The new prime minister’s celebrated missteps and misjudgments … Blunderbuss … Overplaying his Costigan hand … Trauma at Tourang … Goldman Sachs and FAI … Not-so-ancient history
FROM menacing bully to consensus leader who promises to reintroduce civility to politics and to consult, consult, consult.
From snarler to charmer in one sociopathic conversion. This is the journey that Malcolm Turnbull has made, not altogether comfortably. Surrounded by a world full of idiots and lesser beings he must have bitten his tongue till it bled, as he contain his impatience and his overweening sense-of-self.
It was all a matter of time for the inevitable ascension. At age 21 he was telling people he would be prime minister by the time he was 40. Journalist David Dale asked him, “For which party”? “It doesn’t matter,” replied Turnbull.
There’s been a fair degree of myth making along the way. Reporters frequently refer to him as a former barrister. He was too impatient for that and bumptiously let it be known that as far as he was concerned the Sydney bar was full of second raters.
In fact, his career as a barrister lasted barely two years before he sailed off to work in-house for Kerry Packer. It was Packer who refined Turnbull’s business skills and the art of menace.
Journalists who had dealings with Turnbull at the time were invariably threatened with injunctions or libel actions if he believed they might step out of line.
He waged a war against the former editor of The Economist over something the magazine wrote about Turnbull’s role as an adviser to the insurance company FAI.
In 2008, when he was leader of the opposition he claimed that Kevin Rudd has libelled George W. Bush by privately referring to the president as a “fool”, apparently for not knowing about the G20.
When he was an adviser in 1991 to the a group of junk bond holders who had sunk $450 million into Warwick Fairfax’s disastrous takeover of his family’s media business, he let it be known to certain employees of the venerable newspaper company that he wanted to “clean-up” Fairfax and some of its journalists along with it.
He’d dealt himself into the Tourang consortium alongside Kerry Packer, Conrad Black and the US private equity group Hellman & Friedman.
At this stage he was running, with former NSW premier Neville Wran a merchant bank, Turnbull & Partners, which until Nick Whitlam left in 1990 had been known as Whitlam Turnbull, or as Diamond Jim McClelland called it “the Nick & Nifty Bank”.
In order to get the purchase of Fairfax past the cross-media ownership rules Packer had to keep schtum about his real intentions. He was portrayed as a silent investor who would have no management or editorial control over the company. The truth was very different.
Tensions within the Tourang consortium became acrimonious, and Packer’s right-hand man, Trevor Kennedy, along with Turnbull were pushed out of the group.
Turnbull was livid. “It wasn’t the conduct of someone I’d been friends with for 17 years … Each of us has to live with the consequences.”
And for Packer there were consequences. The Australian Broadcasting Authority was on the case. Turnbull leaked to the head of the media regulator, Peter Westerway, the contents of notes compiled by Kennedy, which revealed that Packer had misled a parliamentary committee about his true role in the takeover of Fairfax – which was to exercise control over the company.
Two days later Packer withdrew from the Fairfax bid. Turnbull claimed that what he did was in the interests of the bondholders, a claim that was nonsensical because the fate of the bondholders did not ultimately depend on Turnbull betraying Packer.
Turnbull had worked for Packer as company secretary and in-house counsel between 1983 and 1985. He dealt with much of the fallout from the “Goanna” corruption allegations that emerged from the Costigan Royal Commission into the Federated Ship Painters and Dockers Union.
It was here that we saw another of Turnbull’s missteps. Packer had commenced defamation proceedings in the NSW Supreme Court against Douglas Meagher QC, Costigan’s counsel assisting.
He alleged that Meagher had leaked compromising material to The National Times newspaper that damaged Packer’s reputation.
The case clearly didn’t have legs because later Packer filed a notice of discontinuance. Meagher sought to have the notice struck out and the case dismissed as an abuse of process.
“Meagher and Costigan have conducted themselves most reprehensibly in failing to stop an unauthorised and illegal leak of information, which was inevitably going to do immense or irreparable damage to the reputation of Kerry Packer.”
Not bad coming from someone who six years later did damage to Packer by an unauthorised leak of information.
On the day the statement of claim was issued Turnbull told the ABC’s AM program that he had “significant evidence” that Meagher leaked these documents.
There were never any particulars provided to the court of this “significant evidence” and the failure to provide them was not explained.
It was a brazen attempt by Turnbull to crash through and Justice David Hunt found that there had been an abuse of process. Packer’s in-house lawyer, the judge said, had “managed effectively thereby to poison the fountain of justice immediately before the commencement of the present proceedings”.
Failures of judgment are not uncommon among strong-headed young men in a hurry. One such favourite occurred during Turnbull’s time doing bits and pieces for The Bulletin.
