Dirty Rotten Scoundrels

by Matthew Benns

  At the ANZ bank, the volatile trading of NAB’s currency cowboys was ringing alarm bells. There were whispers of phoney trades to cover huge losses. ANZ took its concerns to NAB, who put it in the hands of Gary Dillon, joint head of NAB’s foreign exchange operation. He personified the arrogance of the BOATs. His response was to dismiss ANZ’s concerns as an intrusion, and to threaten to end all dealing relationships with ANZ and any dealer it used. When the scandal was later exposed, new CEO John Stewart described Dillon as being ‘asleep at the wheel’. Disdainfully, he added: ‘I didn’t hesitate for one heartbeat to sack him.’

  At $160 million, the losing trades were getting out of control. The whistle was eventually blown by junior members of the team, ‘London Stench Boy’ Dennis Gentilin and junior trader Vanessa McCallum. ‘My greatest fear was, if nothing is wrong, I’m going to have to leave the desk because you had to be loyal to Luke [Duffy],’ said McCallum afterwards.

  Sentencing Duffy to at least sixteen months’ jail, Victorian County Court Judge Geoff Chettle said personal ambition, arrogance and a misguided sense of untouchable superiority had led him to make the trades that had spun into ‘financial chaos’. ‘No doubt your trading became more frenetic and desperate as you strove to rectify the mess that you had created,’ Judge Chettle said. ‘You and your team saw yourselves as invincible and justified in your criminal conduct by asserting that your principal motives were to make money for the bank. That is simply no excuse.’

  And NAB had to take a share of the blame: ‘The offences were committed by you in a culture of profit-driven morality. To proceed, you had to take risks,’ he said.

  All four of the not-so-invincibles did a stretch in the big house. NAB punted CEO, Don Argus; head of risk management, Chris Lewis; executive general manager of corporate and institutional banking, Ian Scholes (who trousered $2.5 million before his exit); and head of the markets division, Ron Erdos. The last two were axed even though they had no knowledge of the true nature of the dodgy trades.

  NAB set about cleaning house and tightening up its internal checks and regulations, but, clearly, as we saw just a few years later with Lukas Kamay, its greed-driven corporate culture was here to stay.

  * * *

  Over the last twenty years, the majority of Australia’s insider traders have been caught from a tip-off or been inadvertently swept up in a larger investigation and discovered by accident. Of course, it doesn’t help if the corporate cop who is meant to be policing this area is on the fiddle himself. That’s exactly what happened with Kian Lang Teh.

  Teh was working for the National Companies and Securities Commission (NCSC), the corporate watchdog forerunner to ASIC, in the early 1990s. His job was to check confidential company documents that were sent in to NCSC for assessment. Naturally, they contained highly sensitive information that would give someone an enormous advantage if they knew what company moves were going to happen beforehand. Teh used that information for his own gain. For this horrendous breach of trust, he was given a sentence of just three months’ full-time imprisonment and a fine of just over $36,000. The punishments for insider trading have seldom worked as a deterrent.

  In 2004, flamboyant cigar-smoking stockbroker and financial wizard Rene Rivkin was given a sentence of just nine months’ periodic detention for insider trading on Qantas shares, from which he earned just $346.

  But Rivkin’s world had been unravelling for at least a decade prior. The stockbroker made a fortune in the 1980s and was famous around Sydney for his flashy cars, extravagant watches, gold worry beads, multi-million-dollar properties and coterie of buffed young men who went with him everywhere. In 1995, he came to the attention of the corporate watchdog over his shares in a printing company called Offset Alpine, which mysteriously burnt down after being insured for far more than its value. Questions swirled around the mysterious death of a beautiful young woman called Caroline Byrne, the girlfriend of his chauffeur, Gordon Wood, who was the subject of lengthy police investigations but was ultimately acquitted of her murder. Questions were also asked about a parcel of shares Rivkin owned with Labor powerbroker Graham Richardson and businessman Trevor Kennedy. The shares were discovered in Swiss bank accounts, which only came into the open when the head of the Leumi Bank in Switzerland was arrested for embezzlement.

