Political dynasties, pokies, defo, grand prix, Manningham, female directors, Macquarie, Paatsch, Seven, nursing home, water, Suncorp, Rich List and not much more thank god

March 29, 2010

Dear Readers,

it has been 18 days since our last bumper email edition of The Mayne Report but we hope you'll agree there's some lively material below on politics, business, media and local government. To unsubscribe from these occasional emails click here.

Do ya best, Stephen Mayne

The great political relationships list

Greetings to various politicians and councillors for the first time. We'd love to enlist your help in a fascinating research exercise tracking so-called Australian political dynasties.

Building on some original research done many years ago by Crikey we've spent tens of hours updating, expanding and broadening this list tracking "political relationships". We're not calling it "political nepotism" because the vast majority of those on the list got their gigs through merit and we also don't want to be sued.

Our interest was piqued by the Herald Sun's recent front page story that four relatives of John Brumby are on the Victorian public payroll. We initially followed it up with this story for Crikey and also did this interview with Derryn Hinch on 3AW.

Given our heightened interest in local government since getting elected to Manningham City Council in November 2008, we are also expanding the list to councillors from across the country and would love your input to Stephen@maynereport.com.

If you'd rather do it incognito, please click here to use our new anonyous tips box feature. We've already had the following anonymous tip come in on Friday:

You are missing Senator Cory Bernardi from your list of 'political relationships', with his wife Sinead working in his office. Might also be worth looking into exactly how often she does work there for her full time wage!

Such cynicism. No doubt, Sinead works extremely hard for her husband and the taxpayer.

At Manningham, our Labor mayor Charles Pick is the son of a former Liberal councillor Clive Pick and Alice Pryor, one of the female ALP councillors unfairly expelled from the party at Moreland this week, is the daughter of former Brunswick City Council mayor Simon Pryor.

The Sunday Age had a laugh last week when it pointed out that the countback system after the resignation of Casey councillor Karen Baxter produced a replacement called Beverley Hastie, who happens to be Baxter's mum.

And our neighbouring council of Maroondah has a father and son combination of Paul and Michael Macdonald, who apparently voted for different candidates in the 2008 mayoral ballot.

All these examples feature on our rapidly expanding political dynasties list which is just waiting for your updates. Click here to get in touch.

Mike Mangan vs Kerry Stokes

Mike Mangan is the former Deutsche Bank media analyst who famously took on Rupert Murdoch and then lost his job. These days he's a boutique fund manager who writes occasionally for Business Spectator and has been front and centre in the debate over Kerry Stokes's Seven-Westrac deal over the past week.

It all started last Monday when Mangan wrote a story for Business Spectator expressing concern about the pricing of the $2 billion related party deal.

What started out as a short 1000 word report in a niche publication by a small fund manager somehow crossed over to the mainstream media 48 hours later courtesy of this story by Fairfax's Michael Evans.

Alan Kohler admitted the Mangan story was taken down five hours after publishing on "legal advice" and Mangan himself told Fairfax he felt "intimidated" when served with a tracing notice to establish the size of his fund's small holding in Seven.

Mangan continues to believe the transaction needs to be re-priced in favour of the minorities and you'll find his latest 2000 word piece on Business Spectator here.

The latest column repeats the points made in Monday's pulled piece, together with Mangan's understanding of Seven's views. The valuation section in particular is quite detailed but fasincating, especially the elements dealing with ASIC's valuation regulatory guidelines.

I too had a fairly robust exchange with a Seven director after this recent Crikey story complaining about the deal and Kerry Stokes remains the only chairman in more than 300 public company AGMs who has called security to force your correspondent to stop asking questions.

Camp Stokes sure do know how to play rough but I still think the minorities will show some spine and vote the deal down. As Mangan says, it is a simple question of price and an enterprise valuation of $2 billion for Westrac is just too great given the risk profile.

Paul Bendat lands more big hits in pokies battle

Paul Bendat is someone we've mentioned in several Crikey stories over the past 18 months but the tactics and effectiveness of this most unusual anti-pokies campaigner continue to take the breath away.

If you were watching Lateline on Monday night you would have seen this story where the son of Kerry Stokes' long time business partner shows off his 14 membership cards of various NSW pokies clubs and then proceeds to debunk garbage claims such as the $1.2 billion worth of social work that the industry contributes to society each year.

Instead, we heard from the likes of former Treasury official Betty Con Walker that the real value of direct cash contributions from NSW clubs to the community each years runs to about $30 million, which isn't much when you consider that punters lose about $3.3 billion a year on their machines and they get an estimated $600 million tax concession compared with what hotel venues have to pay.

Bendat also travelled to Tasmania with anti-pokies senator Nick Xenophon a couple of weeks back where Liberal leader and likely Tasmanian Premier Will Hodgman publically committed to a $1 bet limit in line with the draft recommendations from the Productivity Commission.

No major political party has ever made such a significant commitment in the fight to mitigate damage to the pokies addicts who are estimated to contribute up to 40% of total losses.

The Sydney Morning Herald is also getting in on the act. It had this story yesterday suggesting the Henry Review is recommending a crackdown on the huge benefits given to the NSW pokies clubs.

The same reporter, Jacob Saulwick, let fly with this page three lead last Saturday pointing out that clubs make an estimated $800 million a year from problem gamblers. He said the Productivity Commission has if anything hardened its resolve on the problem gambling front, although we won't see the full detail until the final report is publically released in June.

Finally, we also had a fascinating package of four stories by James Campbell and Laurie Nowell in the Sunday Herald Sun today about the way pokies operators in Victoria, led by the Woolworths-Mathieson joint venture ALH, are manipulating the rules to gain tax deductions as if they were community clubs.

Several AFL clubs got a serve along the way and the paper estimates the rorting has cost taxpayers about $15 million in pokies tax revenue so far. Well done to Victoria's biggest selling paper and check out this portion of the package online.

All of this amounts to a sustained hit on the pokies industry and it is good to see Paul Bendat's research and campaigning getting plenty of airtime through the mega-phone of the mainstream media.

