Jackson family, News Corp, QANTAS and terms of Rupert's surrender

2. The Jackson family, Qantas, Japan and the ski resort development that wasn't

By Stephen Mayne

Many publishers, broadcasters and journalists know that feeling after a strong but contentious story first hits the public domain. What will be the reaction? Is it right? Will they sue? The best response is usually silence – because then you know it's right. However, too much silence isn't a good thing because it also sometimes means that the rest of the media don't follow up your cracking yarn. And so it was with this package of sealed section items in December 2004 which began with this tip from a skier:

Is it simply a coincidence that Qantas have re-introduced flights, twice weekly I believe, to Sapporo in Hokkaido, Japan? A couple of Australian chaps, Melbourne Minter Ellison lawyer, Roger Donazzan and Australian Alpine Enterprises managing director Colin Hackworth have purchased a defunct ski-resort (Niseko Hanazono) and are promoting it here in Australia.

Fortunately for them Qantas have started flights out of Cairns using Australian Airlines. Roger Donazzan is, of course, married to Margaret Jackson, Chairman of Qantas. Having the flights recommence certainly won't hurt the chances of the lads making a buck.

This is a cracking story but it never went anywhere. Well, plenty has happened over the past 18 months as this Japanese spy explains:

Back in late 2004 Crikey ran a couple of pieces about the adventures of Roger Donazzan (husband of Margaret Jackson) and Colin Hackworth, who were being feted at the time for buying the defunct Hanazono ski resort in Niseko, in the northern Japanese island of Hokkaido and announcing plans to build an 8,000 bed mega-million dollar "world class human-scale ski-in, ski-out village".

Both the intrepid would-be developers have been swanning around the Niseko area in a very nice Range Rover since having purchased and, in Hackworth's case at least, substantially renovated ski villas in the neighbouring town of Hirafu (significantly NOT in the Hanazono area they want investors to commit to), but every time a key development deadline has arrived, they have ducked and weaved and announced "unavoidable delays to make absolutely sure all the groundwork is in place".

Throughout the winter season just ended, Donazzan and Hackworth continued to hold "investment seminars" for visiting skiers from Australia and elsewhere - odd affairs held in a retail shop their company operates in the main street of Hirafu at which the bemused onlookers - who seemed to gather more for the free wine than anything else - were treated to the spectacle of the silver-tongued marketing wizard Hackworth leaping on to a chair and attempting to enthuse all present with a stirring "Hanazono, Hanazono Oi Oi Oi".

Perhaps it is no surprise to have heard in the past week from a source within Tokyu Corporation, the company that sold Hanazono to the lads for a reported $2.5 million, that the game is now up. Colin Hackworth has told senior people around town that they know they will not raise the necessary money proceed to build even one single part of the grandiose scheme, and that the project is now on the market for around $9 million.

One can't help thinking that it will indeed need to go for $9 million so that the original investors (whoever they were) might see some return on their "investment". Curious observers have long been wondering who was footing the bill for the apparent extravagance. The same observers, and many others in Niseko, are now wondering whether the demise of "Mr Jackson's" dreams might have any impact on Australian Airlines' direct flights to Hokkaido, which were cranked up just about the time the original Hanazono purchase was announced.

Given the discussion we're having about perks at Qantas, it would also be interesting to know who paid for what when Donazzan and his development team travelled to and from Australia. If Australian Airlines isn't yet making a profit on the route, Margaret Jackson should be feeling a tad uncomfortable because this isn't a good look.


3. Qantas and the political perks rort

By Stephen Mayne, humble Qantas Club member who has never been upgraded

It looks like we're onto something big with our examination of Qantas, the Chairman's Lounge and the allocation of perks and upgrades more generally by the national airline.

First, to the facts. There is no government payment for the Chairman's Lounge memberships offered to all Federal MPs as this is something which Qantas believes should be paid for by its shareholders voluntarily. It is worth noting that when Ministers travel, whatever entourage they have with them is also ushered into the Chairman's Lounge – something which Ministers exploit to the full as a source of glad-handing and patronage.

And the lurk extends down into the bureaucracy because Qantas influences not just Ministers but senior public servants in the same way through Chairman's Lounge memberships, free upgrades and frequent flyer points – which the public servants and politicians take with them as a generous free gift when they retire.

This also means that politicians and senior public servants have an incentive to travel more frequently – especially when it is always business class. The market value of all these benefits would run to many millions of dollars a year and the cost to Qantas shareholders would exceed $1 million.

This huge rort is not a hangover from when Qantas was government owned – in fact, the lobbying of Ministers was not something that the previously government-owned Qantas did to anything like the extent that the privately-owned Qantas does.

The standard entitlements for our political and senior public service class are business class travel within Australia but the best summary of all the benefits is not on any official departmental website because the highly secretive Finance Department provides none of these details online. However, our good friends at the Parliamentary Library did produce this fascinating guide.

