Conflicts of interest, Rupert's book deal, Gary Morgan ban, AGL demerger
July 28, 2008
Here are Stephen Mayne's 6 stories from the Crikey edition on Monday, 31 October, 2005.
1. The Crikey conflicts of interest list
By Stephen Mayne
Friday's Crikey examined the conflicts of interest facing Bob Carr, Simon Longstaff and Ron Walker and we promised a more in-depth examination of such conflicts. Well, after pondering this issue for much of the weekend, here is a list of our ten favourite ongoing conflicts of interest at the moment. There will doubtless be many more so send your submissions to smayne@crikey.com.au.
Bob Carr: after handing over billions in value to Macquarie Bank as NSW Premier, signs up as a consultant two months after retiring.
Macquarie Bank: separating management from ownership in its various satellite funds whereby huge fees are paid to Macquarie by third party investors relying on Macquarie to act in their best interests as manager.
Eddie McGuire: being an inside player as Collingwood President and an outside commentator and journalist through The Footy Show and calling games for Nine. Of course he chooses to promote Collingwood interests and denigrates rivals.
Larry Anthony: Was Minister for Children and Youth affairs until losing his seat at the 2004 election, but now sits on the board of ABC Learning which receives about $1 million a day in funding from the same department which Larry used to run.
Jessica Reif Cohen: Merrill Lynch's News Corp analyst has been a major booster of the stock for many years and she has received special access to executives and company information. Merrills have also profited enormously from News Corp, including from being lead broker to the Fox float in 1998. All those "buy" recommendations from Jessica helped keep the News Corp price high as it issued $25 billion worth of stock financing a slew of acquisitions. Shame there has been no share price performance at all since 1998.
Terry Mackenroth: Played the tough guy Queensland Treasurer handing our great slabs of hinterland for development, then retired and six weeks later joined the board of Brisbane-based developer Devine Ltd.
Ron Walker: continuing as a Liberal Party influence peddler whilst supposedly the independent chairman of Fairfax. Pocketed a clear profit of more than $70 million from PBL takeover of Crown Casino and is now meant to negotiate a possible Fairfax merger with PBL when James Packer described the appointment of his friend and ally as an "inspired choice".
The NRL: With News Corp as a 50% shareholder, it is difficult to expect The Daily Telegraph and The Courier Mail to objectively cover the game. Similarly, Kerry Stokes is alleging that Seven's superior offer for the NRL television rights was rejected by the NRL because of the Murdoch conflict of interest, which extends to dealing between the Packer-Murdoch Premier Media and Foxtel.
NSW Gaming: Huge donors to the NSW ALP creating a difficult conflict of interest whereby the party finances have to be weighed up against the public interest. The weight of donations contributed to NSW having 10% of the world's poker machines at one point. Conflicts extended to things like the Penrith Panthers sponsoring John Laws who, for some reason, was never much of a gaming industry critic.
Gunns Ltd: Anyone wanting to log in Tasmania has to fill out a Forest Practices Plan. Under self-regulation, an employee of the timber company can draw up the plan, certify it, and then ensure that the logging complies with the rules, the Forest Practices Code. This means a Gunns employee working on a Gunns coup where Gunns wants to log draws up the plan, certifies it and then hacks away.
Five favourite conflicts from the past
Steve Vizard: Telstra director who undercut the telco by snapping up AFL Club internet rights with Eddie McGuire and also offered internet deals cheaper than Bigpond through another business he founded, Virtual Communities. Also had the temerity to sit on the Melbourne Cricket Club committee as it negotiated with Channel Nine over AFL rights at the same time as Telstra was in heavy negotiation with the AFL to buy the lot.
Lloyd Williams: Was chairman of Crown Casino and the largest shareholder in its manager, Hudson Conway, at the same time as he sat on the VRC Committee and was deputy chairman of the then state-owned Victorian TAB during privatisation negotiations in 1993-94. All the while, his fellow Crown director and substantial HudCon shareholder Ron Walker was in charge of securing major events for Melbourne – events which boosted Crown's occupancy and turnover. Walker even told Williams he'd secured the Grand Prix when rival casino bidders had no such prior knowledge.
John Howard: accepted an industrial relations consultancy with law firm Clayton Utz in the early 1990s whilst he was shadow minister for Industrial Relations.
