CHAPTER NINE
SECRET MEN’S BUSINESS

Mostly I’ve found that people who get the credit for great success are the people who have enough sense to get themselves good advisers.

Gordon Barton, 1970

By 1967, neither Greg Farrell nor Gordon Barton were required in the day-to-day management of their transport empire. This they left to Les Arnold and John Konstas. With the cartel running smoothly, cost efficiencies and hence profits were soaring. However, neither Barton nor Farrell were interested in retiring quietly. The pair discussed expanding their business overseas but, given Vonnie’s illness and Barton’s political involvement, this was hardly practical. But Barton wanted to ‘brush up his brain’, and was interested in diversifying.

Ever since he was a university student, he had enjoyed keeping up with the stockmarkets globally. As a 21-year-old he had studied cases of speculators buying controlling interests in corporations at less than asset value, then recouping their investment by paying themselves a large dividend, leaving the firm with more than adequate working capital. By now his own dealings in the Australian share market were increasingly sophisticated.

Concerned about the way foreign companies were buying up local assets, Barton saw a way he might set up a structure to improve the use of local resources, and introduce enthusiasm and new ideas into businesses to increase profitability. The new venture might also fund a political organisation that was becoming increasingly expensive to run.

To Greg Farrell he put forward the idea of creating a new venture specialising in takeovers, asset-stripping, mergers, clever company restructuring and on-selling of assets. It promised to create even more wealth for them both. The pair would require the best lateral thinkers available—professionals who could provide expertise in mergers, acquisitions, company regulations, valuing assets, corporate law and tax law. The commitment Barton wanted from this group was a once-a-week lunch and an afternoon meeting to chew over potential business acquisition ideas. ‘I thought it was a very relaxed way of going back into business’, Barton would comment some years later.

For months the venture lacked a trading name. The group trialled Mantis Corporation in a jokey reference to their vision of preying on the weak. It was perhaps eight months before a more appropriate name was settled upon, Tjuringa Securities. According to Aboriginal legend, every initiated male member of the Aranda tribe in Central Australia was once given an engraved Tjuringa stone by the elders of the tribe depicting events surrounding his totem. Because of the spiritual significance to their owners, the discovery of such stones by non-Indigenous people is extremely rare. To Barton the analogy was perfect—uniquely Australian, depicting a secret, rare find of something of significance to its male custodians. (In time the company based the design of its corporate logo on the patterns cut into these stones. A Tjuringa stone sat on the boardroom sideboard. No doubt the word’s cryptic nature and the difficulty the media had pronouncing it amused Barton. His sense of humour was also evident in the choice of name for another company they would use to execute takeovers—Mandible.)

Barton and Farrell already had a relationship with Barton’s university friend, lawyer Graham Cooke from Allen Allen & Hemsley. Cooke had been doing Barton’s legal work for eight years already. Highly trusted, he would become the team’s legal expert. From a middle-class Mosman family, he was an extremely conscientious practitioner. Like Barton he would begin the day late with an 11 am cappuccino then would work well into the night. As QC Geoffrey Robertson, then a clerk at Allens, observed, Cooke would become ‘obsessed with keeping Gordon out of prison . . . I am convinced that he was vital to Gordon’s success simply because he kept him on a slim leash of legality.’

Barton and Farrell’s second choice was the brilliant Peter Wolfe from stockbroking firm ABS White. They had used Peter very successfully to float IPEC on the market some years earlier. Wolfe had alerted Barton to the improved share prices that could result from efficiently restructuring public companies. Barton liked not only Wolfe’s ideas, but he was different from many of his stockbroking peers in that he did not use the old school tie networks to do business. He had been schooled at Melbourne’s Wesley College, but he was talented enough to rely on word-of-mouth referrals.

Bill Pursche was a tax expert and chartered accountant with Peat Marwick Mitchell. Peter Wolfe had been looking after Pursche’s share deals for years and recommended Pursche as the most talented tax accountant he knew. Given he was the only adviser ‘from the bush’, Pursche brought balance to the team. Even in political ideas, Pursche saw himself as having greater empathy with the average Australian.

