The Australian Federal Police has been probing criminality in the sector and in the Construction, Forestry and Maritime Employees Union, including allegations of corruption, money laundering and other organised crime in Victoria.
A letter sent by a senior federal police officer to Melbourne, Sydney and Brisbane building companies reveals ongoing intimidation is hampering clean-up efforts.
The federal agency was told many contacted business owners had been "intimidated into not co-operating with police after receiving threats".Â
"The source of these alleged threats has been made known to the AFP,'' reads the March 13 letter, published by Nine newspapers.
"Information has also been provided to the AFP that confirms companies have made facilitation/extortion payments to organised crime to enable building projects to progress uninterrupted."
Barrister Geoffrey Watson's "Rotting from the Top" report into the Victorian branch of the construction union said fear from witnesses lingered and prevented some from speaking out.
Victorian Premier Jacinta Allan has repeatedly said allegations of construction sector illegality should be referred to police.
She maintained that was appropriate advice despite the letter's claims.
"I was concerned to read those reports," Ms Allan told reporters on Thursday.
The Independent Broad-based Anti-corruption Commission can investigate public officials, but not third parties such as union officials and bikies under its legislative framework.
Legislation to give Victoria's corruption watchdog "follow the money" or "follow the dollar" powers passed the upper house on Wednesday with support from the coalition, Greens and other crossbenchers.
In the lower house, Labor MPs used their commanding numbers to block the bill from being debated, with the premier absent from the chamber for the vote.
In December, a parliamentary committee recommended the IBAC Act be amended to give the agency powers to probe public funds spent by private entities.
The state Labor government is required to respond to the report within six months.
The calls for the watchdog to get more powers comes as Taskforce Hawk, a special Victoria Police unit targeting crime linked to the construction industry, has laid more than 70 charges against at least 15 people since it was set up.
On Thursday, Jared Davis, 42, was scheduled to make a bail application after being charged with blackmail and extradited from Tasmania.
Police allege Davis is a patched member of the Bandidos and was involved in an unwarranted demand for $663,000 at a business in Melbourne's west in January.
Ex-CFMEU official and bikie Joel Leavitt, who was also charged over the alleged extortion plot, faced court on Thursday seeking to vary his bail conditions so he could leave the state for work purposes.
The prosecution simultaneously indicated it was seeking to change his bail conditions to stop him from associating with a man police believe has been appointed Bandidos president.
The defence will oppose the alteration later on Thursday when the hearing resumes.
24°C