Sydney has always had a soft spot for the ambitious, diligent and physically active type; for the go-getter, can-do people who won’t take no for an answer; for natural leaders, whose personal style is brash, forceful, sometimes even a trifle brutal. These worthy sons and daughters of the city do well wherever they find themselves, and they do particularly well in Kings Cross. The Cross, that dirty half mile of streetfront, halfway between the city and the mansions of Edgecliff and Darling Point, is a hotbed of capitalism, market forces and free enterprise. The keen business minds there, ever aware of market opportunities, are always trying to extend into Double Bay or Oxford Street, following the economic faultlines.
The start of the 1990s saw these captains of industry temporarily in retreat. Even the Double Bay Bridge Club—a time-honoured institution which, in its heyday as one of the better illegal casinos in the 1970s and ’80s, once had the police commissioner on the payroll—had been forced to close, a victim of police crackdowns and tougher economic times. Ironically, in the 1990s, Gayle Rivkin would be one of the pillars of an unrelated association also called the Double Bay Bridge Club, where people actually played bridge—some people have no sense of history.
The Cross was doing it tough as well, though on the surface little seemed to have changed. As the Wood Royal Commission would reveal, the area was dominated by four major heroin and cocaine distributors, eight major drug outlets, seven strip clubs running prostitution and a solid phalanx of standover men. Victims disappeared; killers beat murder charges; police officers stole drugs and money from dealers, ran protection rackets, made up evidence and threatened witnesses. Business as usual, it seemed. Detective Sergeant Trevor Haken had just been appointed head of the drugs squad. Haken’s old buddy Inspector Graham ‘Chook’ Fowler was head of detectives at Kings Cross and Darlinghurst. ‘I love the NSW service; I served it; I hate to see what’s happening to it,’ Fowler told the Wood Royal Commission in 1995.
The city’s media also had a soft spot for the Cross—by which we mean the strip—everywhere except Darlinghurst Road tries to salvage some self-respect by calling itself Potts Point or Darling-hurst. At one point in the early 1990s, an axe murderer was thinning out the tourist population in the Cross on a random basis but it rated barely more than a brief mention in the press. But behind the happy façade, even the Cross was feeling the recession.
Bill Bayeh, the brother of that better-known Friend of the City, Louie Bayeh, who would feature prominently in the Wood Commission, was said to be so down on his luck in 1991 that his one-time protégé, Danny Karam, lent him $50. The money drought hurt everyone, even the sensitive souls who ran the protection rackets. Standover man Anton Skoro would later testify that the drug dealer who paid him $2500 a week to operate in the Cosmopolitan Cafe regularly resorted to paying him in caps of heroin rather than the folding stuff. ‘They were always running out of money,’ he complained. ‘They were the poorest drug dealers that I’ve ever known.’
Impoverished drug dealers. Don’t you hate that? Yet the tide was turning. By 1993, Bill Bayeh was back in the pink, running four heroin and cocaine outlets in Kings Cross—the Laser fun parlour, which reportedly turned over $20 000 a night, the Penthouse billiard room, the Downunder hostel and the Cosmo Cafe.
It wasn’t all crime and laughs. A resurgent Cross economy saw opportunities on the right side of the law as well. On 15 November 1991, as the last scenes of the Fairfax sale to Tourang were being played out, an ambitious thirty-year-old Lebanese businessman called Joe Elcham signed a lease on a restaurant property in Victoria Street, Kings Cross, which he opened as Joe’s Cafe. Elcham had the skills to turn a grubby establishment into one of the Cross’s fashionable meeting places. Its exotic clientele gave the cafe an appealing, racy edge among the Cross’s modish daytime population. In 1996, when the Daily Telegraph wrote a profile of John Ibrahim, the young Lebanese nightclub operator said to be a former Bill Bayeh protégé and described in the Wood Royal Commission as ‘the new lifeblood’ of the drugs trade in Kings Cross, Ibrahim did the interview sitting at ease at Joe’s Cafe. He described life in the Cross, his pastimes, and the way he worked out at the City Gym on Victoria Street. He denied the ‘lifeblood’ claim and said he never touched drugs.
While such connections have given Elcham a colourful reputation— in 1997 the Casino Control Authority found he was not a fit person to work at Star City Casino—his reputation is otherwise unblemished. But he knew a business opportunity when he saw one. Which is why, within days of opening the cafe in 1991, Elcham cold-called Rene Rivkin as the former broker drove past in his green Bentley.
