The 1998–99 summer saw two network sagas which said everything about what Sydney was, and what it was becoming. They were both tales of insiders and secret agreements. While one was about the future, the other represented the past. One was about access, technology, media and sex appeal. It was so 1990s, which is perhaps the biggest reason that it failed. This was One.Tel, the Generation-X debacle. The other deal was insignificant, overcomplicated and irredeemably retro. The Murrin Murrin wheeze worked because that dinosaur Rene Rivkin had stumbled upon the future of marketing. Across Australia the pre-Boomers— refugees from the 1980s, that generation of frantic forty-year-olds who had peaked early and were now pushing sixty—were still firmly in control. In Canberra, the biggest pre-Boomer of them all, John Howard, was looking set for another decade. But the ground was moving.
In early 1998, other stories held the headlines. The BHP board was in meltdown while the AMP Society was struggling through a public float. In April, Goldman Sachs in New York quietly canned the idea of privatising FAI, though Malcolm Turnbull continued to press it. Without Goldman’s help, FAI’s future was looking very bleak to those who knew the real state of the company’s accounts. In May, Rodney Adler was in the US, meeting Mafia figure Jeffrey Pokross who, unbeknown to Adler, had become an FBI informant.
‘He wanted to figure out if I could assist him secretly parking stock in the US so he can get some money and try to drive the [share] price up in Australia to attract a higher takeover bid than apparently he was getting,’ Pokross later testified in US court proceedings against an American stockbroker. When questioned about this at the HIH Royal Commission in 2002, Adler denied asking Pokross to manipulate the FAI share price.
Gerard Farley’s appeal in the Administrative Appeals Tribunal, against the four-year ban on him from acting as a broker because of the Bendigo Mining affair, was heard in early May. On 22 May, Theo Onisforou resigned from the boards of all Consolidated Press companies, apparently after a row with Kerry Packer. One estimate suggests that Consolidated Press paid Onisforou $20 million to buy him out of his partnerships with James Packer.
Meanwhile, the eastern suburbs were hearing exciting stories about shares in a new local telephone company, which was winning support from canny US investors. On 26 March, One.Tel announced it had placed 7.5 million shares with Coldstream Capital LLC, a Los Angeles-based investment partnership. Brent Potts handled the deal. ‘The new issue was initiated and organised by P.G. Intercapital Ltd,’ One.Tel said. In a second placement another half a million shares had been issued to institutional investors, the company said. Potts’s Bank Leumi records show another story, though Potts says the trading details noted here are incorrect and the conclusions drawn from them are wrong.
According to Bank Leumi records, Potts had begun buying One.Tel shares through his Swiss account in early February. When he organised the Coldstream deal, the secondary placement did not go to institutions as was announced. Instead, 450 000 shares went straight to his Leumi account. His fee for handling Coldstream paid for half of his new shares. The One.Tel stock that Potts now held would soon be worth a fortune. If only he had known. Instead, in August, he began selling out. By October, he had sold more than $1 million of stock. While this provided him with a profit of several hundred thousand dollars, if he had held on for a few months more, he would have walked away with $7 million. It’s not clear why Potts began selling in August 1998. It’s possible that he was short of funds and needed to liquidate some assets after the discovery of the losses in his EBC Zurich account from Axel Fundulus’s embezzlement, which had just come to light.
Or it might have been simply that Potts didn’t believe in One.Tel. FAI director Peter O’Connell had sold his shares for $2.6 million in February, while Lachlan Murdoch’s next-door neighbour, property developer Philip Wolanski, who had invested more than $350 000, sold out by August. The rollcall of people who might have made a killing in One.Tel makes sad reading. Through much of 1998, the only consistent buyer for One.Tel shares was Rodney Adler. He made the market. FAI spent $3 million buying One.Tel shares between April and October. Adler accounted for two thirds of the turnover in those six months, standing in the market day after day, pushing the share price from $2.22 up to $2.80. The sheer volume of FAI trades in a thin market suggests Adler was manipulating the stock.
Adler’s support was critical for One.Tel because in October the founder shareholdings of the company came out of escrow and James Packer faced the decision whether to invest more money or to walk away. The high share price made the decision easy. Packer signed up to a new share agreement, while Rich raised another $10 million in convertible notes from Packer and Westfield’s David Lowy.
