The Vidors and Toga Group

Jan 22, 2021 | Secret Rich List

Top 200 Rich List (2020)No. of Dark Companies: 2Political Donations since FY 1998-99
Rank: 115Toga Pty. Ltd.Labor Party: $546,658
Wealth: $866mToga Development No 36 Pty LtdCoalition: $531,927
Wealth (2019): $973mIndependent: $0
YoY wealth change: -11.0%Total: $1,078,585

Ervin and Charlotte Vidor are pioneers in the Australian hotel and property development industries. Through their Toga Group empire, which includes two Dark Companies, the pair control over 10,000 hotel rooms across Australia, New Zealand and parts of Europe.

Considering their commanding presence in the hospitality sector, the Vidor couple does well to keep a low profile. Both Ervin and Charlotte escaped post-war Europe from Hungary and Poland respectively, emigrating to Australia in the 1950s. Charlotte and her parents were some of the few survivors of the Jewish community of Lviv (now part of Ukraine) which after the outbreak of war had swollen to about 200,000.

In 1950, Ervin established his own business making metal shoe tips allegedly weeks after arriving in Australia. The start-up eventually led to his own factory selling jewellery to suppliers including Coles and Woolworths. His girlfriend, and pharmacist at the time, Charlotte would dye the perspex stones of the jewellery. While operating the business, Ervin studied accounting at UNSW. Charlotte would later complete a master’s degree in Town Planning.

Vidor founded Toga in 1963, with his wife joining the business four years later. The group’s activities include the acquisition, construction, and management of commercial real estate, servicing the housing, property management, hospitality and retail sectors.

The company almost went broke in the early 1970s after a poor decision to list on the stock exchange. The move saw them pressured by merchant bankers to value fast profits over strengthening their property portfolio, resulting in halted constructions and a debt surpassing $100 million. However, their bank at the time backed them, funding Toga for two years to finish its projects.

In 2013, the Toga Group formed a joint venture with Singapore’s largest private property developer Far East Organization via their hospitality wing Far East Orchard. The partnership operates under Toga Far East (TFE) Hotels and owns upwards of 70 hotels including the Adina serviced apartments, Vibe, Medina and Travelodge hotel brands. The Adina business is recognised as the first Australian hotel operation of its time to enter Europe.

ATO tax transparency data shows Toga declared an income of $2.4 billion between financial years 2013/14 to 2017/18. Over this time, their tax payable was $54.3 million, representing 26% of their taxable income. However, taxable income and tax payable for three out of these five years were $0.

The Toga Group was also linked to the Australian government’s controversial $1 billion-plus visa privatisation project proposed in 2019.

The proposed deal – which was terminated in April last year following the Covid outbreak – saw a convergence of some of the Liberal Party’s closest friends and largest political donors (contributed handsomely by the Vidors) including “friend and political advisor to Scott Morrison Scott Briggs … fruit and veggie moguls the Tripodina Family, executives and companies associated with James Packer, Qantas and NAB, and an opaque Sydney property group, Toga Investments”.

Toga Investments’ parent company is Toga Pty Ltd, a Dark Company exempt from lodging financial accounts.

How we compiled the Secret Rich List

What are they trying to hide? This is the driving question behind our ‘Secret Rich List’ project at Michael West Media.

Our aim is to shine the spotlight on the 1,119 large proprietary companies that continue to enjoy a privileged exemption from having to lodge financial reports to the Australian Securities and Investments Commission (ASIC).

An exemption from any new law or regulation is commonly referred to as ‘grandfathering’. In this case, the exemption from having to lodge audited accounts effectively creates two classes of Australian citizens; large proprietary companies that have to comply with government legislation, and the remaining 1,119 companies that by definition are required to do the same, yet enjoy an antiquated free pass from full public transparency.

What was issued as a “temporary measure” by the government of Paul Keating in 1995 has placed these companies above the law for more than 25 years. We believe it is in the public interest to put an end to this outdated government legislation once and for all.