Arrangements for ministerial travel in Australia are handled in the same way as those for MPs and Senators. However, overseas travel comes under prime ministerial control as you can see towards the end of the official Ministerial Guidelines.

In terms of the huge Qantas frequent flyer rort, some Ministers have accumulated millions of points over the years and there are in effect no restrictions on them using these for their own purposes after they leave the Parliament. There is a very weak guideline encouraging them to use up the points but it is almost universally ignored as The Age reported last year.

So what does Qantas get in return for its investment? Government favours of course. No ACCC chairman has had a concerted go at Quantas's regular abuse of market power which has helped send half a dozen airlines out of business over the past 15 years.

And when Ansett collapsed, it was quite outrageous how the PM's Ansett Taskforce tolerated Qantas making a successful grab for those vital extra landing slots and gates at Sydney Airport, giving it a huge advantage over its rivals. Crikey has been told that policy deliberations inside the taskforce at the time were influence by the common perception that "the Prime Minister likes Qantas". He likes chairman Margaret Jackson so much that she was even offered the keys to Yarralumla.

And why wouldn't the Howards like our national airline when you consider the duchessing that our first lady receives. The PM usually travels in the government jet, but his family members are treated better than royalty – every whim catered to, nothing too good for Janette who, if she travels, tends to have a charming Qantas PR person assigned to look after her.

One isolated upgrade for the Costello kids sounds like it could just be the tip of the iceberg. Has the PM ever disclosed family benefits from Qantas and who paid for what when Richard Howard headed to the US in 2004 to work on George W Bush's re-election campaign? Hmmm, we might just be onto something here.

All of this barely scratches the surface of what poured in yesterday so keep the tips and feedback coming to smayne@crikey.com.au.


4. News Corp's humiliating poison pill retreat

By Stephen Mayne, News Corp shareholder and failed board candidate

Rupert Murdoch has today reached a humiliating settlement with the global coalition of institutional shareholders who sued News Corp in Delaware for unilaterally extending its notorious poison pill arrangement for two years without seeking shareholder approval. So humiliating, in fact, that Rupert hasn't even informed the ASX, even though the development has helped push News Corp shares 18c higher to $24.90, it's highest point since the move to America in November 2004.

Invoking the poison pill to stop John Malone's Liberty Media adding to its 18% News Corp voting stake was bad enough, but then Rupert unilaterally extended it for two years last August and refused to honour his earlier court-noted pledge to put such an extension to a shareholder vote. A coalition of institutions sued in Delaware and now Rupert will belatedly put the extension to a vote at the 2006 AGM in New York in October, plus pay all the legal bills, which is a sure sign of who has lost.

The outcome is only advisory because Rupert has retained the right to ignore it. But if that happens, the parties will return to the Delaware courts and slug it out again and the institutional argument would be strengthened by the shareholder vote. It would be an extremely brave News Corp director, even considering Rupert's ability to attract and retain sycophants, who sanctions such a brazen move.

While the institutions will be vital to the voting outcome, it will ultimately be decided by the three biggest shareholders – the Murdoch family with 29%, John Malone's 18% and Saudi Prince Alwaleed bin Talal with 5.5%.

Considering the poison pill is all about entrenching Rupert's family control, the Murdoch family shouldn't be able to vote given that they clearly have an interest in the outcome – something which matters in Australia. However, slack Delaware laws not only tolerate these poison pills but also allow conflicted controlling shareholders who propose them to vote.

Rupert and his supportive Saudi Prince will be hard to beat and it is not even clear that Malone will vote against the extension given that he supported every resolution at last year's AGM – including supporting four directors who compromised their integrity by supporting the poison pill extension.

From Rupert's point of view, the settlement buys him another six months to reach a compromise with Malone. The fear here has always been that Rupert will use company cash and assets to get Malone off the share register and entrench his family's control once again, even if it hurts the share price. History shows that Rupert puts personal control and world domination ahead of shareholder returns.

The recent recovery in the News Corp share price is another factor which has taken some heat off Rupert because the opportunistic lows associated with all that selling by Australian institutions has now passed. Rupert partly defended the poison pill on the basis that it would stop Malone taking control on the cheap and it is doubtful Liberty would be prepared to spend another $3 billion at $25-plus a share to match Rupert's voting stake.

That said, even with 18% Malone is well positioned to join up with key institutions and stop Rupert handing management control of News Corp to his children, which is what this is all about.


5. The 12 terms of Rupert's surrender

By Stephen Mayne

There were six brave not-for-profit Australian super funds – Unisuper, MTAA Super, CARE Super, CBUS, HESTA and PSS/CSS – combined with a handful of other funds from the US, the UK and the Netherlands, that thrashed out today's poison pill settlement with Rupert Murdoch, his management underlings and John Thornton, the News Corp non-executive director who led the negotiations.

