The sinking of WA Inc.

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Cycles of money-fever run through Western Australian history. Prominent among them were the gold rushes of the 1890s, Australia's first commercial oil strikes, the North-West's massive iron ore mines, the Poseidon nickel boom, diamonds at Argyle in 1980s, gold bouncing back and forth many times.

The size of the state, its resource wealth and a population of only 1.5 million have meant that all of its governments have lived cheek-by-jowl with business. Liberal strongman Sir Charles Court was such a firm interventionist that Lang Hancock, the iron-ore magnate, reckoned he was the greatest socialist of all ...

In WA, Brian Burke won office in March 1983. Burke was a former journalist who knew how to work the press, a good talker who could charm when he wished, one possessed of great political instincts. He was also suspicious and impatient, tending to revert to Tammany-hall-style tactics when cornered.

Like Labor around Australia, Burke set out to win over business. He courted Perth's 'four-on-the floor' entrepreneurs. He set up the John Curtin Foundation, which had ten of WA's business high-fliers as vice-patrons, including Alan Bond and Laurie Connell. Like John Cain, Burke made business the business of government. He set up the Western Australian Development Corporation to 'pick winners'.

Life rolled along in WA as long as the economy stayed buoyant. Living was generally pleasant, unless you happened to be an Aborigine. Burke's Liberal opponents were mostly dills, and people should just give newfangled ideas like the development corporation a fair chance.

This sunny air of complacency was helped along by WA's lack of freedom of information laws ...

Under Burke, and then Peter Dowding, many things were deemed 'commercially confidential' even though it was the taxpayer who was paying. One state secret was the rumoured mega-salary paid to John Horgan, a Perth businessman, as head of the development corporation. Taxpayers could find out how much was paid to a Supreme Court judge, but not what was paid to Horgan ...

During the good times, the wild men of Perth business attracted attention from interstate because of their background and lifestyle. Bond was a former signwriter and Connell the son of a bus driver. Bond struck a commemorative gold medal for guests at his daughter's wedding, while Connell hired a train for 150 of his closest friends and took them to a country race meeting.

Largesse was shared around. It has since emerged that Connell's Paragon Resources NL had donated $250,000 of its shareholders' funds to the Australian Labor Party in July 1987. Paragon, a gold miner, was then 60 per cent-owned by Connell's private company, Oakhill.

The truth about donations by business to all sides of politics will probably never be known, because WA's laws on disclosing donations to political parties are hopelessly inadequate, like those in the rest of Australia.

Then the music stopped and Rothwells crashed. It was propped up for a year by the 'rescue', after a frantic passing-the-hat round Australia and overseas one weekend in 1987. The government provided a $150 million guarantee, and later shovelled hundreds of millions into related ventures. But Rothwells sank anyway.

A report to Parliament by the old corporate watchdog, the National Companies and Securities Commission, found that a huge number of loans made by Rothwells were to interests associated with Connell. Indeed, a condition of the 'rescue' was that Connell himself should contribute $70 million.

The commission later concluded that 'Connell's $70 million personal commitment to the Rothwells rescue, on which the other parties to the rescue relied, was more than covered by fresh loans to Connell's companies from Rothwells'.

Probably the last chance to save Rothwells was a desperate deal allowing Connell to buy $350 million worth of Rothwells' non-performing loans, most of which were to Connell himself.

Connell and Dempster were then partners in a petrochemical project at Kwinana, south of Perth. The government gave them a mandate, but the project was still largely in the planning stages when it was bought jointly by the government and Bond Corporation for $400 million.

Although Connell and Dempster had been 50/50 partners in the project, Connell was paid $350 million (which he used to buy the $350 million in loans from Rothwells) while Dempster received $50 million.

Alas, the project is still just a great idea. The liquidator of the project's business vehicle told The Sydney Morning Herald that he would throw a party if he could get $40 million for the remains. He said: 'It is hard to comprehend that they [the government and Bond] paid $400 million for a project that was still on the drawing boards. It is very difficult to come to grips with how they spent all that money when no one had even put a shovel in the ground.'

The collapse of the petrochemical project precipitated a massive falling out between Bond and the WA government. They are now fighting through the courts for compensation from one another.

A new twist on WA Inc. surfaced during the trial last year of Robert Smith, a private investigator found guilty of phone-tapping in Perth while Burke was WA premier. Wilson Tuckey, the voluble Liberal MP, has claimed in Federal Parliament that Burke is the 'BB' mentioned in Smith's work diaries, and has called for Burke to be sacked from his diplomatic post.

During his trial, Smith denied that Burke was the 'BB' mentioned in the diaries, but they do refer to visits to the Premier's office, to meeting Burke's brother Terry (also a Labor MP at the time) and to the Premier's former driver.

What has sparked most conjecture is a file and other material marked 'GOVT', which was seized by federal police when they raided Smith's office more than two years ago. The federal police pressed on with the matter within their jurisdiction, namely the phone tapping, and then handed the file over to the WA police.

One matter leaked from the file concerns a Liberal politician allegedly telling Terry Burke how a local councillor was bribed to vote for a controversial seaside hotel, Observation City, which was built by Bond Corp. The WA Opposition asked the state ombudsman, Eric Freeman, to investigate what the local police had been doing for two years. Freeman did so, and recommended that a royal commission be held into WA Inc.

Dr Lawrence took a short while to consider the recommendation, then called a wide-ranging royal commission to consider government-business dealings going back a decade. Previously she had resisted calls for a commission, but the recommendation from the ombudsman's report opened the floodgates of public opinion.

The inquiry into WA Inc. was to begin in March. Brian Burke has said he will give evidence, and the commission has appealed for help from the public.

Nobody knows where the trail will lead, but where did it start? Probably in greed for money and power, and in some problems that bedeviled all of Australia in the 1980s: limited public access to government decisions, dissembling politicians, grasping businessmen, soppy journalists, a concentrated media and a public too complacent until the very end.

Indeed the public was right in there during the decade of greed, albeit on a smaller scale than the big players. Investors in Rothwells and in the Farrow building societies were there because they received one or two percentage points' interest above that offered by the major banks. These people have since cried out for government protection in their hour of need.

Were they going to share the extra interest on their money? To paraphrase John Kenneth Galbraith, people only want money to be good when it is bad. When it is good, they go for it.


Mark Skulley was a finance journalist in Perth during the Burke Government's term of office. The above excerpt is from an article that appeared in Eureka Street in April 1991.

 

Topic tags: mark skulley, wa inc, brian burke, alan bond, global financial crisis, market crash

 

 

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Existing comments

Mr Skulley's tale invites questions.

Most of the questions that I would pose take the form, "how many schools/hospitals/ railroads/water recycling plants/rainwater tanks/solar panels/reafforeastation projects would already be up and running if governments did not cast taxpayer funds into the gaping maws of the debt monsters created by all these entrepreneurial mates of the Party?"


David Arthur | 04 December 2008


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