  As things fell apart, Rivkin, who suffered from depression and bipolar disorder, took to bouts of uncontrollable crying in a darkened room. Earlier, after having a brain tumour removed, he said: ‘It’s not that I thought I was immortal … but that I could never imagine the world without me.’

  He had to sell his assets, including the Embassy Nightclub in swanky Double Bay and his art collection, and he also had to secretly divorce Gayle, his wife of 30 years. He was 60 years old and living back at home with his 87-year-old mother when, just like his father before him, he took his own life. Almost a decade later, his $39-million bankrupt estate was wound up after investigations into offshore tax accounts in Jersey, London and Switzerland failed to turn up all of his cash. At least $11 million had mysteriously disappeared.

  My Word is My Bond (and It’s Not Worth a Cent!): Alan Bond

  AS a cub reporter coming to Australia for the first time in 1987, I landed a gig on The Australian. It was the lead-up to the Bicentennial and a great time to be in Sydney. Australia was riding the 1980s’ wave of success, and everything big and brash was wonderful. And, of course, Bob Hawke was the prime minister. It was a time when having a notorious lothario and larrikin who could drink a yard of lager quicker than most men as the leader of the country was considered a badge of honour.

  As a young pom, I had the barest superficial grasp of the world I had entered. One Friday, when the rest of the staff had repaired to a local restaurant, the Malaya, for their customary long lunch, I remained sitting alone in the newsroom. Brian Woodley, the lanky chief of staff from New Zealand, loped over and dispatched me to cover a lunch at Fort Denison. That was the extent of the briefing. In the lift, I bumped into the tall blond tanned photographer who would be accompanying me, and breathed a sigh of relief that Adrian Brooks was clearly the quintessential Aussie. Until he opened his mouth and said ‘G’day’ in a British Home Counties accent. Neither of us had a clue.

  The prime minister flew in by helicopter from Mount Druitt, where youth unemployment at the time was running above 50 per cent, to the lavish luncheon at Fort Denison, where he would be met by Alan Bond. Mr Bond was presenting a $12-million gift to the nation, a replica of Captain Cook’s barque the Endeavour. The event was covered on Ray Martin’s Midday Show on the network that Bond happened to own — Channel Nine. There they were, Hawke and Bondy, as he was affectionately known, together at a Captain Cook–themed event and both delighting in every moment. Hawke did not hesitate to praise the entrepreneurs who made money for themselves while creating jobs and wealth for everyday Australians. ‘It would be a condemnation of our society if we did not recognise the enormous contributions of the Alan Bonds and other great entrepreneurial risk-takers of this country,’ said Hawke.

  Bondy was signing over the gift with a quill, in keeping with the Captain Cook theme. Adrian grabbed a tricorn from one of the costumed ‘guards’ standing around the room and handed it to him to put on.

  ‘Go on,’ I urged. ‘It will be great for the photo.’

  Bondy popped it on, Hawke laughed and Adrian took the shot. And there it was on the front page of the paper — the PM and the Pirate. Unwittingly, we had summed up the mood of the nation. There they were, a couple of lovable scallywags, at least one of whom was a total buccaneer. We just couldn’t prove it yet.

  * * *

  Four years previously, Alan Bond and Bob Hawke had been the toast of the nation on the back of Bond’s America’s Cup victory. ‘Any boss who sacks anyone for not turning up today is a bum,’ declared the prime minister at dawn in Claremont, Western Australia. Like the rest of the country, he had been up in the early hours of the morning to watch the yacht Australia II take the America�
�s Cup from the Americans for the first time in 132 years. The money, brains and enthusiasm behind that stunning victory on 26 September 1983 was Bond, a ten-pound pom who had gone on to become the epitome of the bold boisterous Aussie taking it to the big boys.

  And how we loved Bondy. Look at the commentary at the time, the newspaper headlines — the Daily News screamed ‘It’s Ours’. Bond was a working-class hero we could all relate to. It was his fourth attempt at winning the coveted cup, his first being nine years earlier in 1974 when he was just 34 years old. ‘He was tenacious. It was said by crew members of Australia II that Alan never knew when to give up. So he was tenacious. And I was grateful [to him], as I think all Australians were, for lifting the spirits of our country,’ said Mr Hawke.

