Just short of 11 years ago, energy company Enron hit the wall, with around $31 billion in unpaid bills. Chief executive Kenneth Lay died on a skiing holiday five years later, just avoiding a likely imprisonment term of 30 years for fraud related charges.
Investors in Enron lost $11 billion.
In relative terms, Gunns’ financial position is worse than Enron’s. Far worse.
Conveniently for Gunns, and less so for the media, in typical fashion the company lodged it’s final report with the ASX a week late, at 7.10pm on the last day of August.
As with many recent ASX releases from Gunns, the Preliminary Final Report is a concoction of misleading statements, obfuscation, and outright untruths.
And if Enron was bad news for the United States, then Gunns is arguably the worst disaster to confront the Australian corporate sector for years. Not just in terms of lost capital, which relative to Enron is far worse, but as an example of how political misjudgement and media incompetence can interfere with market dynamics.
In case mainstream media miss it, the $904 million loss announced just after tea time, is understated. I know it, analysts know it, and Gunns’ auditors know it.
The shonky attempt to reclassify some $200 million of debt as equity 24 hours before the reporting deadline might fool a couple of cadet journalists at The Examiner, but even Arthur Anderson, a firm that collapsed along with Enron, wouldn’t fall for that one.
So in a few weeks’ time, when there’s still no audit report, no ASX trading resumption and no pulp mill, no doubt questions will be asked. Like, who can be blamed for such a fuckup?
Let’s start with Robin Gray. A hated and fiscally incompetent Liberal Premier, who avoided sharing a jail cell with Gunns’ chairman Edmund Rouse despite being found to be deceitful and dishonest by a Royal Commission. The term hubris scarcely begins to define this man. Still blaming the environmental movement for the failure of the Wesley Vale pulp mill more than two decades ago, let alone the fact the South West isn’t underwater, Gray is a true Queenslander, albeit one living in Launceston these days.
The usual brunt of criticism for Gunns’ collapse is John Gay. He seems in robust form these days, although The Examiner has suggested his defence against pending charges of insider trading will be his fading health. Gunns’ bankers ANZ don’t seem to think he’s a good bet these days; threatening to withdraw financial support from at least one sawmill operation who looked to appoint Gay to its Board. Gay may have been pushed by Gray, but as joint directors of a failed corporate entity, they share the same liabilities under Corporations Law.
Launceston’s newspaper, the Fairfax-owned Examiner, has been in lockstep with Gunns for years. Even before a pulp mill project was signed off by the Board, The Examiner was spruiking a mill as an economic saviour for the region despite the obvious community opposition to a massive factory in the Tamar Valley. The Examiner, stifled by incompetence and blunted by inexperience, still supports the dead project against all odds.
There’s also a string of compliant Gunns directors, most of whom were appointed by Gay. During their well-paid tenure, they contributed nothing. Gunns’ annual general meetings were less an opportunity to question Board members than an unpleasant 20 minutes of rhetoric from John Gay, with occasional interjections from Robin Gray.
The conduct of the company’s auditors will be looked at closely by liquidators.
We haven’t even considered the political landscape here. Paul Lennon, an unapologetic lover of Gunns, even hired the firm to rebuild his house at mate’s rates. Successive Premiers have failed to distance themselves from the taint of cronyism. As recently as last week, Lara Giddings was spruiking the benefits of a pulp mill, although one presumes even she would balk at a 300 hectare chemical factory anywhere near her Howrah dwelling ...
Some of these individuals - company directors, financiers, politicians - may end up in jail.
There’s no question the fall of Gunns will be blamed on the environmental movement. As recently as this morning, callers to ABC Radio were blaming `greenies’ for the closure of the former Gunns Triabunna woodchip mill.
In the bleak miasma that passes for public political debate in Tasmania, that sort of uninformed commentary is unlikely to go away..
So who is to blame for the collapse of Gunns? The loss of thousands of jobs; the destruction of Tasmania’s timber industry, and the evaporation of billions of dollars in investment?
Some will blame the Greens. More rational observers might point to the strength of the Australian currency, and the emergence of other nations growing lower-cost pulpwood for export markets. A few might entertain various conspiracy theories.
One day, an educated appraisal of the fall and collapse of Gunns will be written. In that analysis, I hope the impact of campaigners like Paul Oosting, who unlike the ego-driven Steven Mayne, managed to successfully bring shareholder activism to the boardrooms of Australian banks for the first time, will be recognised.
That might be some time off. But until then, at least we have a few years of blame and counterblame to enjoy.
Jarvis Cocker is an independent media and communications consultant specialising in the Australian financial sector. He has previously worked as a senior manager with one of the country’s largest stockbroking firms and as a policy advisor to a Federal Government department. Now living in Tasmania, he tries to temper his sometimes rabid capitalist views with infrequent visits to the Tasmanian wilderness.
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• Remember when ...
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