Jodee Rich had just made his most audacious—and absurd— move yet. The Australian Communications Authority had held an auction of spectrum for mobile phone companies. At the end of the auction, it was left with a ragbag collection of frequencies that no one wanted. On 15 September, Rich bought this spectrum for $9.49 million. He then announced dramatically that One.Tel would be building its own mobile telephone network.
It was an intoxicating concept and Rich had shown he was a superb marketer. There was no end to what he could achieve with his own network. This was an idea tailor-made for the dotcom boom, and the Murdochs and the Packers would bet a billion dollars on it. However, right from the start, there was a technical problem.
Running a wireless network is a complex business that needs a certain amount of spectrum to handle the traffic. Some channels must be set aside for managing interference, leaving fewer channels for control and subscriber traffic. The bottom line is that running a mobile phone network takes eight to ten megahertz of spectrum and One.Tel didn’t have nearly enough. Despite all the hype and bright promises, Rich had bought a tiny sliver of spectrum that was too small to do much with. It was technically impossible to run a telephone network with the 2.5 megahertz of spectrum that he had bought for Sydney. In fact One.Tel was based on an illusion.
As the dotcom boom began, technical concerns took a back seat while the whole tech stock sector, including One.Tel, simply took off. On 14 December, Worldcom bid $530 million for Ozemail. Malcolm Turnbull and Trevor Kennedy would walk away with $59 million apiece and Sean Howard $118 million. Another venture called LibertyOne had part-ownership of an Internet search engine; it turned a $1 investment by its chief executive, Graham Bristow, into a $52 million fortune.
Jodee Rich had now lured James Packer away from his most senior advisors. In 1997, the then Consolidated Press Holdings chief, Brian Powers, had warned James against putting money into One.Tel. Powers’ successor, Ashok Jacob, would repeat the warnings, as would Nick Falloon, CEO at Publishing and Broadcasting Ltd.
‘Nick Falloon told me to be cautious about everything,’ James Packer scoffed later at the One.Tel receiver’s hearing. Falloon had expressed negative sentiments about One.Tel management ‘just as he expressed at some times negative views about buying Crown Casino’. However, ‘at the end of 1999 for example I think he said to me something along the lines of, “James, you were right and I was wrong.”’
On 11 December, Packer made his biggest commitment yet to One.Tel, paying $47.3 million for One.Tel shares acquired from FAI and from director John Greaves. One.Tel’s share price doubled and Packer was a winner again. The shares in his company Dorigad were now worth $150 million, a profit of $65 million. Packer’s judgement was confirmed five days later when US fund manager Gilbert Global Equity Partners, run by George Soros’s associate Steven Gilbert, agreed to invest US$30 million in One.Tel (Gilbert was a regular visitor to Sydney, where he sat on the board of Star City Casino with One.Tel shareholders Dick Warburton and Neil Gamble). By the end of December, One.Tel’s share price had zoomed to $6.
One.Tel’s trajectory was determined by personal relationships between a small group of people. Behind the slick talk, Jodee Rich and his followers really believed in the product. The soap opera they spun off was not a trick. It was a generational debacle: a product of the total disaster zone that characterises the Australian alpha male and his progeny. Jodee Rich may have moved away from the Rich compound on Bulkara Road since the Imagineering days, but the shadow of his father never seemed far off. Jodee’s One.Tel shareholding was held through a family trust linked to his parents.
‘We [eldest sons] all feel a special pressure to prove ourselves, and Jodee is no exception,’ Adler told Sandy Plunkett in 1991. ‘He [Rich] didn’t do it for any material gain; he grew up in a wealthy family. He admires his father’s business skills.’ Adler himself would never be free of his father’s legacy. James Packer skirted the same issue in a 1994 interview: ‘I want to be able to look at my father in ten years’ time and say, “I’m proud of you, and you should be proud of me.”’
Father–son tensions are standard issue for Australia’s richest postcode. Bellevue Hill is awash with Oedipal angst. With the possible exception of the Lowys and the Pratts, Australia’s wave of post-World War II fortunes has arguably never seen a successful family succession (the Smorgons would be contenders as well, but only after the third generation split up). It was perhaps only a matter of time before James Packer and Jodee Rich got together with that other victim of an over-achieving father, Lachlan Murdoch. It began with James Packer hosting a dinner for Lachlan at his home on 20 January 1999. The two young heirs had become friends of sorts during the Super League battle in 1995, despite their different styles and interests. At the end of a wide-ranging discussion, Packer raised the potential returns if News Corporation and Publishing and Broadcasting Ltd (PBL) ever got together in a telecommunications venture. Lachlan agreed. Packer then suggested they could do it through One.Tel.
