State Of Unholy Matrimony - When Govt Merged With Business

Sydney Morning Herald

Tuesday November 8, 1988

By PETER SMARK and MARK SKULLEY Mark Sculley wrote last story

WA Red Ink was the merging of two worlds - Brian Burke's ALP mates and the new money in Perth, a small town with small town ways where deals are done face to face. Regular contact between Labor and business saw the line between the worlds begin to blur and, eventually, the only way to distinguish between Government men and businessmen was the make of their cars (Laurie Connell has a Porsche).

Now Burke's successor, Peter Dowding, says things will change. Well, the next Rothwells, whatever it might be, won't be bailed out, but severing the corporate State into two separate entities is another matter. This has not just been a marriage of convenience: Labor and big business here really love one another.

Mr Dowding's announcement yesterday of a new Commission on Accountability, under a former Chief Justice, Sir Francis Burt, was allied to a range of moves to tighten supervision of spending by Government agencies and a strengthening of the State Corporate Affairs Department. Perestroika has come to WA. But, as with its advent to the Soviet Union, there are many sceptical people who wonder if an imaginative public relations campaign on the issue really means a fundamental change of hearts and minds.

Brian Burke remembered his mates and took them with him when he climbed to power in 1983. His long-time PR man, Darcy Farrell, became his media supremo. It was Farrell who produced the first election slogan - "Brian Burke - the best new leader in Australia". Farrell eventually moved on and became a spokesman and director of Laurie Connell's Rothwells.

Burke plucked an old uni mate, Tony Lloyd, from an assistant town clerk's job and shoved him into a souped-up Premier's Department. Lloyd later worked as Burke's director of policy, assistant under-treasurer and as a commissioner of the State insurance company, responsible for hundreds of millions of dollars and not just policing the Dog Act. Lloyd was a key figure in the original rescue of Rothwells, left Government and became managing director of that ailing, and now sunk, company.

Another old uni mate of Burke's, Kevin Edwards, was taken from a union post and was eventually crowned head of the Premier's department and thrust on the boards of the State-owned insurance company and the State super board. Edwards is still in Government, but evidently has a liking for business - he was the key figure in the State insurer buying and selling a slab of BHP.

There are other names from the past of Brian Burke, since February Ambassador to Ireland, once spoken of as a future senior Labor figure for Canberra, but now a forlorn figure. Some mates have been and gone such as the former head of the State Superannuation Board, Len Brush, who was acquitted in April on charges of forgery and corruption. Burke stuck by his mate and said Brush had been "hopelessly naive and foolish", but had done nothing illegal.

Others are still sprinkled through the Government boards, authorities, commissions and sundry quangos.

But it was not just trusting and helping old friends which created the turbulence in WA. Burke and his ministers made a decision early in their time in office, five years ago, that the State's real entrepreneurial energy was generated by the new breed of businessmen personified by Alan Bond, Laurie Connell, John Roberts and Dallas Dempster.

These men were courted, flattered and encouraged. They responded in kind.

Can the two networks now be separated again? Businessmen of all kinds are spread through theGovernment quangos just as political mates have spread out into the private sector.

One problem for Peter Dowding's Cabinet is that this is a 'can do'Government. Its methods may be questioned, but not the energy of most of its senior ministers. The 'doers' here, or at least the major ones, are the very people Burke people chose to embrace.

Maybe the Government shouldn't be as close to Alan Bond, but he does own most of the Perth CBD, and much outside. He is to Perth what BHP is to Newcastle - immensely powerful and vitally important, whatever the political complexion of the local administration. Much of what Bond owns has been built by "Multiplex Jack", John Roberts, the driving boss of the big building company and a mate of the BLF.

In the wake of last October, many of Perth's smaller companies, especially those linked to high technology and innovation, have hit hard times. The Rothwells' collapse could send several to the wall. They don't really present an alternative to Big Business as an engine for growth.

The view from inside the Labor Cabinet room is that the choice for the Government is either the "four-on-the-floor" entrepreneurs, like Bond and previously Connell, or a stagnant State economy.

It's either them or trying to forge the old alliances of Sir Charles Court with the mining companies. But even in a time of higher prices for metals, some of the miners have their troubles with traditional ALP supporters, as evidenced by the disputes at Robe River and now at Mt Newman.

