One of the major issues that KPMG was engaged to investigate was whether or not there were any indications of potential interference in what would otherwise have been (save for the interference) the ordinary course of the investigation into Thomson.

The terms of that part of the reference from FWA to KPMG are here (note FWA set the terms under which the independent review into its own work would be conducted):

1.4.4 Considering the overall integrity of the investigation process and whether there are any indications of potential interference

And KPMG's finding is here:

Through the work undertaken KPMG did not identify any indications of potential interference in the HSU investigation process.

In order to understand what FWA did and how long it took, it's important to understand what material FWA had at the commencement of its responsibilities for the Thomson/HSU matter.

Under Kathy Jackson's leadership, the HSU commissioned several audits into Mr Thomson's spending.

The most comprehensive of these was conducted by BDO Kendall through Slater and Gordon.   the device of an entity engaging a law firm to engage 3rd party advisers (ie HSU engages Slater and Gordon who engage BDO Kendall) may make any  "advice" that law firm gives back the subject of client confidentiality privilege.   Thus if say the HSU went straight to an audit firm, no confidentiality - but if it gets the audit firm contracted by a law firm which then reports back to the HSU - it may trigger confidentiality and protection against subpoena or other forms of enforced production of the documents so produced.

The lodgement of the BDO Kendall audit reports with the IR/FWA is recorded in the Summary of Events of the investigation:

17 June, 2009 - Slater and Gordon/BDO Kendall report was lodged with the Industrial Registrar.

I have a full copy of the Slater and Gordon/BDO Kendall report with its appendices.  I acquired the report through a confidential source, I am operating in these circumstances as a journalist with the implied privilege enjoyed by a journalist in communications with a confidential source.   For the purposes of analysis, I have forwarded the BDO Kendall audit documents to Dr John Lourens FCPA for his review and he has produced the following paper with me included in the author credits.

I present this to you now - John Lourens took 3 days to summarise the BDO Kendall report and produce this document while keeping down his day job.

Download Accountability in the HSU (1)

Fair Work Australia had all this information to hand when it assumed responsibility for investigating Thomson, and it did not even start its investigation for almost 12 months.

Note the FWA/IR summary also records that the DPM was sent a briefing note about an SMH article on 16 June 2009.   

Here is the Sydney Morning Herald report of 16 June 2009.

Card rort findings sent to regulator

A SECRET audit report and legal advice to the Health Services Union has suggested there were financial irregularities and possible breaches of industrial law while the union's national office was headed by the Labor MP for Dobell, Craig Thomson.

The HSU's national executive yesterday referred the audit findings to the Industrial Registrar and the Australian Electoral Commission but decided to keep the document confidential after an intense internal debate.

Mr Thomson, who headed the HSU for five years before entering Parliament, has strenuously denied any wrongdoing over allegations his union credit card was used to obtain cash advances from ATMs of more than $100,000 from 2002 until 2007.

The audit also examined use of his union credit card to make payments to a brothel and escort agencies and separate spending by the HSU national office on Mr Thomson's election campaign in Dobell.

In a previously undisclosed detail the report said one of these transactions, a sizeable payment to a Sydney escort agency operator, Keywed Pty Ltd, in April 2005, was initially charged to Mr Thomson's union Diners Club card, but was then reversed and processed on his MasterCard a day or two later.

This undermines suggestions by Mr Thomson that someone else with unauthorised access to the MasterCard may have been responsible for the "adult services" transactions.

The report was prepared by the HSU's solicitors, Slater and Gordon, and included findings of an audit carried out by a forensic accounting firm, BDO Kendall.

A section of the report dealing with the cash advances said the auditors had been unable to find out what use was made of the cash and unable to conclude whether every withdrawal had been appropriately documented.

"It is difficult to foresee the need a union official would have for cash at the amounts withdrawn," the report said. "The practice of cash withdrawals was clearly vulnerable to abuse."

Mr Thomson told the auditors the cash was used on legitimate union business such as meeting expenses and he had provided receipts for all these expenses. The HSU's former bookkeeper, Belinda Ord, is believed to have supported Mr Thomson's insistence that he provided receipts.

But the auditors were not able to locate receipts for most of the cash advances.

The report also examined transactions on Mr Thomson's HSU MasterCard with a Sydney brothel and escort agencies in 2003, 2005 and 2007.

The auditors said they were "unable to determine conclusively" whether or not Mr Thomson had used union credit cards for these "adult services".

They said Mr Thomson had told them he had not been responsible for these transactions. But he could not explain why he had not pointed out before the HSU's internal investigation that he had not incurred these transactions.

A section of the report on the election spending said the auditors did not make any adverse findings against Mr Thomson because it was difficult to distinguish the union's general political spending on the Your Rights at Work campaign from specific spending on Mr Thomson's Dobell campaign.

"The combined expenditure was significant in dollar terms and ultimately to his advantage," the report said.

After a day-long meeting the HSU's national executive decided to refer the findings to the Industrial Registrar and to co-operate with the registrar on a formal investigation. It is believed the executive heard legal advice the registrar could conclude there were reasonable grounds to suspect a breach of Workplace Relations Act prohibitions on officials using their position to gain a personal advantage. The penalties include a maximum fine of $2200 and orders to pay compensation.

The union's NSW secretary and national president, Michael Williamson, argued it had to be kept confidential because Mr Thomson had threatened to sue for defamation.

Mr Thomson said he had not been provided with a copy of the report and called on the union to release its findings. He said he had been verbally advised the report accepted his evidence on key points.

Keep a few things in mind.   Mr Williams the IR was going full speed ahead investigating the Thomson allegations.  He engaged an external accountant.   He had investigation plans ready to go.   He ordered a formal coercive investigation and he recommended advising police.

Tim Lee was ready to take over in a few days.   Michael "safe as houses" Williamson was the national president of the HSU.  Note the minutes below, particularly about no copies of the report being retained after the meeting.

Safe as houses.

Here are the minutes of the HSU's National Executive in its deliberations about the BDO Kendall report.