Several days later, Packer called Murdoch and suggested he meet Jodee Rich. The meeting took place during the last days of January at the News Ltd offices in Holt Street, Surry Hills. At some point after that meeting, the ‘I’ word came up.
‘He (Packer) described Imagineering and put his opinion that it was a company that had grown too quickly, which was the cause of its ultimate downfall,’ Murdoch said.
A week later Jodee, James, Lachlan and Brad Keeling were in New York putting a proposal to Rupert Murdoch. On Monday 16 February, News and PBL signed off on a $754 million investment in One.Tel. It wasn’t just money that Murdoch and Packer were offering—it was also the political muscle to convince the government to release more spectrum for One.Tel.
The Tuesday newspapers ran variations of the same photo op— Jodee and James and Lachlan and Brad arm in arm, three of them beaming varying shades of morose, while Keeling flashed that billion-dollar grin, all of them clinging together like drunken sailors. The shares were at $6.40 when Packer first broached the idea on 20 January, but within days they had risen sharply. The morning after the deal was announced the stock hit $13. Overnight One.Tel had become a $3 billion company, and the Murdoch and Packer interests together were sitting on a $900 million profit. It was another roaring success. This was the deal of the decade, the highwater point of the network, and all Bellevue Hill wanted a piece of it.
Jodee Rich was following the same game plan he had with Imagineering. He had hyped up a marginally viable business to a rich investor. And as with Imagineering, a third of the new cash he raised was paid straight to shareholders as a share buyback, which left the company without enough money to fund its expansion plan. This was payday. Jodee Rich trousered $52 million that year, part of more than $75 million he extracted from One.Tel. James Packer’s share of the stock buyback came to $26 million.
There was now a new eastern suburbs parlour game called Who Made Money on One.Tel? By 29 January, poor old Brent Potts had cashed total profits of $737 000 through his Swiss account—too early to make real money. He now held only 25 000 shares, worth $325 000. The One.Tel family connections had done well. As of 3 March 1999, the share register showed that Gayl Rich had two share parcels worth $234 000 at the $13 share price. Her son-in-law, Adam Long, held $221 000 of shares. Maxine Rich’s brother, Philip, held $58 000, while Dr Leonard Brenner held an $86 000 stake. Brad Keeling’s father, William, held a $104 000 stake, while Ashley Keeling’s stake was worth $130 000.
Rodney Adler was one of the biggest winners after he guided One.Tel options, which arguably should have gone to FAI, into his own family trust. Their sale eventually raised $15 million. David Lowy also ended up $15 million ahead from his convertible notes. John Greaves, the One.Tel chairman, raised $3.77 million. Neil Gamble had sold his 40 000 shares. Brad Keeling’s old boss at Strathfield Car Radio, Andrew Kelly, had sold a third of his stake, but still held another 20 000 shares worth $260 000.
The lucky winners included plastics manufacturer John Hill, who held shares worth $782 000, Gresham Partners ($650 000), Toorak socialite Dianne Allen ($520 000), Julie Trethowan of the Hyde Park Club ($117 000), Michael Rennie of the McKinsey group ($121 000), Dianne Jagelman ($65 000), James Packer’s friend Ben Tilley ($65 000) and Alec Shand QC ($50 000). Other investors included the Sarich family, Andrew Kroger, Bryan Frost, Bruce Corlett and the family of FAI executive Tim Mainprize. Tessa Philips, the mother of Lachlan Murdoch’s friend and Ecorp executive Jeremy Philips, held a modest $32 000 parcel.
Like any list, what is most interesting are the names that are not on it. There were no major fund managers. For all the hype and excitement, Jodee Rich had managed to keep 98 per cent of the shares locked up with shareholder agreements. Only a handful of people made serious money from One.Tel. Everyone else had tiny holdings. One.Tel was like a club with a line of people outside who weren’t allowed in. Long ago God made Sydney restaurants to show us there is nothing so appealing as exclusivity. By June 1999, Theo Onisforou’s company Angreb had amassed a $3.6 million stake. But the windfall profits were over.
