The Murdoch Archipelago

by Bruce Page

  Checking the responsible government’s health – and finding a replacement should it expire – are matters in which the British monarch claims inherited expertise, and can apply it as Australia’s head of state. In practice, Elizabeth II puts out the Australian work to a resident governor-general, and, finding by the 1970s no call for aristocratic exports, her practice was to take a vice-regal nomination from the serving Prime Minister. Gough Whitlam, when this came up in 1974, chose Sir John Kerr, the portly, sociable Chief Justice of New South Wales. Sir John had a friend and admirer in Rupert Murdoch, who said that if younger Kerr might have edited the Australian (though people had begun to think about taking a number for that). But Whitlam also admired Kerr, saying he would change people’s ideas about the Governor-General’s role: prescience again.

  In November 1974, within a few days of Murdoch’s evening at The Lodge with Whitlam, there was a weekend gathering at the Cavan homestead outside Canberra: News Ltd cadres were summoned to feed the boss with political intelligence. At such a party eminent outsiders might be expected. It seemed the new Governor-General might drop in, and so he did. Sir John socialised generally, then settled down with Murdoch and a small group.

  Queen Elizabeth’s understudy then expounded some striking ideas about the job he had been in for about three months. He thought that, in a certain kind of a deadlock between the Representatives and the Senate, the Governor-General could use the monarch’s reserve power to dismiss the Prime Minister – regardless of the will of the lower house – and that he might do so without warning.

  The circumstance he envisaged was a refusal by the Senate to vote Supply, the legislation formally enabling a government to raise money and run its budget. In democracies, of course, the legislature usually controls executive spending – and in 1997 America suffered an extended crisis when the House of Representatives under Speaker Gingrich tried denying Supply to Clinton’s administration. Again, there are American resemblances, and differences – because it had been assumed that the Australian Senate, though it might stop specific legislation, could not block enabling decisions on money, or refuse a Budget.

  Inquiry, however, showed this to be just a custom, derived from a British one under which the hereditary House of Lords never refused money bills from the elected House of Commons. As their distaste for Whitlam grew, Australian conservatives noted that the Senate was elected, and might escape this British inhibition (though many of them, such as Sir Garfield Barwick, Chief Justice of the High Court, greatly admired British customs they found agreeable).

  Sir John, while not wholly a drunk, was far from the judge in the sobriety metaphor, and never the reticent lawyer. (‘An amiable, rorty, old farting Falstaff’ was the novelist White’s account.) All the same, these were startling thoughts for a representative of the monarchy. The reserve, or emergency, powers had their last British outing during the American Revolutionary era, and with results not thought encouraging.

  Though there is no exact record of what was said at Cavan, Kerr’s remarks were necessarily theoretical. As practical fact, the Liberals, the Country Party and their allies had not then sufficient Senate numbers to block the Budget. And even given the numbers, for convention to be so far defied as to dynamite the government there would have to be more than financial formality at stake. It would be necessary to portray the nation as being under threat from an iniquitous executive. And while Whitlam’s public record was spattered with errors, ‘iniquity’ went too far.

  Though Murdoch listened closely to Kerr – it was the kind of talk dedicated insiders love – there were no immediate consequences, and very likely he thought it premature to write off an administration within which he had such remarkable contacts. If at this stage he thought Whitlam deserved to be ‘torn down’, he took no steps towards it. (Furthermore Alwest was approved early in 1975 – though with heavy environmental conditions – and the Australian called it a late move the right way.)

  But, anyway, the question of government iniquity was not one News Ltd’s papers were equipped to address. Strong editorial teams aren’t needed for campaign rhetoric (see 1972) or secret-agent fabrications (see 1968) – indeed, their presence makes such things difficult. As Watergate had just shown, revelation may destroy a government. But disclosure of wrongdoing in high office requires pertinacious reporters, led by executives who aren’t worrying about oneway phone calls, and these are rare within the News culture. In 1975, however, most Australian newspapers were still outside News Ltd’s control. An exemplary stroke of investigative journalism transformed the situation late in 1975. It had nothing to do with Murdoch.

