AT MALCOLM TURNBULL’S thirtieth birthday party, held right the middle of the Costigan commission furore, ACP boss Trevor Kennedy had famously roasted him: ‘Malcolm probably wouldn’t even be satisfied with being prime minister of Australia. He’d probably rather be prime minister of the world!’1 But Turnbull had turned his back on a political career, resigning his ten-year-old membership of the Liberal Party in 1983.2 He told one journalist in the wake of the Spycatcher victory that his political ambitions had been scrubbed completely, that he had no desire whatsoever to be PM: ‘It just doesn’t fit in with what I want to do. I don’t want all the hassle and responsibility and invasion of privacy.’3
Turnbull was surrounded by money and realised what he wanted was to make his own pile—not to buy exotic cars and huge yachts, which he has never done, but because ‘financial independence gives you freedom … you can’t do things unless you have a bit of brass’.4 The only way to make serious money, fast, was to put up some capital. As Turnbull later said: ‘What do my investments say about me? They say I like turning $1 into $10. I like direct investment. It’s creative.’5
There were a few fizzers. Turnbull’s first foray was in mid 1985, when he bought a small share of a boutique finance firm launched by the half-brother of James Fairfax, Edward Gilly, and backed by a couple of offshore institutions. Called Sydney Fund Managers, the outfit raised about $75 million from clients, much of which went into a Japanese property trust, but it was never profitable and fell to earth in the October 1987 sharemarket crash. By the end of the year it had been taken over; Turnbull got back a small amount for his share. In September 1986, Turnbull joined the board of ASX-listed home video distributor Communications and Entertainment Limited—he quit after a year and the company went broke not long after.
Turnbull’s next business investment was more serious. In late 1986, as Turnbull was preparing for the Spycatcher trial, his partner Bruce McWilliam was approached by a friend, former Olympic yachtsman Jim Cook, who along with his partner John Laws (not the famous broadcaster) was working in the contract cleaning industry. They wanted to go out on their own but needed the start-up capital to buy equipment and pay themselves a wage. Turnbull was interested in the venture, and brought in a prominent associate.
Turnbull had already approached NSW premier Neville Wran about life after politics, having ‘a feeling [Wran] might resign’.6 The Wran era was certainly drawing to a close. Attempts to switch the popular premier to federal politics had unravelled due to a combination of throat surgery and corruption scandals, particularly allegations aired in April 1983 which implicated him in an alleged conspiracy to pervert the course of justice in relation to charges brought against NSW rugby league boss Kevin Humphreys.7 The subsequent short, sharp royal commission by Sir Laurence Street cleared Wran of any personal involvement, but the inquiry left many questions unanswered. Wran was left bruised and, though he was vindicated by winning the 1984 state election, he was soon looking to the next stage of his career. Before entering parliament, Wran had been a high-flying barrister and was used to making money, telling friends he ‘took it home in trucks’.8 By 1986 Wran wanted to make up for lost time. Turnbull was on the same page and they went into business together, forming a partnership that would last almost twenty years.
At first Turnbull suggested Wran might consult with his new law firm, Turnbull McWilliam, praising Wran to one journalist: ‘Big litigations are essentially wars where you have to think strategically on a big canvas. Neville thinks that way. He is a very experienced and a very good lawyer. His years in politics have not diminished his legal abilities but rather enhanced them.’9 Right in the thick of the Spycatcher trial, Turnbull set up a new company, Allcorp Property Services. On Christmas Eve 1986, he was joined in the business by Wran, McWilliam, Cook and Laws. Wran became chairman and the largest shareholder, with roughly a one-third holding; Turnbull and McWilliam took a quarter each; and Cook and Laws split the rest. Combined, they chipped in $100 000.10 The company would run out of one of Turnbull and McWilliam’s spare floors at 60 Park Street.
Allcorp caused quite a stir. Seemingly within days it had snagged contracts to clean at Kerry Packer’s Channel Nine and 2UE, Frank Lowy’s Channel Ten and Westfield Hurstville, and Sir Peter Abeles’ Ansett. By March 1987, Allcorp employed 100 people, and soon it was the fastest-growing cleaning company in the country. Normally, cleaning contractors cultivate relationships with building managers and growth happens slowly, organically, from the bottom up. At Allcorp, whenever a contract came up, Wran could pick up the phone and call the relevant chief executive, who would send word down the line: give them a shot. Within a year of starting up, the company had forty contracts and a turnover of $4 million.
