Bitter tax fight, Rupert autobiography, Aunty's chairman, QANTAS, 20 highest paid bankers
July 28, 2008
Here are Stephen Mayne's six stories from the Crikey edition on Tuesday, 6 December, 2005.
4. The other Reserve Bank board member's bitter tax office fight
By Stephen Mayne, doing an Alan Ramsey:
One interesting aspect of the Rob Gerard affair is the way the press failed to put anything like the same amount of pressure on Westfield boss Frank Lowy in June 1995 when he was first appointed to the Reserve Bank board by the Keating Government, albeit one month after settling his tax dispute with the ATO. Then SMH reporter and current AFR China correspondent Colleen Ryan was the only person to have a go – and this is part of her story on July 3, 1995:
Mr Frank Lowy, the newest member of the Reserve Bank board, saved an estimated $25 million when his family settled its long-running dispute with the Australian Tax Office in May. The dispute involved two amounts of $42.8 million and $5 million received by a Lowy family company, Cordera Pty Ltd, in January 1987 and November 1988. Cordera is the primary vehicle for the family's shareholding in Westfield Holdings Ltd.
The Lowys claimed that the money was a capital injection from an unknown investor. The Tax Office claimed it was income. Elements of the dispute went before the Administrative Appeals Tribunal on May 9, and several days later the case was settled.
The Lowy family company Cordera Pty Ltd was liable for primary tax of $21.4 million on the disputed income. Penalties at 40 per cent were expected to be $8.5 million, while interest at 14 per cent a year compound was expected to be about $20 million. The total for tax, penalties and interest outstanding for Cordera was estimated within the Tax Office to be $50 million to $51 million.
However, the Lowy family reached a settlement with the ATO to pay a total of $25 million. The settlement caused consternation among Tax Office staff. Two investigators involved in the investigation took stress leave after the settlement decision.
The ATO staff were upset primarily on equity grounds. They saw the settlement as yet another example of the Tax Office having one rule for the ordinary people and another for the big boys. They claim that if the case involved a coffee shop owner or some other small business operator the ATO would pursue interest and penalties without hesitation.
The Administrative Appeals Tribunal hearing in May revealed key details of the case. The documents related to transactions with a Lichtenstein-based entity, Yelnarf, which the ATO believed may have been linked to the Lowys, who have a number of companies with the word Franley (Frank and Shirley Lowy). "Yelnarf" is "Franley" spelt backwards.
Crazy former Liberal backbencher Ken Aldred had waged a long battle with Frank Lowy over the years, and he repeated some of these claims in federal parliament on October 25, 1995, generating another story in the The SMH which included the following:
The Leader of the Opposition, Mr Howard, has defended Westfield boss Mr Frank Lowy after a Liberal backbencher alleged Mr Lowy's appointment to the Reserve Bank board, shortly after he had settled a multi-million-dollar tax dispute, was a scandal.
Mr Howard described Mr Lowy as a good friend and disassociated himself from the attack in Parliament by Victorian MP Mr Ken Aldred.
Mr Howard, angered by Mr Aldred's allegations, carpeted the MP and told him he had "a very high regard for Mr Lowy ... who has been a great success story and who has made a very philanthropic contribution to the Australian community."
A spokesman for Mr Howard said Mr Aldred had not informed Mr Howard he was going to make the allegations. Mr Aldred told Parliament on Wednesday that Mr Lowy had settled an outstanding dispute with the Australian Tax Office, just before his appointment to the Reserve Bank board.
A Lowy family company settled an outstanding matter with the ATO earlier this year for $21.4 million despite an earlier assessment for tax interest and penalties of more than $50 million.
The dispute with the ATO related to amounts totalling $47.8 million being paid to the Lowy family company in January 1987 and November 1988. The ATO claimed it was taxable income. But, according to Mr Aldred, "Mr Lowy claimed the money was a capital injection from unknown international sources ... how lucky can you get?"
The circumstances are not dissimilar, but Frank Lowy is no hick Adelaide manufacturer. John Howard and four Labor Premiers attended Westfield's 40th birthday celebrations in 2001 and with three common Fairfax directors for much of that period, a sustained campaign against Westfield wasn't a likely prospect.
15. Rupert's Fleet Street reflections – what about the autobiography?
By Stephen Mayne
The Independent quoted from a fascinating interview with Rupert Murdoch last week as he reflected on the industrial revolution News Corporation drove through Fleet Street in the 1980s after Maggie Thatcher produced a genuinely revolutionary set of new workplace laws that helped revitalise the British economy and destroy union power.
The paper bills its 2450 word profile as Rupert's "first major interview for five years." Sadly, only the first few paragraphs are now online but Rupert is quoted explaining his purchase of The Times: "It appeared to me to be a risky but a great opportunity. It wasn't the £10m-£12m we paid for it. It was the subsequent £35m we lost, just by trying to get over pigheaded unionism, you know?"