  Bond took on the stuffy world of the New York Yacht Club at Newport, Rhode Island, with a green-and-gold boxing kangaroo flag and the Men at Work hit ‘Down Under’ blaring over the classical arrangements used by rival boats. Aussies wandered the cobbled streets and packed the bars as Alan and his wife, Eileen, threw parties and gave impromptu interviews that reflected an indomitable Aussie spirit. The Americans did not really countenance losing, even when the Australians wheeled the yacht out with a skirt wrapped around her winged keel to keep her mysterious powers secret. By the fourth of the seven races, the US team, under skipper Dennis Conner, was holding a commanding 3–1 lead and only needed one more to win.

  ‘Don’t count us out,’ Bond told reporters. ‘We had our backs to the wall at the battle of Gallipoli and we won that one.’

  Well, actually, we didn’t.

  ‘The point I meant to emphasise is that Australians hate to give up,’ he recovered.

  Australia II, under skipper John Bertrand, clawed her way back to even the scores. It was down to a nail-biting final race that was broadcast live, just before dawn in Australia. It seemed like the Americans were going to keep the cup, when, on the downward run of the second-last leg, Australia II took the lead. It won by 41 seconds and united a nation.

  ‘I’m told the country stopped when we crossed the finish line and I’m still amazed at some of the stories I hear of how people celebrated,’ said Bertrand, who praised Bond’s resilience and never-give-up attitude as the driving force for the victory. ‘You have to remember that Australia was in a tough economic recession at the time; there had been devastating bushfires and drought, and the country was in many ways on its knees … I’m told more people became citizens as a result of that day than ever before or since. They wanted to be a part of this country for the first time.’

  As the dinghy pulled alongside Australia II to allow Bond to clamber aboard and start uncorking the champagne and cracking open the Swan Lager, he could not have predicted what the success would do for his business empire. This was the little guy who took on the American giant and won. He could do no wrong, banks loved him, and they happily tipped money into his pockets to fund his business deals. The only problem was that Bond, one of Australia’s greatest salesmen, viewed loaned money as being as good as a profit and he spent it with no thought given to ever paying it back. Winning the America’s Cup was Alan Bond’s greatest triumph, but it launched him on a path to disaster.

  * * *

  Bond arrived in Australia as an eleven-year-old in a tweed suit in 1950. Later, he would tell an interviewer the port in Fremantle in Western Australia made him feel like he had landed on the moon. He arrived with his mother, Kathleen, a clerk, and his father, Frank, who filled in time as a butcher, builder and milkman.

  His old neighbours in London recalled the young Bond as a tearaway who would regularly be brought back home in a police car. In Australia, he carried on where he had left off, getting caught for petty theft. His despairing father predicted his son would either end up the richest man in Australia or in jail. He was right on both counts.

  Bond left school at fourteen, an arrangement that was satisfactory to both parties. He would later say that he went to school on a scholarship and could speak four languages, a boast that only proved just how powerful his imagination and ability to dream really was. In truth, he was bottom of the class, and used to hand out sweets to try to buy friends.

  He started an apprenticeship with Parnell Signs in Fremantle, but his career with the firm was cut short when the boss found Bond was undercutting Parnell Signs and offering a cut-price service to the firm’s own customers. Instead, Bond went out on his own, setting up rival company Nu Signs. He bragged later that he employed a hundred people and spent his evenings doing an accountancy course. His unofficial biographer, journalist Paul Barry, said neither claim was true.

  Certainly money was tight. In 1956, an eighteen-year-old Bond was arrested again on charges of being on premises and reportedly admitted that he was planning to rob a house. It was not an auspicious start for a young man who also had responsibilities — a year earlier, he had married Eileen Hughes whom he had met at a ballroom dancing class in Fremantle.

  But then it all changed — at 22 years old, Alan Bond discovered the real estate market.

  He borrowed big to buy up a bush block fifteen kilometres to the east of Perth that the owner was having trouble selling. Bond renamed the block Lesmurdie Heights, took out giant ads announcing a land sale and had the punters rolling in. The sand hills next door looked drab and scrubby, so he had them thinly coated with bitumen and sprayed green so that they would look good in the photographs for his glossy brochures.