This is a government largely of school teachers, ambitious for the State but not wordly in the ways of business. Maybe things will change, but very likely not much. The problem for WA has always been to stop being simply a quarry and a farm.

Let's look at how Perth works: a good example is Dallas Dempster's Burswood casino "resort".

Dempster submitted grand plans of the sort Texans and Laurie Brereton would love if they were allowed to have a casino. The Government loved them. It passed special planning legislation which bypassed Perth City Council. He bought in an overseas partner, and sold shares locally.

John Roberts, of Multiplex, who has written his name across the Perth skyline, was the builder. The electrical wiring was done by the then Lord Mayor of Perth, Mick Michael. Both men were backers of Labor's John Curtin Foundation from its birth, as was Alan Bond, as was Laurie Connell, as were others of the names which pop up again and again in deals, contracts, boards, commissions.

There were cost overruns and time delays on the casino, even talk of court action against Dempster and others because the final cost was much higher than forecast in the prospectus.

The bottom line, as seen by the Government, was that the casino was quickly up and thriving, along with an accompanying giant hotel and vast convention centre, the whole lot fused in a way NSW couldn't pull off at Darling Harbour

However, a corporate affairs investigation recommended that charges be laid against Dempster and others over the cost overruns. It didn't happen. Dempster argued that prosecution would only be nitpicking which could hurt his reputation and so damage his and Laurie Connell's prospects of building a $1 billion petrochemical plant. Dempster and Connell eventually sold the project, still really only an idea, to Alan Bond and the Government for $400 million.

As a bonus, the "resort" has been allowed to grab a slice of public parkland for its new golf course.

Another example of Perth at work is the city's tallest building. Alan Bond planned it for years and owns it.

Its construction was delayed for years because the historic Palace Hotel had been a landmark on the site since the gold rushes. The hotel was classified by the National Trust and Bond was allowed to build a bigger skyscraper, provided he retained the hotel.

Today, the skyscraper soars above the gutted and revamped shell of the old hotel which will soon re-emerge as a bank. Mr Bond originally pledged to retain the hotel as it stood; what stands now is, in the words of one Perth city councillor: "A 1980s version of an historic building".

Once again, "Multiplex Jack" John Roberts did the building and Mick Michael worked on the wiring.

But these were big ticket projects. Ordinary Perth people are keen punters and many play the share market as well. They jumped into the swirling bullmarket just like the big players.

Take the invention which looked like a metal wardrobe. The blurb said you could hang your shirts in it and they would emerge fully ironed - no fuss. The invention was the main offering of a Perth "high tech" company. Its shares were snapped up, mostly by small investors. But the stores are still selling a lot of irons. Still, the day could come when there'll be one of these boxes in every Australian and American home; optimism is the fierce fertiliser of WA's growth.

Way below Alan Bond, there is an army of ambitious little entrepreneurs trying to emulate him . It's easy to laugh at some, with blond tips in their hair, moustaches, double-breasted suits, personalised number plates and body language straight out of success seminars. But there is raw energy, ambition and a slowly building pile of success stories to confuse many outsiders' views of Western Australia as a place merely of wheeler-dealers and snake oil salesmen.

The comparison inevitably is with Texas, right down to the attempts every decade to beat the boom-bust syndrome. But both keep on coming.

WA LABOR'S BUSINESS FRIENDS

In October 1984 many of Perth's leading businessmen gathered to become vice-patrons of the John Curtin Foundation, a fund-raising organisation for the ALP. Most of the vice-patrons were also involved in big business with the Labor Government.

1 Dennis Cullity, a leading Catholic layman and head of Westralian Forest Industries, the country's biggest producer of particle board.

2 John Horgan, former director and chief executive of Metro Industries, with 15 companies and a turnover of $80 million a year. Now head of the Government's WA Development Corporation and Exim Corporation.

3 Alan Bond, chairman of Bond Corporation and one-time winner of America's Cup, involved in many deals with the WA Government, including redevelopment of prime city sites and joint purchase of Laurie Connell's share of Petrochemical Industries.

