CHAPTER TWENTY-FOUR
THE CLARITY OF COCAINE

The King is sick, and knows not what he does.

Tennyson, Morte d’Arthur

Barton and Mary Ellen would return to Sydney several times a year to catch up with old friends. The pair shared a passion for Loch Maree, their Vaucluse home. By 1984 they had begun to plan its renovation, in preparation for their full-time return to Sydney.

The couple took great delight in scouring European stores for exquisite furniture together. Dining one night at a Relais et Chateau restaurant in the French town of Macon, they looked down to find their feet resting on an ancient flagstoned floor. It was what they had been looking for. The next day the couple visited a Frenchman who specialised in buying stone from demolished castles all over Europe. They clambered over his acres of recycled treasures—escaliers from ancient convents, frames from long-gone monastery windows. But it was a medieval flagstone that captured their hearts, its faintly pink colouring suggesting that ancient monks had carelessly splashed a good French burgundy while dining upon it at long wooden tables following vespers. Barton would spend over half a million dollars on its purchase and shipment of a similar floor retrieved from a nearby French convent.

Laying the stone proved painstaking. It would be two years before the orange flokati carpet was replaced by the ancient flagstones, which in the Mediterranean style extended outdoors to the vine-covered courtyard.

Barton had intended that the cost of the lavish renovation would be funded out of profits from his bond-trading. However it would be Sanwa, a Japanese merchant bank, which in 1985 put up the $2 million required, using the Vaucluse house as security. While Sanwa did most of its lending to multi national companies, Barton’s connections meant it made an exception for him, approving a domestic property loan.

Over the next three years, the Loch Maree renovation costs escalated. The Sanwa loan was increased three or four times to about $3.75 million.

Now less than four years after Barton had sold Skypak it had morphed beyond recognition, merging with the road freight business. Barton could only stand by horrified as his IPEC Europe business was also re-engineered with Sir Peter Abeles deciding to give less priority to road freight, spending millions investing in airfreight instead. Senior executives recall Abeles becoming increasingly irrational. ‘I don’t care what we lose, but build an airfreight network’. Airfreight overheads were crippling, and healthy profits from TNT’s European road network soon vanished.

Barton was worried. His 1986 royalties would shrink to little more than $200,000. For the average family this was more than plenty, but Barton and Mary Ellen now had a hugely expensive lifestyle, keeping houses in London and Sydney as well as supporting Cindie’s studies in the US. Despite their plans, it was not an opportune time to return to Sydney as a family.

By early in 1987 Barton was again concerned about his income for the coming year. When a TNT-IPEC profit was declared in 1987, TNT argued this needed to be set against losses for the previous year. Barton disagreed. TNT’s then chief financial officer, Colin Green, agrees that the Henry Morgan arrangement ‘wasn’t a good deal for Gordon’.

In 1988, with his financial situation critical and determined to gain a fairer profit-share, Barton did not feel his lifelong legal adviser Graham Cooke was the best man for this task. Instead, he turned to Aleco Vrisakis to renegotiate the agreement. Vrisakis, with legal firm Dawson Waldron, had gained a reputation as a hard fighter in contested takeover law, acting through the 1980s for many big Australian players, including Alan Bond, Larry Adler and John Spalvins.

Despite the renegotiation, as the freight business departed further from what Barton had sold the profit-share sums became increasingly difficult to understand. Every November, Barton would pore over the faxed figures as he and TNT checked and double-checked additions, subtractions and exclusions from the final figures.

In the mid-1970s, Rod Maclure had initiated some government futures trades with a few million dollars of DAC funds. The investment at one stage had a paper profit of some $3 million. Maclure wanted to cash in the investment and walk away, but Barton had become quite excited and instructed him to trade on. IPEC ended up selling out with a fraction of the profit it could have gained. Maclure recalls that for the first time Barton recognised how easily he might have profited if he had predicted the market correctly.

