Analyst manipulators, bullying cost News Corp, boring billionaires, Ron Walker, Packers avoid Crikey

2. Lowy, Murdoch and Packer: analyst manipulators



By Stephen Mayne

The whole question of analyst independence in Australia has been opened up by Deutsche Bank's former News Corp analyst Mike Mangan and his explosive whistleblowing effort in Eureka Report. Mangan alleged regular intimidation and manipulation by the Murdoch machine which eventually led to his sacking after he issued a report with another "sell" recommendation on the stock – you can read that report here.

The mainstream media's reluctance to touch the story when it really should be triggering a wide debate about analyst independence and regulation says a lot about the power of Rupert Murdoch

As usual, ASIC and the major political parties are saying nothing about an issue which causes grief for either the Murdoch or Packer families. A subscriber has revealed another interesting example of the analyst system at work, although this time, it relates to the Packers:

There is also the case in takeovers where one company does not like the research being written in regard to a deal and they then employ the corporate advisory department of an investment bank or stockbroker to effectively control or stop any research being published.

A prime example was the Packer family's play for Burswood Casino last year. PBL didn't like the research coming out of WA broking firm Patersons. Although they had UBS advising, PBL later also retained Patersons in an effort to quash the Patersons research which was basically talking up the price to be paid for Burswood.

This theory makes last year's giant three-way merger between Westfield Holdings, Westfield Trust and Westfield America Trust all the more interesting when you consider that the Lowy family engaged virtually every investment bank in town. One Dow Jones wire story on the Westfield merger concluded as follows:

Deutsche Bank, UBS and Grange First Provident are joint lead advisers on the transaction. Other advisers include ABN AMRO, Merrill Lynch, JP Morgan, Carnegie Wylie, Investec Wentworth, Citigroup, Goldman Sachs JBWere, Credit Suisse First Boston and Morgan Stanley.

Naturally, this prevented any analyst at these firms pointing out that the Lowy family was getting a sweetheart deal swapping their tenuous management contracts (just ask Lend Lease about losing the GPT management rights) for shopping centre bricks and mortar. It also precluded all the said firms from acting for anyone planning to play the spoiler. Check out Crikey's story at the time on this issue here.

So there you have it folks, Australia's three richest and most powerful families, the Lowys, Packers and Murdochs, have all worked our analyst system to their advantage over the past 18 months, yet we still can't have a mature debate on the subject. Sad, isn't it.


3. How workplace bullying cost News Ltd $2m



By Stephen Mayne

Anyone who wants to understand the culture inside Rupert Murdoch's global empire should check out this extraordinary judgment on June 25 from the NSW Supreme Court. It involves one Dave Devandar, who used to be second in charge of security for News Ltd in Sydney during the 1990s.

As a result of alleged systematic bullying by a senior News executive, his boss, Dave is unable to work for the rest of his life, and will need regular bouts of hospitalisation. He has been awarded damages that appear to exceed $2 million, to be split 65% by News Ltd and 35% by Group 4.

The damages include lost salary of $70,000 a year until the age of 65. His employment was terminated in 1998, aged 38, so that is at least 25 years, or $1.75 million.

Then there are general damages of $200,000, exemplary damages against News Ltd of $150,000, plus $115,000 already paid out by the NSW WorkCover Authority, which they will presumably be claiming back against News and Group 4. This looks lilke one of the biggest cases of workplace bullying in Australian history, yet it hasn't been reported anywhere.

According to the judgment, Dave was being harassed and sexually assaulted by his News boss when he was guarding Cumberland Newspapers during a strike by journalists. There's also a reference to guarding Lachlan Murdoch's home. The judgment is a long read but well worth a look.




4. FIRB, Malone and the power of Rupert



By Stephen Mayne

Neil Chenoweth had a fascinating feature in The AFR today revealing that John Malone's Liberty Media sought approval from Treasurer Peter Costello to increase its News Corp voting stake way back in December 2002.

As ASIC investigates Telstra for supposedly not keeping the market informed, there's no doubt that Cossie was sitting on price-sensitive News Corp information for a couple of years, although he was presumably bound by confidentiality agreements.

Whilst Chenoweth's story was quite complex today, the key point is that Malone was seeking approval for the direct foreign ownership of News Corp's entire share capital (including non-voting shares) to be lifted above 38%.

There was plenty of headroom at the time, suggesting he was planning to spend billions, although he obviously couldn't go above 20% of the voting stock without being required to launch a full bid under Australia's takeover laws, which certainly don't apply in Delaware.