Several other funds, mainly for-profit conglomerates, withdrew from the Delaware court challenge for fear of brand damage that might have stemmed, in part, from attacks in Murdoch media outlets around the world. They therefore are missing out on the glory of what is a major governance victory that recovers much of the ground lost when News Corp's institutional shareholders were hoodwinked into supporting the move to America and lied to about the poison pill.

PSS/CSS holds the employee contributions from past and present federal public servants and has a good record on corporate governance voting. It should be getting the tens of billions going into the Future Fund, but the Federal Government and its business supporters don't like institutional activism from funds not bedevilled by conflicts of interests.

It's hard to imagine Future Fund chairman David Murray, the former CEO of CBA, committing to such an important legal case. And where were the likes of AMP, MLC, Colonial First State and BT?

Phil Spathis and Michael O'Sullivan from the Australian Council of Superannuation Investors should take a bow today for their victory and these are the 12 specific terms of Rupert's surrender:

1. The trial set down for 24 April 2006 in the Delaware Court of Chancery is postponed.

2. News Corp will put the extension of the Shareholder Rights Plan (“The Poison Pill”) to a vote of stockholders at the October 2006 AGM.

3. If the stockholders vote against the extension of the poison pill, the Board of News Corp retains the right to treat the vote as advisory, and to proceed with the trial. This will be made clear to stockholders before they vote.

4. The stockholders will vote on a Board proposal to extend the pill for two years to October 2008, with the Board having the right to extend for one more year to October 2009 if the Liberty situation has not been resolved.

5. When the poison pill expires, no further poison pill can be adopted for a further period of nine months.

6. After that nine months, the company may institute a new poison pill with a duration of one year. No rollover will be allowed without stockholder approval until a further nine months have passed.

7. If during any such nine month period, a person acquired 5% of the stock, or makes an offer for 30% or more of the stock or assets of the company, the Board can institute a new poison pill for one year.

8. The company may institute a poison pill at any time with stockholder approval.

9. The plaintiffs will not solicit proxies or take other action to defeat the poison pill at the October 2006 AGM. Plaintiffs will vote as they see fit.

10. The public position of the plaintiffs and ACSI will remain, as it always was, that the issue was not the merits of the poison pill, but the right of shareholders to vote on its extension.

11. These provisions will expire in 20 years in October 2026.

12. In recognition of the benefits conferred by the settlement on all shareholders, News Corp will pay the plaintiffs' legal fees and costs.


22. The Phil Burgess caravan keeps rolling

By Stephen Mayne

Another day, another fascinating debate about the future of public company AGMs featuring a panel of key players and, most importantly, Telstra's colourful regulatory boss, Phil Burgess.

The caravan moved to Sydney's Sheraton on the Park yesterday and there were plenty more gems from big Phil who claimed the miserably small 5800 visits a week (not a month as Phil said in Melbourne) that Telstra's you beaut new website, nowwearetalking.com.au, gets is mainly from people who are bored with Crikey and moved on.

Yesterday, I pledged to the AGM debaters that the Crikey Army would double Phil's traffic as we implored 35,000 of you to visit the site and repeat that message today. It really is worth a look because no other Australian public company has ever produced such a jovial and straight-talking website, complete with blogs and a cartoonist. There's also plenty of ammunition being fired in the war with the government over excessive regulation.

There was an interesting moment yesterday when Lateline host Tony Jones asked me if Telstra's combative approach to the government would backfire.

I said it was refreshing to have some straight talking for a change but the Howard Government has a well-established track record of rewarding monopolies and duopolies – such as the banks, the ASX, Sydney Airport, Patrick, Qantas and the like – that sit there like corporate patsies and never criticise. Political donations also usually help too.

The contrast between Telstra throwing rocks and Qantas spending millions on political largesse is stark indeed. Qantas never strongly criticises the government and Telstra seemed to get a much better hearing when it provided the PM and communications minister Richard Alston with free digital plasma TVs.

Westpac company secretary and panellist Richard Willcox didn't seem too happy with my assessment and outlined some complaints that Westpac had with government regulation, although you'd never see it in a letter to shareholders or a major advertising campaign. And Westpac is the biggest donor of the major banks.

After all, when one bank economist criticised government policy, Peter Costello famously rang his CEO and threatened adverse regulatory interventions. Sadly, that's the Australian corporatist system.

The one thing that could save Telstra is the government's obvious interest in maximising the value of its 51% stake, but caving in to Telstra's many demands would be too big a dose of humble pie for those sensitive souls in the Howard Government.

Phil Burgess is absolutely right when he says that "a little bit of humble pie sometimes is good for the soul". Unfortunately, the glass jaws at the top of the Howard government don't see it that way and seem determined to run down the Telstra share price in order to punish Sol Trujillo's management team for daring to have a different view.

Copyright © 2024 The Mayne Report. All rights reserved

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