Dirty Rotten Scoundrels

by Matthew Benns

  Meanwhile, in the rest of the world, BHP was not faring any better, and a year later, in 1997, the wheels well and truly came off. Project costs were over budget, three top iron ore executives were shown the door and the charismatic head of BHP Petroleum, John O’Connor, followed within 48 hours after he argued the oil division be publicly floated in direct defiance of the wishes of the board. The man brought in to bring matters back under control and sort out the mess was an outsider, Phil Aiken, who had made his name at car component and hose pipe manufacturer BTR Nylex. He quickly got to work, started massive new projects in the Gulf of Mexico and got BHP back on track. He also inherited Davidson Kelly, who was still eagerly pursuing the three billion barrels of oil sitting in the Halfaya oilfield.

  Two-time Congressional Medal of Honour winner Major General Smedley Darlington Butler said in a speech in 1933: ‘War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.’ If ever there was a man to prove this was true, it was Davidson Kelly, who certainly saw himself as one of the few.

  Aiken was not that bothered about Iraq. The turmoil on the ground meant that getting to the oil underneath it was too much trouble. Davidson Kelly picked up the vibe; his emails to Aiken would often have the subject line ‘Your favourite country’. Davidson Kelly banged on repeatedly about his plan to help Iraq build an oil pipeline to Turkey. Aiken said no. Davidson Kelly pushed on with his plan anyway. Aiken was furious. ‘I was of the opinion that Iraq got a big red light in July and I expected that all such efforts were being closed down. It is not much use us agreeing to something and doing something else, particularly in light of the current trading situation,’ he fired off in an email to Davidson Kelly. Boy, was he having trouble with that one.

  Naturally, when the opportunity to get shot of him came up, Aiken jumped at it. Of course, Davidson Kelly had an angle. He suggested ‘an elegant exit’ for BHP from the troubled region. His own Gibraltar-registered company, Tigris Petroleum Corporation, would take over all of BHP’s rights and interests in Iraq. While these were probably not worth a lot at the time, they would possibly be worth a motza in the future. But Davidson Kelly had that one covered — he would give exclusive rights to BHP if it ever got any oil out of the ground. And — here was the clincher — he would also act as debt collector on the outstanding money owed on the wheat shipment and give BHP 25 per cent of anything he collected.

  This was all excellent — except wasn’t that wheat shipment a gift of humanitarian aid that had been written off the books? Somehow Davidson Kelly had just turned it back into a debt.

  The wheat was a long-forgotten loss to giant multinational BHP, but to an avaricious little fish like Davidson Kelly it represented — taking in interest owing on the debt — a nice $8-million windfall. The fly in the ointment was that, if the deal was truly as presented in Davidson Kelly’s ‘elegant exit’, then BHP had delivered the wheat in breach of the UN sanctions. BHP’s lawyer John Lyons has subsequently admitted that he missed that crucial point when he advised Aiken to agree to the deal. ‘I was more concerned about BHP not being directly involved in Iraq,’ said Lyons. ‘The shipment of wheat was something I never really worried about, it was a nothing issue. In hindsight, it wasn’t. I should have worried about it.’

  On the day the contract appeared on Aiken’s desk, his mind was on other matters too. ‘The day I signed that agreement, that Tigris letter, I was actually rushing to Sydney because my mother was very sick and in fact died a week later. I just acted on advice that maybe wasn’t the best advice I could have been given,’ he said. The scandal that eventually followed took a heavy toll on Aiken, who was not even at the company when the wheat was delivered to Iraq. He later moved to England, and the next man in his chair got the recognition for the projects he had started.

  Once the agreement had been signed, Davidson Kelly used the wheat debt to try to pressure his contacts in Iraq into allowing him to develop the southern oilfields. But by 2002, war looked inevitable and that meant all of those carefully cultivated contacts within the palaces and ministries of Saddam Hussein’s Iraq would be worthless. Davidson Kelly needed another avenue.