The upstart caused competitors some angst, and a handful complained to the media about losing contracts without a reason, or without a fair opportunity to tender. Of course, private companies had no obligation to run competitive tenders. But that didn’t stop accusations of ‘jobs for the boys’, with Wran’s mates at the big end of town handing him work. The industry backbiting got so bad that some members of the Association of Cleaning Contractors of Australia objected to Allcorp’s application to join, ‘mainly on the grounds of its methods of obtaining business, including the influence being exerted on the clients by the chairman’.11 Cleaning rival and former association president John Hayes posed the question:
Why has this company been so successful? It’s a company that has been around the traps less than a year and even though it is staffed by people with a few years’ experience, that is no reason for its phenomenal success. It takes other people twenty years to get to their size.12
Milking connections and bidding low to win contracts was one thing. Making money out of it all was another. Cleaning is a brutally competitive business, with very thin margins. Although Allcorp’s revenue grew exponentially, it wasn’t making money yet. The company reported a $9000 loss in its first year and lost another $7000 the following year, even though its turnover rose to $10 million.13
Wran did the door-opening and Cook ran the business—he was a genius at quoting buildings, calculating jobs down to the last dollar before he’d even left the premises. Turnbull’s role was mainly limited to monthly board meetings, but he was an aggressive participant, constantly locking horns with Cook. John Laws thought Wran and Turnbull had a good cop/bad cop routine going—Wran kept above it all, while Turnbull skipped the pleasantries and went straight for the toughest item on the agenda. Laws and Wran would often slip out for a quiet cuppa, leaving Cook and Turnbull to thrash it out.
Allcorp kept expanding, borrowing $1 million and ploughing it back into the business, buying new headquarters in the inner-western suburb of Rozelle. Within three years the company had grown to 600 workers, was making $250 000 in raw profit, and was one of the top five cleaning contractors in the country, nipping at the heels of giants such as Berkeley Challenge (now Spotless) and Tempo.14 But a bigger prize was in sight. Nick Greiner’s reformist Liberal government was elected in 1988, with plans to outsource the cleaning of the state’s schools, hospitals and other public buildings. The contracts on offer were huge: a billion-dollar industry was coming of age and Allcorp was keen for its slice, a spokesman telling one reporter it would certainly bid on any outsourced contracts: ‘We wouldn’t have any ideological block about it … if there’s any chance of us getting work, we’ll be chasing it. Don’t worry about that.’15
As big as Allcorp quickly became, it was only ever a sideline for Turnbull. With remarkable impatience, given his outrageous success in the Spycatcher trial, Turnbull was already moving on from the law firm he ran with Bruce McWilliam and eyeing off a move into a far more lucrative enterprise: merchant banking, a business that was taking off as the sharemarket boomed and treasurer Paul Keating opened up financial markets to foreign and non-bank lenders.
At the beginning of 1987 Turnbull helped Kerry Packer offload his television empire onto West Australian entrepreneur Alan Bond, in a classic top-of-the-market deal. It began with some loose talk between Packer and Bond, who owned the Channel Nine stations in Perth and Brisbane. The Hawke government’s abolition of the two-station limit in favour of new, generous audience-reach rules meant that truly national TV networks could be formed for the first time. Combined with new cross-media rules, which stopped newspaper publishers from owning TV stations, the result of the Packer-friendly media reforms was a one-off land-grab: within a few months of each other, all three commercial networks would change hands. Packer had approached Bond about buying his two stations, but when Bond canvassed a figure of $400 million, Packer mused out loud that at that price his own stations in Sydney and Melbourne would be worth $1 billion. To Packer’s astonishment, Bond not only agreed, he offered to pay him $1.05 billion.16 Packer could not refuse: he knew it was twice what the stations were worth.
Packer’s objective now was to get the deal over the line fast, before Bond could come to his senses. Turnbull was at the final meeting in Packer’s Park Street office. Just before the Bond team arrived, Packer arranged to put an old portrait of Sir Frank up behind his desk. With the papers ready for his signature, Packer hesitated, gazing up at the picture, overcome with emotion. He pondered aloud whether he could really sell off his father’s beloved Nine. Packer’s apparent reluctance only galvanised the Bond executives, and the deal was soon done. On their way out the door, Packer gave Turnbull a smile.17
Packer’s wealth skyrocketed and it was his own money to punt, not his inheritance. Fully $800 million of the Nine purchase price was in cash, and this was the beginning of a fabulous spree. Packer spared no expense on his Ellerston farm at Scone and his other polo estates round the world. As Packer famously said later, after buying back the Nine Network for a song when Bond was on the cusp of bankruptcy, ‘You only get one Alan Bond in your lifetime, and I’ve had mine.’18
Turnbull could only marvel at Packer’s good fortune, perhaps more fired up than ever to secure some wealth for himself. But if Turnbull and Wran were going to get into merchant banking, they needed to partner with a banker. First Turnbull approached Mark Johnson, the Macquarie Bank co-founder and a neighbour of Packer’s in Bellevue Hill, who had worked on the original privatisation of Consolidated Press Holdings. Johnson turned him down: Macquarie had just gained its own banking licence and was on its way to the big league.
