Kathy Jackson was hailed as a whistleblower against union corruption — until one man revealed her secrets
/In 2012, Kathy Jackson took the stage at the conservative think tank, HR Nicholls.
It was an unusual setting for the firebrand secretary of the Health Services Union.
"I've been attacked for agreeing to speak to you tonight because you are seen as enemies of the trade union movement," she opened.
But this union heavyweight was now fighting her own movement.
"I've resolved to make common cause with anyone who shares my desire to see reform in unions," she told the packed room.
In the year before she took the stage, Jackson had turned two of her union colleagues over to police — for using members' money to live the high life.
One, Michael Williamson, was a former Labor Party president and the other, Craig Thomson, was a government MP.
Between them, the two union bosses had spent well over a million dollars of union funds on mortgage repayments, escorts and private school fees.
Now, Jackson was calling for sweeping reform of the union movement.
And the Coalition were all ears.
"Kathy Jackson is a revolutionary, and will be remembered as a lion of the union movement," minister Christopher Pyne would later tell Parliament.
But she ended her address with a comment that should have acted as a warning: "I'm no Joan of Arc. I'm not a political virgin. I've been an activist in the labour movement all my adult life."
Tony Abbott seized upon her revelations to announce a royal commission into union corruption in 2014.
What no-one knew yet was that there was someone waiting to blow the whistle on her — and you've probably never heard of him.
The man behind the X-ray machine
While Kathy Jackson had the ear of the prime minister, radiographer Craig McGregor was trudging hospital corridors.
He was taking X-rays in Western Melbourne when he heard his union's secretary, Kathy Jackson, had referred her predecessor, Craig Thomson, to police.
There'd long been rumours of the union misspending members' funds, and even as a rank and file member, McGregor had seen glimpses.
"There'd be a union credit card put on the bar and Young Labor would be shouted drinks all night on a regular basis," he recalls.
"But when the rumour was proven to be far more than that … I was furious."
McGregor had worked in hospitals as a radiographer for nearly two decades. He was just the guy behind the X-ray machine, but he was not going to let this slide.
He cashed in his long service leave and spent six months campaigning to take charge of his Health Services Union branch.
It was Kathy Jackson's old branch, and she wanted her allies in control.
But here was a cleanskin, campaigning for a "Clean Sweep" of his union.
"I was driven by a sense of wanting justice and wanting to return the union to its membership."
Despite being unknown to the ALP "factional warlords", as Jackson called them, McGregor won.
But the branch he inherited was in disrepair.
"When he first came in on that first day, the only thing that was there for him to build upon was piles of shredded documents underneath the tables," McGregor's partner, Sarah, recalls.
The branch had just been demerged from a few other branches of the union, and in the chaos, it took months for McGregor to get a clear picture. Banks blocked access to old statements, and whole tubs of paper records had gone missing.
Eventually, the information dribbled in and alarm bells started to ring.
The paper trail leads to a shocking discovery
The first thing McGregor discerned was that vast amounts of cash were being withdrawn from union accounts.
"$10,000 just taken out in cash money and no record of where that money went or what was being done with it," he says.
"I was stunned."
This was the branch Jackson used to run. Could the self-styled corruption whistleblower have been misappropriating members' money just like the union bosses she handed to police?
As McGregor and his accountant pieced together the records, it became clear that Kathy Jackson had been treating the union accounts like her personal credit card.
"People wouldn't believe you when you said, 'Oh, no, we've seen this in the books. We've seen how the mortgage got paid or the pram was bought or the shopping trips or the bottles of tequila," McGregor's partner Sarah recalls.
McGregor was at a loss for where to turn. Jackson had been on sick leave since she blew the whistle, but she was still the union's national secretary, with influence at every level.
The timing of new corruption allegations was also sensitive for the union movement, which felt under siege from the Abbott government.
Still, McGregor felt compelled to act.
So he sat down with some journalists from Fairfax Newspapers — and told them the Jackson narrative "was bullshit".
Fairfax newspapers had been a key outlet for Jackson. It had helped expose lavish spending of union funds by her former allies.
Now, McGregor was telling Fairfax that Jackson herself was suspect.
"I must say I was reluctant at the start because I think I was one of those who bought the Kathy Jackson story," says investigative journalist Nick McKenzie.
"She'd really suckered everyone into thinking she was a hero.
"But then in meeting Craig … he struck me as such a decent, honest [guy] and had that sort of zeal of a whistleblower. And he brought evidence."
McKenzie was stunned by the sheer amount of evidence Jackson left behind of her unbridled spending, "as if she thought she was untouchable".
With Abbott's royal commission just around the corner, Fairfax newspapers dropped a bomb.
According to The Age, the commission's star witness had transferred a million dollars of union funds to pay off her personal credit card.
The federal court later found Jackson had spent $300,000 for personal purposes using union credit cards without authorisation.
Then there was what appeared to be a slush fund, started with almost $300,000 that was supposed to be back pay for underpaid cancer researchers.
"It was brazen, it was corrupt, it was wrong," says McKenzie.
"And it really spoke to this self-entitlement, this sense that Kathy Jackson had, that the union was her plaything.
The backlash from Jackson and her supporters was swift. Jackson was a seasoned fighter — she'd reportedly once pegged ice cream at Bill Shorten in a preselection dispute.
"I called her up and put the allegations to her and it was like encountering a tornado of venom — she called me a 'conniving poodle'," McKenzie recalls.
Inside the union, McGregor says he faced a similar backlash for "airing the union's dirty laundry".
And some media outlets branded him a factional hack, even though he'd never been part of the ALP.
His last hope for justice was the royal commission. So he boarded a plane to Sydney, where hearings were unfolding as both sides of politics watched anxiously.
