COUNSEL assisting the ICAC's Operation Spicer inquiry, Geoffrey Watson SC, was so "inappropriate and unfair" to some witnesses that his conduct "caused considerable damage" to the ICAC and may have reduced its ability to fight corruption, the Office of the Inspector of the ICAC has found.
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The report by ICAC investigator Bruce McClintock SC was handed to parliament on Thursday. It has been welcomed by the two former Liberal parliamentarians whoe complaints triggered the report, Mike Gallacher and Andrew Cornwell.
But Mr Watson has justified his methods, and questioned Mr McClintock's findings and his grounds for conducting the inquiry.
One trigger for the report was a May 2014 section of evidence in which Mr Watson accused Darren Williams, a co-founder of Newcastle developers Buildev, of having "hatched a corrupt scheme" for election donations" with Mr Gallacher, who was police minister at the time.
Mr McClintock said Mr Gallacher was immediately "compelled" to resign as minister "as a direct result" of questions "which were then not supported by evidence".
He said that after examining other evidence he concluded it "was not an isolated instance".
"I consider that Mr Watson's conduct caused serious damage to the standing of the commission which may well have reduced its ability to performing its important public functions of attacking corruption in this state," Mr McClintock said.
The second complaint arose from a meeting, two months later, between Mr Watson and Mr Cornwell, who offered "new evidence" that later "figured prominently" at the inquiry.
Mr Watson had given the Charlestown Liberal MP a signed statement saying he was "confident" he could obtain an order to say that none of the new material would be used against him.
It was Mr McClintock said Mr Watson should not have been involved in the offer, which he called "an inducement".
Asked by Mr McClintock for his reponse, Mr Watson denied it was an inducement and disputed Mr McClintock's account of the Gallacher resignation.
Mr Watson noted Mr McClintock accepted he had no powers to make findings against him.
"Your present investigation and report is no more than providing yourself with a means of indirectly doing that which you are not permitted to do directly," Mr Watson wrote.
Despite Mr Watson's response, Mr McClintock said he maintained his conclusions.
"A significant influence on my decision to undertake this investigation is my perception that there is continuing concern about Mr Watson's conduct as counsel assisting in Operation Spicer, even though the hearings took place in 2014," Mr McClintock said.
"Counsel assisting has a critically important role in ICAC investigations and public inquiries and, indeed, sets the tone of the process.
"When counsel assisting behaves unfairly, the process and the findings of the commission will be undermined and seen to be unfair, or there is, at least, a serious risk that will be perceived to be the case."
Mr McClintock said it was "fundamental" that the ICAC "behaves fairly towards those who come before it" and is seen to be fair to those "who may ultimately be the subject of adverse findings".
Operation Spicer ran from 2012 until its report in 2016, investigating political donations to Liberal candidates, mainly in the Hunter, in the lead-up to the 2011 state election.
Evidence at some of its public hearings created immense political pressure. Mr Gallacher lost his ministerial role, Mr Cornwell and another first-term Liberal, Newcastle MP Tim Owen, resigned from parliament, while Independent Newcastle lord mayor Jeff McCloy, resigned from the council.
Mr Gallacher said yesterday that Mr Watson calling him "corrupt" had ruined his career.
"Spicer is still on the ICAC website as a Liberal Party investigation but the only person found corrupt was Labor's Joe Tripodi," Mr Gallacher said. "It's been five years of pain and embarrassment and I'm glad this is all now coming out."
Mr Cornwell - working again as a suburban veterinarian - said he had gone into the meeting with ICAC to be "upfront and honest".
"I was congratulated on that honesty and I was told, as Geoffrey Watson said, he'd stake his reputation on protecting my reputation. Then five days later I was called into a public inquiry and got my head cut off.