The Most Corrupt State Government since Federation
The Jenolan Story is an extraordinary example of how government-private partnerships can go wrong. In this case the government withheld treasury funds from the Jenolan Caves Reserve Trust; this created unnecessary risks to public safety and destroyed the commercial viability of the businesses in the village.
There were repeated problems with breaking water pipes and unfiltered water at Jenolan Caves. This damaged the customer experience at the hotel and the reputation of the Jenolan brand. On or about 30 July 2003, a complaint was made by a hotel guest because water was unavailable due to broken pipes.
Despite the government’s agreement to supply continuous clean water , the Trust dismissed the complaint. It stated the Trust had “at all times operated in accordance with the Services Agreement”.  At no time did the Trust accept it had a duty to compensate customers staying overnight or businesses operating kitchen facilities without water, nor did they admit they had a duty to carry out preventative maintenance. 
In November 2004, Premier Bob Carr was alerted to the disrupted state of water supply at Jenolan Caves. The Premier’s Department replied to JMA concerns by asserting that all water issues had been thoroughly investigated and the Trust had met its responsibilities. In January 2005, the JMA Parties replied stating, they could not continue operating services at Caves House if chronic water problems continued.
The JMA Parties also stated the Premier’s Department was “poorly informed about the Trust meeting its obligations otherwise this situation would not have continued for such a long time.”
At least a few members of government had become concerned about the situation at Jenolan Caves by this time.
On 12 October 2005, The Hon Michael Richardson MP, Shadow Minister for Environment, stated he:
Was of the view that the Government was running the case in an illegal way.
Was suspicious that the Government could not even provide clean water to Caves Hose, the kiosk and other businesses (seeing as Jenolan Caves is NSW’s largest inland tourist attraction).
Questioned whether the Government cared about the health and safety of visitors to the Caves.
Questioned if this was part of the Government’s plan to try to undermine the lessees in the commercial zone and force them out of business, so that it could amalgamate the cave tours with Caves House.
Minister Debus replied to Richardson, claiming that more than 15 years of testing the Jenolan water by the Department of Health showed drinking water complied with the ADW guidelines. These results were contradicted by multiple tests carried out by the government and independent third parties. 
The Hon Rick Colless MLC, on 19 October 2005 referred to a letter addressed to members of parliament by Mr Templeton on 15 June 2005. Colless states that if the letter is correct the Government stands condemned.
He continues: “I am concerned about the way in which the Government has been prepared to put people's health at risk to fulfil its objective of gaining control of the commercial zone.”
On 10 November 2005, Jenolan Caves Resort (JCR) referred its water concerns to retired Court of Appeal Judge the Hon Roderick Meagher AO QC. His advice was provided to the Premier’s Department that day. The Meagher advice refers to the water problems and the Plan of Management and states:
“Of these documents, by far the most important is the Plan of Management. It deals with every conceivable aspect of the management of the land on which Jenolan Caves House is situate… It deals with extensively with the provision of essential services such as potable water, eradication of noxious weeds…
The Plan in effect, consists of a series of obligations to be performed… the party who is under a duty to perform the obligation is, and can only be, the Trust...
There is, on the facts, no dispute that the Trust was in default of its obligations. The water it provides (when it does provide it) is hopelessly far from potable. Noxious weeds abound, and nobody has cared to eradicate them. The touring arrangements and the visitors’ accommodation are sub-standard. These facts are not only asserted by Jenolan Caves Resort, but have been admitted by the Trust in a letter from its Chairman.
The second document, the Services Agreement, really reinforces the Trust’s obligations to supply, and keep supplied, potable water. The Trust is in default under this Agreement.”
On 14 November 2005, the Meagher advice was delivered to St George bank. On the same day, a copy was also forwarded to the Bank’s Chief Executive, Gail Kelly. The wording in the advice made it abundantly clear that “the water [the Trust] provides (when it does provide it) is hopelessly far from potable”.
On 9 December 2005, St George Bank appointed Receivers and Managers to take over operation of Caves House. The Bank had been financing the further upgrade of the hotel and was aware by this point that the property could not be fully developed, refinanced or sold while there was no Trust Board.
The Trust and the Receivers and Managers, both having received a copy of the Meagher advice, are reported to have immediately removed signage that advised the public not to consume tap water at Jenolan Caves. The public, especially immune comprised people, would no longer be informed that the Jenolan water was not filtered and known to contain E.coli and other contaminants.