  To fund the property, he borrowed money and took more from his struggling Nu Signs business, making up the difference by simply not paying his creditors. He told an employee who asked if he ever intended to pay back the people to whom Nu Signs was in debt: ‘No, it’s cheap money.’

  Paul Barry, who wrote The Rise and Fall of Alan Bond and Going for Broke: How Bond Got Away with It, said this would become Bond’s modus operandi for building his empire, but with much bigger sums of money. The man had a pathological hatred of paying back debts; instead, he used the money from one deal to fund the next. Barry wrote in The Australian after Bond’s death that Perth’s businessmen had been astonished when, the very next day after Bond had persuaded them not to make him bankrupt, he had paid out thousands of dollars for more real estate. ‘Yet to Bond this all made perfect sense. Having bought the land for, say, £10,000, he could then persuade a friendly valuer to say it was worth twice that much, whereupon he could borrow £16,000 from a finance company to purchase the block and pay off his most pressing creditors,’ wrote Barry.

  In this way, Bond skipped from audacious deal to even more breathtakingly bold deal, just missing out on bankruptcy in 1963, 1968, 1974, 1978 and 1983. Nu Signs rolled into Lesmurdie Heights, which ultimately became Bond Corporation.

  He was a shrewd negotiator. In 1973, he bailed out Jim Jamison’s Mineral Securities by buying its best asset, iron ore mine Robe River, for almost $20 million. Jamison wanted to settle with his creditors without a flurry of court cases. Bond knew that Jamison wanted to stay out of court and so would not want to scupper the deal. For many nights, Jamison would sit in his office waiting for Bond to arrive and make payments — only he often never showed up.

  From there, Bond bought 37.5 per cent of Santos for $36 million, but he only put $11 million down as a deposit. The South Australian government was desperate to stop him from taking control of the oil and gas company. South Australian mines and energy minister Hugh Hudson said: ‘If Mr Bond feels in a position of strength, he will threaten and attempt to govern by fear. Once he knows the cards are stacked against him, he will plead and give assurances without limit.’ The government passed legislation restricting ownership, and Bond moved on with a $100 million profit because of an oil strike in the Cooper Basin.

  Bond used the money well, taking over the Swan Brewery and then building it into a brewing empire by buying Castlemaine Tooheys for $1.2 billion of borrowed money. He now controlled 40 per cent of Australia’s beer market.

  For anyone who knows Australia and its love of beer, it i
s hard to imagine ever running an Australian brewery and going broke. But Bond managed it.

  The pub landlords who leased their premises and took their beer from Bond’s Tooheys brewing empire were certainly not among those who shed any tears for the tycoon when he eventually came crashing to earth. After Bond took over, they were told that they no longer had any interest in their own pubs. These were hard-working honest battlers who had invested their lives into their businesses. They were not happy to be told that when their leases were up, they would lose everything. According to Barry, when his brewery managers raised the leaseholders’ objections with Bond, he said: ‘Burn the bastards.’ At least one pub leaseholder took his own life before they won a moral and legal victory in the courts.

  In 1987, Bond negotiated with Australia’s richest man, Kerry Packer, for control of the Channel Nine television stations in Sydney and Melbourne. A year earlier, treasurer Paul Keating had ended the ban on anyone owning more than two television stations. Bond already owned Channel Nine in Perth and Brisbane. He told Andrew Denton in a television interview that he could see the cost benefits of joining the networks together. ‘We sat down and [I] said [to Packer]: we’re either going to sell our stations to you for $400 million or you’re going to sell your stations to us,’ he said.

  Packer was not interested in buying any more stations, and would only consider selling his two Channel Nine stations, which were at the time the top-performing stations in Australia, at the right price. ‘Listen, if you can pay me $1 billion, I’ll sell them to you. Otherwise, bugger off,’ Packer told him.

  Bond went to NAB chief executive Don Argus and pitched the idea of bundling the stations together with other media assets, including Sky Channel, and calling it Bond Media. His plan was to pay for it by floating the company on the stock exchange. Argus bought in and agreed to help finance the deal. Bond had thought he could beat Packer down to $800 million, but in the tough-talking billionaire he had met his match. Packer took $800 million with a $200 million payment to come.