This should be the last F1 Grand Prix at Albert Park

We're hitting the button on this edition and then settling down to watch the Grand Prix with our car mad 5 year old son Philip.

Jeff Kennett's great mate Ron Walker is today presiding over his 15th F1 grand prix at Albert Park and it really should be the last.

Big Red turned 70 last year and is not in the best of health after a bike fall in February led to emergency brain surgery that has slowed him down considerably.

These developments coincide with the inexorable slide in popularity for the GP. Former loyal supporters such as the Herald Sun and 3AW morning presenter Neil Mitchell now openly question whether it should continue at a cost of $50 million a year.

With Victoria's state debt soaring at about $5 billion a year since 2008 we're now talking about gross liabilities of $23 billion. The first eight years of Labor in Victoria saw gross debt remaining steady at around $12-13 billion as you see from this table on the TCV website. Such a rapidly deteriorating balance sheet makes indulgences such as spending $50 million on a two hour race in a public park hard to justify.

Whilst John Brumby was strongly defending the event to Jon Faine on 774 ABC Melbourne this week, some observers reckon both sides of politics will support it through the November state election and then give it away after that.

Sure, there is a contract until 2014, but Bernie Ecclestone claims there's lots of interest in Asia so it wouldn't be hard to walk away.

Besides, who on earth would take over as chairman of the Grand Prix Corporation when Ron Walker calls it a day? Ron himself probably wouldn't support someone else taking charge so why not let the curtain finally fall on the $500 million taxpayer funded dalliance in 2011 with both sides of politics agreeing that it is time to move on.

Perhaps some of that $50 million a year could then be directed towards providing local car racing and drag racing to satisfy those hoons who rioted in Oakleigh two Fridays nights ago.

Meanwhile, here is what Save Albert Park spokesman and former City of Port Phillip councillor Peter Logan has distributed earlier today:

Two years ago the headline was: “Truth on crowd numbers would hurt us, admits GP chief”. This year we have a bigger problem – with shrinking grandstands and corporate boxes and a sparse outfield crowd, the GP corporation is posting attendance figures that are overestimated by nearly 90%.

Save Albert Park president, Peter Goad said, “The grandstands have halved since the first event and the corporate places are down to one third of where they started. We are seeing a sparse crowd in the outfield, with a few thousand in groups on the viewing mounds but vast lengths of track with next to nobody. The figures they are putting out at the end of each day are an insult to the major funders of this event – the Victorian taxpayers.

“Please do your own check - look at the television footage to assess the crowd numbers. With around 30,000 seats in total in the grandstands and corporate boxes added to a generally sparsely filled outfield, the crowd count would be considerably under 200,000 over the entire four days.

“With no bar-code, turnstile or similar direct system to accurately and honestly record attendances, the GP corporation cannot claim to have any credibility and they cannot hide that fact – the truth is there on the television pictures for us all to see.

“Victoria has a problem. As the Auditor-General found, we are not getting a profit on our investment and it doesn't increase tourism.

“The truth would not hurt us – the Victorian taxpayers expect our media to report the facts and not repeat lies and exaggerations, especially if they can reasonably be proved to be false. With the losses mounting on this event and an undisclosed number of free tickets handed out, the stakes are very high, especially when this money could instead be used for the benefit of future generations of Victorians.”

Contact Peter Logan, spokesperson for Save Albert Park, 0412697074 or 9699 1606

Proxy adviser Dean Paatsch vs head hunter Chris Thomas

The AFR has recently played host to a fascinating and amusing public stoush about the roles and responsibilities of directors and shareholders with Dean Paatsch from proxy adviser RiskMetrics on one side and Egon Zehnder partner Chris Thomas on the other.

Thomas has been helping Australian boards recruit directors senior executives for the past 15 years and, like many senior players in the directors club, is fed up with Paatsch and his colleagues telling institutional investors to vote against remuneration reports.

We've packaged up all four installments for your enjoyment here and have added this final response from Chris Thomas, which The AFR declined to publish:

It is unfortunate that despite my invitation to Dean Paatsch of RiskMetrics to respond to the 'message' he chooses to continue attacking one of the 'messengers' (Letters "Sticky Paatsch" March 12) . His modus operandi when faced with a challenge is now clear. Personal attack by phone followed by personal attack via an open letter repeated! Based on my more than 30 years with Egon Zehnder International, the last half of which has focussed on advising boards here and internationally, I am happy to be judged by those who know me and whom I have served.

It is curious that despite my now several invitations to enter the debate on questions posed in my original Opinion article (" Executive pay an easy target for proxy advisers" March 2), Paatsch has chosen not to engage at that level. He also chooses to ignore the coincidental comments attributed to David Crawford ("Chairman takes aim at proxies", 26 February) that "they (the proxy advisers) have a very limited time to assess those reports, we don't know the quality of the people they use to assess them, we don't get an opportunity to talk to them." Similarly, comments by Henri Aram ("Crawford ire may jolt proxies action" March 1) appear to have not received a reasoned response from Paatsch despite Aram's comments that "Hopefully Crawford, with his well reasoned concerns, has jolted the authorities into positive action and opened the subject to informed public debate". Not only has the debate not been joined by Paatsch but neither Crawford or Aram have apparently been the target of his vitriol.

On reflection, I wonder if Mr Paatsch is taking a little too literally a comment made last week by one of his US colleagues Patrick McGurn. In noting the tougher SEC rules on CEO pay disclosure ("The Power of Shame This Proxy Season", Bloomberg Business Week, March 8) McGurn observed that "it appears that the mere threat of humiliation does the trick just fine".

Doubtless, the implied army of researchers supporting Mr Paatsch in his work will be disappointed that again he has chosen not to address the issues that I and others raised and that he has passed up on the opportunity to transparently display this resource and how it reaches its conclusions.