On 30 June 2006, the government purchased Caves House from St George Bank at a price significantly below market value.
A few weeks later, on 10 August 2006, the government installed filtration at a cost of $8,307.64.  These facts are later disputed by the government’s own statements. The matter was referred to the government through Questions & Answers, on 9 May 2007 by the Shadow Minister for Environment.
The government responded on 13 June 2007, stating that filtration was installed at Jenolan Caves between December 2006 and February 2007. The government noted the cost of the system was approximately $15,000 and was part of a long-term revitalisation works program. The installation of new piping would also be completed within the month.  All of these statements were refuted by documents accessed by the JMA parties under FOI on 20 September 2011.
On 3 September 2003, when the Special Review of the Trust was authorised by the government, a condition was placed on the use treasury funds. The condition was that no funds could be used to benefit the current lessee of Caves House.  The JMA Parties believe that the government’s failure to disclose this caveat meant that its statements in relation to Jenolan water issues were misleading.
To date, the JMA Parties have been unable to obtain evidence that the government informed the Trust of this pre-condition. The funding problems experienced by the Trust were caused by Treasury’s decision not to fund the capital works at Jenolan Caves. While the Trust had commitments to supply potable water and maintain water supply equipment the caveat meant it could not obtain these funds.
The caveat shows that the government had no intention of supplying potable water, or repairing aging water infrastructure to Caves House while the hotel was operated by JCR. By refusing to fund infrastructure repairs the lease was made worthless and the property could not be sold. If the property could have been sold after amendments to the Act came into effect on 1 July 2006, the sale price would be significantly less than valuations of the hotel prior to the disbandment of the Trust in 2004.
There is no doubt there were a multitude of water problems.  The government’s response to these concerns between 2003 and 2006 was to reject all allegations that the water supply was not complying with the Service Agreement. 
This came to a head on 10 November 2005 when the Environment Minister Bob Debus was offered a sample of the water from the Trust’s tank to drink. He refused.
The Minister was asked to “forget his personal feud with the lessee of Caves House and concentrate on his responsibility to provide clean, safe drinking water for visitors to the Caves”.
The following chapters will sum up the government’s deceptive conduct in the period between 2003 and 2011. They will then highlight the bank’s role in working with the government to sell the property at a significant discount.
Later chapters will identify problems that arise when governments enter into public-private partnerships, and choose to amend legislation without any consultation or consent by business partners. The problem is compounded when the private partners have no opportunity to reverse the government’s dishonest and corrupt behaviour.
It will also be explained how subsequent governments have determined that it is in their best interests to rely on misleading statements to disregard all allegations of dishonesty and corruption. This is only possible due to a policy of never investigating serious complaints.
JMA Parties would appreciate feedback on this Chapter, including information that should be corrected.
 “1. MINISTERS WILL PERFORM THEIR DUTIES HONESTLY AND IN THE BEST INTERESTS OF THE PEOPLE OF NEW SOUTH WALES. 2. MINISTERS WILL BE FRANK AND HONEST IN OFFICIAL DEALINGS WITH THEIR COLLEAGUES”, Code of Conduct for Ministers of the Crown, Annexure A, Ministerial Handbook, p A1.
 “Members of Parliament acknowledge their responsibility to maintain the public trust placed in them by performing their duties with honesty and integrity”, Code of Conduct for Members of Parliament, Annexure B, Ministerial Handbook, p B1.
 Letter – Col Gellatly to JMA Parties, 22 December 2004
 Letter – JMA Parties to Col Gellatly, 17 January 2005
 See: Results and Recommendations by Ecolab Water Care; Water Quality Report by Sonic Healthcare; Letter regarding Jenolan Caves Resort Infrastructure by Medland Mitropoulos; and Re: Jenolan Caves Resort Water Quality Inspection, Discussion and Recommendations by J. K. Humphreys, B.E. M.I.E.A. C.P. Eng, 11th October 2005.; and D. Templeton’s letter to the Minister for Justice Greg Smith dated 14 November 2011.
 Cabinet Minute by the Cabinet Standing Committee on the Budget, Review of the Jenolan Caves Trust to be undertaken by the Council on the Cost and Quality of Government, 3 September 2003, obtained through FOI-DPC14/05302 (A1).
 Plan of Management 1999
 List titled unfiltered water not fit for human consumption, trust not supplying 24/7 water supply and public safety concerns. Notes the water issues confronting the businesses.