Then Turnbull bumped into Nick Whitlam during a summer holiday at Sydney’s Palm Beach. Whitlam, who had been running the State Bank of NSW successfully for six years and was casting around for the next thing, was a Harvard graduate and son of former prime minister Gough. Over a relaxed dinner with Lucy and Whitlam’s wife, Judy, Turnbull asked Whitlam whether he was interested in setting up a new investment bank. He was, and Turnbull asked him to set out in writing how it might work. By the end of January 1987, Whitlam had laid it out, as his memoir records: ‘The institution I described would have two business lines: providing corporate financial advice and investing for its own account.’19
This last aspect was crucial: to make serious money, the bank would need serious money to invest. Whitlam wanted to kick off with $100 million in backing. Turnbull told Whitlam that Packer would stump up the money. When Turnbull spoke to Packer and mentioned that Wran would be involved, he was interested. The idea of a bank was settled at an initial meeting over mineral waters in Packer’s apartment at Elizabeth Bay, with Turnbull, Whitlam and Wran all guests.20 Turnbull wanted other investors on board, to counterbalance Packer, and Whitlam suggested Larry Adler, the wealthy head of FAI Insurance, also a friend of Packer’s. By March, a deal was struck: Packer and Adler would chip in $25 million each. It was half as much as the partners had wanted, but it was a decent start.
The bank would be called Whitlam Turnbull. Whitlam remembers that, as the draft partnership agreement went back and forth, Turnbull reverted to alphabetical order on more than one occasion. Whitlam would have none of it: he was the banker, after all, and as the son of a PM his surname carried more weight than Turnbull’s. Two bulls in a paddock, they were destined to lock horns. Wran told friends that when the three of them sat down to discuss something, his was the smallest ego in the room.21 It was something he would have to manage as chairman. Whitlam did not realise at first that Wran and Turnbull were in lock-step together. The contracts stipulated that the three could appoint a fourth director. If Whitlam had known Turnbull and Wran would always vote together, leaving him in the minority, he would have structured the partnership differently.22
Whitlam Turnbull was pretty big news. With Wran on board, Whitlam boasted that ‘the three of us can, with all modesty, get to each chief executive in the country’.23 Posing for one happy snap together, Turnbull threw a phone book on the floor and stood on it, throwing his arm around the shoulders of the much taller Whitlam, who stood at an imposing 6 foot 3 inches tall.24 Some media were duly sceptical, with BRW reporter John Cavanagh commenting that at the end of a four-year bull run on the sharemarket, and competing with 140 other merchant banks, the threesome ‘may have left its run a little late’. Noting that the likes of commercial lawyer David Gonski had joined the investment arm of Westfield, Cavanagh added that ‘the Gonskis and Turnbulls are sick of merely advising. They want to get into the market and mix it with Larry [Adler], Ron [Brierley], Robert [Holmes à Court], Rupert [Murdoch] and John [Elliott].’25
The first board meetings were high-powered: besides Wran, Whitlam and Turnbull, major shareholders Packer and Adler, who sometimes brought his son Rodney, would also attend. There was friction from the beginning, and by mid-October Adler wanted out. He advised the partners that he had decided to terminate FAI’s shareholding rather than ‘allow a difference of views to compound’,26 and had negotiated to sell it to Packer at cost. Whitlam later wrote that Adler’s hands-on style was part of the problem: ‘We were happy to see him go, because he wanted to know everything we were doing, and that was simply inappropriate in the corporate advice area.’27
Adler’s timing was uncanny. He pulled out on 14 October, a Wednesday. Six days later, the Australian sharemarket plummeted, opening 25 per cent down following shocking overnight leads in New York and London. It was another Black Tuesday, and though it would take months, in some cases years, for the teetering giants of the 1980s to fall over, they inevitably did. For a while at least, the ‘greed is good’ era championed by the fictional Gordon Gekko was over. Neither was it a good look for Whitlam Turnbull’s backers to be peeling off after just three months. One pundit wrote that although the bank had started in a blaze of publicity, it had so far managed to secure only the advisory job for the NSW Egg Board privatisation and be on the losing side of the takeover bid for a junior mining company.28
In some ways, though, the bank was well placed. The founders’ $50 million share capital was safe—there had barely been time to invest it before the crash—and the wave of corporate desperation was about to dump a lot of advisory work on them. One troubled company in particular would make Whitlam Turnbull a success: John Fairfax Holdings.