Chris Thomas
Partner Egon Zehnder International Melbourne, Vic

Whilst RiskMetrics does have too much power, I reckon they get it right more often than not. Ironically, the only time they've recommended me in 40 public company tilts was at Centro Retail in November 2008. Lo and behold, my average vote of 13% suddently leapt to 70% of the non-Centro shareholders voting in favour.

Maybe Chris Thomas is angry at Dean Paatsch because he then had to go through a serious interview process with yours truly before deciding there were more suitable candidates available to rebuild the two Centro boards. On that score, he's done a pretty good job and landing Robert Tsenin first as a director and later as Centro CEO was inspired.

Meanwhile, Egon Zehnder has today landed the gig advising Seven in its hunt for two new directors.

The problem with David Crawford

With the retirement of Don Argus as BHP-Billiton chairman, David Crawford is probably the most senior member of the directors' club left in Melbourne.

Chris Thomas no doubt knows him well but the Crawford attacks on RiskMetrics lack credibility and have an obvious motivation.

You see Crawford is the chairman of Lend Lease which in 2009 copped a 41.4% against vote on its remuneration report as you can see from this list tracking the biggest protests.

RiskMetrics recommended that against vote and a year earlier RiskMetrics also recommended a vote against Lend Lease director David Ryan, an old accounting colleague of Crawford's whose reputation was shot when ABC Learning collapsed and he was chairman at the death and chairman of the audit committee for the previous five years.

Crawford used his personal credibility to persuade institutions to back Ryan for another three year term at Lend Lease which, in my view, displayed an appalling lack of judgment. He still received a 29% protest vote - one of the largest in corporate history - but Crawford clearly carries the scars.

Which brings us to this Crawford quote used by Chris Thomas in the unpublished letter to The AFR produced above: "they (the proxy advisers) have a very limited time to assess those reports, we don't know the quality of the people they use to assess them, we don't get an opportunity to talk to them."

As George Lekakis pointed out in the Herald Sun:

Mr Crawford is also a director of BHP Billiton, where he chairs the board's audit committee. In 2008 BHP appointed the former head of research at RiskMetrics, Professor Geof Stapledon, to manage its internal governance unit.

So, Crawf reckons he doesn't know the quality of RiskMetrics researchers but the company he's served on the board of since 1994 head hunted their top researcher to run governance. Hmmm. And we're still yet to hear Crawf defend his chairman's package at Lend Lease which at $748,000 - after an excessive 25% pay rise in 2008-09 - is one of the biggest in the country.

Rather than shooting the messenger, David Crawford should get his own house in order by cutting his chairman's fees, asking David Ryan to resign as a Lend Lease director and moving on from BHP-Billiton where he has served about 5 years too long already.

Tales from the talk circuit - Pigs at the Trough book launch

It has been a busy few days on the talk circuit starting with the launch of Adam Schwab's excellent new book Pigs at the Trough at Dymocks on Collins Street on Wednesday night.

Schwab is a former commercial lawyer at Freehills who then tried his hand at journalism through Crikey and then landed a short term gig helping out proxy adviser RiskMetrics a couple of AGM seasons ago.

His main enterprise these days is running a property rental business but he also writes occasional pieces for Fairfax's Businessday.com.au website and it was good to see The Age's Mark Hawthorne gave the book launch this brief plug on Thursday morning:

Tales from the trough

YOU have to give business scribe Adam Schwab his due - he doesn't pick soft targets, and has ruffled some rather wealthy corporate feathers. Schwab's book, Pigs at the Trough: Lessons from Australia's Decade of Corporate Greed, was launched last night. It probes the millions of dollars made by Sol Trujillo, Eddy Groves, David Coe, Gordon Fell, Mark Rowsthorn and Village Roadshow's Kirby family. It details the collapses of Babcock & Brown, MFS, Allco and Timbercorp. A few legal types are running an eye over it. Let's hope, for Schwab's sake, it sells well.

John Durie wasn't quite so charitable in The Weekend Australian, suggesting Schwab "sadly follows a well-rehearsed, cliched script that ASIC has failed in its job, non-executive directors were asleep at the wheel and the company chiefs were a bunch of greedy crooks."

However, I do agree with Durie's assessment that Schwab's book is "a well-researched run through what he sees as the biggest governance snafus, including the Sol Trujillo era at Telstra, ABC Learning fiasco, MFS, Village Roadshow, Babcock, Allco and Great Southern Plantations."

"Like the doyen of the craft, Trevor Sykes, Schwab also clearly explains the basic economic and accounting concepts to make the book easily accessible to newcomers. This is where the easy-to-read book excels."

One of the problems in Australia is that not enough corporate books are written and we don't learn the lessons. No-one ever wrote the full story on John Elliott and Elders IXL, the Coles-Myer story has never been written, Macquarie Bank is yet to be forensically told in book form and even something like WA Inc never made it into hard cover.

In my opinion, Pigs at the Trough provides an excellent summary of the rorting and I found myself quite angry again after being reminded of the extraordinary events that happened and the estimated $20 billion that was lost by shareholders and lenders in these various collapses.

Macquarie gets another bonus driven float away

Macquarie Group is little more than an ambitious group of extremely smart bonus-driven bankers looking for the next big deal around the world. With the Millionaires Factory dishing out bonuses shortly after its reporting cycles conclude, it is always amusing to watch for any particularly ambitious transactions as those dates approach.

Last year it was the $345 million MAP divorce payment which was literally approved by shareholders on September 30, the last day of the first half and contributed the bulk of this line item in the interim results presentation: "gains from listed funds initiatives: MCG, MLE, Map: $414m".

This year is was the float of oil services company Micelyn which debuted on Friday, just four business days before the March 31 year end, and closed at the offer price of $1.90.

Macquarie sold down from 59.2% to 34% and pocketed almost half of the $284 million raised in the float, at least $50 million of which should show up as pure profit in the full year result given that the business was bought in 2007 for about $US300 million in a leveraged buyout.

The Millionaires Factory has built up a global advisory expertise in the energy business and this is an example of a private equity style play which has paid off, even though it was financed at the top of the credit boom.

