Kennet's publicity blitz, Macquarie, defending Crikey and SKY news
July 22, 2008
Here are Stephen Mayne's four stories from the Crikey edition on Monday, 1 May, 2006.
4. What's behind Jeff Kennett's publicity blitz?
By Stephen Mayne, former Kennett government spinner and publisher of the now defunct www.jeffed.com
Sunday Herald Sun sports columnist Jon Ralph had an interesting column yesterday tracking the publicity blitz that Hawthorn Football Club president Jeff Kennett has been enjoying of late. On assuming the Presidency last December, Jeff told Hawthorn members at the AGM: "After tonight, you won't see or hear much of me..."
This was because Jeff declared that football matters would be dealt with by coach Alastair Clarkson and CEO Ian Robson would deal with club issues. Ralph has tallied up Jeff's recent football pronouncements and they cover the following: Fashion parade etiquette, AFL finances, drug policies, coach and player contract negotiations, finals scheduling, The Footy Show non-appearances, Kings Domain campsites, Hawks board departures, the unsustainability of ten clubs in Victoria, clubs being "chicken fed" by the AFL, the final eight and acting lessons for his players.
Unfortunately, Ralph missed the key point when he asked the question: "Is Kennett a serial attention junkie and media dial-a-quote, or is he just the man to spearhead Hawthorn's revival as it attempts to position itself as an AFL powerhouse again?"
The answer is that Jeff is cranking up all the publicity he can get ahead of a final decision about a return to State politics. The Liberal seats of Doncaster and Warrandyte have both opened up with the recent retirements of Victor Perton and Phil Honeywood and Jeff is seriously weighing up his options.
The signs have been there for months. Journalists who call Jeff's taxpayer-funded office in Treasury Place now hear a message with his mobile number. That zany yellow and brown Hawthorn blazer is just another example – so good in fact that The AFR had Jeff wearing it all over page one just on Friday, promoting a magazine cover story.
Then there was Jeff's prominent role during the Kooyong preselection struggle. When the three Queensland ministers intervened, Jeff happily made himself available to the ABC in an interview that ran prominently on both radio and TV.
Gary Morgan voluntarily produced some polling numbers that showed Jeff was far more popular than the current Costello-backed Victorian Liberal leader Robert Doyle and then Doyle's new deputy, Louise Asher, was out there with the ever-obliging Jeff banging the drum again yesterday to The Sunday Age:
"I'm a huge Jeffrey supporter," she says. "I think Jeff Kennett is an amazing human being but yeah, he got it wrong. I think for quite a while he tortured himself about how this all went wrong. He's got a really good attitude to life. It's done … move on and do the next thing. It doesn't mean he doesn't analyse it, it doesn't mean he wasn't upset about it."Even today the Herald Sun carrried some Jeff comments attacking John Howard over the $3,000 baby bonus and his soft touch on Pauline Hanson, which are from interviews conducted for The Longest Decade, a new book by The Australian's George Meglogenis.
Kennett himself says of Asher's elevation: "Already there is a very clear and obvious improvement. The party was very divided prior to her resuming the role and I get the sense there is less of that now."
Asher, he says, is useful because of her ministerial experience and will "bring views of a different gender". "I found her very easy to work with. She's quite vocal. She has a point of view and she's prepared to argue it. You don't want to be surrounded by sycophants."
It certainly does all seem to point to a political comeback, but at 58 you have to wonder why he'd bother because the Labor Party would have enormous ammunition to use against him on personal ethics and could also run a strong scare campaign based on his slash and burn policy legacy.
5. Out come the Macquarie legal eagles again over Beaconsfield
By Stephen Mayne, Macquarie Bank shareholder who asked about Beaconsfield at last year's AGM
Macquarie Bank are already embroiled in an expensive supreme court defamation fight against The Australian over its Walkley-winning coverage of the extraordinary profits from the Beaconsfield Gold Mine. On Friday, I copped a legal letter from Clayton Utz in response to the item Crikey published last Thursday in the aftermath of the tragic rock fall, which has now also become a story about miraculous survival. This is the apology the Millionaires Factory have requested we publish:
Correction and apology to Macquarie Bank and Warwick MorrisI've probably been responsible for more apologies and corrections than anyone else in the Australian media – partly for being, as Tim Blair once cleverly put it, "Australia's largest supplier of internet inaccuracies", but mainly because our policy of correcting the record and giving people a right of reply is different from most other outlets.