  After the American-led coalition troops went into Iraq, things stalled, until, a couple of years later, the coalition-led Provisional Authority took over. Davidson Kelly was still after his money, but now he turned his sights elsewhere and tried to persuade the AWB to get the money from Iraq on his behalf. He used his high-level contacts within the Australian and British governments to convince the AWB executives that there was a great deal of interest in the debt being recouped. On one occasion, he said the Australian Department of Foreign Affairs and Trade had a direct involvement in getting the debt repaid — a barefaced lie. The smooth-tongued scammer’s gregarious nature won them over; the AWB invoiced the Iraqis for the inflated price of the wheat and then paid the money — minus its $500,000 fee — to his offshore tax haven, Tigris Petroleum Corporation. Kerching — $8 million ill-gotten bucks, thank you.

  A Royal Commission was set up by the Australian government in 2001 to investigate and Commissioner Terence Cole identified a dozen executives who were involved in the AWB scandal, but picked out Davidson Kelly as the biggest rogue of the lot. He was ‘a thoroughly disreputable man with no commercial morality,’ said the commissioner. He was also the only one of the dirty dozen to personally trouser any of the loot, and to gain from what was meant to be a humanitarian gesture to the starving people of Iraq.

  None of this appears to have remotely troubled the conscience of Davidson Kelly, who refused to leave Little Boarhunt and attend the inquiry. In his final report, Commissioner Cole wrote that Davidson Kelly ‘evolved the scheme to recover the “debt” by “loading up” the price of wheat to be recovered from the escrow account by AWB under contracts A1670 and A1680. He agreed upon this mechanism to deceive the United Nations with the Iraqis and AWB. Money set aside for humanitarian purposes for Iraqis was thus used to enrich Mr. Davidson Kelly and his family, through Tigris.’

  For his part, Davidson Kelly said he did not agree with the findings and did not attend the inquiry because it was a ‘non-judicial process’ that ‘thrives on high-oxygen publicity’. He finally spoke about the matter seven years after the inquiry, when, as the chairman of Canadian fracking company Shoal Point Energy, he was back in the news. CBC News in Canada quizzed him about Commissioner Cole’s findings. ‘He draws certain conclusions from some of the material he examined, which we did not share, and do not share,’ Davidson Kelly said. ‘And certainly the personal criticisms were very wounding. But he made them, and he was entitled to say what he wished.’

  So what about the money he pocketed?

  ‘I can’t comment on that,’ he said.

  Why not?

  ‘I’m sorry, I can’t comment on that.’

  Davidson Kelly was being questioned because Shoal Point Energy, in which he owned 3.5 million shares, had bought up vast tracts of Newfoundland for fracking — extracting gas by fracturing the rock under which it is trapped deep underground. UNESCO warned the company was threatening Gros Morne National Park’s status as a world heritage site. The company had already put out a statement saying it had the green light to start drilling, when the Canada–Newfoundland and Labrador Offshore Petroleum Board pointed out that, actually, it hadn’t, forcing the company to issue a retraction. On his company website, Davidson Kelly reassured the Canadian people: ‘Shoal Point Energy Ltd. conducts business with integrity and a strong focus on achieving the highest performance and ethical standards.’

  Yeah, right.

  International Man of Mischief: Peter Foster

  THEY called him the Milkshake Tycoon. His name was Peter Foster, the whizz kid who, at the age of seventeen, saw an opportunity from his time in local night clubs and signed up former British heavyweight champion Bunny Jo
hnson and Australian Tony Mundine on $10,000 contracts each for a bout at the Hordern Pavilion in 1979. Perhaps it was living on the Gold Coast during the boom time of the 1980s, when Christopher Skase was the king of the coast, but Peter Foster grew up with an eye on the prize and the ability to seal the deal. When judging a beauty contest as a youngster, he was the one who went backstage and asked the contestants who wanted to put the result beyond doubt. That takes a lot of nerve as a young man, but Peter Foster has never been short of chutzpah. In a country that has bred some astonishing con artists, Foster rises head and shoulders above the rest. Where lesser mortals may have lost their nerve, he has simply lied bigger. Quite simply, his audacity is breathtaking.

  Foster was the son of a Gold Coast real estate agent, Louise Poletti, who had split from his father when he was just seven years old. From an early age, he had taken on the role as the main man in his mother’s and older sister Jill’s lives.