The soaring gas markets in Asia and some good management probably explain how they did it.

Macquarie's sneaky cash management tactic

A Macquarie client writes:

Have you seen the proposal to convert all units in the Macquarie Cash Management Trust to deposits in a Macquarie Cash Management Account (ie. a bank account with Macquarie).

For many months now Macquarie has been contacting CMT unit holders trying to get them to convert over to a CMA account. They use the argument that the CMA account earns higher interest and that it has the Government guarantee. What they don't tell you is that the real motivation is to put your money on Macquarie Bank's balance sheet. As a deposit it carries risks associated with being a depositor in a bank. Macquarie can use this money in any way they like and the depositor is at risk as an unsecured creditor of the bank. No doubt there are banking ratio advantages to Macquarie having this money on deposit in its balance sheet.

The CMT on the other hand is supposed to only invest in Bank issued, endorsed or guaranteed Bills and government securities. One would hope that a prudent manager would be investing in a spread of Banks Bills. The CMT is therefore less risky that a deposit with a bank who can invest the money in anything they like and you are exposed to the total risk of one bank.

This doesn't seem like a proposal in the interests of unit holders in the CMT and could only arise from the conflict of interest inherent in the manager. The beneficiary of this proposal is Macquarie Bank.

The Australian financial system has existed for all but the last couple of years without a Retail or Wholesale government guarantee and this will now be withdrawn in the near future. This justification is a nonsense.

The most extraordinary thing is the fact that the Macquarie CMT has been underperforming the market over recent months and this helps justify why units holders should move their money to the a bank account with Macquarie. Their CMT website quotes the 7 day annualised rate of return at 2.67%. Anyone in business will tell you that 30-90 day bank bills are running about 0.75% above the cash rate. The last bills we rolled were close to 5% (plus the bank's margin) - this rate is often referred to as BBSY (I think) and is quoted in the newspapers. Even allowing for Macquarie's management fee the performance of the mighty Macquarie's management of this trust is questionable.

It is amazing that a proposal to convert a unit in a distinct entity can be converted into a bank deposit in this way. One presumes that Macquarie is relying on investor apathy and ignorance to get this proposal approved.

* Karen Maley also had this interesting column on the Macquarie tactic on Business Spectator in February.

Battle over Manningham's Chinese nursing home rages on

Victoria's embattled planning minister Justin Madden has unilaterally changed Manningham's planning scheme to enable a tripling of the On Luck Chinese Nursing Home in the green wedge, sparking lots more controversy and conflict which appears likely to play itself out on the floor of Tuesday's council meeting.

Nursing homes are prohibited in rural conservation zones, so the story made both the Channel Nine and ABC TV news a few days back as you can see from this package of links that summarise the key issues.

Our deputy mayor Fred Chuah, who is also the chairman and founder of the nursing home in question, is yet to say anything meaningful to all the councillors which at one level is understandable now that our Greens councillor David Ellis has formally requested a Councillor Conduct Panel to pass judgment on these events.

However, Fred's supporters and friends in the ruling Labor-led faction at Manningham appear set to break from their previous positions voting to express concern about the planning process based on this motion put up for debate on Tuesday night by Labor's Ivan Reid:

Following the reasoning of the explanatory report to the C88 Amendment, Manningham City Council hereby resolves to support the decision of the Planning Minister and the Department of Planning & Community Development to approve Amendment C88. Council notes that:
  1. Demand for residential aged care catering for people from culturally and linguistically diverse backgrounds is increasing rapidly, particularly in the Eastern Metropolitan region.
  2. This year's allocation of residential aged care places by the Commonwealth is focusing on providing for people from such backgrounds.
  3. Increasing the number of aged-care beds for our Cultural and Linguistically Diverse communities is consistent with meeting a range of federal, state and local polices and social needs.
  4. The amendment will not lead to any adverse environmental effects on land, which is already lawfully used for accommodation purposes.
  5. Council reluctantly accepts the planning process undertaken by the State Government due to the urgency of this year's Federal allocation of aged-care places specifically for Chinese and other non-English speaking cultural groups.
We all know that more nursing home beds are needed across the board, so why has there been so much opposition to other nursing homes in Manningham, including council's own?

If we councillors in any way condone state government takeovers which by-pass formal council planning processes, especially by a group chaired by one of our own councillors, then we are surrendering the moral high ground on other vital projects such as the 48ha Eastern Golf Club site in Doncaster.

For mine this is a very straight forward case of putting council first. If the proposal had come to council, I probably would have supported it. But if the deputy mayor and his factional colleagues can't see the problem in by-passing council and running off to the Minister then we've got a real problem.

Cornwall on the health debate, Tony Abbott and Kevin Rudd

How NSW left Victoria behind on water reform

Victoria claims to have the best hospital system and is acknowledged for leading the states in several other areas such as power industry reform. However, a guest writer who is a well-informed water expert is no fan of John Brumby's record in water management:

In your recent conversation with Lindy Burns on the ABC 774 dealing with health reform, I thought I heard you lump water reform in with health reform, where you said Victoria is the leader.

In water reform, Victoria is generally considered to be recalcitrant in comparison with NSW. Water is managed in a command economy manner in Victoria. In Geelong for example, like most of regional Victoria, water restrictions have been at or near the highest level for 4 years or more, with the prospect of at least another two years.

The loss and damage caused by water restrictions has been assessed by the Productivity Commission in the billions of dollars.

The reason for this is water infrastructure is, with the exception of the Wonthaggi desalination plant, the sole domain of large inefficient politically directed monopolies. No-one can get recycling going because it competes with first use water and entrenched interests in the monopolies obstruct it.

The recycling figures in Victoria are smoke and mirrors. The growth that has been ascribed to recycling is in fact mostly sewerage disposal at the Werribee facility that has occurred for 100 years.

VECCI suggested the need for a framework to allow innovation and private sector involvement, and while the Brumby Government said they would implement the findings, they have done very little.