In about 1982, Barton began private dabbling in fixed-interest bonds. Within two years ABS White stockbroker David Lesnie introduced Barton to Tony Lewis, a ‘whizz-bang young kid’ who specialised in government futures trading. Barton added government futures to his investment portfolio. The principle of futures trading is predicting the market. Bond prices are linked to interest rate rises, so making the correct predictions could mean serious money if you purchased before a rate rise. Initially Barton had given Lewis about $5 million to invest, letting him make day-to-day investment decisions. Within a year or two, Barton had cashed out, realising a significant profit.

It was years before Tony Lewis heard from Barton again—in October 1987. There had been a severe storm in London and the London trading market did not open that day. With world equity markets already teetering, and global traders forced to focus on the New York exchange, this was the catalyst for the global stockmarket crash that year.

A day or two after the crash, Lewis received a call from Barton in London. Barton’s view was that investors would cocoon themselves, and the Australian government would push the currently high interest rates down to encourage economic activity and stabilise the market. Buying government futures looked to be profitable. It didn’t matter that Barton had little in the way of ready cash. Finding just $250,000 (through Lewis Securities), he was able to leverage this to purchase around $25 million in bond futures without further security.

However, cash was still needed to be able to respond to shifts in the market. If values fell $100,000 overnight, investors had to top up their accounts by this amount immediately, otherwise holdings were automatically sold. Nearly all the traders in government bond futures were large institutions who played this market buffered by a huge asset base. They could afford to finance or write off losses. The risk for individuals was enormous. This meant it was highly unusual for private investors to play this game, particularly when, like Barton, you were using mostly borrowed funds. Barton of course had always done things differently.

Tony Lewis got on well with a couple of dealers at futures brokers Capel Court, an arm of National Mutual Royal Bank. Each time Lewis was instructed by Barton to buy more bonds, Capel Court’s dealers would make the transaction and extend further credit, as long as Lewis passed title to the bonds on to Capel Court as security. This meant that despite having no approved loan, Lewis’ contacts gave Barton access to a revolving line of credit. Lewis could repeatedly buy millions of dollars’ worth of futures on Barton’s behalf, with Capel Court footing the bill. As the trades were so profitable for Capel Court, no questions were asked. Barton never let Lewis advise him—the broker simply bought and sold when instructed.

‘They [National Mutual] thought they had a loan to ANZ . . . Clearly they didn’t have controls in place,’ Lewis explains. Ultimately there was ‘the most incredible situation where National Mutual didn’t even know they’d lent Barton $63 million’. It ‘was an extraordinary oversight’, Lewis confesses, particularly as Capel Court never revalued the futures it had paid for. ‘They just put [the futures] in the bottom drawer.’

Nonetheless, over the next six to seven months Lewis’ trading increased Barton’s initial investment by a book value of $7 million. Barton instructed Lewis to continue borrowing. On a regular basis, Barton’s trades made up an extraordinary 5 to 10 per cent of the entire futures market, usually the exclusive domain of banks and superannuation funds. And although Barton refused to divulge his dealings to her, Mary Ellen was becoming increasingly alarmed at his long nocturnal telephone dealings with Lewis.

By now Barton had set up a trustee company—Oamington Pty Ltd—through which he channelled his market deals. He had men he trusted as its directors—John Crew, his new lawyer Aleco Vrisakis, his personal accountant Bob Miller and Tony Lewis.

While Barton had always been a risk-taker, he was no expert in futures. Miller surmises that, having lost so much in the IPEC collapse, Barton was looking for ‘quick plays’ to regain the level of wealth to which he and Mary Ellen had become accustomed. Barton admitted to Lewis, ‘I want to become seriously rich’.