‘I tapped on the glass,’ Elcham told journalist Ali Cromie in 1998. ‘He looked. I’m sorta a little terrifying looking ’cause I’ve got a growth and I’m quite dark. If you didn’t know me I look quite mean. I’m not. I’m a real softie and he wound down the window half an inch.’ Rivkin appeared unfazed by the growth. Elcham told him he had been a big fan of his for years. ‘I’ve got this little cafe across the road and I’d love you to come in one day and have a coffee,’ Elcham said. ‘The next day, he was there, saying, “Okay, show me this great coffee”.’
For the next four years Rivkin would be a habitue of Joe’s Cafe, cultivating a set of athletic young men who hung out there when they weren’t exercising at the City Gym. ‘Rene is an animal who thrives on conversation,’ was Andrew Lakos’s verdict. ‘He hates to be alone.’ He hired one of the young men, a former bouncer and would-be tattooist called George Freris, as his chauffeur. For the rest of the 1990s he would take groups of his cafe pals on holidays with him, and they would duly lounge about in the sun and vie for his attention. With the rest of his life falling apart, Rivkin still had the trappings of wealth.
The great appeal of the Bright Young Things to Rivkin was that they would do what he told them. The appeal was the power imbalance. ‘I have good older friends, but I like my young friends more,’ Rivkin said later. ‘Old friends are my equal. If I was out with my old friend Trevor Kennedy, and I said I wanted a nap, he’d say, “No, you can’t have one.” My young friends will do what I want to do and my older friends will not do what I want.’ That meant that when Freris wore an earring that Rivkin didn’t like, he paid him $200 and Freris took it off. ‘At the time, $200 was a lot to me,’ Freris told the City Weekly in October 1996. Rivkin would play mind games with his group of yes men. He would say to one of them at random, ‘George Freris thinks you’re an idiot. What do you have to say about that?’
‘I like controlling people,’ Rivkin told Australian Lifestyle in 1998. ‘I don’t know why, but I do it for their benefit.’ Like medicine, it was no good if it didn’t hurt a little. That’s the pleasure of power. Rivkin put it bluntly to Freris: ‘I don’t want to pay people to do things they want to do. I pay people to do things they don’t want to do.’
All of this didn’t help the Rivkin bank balance, so it was wonderful timing in late 1992 when Rivkin got a call from his very good friend Graham Richardson. It had been a disastrous year for Richo. He had begun with high hopes as the new communications minister. He had been able to head off a few threats posed to the Packer television interests by pay-television proposals, largely by postponing any consideration of the issue. Then he had gone off on a world tour to inspect pay-television operations around the world. He said later the highlight was a round of golf at the famous Augusta course in Atlanta, Georgia, that Kerry Packer and Greg Norman had arranged for him. He stayed in Rivkin’s flat in London and used his Rolls Royce. In return, Richardson’s office was helping the immigration application for a young Scandinavian barman whom Rivkin had taken it into his head to employ. It was a whim of Rivkin’s, and how pleasant it was that a senior government minister would feel compelled to act.
In May 1992, though, after less than five months in office, Richardson was forced to resign from Cabinet over revelations about assistance he had given to Greg Symons, an old friend and the husband of his cousin, who had been charged with a passport scam in the Marshall Islands. It was the biggest professional setback Richardson had had. Yet it wasn’t all loss. He said later that it was only after his demotion from Cabinet that he began to make some modest share investments. And in the winter of 1992, Richardson became involved in meetings of a new faction of the Labor right in state politics called the Terrigal group. It met in the Terrigal beach house of Eddie Obeid, the Labor power-broker for the Lebanese community. It was here that Richardson helped persuade left-winger Michael Knight to defect and join the right. Much later, when Knight became Olympics minister, he appointed Richardson mayor of the Olympic Village.
By late September 1992, Obeid had told Richardson about his interest in acquiring a little printing business owned by Kerry Packer, which did a little printing work for trade unions. The business had been run for half a century by three generations of the Hackett family, starting out in 1938 with Ronald Hackett senior as the Offset Printing Company. By the time Kerry Packer took it over in the 1980s, the operation had become Offset Alpine and it was run by Ron Hackett junior and his son Garth. Trevor Kennedy sat on the board. By 1990, it was turning over a tidy little profit each year of $4.5 million to $5.5 million before tax. But its presses were ageing and the company needed some serious investment to keep it competitive.
