kilometres away in Canberra's Parliament House, federal politicians spend much of their parliamentary time these days studying the Twitter feeds spurting from the mobile phones of reporters and observers at the inquiry.

These short Twitter ejaculations of each new twist and turn, each new allegation, each denial or obfuscation, have become over the past couple of weeks a river of dread for the Gillard government and an entertainment beyond price for the Abbott opposition.

NSW Labor has been drowning for years now in a swamp of perceived corruption, dirty deals, factional bastardry and plain political ineptitude. The state Labor government was finally tossed aside by disgusted voters in 2011 - the worst defeat in a century, though the scale of it was eclipsed within a year when Anna Bligh's Labor in Queensland was all but wiped off the map.

Federal Labor, heading towards its own difficult election on September 14, prays that Queenslanders have rid themselves of their bile, but they know NSW is a different story.

Every day now, the state's voters are being reminded that powerful Labor figures were, if the waspish accusations of the inquiry's counsel prove to be accurate, involved in a level of corruption not seen since the Rum Corps ran Sydney in the early years of European settlement.

NSW - particularly the Sydney basin - is crucial to federal Labor's political survival. If voters decided to punish the whole Labor brand and the party were to lose a significant number of federal seats in NSW - and public and private polling suggests as many as 10 could be swept away - the Gillard government would be gone. Most observers simply can't find enough potential Labor wins in the other states and territories to counter-balance such a loss.

Which is why the bald accusation that a former Labor state minister was ''a crook'' had the power to suck the air not simply from the inquiry's public gallery, but from ALP hopefuls everywhere.

The corruption commission was trying to get to the bottom of whether or not Macdonald opened up a coal mining area for the benefit - to the tune of tens of millions of dollars - of Eddie Obeid and his family.

Only months before Macdonald decided to open a coal mining tenement in the state's Upper Hunter in 2008, Obeid and his family happened to have purchased a nice slice of farming land right within those very boundaries, it has emerged.

Inside knowledge, the inquiry's counsel charges.

Pure chance, Macdonald has declared. And how did he find this new area for coal mining? From an atlas, he says.

It was a happy stab at a page in an atlas for Eddie Obeid and the family - they stood to make as much as $100 million. Indeed, those juicy gains could reach as high as $175 million if a further mining permit is issued. Such a permit, the inquiry's counsel assisting observed, would cover three Obeid properties ''like a blanket''.

The inquiry has also been trying to establish this week whether Macdonald was due for a little icing himself - $4 million has been mentioned, though the deal that might have provided the cash had fallen through.

Meanwhile, he has received payments from a business partner - one of whose companies is named, deliciously, Bagman Properties - totalling $450,000 over the past few years ''to keep him rolling along'', as he put it.

The corruption commission's investigators have had to burrow through a lot of figures - Macdonald, the inquiry has heard, had 14 separate bank accounts. Plus, of course, he took a nice little excursion to the Obeid ski chalet at Perisher Valley, free of charge, his astonishingly expensive meals (one cost more than $600) paid by the family, just days after he is alleged to have provided the Obeids with a list of mining companies that proved useful in putting deals together.

As to the claim that he is a crook, Macdonald took umbrage.

''That's an absolute lie,'' he told the inquiry. ''It was just said for the benefit of the Fairfax press.''

Whatever Macdonald may or may not be, the real star of the inquiry is Obeid. He was, as everyone in NSW knows, no ordinary politician.

He was for many years the most powerful member of the most feared faction in the state's Labor pantheon, the maker and breaker of premiers and a man of such wealth that he, apparently, can't explain it, even though he is a trained accountant.

Indeed, he told the inquiry 40 times that ''I don't know'' when he was asked about the workings of the family business or their trust's loan accounts and how he had been able to live the life of the fabulously wealthy when he had listed as his only source of income his parliamentary salary for the last 10 years of his political career.

He proved touchy when Watson wanted to know how he'd managed to ''squirrel away'' large amounts of money.