Barton’s sole significant unencumbered asset was his waterfront Loch Maree home at Vaucluse. If he was prepared to risk it, he could mortgage it to fund his futures trading. Unbeknownst to Mary Ellen, Barton was willing to gamble everything in that pursuit. With decades more experience since then, Lewis now recognises such an attitude as incredibly dangerous. Nonetheless, at the time he had Barton’s home valued at $14 million, providing the additional millions in security he needed to keep trading. Recalls Kate Ayrton: ‘He’d stay up late, he’d keep very odd hours and sleep all day.’ His family would find him up all night doing sums in his study, surrounded by reams and reams of paper. ‘He wouldn’t eat. I’d try to talk to him and rally him. He was very very depressed.’

To cope with the stress, Barton took up a habit he had derided his whole life. Constantly on edge, he would awkwardly pinch a cigarette between thumb and forefinger before sucking in as his children stared disbelieving.

Mary Ellen explains Barton’s motives in hindsight as stemming from his role as his family’s breadwinner after his brother and father disappeared. ‘He wanted to take care of everybody.’ If she had known the vast figures Barton was playing with at the time, she admits she would have ‘raised the roof ’.

By the second half of 1988, Tony Lewis was on the phone to Barton each evening regarding that day’s trades. At one stage Bob Miller recalls Lewis calling to let him know Oamington’s market exposure had reached $250 million. ‘What!’ the alarmed Miller exclaimed. He and Aleco Vrisakis had had no idea the borrowings had reached such a level. ‘It’s getting a bit silly, Tony.’ Miller well knew all but $20 million was borrowed money.

Just weeks later, Lewis rang Miller again. He had just upped Barton’s exposure to $325 million. Miller lost it. He recalls screaming down the phone, ‘You’ve what! Like fucking hell you have. This is fucking madness. You haven’t consulted Aleco or myself. The exposure here is absolutely enormous. It’s ridiculous. Close out three-quarters of it.’

‘I can’t do that,’ Lewis replied.

‘I’m instructing you to,’ insisted Miller, before ringing Aleco to let him know.

According to Miller, Vrisakis resigned as a director immediately. Miller knew he had to track down Barton to talk some sense into him. In an era before mobile phones, he logged dozens of international phone calls that afternoon—finally locating Barton in a New York hotel. He recalls it was about 3 am. The hotel staff didn’t want to wake Barton, but Miller insisted.

Finally Barton’s voice came on the phone. He was so groggy, Miller suspected he’d taken a sleeping pill.

‘Gordon, this is fucking insane’, Miller recalls saying. ‘I’ve instructed Tony to close out three-quarters of the positions. Aleco’s resigned. This is absolute madness.’

As if someone had just asked if they could fart in his presence, Barton replied, ‘Oh, oh really? Do you think? Oh . . . Okay. If you feel that strongly about it.’

‘Gordon, you’re going to lose every bloody cent you’ve got.’

‘I agree, close out three-quarters.’

‘You don’t have to agree. We’ve already done it.’

In selling down their position, it meant losing four or five hundred thousand dollars. Bob Miller was just relieved the damage was not worse.

A few days later Barton faxed the stressed Lewis a hand-drawn graph, outlining how he saw bond interest rates falling steadily over the coming twelve months. Under each month he detailed a comment on predicted fiscal developments in the US or Australia. At the top of the fax he scrawled, ‘Dear Tony, To warm your spirits’.

Lewis was instructed to keep trading the balance of Barton’s exposure, which by December 1988 remained in the hundreds of millions. From December, interest rates soared. Barton had predicted the opposite. The value of his holdings plummeted some $10 million. Lewis recalls calling on Barton in Vaucluse to talk to him urgently about the situation. He shakes his head today in disbelief.

The Loch Maree renovations were nearly complete, and as the Bartons were still based abroad they had installed a fulltime caretaker-cum-butler to manage the property and to take care of the two family German Shepherds, thought by Barton to be the best form of security. A cleaning lady came regularly, and a gardener once or twice a week. Barton had friends over when Lewis arrived to see him. One of the valuable family cars had been stolen, so Barton had no time to discuss his multimillion dollar speculation.

Insisting he would ‘weather out the storm’, Barton was convinced the market would eventually change. As the days progressed, a further $10 million was wiped from his assets.