  ‘Strangler’ Connor was a grandiose economic nationalist, holding that the Australian state must develop the nation’s natural resources at top speed – while excluding foreign equity, such as the leaders of the Alwest consortium. The economic maelstrom made it impossible to find money for this by normal government finance, unless Whitlam could be got to sacrifice the government’s social programme. The Strangler had earned his nickname among the coalminers of Wollongong, and other ministers often rated him an irresistible force. However, he knew an immovable object when he saw one, and rather than confront Whitlam he sought a way round him.

  Like many fierce beasts he was naive outside his personal jungle, and he simply broadcast on the grapevine that he wanted financial stratagems. Almost immediately, his colleague Clyde Cameron – another old-style fixer, Minister for Labour and Immigration – said he knew two Adelaide opal dealers who suggested in deep confidence that certain Hong Kong contacts might find petro-dollars for Connor. Nothing makes quite plausible the political lunacy involved here, but it becomes faintly less baffling with the reminder that ‘petro-dollar’ just then had the properties of ‘railway share’ in 1840s Britain, or ‘dotcom’ almost anywhere more recently. Realism dissolved on contact. And as with railways and the Internet, there were slivers of truth within the fantasy. Oil being a commodity traded in dollars, the price-hike was making large dollar pools – mainly in Arab countries – whose owners needed investment prospects.

  Even so, only a pair of obsessive politicians could have thought Tirath Hassarem Khemlani a competent broker in sovereign debt – nearly everyone else correctly perceived a small-time commodities dealer. Cameron and Connor were deeply impressed when he turned up for a secret meeting with them in Canberra on 11 October 1974. (The fact of its secrecy, though, was remarkable. The opal dealers’ ‘confidential’ inquiries seem to have echoed throughout Asia’s entrepôts, and Khemlani picked them up quite casually in Singapore.)

  Of course the development of Australia’s natural resources was a valid ambition – indeed, the oil crisis itself made that obvious – and Connor was not the only minister who thought the Treasury’s orthodoxy might reduce the nation’s opportunities. Connor argued that the Treasury approach was obsolete in a world where the centre of financial gravity was shifting, and he had enough party standing to generate trouble if not allowed to give his discovery a trial.

  This does something to explain why on 13 December 1974 Whitlam, with his Treasurer and Attorney-General, signed papers authorising Connor – a departmental minister – to avoid official channels and negotiate loans to a value of US$4 billion (say $13 billion in present values). Success, some thought, would bury criticism – and failure would be Connor’s problem. Thus codenames were devised to cloak the operation: Connor was ‘Rock Phosphate’ or ‘Uncle’; the government’s London lawyer was ‘The Big Man’; Whitlam (only scantily informed) was ‘The Father’. Money was ‘Sugar’.

  The Treasury officials had to be told, of course, that a consultant had been engaged to show them the way. Dutifully they enlisted their worldwide contacts to provide the government with background. It took time, for Khemlani was unknown to Wall Street and the City: he was a Pakistani citizen, trading from a London basement containing a camp bed, a bathroom full of drip-dry shirts, and a telex. (Telex then was advanced business telecoms: e-mail and fax were for specialists only
.) The Canberra rumour-mill had few facts to go on, but that has rarely inhibited it, and did not do so in this case.

  In January 1975 the Strangler’s senior colleagues grew nervous and revoked the US$4 billion authority. On 28 February a new authority for US$2 billion was issued, but questions were popping up in Parliament, no sugar was visible, and Connor’s standing was falling fast. On 20 May, the second authority was revoked.

  At this stage Labor’s political fortunes were chilling along with Canberra’s mountain air in the southern winter. Treasurer Jim Cairns having survived the addition to his payroll of a thinly qualified woman friend – caught the loan fever, and wrote to a Melbourne executive suggesting he might profitably raise cash for Canberra. As a football-club president George Harris was not an obvious financial choice. As a friend of the Opposition’s finance spokesman, he was a horrid political error.