Packer loathed printers and the printing business—he had convinced his father to sell the Telegraph to Murdoch just before Sir Frank died. But he had kept Offset Alpine because he wanted an alternative printer for the ACP magazines as a negotiating point when printing contracts were being worked out. That pressure had lessened now that it was possible to outsource the work to high-quality printing outfits in Singapore. Bob Carr’s wife, Helena, and her business partner, Max Turner, had been negotiating for months to buy Offset Alpine from Consolidated Press. Previously Carr and Turner had run Leigh Mardon, the communications and packaging arm of Amatil, until they lost out in a management buyout deal in 1990. They had experience in specialist printing, but not enough money.
Just how Eddie Obeid got involved has never been clear. He had run the Arabic newspaper, El Telegraph, for years, but his property investments were struggling in the recession. He subsequently said that he heard Offset Alpine was on the market and raised the matter with his good friend Graham Richardson. All Richo could do was to flick the deal to Rene Rivkin. By October 1992, the Offset sale had quietly switched from a deal with Carr and Turner to a sale to Rivkin’s public company Stroika. The terms of the sale had become a bit sweeter as well.
On 16 October, Stroika announced it was buying Offset Alpine for $15 million, with the seller, Packer’s newly listed magazine arm, Australian Consolidated Press, lending $5 million of the purchase price to Stroika. Rivkin later described it as the best deal of his life. It seemed ridiculously cheap. In the previous three years Offset Alpine had earned that much in pre-tax profits. And it was going to get better. In the past Offset Alpine had got less than 10 per cent of its business from ACP: now Stroika announced that the deal included increased printing work for ACP.
The value of Stroika’s shares jumped by $10 million after news of the deal. Rivkin controlled 63 per cent of the shares by now, most of it through Swiss accounts, so a majority of the benefit from this deal went to him. But it turned out the Swiss shares weren’t all his. Ultimately more than $35 million would flow out of Rivkin’s Swiss accounts in the wake of the Offset deal. But to whom did it go?
In December 2002, Rivkin testified to Zurich District Attorney Dr Nathan Landshut that when the shares in Stroika (by then renamed Offset Alpine) were sold in December 1995, 7 per cent of the proceeds went to Graham Richardson, Trevor Kennedy received 12 per cent, and the rest was Rivkin’s. Kennedy’s interest was via Brampton, an investment vehicle he had set up in the 1980s in the Bahamas. He says he did not control Brampton or even know what it was investing in. ASIC officers who searched Rivkin’s office in November 2003 found correspondence between Rivkin and Alex Fundulus, the private client manager at EBC Zurich, which referred to Brampton buying Stroika shares in 1992 and 1993. Kennedy says he knew nothing about this and the documents show the deals were organised by Rivkin. Richardson had been using one of Rivkin’s EBC accounts to disguise his interest, Rivkin told Landshut. Rivkin’s Stilton account at Bank Leumi shows several large cash transfers to unknown parties from 1992 to 1995, so there may have been other shareholders who cashed out of Rivkin’s Swiss investing fund early.
Quite apart from the Swiss holdings, Richardson told his biographer, Marian Wilkinson, that he held a small parcel of Offset shares in Australia. Sam Chisholm, the former head of Channel Nine, had bought some Stroika shares in his wife’s name. Governor-General Bill Hayden owned Stroika shares as well, and there was talk of a number of other political figures making a timely investment. There is nothing wrong in buying stock like this, so long as the investor does not have confidential, market-sensitive information.
Eddie Obeid said he did not own Stroika shares but Kate McClymont later reported in the Sydney Morning Herald that Obeid claimed that he held an option to buy 20 per cent of the printing business. This seems a strange bit of accounting—when could Obeid have exercised such an option after the deal was done? It is hard see to how the option would have worked out in practice, since Stroika shareholders had not been told about it and any attempt to exercise such an option would presumably have required Stroika shareholder approval and independent advice. In any event, if there was such a contract, Obeid said he did not have the funds to exercise it. The day before the deal was finalised, Obeid’s son Paul joined Rivkin and Corlett on the three-member Stroika board, adding his experience, which was in ‘property investment, property construction and international trading’.
