In the Independent Commission Against Corruption enquiry it was alleged former minerals and energy minister Ian Macdonald provided inside information to Labor powerbroker Eddie Obeid over the tender of the Mt Penny lease near Mudgee and then awarded the exploration licence to Cascade, a company 25%-owned by Obeid.
In September 2010, Flannery paid $640,000 for shares in Cascade Coal which could have increased in value to about $50 million if it was bought by White Energy.
It is alleged that Obeid was paid $28 million as part of a $60 million deal to remove any link between Obeid and Cascade before the proposed takeover went ahead.
But Flannery told the ICAC that he had no knowledge the $28 million was paid to Obeid, thinking instead it was paid to ensure rival companies did not bid against Cascade for the Mt Penny licence.
He said his concerns over the conduct of the Mt Penny tendering process prompted him to withdraw White Energy’s acquisition of Cascade.
When asked why he did not make his concerns public he reportedly said: “It wasn’t necessary”, according to the Sydney Morning Herald.
In April 2011, White Energy sent a statement to the Australian Securities Exchange announcing the “mutual termination of acquisition of Cascade Coal”
“There has been significant comment in the local area on the effects of mining in the Bylong valley and the results of the above expert reports will be relevant in determining the extent of future mining activities in the area,” the statement said.
“Until these reports are further advanced there remains a degree of uncertainty.
“In light of the risks associated with this uncertainty, the independent board committee of White Energy and the Cascade shareholders have been seeking additional clarity in relation to these matters and negotiating amendments to address these risks in the sale agreement.
“White Energy has been unable to reach agreement on these matters with certain non-White Energy-related shareholders of Cascade.
“In these circumstances … White Energy and the Cascade shareholders have agreed to cease negotiations on the transaction and to terminate the agreement.”
