Oh Zali, how could you?
Whether or not one of the few genuinely likeable and centrist MPs survives the donation scandal will be known in a couple of months, but Zali Steggall’s brand has clearly been damaged by the John Kinghorn non-disclosure fiasco.
Although it’s almost certain the debacle was more cock-up than conspiracy, the failure to disclose a significant $100,000 donation from a coal industry figure will make her life far more difficult.
The donation has gained attention because of Kinghorn’s directorships of Cascade Coal and Felix Resources, but that is far from the only controversial businesses he has been involved with. The donation also seemed out of character; he previously committed $500,000 to right-wing think tank the Centre of Independent Studies, which once published the writings of Steggall’s political victim, Tony Abbott.
But focusing on Kinghorn’s coal interests is very much burying the lede in what has been a spectacular and somewhat colourful corporate career.
Global financial crisis
Kinghorn was a bit player in the frantic financialisation that occurred in the 1990s and 2000s in Sydney, which ultimately led to the collapses of the likes of Babcock & Brown and Allco during the global financial crisis.
An investment banker who once ran Delfin in 1979, Kinghorn convinced an up-and-coming tax partner at blue chip law firm Stephen Jacques named David Coe to join his nascent Allco Finance Group. Coe would eventually take over Allco from Kinghorn before dying, disgraced, as the Allco empire collapsed in 2008, wiping out billions in shareholder and bank funds. But until then the two were fixtures on the BRW Rich List, partnering on ventures like owning the Australian master Krispy Kreme franchise.
After mostly selling out of Allco in 1991, Kinghorn — who had been a wholesale lender — started a consumer brand called Rams Home Loans.
By 2007 Rams had grown its loan book to $13 billion, and Kinghorn undertook what would be one of Australia’s most disastrous IPOs, listing the business on the ASX and pocketing an incredible $650 million (Kinghorn retained a minority 20% stake).
Although Rams’ prospectus forecast strong growth of 34% in 2008, it failed to predict the tightening global liquidity — and within weeks several Bear Sterns hedge funds would collapse. Just three weeks after Kinghorn had reaped hundreds of millions, Rams shares would fall 60% in a single day after the business was unable to sell $6 billion worth of commercial paper in international markets.
A month later shares fell to 57 cents, before the brand name and other assets were acquired by Westpac for $140 million. The float was so bad The New York Times would call it “the worst public initial offering of the decade”.
The story continues …
But that wasn’t the end of the story.
The following year, the Rams board — which included Coe — authorised a transaction which allowed the early repayment to Kinghorn of a $28.5 million loan (at the time, Rams had a cash balance of only $35 million). This generosity came shortly after Kinghorn invested $95 million into one of Coe’s failing entities to stave off margin calls. Kinghorn would also curiously purchase a $5 million luxury yacht for Coe.
Another close associate of Kinghorn and Coe was Greg Jones. Jones was a partner of Kinghorn in his e-Lect IT business and reaped tens of millions of dollars when Rams floated. As Kate McClymont later reported in The Sydney Morning Herald, Jones would lose it and declare bankruptcy in a “whirlwind of excess: palatial homes, extravagant lunches and private planes hired to fly the flamboyant Mr Jones and his pals from one luxurious European location to another”.
But Jones would also form a link to the Obeid/Macdonald corruption scandal which would come to haunt Kinghorn. In 2009 Jones was caught boasting “that he was on to another ‘sure thing’ — a coalmining deal involving his mate Macdonald”.
As always, Kinghorn wasn’t too far away. He was a shareholder and director in the now infamous private company Cascade Coal, which entered into a deal with the Obeid family in 2009 in which Cascade would give the Obeids a 25% interest in the coal explorer in exchange for information which would allow it to win a coal exploration licence in Bylong Valley.
The licence would prove to be very lucrative indeed; Cascade Coal later agreed to be sold to a business called White Energy for $500 million, of which Kinghorn also happened to be a director. (Kinghorn would have reaped about $60 million from the sale.) Kinghorn later had an ICAC corruption finding against him overturned by the NSW Supreme Court.
The broader Obeid investigation was described by Geoffrey Watson SC as “the most important investigation ever undertaken [by the Independent Commission Against Corruption and was] corruption on a scale probably unexceeded since the days of the Rum Corps”.
… and continues
But Kinghorn’s story didn’t end there. The millionaire was seemingly incapable of avoiding controversy.
In 2017 the then 76-year-old was charged by the Australian Federal Police with fraud after allegedly avoiding $30 million in taxes relating to his ownership of Rams through the use of Jersey-based companies. Kinghorn pleaded not guilty in 2018, claiming that it was improper for the Australian Tax Office to pass transcripts to the AFP. A couple of months ago, the NSW Court of Criminal Appeal found that evidence of Kinghorn’s 2005 ATO interview would be admissible as part of his fraud trial, which is still going.
As Colleen Ryan noted in the AFR in 2015: “Kinghorn wins out — most of the time. But he often leaves a lot of damage in his wake.”
Perhaps Steggall should have done a little more diligence on her controversial donor, who presided over one of Australia’s worst IPOs and is facing fraud charges.
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