Crikey Daily on Thursday 27 April 2006 contained an article concerning the Beaconsfield Mine and Macquarie Bank. The article contained factual errors which give rise to serious imputations concerning Macquarie executives' and Mr Warwick Morris's involvement with the mine and their role concerning the miners trapped there. In fact:
Therefore Macquarie never has been in a position to implement (or otherwise) any recommendation suggested to the Beaconsfield Mine. This is a matter for the joint venture committee and mine management.
- Macquarie did not appoint the administrator of Allstate;
- The chairman of Allstate has, in a statement to the ASX, said that Macquarie has received only $3.3 million in relation to the intercompany loans after repayment of the secured debt. The mine was only modestly cash positive through the balance of 2002;
- Macquarie does not sit on the joint venture committee and has no role in relation to the control or management of the Mine;
I acknowledge that the article was extremely hurtful to the Macquarie executives and Mr Morris and I unreservedly retract and apologise for all imputations of wrongdoing on their part which arise from it.
This one has a couple of reasonable points. The two Macquarie executives, Warrick Morris and Jonathan Rourke, don't formally sit on the joint venture committee – but they have often attended the meetings as observers.
I said Macquarie had pocketed about $35 million and had another $65 million to go. They say it is $27.3 million recovered (as of 5 months ago) and $54 million to go, although Allstate chairman Rod Elvish told the AGM last November that negotiations to end the administration were in train so there could well be a cents-in-the-dollar negotiated settlement on the outstanding amount, especially in light of last week's events. Claims Macquarie will recover the full amount, especially now, are indeed "speculative", as the bank contends.
However, Macquarie is also making many millions out of the Beaconsfield hedge book, especially given the recent surge in the gold price. It would be helpful if they could come up with an exact figure as they have certainly contracted to receive large amounts of gold at well below the current spot price of $840 an ounce. If the average price in the hedging is $600 an ounce over 50,000 ounces annually, that comes to $12 million of profit for Macquarie a year.
This whole question about who controls Allstate Exploration and the Beaconsfield Gold Mine itself is an interesting debate. In a strictly legal sense, Macquarie is right, but in my opinion there is little doubt that Macquarie has exercised considerable influence over Allstate. Do they control the mine? Well, Allstate is the controlling shareholder and operator of the mine and, as the largest and first ranked creditor, is still owed more than $50 million – Macquarie could put the company under at any point in time. As for Michael Ryan, the Perth-based administrator recommended by Macquarie, he has done deals that have helped the bank and refuses to answer questions as to why. I still can't fathom why Macquarie would strongly argue for a Perth-based accountant when someone from Melbourne would have made far more sense.
The best online summary of the saga can be found in the transcript from Adam Shand's Sunday cover story last year, which apparently elicited an exchange of letters from the Macquarie spin machine but nothing from the lawyers. On the question of Macquarie's relationship with the administrator, Sunday's story included the following lines:
ADAM SHAND: The ideal outcome for Macquarie was the appointment of an administrator the Bank was comfortable with. Documents lodged with the corporate regulator showed that the men from Macquarie demanded that Michael Ryan be appointed or they would bring in their own receiver.Shand also neatly explained how Macquarie bought this $77 million liability (including the original $21 million Macquarie loan plus about $3 million in interest) for just $300,000?
And on the question of how much money Macquarie has made, in addition to the $54 million intercompany loan bonanza and hedge book profits, Sunday added this little gem:
There was $6 million worth of gold in the manager's lien. That is, until Michael Ryan, the administrator, sold it to Macquarie Bank and BankWest for just $500,000. This was perhaps a desperate move to raise cash, but it also allowed Macquarie Bank to leap to the top of the queue of creditors.