For nine years now the Bartons’ London residences had all been rented as a company overhead. By 1988 Barton and Mary Ellen had decided they would purchase a London property. Ken Tynan’s widow turned down the Bartons’ offer to buy her Thurloe Square home as she wanted it back. So the couple began inspecting dozens of properties. One of these, Hurlingham Lodge in Fulham, had been an old polo clubhouse, reputedly the first in England. It was owned by the well-known photographer Lord Setringham. The sale would pay for his pending divorce settlement. They had been to see it six or seven times. Mary Ellen admits now she had never wanted to buy it. No matter its beauty and elegance, the mansion felt unlucky.

When Barton announced he had just made a gentleman’s agreement to purchase it, Mary Ellen steeled herself for what she saw as impending disaster. Despite the £2.5 million purchase price, Hurlingham Lodge needed renovation, so the family was obliged to lease a more modest home in Clareville Street, Kensington, as an interim measure.

Mary Ellen now admits euphemistically that her partner ‘wasn’t very well at the time’. For Barton, the reality of his huge monetary losses, on top of physical problems—his hearing was deteriorating—must have been a reality he would rather escape. Lawyer and friend Aleco Vrisakis admits: ‘No-one who knows him is going to say to you [his decline] was just bad luck. I mean I’d love to be able to say that, but it wasn’t. It was bad judgment.’ Nick Street, who was now working with Geoffrey Barton in the remail business they ran out of Hurlingham’s free-standing studio, recalled, ‘Gordon’s concentration certainly vaporised’.

Close friend Marion Manton is more candid about what she saw driving Barton’s decision-making. ‘He was a bit of a sucker for those drugs in the end, which shocked me. That he got so involved in it,’ she recalls. ‘When he first took it [cocaine] he made some decisions to buy . . . these future contracts . . . And they [went up] and he thought, I made a brilliant decision because I was on cocaine and my mind was so clear and I saw absolutely what to do and I did it and . . . it’s money for jam . . . money floating into my lap with no effort. I’ll go on doing this. Gordon just got into this folly of thinking that he could make intelligent decisions on cocaine about millions of dollars and he just squandered [it].’

Kate Ayrton recalls, ‘If Cindie and Tigger were aware of it, they didn’t want to deal with it. There was a lot of denial going on about what was happening with Gordon.’

In 1989 Tony Lewis was forced early to sell down $63 million in futures on National Mutual’s behalf. The transactions netted a huge loss. Suddenly Oamington owed its lender $3 million.

However, Barton’s debts did not stop there. Over the previous five years, the Loch Maree renovations had continued unabated with borrowed funds—mainly from Sanwa. With massive sums in accrued interest, Barton owed $6 million. Given Barton’s regular requests for cash from Peter Abeles, TNT was another creditor. He owed it close to $3 million. There were large amounts owed to Coutts in unpaid Hurlingham Lodge mortgage repayments. Westpac had also been a significant source of borrowings. Having given personal guarantees to each lender, Barton was effectively bankrupt.

At the end of lunch one day at their London home, Kate Ayrton recalled: ‘He said that things were really bad and that life was going to change and that I would have to be taken out of university in America and that we all had to basically [tighten] our belts.’ Cindie burst into tears. Kate was indeed removed from her university, moving home to London, where she commenced making and selling hats. Cindie and Geoffrey each started a business of their own to help make ends meet. Meanwhile, Barton was forced to sell his 20 per cent of Skypak for about $8 million. The funds were not nearly enough to save him.

Mary Ellen admits her partner did not deal with the reality of this financial crisis well. Aleco Vrisakis now stepped up to bat for Barton in negotiating with the Australian lenders. It was Mary Ellen who flew to Sydney to see the banks with Vrisakis. According to Vrisakis, they asked some institutions ‘to put ahead of their own material interests, the recognition of the great things that [Barton] had done as an Australian’ and write off his debts. For the first time, Mary Ellen was faced with the full extent of her partner’s massive borrowings.