Egged on by his mother, Lady Mary, young Warwick Fairfax had launched his disastrous $2 billion takeover bid for the 140-year-old namesake company in August. It was the culmination of decades of Fairfax family infighting which, as Trevor Sykes wrote, went roughly like this: ‘Eldest Son sacks Father; Mother and Father groom younger Son to wreak revenge; Father dies; younger Son recruits mercenaries, storms ancestral business and puts eldest Son, Uncle and Cousin to the sword.’ The only twist that was yet to play out was: ‘Mother turns on younger Son.’29
Family aside, Warwick’s bid was also commercial insanity—a sure sign being that West Australian entrepreneur Laurie Connell, founder of the Rothwells merchant bank, was to be paid the largest takeover advice fee ever negotiated anywhere across the globe, a staggering $100 million.30 Connell was a key player in the notorious government corruption scandal that would become known as ‘WA Inc.’—for which he would eventually go to jail—and Rothwells had been a lender of last resort in a very frothy market, overexposed to the decade’s riskiest deals, now illiquid or irremediable as asset values dived. From the second the sharemarket opened on Black Tuesday, Rothwells was in dire straits. Connell needed money fast and, while trying to organise an emergency bailout for his bank, tried to assign the enormous Fairfax success fee to somebody else, at a discount, before he’d even earned it. Various parties refused until a friend phoned Nick Whitlam, then on business in New Zealand. Whitlam then called Turnbull—he later wrote that, ‘as was always the case, if you wanted Malcolm to become involved in something, it became his idea’.31 Turnbull ran hard with the deal, negotiating first with the State Bank, then with Sir Peter Abeles, but it fell through. Connell wound up making his own arrangement with Alan Bond, assigning him the fee for $68 million.32 It didn’t matter: Whitlam Turnbull had earned its first $1 million fee.
While Connell was doing his deals, the wheels were falling off Warwick’s bid. The rest of the Fairfax family, whom he had assumed would remain as shareholders, not only wanted out, they convinced him to pay more for the 36 per cent stake they held, which meant he had to lift the bid price for everyone else too. Asset sales that were meant to pay down Warwick’s debt, including the offloading of various newspapers and the Macquarie Radio division, began to unravel:
The timing of the crash was very bad luck for Warwick. If it had occurred two months earlier, he could have picked up John Fairfax Ltd at cheaper prices. If it had occurred two months later, he should have been able to bed down all his major asset sales before it happened.33
Lady Mary wanted the whole bid pulled, but Warwick ignored her and ploughed on—incurring her wrath as well.
Under Warwick’s original plan, he would’ve taken on debt of $500 million. Now peak debt was approaching $1.5 billion. The banks were getting jittery, from major financier ANZ right down to minor lender First National—which wanted out right away and was demanding immediate repayment of a $13 million loan. Which is where Whitlam Turnbull came back into the picture. On 6 January 1988, Turnbull made an appointment to see Martin Dougherty, the former journalist and PR operative whom Warwick had appointed to oversee Fairfax editorial. Turnbull wanted to pitch legal services to the new management team at Fairfax—his law firm was still going, renamed Malcolm Turnbull & Co. in late 1987 after Bruce McWilliam went back to Allens.34 Turnbull was waiting for Dougherty on the management floor of the old Fairfax building at Broadway when Warwick recognised him and said, ‘Why don’t you come in and we’ll chat for a while until they’re free.’ It was reported that while ‘chatting to Warwick, Turnbull quickly realised the gravity of Fairfax’s dilemma. Intelligent, persuasive and forceful, and with the ability to get quickly to the core of a problem, Turnbull obviously impressed Warwick.’35
Turnbull saw an opportunity and offered Whitlam Turnbull’s assistance to refinance the First National loan right away. Thanks to Whitlam’s banking connections it was able to arrange a $500 million loan with Citibank that would take out nervous junior lenders and tide Fairfax over until its major facility with ANZ fell due at the end of June. It bought crucial time for Warwick, who later admitted in court that if the facility had not been arranged, Fairfax ‘would in all probability have gone under’.36 Until that point, Warwick had been in Laurie Connell’s thrall. Now he realised what a real corporate adviser could deliver: ‘[Whitlam Turnbull] prepared a number of detailed scenarios about what the company should do and the level of detail and, as I perceived it, the professionalism far exceeded any that I had received from the Rothwells team.’37 A condition of the refinancing mandate was that Whitlam Turnbull would be appointed to advise on any asset sales by Fairfax. As Connell was consumed by the doomed effort to keep Rothwells afloat, Whitlam Turnbull quickly became Warwick’s key adviser. As Whitlam wrote later, it was ‘the deal that set us up’.38