"Don't squirrel me,'' he spat. ''I've spent more money than you have made in a lifetime.''

For a moment, you could see past the small, pleasant and bespectacled Obeid to the arrogant tough man who had created the most effective deal-making faction in Labor politics.

For many years, it was an open secret that if you wanted a half-useful career in NSW Labor, you had to deal with Eddie, known as ''He Who Must be Obeid'', and his faction, The Terrigals.

The Terrigals were the largest grouping of the Right (the smaller and less disciplined Right was known as The Trogs), and through a byzantine method of voting and favours delivered, The Terrigals controlled the parliamentary party.

Terrigal, before a recent rise in population and glitz, was once a sleepy fish'n'chips, ice-cream cone and barefoot village by the sea on the NSW Central Coast. It is Labor territory, split - and sometimes, it seems, cursed - by two federal electorates. Craig Thomson, of Health Services Union fame, holds Dobell in the north. Dobell's southern neighbour, the seat of Robertson, was held until 2010 by Belinda (''Don't you know who I am?'') Neal, wife of another former NSW Labor powerbroker and member of The Terrigals, John Della Bosca.

In 1979, Obeid bought a a small beachfront block above the long sweep of sand at Terrigal.

He got it for $57,000 from the advertising man John Singleton, who had amassed a fortune pioneering ''ocker'' ads, became something of a hero among ALP insiders for engineering Bob Hawke's runaway 1983 election campaign and at one point had the extremely colourful stockbroker Rene Rivkin as a silent partner in one of his agencies.

Obeid, born in Lebanon and a hard scrabbler since childhood in Sydney, when he'd collect bottles to raise pocket money, had made it his life's work to know handy people.

In the late 1970s, as publisher of Australia's biggest Arabic newspaper, El Telegraph, he had become a close friend of the man who would become Australia's most legendary Labor fixer, Graham ''Richo'' Richardson.

Obeid and his newspaper proved helpful for Richo and Labor - the ALP enjoyed heavily discounted advertising rates in El Telegraph and the Lebanese community of western Sydney became a valuable resource in the Labor art of branch stacking.

Richo, in turn, would prove helpful to Eddie Obeid. He did the arm-twisting to secure Obeid his parliamentary career.

At Terrigal, Obeid built a mansion. In 1992, he decided to put the place to useful purpose and invited a group of like-minded NSW state Labor political mates for the weekend. And so was born The Terrigals faction.

The house was sold in 1996 for $1 million - the first million-dollar home in Terrigal. Eddie always knew a good deal.

Together, The Terrigals elevated cronyism to a high art and built their power to the point that once Bob Carr resigned as premier in 2005, they would install and remove a series of NSW premiers - Morris Iemma, Nathan Rees and Kristina Keneally (who famously protested she was ''nobody's girl'' after Rees said she would be controlled by Obeid and his Terrigal sidekick, Joe Tripodi).

Ian Macdonald, however, wasn't a Terrigal. He came - at least in name - from the Socialist Left, a lot of whose members loathed him from the start.

He was ambitious. In NSW Labor, the only sure way of turning ambition into reality was to play ball with The Terrigals.

Macdonald, as he admitted to the ICAC inquiry this past week, became an ally of Eddie Obeid. His reward was a series of ministries, including Obeid's own former portfolio, minerals and energy - which, of course, covered mining.

So close did Macdonald come to Obeid that when it came time to undermine Nathan Rees, the premier the Terrigals had created and had now decided to destroy, Macdonald took enthusiastic part. Rees, infuriated, sacked him from his ministry.

Macdonald simply became more enthusiastic in the business of destroying Rees' premiership and installing the newly favoured Terrigal, Kristina Keneally. Once she was premier, Keneally reinstalled Macdonald to cabinet as minister for major events, mineral and forest resources, state and regional development and Central Coast.

The rest, as they say, is history - yet to be unravelled by the corruption commission, which is scheduled to report its findings at the end of July.

A couple of weeks later, while the people of NSW are digesting those findings, Julia Gillard is due to call the official federal election campaign.