The Bold Riders: Behind Australia's Corporate Collapses
By Trevor Sykes
Allen and Unwin, 1994. 651 pp., $45 (hb)
Reviewed by Frank Noakes
"They [the corporate raiders] used tiny equity holdings as the basis for huge empires built on mountains of debt. They took the savings of Australians, entrusted to our banks, and channelled them into takeovers on a scale that had never been seen before ... When the crash came, some of [them] went bankrupt but managed to retain a vestige of their Eldorado in overseas bank accounts, perhaps enough to finance fresh empires. The investors who had financed their delusions of grandeur were left high and dry", writes Trevor Sykes in the preface to his excellent book, The Bold Riders.
Sykes is an experienced financial journalist. Like a detective, he has assembled and laid bare the facts. Like a novelist he weaves in the personalities and lifestyles of his "bold riders". The result is a very detailed and yet most readable account of the former business "heroes" and their often criminal deeds. If this were fiction it would be incredible; as fact, it is appalling.
A metaphor for the role of the business elite during the "greed is good" '80s is this illuminating story that Sykes tells of Alan Bond: "One day Bond drove John Bertrand, the helmsman who won the America's Cup, to the putative resort [of Yanchep, north of Perth, owned by Bond]. As they approached, Bertrand was amazed to see that the barren coast had suddenly turned green. 'Christ!', Bertrand exclaimed. 'Have you put in irrigation?' 'No', replied Bond. 'I've painted the sandhills to make the brochures look better.'"
Eventually these con artist were recognised as such (although their real crimes go much deeper than those of mischievous rogues). Sykes relates how the WA Labor government's favourite business person, Laurie Connell, claiming he would not get a fair trial, had his legal team commission a telephone opinion poll. It found the common perception of him to be "dishonest, a crook, corrupt, a shyster, a liar and not a nice man".
Bond fared better. Such was his popularity following the 1983 America's Cup win, boosted by the media and politicians, that many people afforded him true hero status. Even at the time of his downfall, my daughter's great grandparents, a poor elderly working-class couple originally from the north of England, sincerely held that "good ol' Bondy" was the victim of an ungrateful government — "after all he's done for Australia". That was not untypical in WA at the time.
Sykes does much to explain how capitalism's chorus line of crooks managed to get where they did, remain there and do so much damage. From the outset, the finger is pointed firmly at the banks. "The boom saw a bunch of corporate cowboys financed to dizzy heights by greedy and reckless bankers." He goes on to claim that the "breakdown of the Australian banking system was both financial and moral ... some $20 billion was lost in unsound lending by banks, which are normally perceived as the guardians of the conservative monetary faith."
Banks were keen to outbid one another and other financial institutions, to lend ever greater sums to high profile business people in a bid to maintain market share — increasingly failing to check the soundness of the investment. Sykes notes: "According to a widely held economic theory, competition is an absolute good which can somehow be relied upon to produce the most desirable result. This certainly did not happen in some important aspects of the Australian banking system in the early 1980s."
Politicians, most notably from the Labor Party, lent the authority of their high offices to disreputable business heavyweights in exchange for fat cheques to the party's coffers. WA Inc, the collusion between the Burke Labor government and sections of big business, no matter how it started out, became an exercise in defrauding the WA public of hundreds of millions of dollars. But the losers weren't restricted to those in the west.
"The State Bank of Victoria and State Bank of South Australia effectively went broke and needed massive governmental rescues. Apart from the money lost by overseas banks, the bill for the bold riders was paid by Australian taxpayers (who had to bail out the profligate states of Western Australia, Victoria and South Australia); by shareholders in the banks ... and remaining creditworthy customers of banks (who were slugged mercilessly for years afterwards as the banks got their balance sheets back into order). And unsecured creditors and trade creditors were wiped out by the thousand."
The real and enduring cost to the Australian people of the much-feted "heroes" of the '80s was the loss of tens of thousands of jobs.
Those small businesses not directly taken down with the corporate collapses were squeezed by high interest rates and the onerous demands of banks until many were forced to close.
Ditto small farmers. Sorry tales of Christopher Skase reduced to living in a farmhouse in Spain probably don't impress farming families here who are forced out of their farmhouses because of the likes of Skase and their bankers.
Two politicians were eventually jailed: former WA premier Brian Burke and his deputy, David Parker, for their WA Inc-related crimes.
Sykes castigates the establishment media which, in general, applauded the Bonds of business throughout the 1980s, and points to the almost total failure of the government's corporate watchdogs in this period.
Bold Riders limits itself to the exposure of the big names of the '80s. But just as the ramifications of the decade of greed spill over into the 1990s so does the continuing parade of business people, well known and otherwise, before the courts. Hundreds of them had their hands in other people's pockets, leaving ordinary Australians to pick up bill.
"[T]hey were parasites of Australian society and finance. The savings of ordinary Australians (and quite a few from overseas) were splurged on spending sprees for their companies and themselves. They lived lavish lifestyles on other people's money and never repaid it. Their companies paid little or nothing in taxes, yet they assiduously sought favours and subsidies from governments ..."
There is a suggestion in Bold Riders that this behaviour by the corporate swindlers, their bankers and politicians is somewhat of an aberration. It is not, although it did reach new heights in the '80s. This aside, Sykes' work is important and well written — it is a book that will probably be read by too few.
Rogues gallery
Writing in Time last year, Ken Edwards remarked on the decor of Business Review Weekly's Melbourne offices. Poster-sized photos of Christopher Skase, Alan Bond, John Elliott, Laurie Connell, Bob Ansett, George Herscu and others adorned walls at the magazine's editorial office. Strange icons indeed.
What has become of those behind BRW's framed representations?
- Christopher Skase, former Quintex boss. Estimated losses of other people's money (OPM): $1.25 billion. Fighting deportation order to face courts in Australia.
- Alan Bond of the failed Bond Corporation. Estimated losses of OPM: $5.3 billion. Like Skase, Bond has developed a convenient illness. Has been behind bars once and faces further charges.
- John Elliott, once Elders IXL chief. Estimated losses of OPM: $1.5 billion. Elliott is before the courts at the moment.
- Laurie Connell of bankrupted Rothwells merchant bank. Estimated losses of OPM: $600 million. The last photographer of banker of last resort was likely to have been wearing a dark blue uniform.
- Bob Ansett, former managing director of Budget Corporation. Estimated losses of OPM: $86 million. Ansett, like his failed contemporaries lives very well thank you. However, he faces the courts too.
- George Herscu, formerly of Hooker Corporation. Estimated losses of OPM: $1.4 million. Reportedly lost his own personal fortune; served 30 months of a five-year jail term.
Perhaps Bruce Judge of Judge Corporation and Ariadne, who went bad to the tune of $640 million but still manages to live in a large heritage-listed house in Brisbane, epitomises the attitude of the fallen "heroes". Judge says, "I don't care what the public thinks, my conscience is clear. I'm answerable to God."
The main dispute amongst this gallery of rogues is over which one of them is God.