“It is refreshing, if not surprising, to find someone who maintains that most pellucid of novelists, Anthony Trollope, owed his literary style to the law … The book provides a fresh insight into the novels of Trollope and to an explanation for his style.”
All very well, except that in an elementary lapse of protocol Malcolm forgot to reveal to his readers that he was reviewing his mother’s book. The standard declaration of self-interest that students of journalism 101 are taught did not apply to Turnbull.
In fact, the paper and the Clancy columnist who pointed out this lapse received a ticking-off from mother and son.
His days as managing director and chairman of Goldman Sachs Australia were associated with grief as a result of Turnbull and the investment bank acting as advisers to FAI, both before and during a takeover by HIH – during the late 1990s.
Three years after purchasing FAI in January 1999 for $295 million, HIH collapsed with debts of $5.3 billion.
What had been in contention was Turnbull and Goldman’s advice about the true value of FAI, one of the issues explored by a subsequent Royal Commission headed by Justice Neville Owen.
As part of considering a number of options for the future of FAI, Goldman had conducted a thorough examination of the business run by Rodney Adler and concluded that the bank itself should not invest in the company as part of a privatisation plan. That information was not provided to the full board of FAI.
The Australian arm of the investment bank in a message to Goldman Sachs in New York said:
“We estimate that the true net assets of FAI (that is after write downs and unwinding of reinsurance contracts) is approximately $20 million, compared to a stated book value of $220 million.”
Later, when the HIH takeover discussions commenced Turnbull advised Rodney Adler against retaining an independent financial expert who would advise on valuations. He wrote:
“It may not be in FAI shareholders’ interests to have such an investigation conducted and presented in the Plan B … [FAI’s] directors will have the benefit of advice from Goldman Sachs upon which to rely.”
Subsequently it emerged that FAI’s accounts had been artificially improved by use of reinsurance policies so as to cover a prospective $50 million loss for the year to June 1998. The device converted that loss into a $8.6 million profit.
Four months after Turnbull had privately advised Goldman Sachs in New York that FAI was worth $20 million, the company was purchased by HIH for $295 million.
There was a rowdy episode in federal parliament when the then Minister for Financial Services, Chris Bowen, answered a Dorothy Dixer about the member for Wentworth’s role as corporate advisor to FAI.
The royal commission did not apportion blame to Turnbull or Goldman about HIH paying an over-inflated price for FAI – something that Turnbull claimed put to rest serious allegations that had been made against him by the commission’s counsel assisting, Norman O’Bryan.
What Turnbull did not quote in his public self-justification was this portion of the Royal Commission’s findings:
“It would have been of assistance to the directors of FAI to have known that Goldman Sachs Australia (GSA) had spent considerable time in the course of 1998 analysing a very similar proposal in which Goldman Sachs might invest its own money but had decided not to proceed with it.
Such information should have been revealed to the FAI board by a financial or corporate adviser like GSA because it would have assisted the directors to decide whether to appoint GSA as their financial adviser on the takeover.
It would also have assisted the directors in forming their opinions about the viability of the ‘break up and sell clean general insurance company’ proposal which presented by GSA as a potentially more attractive alternative than the takeover.
The fact that these matters were not revealed to the board of FAI is regrettable. This is particularly so in light of the evidence of some directors that it might have affected their attitude to the appointment of GSA.”
In his haste to announce that the commission’s report “has exposed as completely false the campaign waged against myself and Goldman Sachs by counsel assisting the commission”, he forgot to include the adverse remarks made by Justice Owen.
Instead, he went on to bash-up counsel assisting, as he had done years earlier in the instance of the Costigan Royal Commission:
“I have very grave reservations about the conduct of certain of those assisting the royal commission.”
He complained, again with overtones of his old gripe against Douglas Meagher, of the “relationship between the commission staff and the press”.
“In my view this was intimate, if not incestuous”.
A case of déjà vu, all over again.
While the royal commission may have wrapped up its recommendations with no adverse consequences for the FAI adviser, the HIH liquidator commenced a $500 million civil action against Turnbull and eight other defendants, including Goldman Sachs Australia.
Turnbull said that the liquidator’s case was a “baseless claim, which seeks to revisit matters rejected by the HIH royal commission”.
This was not strictly correct, as the point the liquidator focussed on in his litigation was the same criticism made by Owen about the failure to inform the non-executive directors of FAI about the true net worth of the company.
Nonetheless, in May 2009 Turnbull became the first leader of the opposition in Australia to be a party to one of the largest corporate liability settlements even seen in Australia.
All of this is not-so-ancient history, but history that may help inform us about future exciting possibilities.
Inquiry into media ways sure to test Fink tank
A sureness that weakens Turnbull’s case
Public comment on the HIH Royal Commission report by Malcolm Turnbull