The Offset Alpine sale made a lot of money for a lot of people who had shares in Stroika. Did Kerry Packer intend to be this generous? It seems unlikely. In 1992, Packer wasn’t about to do any favours for anyone or anything linked to Trevor Kennedy. This looked like an Al Dunlap deal. He was still running the show at Consolidated Press Holdings, selling off any part of Packer’s empire that wasn’t welded on. It was hardly the first time Chainsaw sold assets for less than they were worth. However, while Packer had not intended it this way, a number of politicians were better off as a result of the Offset Alpine sale. There is nothing like the bonding that comes from a successful financial transaction. Packer must have built up a bank of political goodwill from the windfall he had inadvertently delivered. This was a new role—Kerry, the patron saint of the political battlers. What a solid fellow he was, a benevolent Santa Claus, quite unlike the ravenous figure he was usually painted as. It proved rather fortunate timing because Packer was about to bounce back into the headlines and he needed Canberra to cut him a little slack.
The Offset Alpine deal was settled on 19 November 19 1992. Seven days later, Consolidated Press announced that it had bought 8.3 per cent of Westpac. Within days the stake was nudging 10 per cent and Packer and Dunlap were talking about what needed to be done to turn the troubled bank around. In contrast to Westpac, Packer’s empire was back in robust financial health. Al Dunlap, that shrinking violet of the management classes, had hacked and hewed at everything he saw at Cons Press, raising more than $3 billion in cash for Packer from floating both the magazine division as Australian Consolidated Press and the US inserts business as Valassis Communications. Unlike almost everybody else, Packer believed Westpac would recover, that its franchise was too strong not to bounce back. ‘Kerry basically thought that Westpac was unfuckable,’ a former Westpac executive said later.
Part of Westpac’s appeal for Packer was the huge property portfolio the bank now controlled after foreclosing on problem loans. In addition, Westpac and its receivers controlled both the Ten and Seven television networks, the rivals to Packer’s Nine. Seven would later be sold in a public float, with News Ltd and Telstra taking the largest stakes. Packer had very strong views about how Ten and Seven should be run and what sort of rivals he would end up with. Packer wanted Ten to be a no-frills operation that would not challenge Nine’s dominance or bid up the price of US programming or sports rights. In the best of all possible worlds, it would broadcast the test pattern all day, perhaps with a little background music. How Westpac sold the two networks and who ended up owning them would be critical for the future of Nine and for Packer himself. This is where Packer’s Westpac move became controversial—because of the restrictions of the cross-media laws.
Mid-year, Westpac had actually taken ownership of Ten to help the resale process. Packer and Dunlap could not join the board until the network had been sold. The bank had been in negotiations with Canadian Izzy Asper’s CanWest group, but finding an acceptable way to keep voting control of Ten in Australian hands, as was required, had been difficult. Westpac CEO Frank Conroy was under pressure to finalise the sale of Ten so an impatient Packer could come on board. As a temporary measure, Packer and Dunlap were invited to a Westpac board meeting on Thursday 17 December as observers. Conroy finalised the Ten sale at 3 a.m. on the day before for $242 million, but it didn’t save his job. After discussion with Packer and Dunlap, the board gave Conroy his marching orders on the Thursday, leaving Packer in the box seat to determine who Conroy’s successor would be. Meanwhile, Ten had been sold to a consortium in which two close friends of Packer’s, Robert Whyte and John Singleton, played leading roles.
Most of the Ten sale price was debt. The cash part of the deal was only $90 million. To get around the foreign investment restrictions, Izzy Asper, a one-time Canadian tax lawyer, set up the deal so that while CanWest came up with more than half the cash it held only 15 per cent of the voting stock. The rest of the voting shares were parcelled out between Laurence Freedman and Brian Sherman (who invested via Telecasters North Queensland), investor Jack Cowin, Melbourne tax lawyer Izzy Leibler, Singleton and Whyte. It made for a delicate balancing act. On one side the Canadians had put in the bulk of the money. On the other Telecasters North Queensland held the biggest voting block with 40 per cent. And perched there on the catbird seat between them with the balance of power were Kerry Packer’s good friends Whyte, with 15 per cent, and Singleton, with 10 per cent.
Whyte became acting chairman, and he and Singo were both on the four-member executive committee that ran Ten in the early months. Their combined investment had cost a mere $11.4 million, yet this modest amount gave them enormous power as they held a quarter of the voting capital of one of the three major networks. It turned out that the views of the new Ten board coincided with some of Kerry Packer’s. The directors under Whyte (who later became deputy chairman) were very much in favour of Ten running no-frills programming that would not challenge Nine’s supremacy. When CanWest put forward a budget in 1993, the board sent it back to them insisting on more cuts.