It would be fascinating to know who, if anyone, Cossie told about the Malone plan. Murdoch will presumably be furious that the Treasurer didn't give him the tip as he seemed genuinely surprised, shocked and angry when the two-stage Malone raid came in 2003 and 2004.

Did Cossie tell the PM? What will it all mean in terms of who the Murdoch press will back if there is a showdown between Howard and Costello next year? As Mike Mangan noted in his Eureka Report article, "If you are used to changing governments (just ask Gough Whitlam, John Major and Al Gore/John Kerry), changing analysts is hardly a challenge."

Murdoch's fortress-like takeover defence strategies have previously been backed up by this Treasurer's discretion in Australia's foreign ownership laws.

Giving that up in the move to America certainly now seems like a major mistake, especially if the coalition of institutions can force the Sun King to either abandon the poison pill or at least put it to a shareholder vote, as he first promised.

All in all, this is just part of the mounting pressure on the world's most powerful individual, as opposed to the US President, which is the world's most powerful position, to surrender some of that power after 52 years unchallenged at the top of News Corporation.



7. Meet the Wilsons – Australia's most boring billionaires



By Stephen Mayne, probably the smallest of Reece's 783 shareholders

The Crikey family recently bought 40 shares in Australia's biggest plumbing and bathroom products distributor, Reece Ltd, to take up the opportunity to meet the very private but extremely wealthy Wilson family, who control 76% of the stock and were hailed as billionaires by BRW in the 2005 Rich List.

Sadly, a prior commitment means I probably won't be able to make Thursday's AGM at 3pm at Reece's head office in the Melbourne suburb of Burwood. But as a registered shareholder I'd love to find a volunteer proxy who could explore a few tenure and transparency issues. Try this for a board line-up:

Alan Wilson, 64, executive chairman since 2001, CEO since 1974 and a director since 1969
Bruce Wilson, 59, director since 1970 and secretary from 1974 until retirement from executive duties in 1999
John Wilson, 67, non-executive director since 1974
Peter Wilson, 37, executive director since 1997 and now general manager operations
Ronald Pitcher, 66, director since 2003 and now chairman of the audit committee, keeping his old firm Pitcher Partners on their toes as auditor

That's an average of 20 years, with the longest-serving executive director at 36 years and the longest-serving non-executive director at 35 years. With 24% in the hands of the public, you'd think one token independent director could be found.

It certainly trumps the old boys club at Gunns Ltd and even gives toilet manufacturing giant GWA International a run for their money. But at least Reece is clearly controlled by its founding family and the performance has been good in recent years with a record net profit of $75.3 million after sales cracked $1 billion for the first time in 2004-05.

However, the annual report is the most spartan effort by a $1.5 billion company that you will ever see. You'd think Australia's largest bathroom and plumbing products supplier, which owns its 230 stores, would know something about producing glossy documents, but there's not a photo to be seen in the annual missive to shareholders.

The Wilson family should either take Reece private or get with the program. Some razzle dazzle for the analysts and some decent corporate governance would probably trigger a re-rating and add $200 million to their paper wealth in no time. Yet Commsec won't even margin lend against this mob, they're that far off the radar.

Alan Wilson's chairman's address at last year's AGM went for 30 seconds so this situation is ripe for some Crikey engagement. The first question should be to the auditor, asking how he feels answering to his old boss. HIH anyone?

Please email smayne@crikey.com.au before 3pm today if you're available to go, otherwise I'll be putting the heavies on Mrs Crikey and she's not keen, although the saga of our new kitchen might give her plenty of things to talk about.


15. How Turnbull forced Treasury's embarrassing FOI release



By Stephen Mayne

Did anyone else wonder why Treasury released those documents on the studies of a 30% flat tax through FOI to The Australian last week given the embarrassment that it caused Peter Costello after his attacks on a similar proposal by Malcolm Turnbull?

In a lovely twist, the public debate about Malcolm Turnbull's proposals appears to have triggered the so-called "public interest" test that dictates whether documents should be released under FOI.

The Australian's FOI Editor Michael McKinnon has a significantly positive batting record after more than 20 different battles with the Federal Government in the AAT over FOI. The public interest is at the heart of this argument and Malcolm certainly generated a lot of interest about tax scales amongst members of the public.

The Treasury boffins clearly knew that McKinnon would go them again in the AAT and all this Turnbull-inspired debate would almost certainly satisfy the "public interest" test. They didn't even bother fighting, instead just handing over the documents, much to the chagrin of Peter Costello who looked rather silly given his attacks on the member for Wentworth.