Water is a political plaything for governments. Imagine if your telephone service or power supply were restricted in the same way water is. How long would the community accept that.

NSW is much more advanced, including having introduced a framework for private sector participation. Recycling in NSW is extensive and high-value in nature. There has been no need in NSW for the drastic measures Melbourne has had to take because Melbourne Water in the 1990s half emptied the Thompson Dam to generate electricity, believing it would rain again. It never recovered.

It is hard to imagine anything more culpable than that.

* Meanwhile, The Sunday Age splashed today with this major attack on Victoria's water management by a range of experts.

Snowball goes in all guns blazing at Suncorp

A long-time Suncorp watcher writes:

Is the Snowball beginning to melt?

Suncorp CEO and former British military tank commander Patrick Snowball was in the UK on 'hols' whilst the Melbourne hailstorms hit and the roll out of mass redundancies got underway. He has come back to fires on all fronts.

The attempt to get the back office 'synergies' by moving all the different companies (brands) GIO, AAMI Apia, Vero, Suncorp on to one system has seen a rushed implementation of a new payroll system. It has been botched.

The suggestion by the spokesperson that only a few hundred have been impacted is spin at its worst. Many thousand have suffered leading to staff being paid out of petty cash. At the same time payments of superannuation entitlements for over 3000 AAMI staff have not moved to their fund for 8 weeks. Traditionally the old AAMI paid into the super accounts on the fortnightly pay cycle. There has been no announcement by Suncorp that they have decided to keep the money themselves for a quarter. The AAMI payroll is reputed to be $4 million a fortnight. That means a lot of missing super fund money. It may just be a payroll software problem but some people are getting edgy.

Further in the quest for 'one company, many brands' Snowball and his team have completely trashed all the executive staff who built the AAMI phenomenon. Belleville, Kay, Casboult, etc all gone. 100 years of corporate memory. No wonder they were slow out of the blocks for the hailstone crisis. Not many left who knows what to do, it seems.

Then there is the rise of the repairers as Suncorp gears to screw them to the ground. They will not take it lying down as the recent story on Today Tonight shows. It will get particularly nasty in NSW. Snowball and his team have little on the ground experience on how to manage a volatile repair sector. AAMI learnt that the hard way over 30 years but that corporate memory is largely gone.

Then there is the gouging or 'price optimisation' as Suncorp call it. Charge what you can get away with as with only two players controlling 75% of the market, if the customer moves chances are they come in the back door anyway to another Suncorp brand thinking they have gone to another company.

In all of this is the fact that in the GFC the Australian insurance sector was never really the problem. It was always a bank issue yet it is the insurers that are being savaged by Snowball in his bancassurance business, even though the Suncorp loan book was one of the worst in Australia courtesy of its support for all those Queensland developers.

So Snowball may yet get a hard time from the analysts. Certainly chairman John Story, who is paid $500,000 a year, should be getting some grief. After all, it was Story who presided over the Mulchay era and the whole shebang since then. He should have been long gone. So much for good corporate governance and renewal.

Raising lack of women on boards at AGMs

Women only represent 8.3% of directors on major public company boards in Australia. This is a disgrace but at least we've seen a little bit of movement of late.

I gave the David Jones and Seek boards a huge spray at their AGMs in Melbourne on November 30 last year. Have a listen:

David Jones: why is Katie Lahey the only female director?

Seek.com: how on earth can this board be blokes only?

Lo and behold, DJs appointed Philippa Stone as its second female director on March 9 and Seek broke its duck with the appointment of Denise Bradley on February 15.

The Bradley appointment was particularly inspired as she led the Bradley Review of higher education for the Rudd Government and Seek has done a spectacular job carving up the universities since it moved into the education business a couple of years ago.

The NAB board also got the following spray at the AGM in Brisbane last December:

NAB: one woman director is not enough

And chairman Michael Chaney was dusted up in this Crikey story for suggesting that all the women he looked at didn't fit the requirements the board was looking for.

Maybe we were a bit tough at the time given that NAB ended up landing Anthony Yuen as a director. This chap was a former Asia Pacific managing director for Royal Bank of Scotland, which perhaps isn't the greatest advertisement given it was nationalised but after a career in the global banking industry he'll certainly understand NAB's business better than most.

ASA teams up with Murdoch for Telstra hit

The Australian Shareholders' Association formed an unusual alliance with News Ltd earlier this month when the following email was sent to members:

Are you a long-suffering Telstra shareholder?

With the share price below pre-financial crisis levels and the Government continuing to change the goal posts, there is something you can do. You can print off this letter or copy the text here and send it to the Senators for your State and your Local Member of Parliament. It is extremely important that local Members and Senators are aware of their constituents' concerns about this very important issue, particularly in an election year.

Stuart Wilson, CEO

Shareholder Opinion: Telstra standoff to hurt Labor at polls

The unresolved Telstra talks may become an election issue for shareholders. For Telstra, the uncertainty has weighed on the share price, which touched an all-time low last week of $2.88. It has remained below the level of all three floats, ensuring no Telstra shareholder is happy. For the government, it is yet another loose end that has found its way into an election year, and is rapidly gaining traction among shareholder voters.

Will you speak to the media?

News Limited
Steve Lewis, March 10, 2010
National Political Correspondent at News Limited, would like to interview Telstra shareholders today regarding this issue (especially if it is likely to change how you will vote in the forthcoming election).

Melbourne Herald Sun
The Herald Sun would like to talk to retail shareholders in Melbourne who are upset about the Government's proposals regarding Telstra and who are happy to be interviewed and photographed at their home either today, Wednesday 10 March, or tomorrow.

This unusual approach was rolled out across the country judging by this story which appeared in The Advertiser on March 10 and read as follows:

It's dial a revolt on Telstra shares

Mum and dad Telstra shareholders are demanding compensation and threatening High Court action as the revolt grows over plans to split the telecom giant. In the latest challenge to the Rudd Government, furious investors are warning they will shift their votes away from Labor at the ballot box.