  And the Australian turned frosty with the weather. The order to ‘play it down the middle’ was abolished, together with the editor to whom it had been issued. Bruce Rothwell, one of Murdoch’s right-wing honchos, took charge. Reporters found their bylines being excised and their stories rewritten to support an editorial stance favourable to Malcolm Fraser, the Leader of the Opposition. (Actual editorials required use of a sympathetic freelance, the swerve being too abrupt for the incumbent writers.) Whitlam himself said the cause was the Alwest environmental clauses, which had led the US backers to pull out. Perhaps that played a part; more likely Murdoch was repositioning with a view to Fraser’s rising prospects.

  Labor recovery, however, remained possible. John Menadue administered the nation’s business as deftly as he had Murdoch’s. Bill Hayden, replacing Treasurer Cairns, designed a popular and competent Budget. Clyde Cameron, the opal dealers’ friend, gave way to the sagacious Jim McClelland, and spring arrived hopefully. If no more skeletons walked, the government might make it.

  But there was Connor. In June he had written to Whitlam that all loan-raising attempts had ceased on 20 May. Trusting him, the Prime Minister gave assurances to Parliament, stonewalling all further questions. Rumours nonetheless persisted of the Strangler maintaining contact with Khemlani, sometimes lurking all night beside his ministerial telex. The Senate Liberals interrogated opal dealers, and officials of Connor’s department, but unprofitably.

  And there was the Melbourne Herald, still a vigorous, profitable metropolitan newspaper, with a substantial staff. It had recently acquired a new editor, John Fitzgerald, ready to back reporters capable of following a long trail and acting on their own judgment. His staff included a determined specimen of the type named Peter Game, who was a little obsessed with Khemlani. Inquiring in Hong Kong during June, Game picked up reports of Khemlani still in circulation with a mandate for US$8 billion though the man himself seemed as elusive as the Flying Dutchman, and some thought no more real. Then Game got on the trail again in Singapore. He was a few days behind his man, but he located Khemlani’s daughter, and left with her a letter suggesting that the Herald would provide an interested audience whenever the great loan story could be told. And this must have been persuasively drafted.

  Game spent most of August reporting a revolution in Timor, but as he headed back to Melbourne on 4 September a call reached him at Mount Isa, Queensland. Khemlani, bound from San Francisco to London via Bangkok, was suggesting a rendezvous in Sydney. Game switched his destination. Hotel-room discussion in Sydney suggested that Khemlani was eager to talk – but he was formidably skittish. After six hours of preliminaries, he proposed restarting a few days later, possibly in Bangkok or London. It turned out to be London, and there Game became familiar with the basement HQ where Khemlani, clouded in tobacco smoke, punched telex tapes for his oil and machinery deals. On 14 September, just as Game began unravelling the Connor connection, Khemlani vanished, reappearing from West Africa on the 22nd with the announcement that he must instantly depart for a few hours in Hong Kong. This time Game, with his notebooks and tape-recorder, clung to him for the roundtrip.

  In Australia, political pressure was rising, because the death of a Labor Senator had given the Opposition upper-house control. It was now feasible for Malcolm Fraser to block Supply and deadlock Hayden’s reforming Budget – the government’s chief political asset. Could Fraser then compel his own double dissolution and new elections – likely to make him Prime Minister? Perhaps. But could it be justified? Fraser had said himself that without ‘reprehensible’ conduct an administration should run its elected term. And it was now some time, as a respected commentator noted, since the government had done anything truly silly.

  Peter Game’s own Herald was as conservative an outfit as any in the land, and on 3 October its editorial column, while conceding that the temptations of office were great, said Fraser ‘should not yield’ to them. Courageous refusal would ‘prevent him from becoming the violator of immensely important principles of our democracy’.

  In London, a few hours later, Game began drafting a three-part series about the Khemlani–Connor connection. On 7 October, when Game had transmitted his copy, Khemlani left for New York with several cases of documents. He said he was still working on the loan project, and would visit Connor in Australia. Next day, when the Herald’s main headline said, (‘KHEMLANI TELLS: I’ve got Connor go-ahead’, it became plain that the Strangler would provide no welcome mat. Confronted by Hayden and Menadue, Connor asserted (wildly) that Khemlani was lying and (with reckless accuracy) that his writ for criminal libel was being served. This last bluff co-opted Whitlam, who could only repeat Connor’s denials.