There was some surprise that Whyte and Singo managed to raise the $11.4 million to pay for their stakes. Singo was reputed to be broke and Whyte had privatised most of his public company, Audant Investments, in a share buyback scheme in October. Whyte was always a smooth operator but for once he was having to scrimp and scrape. The independent expert’s report described the share buyout that Whyte organised for Audant as ‘not fair but reasonable’. In the language of such reports that means the deal isn’t fair but shareholders don’t have much option but to accept. Whyte was operating on the ‘pay later’ principle as he scrambled through a series of deals to pay for the buyback. On 23 December, as Whyte raised money from Rodney Adler to complete the Audant buyout, Whyte’s other public company, Trafalgar Properties, reported that Audant ‘will have no cash resources after meeting the payment’. A week later Whyte borrowed even more as Audant paid $6.8 million for its Ten shares.
Things looked tight for Whyte but now he played his trump card. Three years before, Audant had done a great deal to buy a 9.9 per cent stake in Advance Bank for $25.3 million. Remarkably, at a time when commercial interest rates were up to 25 per cent, Audant’s financier, State Bank, charged no interest on the loan other than the Advance dividends paid on the shares. In return, State Bank was entitled to half of any capital gain, an arrangement that suited Whyte very well. If Advance Bank’s restrictions on its shareholdings were ever to ease, State Bank probably hoped or expected to buy these shares from Whyte. By early 1993, bank stocks had started to rise, and Whyte eased his financial pressure by selling the Advance shares for $38.4 million. It was a nice return, even after the profit share arrangement with State Bank. Only it turned out that the Advance shares he sold hadn’t gone very far. They popped up in nominee accounts held by Challenger Capguard Securities and Macquarie Bank. It was never identified who was behind these accounts but they offered Whyte an even better deal than State Bank. The mystery investor agreed to give Audant the right to buy the shares back several years later for $37 million—that is to say, for $1 million less than the mystery person had paid for them.
The return for the unknown investor in the deal would come in the form of the franked dividends it earned from the Advance shares. This seems an advantageous deal for Whyte. However, a party involved in the 1993 deals described them as ‘commercial transactions negotiated at arm’s length’, and said that ‘any view which regarded the transactions as unusual or unique demonstrated commercial naivety and lack of knowledge of available structures to finance complex commercial transactions’.
The only party ever linked to the share deals was a Packer company called Consolidated Press Finance, which loaned money to Audant in May 1993. In return for the one-month loan, Packer’s company took a mortgage over some of Audant’s Advance Bank shares. When asked about this in 1998, a spokesman for Whyte would only say that Consolidated Press provided bridging finance on an arm’s length basis, and on commercial terms. Cons Press did not comment.
What made the loan from Packer’s company different from most commercial loans was the list of conditions that put the loan into default. One of these conditions read: ‘Investigation: any person is appointed under any legislation in respect of companies to investigate the affairs of any transaction party.’ That is, any official inquiry into any of Whyte’s companies triggered the default, and the whole funding structure collapsed.
Back at the end of 1992, however, Kerry Packer had every reason to feel pleased. It had been a lucky few months. He had taken a commanding position in Westpac and was now poised to make a financial killing. The bank had sold the Ten Network to a consortium that featured some of Packer’s closest friends, one of whom he later helped with some bridging finance. The no-frills business plan adopted by Ten was the best possible outcome for Packer. And there was not a peep from Canberra, where a lot of politicians had done very well out of a share investment that Kerry Packer had turned into a windfall.
Packer wasn’t the only one feeling comfortable at the end of 1992. Across town on Christmas Eve, Rodney Adler was helping another up-and-coming businessman in Cabramatta. Phuong Ngo was a thirty-four-year-old Vietnamese entrepreneur with an eye for the main chance. In 1992, Ngo had talked Adler into backing his new venture, a registered club called the Mekong. When it came to lending money, Adler kept a broad church at FAI.
Several blocks away in the CBD, a young blonde model called Caroline Byrne was introducing her new boyfriend to her family on Christmas Day. Gordon Wood was a fitness instructor at Club World of Fitness on Castlereagh Street in the city. He hadn’t quite swept her off her feet—she insisted that he take an AIDS test before the relationship went far. Caroline moved in with Wood over the Christmas break. The two were still celebrating on New Year’s Eve when Wood introduced Byrne to her first ecstasy tablet.