Though Warwick’s bid was in trouble, and the clock was ticking until debts fell due on 30 June, Fairfax still had very desirable assets and there was plenty of interest locally and offshore. Turnbull quickly tidied the sale of Fairfax magazines to Packer, sold off Macquarie Radio, and went about garnering interest in David Syme, publisher of The Age and BRW. Most keen was Robert Maxwell, publisher of London’s left-leaning Daily Mirror tabloid, who had offered $1 billion for a grab-bag of Fairfax assets, including Syme—effectively double what local investors were prepared to pay for The Age. Maxwell had a reputation for interference with his newspapers and, to assuage the concerns of outraged Age journalists, Turnbull helped recruit Sir Zelman Cowen to chair a board that would oversee a charter of editorial independence—it was endorsed by Age staff in March 1988 and subsequently adopted by rest of the company’s metropolitan newspapers (it is the same document that mining magnate Gina Rinehart refused to endorse when she was a major shareholder and demanding a board seat in 2012).39 With Wran able to work on treasurer Paul Keating, Whitlam Turnbull was confident it could overcome foreign investment hurdles to a Maxwell bid. On a trip to Paris in late March, Whitlam and Turnbull joined Warwick’s new hand-picked South African chief executive, Peter King, to negotiate a final deal with Maxwell. Talks were held at The Ritz, and Maxwell famously proposed a Dutch auction to determine a price: he would write down his best price and seal it in an envelope; they would write down their lowest price and do likewise; and then they would swap envelopes. If there was an overlap, they would agree on the midpoint. If there was no overlap, the deal was off. Maxwell wrote $805 million; Turnbull wrote $850 million. Talks might have finished right there, but Turnbull persuaded Maxwell to keep the offer open for three weeks. Soon Maxwell raised his bid to $850 million in exchange for a few extra assets being thrown in.40
Back in Australia, however, something bizarre happened to scotch Maxwell’s bid and set Fairfax on a course to insolvency. Turnbull took a call from King, who told him an American contact had passed on a conversation overheard in a toffy London nightclub, Annabel’s, between Neville Wran and Kevin Maxwell, Robert’s son; Sir Peter Abeles supposedly joined them later. The nub of the alleged conversation was that if Wran could secure The Age for $750 million, he would be paid a $50 million fee by Maxwell. Turnbull was apoplectic, both at the smear on Wran’s reputation, and the implication that his bank was putting its own interests ahead of its client’s. He wrote an impassioned letter to King explaining that the alleged conversation could not possibly have taken place: the men were not on Annabel’s guest list on the night in question, and calls to Sydney from Wran’s hotel showed he was back in his room early. Turnbull, copying in Warwick, demanded to know the name of King’s informant. King replied with an assurance that he had the highest respect for Whitlam Turnbull and there was no question of terminating their mandate, but Turnbull should not press him on the source of the rumour. He accepted Turnbull’s explanation and the matter was behind them.
Turnbull, however, could not let it go. He had to know where the malicious rumour had come from, and continued to raise it with King and Warwick. Much later, Turnbull did work it out: the rumour had come from David Burnham at Drexel Burnham Lambert, Michael Milken’s legendary junk-bond dealers who were in King’s ear about an alternative solution to the refinancing predicament looming in just ten weeks: sell some junk bonds. More debt would allow Fairfax to cling to all its assets, including The Age. But in April 1988, Turnbull was still convinced that the sale of Syme was the only way to stop ANZ taking control of Fairfax on 30 June, and he pleaded with Warwick in the strongest possible terms to accept the Maxwell bid:
I can only assume that you are contemplating some solution for your debt problem which involves the dealing of some equity at the John Fairfax Ltd level and which, for reasons I don’t understand, you don’t want us to be involved in. But please understand that if the banks exercise their security you may be faced with a situation where the equity in Fairfax currently held by you and your mother will be imperilled. Do you understand how grave the risks are?41
Warwick wrote back:
When I decided to do this takeover, I knew all the risks and I assumed them. It was entirely my decision and I acted on my own judgement. I take full responsibility for that decision. I am not financially illiterate: I understand the situation and will deal with it in my own way.42
Warwick’s way, of course, led straight to disaster—within two years, Fairfax crashed into receivership, saddled with a burden of debt it could not service. When it came time to pick over the Fairfax carcass, Turnbull would be among the vultures. For now, however, Whitlam and Turnbull kept their own counsel. Their top priority was to get paid, and they negotiated a $2 million fee for their fruitless work on the Syme sale, on top of their fees for the refinancing and other asset sales. Whitlam Turnbull’s total fee take from Fairfax in 1987–88 was a whopping $7.6 million. In its first twelve months, Whitlam Turnbull had pulled in some $10 million in advisory fees, hired nine staff, and repaid Adler and Packer their $50 million in share capital—the latter by bringing in a new 25 per cent shareholder, British and Commonwealth Holdings. It was flying high.