  He also had an astonishing entrepreneurial flair. Most people come home from their holiday in the Philippines with a cheap knock-off watch; fifteen-year-old Peter brought back a dozen or so to sell to school friends. A few weeks later, the fake Rolexes stopped working and his friends demanded their money back. There was a lesson to be learnt here, but, as history would show, Peter failed to grasp it.

  After another holiday to Papua New Guinea, he took the pig tusks he had bought there and had them tipped with silver. On his next holiday, on safari in Kenya, he took the tusks and sold them to the locals — he could probably have done a cracking job flogging snowballs to Eskimos too.

  Foster’s second boxing bout did not go quite as well as his first. Foster was fined $150,000 for making a fraudulent insurance claim when the bout fell through. That did not matter to Foster, who had already moved on to becoming a television producer, spending time with boxing legend Muhammad Ali at his home in Los Angeles. He signed Ali up to come and fight in Australia. Foster had made a lot of money from ringside-seat ticket sales before the negative publicity about an already noticeably shaky Ali getting back into the ring caused the fight to be called off. Foster loved the attention it generated. He was declared bankrupt and the ticket holders did not get their money back.

  By then, Ali’s wife, Veronica, had introduced him to the next big thing: slimming tea. When he and his mother went to check out the warehouse for Bai Lin tea while in the US in 1983, he was confronted with a mail-sorting room about the size of a basketball court. ‘There were dozens of trestle tables and upwards of 100 employees facing a mountain of mail. Each letter contained a cheque for [US]$19.95 for a packet of tea that cost 50c to manufacture. There were thousands upon thousands of letters,’ he wrote in his unpublished memoir, ‘Revealing Secrets’. Kerching. The Gold Coast wide boy was on his way.

  He started selling the weight-loss tea in Australia and made a lot of money from it, until it became a victim of its own success and the investigators started looking at it. Former Consumer Affairs Commissioner Jan Taylor told the ABC: ‘Bai Lin tea effectively in fact was supposed to help you lose weight and to lose it very rapidly and very easily of course. Now the reality was, it did absolutely nothing.’ A Queensland Department of Health analysis of the ancient Chinese mystical drink found it was exactly the same as normal tea.

  Undeterred, Foster packed up and moved to England with his mother, girlfriend and pregnant sister, Jill, in the latter part of the 1980s. ‘We had a field day in England,’ said Jill. ‘They were heady days indeed. True salad days. We had a ball. We had more money than sense, and I don’t know which one we spent first.’ These were the halcyon days when, as Foster bragged in his memoir, he excelled in ‘giving exhibitions in extravagance. Every day crackled with excitement as I made millions, models and mayhem.’

  At the time, Jill said, there were three major influential woman in Britain: the Queen; Margaret Thatcher; and Samantha Fox, the topless page-three model who became the nation’s favourite bigbusted girl-next-door at the age of just sixteen. ‘[Peter] said, “That’s going to be my next Bai Lin tea girl.” And we just howled him down like, right yeah … [but] she was in the snare before she knew it,’ said Jill.

  Sam Fox fell for Foster’s top trick: the reverse sell. It was a snow job so good, he devoted an entire chapter of ‘Revealing Secrets’ to it, and even subtitled the book ‘The Art of the Reverse Sell’.

  Foster came up with the ploy while trying to get the Bai Lin business off the ground in England. He had arrived with his female entourage and a $10,000 grubstake — nowhere near enough for him to buy the product upfront. The 23-year-old wrote an advertisement offering dealerships in the slimming-tea franchise. When the first good prospect contacted him and came in for a meeting, Foster simply could not get him over the line to pay for the dealership in advance. ‘It was then I hit him with the reverse sell,’ Foster wrote in his memoir. ‘I stood up and went to shake his hand and said, “Sir, I am very sorry to have wasted your time. It’s obvious we aren’t compatible, thank you for coming in, et cetera.” The amazement on his face was priceless.’ Foster pushed home his advantage, arguing more and more strongly why the deal simply was not right, and the investor became increasingly desperate to pay upfront. Within five months, he had used the technique to sell 165 dealerships for $2.1 million, and by eighteen months had made over $11 million.