Although ASIC  defines the companies enjoying the exemption as as grandfathered large proprietary companies, we prefer the term ‘Dark Companies’; it is a more fitting description of old wealth empires whose financial accounts are cloaked by this provision, shadowed from the public eye.

History behind the 1995 grandfathering exemption

This grandfathering regime was issued in response to The First Corporate Law Simplification Act 1995, a 1995 amendment to the Corporations Law at the time.

Before this amendment, whether a company had to prepare and lodge financial accounts with ASIC was determined by whether they were an exempt or non-exempt proprietary company (exempt meant the company did not have to publish accounts).

 ASIC defines exempt proprietary companies as:

“companies where there was no direct or indirect public ownership; that is, they were essentially owned by private individuals. The companies were not required to lodge financial reports where those financial reports were subject to audit and sent to members.”

 

Under the First Corporate Law Simplification Act 1995 the measure of whether a company had to lodge financial accounts with ASIC changed from the reporting entity test (exempt/non-exempt system) to what became known as the ‘small/large test’.If the company was considered a ‘large’ proprietary company, then it must lodge its accounts.

As of the law in 1995, an Australian proprietary company was ‘large’ if it satisfied two of the following three criteria:

  • consolidated gross assets of $5 million or more;
  • consolidated gross revenue of $10 million or more;
  • the company and the entities it controls (if any) have more than 50 employees at the end of the financial year.

The criteria for the small/large test has since been updated.

The new legislation meant that a significant number of previously exempt organisations now had to prepare and lodge their financial accounts.

The explanatory memorandum for the Bill notes: “To avoid disrupting established commercial arrangements, those existing exempt proprietary companies which have their annual accounts audited, which are large and which elect to continue operating under the existing rules, will not need to lodge their accounts with [ASIC].”.

Thus was born the concept of the grandfathered list - or Secret Rich List as we like to call it. In 1995, it was home to more than 2,000 large proprietary companies.

Significant Global Entities

Some 12 of the 1,119 Dark Companies are considered ‘significant global entities’ (SGE). An entity becomes an SGE if it fits at least one of the two following criteria:

  • a 'global parent entity' whose 'annual global income' is A$1 billion or more,
  • a member of a group of entities consolidated (for accounting purposes) where the global parent entity has an annual global income of A$1 billion or more.

These entities must prepare and lodge general purpose financial accounts with ASIC. This requirement is no different for the 12 SGEs on the Secret Rich List as their SGE status overrides the grandfathering exemption.

 

MWM Methodology

Using both the ASIC and Australian Electoral Commission (AEC) databases we have conducted more than 5,000 searches and counting.

Through the ASIC searches we have been able to collate the necessary information for every company on the grandfathered list, ranging from company directors, shareholders (both persons and organisations), a company’s auditor and much more. This has all been incorporated into our database, which is designed to map out these Dark Companies and tackle our driving question.

We also used the AEC database to generate an extensive list of political donations from these Dark Companies that date from the 1998-99 financial year to the present. We have designed a separate database for these figures, listing political donations from the entity itself, its directors and/or its shareholders. Each donation has been separated into recipient categories to better display the amounts funnelled to the Liberal and Labor parties and their constituencies.

The donations help indicate why the exemption, which ensures such a lack of transparency, has stood the test of time despite numerous attempts over the years from both sides of Parliament, the cross bench, the Greens, Treasury, corporate regulator ASIC and a joint parliamentary inquiry, which have all called for the exemption to be abolished. Both databases created by Michael West Media complement each other to bolster the narrative of the stories that follow.

In a similar approach to our Q.E.D. and Revolving Doors series, we will be releasing a profile each day that highlights directors of these Dark Companies, many of whom appear on the 2020 Australian Financial Review Rich List.

The ‘Secret Rich List’ project will provide considerable evidence to shore up the next attempt to repeal the grandfathering exemption, which Independent Senator Rex Patrick is scheduled to move before the Senate in early 2021.

If you have information about this or other entries in the Secret Rich List, contact us in full confidence via ProtonMail - click here.

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