Neil Ohlsson was a deal-maker who ran a specialist company selling corporate shells. Seen as having a ‘loophole mind’, he had been one of the first Australians to set up offshore companies. He and Barton had met a few years earlier. As usual, Barton had been on the hunt for a loss-making business to which he could divert IPEC profits to minimise tax. Ohlsson had just the thing—a large company in receivership. The pair developed an easy rapport. With the same slim and wiry builds, they were often mistaken for one another. Each took pleasure in playing up to their mistaken identities. As Tjuringa’s deals developed, Ohlsson would be given the task of arranging joint ventures.

Shann Turnbull was the son of Senator Spot Turnbull. When Barton had established the Liberal Reform Group the year before, Shann had been a keen supporter. He had been trying to communicate his own ideas on economic policy to the federal government since 1965. Turnbull was working for himself at the time, in a discipline that would one day become known as management consulting. He understood how, with the right management team, moribund companies could be transformed into growing businesses. A creative lateral thinker, Shann had the ability to come up with thirty ways of tackling an issue. While most might prove to be impossible, this skill would be crucial in implementing many of Tjuringa’s strategies.

Fred Millar, also a partner with Allen Allen & Hemsley, was invited into the group. While he attended some initial sessions, it was not long before he walked, citing conflict of interest with his existing corporate clients.

For each adviser, the pay-off was an annual advisory fee of $4000 (equivalent to $40,000 today), though by 1971 their fees would increase to $25,000 each ($219,000 today) plus a car. In terms of profit share, given IPEC was funding the deals and providing administrative support, Farrell and Barton allocated themselves 35 per cent each. Peter Wolfe’s stockbroking firm would provide the office space, at least initially. He was to get a 10 per cent share and the remaining four advisers 5 per cent each—what Neil Ohlsson wistfully calls ‘the pie in the sky’. Wolfe, Cooke and Pursche were salaried professionals. Their time would be on top of their day-to-day work. However, there were other benefits for these three and Shann Turnbull. They would rake in billings from, respectively, the stock-trading, legal, accounting and consulting work generated by their deals.

Nicknamed by some the ‘Magnificent Seven’, over the next eight years this team would become one of the most feared raiders in corporate Australia. In late 1960s Australia, rivals were scarce. There was the English owned, publicly listed Slater-Walker, and Industrial Equity, headed by New Zealander Ron Brierley, was just becoming active in Australia. Tjuringa would pride itself on generating more challenging deals than either of its rivals.

The group would meet every Monday to discuss a range of acquisition possibilities and to decide which had the best prospect of success. Being the youngest, Turnbull was the minute-keeper. He would hand-write the minutes that same evening, roneo six copies and hand-deliver them to the others at their city offices the next day. In the interests of confidentiality, takeover targets and their principals were never mentioned by name—instead code words were used.

Barton would stretch the group’s thinking. He would come up with a totally off-the-wall idea and launch it on his advisers. They would cry that it was impossible and crazy. Half an hour later they might have worked out a way to carry it off.

At their first meeting on 26 April 1967, Turnbull arrived with a list of twenty publicly listed target companies. As with every potential deal, the group was made to do its homework, analytically and politically. There were some very powerful intellects in the group. Turnbull remembers ‘Tjuringa meetings were very confrontational. All the way through. Everybody had their little fiefdoms. You had a room full of egos . . . You had some very powerful independent people . . . You had to go and lobby everybody . . . except Gordon, who would sometimes just do things his way.’

Their targets were old, established companies, rich in potential assets but with conservative managements. Their firing line was wide, extending far beyond the shores of Australia. Shann Turnbull carried out the copious research to identify possible targets, though as the business grew he would deputise much of his work to younger analysts.