By the end of 2001, the Macquarie bankers began to play a role far beyond that of lender to Allstate. It was a highly credentialed team — Rourke an experienced markets guru in precious metals and minerals. Warrick Morris was a qualified geologist. The pair had full access to the underground workings and all its records. It operated Allstate's hedge book. They knew more about the business than the directors who built it. Sunday has obtained correspondence suggesting the Beaconsfield mine was emerging from its difficulties. By late 2001 and early 2002, emails with headers like, "Gold, gold, gold — excellent gold figures" and "Capturing Allstate's equity upside" began to bounce in and out of the "Millionaires Factory". Meanwhile, the administrator had forecast that the mine would produce 90,000 ounces in 2002, just 10,000 ounces short of budget. But unsecured creditors, who held the fate of Allstate in their hands, would never see this forecast. The unsecured creditors of Allstate were mainly Tasmanian small businesses. Their livelihood depended on the mine's continued operations. 150 jobs were on the line. The administrator, Michael Ryan, called a meeting in March 2002 to discuss the future of the mine. Warrick Morris from Macquarie came with an ultimatum to the small businesses — approve the deal selling $77 million worth of debt for $300,000 or the Bank would walk away. The mine would be flooded and any hope of repayment would disappear.I just don't see how Macquarie can take a "nothing to do with us" approach. If it was going to cost $20 million to make the mine safer, surely the senior creditor, major lender and hedge book operator would be consulted. In strict legal terms, they don't control it, but the reality of the past five years shows a lot of clout has been exercised and the dealings have proved hugely lucrative. The Beaconsfield tragedy and now potential miracle survival will put a spotlight on these dealings.
However, I'm more than happy to accept that, even if inquiries conclude Allstate should have done more, it would be a stretch to blame the rockfall tragedy on a Sydney-based banker just because he's a geologist who has dealt extensively with the company over the past few years. The administrator, mine manager and voting members of the joint venture committee will be far more in the spotlight over this, provided it isn't demonstrated that Macquarie knocked back a safety-based funding request, which has not been suggested by anyone at this point.
If you've got any further insights into this saga, drop me a line at smayne@crikey.com.au.
17. In defence of Sky News – and Crikey journalism
By Stephen Mayne
Last Thursday's edition of Crikey included a cheap shot at our leading pay-TV news channel under the headline, "Sky News – Channel of the year and blundering amateurs" (item 19). It was a typical Crikey piece enjoying the irony of Sky News being declared "channel of the year" on the same night that Sky Business Report was beset by technical difficulties. However, a former producer of the program immediately emailed through the following:
Your attack on Sky News was very unfair. What you have failed to appreciate is that Sky News moved studios last weekend and I'll guarantee their technical problems last night were a result of problems with new gear. Technology is great as we all know until it doesn't work. I'm sure there's never been a technical glitch at Crikey.And a polite call also came through from Sky News CEO Angelos Frangopoulos saying it was all rather unfair. Being an agreeable chap and conscious of our policy of regularly publishing rights of reply, I agreed to do a square-up item and can confirm that the channel had indeed just moved its studio from Frenchs Forest to Macquarie Park, near Ryde in Sydney.
If those technical problems happened repeatedly you may have a point. Surely though you would be much better off focusing on the content of the program, rather than something which, while very embarrassing, is a once off and can happen to anybody.
Angelos pointed out that Sky Business Report's ratings are up significantly since former ABC finance reporter Karen Tso started presenting the program and the channel's daily business coverage is being substantially expanded from today.
All of this got me thinking about the way News Ltd handles complaints, rights of reply and letters to the editor. Piers Akerman produced a column last year declaring that "it can be argued that almost anyone can call themselves a journalist these days, as evidenced by the nonsense published by people claiming to be journalists on websites such as Eric Beecher and Stephen Mayne's Crikey".