And they have likened the Government's actions to communist Russia, demanding it shelve plans to break up Telstra as part of its $43 billion national broadband network. The Advertiser was yesterday flooded with complaints from the company's 1.4 million shareholder army over Labor's reform plans.

Richard Thomas, of Adelaide, accused the Government of "blackmail" as it tries to break up Telstra under a plan called "functional separation".

Shareholder Ian Nicholson is equally blunt: "What the Government is doing is a bloody disgrace," he said.

From councillor to parliament

Thanks to all those councillors who sent in updates and corrections to this list tracking councillors in Parliament. We started with 79 and are now have north of 120 examples of current and past federal and state politicians who got their start serving on their local council. Below is an example of a new entry on the list and please send any corrections or additions to stephen@maynereport.com:

Shelley Hancock
- prior to being elected to the NSW parliament in March 2003, the Liberal member who represents the South Coast of NSW, was a Shoalhaven City Councillor from 1987 until 2004. This included a stint as deputy mayor from 2000-01. Shelley was also a school teacher for 26 years at Ulladulla High School in NSW.

If you'd rather tip us off anonymously, just click here.

Government bonds list and the great Rudd debt spree

The Mayne Report remains the only publication in the country which directly tracks Federal government bond issues as they unfold. As the globe focuses on sovereign debt servicing risks, surely the record debt issuance by the Rudd Government should be receiving some more attention.

However, at least the Australian Office of Financial Management is to be congratulated for prominently declaring the total outstandings on its home page. As of Friday, the figure was $131.68 billion, comprising $121 billion of bonds and $10.7 billion of shorter dated treasury notes.

As was revealed in our February 23 edition, the states are pathetic when it comes to debt disclosure but at least the Feds have got their house in order, even if the sums involved are a little disconcerting.

The Feds have now raised more than $50 billion raised since the second stimulus package was unveiled 13 months ago. Below are the bond tender results since the last edition and you'll notice each has produced interest rates well above the 4% projected in the budget but no shortage of bidders:

Wednesday, March 25: $900m of 3 and 6 month treasury notes which sold for between 4.17% and 4.37% and were about 3 times over-subscribed.

Friday, March 19 , 2010: $1b tender of 2 year bonds expiring in November 2012 were sold for an average yield of 5.06% and was 3.2 times over-subscribed.

Wednesday, March 17, 2010: $500m tender of 4 year bonds expiring in April 2015 were sold for an average yield of 4.35% and was 3.7 times over-subscribed.

Wednesday, March 14, 2010: $500m tender of 9 year bonds expiring in March 2019 were sold for an average yield of 5.65% and was 3.8 times over-subscribed.

Friday, March 12 , 2010: $700m tender of 3 year bonds expiring in May 2013 were sold for an average yield of 5.45% and was 3.7 times over-subscribed.

Wednesday, March 10, 2010: $700m tender of 4 year bonds expiring in June 2014 were sold for an average yield of 5.20% and was 3.4 times over-subscribed.

Friday, March 5 , 2010: $700m tender of 3 year bonds expiring in May 2013 were sold for an average yield of 5.45% and was 3.7 times over-subscribed.

Looking good with the former Premier

Fellow councillor Meg Downie shouldn't give up her day job based on this photo she took at the recent launch of Shannon Bennett's Cafe Vue at the wonderful Heidi gallery in Manningham:

Yep, that's Cr Mayne, blundering along with his eyes shut.

Donate to help fund our activism

The Mayne Report is a free service which costs almost $100,000 a year to run and relies partly on donations to survive.

Thanks to everyone who has chipped in a collective $5000 worth of donations over the past few months and you can check out their details on this honour board.

If you fancy giving us a hand to help fund our activism and keep The Mayne Report going as a free service, just click on the image below:

More additions and updates for The Mayne Report Rich List

The Mayne Report Rich List continues to be easily the most popular feature on our website. In 2009 the Rich List had 36,692 page views and 32,075 unique visits. Since the beginning of 2010 there have been 7,586 page views and 6,582 unique visits which is up on the same time last year. We've got more than 1400 names with those who've fallen back below our $10 million cut off now italicised. Below are some new and updated entries, many of which have come from the latest BRW list tracking Australia's wealthiest executives:

Samuel Afdal: large shareholder in WA-based Medusa Mining, who owns about 6m shares. The stock bottomed at 40c in December 2008 but has since risen to a significant peak of over $3 in early 2010.

John Atkinson
: managing director of White Energy who's shareholding in March 2010 was worth around $12 million.

Barry Bernoth: Toowoomba-based developer owns a large number of commercial buildings in the main centre of Toowoomba including Bernoth Shopping Centre and the Downs Motel. In addition he owns a large land bank for future development.

Terry Bowen: finance director of Wesfarmers he has a share wealth of almost $10 million in March 2010, but combined with his remuneration, his wealth is north of $10 million.

Vaughan Bowen: co-founder and managing director of M2 Telecommunications who has a share portfolio valued at more than $18m in March 2010.

Bernie Brookes
: the former Woolworths supermarkets boss turned Myer CEO has made more than $20 million out of these two retail plays. Since Myer Holdings was floated, his shareholding in Myer was worth more than $35 million in March 2010.

Michael Caratti: chairman of Lycopodium who is a large shareholder. His share value in March 2010 was north of $30 million.

Collins family: they own a large parcel of commercial properties in Toowoomba which includes a large Retravision Store and some supermarkets.

John Delano:
chief executive of leasing company FlexiGroup, which listed in late 2006. He owns shares worth more than $14 million in March 2010, even after the stock plunged from more than $3 to $1.57 in January 2010.

Anthony Fini: Fini Group founder negotiated a $180 million deal to sell his retirement village portfolio to investment bank Babcock & Brown and prominent retirement village player Primelife Corporation.

Rodney Forrester: managing director of Queensland developer FKP from 1987 until 2003. Remains a non-executive director and owns about 7m shares. The stock peaked at almost $7.50 in December 2007 when he was worth more than $45 million, bottomed at 40c in December 2008 and in early 2010 was around 72c. Has a private development company, Aria, with his son Tim.