Once a business was acquired, Tjuringa tended to either improve the management, liquidate undervalued or underperforming assets or reorganise the company’s capital, sometimes adding value through tax effects. Within two years, Barton was telling the press he would like to see Tjuringa become the first Australian think-tank, responsible to parliament and giving advice as an institutional idea producer. The Labor-aligned Fabian Society and the Liberal-funded Institute of Public Affairs had already been established.

By the end of 1967, Tjuringa had its first full-time employee—fellow Liberal Reform activist Harry Wallace, who swapped between writing party policy and managing Tjuringa. This did not matter much, given Barton and Farrell were bankrolling both. Wallace would be Tjuringa’s general manager, working out of a rabbit warren of small, unused ABS White rooms at 81 Pitt Street.

Tjuringa’s first acquisition was HC Heathorn, a Tasmanian importer and distributor of new and second-hand cars. Shann’s research had shown the company’s property assets to be worth four times its sharemarket value. The business also had a finance arm of particular saleability. Tjuringa approached UK-based financiers Lombard requesting a half-million dollar loan. To sweeten the request it agreed it would, upon acquisition, sell the car importer’s hire purchase division to Lombard at book price, giving the UK bank an immediate presence in Tasmania. The car sales division was sold to another dealer in exchange for shares. The spare parts subsidiary was retained. In time, a second Tasmanian vehicle distributor was acquired and merged with the first, redundant dealerships and real estate being sold off again. This would make Tjuringa a neat $1.25 million profit. The venture had its first capital.

The group looked at prawn-farming on the New South Wales north coast; using new technology to rework the tailings of tin mines to extract silver; an alternative Polaroid camera design. Barton was willing to spend money investigating the possibilities. He believed that if somebody was making a killing out of something there was room for two people to do very well.

Not all their ideas were serious, however. Someone suggested buying a Sydney crematorium—removing the ashes to a more convenient place and selling the real estate. ‘I mean you’d never get away with it’, admits Neil Ohlsson, ‘ but it was wonderful fun to play around with such crazy ideas’. Somebody else arrived at a Monday meeting with an idea to win control of the enormous AMP Insurance. They calculated that if IPEC bought a $100 life policy for every one of its thousands of staff, obtaining voting proxies from each, Tjuringa could vote in its own board—controlling the country’s largest insurer.

Ohlsson recalled coming up with a particularly nutty idea. Tjuringa would put people on the board of the Art Gallery of New South Wales, take control, and raise membership fees to a ridiculous $50,000 a year thus forcing patrons out. ‘There’d be no-one left. We’d finish up in total control of the New South Wales Art Gallery’, he remembered.

At one stage, tired of the ARM’s constant criticism, someone claiming to represent one of the major political parties offered Barton a deal. If he contributed $50,000 to their campaign fund, they would endorse him for a Senate seat. All he had to do was abandon his political group. ‘I suggested it should be the other way around’, Barton recalled. ‘It seemed to me this was taken quite seriously.’

At a subsequent Tjuringa adviser’s meeting Barton told the group about the offer. After some quick mental arithmetic, he announced, ‘Sixty [seats] would give you control. For $3 million we could buy government.’ Speaking at the National Press Club in October 1972, in typical fashion, Barton exposed the offer, although he would not say which party had made it.

It was up to others in the Tjuringa team to shoot down the craziest schemes. At times Barton would do the great leap and wonder why everyone wasn’t following him. In Harry Wallace’s opinion, ‘Gordon’s very best and worst decisions were emotional ones. Later on the bad decisions increased.’

In an innovative move, Tjuringa obtained control of a company it then used to warehouse shares in listed firms it was keen on. Called Australian Mutual Growth Fund (AMGF), Barton, Farrell and Cooke were installed as directors. By November 1970 AMGF had raised $2.1 million with its objective perhaps four times that amount. The bulk was earmarked for Tjuringa takeovers. Once a listed company was targeted, the fund might be instructed to buy 20 per cent of its shares. This meant when a takeover offer was made, Tjuringa was already in a strong position. If the raid succeeded, AMGF shareholders would receive around 30 per cent more than the latest market price. Should the takeover falter, Tjuringa guaranteed to buy the shares back at cost.