If there is one autobiography that should be written one day it is Rupert's. The Sun King fully intended to do exactly that as his 1990-91 debt crisis blew up, but then he changed his mind as he focused on bringing News Corp back from the brink. He sent an amusing outline to prospective publishers at the time, which included a promise to reveal "the fundamental reason I've been successful and other people aren't."
Rupert tantalised publishers with a promise to cover everything from "my intervention in elections on three continents" and "what exactly is my power and influence" to "the Murdoch recipe for jet lag."
Originally Rupert wanted the autobiography to mark his 60th birthday in March 1991, when most normal people are beginning to slow down. "It had better be done now ... I want to get my side of the Great Murdoch Controversy on the record soon."
"I'm acutely aware," he noted, "that nasty things can happen to businessmen who write autobiographies in the middle of their careers – look at (Dr A.N.) Wang and (perhaps) Donald Trump."
Having started out in October 1953, Rupert clearly believes that 37 years was the middle of his career. That was 15 years ago so there's only another 22 to go.
The best example of Rupert's theory about premature autobiographies is undoubtedly fallen media mogul Conrad Black, whose 1993 A Life In Progress might need a little updating from the inside of a jail cell. Peter Beattie might also come a cropper one day for taking Rupert's coin in producing a mid-career autobiography earlier this year.
23. As easy as ABC as Donald McDonald turns on the charm
By Stephen Mayne
ABC chairman Donald McDonald, a personal mate of the PM, was installed to rein in Aunty. Instead, he went native and actually works pretty hard to preserve and build the national broadcaster.
Sure enough, there was Donald at the 50th Walkley Awards last Thursday night sitting next to Sydney newsreader Juanita Phillips and generally enjoying the evening as Aunty scooped the pool with 14 gongs.
Donald is also quite prepared to open up the boardroom to individual broadcasters, which is exactly what he is doing for new 702 ABC Sydney Morning host Virginia Trioli, who was back in Melbourne on the Insiders couch on Sunday.
Trioli will be the guest of honour at Donald's boardroom lunch on 12 December, with a guest that list extends far and wide and will apparently include the likes of spin doctor Ian Kortlang and NSW Art Gallery director Edmund Capon.
Donald and Trioli both share a love of the arts, so they'll probably get along just fine, which is probably not what was expected given that Trioli is sometimes criticised for being a trendy lefty while John Howard's mate is meant to be a warrior of the Right.
Crikey is filling in for ABC 702 Melbourne morning host Jon Faine for the last two weeks before Christmas, but don't expect Donald to fly south and host a boardroom lunch for some stop-gap blow-in.
28. The list of Australia's 20 highest paid bankers
By Stephen Mayne
Australia's licensed banks have never collectively been more valuable. So it's no surprise that 2005 has broken all the records in the salaries of the lucky executives who run one of the world's most lucrative cartels.
With NAB finally releasing its annual report in the hours after Van Nguyen's execution on Friday, here's the complete list of Australia's 20 highest paid executives of our listed banks in 2005:
David Murray: departed CBA CEO: $27m
Allan Moss: CEO Macquarie Bank, $18.5m
Nicholas Moore: Macquarie investment banking boss, $18.22m
Bill Moss: Macquarie property boss, $15.4m
Ottmar Weiss:Macquarie commodities boss, $11.5m
Andrew Downe: Macquarie treasury boss, $10.4m
Phillip Green: CEO Babcock & Brown: $10.3m
Steven Zissus: Babcock US boss: $10.26m
David Clarke: Macquarie chairman, $9.8m
David Morgan: Westpac CEO, $9.1m
John McFarlane: ANZ CEO, $7.2m
Eric Lucas: Babcock Japan boss, $7.07m
John Stewart: CEO NAB, $5.9m
Ahmed Fahour: CEO NAB Australia, $5.9m
James Babcock: Babcock chairman and co-founder: $4.97m
Chris Hadley: Westpac private equity boss, $4.9m
Richard Sheppard: Macquarie deputy MD, $4.8m
Rob Topfer: Babcock finance boss, $4.67m
Peter Hofbauer: Babcock infrastructure boss, $4.65m
Gail Kelly: St George CEO, $4.49m
Of the top 20, seven are from Macquarie Bank and six from Babcock & Brown and there would be a dozen other investment bankers with foreign owned giants or boutiques earning similar sorts of figures.
And isn't it nice that one woman, Gail Kelly, has broken into the boy's club at number 20. Her triplets can look forward to a tidy inheritance given that she's getting by on just $4.49 million a year.
The point to remember about these bankers is that they are also collectively more than $1 billion in front on their equity plays. While BRW has none of them on the Rich List yet, at least half would be worth more than $110 million.