For the Whitlam Turnbull shareholders, it was dividend time. Turnbull and Whitlam got $1.75 million each—on top of their $300 000 base salaries—and Wran half as much. For the two principals, it was the equivalent of $4 million each in today’s dollars, for a year’s work. Turnbull went on a splurge. In late 1987 he had splashed out $820 000 for a weekender at Palm Beach, unencumbered. Now, he and Lucy decided to sell their Bellevue Hill home of five years, which one journalist described as a ‘solid dark-brick un-trendified home [belonging] to an earlier, more comfortable and civilised time’43. They then paid $2 million in cash for what was reportedly the most expensive terrace house in Australia at the time: Alster House on Goodhope Street in Paddington. Dating from 1878, the freestanding Victorian terrace had six bedrooms over three storeys, a spa, pool, and views to the city and harbour from the rooftop. Whitlam, already a Paddo resident, had found out the house was for sale and tipped off Malcolm. Turnbull decided he had to have it. The old house at Beresford Street, bought from Kerry Packer for $280 000 in 1982, went for $1.4 million.
Turnbull’s splurge didn’t stop at home. In June 1988, he and Bruce McWilliam, who by now owned four floors of offices at 60 Park Street, got deeper into commercial property, like many investors looking for a safer alternative to the sharemarket. Unfortunately they overpaid in the mini-stampede to bricks and mortar, forking out $6.8 million for a small shopping centre in Neutral Bay on Sydney’s lower North Shore. Called Bay Plaza, the property would prove a challenge. Although the gross rental income was substantial, at around $700 000 a year, vacancies crept up as the economy lurched towards recession. With interest rates hitting double figures, they sold at a $2.2 million loss in 1991.44
Still, at the end of 1988, Turnbull was in his prime. His wealth was made up of property worth $5.5 million, including the farm at Scone, his half of Bay Plaza, the Allcorp cleaning business and Whitlam Turnbull itself. Putting it all together, it would have been easy to arrive at a net worth of $10 million, meaning he had doubled or tripled his inheritance within six years. Turnbull spoke frankly with an interviewer about his early successes:
I’m just starting to realise that I am unquestionably an adult, that I can’t go around and pretend otherwise. You may do some important things in your twenties, be something of an enfant terrible. But inevitably you do defer more to your elders, you take the shit. Well, now … I don’t want to pay obeisance to anybody.45
Then the same old question arose: Would Turnbull ever be prime minister? The interviewer concluded with a kiss-off: ‘For the record, he says he doesn’t know right now and smiles broadly. But he may as well have a shot at it, if only because after forays into journalism, publishing, law and commerce, there could be precious little left to aim for.’46
At the end of 1988, the partners of Whitlam Turnbull canvassed selling a 13 per cent stake to Gary Weiss, who had quit working for legendary New Zealand corporate raider Ron Brierley, in a deal that would value their merchant bank at a lofty $20 million. The company soon moved uptown into far more salubrious offices at Chifley Square. Christmas that year saw Malcolm and Lucy holidaying at Long Island with her uncle Robert. But the following year would prove a more difficult one for Whitlam Turnbull.
There were more clients in 1989, but no jewels like Fairfax, and a couple of deals turned sour. Three-quarters of a million dollars in emergency finance extended to Rothwells was lost when the bank went into liquidation. They lost another million dollars on a prospective retail property development at Double Bay. Some $4 million in loans to radio entrepreneur Rod Muir were only recovered with huge effort. Acting for UK miller Ranks Hovis McDougall, the bank missed out on a fat success fee when shareholders rejected its $2 billion hostile bid for Goodman Fielder. And to cap it all off, there were share-trading losses. At the end of 1989, overall fee income had fallen 30 per cent to $10 million compared with the year before, and pre-tax profits fell harder, by 41 per cent to $6 million. Whitlam Turnbull was still up there on the league tables, claiming the third-highest deal tally of any merchant banks that year.47 But bonuses would be lower all round.