Tjuringa’s outlay would turn up as a profit in the AMGF accounts at the end of the year. Devised by Peter Wolfe, it amounted to a clever form of insider trading. It would never pass legal scrutiny in today’s highly regulated market, but in 1970s Sydney, Wolfe and Graham Cooke made sure it was perfectly legal.

Peter Wolfe brought Direct Acceptance Corporation (DAC) to the attention of the Tjuringa adviser group early in 1968. Founded in 1926 as Direct Cash Orders, it was one of the nation’s oldest publicly listed finance firms. As far as the Tjuringa team could see, it specialised in high-interest personal loans to struggling families throughout Australia’s eastern states.

Five years earlier the business had written off a lot of bad debt. Its gearing and profits had slumped. With more than $7 million in assets, its share price was trading at way below asset value. It was a good time to buy. Wolfe’s concept was to acquire the corporation then redirect invested funds out of money markets and into financing new acquisitions. The plan for the share raid was given the code name Daisy.

When Tjuringa was close to making such a raid, final strategy and crisis meetings were often held at night in Barton’s Castle Cove home. The group would reassess tactics, agree on who would buy shares on their behalf, where the funds would come from, what the bank would lend and consider every conceivable outcome. It was immensely stimulating and exciting—Shann likened it to a military campaign. The group knew they were mavericks preparing to buck the system.

Often these meetings would not wind up until after midnight, each member of the group returning home mentally exhausted and in trouble with their wives. At some stages these meetings would occur every week. At quieter times they were months apart.

By April 1968, Tjuringa had nearly a quarter of DAC’s shares. Within another week or two it had spent $1.5 million, taking its shareholding to over 50 per cent. This would be enough to gain control of the board. But, unexpectedly, DAC’s directors fought back, voting for a 2 million share issue, which was quickly snapped up by their own nominees. Tjuringa no longer had the majority holding.

DAC’s move was legally doubtful. Its nominees had only paid 5c in every new 50c share. It was a weak spot. Barton and his team were ready to play hardball, promising to take DAC to the Equity court to obtain an injunction to cancel the dubious share issue.

Ratcheting up the pressure, Tjuringa also declared it would continue to buy shares until it had a majority. Once in control of the boardroom, the incumbent directors were told, Tjuringa would call up the balance on their partly paid shares—ensuring they were personally liable for any monies not paid up. The alternative was to cancel the share issue and surrender quietly.

By late May DAC’s directors surrendered. Tjuringa’s $1.5 million outlay had given it control of a $7 to $8 million asset base.

The Tjuringa team soon came to realise that for many Australians in need of a small loan, DAC’s was a much-needed service. Many took out loans for just one or two hundred dollars. Door-to-door collectors—nicknamed ‘gorillas’—would do the rounds of outer-suburban households each month to collect repayments and encourage new loans. Some people seemed to be borrowing simply for the regular face-to-face contact. (Others would leave their cash repayments in their back laundry copper for the collector.) The main way DAC lost money was when clients skipped town. Interest rates charged were exorbitant—20 to 25 per cent which could compound to over 70 per cent annually. Given the high costs of fortnightly collection, however, the lending business only returned some 18 per cent.

Collectors earned commissions on their collections through generating new loans, and some of their practices were less scrupulous. A new loan required the husband’s signature but given it was often just the wife at home, collectors would wink and say, ‘Just go out the back and get your husband to sign and you can borrow another $60’.

Given he was a full-time sharebroker and ABS White was underwriter for a competitor, Peter Wolfe could see the inappropriateness of him being on DAC’s board. So instead Bill Pursche, Neil Ohlsson and Shann Turnbull were roped in. The 34-year-old Turnbull was made chairman.