Westfield: Frank Lowy's shopping centre empire used to have no independent directors on its separate trusts. The Lowy family owned 30% of the manager and developer of its centres, Westfield Holdings, but no meaningful interest in the likes of Westfield Trust, which actually owned the centres. Therefore, the Lowy family was effectively writing its construction and management contracts with itself. No wonder shares in Westfield Holdings increased 20 fold in 20 years whereas units in Westfield Trust barely tripled over the same period.
Michael Wooldridge: gave an additional $5 million to the Royal Australian College of GPs for a new Canberra headquarters one week before quitting as Health Minister in November 2001 and then signed up as a consultant a few weeks later, eventually receiving a $382,500 payout.
4. Rupert's book deal with his Saudi Prince
By Stephen Mayne
Rupert Murdoch's book publishing arm Harper Collins has occasionally been embroiled in controversy over the years for the way it has used the payment of big advances to arguably further the political or commercial interests of the broader company. Mother Jones had this excellent wrap of the issue in 1995.
The questionable or politically convenient Harper Collins advances have included the following:
- $US4.5 million to Newt Gingrich as he prepared to become Republican speaker of the house in 1994-95 and Rupert faced some regulatory problems in the US.
- $US5.4 million to Margaret Thatcher for her memoirs after all those regulatory favours she did for Rupert.
- More than $US1 million to Deng Rong for the English translation rights to her book, My Father Deng Xiaoping, in 1995, shortly after Rupert had bought STAR TV and wanted to expand into China.
- Many millions to Jeffrey Archer for his novels when the former Tory party chief still wielded considerable influence in the British government of the day.
- An undisclosed deal with Queensland Premier Peter Beattie last year at the time of the News Corp move to America and Queensland Press-related party transactions dramatically reduced Australian ownership of The Courier Mail and the Gold Coast Bulletin. A patriotic Queensland premier would have spoken out against the move. Beattie raised no concerns.
Questions were asked last week about a series of full-page broadsheet advertisements promoting a biography of Prince Alwaleed Bin Talal Alsaud, the American-educated nephew of the late Saudi King Fahd, who is rumoured to give away more than $100m a year. Indeed, Americans like to think of him as "the Saudi Warren Buffet", the multimillionaire investor who last week sold his memoirs for $7m. Alwaleed: Businessman Billionaire Prince, an authorised life by Riz Khan, is published by HarperCollins in what cynics were suggesting might be a so-called vanity deal. It's not clear whether the Prince is a business associate of Rupert Murdoch, whose News Corp owns HarperCollins.
He certainly is a business associate. The Prince voted his crucial 5.5% voting stake in News Corp in support of all resolutions. If he'd gone the other way, the pay rise for directors would have gone close to being rolled. Will a flattering biography promoted by the News Corp empire help secure the Prince's voting support if we really do get a showdown for control with John Malone?
Similarly, will the likes of Fox News and the Murdoch tabloids curtail some of their blatant Muslim-bashing now that the world's richest Muslim is a key ally of Rupert Murdoch. After all, the Saudi Prince presumably buys stakes in American media companies such as News Corp and Time Warner for influence as well as financial returns.
Former New York Mayor Rudolph Giuliani famously rejected a $US10 million donation from Prince Al-Walid bin Talal after the September 11 attacks because he said the following: "At times like this one, we must address some of the issues that led to such a criminal attack. I believe the government of the United States of America should re-examine its policies in the Middle East and adopt a more balanced stance toward the Palestinian cause." Al-Walid later blamed Giuliani's decision on "Jewish pressures".
Here's a sample of some of the Arab media reaction at the time. If the same thing happened again today, how would the Murdoch outlets play it?
13. The Federal Environment Minister who supports forests
By Stephen Mayne
The Australian's Matt Price had an interesting column on Saturday after taking a walk through Tasmania's magnificent Tarkine forest in which he seemed surprised that Federal Environment Minister, Senator Ian Campbell, professed an admiration for the forest and a desire to save more of them.
The Minister, unlike green sceptics such as Andrew Bolt and Christopher Pearson, claims to have read the science and formed a view that global warming is real and something has to be done. On this score, he joins business heavies like Insurance Australia Group CEO Michael Hawker.