By late 1998, the different threads of the network were falling over each other. Adler had gone to New York in July to lobby Goldman Sachs to save Operation Firelight, but on Thursday 3 September, Goldman Sachs formally canned the deal. An internal memo at Goldman in Sydney after certain assumptions put FAI’s net tangible assets at only $20 million. (Goldman executives told the HIH Royal Commission that this was an opinion held by one executive which was not generally circulated.) Turnbull told Adlerthe deal was off the following Tuesday. While it was well disguised, FAI was next to insolvent. Adler was fighting with his board over a deal to pay $25 million for a Sydney fire alarm manufacturer, Ness Systems. It was owned by Adler’s former school friend Paul Brown, who had paid $781 000 for his stake four years before via the British Virgin Islands. The FAI board minutes, later tabled in the HIH Royal Commission, show that chairman John Landerer openly doubted Adler’s claim that he was not connected with Brown. With the last hope of a Goldman Sachs rescue dashed, Adler began takeover talks with Ray Williams at HIH Insurance. On 23 September, Adler sold half his family stake on-market at 75 cents a share to HIH, which announced a $300 million takeover bid for FAI.
A week before the bid, Brent Potts was having lunch in the south of France with Robert Pittorino, the former head of broking house County NatWest, when he was phoned by Ernst Imfeld at Bank Leumi. Imfeld placed an order to buy FAI shares. The conversation was detailed in a formal referral that ASX Surveillance made to ASIC two weeks later, quoting Potts. Leumi had been buying GIO Insurance ‘for some months’ and Imfeld was buying FAI in the expectation that it would be taken over as part of industry rationalisation, Potts told Jim Berry at Surveillance on 28 September. ‘Adler had been rumoured as a seller for ten years, but always wanted too much, even $1.50,’ Potts continued. Pittorino had also ordered some FAI shares, he said, and there was some buying by Cantrade Private Bank, Switzerland.
If Potts really said all this, he was pulling Berry’s leg. P.G. Intercapital did buy FAI shares for Leumi on 17 September, but they went straight to Potts’s Remgus account. He sold them on 29 September—the day after he talked to Berry—and booked a $54 000 profit. The GIO buying that Potts mentioned was also for himself. Remgus sold into the AMP takeover bid for GIO in January 1999 for a $158 000 profit.
Rivkin had lunch with Adler the day before the FAI bid, along with Gary Gray, the ALP national campaign director, and Labor senators John Faulkner and Bob McMullan. After lunch the subject turned to FAI’s future plans. Rivkin bought FAI shares that day for his son Jordan and his company Tarfaya Nominee. The next day, before the bid was announced, Rivkin bought 200 000 FAI shares through his World account at Leumi, which he sold three weeks later for a modest $16 000 profit. The day after the FAI bid was announced he made a superb judgment call to buy FAI Life shares through Zurich. This was Rivkin at his best—realising before anyone else did that if FAI was facing a takeover then FAI Life was also in play and notching up a quick $86 000 profit.
That kind of shrewd trade was more like the Rene of old. In fact, while the rest of the world was delirious over tech stocks, Rivkin was working on an old chestnut of a deal that would have sounded passé in the 1950s. It was the old story—a hole in the ground and lots of paper. Rivkin’s finest moment would be his escape act from Abednego Nickel.
It had been a difficult year for Rivkin, what with the scandal of Axel Fundulus’s unmasking in Zurich, Joe Elcham’s probity problems at Star City Casino and the media coverage of the Caroline Byrne inquest. He later told Andrew Denton that the speculation about him ran so high that at a dinner, where he was to have sat at the prime minister’s table, federal police had warned that associating with Rivkin might embarrass the PM. The eastern suburbs had dropped him. Most of his old friends had moved on. He was never part of the One.Tel rush. But Rivkin didn’t need the old network links—he had created his own private network with the Rivkin Report. In April 1998, it had 1900 subscribers paying $600 a year for Rivkin’s weekly views. By June 1999, it was up to 5800. At its peak, Rivkin would claim to have 17 000 subscribers, collectively paying $13 million a year in fees, all drawn by the Rivkin brand name. The most successful thing Rivkin had ever done was himself. He had become a franchise, spinning off a string of ventures from legal services to insurance products based on his name. This was the future of networking. It was now a question of how to squeeze the most money out of it.