Ominously, there was increasing tension between the partners. The first big problem was a flare-up between Turnbull and Judy, Whitlam’s wife. It was over a small thing, but it festered. Nick and Judy had two adopted children and a son with disabilities, Peter. Malcolm had said he and Lucy would go to a charity ball for Peter’s school, but he called Judy to cancel at relatively short notice. Judy was not impressed—she was trying to get bums on seats—and the conversation went right off the rails when Turnbull said: ‘Your having a handicapped child is your problem. Although I sympathise, it is your problem.’48 Judy must have let fly because Turnbull wrote back later that day:
Please be assured that I have not taken any offence at your remarks to me today. Nor will I allow your abuse to diminish in any way my relationship with your husband. I can only begin to understand the constant grief and stress which Peter’s condition causes you, and I do assure you that I genuinely sympathise with you and Nicholas and admire the way in which you both cope with it.49
The letter went on to explain that on the relevant weekend, he and Lucy had planned to be in the country at Scone, where there were important business decisions to be made: ‘My farm, despite what you may think, is not a hobby farm, and is as important a business enterprise to me as Nicholas’ wine interests are to him, except that he has capable partners who can assist him, while I have not.’ Turnbull repeated an offer to donate to Peter’s school, noting that Judy had said ‘that you did not want my money. I assume you were not serious in that respect’ and pointing out that ‘far from being a selfish “yuppie” my donations to schools and hospitals in the past four years exceed $300 000’. Judy, however, was serious about refusing Turnbull’s money, and from that point was extremely wary of him. Turnbull told Whitlam that ‘Judy has a very sharp tongue and she should control it’.50
Turnbull’s brush with Judy was difficult terrain, but he and Whitlam could surely have forgiven each other if the business relationship had been travelling better. Unfortunately, the differences between the partners widened as Turnbull became embroiled in the mop-up of WA Inc. The State Government Insurance Commission was a client of Whitlam Turnbull, serviced almost exclusively by Malcolm and Wran, and Turnbull’s name was dragged out in a bitter debate before the West Australian parliament.
Throughout 1989, Alan Bond was getting more desperate by the hour and, used to throwing his weight around in Perth, had demanded the state government buy a property he owned, to be used in the development of a much-needed petrochemical project at Kwinana—at a massively inflated valuation. It was the kind of deal that might have worked in the bull market a few years earlier, under then premier Brian Burke, but his successor Peter Dowding dug his heels in. Bond retaliated by threatening to bring down the government, purportedly in cahoots with the Liberal opposition. Dowding then read out in parliament a long letter written by Turnbull, which spelt out the outrageous behaviour of Bond’s henchman Peter Beckwith. This was followed by an exchange with Jim Clarko, the Liberal member for Marmion:
Dowding: ‘He is a well-known Sydney lawyer who has a reputation, might I say, as no political hack, certainly in the Labor Party. He is seen by everybody as one of the toughest commercial lawyers around town and around Australia. That, of course, is Mr Malcolm Turnbull. I do not think anyone in this House would challenge his integrity.’
Clarko: ‘He is a partner of Whitlam’s son, isn’t he?’
Dowding: ‘Does anyone in this House challenge his integrity?’
Clarko: ‘Turnbull is a mixed bag, and you know it.’
Dowding: ‘Does the Member for Marmion challenge it?’
Clarko: ‘I do not know him.’
Dowding: ‘Does the Member have any other reason to challenge his integrity?’
Clarko: ‘The fact that you are using him.’51
This politicisation of their bank rankled Whitlam, who wanted Turnbull to keep a lower media profile. Turnbull would not stop his media appearances, even though it had been agreed that he would.
It did not help that Whitlam had known Bond since his State Bank of NSW days, when he helped fund the takeover of Castlemaine Tooheys, and was quite fond of him. Bond had become a client, asking Whitlam for help in extricating himself from a disastrous investment in British businessman Tiny Rowland’s Lonrho conglomerate, the prelude to a takeover bid.52 There was no easy way out, and in fact the investment would undo Bond completely as Rowland went on the counter-attack, fatally undermining Bond’s credibility with a devastating analysis of his empire’s finances that was circulated among investors. That lay ahead. In 1988 Bond was still partying, and Whitlam attended his fiftieth birthday in London—at Annabel’s, ironically, where the Château Lafite was poured generously.53
Whitlam Turnbull’s involvement in WA Inc.—advising Bond, Rothwells and the state government in the aftermath—cost the firm work in Queensland, where it was pitching to do a review of the state’s financial institutions for newly elected premier Wayne Goss. When it was reported that Goss did not want ‘even the slightest hint that his government will be following the West Australian Labor government into entrepreneurial deals’, Wran wrote a letter of protest to Goss’s then principal adviser, Kevin Rudd, complaining that the bank was engaged in WA ‘long after the “entrepreneurial deals” were concluded and [in] the interests of the public’. Wran asked that Rudd pass it on to Goss, finishing off, ‘least said quickest mended’.54
The key moment in the disintegration of Whitlam Turnbull came in early February 1990 when, after their families had had a civilised Sunday lunch at Whitlam’s home, the two men had a long conversation in which Turnbull volunteered the blunt opinion that he was contributing far more of the bank’s revenues and earnings than Whitlam, who was not working hard enough, and that Wran agreed with him. In two years, when their service agreements expired, Turnbull would be seeking to renegotiate their respective shareholdings. As Turnbull saw it, he was simply being candid. The discussion was followed by a couple of beers at their local pub, the Royal Hotel. Turnbull clearly thought he had been given a friendly hearing—perhaps even that there had been a meeting of minds on Whitlam’s shortcomings. Of course, the opposite was the case. Whitlam was quietly furious, and the partnership would last barely another three weeks.