19. Why Walker won't move on The Age – for a month



By Stephen Mayne

Crikey speculated yesterday that new Fairfax chairman Ron Walker was poised to sack English import Andrew Jaspan and install his mate Neil Mitchell into the top job at The Age, and there are certainly signs that a palace coup might be in the offing.

Mitchell's presence co-hosting the Walkley Finalists announcement in Melbourne last week with The Age's Clair Miller was an interesting choice. Sure, Mitchell is on the Walkley Advisory Board, but publicly lauding the great work of all the entries, in a year when Fairfax and The Age did well, was a good PR step.

But it is most unlikely that Walker would be game to make such a controversial move before his first John Fairfax AGM as chairman on November 18. After all, he is up for re-election and is facing a contest – albeit only from me, Australia's most unsuccessful candidate. That said, the last thing Walker needs is to create an issue that would get Fairfax journalists up in arms and potentially lobbying institutional investors to give him the flick.

It certainly will be very interesting to get Walker on the record at the AGM about Jaspan's performance and the prospect of the 3AW Morning host being installed by a supposedly non-executive chairman. Whilst Ron is used to clicking his fingers at getting whatever he wants, he doesn't clearly have board control at Fairfax given the recent ascension of the apparently hostile Mark Burrows to the deputy chair.

Mitchell would be a lot better as editor of The Age than many people give him credit for, but he faces a major PR problem given his perceived closeness to the likes of Walker and former Victorian Premier Jeff Kennett. There's also the inherent snobbishness that so-called quality Fairfax broadsheet journalists have towards populist shock jocks, and Mitchell has been out of the newspaper game for almost 18 years.

Incidentally, did anyone else think it a little odd of The AFR to use Kennett as their page one picture yesterday, with a glowing Rohan Callick piece talking about his reform record? Considering those two expansive features in The Age two months back, it appears traditionally hostile relations between Jeff and Fairfax journalists have thawed. Could this be the hand of Big Ron at work?




30. Coincidence? Or are the Packers avoiding Crikey?



By Stephen Mayne

Ever since Hugo Kelly and I made plenty of mischief at the 1999 PBL AGM just four days after James Packer's $10 million wedding to Jodie Meares, Australia's richest and most powerful family have seemingly worked hard to avoid further encounters.

This may be cynical but knowing my interest in the two previous John Fairfax AGMs, in 2000 the meetings of both media companies started at 11am in Sydney on November 3. Thankfully, James Packer didn't believe in giving a chairman's address so we were able to have a robust exchange, including extracting Kerry Packer's Crikey mug quote – "do you deliberately set out to be offensive or is it just natural?" – and get down to Fairfax where Jack Tilburn was still on his feet delivering his opening burst. Check out the report on both meetings here.

Babies, lack of cash and Crikey commitments contributed to no-shows by the editor in 2001, 2002 and 2003. However, Hugo Kelly attended in 2003, although I was too disorganised to arrange a proxy in time, and Neal Woolrich did the job in 2001 and 2002.

In 2004 we had the very cynical move of scheduling the PBL AGM to clash with the all-important News Corp vote in Adelaide on the move to America, which was clearly designed to avoid the entire group of media reporters. However, Crikey's Glenn Dyer was still able to attend and file as you can see here.

This year's timing is also a little suspicious after I announced plans to get back into the AGM game after the sale of Crikey. The Crikey Daily on September 7 revealed that Gunns had accepted my nomination to run for their board and the AGM would be held in Launceston at 10.30am on Thursday, October 27.

Lo and behold, PBL releases its notice of meeting on September 26 and announces the AGM will start at 11am on October 27, probably about the time Crikey will be giving the 5 minute spiel to the assembled Greenies and tree-loppers at Gunns HQ.

This obviously makes it rather difficult to get to Sydney to resume hostilities with the Packers after a regrettable five year absence. Alas, we'll have to be satisfied with the Seek AGM on November 9 when James Packer will chair his maiden public meeting in Melbourne. The 3pm start is even nice and convenient for the Crikey publishing schedule.

The Packers are clearly sensitive about Crikey. Remember when they banned Justin McMurray from attending the 2003 full year results briefing and then, of course, we got our website and email completely banned from all PBL offices last year. Then again, maybe this is just another crazy Crikey conspiracy theory as PBL's AGM scheduling has been pretty consistent over the years:

1998: October 29
1999: October 26
2000: November 3
2001: October 31
2002: October 31
2003: October 30
2004: October 26
2005: October 27

Mark Latham recently asked why I'd never run for the PBL board, so maybe it's time to commit to a Packer board tilt at the 2006 AGM and therefore ensure a belated reunion. The only problem is that Kerry's 37% stake makes it all a forgone conclusion.

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