The Australian's Strewth column mentioned the possibility that I would register a complaint. I can today reveal it is proceeding and a letter has come back from The Daily Telegraph's Roger Coombs rejecting the complaint and making the completely false claim that Crikey regularly refuses to give people a right of reply.
The process is interesting to experience and the options now are to drop the complaint, go to a full panel hearing or have a Press Council mediation with the paper. I'll be going for mediation, armed with a pile of News Corp rights of reply that have appeared in Crikey over the years. All we asked for was a brief letter in response to a patently ridiculous claim that The Telegraph's former chief of staff and business editor wasn't a journalist. Sadly, The Daily Telegraph is happy to take up management time and resources to ensure that doesn't happen.
Such hypocrites!
23. Inside the lucrative Alumina lunch club
By Stephen Mayne, small Alumina shareholder
Melbourne has long been Australia's clubbiest business community and the development and management of Australia's vast mineral resources has been plotted and planned by a group of closely associated blokes in the Collins Street boardrooms ever since the gold rush of the 1850s.
However, the last 12 years have seen the departure of Woodside and Alcoa to Perth, Rio Tinto's move to London, the merger of BHP and Billiton, the takeover of North and WMC and the collapse of Pasminco. This has put paid to the club, although the last remnants can be seen at Alumina Ltd, the post box company which owns a 40% stake in AWAC – a global aluminium and bauxite joint venture run by Alcoa out of Pittsburgh.
With just a CEO, company secretary, one other executive and support staff, there isn't much to be done, yet the board insists on paying themselves full freight, as if they were running some complex global mining operations with thousands of staff.
I opened the batting at Thursday's AGM by asking how the board was put together in 2001-02 and what they actually did. Were there specific things they could point to that Pittsburgh did or didn't do because of the actions of its minority Australian partner?
Chairman Don Morley said the board was put together by WMC management. They wisely decided that the man who had been finance director for 18 years would settle nicely into the Alumina chair for a fee of $212,500 a year, which will rise to $287,500 in 2006 – more than the $250,000 that WMC chairman Ian Burgess got in 2002 when he had 3,000 staff and 1,500 contractors to deal with.
As for their role, Morley pointed to a nice move which maximised franking credits for Australian shareholders and a related party transaction with Alcoa that the board signed off on. Fair enough, but what about the rest of the year?
I did my usual spray about the old Melbourne miners club and singled out Mark Rayner, who failed miserably as chairman of Pasminco, Mayne Nickless and NAB. Morley responded by saying Rayner was re-elected with 95% support last year, prompting a retort that such a low vote is the equivalent of a revolution in Australian corporate elections.
I later tipped Morley himself would get re-elected with between 99% and 99.5% and was spot on. Another director, Peter Hay, managed to keep a straight face when saying the board had done a performance review and Morley had come through with flying colours. Yes, that would be the same Peter Hay who was the Freehills partner most regularly used by WMC over the previous few years.
The lads are clearly taking this board pay issue seriously because Ron McNeilly, the former BHP Steel boss who was retrenched three years back, got up and gave a detailed seven minute speech in his role as chairman of Alumina's remuneration committee. He singled out the time commitment as one reason to justify this post box company getting fees equivalent to an operating miner, which led into my later questions about why on earth the board met 20 times in 2004. The response was amazing. Apparently, the three executives get a bit lonely and like to have their NEDs in the office for regular guidance and advice. To do what? Tell the world's biggest and best aluminium company across the Pacific what to do.
All up, it was an entertaining meeting and the response from shareholders was very strong, although one old dear came up later and gave me a gobful for being disrespectful. She calmed down a bit later and revealed she'd turned 80 last week and had about 100 shares worth $7 million. Not bad for someone who spent 43 years as a nurse.
Unfortunately, my lobbying of the two proxy voting kingmakers, Institutional Shareholder Services and Corporate Governance International, came to nothing because the remuneration report was approved by more than 99% of shares voted. However, on the floor of the meeting it was a close call and the Australian Shareholders' Association representative said he had proxies that were running 4-1 against. Indeed, the little guys know what a rort these fat board fees are.
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