DAC’s funds were chiefly raised from deposits from many small investors. In Shann Turnbull’s three years as chairman DAC’s asset base would double, an additional money tree which would become a major source of Tjuringa’s borrowings. The company logo was particularly apt—a tree with dollar notes growing on it.

Given Tjuringa and Federal Hotel’s clear intention to use DAC as a personal piggy-bank to fund its ever-expanding diversification, Shann Turnbull and Barton were soon at loggerheads. Turnbull acknowledges that while Barton was a friend, he knew that Barton would sacrifice him if things went wrong. ‘If push came to shove, I knew whose reputation was on the line’, Turnbull explained.

Despite his youth, Turnbull stood up for DAC’s shareholders in the face of ongoing demands from Barton and John Konstas for loans. Turnbull was unapologetically a risk avoider, and admits Barton didn’t like not being trusted with money. Whenever financial controller John Konstas came looking for a loan, Turnbull would not lend more than Tjuringa had invested in purchasing DAC shares.

Barton was always willing to consider investment in innovative ideas that looked to have merit and a market. Employee and friend Ossie Emery remembers Barton explaining, ‘I see myself as a sort of explorer for oil. I see myself going around and with the aid of guys like you putting exploration holes down—all over the place. Every once in a while you strike oil and you make a lot of money.’ He also recalls Barton’s interest in the early 1970s in developing ‘a credit card thing you could use in supermarkets to purchase your groceries’. At the time Emery and Greg Farrell were very sceptical of the idea’s worth.

Geoffrey Robertson, later to become a famous human rights lawyer and host of the ABC’s Hypotheticals television series, began three years as an articled clerk with Allen Allen & Hemsley in 1967. At university he had been involved in small-l liberal student politics. Stirred by Barton’s stance against Vietnam, he was more than happy to manoeuvre himself into doing work for Barton’s lawyer Graham Cooke.

One of Robertson’s chief tasks was to have the prospectus of each new Tjuringa company registered at the appropriate office. ‘This usually involved persuading officials that when the glossy Tjuringa brochures showed on their front cover pictures of infrastructure like the Sydney Harbour Bridge, this was not in fact a representation that the company owned the Sydney Harbour Bridge’, Robertson recalls.

He and Gordon Barton would talk at length about media and politics, and one day, Robertson remembers, Barton decided to lure him from law. Over a private lunch—one of his regular haunts was the Johnny Walker steakhouse in Bligh Street—Barton did his best to persuade the young clerk to join his enterprise. ‘He was persuasive, and in some ways I regret now that I was not persuaded: I was still starry-eyed about the law’s potential for guiding social progress,’ admits Robertson.

In June 1968 Vonnie’s tumour had returned. After two aspirations, this time there was little that could be done. Instead, in August Barton took his wife, their two infants and his in-laws, Ray and Daphne Hand, on another vacation, this time via Tahiti, before travelling on to Los Angeles. Here they met up with the woman Barton had been about to leave Vonnie for before she fell ill.

Marion Manton was just finishing a Masters in Marine Biology at the University of Hawaii. She would go on to complete a doctorate in biological sciences at Columbia University in 1973, cementing a lifelong career as an academic and lecturer. Since their days together as neighbours in Castle Cove, Vonnie and Marion had come to understand each other. Marion recalls that Vonnie had been keen that she join them. It would provide her with a little respite from all her husband’s attention.

Barton hired a huge Mercedes, and Marion accompanied the family south to spend five days in Mexico, relaxing in Puerto Vallarta on the Pacific coast. Vonnie was past caring about her husband’s untamed sex drive. Gordon and Marion shared one bedroom, while Vonnie took another. Looking after the two babies, Ray and Daphne were perhaps too busy to notice.

At the end of August, the extended family flew on to London. Here, for Barton’s birthday they met up with Peter Wolfe, his wife and Elaine Wolfensohn. (Elaine and her husband Jim Wolfensohn, then a senior London-based executive for investment bank Schroder and later president of the World Bank, had been friends with Barton for some years.)

