Billionaires grow fat off lazy government

by | Mar 21, 2012 | Business

It might seem ungracious that, in the very week Clive Palmer floats the very civic idea of a billionaires’ blind trust to invest in traditional media companies, we point this out. But somebody has to do it.

Palmer’s flagship companies Mineralogy and Resourcehouse have failed to lodge their accounts in compliance with the Corporations Act. We will get to the details in a moment.

Suffice it to say that this is not a story about Palmer per se. Or Gina Rinehart, whose Hancock Prospecting has also failed to lodge accounts for the past two years, as was revealed last week. It is about the failure of government.

It is the misfortune of billionaires, and we say this without a hint of irony, to be in the public eye. They serve as first-rate subjects to prove a public point. And the point here is that if the government and its agencies can’t get their act together to make high-profile types such as Palmer and Rinehart comply with their laws, why should anybody else bother?

Are billionaires simply too big to touch? There was a song and dance made by press release last June when the Melbourne Magistrate’s Court fined a Victorian company, Fulcrum Equity, $15,000 for failing to lodge its annual financial reports with the Australian Securities and Investments Commission.

Authorities were not quite so robust last week when asked what they were doing about two years of missing accounts for Hancock Prospecting. Its accounts for four years before that were lodged more than a year late.

“No comment” all round, accompanied by a bit of fluff about serious commitment to compliance.

Finally though, a week later and hard up against deadline for this story, Bernie Ripoll came good with a real response. Ripoll, fresh in the job as parliamentary secretary to the Treasury, said he was on it.

“No one is above the law. Everyone, every company, every organisation, is expected to meet their responsibilities,” Ripoll said.

“The law is absolutely clear and ASIC is the regulator. I am very confident that the regulator will use all of its resources and all of its powers to make sure [company directors] fulfil their full responsibilities.”

Hand on heart, we can report that this was the most fair dinkum response we have had from government in years and hope that it is not just the enthusiasm of a freshman parliamentary secretary whose bold and true ambitions will be soon dashed upon the rocks of bureaucratic pettifogging and timidity.

There is a sweet paradox too. How did the Treasurer, Wayne Swan, know that Rinehart and Palmer were billionaires anyway when he had his celebrated lash at them? It couldn’t be based on statutory accounts.

The argument for big private companies not filing accounts is a fair one. They are private, after all, and why should they reveal their financials to customers and competitors?

The counter argument is that creditors and staff deserve to know the financial status of their counterparty or employer so they can be secure in dealing with it.

One company, Dynamic Supplies took the regulators all the way to the Federal Court and thence the Administrative Appeals Tribunal to keep its private accounts private. It lost. A win would have opened the floodgates.

Regardless of your view on the law however, the law says that a big proprietary company has to file accounts within four months of balance date.

And that brings us to the Clive Palmer companies.

A spokesman for Professor Palmer said: “Mineralogy is a private company and doesn’t publicly discuss its financial affairs. The company can confirm that it files tax returns and pay taxes in accordance with our statutory obligations.”

Company searches show that Palmer’s flagship company, Mineralogy Pty Ltd, has no auditor. No auditor means no audited accounts, which in turn means the company does not qualify for grandfather relief from lodging accounts with ASIC.

As there are no audited accounts on the ASIC database, it appears that Mineralogy has not lodged accounts for many years, if ever.

Then there is Resourcehouse Limited, which was the vehicle Palmer had been intending to float on the Hong Kong Stock Exchange for $7.3 billion.

Resourcehouse, like other public companies with a June balance date is required to prepare and lodge audited annual accounts by October 31 each year.

Audited accounts for June 30, 2011 are missing from the public database. Audited accounts for June 30, 2010 were signed off in December 2010 but not lodged with ASIC until November 23, 2011 – more than a year late.

There are a few incidental points of interest from the Resourcehouse searches. Former foreign minister Alexander Downer is still on the ASIC record as a director. Ernst & Young is listed as auditor. The firm makes just $200,000 from the audit but $848,500 for other services.

The substantial float costs – bear in mind the float never got away – are booked in the Resourcehouse balance sheet as an asset, which is a rather exotic accounting treatment.

But we digress. Palmer and Rinehart have been somewhat singled out here when it is clearly evident that they are just the tip of the compliance iceberg.

There may be an explanation for why Palmer’s group has not filed in accordance with statutory obligations. It may even be that the CIA has hacked into the ASIC database and destroyed the financial reports. However, neither the national treasurer nor the national regulator is saying.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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