Two narratives presented
McGregor took the stand the day after Jackson.
He was hopeful the commission would get to the bottom of Jackson's spending, with the help of the bank statements he'd supplied.
But the commission seemed more focused on McGregor's tactics.
It questioned why McGregor hadn't put the allegations to Jackson before going to the media. And why had he gone to the media ahead of the commission?
His allegations were branded by the commission as "speculation".
McGregor had met with the royal commission lawyers before approaching journalists but he said they didn't seem interested. And the journalists had themselves put the allegations to Jackson.
Watching this unfold was The Australian's Brad Norington, who later wrote a book on the scandal called Planet Jackson.
When Norington looked at the accounts supplied by McGregor to the royal commission, he says Jackson's dubious spending trail was obvious.
"It bothered me that the royal commission didn't even look at those things."
According to Norington, here was a man blowing the whistle on the whistleblower — and the commission seemed to be blocking its ears.
But as the furore became impossible to ignore, the commission recalled Jackson and changed its tune.
"It was a bit like turning around a large ship, turning around the Queen Mary … to shift a very powerful political consciousness and public consciousness about who Kathy Jackson was," Norington says.
She was grilled about withdrawing $50,000 from a union account the day before she paid this same figure to her ex-husband as part of their divorce settlement.
Outside the commission, Jackson told reporters she'd been ambushed.
"These people in the Health Services Union rely on a judicial gang rape of Kathy Jackson, because they can afford to do it, they've got lawyers, guns and money."
The slush fund she'd set up was no big deal, she said. Every union had one.
"You need to have these funds to make sure that these vultures that are circling these unions to take them over aren't able to do that."
As for her spending, Jackson claimed it was all approved, but the minutes that proved it were in an exercise book that had been thrown out during a "union chuckfest".
Today, Jackson still maintains the evidence that would exonerate her was destroyed by "senior figures in the HSU".
After his day on the stand, McGregor lost faith in the commission.
His partner, Sarah, remembers him returning home to their three young children "devastated".
"He was so stressed and worried about having gone and made these allegations public. He thought his career would be over.
"People couldn't understand who was the real whistleblower and who wasn't. And that remains to this day, I think."
Millions left unpaid
The royal commission concluded that while Jackson was "instrumental in revealing the conduct of [union bosses] Craig Thomson and Michael Williamson to authorities … she had her own dark side".
"She misused her position to further her own interests and political ambitions in a number of ways over a period of years".
The commission referred Jackson to police following a civil judgment from the Federal Court.
The union had sued its former national secretary, and the court ordered her to repay $1.4 million plus another million in interests and costs.
Jackson declared bankruptcy twice and the union is still chasing its money, but that could soon change.
She recently inherited a one-tenth share of a $27 million estate following the death of her one-time barrister and friend, David Rofe.
Jackson said in a statement from her lawyer that she had no control over when or how the money would be distributed, and that it was a decision for her bankruptcy trustee. She has been discharged as a bankrupt.
McGregor is hopeful the union could finally be about to see some of that money.
"If we get the money back, that will be a hugely important day for the membership. We can put the money back where it belongs, in their union.
"The project has been over 10 years now and we still haven't got to the end of it."
Jackson was also found guilty on four counts of obtaining financial advantage by deception after misappropriating around $100,000 of union money.
She avoided jail time after receiving a suspended sentence, with the court citing mental health issues.
The court found she'd spent union funds on a Mercedes, jewellery and, among other things, an extensive collection of DVDs.
She'd also travelled the world on the union's dime, including shopping sprees in Asia and a family holiday to France.
Murky intentions
Craig McGregor believes Kathy never was a whistleblower but was forced by the union's national executive to investigate Thomson.
"Jackson certainly did not want to expose Thomson's [conduct] because her own misappropriation would be revealed".
As for NSW boss Michael Williamson, McGregor feels Jackson turned on him before he could turn on her.
"Once the Thompson stuff had come out, they both felt very vulnerable. Thieves inevitably fall out because one knows what the other one's done and there's suspicion, and a lack of trust."
Jackson had reportedly been aware of Williamson's corrupt business dealings for over a decade before referring him to police.
Jackson still sees herself as a whistleblower. Through her lawyer, she told Background Briefing her decision to expose corruption cost her her career, her reputation, all her assets, her relationship and 10 years of her life.
The sacrifices made were worth it
Today, McGregor is still in the same role he first campaigned for a decade ago.
The only trace of the Jackson era is a Charles Blackman painting she famously bought with members' money, which hangs above Craig's desk.
In the office, he's wearing one of the union T-shirts he wears so often they're getting holes.
At home later, he changes into a shirt that says "World's Best Dad" — but as he looks down at a photo of his young kids, he starts to cry.
The whole affair took him away from his most important role: being their father.
During the ordeal, he began to isolate himself as he'd "lost a lot of faith in institutions of state."
"I became very depressed, and I started to drink in a really dark way."
It took a significant toll on his relationships with family and friends.
Craig eventually got into a rehab program and turned his life around over a period of years.
"I've come out the other side and I'm better at my job than I've ever been … my relationships and family are better than ever."
Craig doesn't want to be remembered as the whistleblower behind the whistleblower — he's more proud of the work his team have done to rebuild their branch.
Still, he says he'd do it all again.
"I would blow the whistle on someone like Kathy Jackson any day of the week," he says.
"I wish that my family hadn't endured such negative implications flowing from it. But on a personal level, I have no regrets."
Kathy Jackson did not respond to an interview request from Background Briefing.
This story comes from ABC's Background Briefing program. Follow the podcast on the ABC listen app.