Vonnie’s health was stable so in mid-September Barton returned to Sydney to deal with work responsibilities while Vonnie, her parents and the children stayed on, renting a small house near Montpelier Square in Knightsbridge. Barton’s work and political responsibilities would keep him apart from Vonnie and the children for much of the next two months.

Back in Sydney, Tjuringa’s research team had been busy. It had hit upon an old established English investment company—the Australian Mercantile Land and Finance Company—which owned produce stores and a dozen properties in Australia as well as assets in Argentina. Barton was a firm believer that too much of Australia was in foreign hands, so if successful in his bid for the company he would also be buying back a bit of Australia. However, of even more interest was the licence this finance company held to borrow money without a prospectus. If Tjuringa could win control, raising funds for future projects would be infinitely easier.

Mercantile Land’s management was in the hands of a distinguished board of directors from institutions such as National Westminster Bank, Pearl Insurance and Sun Alliance—peers of the realm and bastions of the establishment. However, they were sleepy, making only modest profits for the company, paying even smaller dividends. Tjuringa’s research discovered the business had highly valuable assets and that shares were being traded on the London Exchange at a much lower level than their underlying value. This promised to be Tjuringa’s asset strip of the decade, with a calculated £9 million profit once the assets were sold off. Its code name would be ALFIE.

In 1960s London, however, there were English businesses that simply wouldn’t sell assets to an Australian business, even at top dollar. No self-respecting Englishman liked to think the ‘colonials’ had the capacity to buy them out. Nonetheless, English finance company Lombard agreed to lend Tjuringa £7.5 million. The carrot—a third of profits from the asset strip—Barton calculated as rich enough to overcome any objection. He soon learned that in London such deals were not done without the involvement of a merchant bank. The services of SG Warburg were enlisted. In preparation for the takeover Tjuringa began to buy and after a short period was the largest single shareholder with 15 per cent. Its ultimate aim was to make a cash bid for the remaining shares.

Neil Ohlsson had previously dealt with British financiers and twice his deals had collapsed. He was particularly worried that Tjuringa not be jilted on this one as well. However, by the end of November 1968 the buy-out seemed to be progressing well. Barton relaxed, spending close to six weeks with Vonnie travelling with her across the English Channel to France, Rome, Belgium and the Netherlands. It was hard to miss all the expressways built and being constructed and he decided Europe was ripe for an IPEC-type express service. The profits from ALFIE would fund it.

By early December, Tjuringa’s share purchases had passed the 24 per cent mark. The bid seemed now to be a mere formality. With Vonnie’s headaches starting to return, there was no option now but further surgery, so Barton hurried his family back to Sydney for Christmas. Rather than brave a frozen Christmas alone in London, Peter Wolfe jetted home to his family as well.

Forty years later Neil Ohlsson’s memory is still clear on what happened next. When he realised the ALFIE acquisition had not been finalised he told Barton, ‘For Christ’s sake, you cannot trust the Brits. They are robbers under privilege. We come home, they’ll take it from us. I don’t care what we spend. Send Peter’s family over—kids and all—and have Christmas over there and be breathing down their neck every day. That’s how strongly I feel about this.’

Ohlsson’s fears were confirmed when, soon after Christmas, Lombard advised it could not proceed with the deal, declining to give a reason.

Barton dashed to California and New York to seek alternative financing. In the meantime, acting within its legal rights, Lombard called up its loan on the ALFIE shares. The shares, being security, were on-sold. The deal had collapsed.

In the Tjuringa camp there was surprise and disappointment at Lombard passing up a £3 million profit. While Lombard paid all the expenses Tjuringa had incurred, the reason for its last-minute decision was only later revealed. The London establishment had turned against Tjuringa—the National Westminster Bank offered a very generous price for its ALFIE shares.

Ohlsson suspects that Barton simply got up the noses of the English. It was perhaps an important lesson in negotiation.