  The money opened all sorts of doors, and on one occasion Foster found himself at an event with Sam Fox. ‘It was reverse psychology,’ he explained later. ‘I had read where she said that she could have any man she wanted. So when I met her, we chatted away and she asked if I would dance with her. I said “no thanks”. She was terribly upset with my refusal and stewed on it. So I just played it cool for a few weeks and then I think it was a night in Hong Kong where we finally got together. I won a few big bets with my mates that I would bed her.’

  As well as proposing marriage, he also signed her up to be the face of his miracle slimming tea, which by now carried the legend that it was an ‘Ancient Chinese diet secret’. In a video pitch to dealers, he said Fox ‘is contracted to her best endeavours to put the phrase in “I drink Bai Lin tea three times a day after eating normal meals”’.

  Years later, Fox, who had by then come out of the closet and turned to the church, said: ‘I’m old enough now to know that I’d never be taken in again by the likes of Peter Foster. But then I was 22 years old and impressionable. My parents had split and here was a man who was clever, manipulative and domineering. I came close to marrying him I was so vulnerable.’ She was lucky to have rumbled him before she could go through with the nuptials.

  And he did not stop with Sam Fox. Foster wanted a royal endorsement, not from Princess Diana, who he considered too anorexic, but ‘Fat Fergie’. In his memoir, the Wizard of Oz said he pulled that off by offering his agent $50,000 if he could get Sarah Ferguson, the Duchess of York, on the front page of one of Britain’s bestselling papers with the tea. It would be the perfect trick to take the slimming tea upmarket. Just two weeks later, the Daily Star front page had a photo of the duchess with the headline ‘Foxy Fergie’ and the subheading ‘Sarah Ferguson loses weight drinking Sam Fox’s slimming tea’. Inside was a photograph of the duchess’s assistant walking out of Harrods in Knightsbridge with a bag of Bai Lin tea.

  All of which was just fantastic, apart from one little itsy bitsy detail: the tea did not work. As had happened in Australia, so many people were buying the tea and then not losing weight that the grumble of public dissatisfaction became a roar. Foster had also failed to take into account the UK’s tough consumer laws, which carried penalties of heavy fines and even jail time.

  Foster maintains he should have put the phrase ‘to be taken in conjunction with a calorie-controlled diet’ on the packet; then he would have been in the clear. He didn’t, and by 1988, he and his fellow directors had been charged with false labelling and false advertising in breach of the Trade Descriptions Act.

  Rather than face the music, Foster did the bolt to America. There, havin
g learnt nothing from his mistakes, he remarketed the tea as Chow Low Tea. Advertisements in the New York Times and the Washington Post promised gullible, chubby Americans that sipping the tea would lower their cholesterol no matter what they ate. A big call in a country that gave the world the Big Mac and the Whopper. Foster’s own whopper was rumbled again, and he was convicted for conspiracy to commit grand theft. He spent four months in the big house in Los Angeles in 1989; in the state of California it is an offence to fraudulently claim a food product can lower cholesterol.

  By now, Foster had realised the vanity market was just too big to ignore. Over the next decade, he spruiked Biometric Contour Thigh Cream, guar gum slimming capsules, a diet patch, TRIMit diet pills, Great Looking Hair (also known as ‘hair in a can’) and Linger Longer anti-premature-ejaculation cream. Foster told Andrew Denton on the ABC TV show Enough Rope that his mother had found the cream in Hong Kong and brought it home for him to test. ‘I never actually found out if it worked because after six hours I got tired and had to stop,’ he said.

  In 1994, he returned to Britain, where he was fined £21,000 over the Bai Lin tea saga. Two years later, he was jailed over the sales of slimming granules meant to be drunk in tea. He ran again, this time from open prison, and fled to Australia on a false passport. Back home, he was fined for the thigh cream scam and jailed for withholding information from the Australian Securities and Investments Commission. The Brits were still after him and he was arrested on an extradition warrant once he got out. Foster spent eighteen months in jail fighting that warrant, claiming his work as an Australian Federal Police (AFP) informant meant his life was in danger while he was in prison. For once he was telling the truth — he really had been an AFP informant in 1993 and again in 1997. Denton asked him during their interview: ‘Is this the only truly moral thing you have ever done?’ To which he replied: ‘It’s probably the only moral thing that people like yourself are aware of.’