Whitlam went straight to British and Commonwealth Holdings director John Gunn to say he could no longer work with Turnbull, that he was not the only one who felt that way, and that Gunn would need to choose between them. Whitlam outlined longstanding staff resentment of Turnbull, whose nickname round the office was ‘The Ayatollah’. Turnbull constantly generated a feeling of crisis, Whitlam said, and a mass defection was on the cards. Turnbull responded by accusing Whitlam of trying to get the numbers to oust him, lobbying directors and staff like it was a Labor Party caucus meeting. He convened an emergency meeting with Wran to remove director Peter Dodd and replace him with Bruce McWilliam, outnumbering Whitlam and Gunn. Most damaging of all, an article on the bust-up popped up in the Herald, quoting an unnamed source saying: ‘essentially they don’t have a lot of work on and one in particular of their number is not doing much to bring any in’.55 There was no way back. Whitlam negotiated a payout of almost $1 million, and resigned. Several other staff were equally quick to leave. The bank limped on, dragged down by the June collapse of British and Commonwealth, which left a quarter of its share capital in limbo.
Whitlam was hurt by the public accusation he had not been pulling his weight. It wasn’t true: tallying up the mandates, he accounted for almost half, as might be expected. Although he took legal advice, Whitlam was already fielding job offers and decided to put it all behind him rather than sue. Recriminations were kept to a minimum. ‘I’m not bad-mouthing Nick, and I trust he’s not bad-mouthing me,’ Turnbull said.56 Off the record, rival bankers were less than charitable about Turnbull’s hot temper. ‘There wouldn’t be one of us around town who hadn’t had the phone banged down in his ear,’ said one. Another said Whitlam Turnbull was small fry: ‘They never worried us. They were always rather a marginal player in the second eleven. They took on three or four high-risk things for which they claimed absolutely extraordinary abort fees when the deals fell through.’57 With Whitlam gone, the bank was renamed Turnbull & Partners (one columnist suggested ‘Turnbull Feecatcher’ had a nice ring to it).58 Whitlam and Turnbull would not speak again for many years.
By 1990 things were not going so well at Allcorp, either. The cleaning business had finally turned profitable in 1989, netting $250 000, but this wasn’t much to show for a turnover of $14 million. When the profit all but evaporated,59 Turnbull’s relationship with managing director James Cook, never easy, began to deteriorate. In August the board suddenly sacked Cook, precipitating a crisis because he was sole guarantor for a $1 million overdraft to the State Bank of NSW—which temporarily stopped all cheques—and a signatory to the master lease over the company’s equipment, which was worth almost as much again. Turnbull had to renegotiate with the bank to save the business. Cook said that his former partners ‘thought a service industry like that was a licence to print money … it really is a lot of hard work and very fine profit margins. I just got fed up with the abuse in the end.’60 Weeks later, Cook, who still owned 20 per cent of Allcorp, struck back with a summons and writ claiming wrongful dismissal, restraint of trade, and oppression of a minority shareholder.61 The case was settled out of court, but Allcorp started to wobble and spent the next six months desperately trying to cling to its contracts—including one with its own lender, the State Bank, only saved after some last-minute pleading by Turnbull himself.62 Turnbull, Wran and McWilliam were now treading water at best. Around the industry, the outfit was nicknamed ‘Allcorpse’.
But Turnbull had bigger ambitions. As Australia headed inevitably for recession in 1990, interest rates were skyrocketing and media empires were crumbling under the weight of debts carried over from the boom. Nine, Ten and Fairfax were all up for grabs. Turnbull wanted a piece of the action—perhaps a chance to run a media company himself. He was drawn back into the Packer fold, for the last time.