Westpac for one was convinced to clear the slate. However, perhaps still smarting from having been hoodwinked into bankrolling Barton’s disastrous futures trading, National Mutual was unwilling to walk away from the $3 million it was owed. With Sanwa having first rights to Loch Maree, National Mutual turned instead to the Berkeley Vale land. It was agreed that better returns would be achieved if it was on-sold as home sites. This meant connecting sewerage, street lighting and power as well as road-building. Blocks could be sold off piece by piece as each section was connected to facilities. Property developer Jennings was to manage the project. National Mutual agreed to take up 75 per cent equity in exchange for lending Barton funds for the remainder.

The project soon bogged—literally. Constant rain every week for months on end turned the Central Coast site into a muddy quagmire, delaying construction. As Barton’s borrowing had been tightly time-limited, huge interest penalties began to mount.

Tony Lewis had done well out of Barton’s futures trading even if Barton himself had not. In an effort to make amends for his client’s huge losses, Lewis volunteered to manage Barton’s interests in the land deal. He would spend over nine months of 1989 dealing with developers, lenders and other stakeholders to rescue the development in the face of crippling interest rates. It was a horrible situation. When, after two years, progress was nothing like what had been projected, National Mutual cancelled further funding. Barton continued to hold out hope that ‘prices could rise steeply’ and that Berkeley Vale ‘could become worth a lot of money’.

It would be four more years before Aleco Vrisakis eventually salvaged a sale to LJ Hooker. He admits it was far less than Barton should have received. Once Hooker realised the receivers were involved, it had held out for a bargain.

It was not only his fortune that Barton was losing. From 1986, he began progressively losing his hearing. Numerous specialists were powerless to halt the slow deterioration. For a sometimes introverted man of ideas and debate, this sensory loss was particularly frustrating. Unwieldy external amplifiers began to sit on tables between Barton, his friends and business colleagues. For a time he tried a device that attached to his telephone earpiece, but ultimately he fell back on the fax machine. Realising his loss was greatest at the higher frequencies, Mary Ellen trained her voice to drop an octave. In company, Barton would become increasingly reliant on lip-reading. Mary Ellen found a lip-reading teacher and together she and Barton took a course so as to improve his communications skills as efficiently and quickly as possible.

In July of 1990, the Bartons were effectively bankrupt in their Hurlingham mansion. His secretary now came just one day a week. Desperate to shore up an ongoing salary, Barton must have swallowed his pride as he confessed to TNT chairman Fred Millar the depth of the financial black hole into which he and Mary Ellen had fallen. One solution was to return to a senior executive role. Barton suggested he become the European managing director at TNT Express. With a single European market having just been created, he pointed out to TNT’s chairman, ‘I don’t think anyone in TNT understands that market as I do’.

The following month, in a letter to TNT managing director Peter Abeles, Barton was more direct. Given the chance, he thought he could fix the TNT Express problems. Six months later, as Barton’s financial situation became even more dire, he was still trying to convince Fred Millar to give him the role ‘which I am uniquely qualified and motivated to do’.

The same year, an unexpected $250,000 appeared in Barton’s Sydney trading account. Tony Lewis assumed he was authorised to trade it. When he discovered Lewis had invested the money, Aleco Vrisakis became furious on Barton’s behalf, raging that Lewis had no authority to trade. Forced to sell out of the investment, Lewis lost 40 per cent of the original sum. It rubbed salt into smarting wounds. Bob Miller admits now, ‘Even after basically everything was lost, Gordon wanted to keep on punting . . . He was convinced that he was going to get his money back. He was like the punter at the races. Your money’s all gone, let’s borrow another ten bob and see if we can get out of it.’

Tony Lewis would become the scapegoat in this particular debacle. Disgraced, he resigned his Oamington directorship before the company went into receivership. He never spoke to Gordon Barton again.