In late October, the Rivkin Report once again began urging subscribers to buy Abednego Nickel shares ‘if you have not already . . . the stock is 82 cents and under takeover by Anaconda at $1.’ Andrew Forrest at Anaconda Nickel had launched a takeover bid for Abednego at the start of the month, after circling the company for years. Anaconda had a nickel project in Western Australia called Murrin Murrin. The nickel deposit ran into the lease next door, which was owned by Abednego, which was why Forrest wanted Rivkin’s company.
Rivkin was desperate to sell. Abednego was a $5 million dud investment that had sat on his books for almost three years. On 1 October, Anaconda agreed to buy 20 per cent of Abednego from Rivkin and his circle of friends as prelude to a full takeover bid. The sellers included Trevor Kennedy, Joe Elcham, George Freris, Laira Investment Company and Rivkin’s former butler, Thomas Mann. Anaconda was offering $1 a share, but only 15 cents of that would be cash. The rest of the payment would be in the form of convertible notes in a subsidiary of Anaconda, which was called Murrin Murrin Investments. The Murrin Murrin notes would be paid out in cash in 2000 and 2001.
This delayed payment did not suit Abednego’s other major shareholder, Dominion Mining, which wanted cash upfront for its 20 per cent stake. On 27 October, it sold its shares for 75 cents. It is a measure of Rivkin’s desperation that he bought a large portion of the Dominion shares himself, shelling out $3.7 million in Switzerland and Australia. As he shuttled stock back and forth between Sydney and Zurich, his total outlay on Abednego grew to $12 million. Rivkin needed to find buyers for his shares, which is where the Rivkin Report became so useful.
Rivkin issued a strong ‘Buy’ recommendation to his subscribers the day before he did the Dominion deal. He followed it up a week later: ‘I strongly urge you not to sell at these levels since you will be delivering the buyer of the stock returns of over 100 per cent over a two-year period. This is one to buy [around 85¢] and just put away for the next two years, if you do you will end up loving me for it.’
Rivkin’s faithful fans—the Mum and Dad investors, the aspirational share traders, the true believers—dutifully bought Abednego shares and later Murrin Murrin notes, while Rivkin sold and sold and sold. By July 2000, $12.6 million had flown through Rivkin’s World account. It was showing a $1 million profit.
Amid all the excitement, Graham Richardson was taking a European holiday. On Friday 11 December, he slipped into Bank Leumi’s London office with his old friend Peter Barron. Barron presented his passport (Number E510–4496) and withdrew $30 000 from the Laira account. Barron later told the Australian that it was a gift from Richardson. Laira’s records show that a month before, Richardson had transferred $30 000 from Portfolio 2 (Richardson’s sub-account called Cheshire) to Portfolio 1, which held Rivkin’s money. This way, Richardson could claim that the payment from Laira was actually a loan from Rivkin.
Life was good for Richo. On 16 December, Anaconda raised the cash component of its Abednego bid from 15 cents to 40 cents. The Abednego board, which included Rivkin, Barron and chairman Bruce Corlett, unanimously recommended the revised bid. The cash payout for Laira’s 3.8 million Abednego shares had just gone up by $1 million.
Richardson’s route onward from London was marked by a series of bank transfers and withdrawals—in Spain at the end of December, then Zermatt in Switzerland on New Year’s Eve (Corlett was skiing across the Austrian border in Zürs am Arlberg, staying at the luxurious Thurnhers Alpenhof). On Friday 8 January, Richardson slipped down Claridenstrasse in Zurich to knock on the armoured glass doors of Bank Leumi. Ernst Imfeld, charming as ever, helped Richardson fill in the forms for four withdrawals from Portfolio 2 totalling $41 540. Leumi’s records state: ‘Cash withdrawal, client signed the receipt.’ Despite all his precautions, Richardson had now signed his name to the Cheshire account he wasn’t supposed to own.
A week later, Richardson was back at Bank Leumi in London, showing his passport (Number L5264526) to withdraw US$3355. Richardson didn’t know it, but he was now only a taxi ride away from an old acquaintance, that inveterate networker Gordon Wood.