29. The SMH and some bullish Goodman boosterism
By Stephen Mayne
Elizabeth Knight was particularly bullish in The Sydney Morning Herald last week when she wrote a column talking up the prospects of the $2.5 billion Goodman Fielder float. These lines were a cause for concern:
There are numbers circulating in the market that put a new complexion on the future of Goodman Fielder. For a start, numbers have been produced by some investment players that say the 2006 EBITDA will be $440 million rather than the $417 million. This changes the whole outlook. It certainly increases the value and attractiveness of Goodman Fielder, and if the optimists are to be trusted it should improve the demand for stock.
So where do the additional earnings come from? Apparently it's a combination of the annualised earnings from La Famiglia (a garlic bread product) and greater-than-expected contributions from New Zealand Dairy Foods – the business that Graeme Hart is personally selling into the Goodman Fielder float.
Apparently the management is confident that there is room for a lot of profitable change in Baking Australia, the division that sells the bread. Some of this comes down to a plan to increase prices. The major competitor in the bread market, George Weston, chose to follow Goodman Fielder last time it pushed up prices. Goodman Fielder would also like to increase the shelf life of bread, which now goes back to the supplier after one day and is ultimately sold to pig farmers for 1c per loaf.
Goodman Fielder may have more success by increasing its marketing sales of its higher margin premium breads such as Helgas and Mollenberg. As always, the potential to achieve short-term growth comes down to whatever number Hart and his team pluck out of the air to cover the synergy benefits. It's always difficult to check these estimates. The prospectus says synergies should come in at $10 million but there are estimates that range as high as $25 million. Maybe the optimists are just being optimists or maybe Hart and his team are underboiling in order to create a strong secondary market.Time will tell.
We don't want to sound like a broken record on this, but Liz Knight's husband, media analyst Alex Pollack, has an indirect interest in the success of the float through his role as a director of a Macquarie Bank, one of the joint lead managers in the IPO.
When Liz writes about Macquarie, she offers an inadequate disclosure of her interest in Macquarie Bank shares. She is now getting awfully close to spruiking an overpriced IPO by disclosing information not in the public domain and not disclosing her interest.
New SMH editor Alan Oakley needs to lay down the law on this issue – and ASIC ought to make some inquiries about where these figures have come from. Should investors rely on the prospectus or Liz Knight's mystery figures?
30. Qantas negotiates through the ABC
By Stephen Mayne
Qantas CEO Geoff Dixon really is a strange fellow. With a series of vital decisions to make at tomorrow's board meeting, the former Wagga Daily Advertiser reporter decided to give Alan Kohler and Inside Business one of the most interesting television interviews with a corporate leader this year.
Alan Kohler had apparently been asking for a couple of weeks and finally spoke to Dixon on Friday afternoon in Sydney. It almost looked like Dixon chose to deliberately use the ABC to extract bid improvements from Boeing and Airbus.
Kohler: Just looking at the fleet renewal first – how big a decision is that? I've seen figures of $20 billion, $27 billion, being talked about.
Dixon: It depends on how much we can knock the manufacturers down, how much the money is. But certainly it will be in the vicinity of $15 billion to $20 billion, and that is on top of $18 billion we already have being expended from 2000 to 2010. So it's very significant.
Kohler: Is that a decision that's already been made?
Dixon: This one? No, it's not. It goes to the board next week and whether the decision made there will depend on what the board feels and indeed what recommendation the management wants to make and to tell you the truth, we haven't decided that as yet.
Kohler: Only a few days to go.
Dixon: It is, but there is still a lot to come. That's the closest contractual race I have ever seen in my time in the industry.
If that isn't using public pressure to influence a tender process then I'll go heave. C'mon boys, how badly do you want it? Let's see who can come down another $500 million. Throw in two more planes and it's yours.
And wasn't that poor form of The AFR yesterday to follow the story but only refer to "a television interview". The same Inside Business program featured this interview with The AFR's retiring Pierpont columnist, Trevor Sykes, after 50 years in the business. AFR bosses presumably still hold a grudge against Kohler for daring to leave after they cut his pay. The Australian was more charitable giving full credit as it led yesterday's business section with the story.
Finally, Flight Centre shares have recovered 35c to $9.41 this morning after yesterday 12% slump inspired by another piece of heavy-handed work by Qantas in slashing commissions to travel agents for the second time in a year.
The Mangy Roo is always complaining about how tough things are yet the fact remains that profit was up 18% to a record $764 million last year and the new aircraft will be comfortably funded out of operating cash flow.
There's always someone being shafted or some Canberra string being pulled. Dixon will no doubt use the threat of offshoring maintenance jobs against the Federal Government as it decides whether to grant Singapore Airlines access to the lucrative Pacific route.
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