The likes of Bolt and Pearson find themselves in a unique position given that Australia is arguably the world's worst polluter and they work for the Murdoch family which has been responsible for the consumption of more trees, including heaps of Tasmanian hardwoods, than any other media empire in history.
However, to get a feel for the Tasmanian forestry debate, you also need to take in some of the devastation caused by clear felling of native forests, something which mainland Australia is rapidly phasing out. I was taken to such an area near Launceston by a Greenie last Wednesday and was quite shocked.
The contrast with the 40 metre stretch of beautiful rain forest next to the burnt out remains left by the Gunns contractors was stark indeed. This tract of forest couldn't be felled because of a nearby stream. Boosting protection around waterways and reserving parts of Senator Campbell's beloved Tarkine were the two key aspects of this year's deal between the Federal and Tasmanian governments which Mark Latham says he would have jumped at last year if the Lennon Government had put it on the table.
In one of life's coincidences, I found myself sitting next to Campbell's colleague, Federal Forestry Minister, Senator Ian Macdonald, on the plane back from Launceston last Thursday having failed to make it onto the board of our one of the world's biggest native forest slaughterers, Gunns Ltd.
Senator Macdonald also looks after Fisheries and Conservation and was in Tasmania for a Federal Ministerial Industry Council. It was a shame he couldn't drop by the Gunns AGM to see what sort of show the cowboy tree-loppers run.
The Minister seemed quite pleasant and softly spoken, in stark contrast to this spray he gave us in the Parliament on August 8 after Hugo Kelly reported his press secretary's "bong brigade" comments and a Green group then confused him with his NSW Labor namesake, another Ian Macdonald (same spelling too), who also happens to be responsible for forests.
14. Gary Morgan's newspaper ban
By Stephen Mayne
Colourful pollster Gary Morgan was on the blower not long after first light this morning retailing an encounter he had with Herald Sun editor Peter Blunden at the races on Saturday.
Morgan says that he asked Blunden why his paper did not report Friday's state-based political polls, showing that primary support for the Bracks Labor Government was up 5.5% to 50%, the highest level since June 2004.
The response from Blunden was to denigrate Roy Morgan Research's newspaper readership figures and declare that he wouldn't run any Morgan poll as long as they continued to get their readership figures wrong.
It seems a similar approach was taken across the country, perhaps reflecting the new joint venture operation that News Ltd and John Fairfax are establishing to provide alternative newspaper readership figures to those provided by Roy Morgan. Given all the circulation rorting that Crikey has revealed this year, who'd trust industry-generated figures in the current environment?
Just in case you also rely on a Murdoch outlet for your political news, here are the links to the various Morgan polls on Friday:
NSW: Labor steady at 43.5% primary vote, Coalition down 0.5% to 36.5%
Victoria: ALP up 5.5% to 50%, Opposition down 3% to 32%
Queensland: ALP down 4% to 49%, Coalition up 4% to 35.5% (Liberals – 25%, up 3.5%, Nationals – 10.5%, up 0.5%).
South Australia: Labor down 3% to 50%, Opposition up 1% to 33%
Western Australia: ALP down 1% to 41.5%, Opposition up 0.5% to 38.5%.
However, it is not just News Ltd which is subjecting Morgan to what appears to be a commercially driven ban that ignores what might be genuine news. The AFR today carried a story on page 7 about Victorian Liberal leader Robert Doyle that quoted Friday's poll results without saying who conducted the poll.
At the end of the day, it's a shame that Australia's newspaper duopoly can't treat news as news without allowing petty commercial or personality differences to cloud these judgments.
* Disclosure: Roy Morgan did one free poll for Crikey whilst I owned the business
24. AGL demerger and the great Australian power shuffle (continued)
By Stephen Mayne
The Age's Stephen Bartholomeusz had a typically thoughtful column on Saturday on the $3 billion-plus in capital to be raised by two forthcoming energy sector floats, Spark Infrastructure and SP Ausnet.
This represents a major selldown of equity, but not control, by the two biggest Asian investors in Australia over the past decade, the Singapore Government-owned Singapore Power and Hong Kong billionaire Li Ka-shing's Cheung Kong (CKI).