The Gordon Wood saga just refused to die away. On 25 October, as Nigel Littlewood was writing his recommendation to buy Abednego shares in the Rivkin Report, Jamie Fawcett in the Sun-Herald reported a sensational new development in the Caroline Byrne murder investigation. The coroner had made a suppression order in relation to new evidence that Fawcett had given to police about another witness in the Caroline Byrne case now in hiding abroad. The witness’s mother expressed fears for her safety. ‘My child doesn’t want to go over The Gap too,’ the mother said.
Interpol records show that Wood took a plane flight the next day, 26 October. It is believed he flew from Florida to London. Once there, Wood experienced a stunning transformation in his fortunes. A mystery figure had arranged a new life for him. Wood, at thirty-six years of age, had no professional qualifications and little training beyond his stint looking after Rivkin’s cars in the mid-1990s—in fact, he had never worked in an office. Yet within days of his arrival in Britain, Wood’s unknown benefactor had arranged a $400 000 a year job for him, and a fictitious work history to match.
Wood’s advancement was due to a Welsh-born investigating accountant called Glyn Harris. Harris worked for BP in the 1980s as vice president corporate finance at BP Finance International, then went on to become finance director for Man Financial, a major commodities broker, fund manager and later discount broker. By 1993, he was a director of Graig Shipping and managing director of Europe Energy Group before it was taken over. By the mid-1990s, Harris was on the NatWest panel of corporate turnaround specialists. In late 1998, NatWest called him to fix a management buyout that had run into problems.
For fifty years, PressTech Controls had provided technical expertise for publishers around the world who required high-calibration printing—for example, in printing bank notes, securities and lotto forms. NatWest Bank had part-funded a £9.2 million ($24 million) management buyout in 1996, but the Asian economic crisis and the surging British pound had decimated the value of PressTech’s foreign contracts. The venture capital partners, 3i Group and Barclays Private Investors, wrote off their £4.2 million investment and NatWest called for a corporate doctor.
It was a part-time job for Harris, who would delegate the day-to-day work. He knew just the man for the job . . . which is how Harris came to be introducing Gordon Wood to NatWest Bank and PressTech management. He told them that Wood was a senior financial controller and an experienced turnaround expert. Harris knew how good Wood was, he said, because he had worked with him previously.
Six years later, Harris conceded that this was not true. He had invented Wood’s work history. In reality, he said, he engineered Wood’s appointment after someone recommended Wood to him. But Harris refused to say who the recommendation came from. A former NatWest executive said:
Gordon Wood was someone not known to NatWest at all, but we had 100 per cent faith in Glyn Harris. He was described to us as a financial controller who had worked in a number of turnaround situations in the past. That’s how Glyn introduced Gordon to us. There’s no doubt about that. Gordon was introduced to us as someone who had worked with him before.
Wood told colleagues that he lived with Harris and his wife in their Hertfordshire house when he first arrived in Britain. At Harris’s urging, Wood’s appointment was written into his contract with NatWest. The bank restructuring agreement for PressTech explicitly stated: ‘Gordon Wood shall be employed for three months at £500 a day.’ None of Wood’s workmates at PressTech questioned his qualifications.
Chris Male, the outgoing executive chairman of PressTech, who in ten years had doubled the firm’s sales, said Harris described Wood as an ‘excellent chap’, ‘excellent on collecting debts’ and ‘dealing with debtors and creditors’; ‘Harris said he’d worked with [Wood] in a turnaround situation before.’ Male said that Harris had been given a mandate that allowed him to employ whoever he wanted. ‘I know that Glyn had been involved in some venture in Australia in the mid-90s . . . I believe he did have some project in Australia,’ he said.
When asked about Gordon Wood in late 2004, Harris told me, ‘I really have no comment, it was really a very long time ago,’ before hanging up the phone. In a subsequent call he made a brief response to written questions about why he employed Wood.
‘He was recommended to us by someone who knew him, who had nothing to do with Australia,’ Harris said.
Who recommended Wood?
‘I could tell you, but he would not want to be pestered by you. I’m aware of the people who recommended him and they had nothing to do with Australia or NatWest.’
So why did he tell PressTech and NatWest executives that he had worked with Wood previously, and that Wood was an experienced financial controller?
‘I think that’s probably as far as we’d like to go. As you know we have been pestered by reporters and so forth over this affair. There are no further comments to make,’ he said, and hung up again.