Brett Godfrey: the Virgin Blue managing director has made more than $30 million from his time running the airline. As of March 2010, the value of his shares were north of $5 million. Retiring at the end of 2010

Richard Goyder: managing director of Wesfarmers, he has a shares worth almost $23 million in March 2010.

Robert Hand: executive director and senior portfolio manager for K2 Asset Management Holdings, he owns shares worth more than $11 million in March 2010.

Kelly family:
Toowoomba-based family who own a range of hotels, shopping centres and storage facilities. Jack Kelly built a very wealthy private company which was passed to his family when he died. They have also developed large commercial ventures in the past such as hospitals and other government buildings.

McHugh family: Sydney publicans who took on too much debt during the days of easy credit and in early 2010 were forced to sell the Kinselas Hotel at Darlinghurst for $12 million to a group led by John Singleton and Mark Carnegie.

Andrew Mckenzie: managing director of WA based Euroz, who owns about 8.5m shares. The stock peaked at almost $2.75 in November 2007, bottomed at 60c in November 2008 and has improved to $1.40 in early 2010 pushing his wealth north of $13 million.

Campbell Neal: executive chairman and CEO of K2 Asset Management Holdings, he owns shares worth more than $55 million in March 2010.

Mark Newman: chief investment officer of K2 Asset Management Holdings, he owns shares worth more than $43 million in March 2010.

Gavin Nixon: property director of the Retail Food Group which owns the Donut King and Brumby's Bakeries franchises, he owns about 5m shares. The stock bottomed at 90c in December 2008 and has since recovered to reach $2.89 in January 2010 which makes him worth more than $10 million.

Katie Page: CEO of her husband's company, Harvey Norman together they have created a retailing powerhouse. In March 2010 her share wealth was around $65 million.

Graeme Rowley: the former Rio Tinto executive is now head of operations for Fortescue Metals and has made more than $30 million from this exercise over the past five years as shares in the iron-ore exporter have soared. In March 2010 his share wealth was around $96 million.

Russell Scrimshaw: executive director of Perth-based Fortescue Metals Group who owns about 8m shares. The stock peaked at almost $12.80 in July 2008, bottomed at $1.20 in December 2008 but has recovered back to $4.60 as of January 2010 which pushes his wealth to about $40 million.

Alan Shortall: CEO of US-based Unilife Medical Solutions. He owns shares that were worth more than $18 million in March 2010.

Mark Smith: exploration manager of Mt Martha-based Karoon Gas who owns about 2m shares. The stock bottomed at $1.60 in November 2008 and in early 2010 it is up to $8, valuing his stake at above $15 million

Introducing the Cornwall shop

Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing his satirical commentary to The Mayne Report since March 2009. The cartoons are now available to purchase and make a great gift. Here is a collection of his best toons and there are now also some amusing animations:

Capital raising plays since the last edition

There has been very little to report on the capital raising front so far this year, but the full list of plays since January last year makes for happier reading and is available here. The only plays of note since the last edition were as follows:

March 9
Norfolk Group:
$10,000 into 2-for-9 entitlement offer at 72c with overs but scaled back to just $13 allotment.

March 18
Charter Hall: $5000 into 2-for-5 entitlement offer at 65c with overs. Exited at 70c for gain of $380.

Offers we're currently committed to

$10,000 so far into 15,000 SPP at $6.31 or VWAP. Closes March 29 and allotted April 14.

Let's hope things get a more active as the year progresses, otherwise an alternative major funding vehicle for our shareholder activism will have to be found.

Cornwall on the polls

All the share trades: lightening up in a rising market

With the All Ords edging up towards 5000 we've been reducing our exposure to the market and as of March 22, 2010, the portfolio of 761 holdings was worth $104,322. The overall paper loss was $3,388 and the average holding worth just $137.

You can see a full record of all our trades here and the specifics since the last edition have been as follows:

March 27
Berkeley Resources:
sold 390 at $1.335

March 22

Maryborough Sugar: sold 260 at $1.95
Charter Hall: sold 7,700 at 70c

March 17

Perseus Mining: sold 303 at $1.97

March 16
Clinuvel Pharmaceutical: sold 1,990 at 25c
Dragon Mining:
sold 4,990 at 8.6

March 15
Gunns: sold 231 at 57c
Ludowici: sold 176 at $2.72
Nexus Energy:
sold 307 at 24.5c
sold 70 at 70c
sold 94 at $3.05
Tox Free Solutions: sold 208 at $2.58

March 12

Alkane Resources: sold 1,603 at 32.5c
Brierty: sold 1,563 at 32.5c
Forest Place: sold 615 at 84c
Quantum Energy: sold 4,536 at 12c

March 11

Amcom Telecomm: sold 1,740 at 30.5c.
Bluglass: sold 2,942 at 15.5c
Resmed: sold 1,379 at 49.5c.

March 10
AGL Energy: sold 30 at $14.89
Bow Energy:
sold 465 at $1.24
Centrepoint Alliance: sold 3,330 at 13.5c.
Choiseul Investments: sold 90 at $4.98.
China Steel: sold 4,157 at 13.5c.
News Corp:
sold 200 at $18.22
Tabcorp: sold 600 at $6.91
Telstra Corp: sold 3,000 at $2.97

Cornwall on Steve Fielding

Expanded defamation list as Phil Cleary goes down

I dropped into the Victorian Supreme Court on Monday morning to watch the judge provide a final summing up to the all woman jury in the long-running defamation battle between barrister Dyson Hore-Lacy and Phil Cleary.

It was a difficult one to call as I've dealt with Phil Cleary a bit over the years and really like the guy. That said, he did go down in a major way and Hore-Lacy was represented by Julian Burnside QC, the barrister who represented us pro bono in our defo battle with shock jock Steve Price all those years ago.