Add to that this morning's reported $1.425 billion purchase of Southern Hydro by AGL, which in turn has announced a demerger and the departure of CEO Greg Martin, and you have another flurry of deals over assets that were, in the main, first broken up and privatised by the Kennett Government.
With three $1 billion-plus energy sector deals and a major demerger going down at the moment, the only way to understand the flurry of activity is to refer back to Crikey's world famous power sell off list, which tracks every power sector deal and many of the advisers since 1992. The detail around the four big deals are not totally clear so the entries are as follows:
October 2005: AGL pays $1.425 billion for Southern Hydro's renewable business of 737mW of power across Victoria, NSW and South Australia.
November 2005: AGL to demerge its energy and infrastructure businesses after Southern Hydro acquisition.
November 2005: Hong Kong conglomerate CKI to float 50% of Victorian and South Australian electricity distribution businesses in a $1.5 billion-plus raising through a float of Spark Infrastructure.
November 2005: Singapore Power to raise more than $1.5 billion though the partial float of its largely Victorian gas and electricity assets in a partial float to be called SP Ausnet.
The real challenge will be trying to work out who has made and lost money on these latest deals, most of which relate to assets sold in the original $30 billion Kennett government sell off of Victoria's gas and electricity assets. For instance, the record on Southern Hydro is as follows:
November 1997: Infratil and NZ company Contact Energy pay $391 million for Southern Hydro, Victoria's small hydro power outfit.
1999-2000: Alliant Energy Corporation (AEC) trading as Alliant Energy Australia (AEA) progressively bought Southern Hydro and now owns each of the three partner companies that form the Southern Hydro Partnership, having bought the Contact Energy share in 1999 and the Infratil share in 2000.
March 2003: Alliant Energy sells Southern Hydro to government-owned Kiwi utility Meridian for $550 million which was close to what they paid in 1999 and 2000 to another Kiwi company Contact Energy and utility company Infratil.
Has the New Zealand taxpayer really made close to a $1 billion capital profit on today's deal with AGL?
25. More conflicting tales on News Corp voting
By Stephen Mayne
Crikey reported on Friday that News Corp did not vote the open or undirected proxies at its recent AGM but a different story is emerging from the respected Boston-based Global Proxy Watch newsletter which published the following last week:
No Confidence
Seen through News Corp's eyes, four directors were handily re-elected at Friday's annual meeting with votes of at least 85%. But take a closer look. The Murdoch and Malone blocks, representing 54%, were pre-pledged to management. Brokers voted at least another 5% of stock with management on behalf of investors who gave no ballot instructions. What's left is a true picture of market confidence in News Corp's board. And it is devastating. Investor anger flared when News reneged on a pledge to put its poison pill takeover defence to a vote. Shareowners withheld at least 63% of ballots from Rod Eddington; 61% from Chase Carey; 60% from Andrew Knight; and 54% from Peter Chernin. Exact numbers won't be known unless News reveals broker votes – something it doesn't have to do.
A News Corp supporter with an alternative views asks: "How can 63% of stockholders withhold their votes for a director when the Harris Trust (Murdoch) and Liberty Media combined own 47.2%? I don't get it. Unless they're twisting the figures to say 'if you take out everybody who voted FOR the proposals, then the proposals would have been defeated'."
The US and Australia certainly have very different voting systems. The "broker vote" which Global Proxy Watch refers to is also called the "routine" vote. If a broker has not received voting instructions from their client ten days prior to the AGM, they may vote the shares, but only on non-material proposals, which included the election of directors and auditors at the News Corp AGM.
This is different from the "open vote" where a shareholder lodges a proxy but doesn't direct it, thereby handing open votes to the chairman. News Corp says it did not vote these shares, which is commendable. However, there has been no disclosure on the size of the "open proxies" or the "broker vote," which is disappointing.
The "broker vote" usually runs as high as 20% in US corporate elections (less for News Corp given the presence of the three billionaires), so it certainly would have helped with Rupert's four incumbent directors who were returned.
Finally, Andrew Clearfield, the president of the Global Institutional Governance Network and the man who spoke at the AGM on behalf of the coalition of institutions suing News Corp over the poison pill, has also provided an interesting perspective of events on his blog. Both posts on News Corp are worth reading in full.
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