A solicitor who ran an internal investigation into a $500,000 loan the NSW Electrical Trade Union made to the ALP five years ago has rejected suggestions it was a conflict of interest, the royal commission into trade unions has heard.
Asked if he was concerned about whether he could conduct an impartial investigation given the union, the client, owned 50 per cent of his firm, New Law Pty Ltd, the solicitor, Robert Whyburn said "no".
"I'm always conscious of potential conflict, but in this particular case I didn't think I had a conflict at all," Mr Whyburn said.
Asked whether his close friendship with former ETU secretary Bernie Riordan was a conflict of interest that he should have declared to current secretary Steve Butler, Mr Whyburn said he did not believe so. He said he did not think this was an issue of concern in the initial part of his investigation.
"But it would have been a matter had I thought there was anything in the complaint, and when we were discussing what further action should be taken, it was certainly a matter that I would have raised with him then," Mr Whyburn said.
Royal Commission into Union Governance and Corruption counsel assisting Jeremy Stoljar said: "If it was a problem for the latter part of the investigation, it must necessarily have been a problem for the earlier part of the investigation as well?"
Mr Whyburn said he did not see that as being an issue at the time.
"Looking back, do you think that might have been an error on your part?," Mr Stoljar said.
"I don't believe so," Mr Whyburn replied.
Russell Wilson, an elected official of the ETU, who raised concerns about the loan last week, told the royal commission he was concerned that New Law Pty Ltd was appointed to conduct the investigation because he thought this was a "conflict of interest".
The ETU loan is controversial because it was made in December 23, 2010 without any record of it being discussed or approved by the executive.
Witnesses have given conflicting evidence about whether the loan proposed by Mr Riordan as secretary was approved or discussed by the executive in December 2010, despite it not being recorded in the minutes for meetings held on December 13 and December 20.
The royal commission has heard the New Law investigation found the ETU had complied with its own rules in making the loan, but that the union laws were not compliant with the NSW Industrial Relations Act.
The union changed its rules in 2012 to make them compliant with the Act which says the rules of a state organisation "must provide" that a loan, grant or donation of more than $1000 is approved by its committee of management.
The union rules in 2010 allowed the state secretary to make an "investment" without the approval of the executive. But, a "loan" needed the executive's approval.
The union has argued the loan was an investment because it charged the ALP 8.5 per cent interest.
Earlier during the hearing on Wednesday, Unions NSW secretary Mark Lennon gave evidence about a $1.5 million loan to the NSW ALP that he approved on December 15, 2010.
Mr Lennon said he considered the 8.5 per cent interest rate the ALP had offered to pay for the loan was "too high".
A lower rate of 7.8 per cent was struck with former NSW ALP secretary Sam Dastyari, because Mr Lennon said this was "the more appropriate rate".
Mr Stoljar said: "I can well understand that wearing an ALP hat, if you can put it that way because you want the interest rate down. But wearing your Unions NSW hat and negotiating a commercial loan, don't you want to get it up to get as much money as possible?".
Mr Lennon replied: "I do, but I want to ensure we're being fair and equitable and I considered 8.5 per cent to be too high".
The Unions NSW loan was made on December 23 to help the NSW ALP with its cash flow in the lead up to the 2011 state election.
In a sworn statement, Mr Lennon said it was the expectation of Unions NSW that the ALP would be able to repay the loan in full once the party had received public funding for the state election from the election funding authority.