Paula and I went to Burnside's 60th birthday, so at one level it was congratulations to Burnside for such a big win but on the other hand that $630,000 judgment looked way over the top, Cleary didn't deserve that sort of spanking and publishers across Australia recoiled in horror.

This issue was discussed with Lindy Burns on 774 ABC Melbourne last Wednesday and there has also been two Crikey stories.

Meanwhile, we've updated the great Australian defamation list so do check it out.

From the archives - Manningham's Lion fight

Dyson Hore-Lacy is a fellow old boy from Ivanhoe Grammar and was the last President of the Fitzroy Football Club before it merged with the Brisbane Bears. The defamation writs were flying in those final years and we even discovered this interesting tale related to Manningham from the archives of The Age:

Lions face $150,000 legal threat
by Stephen Linnell, The Age, June 27,1996

The proposed merger between Fitzroy and North Melbourne has hit another unexpected snag, with Manningham Council set to issue a writ against the Lions, which could cost the club more than $150,000. The issue relates to a lease agreement signed between the Lions and the former Doncaster-Templestowe Council for use of Bulleen Park as a training facility.

The council claims Fitzroy has failed to keep pace with costs and owes more than $26,000 in outstanding rent and maintenance. The 20-year lease agreement was believed to have been signed five years ago.

Manningham Council has placed the matter in the hands of its solicitors, and a writ is expected to be issued within the next 10 days. The chief commissioner of Manningham Council, Adam Kempton, said yesterday the council would not "back off" and would pursue the claim through the courts.

"There's no question of us backing off. We have an obligation to our residents and ratepayers to recover the amounts owed. There's also a question of compensation, should the lease agreement be broken by Fitzroy."

It is believed the agreement cost Fitzroy around $10,000 annually. If Fitzroy merges with North, the council is expected to seek compensation, as well as money alleged to be outstanding.

"It could be a substantially greater amount than that already publicly acknowledged," Kempton said.

Maybe Hore-Lacy could make a donation to Manningham out of his $630,000 tax free defamation windfall.

Cornwall on selling quarry Australia

From the press room

Check out the Manningham package here and below is when the nursing home issue went front page in the local paper:

Manningham Leader
Friday, March 19, 2010

Four Crikey stories since last edition

Labor burns the witches of Moreland as Phil Cleary watches on
Friday, March 26

Why Allen & Unwin should have settled Crikey-style
Wednesday, March 24

Brumby's poor disclosure over donations and jobs for relatives
Wednesday, March 17 2010

Pokies industry arguments and edifices starting to crumble
Thursday, March 11 2010

A solid session on Sky's Business View

After ten years away, it was nice to once again stroll the editorial floor of the Herald Sun two weeks back. This came to pass because Sky has moved from Channel Nine to level 12 of the HWT building at Southgate. Whereas previously you were locked in a broom closet at Nine - something Julia Gillard apparently refused to do after a while - the set up at the Herald Sun has you sitting on a bar stool with journalists working all around you.

One of the hacks commented at the end that it was "a very long interview". Indeed, thankfully there were three journalists, host Helen Dalley a few ads to get through the hour that is Sky's Business View program and we've edited our contributions down to the following package:

Sky Business View
Friday, March 19, 2010

A range of radio chats

774 ABC Melbourne - discussing Rio Tinto, defamation payouts and other things financial on March 24.

774 ABC Melbourne - discussing the extraordinary housing bubble on March 17.

3AW Melbourne
- discussing John Brumby's apparent nepotism with Derryn Hinch.

Click the link below to get the latest radio and AGM audio

Pokies, Cornwall and NAB AGM join our video blog specials

From the archives of The Mayne Report video blog we have added 3 more playlists to this collection of special edition videos. The new additions are our Pokies collection, Cornwall cartoons and the NAB 2009 AGM which was a lively affair.

Mayne Report RSS Feeds

The Mayne Report now has RSS feeds for you. We have bundled our best articles into a simple and easy delivery for you. Add an RSS feed to your personal reader, iGoogle, MyYahoo, or blog. It's quick and easy to do and means you're always up to date with our activities.

Sign up for Mayne Report Tweets

We have only been twittering for a few months, but now have 1,105 followers and are regularly dropping out the latest developments from AGMs, capital raising plays and even Manningham Council. Sign up below to get the latest updates from all our activity and check out some of the latest tweets:

2.01pm March 19: Sky Business View at 2pm discussing the week in business and finance

12.54pm March 17: Madden has changed Manningham's planning scheme enabling Green Wedge nursing home chaired by dep mayor Fred Chuah to be tripled. A disgrace!

10.29pm March 16: Regular chat on 774 ABC Melbourne discussing the housing bubble http://video.maynereport.com/audio/774_170310.mp3

12.49pm March 16:
Deputy mayor's nursing home expansion at the heart of another fractious Manningham council briefing last night. Issue coming to a head soon.

8.33pm March 11:
chatting to Derryn Hinch on 3AW about political nepotism http://video.maynereport.com/audio/3AW_120310.mp3

7.06pm March 11:
Will be chatting to Derryn Hinch on 3AW after 5pm about political nepotism after Herald Sun revealed 4 Brumby relatives on public payroll.

3.21pm March 4:
Gave Woolies, Mathieson and Clubs NSW another well-deserved spray in Crikey today over tax rorting. Read here: http://www.maynereport.com/

3.38pm March 8:
Delighted to see David Jones appoint second female director after big AGM spray last November. Listen here: http://www.maynereport.com/

11.30pm March 8:
Just sent out lively email edition, leading with yarn about $2m funds freeze for QLD ALP. Check it out here: http://www.maynereport.com/

8.21pm March 6:
Went to WNBL grand final yesterday and sad to to see Bulleen Boomers lose to Canberra in a cliff hanger. Huge noise from hail at the death.

3.21pm March 4:
Camp Seven making veiled legal threats after yesterday's Crikey so have written a lively square up piece for today's edition. Don't miss it.

That's all for now.

Do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here. Alternatively, click here to send us an anonymous tip.