4 Laurie Connell, Perth's flamboyant high-flier and a Rothwells director until a week ago. Among his best-known deals with the WA Government were the$150 million guarantee made by then Premier Brian Burke 12 months ago, which saved Rothwells for a time, and the purchase, by the Government and Bond Corp, of Connell's share in share in Petrochemical Industries for $350 million, though the company had only $500,000 in hard assets.

5 Ric Stowe, one of Perth's other type of multi-millionaire. Stowe shuns publicity despite his position as head of the Griffin Group with interests in resources and trading. A long-term supplier to the State Energy Commission. Brian Burke got into trouble for accepting a free ride to Fiji in Stowe's private plane in 1985.

6 Sir James McCusker, chairman of the Town and Country Building Society which has bought huge parcels of suburban land held by the State Housing Commission.

7 Rod Evans, leading bookmaker, a Perth City councillor and also chairman of the council's town planning committee which approved controversial project like the Burswood casino and gave generous planning concessions to Perth's tallest building, half owned by Alan Bond.

8 Kevin Parry, failed defender of the America's Cup, a victim of the crash of '87 who was dumped as chairman of Parry Corporation. He was regarded as the abrasive and unsophisticated member of Perth's financial royalty. Under his leadership Parry Corporation planned a wide range of technology and resource developments.

9 Bob Hawke, Prime Minister.

10 Brian Burke, then WA Premier.

11 John Roberts, head of Multiplex Construction, which has built a big share of the recent projects in Perth's central business district. Many are Government projects. The Queen visited his Egerton Stud when she was in Perth in April.

12 Sir Ernest Lee-Steere, establishment figure and former Lord Mayor of Perth.

QUOKKAS, BOMBS AND SANDGROPERS

PERTH: It's funny what upsets Perth people. Few appear wildly angry that their Government could lose $100 million in trying to rescue a private company, but touch their beaches or the Swan River and watch out.

CASE 1: Alan Bond's Observation City hotel is a huge $70 million development, a chunk of the Gold Coast which is Perth's sole beachfront high-rise.

Way back in 1982, the Labor Opposition called for the Liberal Government to stop high-rise development at Scarborough on Perth's northern beaches. Labor was elected and Alan Bond's hotel was approved, upsetting residents and the local ALP branches.

In 1984, the then Premier, Brian Burke, said the $70 million hotel had been approved because it meant jobs: "That policy also explains the attitude of the Government towards the (Burswood) casino." Work kicked off with America's Cup fervor, and with "Multiplex Jack" John Roberts doing the construction.

Mutterings continued, and then, in 1985, unknown malcontents tried to blow up an 80-metre tall crane on the hotel site. The would-be saboteurs used gelignite, but failed to topple the crane or noticeably slow construction.

Perth reeled. A local psychologist said a rash of controversial developments such as Observation City and the casino at the same time had probably stoked ill-feeling. He said the bomber was anti-authoritiarian and had little regard for social responsibility.

Hostility was often inflamed when the impression was gained that a few big businessmen were organising the lives of smaller people.

Security was stepped up at Observation City, although the bomber was never caught, and the hotel opened with much fanfare. Alan Bond's wife Eileen did the poolside television commercials. The WA Labor Government has since fought tooth-and-nail against further beachfront high-rise.

CASE 2: Paul McCartney called it the "rottenest island in the world" (but then he preferred the Mull of Kintyre).

Still, to locals, Rottnest, or "Rotto" as it is known, is part of local lore. The island, an hour by ferry off Perth's coast, is the holiday spot for teenagers.

One of the island's original inhabitants is the quokka, a shy, wallaby-like creature, too trusting for its own good. Closing time at the "Quokka Arms"hotel has spurred many a game of "quokka soccer" in which the hapless marsupials are kicked around like balls - a reminder to easterners that this is a richer, more piquant culture than they are used to, and that dwarf-throwing is not the only quaint aspect of the Australian character.

But Rottnest also has quiet bays and family picnic spots. It, too, is a favourite haunt of the Perth's new rich. The island has produced some of the few clashes between the Porsche-BMW set and the drivers of five-year-old Fords.

It still rankles that a treasured bay was turned into a "millionaires'cove" in 1984 when boat moorings were given to a fleet of tycoons, allowed to jump a long queue of lesser mortals.

Further uproar over the "people's paradise" followed when a report to the Government suggested Rotto should follow the Gold Coast example.

