Image for Dear PPB Advisory: Possible misuse of public funds to prop up seemingly bankrupt companies

The decision by PPB Advisory the Gunns Liquidator to establish if Gunns traded whilst insolvent is of great interest to thinking Tasmanians.

A large amount was owed by Gunns in July 2011 to Forestry Tasmania. This debt was in part extinguished by a Federal Government payment to Gunns under the TFIA of $34 million, a payment that was not expected and in all probability was a result of corruption of due process.

I have detailed this payment and its relationship to the contracts then extinguished between Forestry Tasmania and Gunns, in various documents. I have drawn together the relevant sections from these documents with the aim of helping the Liquidators to assess Gunns’ solvency at the beginning of July 2011.

The first extract is taken from my Underbelly series published on Tasmanian Times:

Underbelly: Paul Harriss; a step too far?

The Underbelly of Forestry Tasmania. Julia pledge on pulp mill

The Underbelly of Forestry Tasmania

Underbelly: The suggested grounds for a Royal Commission

Reference to the complete series is suggested to give further context to the corruption of due process as it applies to the Tasmanian logging industry.

In the document quoted below Bob Gordon as CEO of FT has signed a Briefing Note over Gunns Debt and Recovery Strategies and supplied it to then Premier Lara Giddings and then Forestry Minister Bryan Green the people’s representatives - the Shareholder Ministers on the board of FT.

It is dated the 29 July 2011.This date is very important when discussing Gunns’ solvency for Gordon was then of the opinion that…. ‘Gunns financial problems are overwhelming and may soon lead to the appointment of a receiver by its secured creditors’

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This document was obtained by a Liberal politician, Elise Archer, under FOI on 24 November 2011 and seemingly buried. The suggestion could be made that the Liberal Party protected Gunns by not disclosing their financial position as evidenced by the FOI request ...  much to the detriment of those self-employed contractors used by Gunns.

In July 2011, Gunns could have been insolvent, a position only corrected by an infusion of Government funds via colluding pollies, regarding previously surrendered contracts. 

“Forestry Tasmania considers that it is unlikely to recover any more than a small proportion of the amounts owed by Gunns, [$26.83 million] unless specific measures are taken to recover the outstanding amounts….Forestry Tasmania has formed a view that Gunns’ financial problems are overwhelming and may soon lead to the appointment of a receiver….the suspension of supply (hardly relevant, in the current circumstances) the termination of contracts (also of limited relevance, given Gunns, termination of Contracts 917 and 918 by notice in writing on 18 April 2011)…..”

This problem of payment by Gunns of its outstanding debts was critical to the solvency of Forestry Tasmania.

It was cleared up by the first large payment under the IGA to Gunns who passed on the majority of these funds to FT for the already surrendered contracts. The legality of this payment from Federal funds over Contracts 917 and 918 is arguable; the fact that it saved FT is not.

The second reference has been extracted from my submission now tabled in Parliament and available in Hansard thanks to the good offices of Andrew Wilkie. It explains the source of the money paid to Gunns from the TFIA and the probable illegality of that payment.

TT: Forestry Tasmania, Andrew Wilkie MP and the tabled document ...

I Quote:

“1.11 Cancellation. The Pot of Gold, Tasmanian public servants and politicians.

… When the Tasmanian Forests Intergovernmental Agreement (TFIA) was signed on 7 August 2011 the State and Commonwealth Governments made provision for $250 million for Tasmania and its forest industry (Attached).

The principal payments were designated as being for:

$85 million to contractors, $43 million to the protection of new areas of high conservation forests, $120 million over 15 years to identify and fund appropriate regional development, $7 million to manage new reserves.

This sum was later increased for reasons of political expediency by State and Federal Labor to $379 million, to create a serious Pot of Gold. Was it created to buy the votes in Tasmania at future elections?

As this complex in-house saga progressed and the Pot of Gold was distributed one can deduce how the politicians used these funds at the expense of the publically-owned GBE, FT, for different purposes …

Events were moving swiftly; in 2011 Gunns was either broke or going broke fast and an excuse was needed by State Labor to save them by immediately extracting a large sum from the Pot of Gold.

The Gunns’ Take or Pay contracts were in the frame and had already been terminated by the company who had given 6 months’ notice of cancellation. With only weeks to run before this notice was completed and the matter discharged at no cost to the taxpayer this much disputed matter was rapidly settled with a cash payment to Gunns of $34 million of federal funds.

This payment was to apparently allow the IGA to proceed.

… Where is Gunns’ right to these funds as stated in the TFIA allocation of monies as noted above and which Ministers can be held responsible for this probably illegal disbursement …

1.12 Why did the Minister agree?

There is a precedent to cash payments over Take or Pay contracts regarding a possibly illegal settlement by Ministerial direction in the dubious payment to Gunns over The Take or Pay, China Contract, Contracts 917 and 918.

On 10 November 2014 Dr Julian Amos, before the Legislative Assembly Standing Committee on Community Development, under oath, stated that the view at the time was that the Gunns’ contracts had been terminated.

This confirms my previously stated opinion that no compensation was payable to Gunns:

Amos - The view industry had at that time was that the [Gunns] contracts had been terminated. [China, 917 and 918]

Shelton - The question is what was the money for?

Amos - The point I was making to you was that it seemed as though there was a wedge. The government had got itself into a wedge with the timeline issue where in order to resolve the IGA it had to resolve the conflict with Gunns, irrespective of whether that conflict was relevant or not. The fact was that there was a dispute, they had to get rid of the dispute and money was put on the table to get rid of it, irrespective of the merits of the case. That is my view.

Ms O’Connor - You will recall that the government made the payment on the basis of the Solicitor-General’s advice

Amos - I haven’t seen the SG’s advice.

Ms O’Connor - No, none of us have.

Barnett - … the letter from the Premier makes it very clear that the Crown legal advice says that it is appropriate, not required or compelled. The letter from the Premier makes it very clear that the Crown legal advice says it is appropriate, they are entitled to meet the objectives of the TFA according to her, but there is no requirement, no compulsion to pay. Is that the way you -

Amos – That is my reading of it.

Amos in his Aide Memoire Issues for Consideration lodged as a submission to the Committee notes that:

General view that this was a joke … Gunns gets paid for a contract that was already surrendered, and gets out of its debt to FT.

This is the convoluted political logic that sets up the precedent for a Minister of the Crown to allow TA Ann to receive $28.6 million from the public purse.

Where in both matters can we see our political masters observing due process or properly serving the interests of the Tasmanian taxpayer?

The case for a Royal Commission regarding the Gunns’ payment over Take or Pay contracts was put by me in four parts on TT. It explains why Amos is not quite correct over the timing of the termination of the three Gunns contracts. The truth is even more damning.”

Underbelly References available on Tasmanian Times:

http://tasmaniantimes.com/index.php/article/underbelly-paul-harriss-a-step-too-far

http://tasmaniantimes.com/index.php/article/the-underbelly-of-forestry-tasmania.-julia-pledge-on-pulp-mill

http://tasmaniantimes.com/index.php/article/underbelly-part-ii

http://tasmaniantimes.com/index.php/article/underbelly-part-3-the-suggested-grounds-for-a-royal-commission 

In Conclusion

I hope that the above information will provide PPB Advisory with some background as to the possible misuse of public funds in order to prop up two seemingly bankrupt companies - Forestry Tasmania and Gunns at the behest of Tasmanian pollies.

Did Gunns largest creditor, Forestry Tasmania, get paid when the directors of Gunns knew that their own company was likely to be insolvent?

On the above evidence the answer may be Yes.