  It was Wednesday. Game and Khemlani arrived in Melbourne to spend the weekend in a motel with editors, lawyers, the Khemlani document hoard and Connor’s writ – one more tryout for criminal libel, and one certain to terminate several journalistic careers if it did somehow serve its purpose for the Minister.

  Game had brought home a courageous, skilful inquiry, one that bore comparison with Woodward and Bernstein’s greater achievement. But there were long anxious hours while the lawyers wrestled with the unbelievable facts. (The Herald now is Newscorp’s Herald-Sun, and has added no similar honours to its record.) On Monday, the headline was ‘KHEMLANI REPLIES: EIGHTEEN TELEX MESSAGES’. The copy demonstrated that fund-raising contacts had persisted after 20 May, that Connor had lied to Whitlam, who had thus misled Parliament. There had been elaborate precautions: phone calls via Connor’s mistress, and a system to collect late-night messages from the ministerial telex. All were exposed. Next day’s lead was ‘CONNOR QUITS’, and after that ‘FRASER DECIDES: SENATE TO STOP THE BUDGET’. Clearly, it was reprehensible. Equally clearly, the fall of Whitlam and his replacement by Fraser seemed inevitable.

  And now it was time for Rupert Murdoch to join the hunt. He arrived from America and immediately launched in the Australian a strident assault on Whitlam’s administration – slanted to the same degree as 1972, but reversed in sense. There was no suggestion that inquiry or reflection might be in order.

  The Senate Opposition, consisting of the Liberals, the Country Party and a few independents, blocked Labor’s Budget on 15 October, declaring Whitlam unfit to govern. No Supply would be voted until Labor agreed to double dissolution and new elections. All this was clothed in rhetoric about constitutional rectitude and urgent need. But anti-climax ensued. Though concerned, the public displayed few signs of panic or zeal for fresh hustings.

  One reason for this was that House and Senate had several times recently batted budgetary threats to and fro – always settling up, after tedious armwrestling – and people did not quite see the difference this time. It was particularly hard to take seriously the constitutional scholarship paraded by the Australian and other hot enthusiasts for dissolution, because Opposition control of the Senate rested on a fix of almost Soviet crassness. Senators, as in America, represent the states: additionally the Senate is designed to stabilise politics by working to a longer political cycle than the popular House. So, when mortality removes a Senator, the government
of the deprived state nominates a replacement, instead of holding a new election – maintaining the Senate’s distance from the politics of the instant. Under this principle, the nominee belongs to the party of the person replaced.

  But the principle then existed only in the unwritten or gentlemanly part of the Constitution. (It is now set in stone.) The dead Labor senator was from Queensland, where the conservative government rated Whitlam’s Canberra as lower than the Cities of the Plain and retribution far above gentlemanliness. Queensland nominated an obscure, elderly defector from the ALP, whose one qualification was malice towards his former party. When this occurred – in September, before Murdoch took the helm – the Australian had shared the general revulsion. If you thought about it, it was the kind of thing Strangler Connor might have done. Australians are sometimes unsure about the details of their constitution. But they usually can distinguish between statesmanship and appetite for office.

  It soon emerged that the government had resources to operate without a budget for weeks, possibly months. There were differences about the placement of the deadline, depending on what the banks might be persuaded to do. But the most commonly agreed date turned out to be 30 November, which drained much drama from the situation. Might Whitlam find an exit from the trap into which Connor’s arrogant dishonesty had propelled him?

  His critics were many of course. But even conservative papers had doubts about using constitutional devices against a representative majority – notably the Herald, which had done the work and taken the risks to expose Labor’s misdeeds. Most journalists saw the moment as demanding all the professional objectivity they could muster. The Australian displayed no such restraint, but neither did it take any risks. It participated as an engine of propaganda, and its motivation was apparent to all Murdoch’s familiars. If the government did survive, Rupert Murdoch would get no more invitations to dinner with the Prime Minister. And now John Menadue, who had toiled to connect the engine to Labor’s bandwagon, saw how readily other vehicles could be hitched up. He understood his old chief’s new alignment because ‘I had seen it at first hand three years earlier … It is like an addiction [with Murdoch].’ The ALP had ridden a tiger, and now there was ‘a price to pay’.