The people won a reprieve. It was a sensitive issue, but luckily Premier Brian Burke was chairman of the island's controlling board. Burke appointed casino millionaire Dallas Dempster as his deputy chairman and Dempster was made chairman of the revamped board in May by Burke's successor, Peter Dowding.

Laurie Connell also likes to relax at Rottnest. He and millionaire builder"Multiplex Jack" John Roberts have been known to race their luxury launches back to the mainland. Connell once demanded a faster boat after finishing second in a two-boat race.

The friction between classes at Rottnest continues. Recently, a reef was illegally blown up near moorings for flash boats, leading to howls of outrage and charges that the rich would do anything to make it easier to go anywhere in their boats. But a police investigation has failed to find who was responsible.

There also has been muttering from some people about Laurie Connell being allowed three years' exclusive use of two historic cottages in return for spending $125,000 doing them up.

COMMISSION TO EYE FUTURE WA GOVT DEALS

PERTH: The West Australian Government is to inquire into its investment activities - but not how it could lose $100 million or more from the fall of Rothwells Ltd.

The Government said yesterday that a five-member "Commission of Accountability", chaired by a former Chief Justice, would investigate its investment practices.

The commission, however, will not investigate past dealings by the Government, such as its $150 million guarantee in the original Rothwells rescue last year.

The Premier, Mr Peter Dowding, said yesterday there was "obviously a need to restore public confidence in the Government's investment decisions".

"If the issue is about perceptions, then WA Inc is dead. WA is alive and well," he said.

The commission will report to Mr Dowding, but it appears the report will not be made public and that it will hear evidence behind closed doors.

Meanwhile, the whereabouts of a $15 million payment from the WA State Energy Commission to Western Collieries Ltd was still undisclosed yesterday.

Mr Dowding, who is also the WA Treasurer, said he knew a cheque from the SEC to Western Collieries had been presented to a financial institution, but he did not name which one. "It is a matter for the NCSC or the provisional liquidator," Mr Dowding said.

Rothwells had arranged to buy Western Collieries, a WA coal miner, for $132 million from CSR, but still owed $76.5 million when it went into provisional liquidation last week.

The SEC agreed to pay Western Collieries in advance, in return for cuts on the price of coal.

However, CSR said on Sunday the cheque for $15 million had been placed with an unnamed institution, without the knowledge of Western Collieries'independent directors and management.

Both the National Companies and Securities Commission and Rothwells'provisional liquidators, Ferrier Hodgson and Co, said they were also interested in the cheque's whereabouts.

A Government spokesman said it had "no problem" with the cheque because legal advice was that it had been paid to Western Collieries.

Perth-based land developer Katanning Holdings Ltd was suspended at its own request as a result of the Rothwells collapse. It follows voluntary suspensions by Beltech Corporation and Portman Mining Ltd.

The Perth Stock Exchange said Katanning's directors had asked for the suspension "in view of the company's reliance on financial support from Rothwells Ltd".

Rothwells lifted its stake in Katanning to about 32 per cent in July after it swapped shares in satisfaction of a loan from Mallina Holdings. Perth casino millionaire, Mr Dallas Dempster, is Mallina's second biggest shareholder.

Meanwhile, Mr Laurie Connell announced his resignation as head of two State Government meat industry authorities.

WA Agriculture Minister Mr Julian Grill said Mr Connell had resigned from the two Government bodies because of other commitments.

NCSC deputy chairman, Mr Charles Williams, said yesterday the commission was also taking a "very keen" interest in whether Rothwells' directors had neglected their fiduciary duties.

"Auditors certainly have a look at that, or information which may lead to conclusions about the officers of companies, and so do liquidators," the deputy chairman of the NCSC, Mr Williams, said on Perth radio.

"Where we are now is in taking a very keen interest in the conduct of the officers of the companies involved. They have some heavy responsibilities upon them ... in relation to acting honestly and for the good of the company."

Mr Connell's private company, Oakhill Pty Ltd, failed in seeking an injunction stopping Standard Chartered bank's selling off 150 million shares in goldminer Paragon Resources NL.

The WA Supreme Court rejected an application from Oakhill to restrain Standard Chartered from selling the shares.

© 1988 Sydney Morning Herald

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