tip off

Richard Pratt: rich man, beggar man, thief

With Richard Pratt sadly close to succumbing to cancer, his legacy in business and philanthropic circles remains unwritten. While his wealth is almost impossible to determine due to the private nature of his Visy cardboard and recycling empire, last year, BRW estimated Pratt’s net worth at more than $5 billion. Recently, US magazine Forbes placed Pratt as the 468th richest person in the world with a more conservative appraisal of his wealth as being US$1.6 billion.

Pratt, like his contemporary Frank Lowy, is a true Australian business success story. Born in Poland in 1934, Pratt’s family fled Nazi persecution in 1939 to move to country Victoria. Pratt’s father Leon, originally a fruit grower in Shepparton, later realised that growers required boxes for their product. It was a business that was rapidly expanded by Pratt after his father’s death in 1969. Visy now has more than 9000 employees and operations across the globe.

Early in life, Pratt had success as a footballer, winning a Morrish Medal (the equivalent of a Brownlow Medal for a Carlton junior side) and later, rejected a role in a Hollywood motion picture in order to further his business career. It is that business career that has earned Pratt both a degree of respect and controversy, especially in recent years.

Pratt is currently awaiting criminal charges relating to allegations that he gave false or misleading evidence to the Australian Consumer and Competition Commission in 2005. In 2007, Visy was fined over claimed that the private company engaged in anti-competitive behaviour in breach of the Trade Practice Act. Visy’s alleged partner in the scheme, ASX-listed Amcor, received immunity from prosecution after it supplied information regarding the cartel.

In 2005, when the ACCC announced their investigation into Visy, Pratt issued a statement which noted that Visy “completely reject the notion that Visy was a knowing participant in widespread anti-competitive behaviour.” Two years later, in October 2007, Visy was ordered to pay a record fine of $36 million (with two executives paying further fines of $2 million) after the company effectively settled the matter with the ACCC.

In meting out the penalty, Federal Court Judge Peter Heerey stated that the cartel operated by Visy was “calculated and premeditated” and the case was the “worst … to come before the court in the 30-plus years since cartel behaviour has been illegal” in Australia.

The Federal Court judge also noted that:

There was no doubt that] Pratt also knew (along with — Visy executives —  Debney and Carroll) that the cartel, to which he gave his approval, and in which he has admitted to be knowingly concerned, was seriously unlawful.

There is also the factor that the cartel was to operate for Mr Pratt’s personal benefit, via his ownership, or part ownership, of Visy. This was not the case of any employee action out of some misguided sense of corporate loyalty.

Less than 12 months after reaching a civil settlement, the ACCC shocked Pratt and the business community by launching criminal proceedings against the billionaire, alleging that Pratt gave false evidence during his examination before it. The allegations related to statements made by Pratt in which he denied having any recollection of conversations with Russell Jones, Amcor’s then Managing Director, about the existence of the agreement between Visy and Amcor. The criminal action, under the Trade Practices Act, gave rise to the possibility of a $2200 fine or 12 months imprisonment for each of the four counts upon which Pratt was charged.

The price fixing allegations were not Pratt’s first brush with controversy. The billionaire was also embroiled in one of Australia’s most infamous corporate episodes  — the foreign exchange dealings between John Elliott’s Elders IXL and Australia’s then largest company, BHP. It was alleged by the NCA (and former Elders executive, Ken Jarrett) that in 1986, Pratt (along with jailed New Zealand entrepreneur, Allan Hawkins) acquired a sizable stake in BHP to fend off corporate raider, Robert Holmes a Court.

In order to repay Pratt for his alleged assistance, it was claimed that Elders entered into a sham transaction, in which it subscribed for $52 million worth of shares in a shelf company called VicInvest. Those monies were later claimed to have been passed on to Pratt. At the time of the allegations, a spokesperson for Pratt claimed that allegations of impropriety on the part of the group were “without substance [and] without credibility”. However, several years later, it is believed that Pratt agreed to an out-of-court settlement with Foster’s (the successor of Elders IXL) which involved a payment of $20 million and a supply deal.

Pratt was also implicated in what became known as the Regal and Occidental scandal in the early 1990s. Battery, which was controlled by Pratt, had earlier acquired the Occidental term and disability insurance company and Regal, a smaller life insurer. In order to reduce gearing, Battery proceeded to sell the insurers to a shelf company called Heath Holdings for $132 million (of which, $65 million was paid to Battery’s bankers). Less than a week later it was realized that the funds for the purchase had come from the insurers’ reserved. Heath turned out to be a front for conman, Phillip Carver, who also managed to strip $1 million from the business to repay his own creditors.

As Michael Pascoe noted, Pratt later contributed tens of millions of dollars to the civil settlement that followed and was also able to benefit to the tune of almost $20 million from Battery’s considerable tax losses.

While his successful business career has not been without incident, Pratt is also regarded as one of Australia’s most generous philanthropists, donating upwards of $14 million annually to a wide array of causes.

Pratt’s philanthropy has drawn praise from both sides of politics. Former Liberal Premier Jeff Kennett once noted that “most of Richard Pratt’s philanthropy you would never hear about … a lot of his charity is to individuals who are down and out. It is not just the fact that he and Jeanne are givers  — it is that they have been doing it for decades.”

Victorian Premier John Brumby, was equally effusive in his praise for the billionaire, stating that Pratt was “great Australian success story” and a “very generous” man. Brumby also told reporters that he has always “strongly defended Dick Pratt as a great Victorian and a great Australian.” The latter was a somewhat strange comment given that Pratt is currently facing criminal proceedings.

There is however another side to Pratt’s philanthropy. Alan Hancock, a former close associate of the businessman (who later fell out with Pratt) told The Australian last year that:

Pratt is driven by ruthless self-interest in all aspects of his life, including his philanthropy. “Pratt once said to me, ‘I do nothing for nothing — people think I give this money away, but I never give it away unless there is a reason.’”

It was a view apparently also shared to some extent by Pratt himself, who told The Australian that:

Of course there is self-interest, it is public relations,” he says. He admits he has at times wondered whether his philanthropy was a “way of buying respect”, but says that in the end “you don’t buy respect, you get respect by giving respect”.

Pratt’s brushes with controversy are hardly unusual among Australian business circles. A glance through the lists of Australia’s wealthiest people gives rise to a myriad of controversies for Australia’s which egalitarian roots spurs a near insatiable tall-poppy syndrome, with the unspoken assumption that one can only get rich by doing something wrong.

Like many successful Australian businessmen, Richard Pratt achieved remarkable commercial success through a degree of ruthlessness, hard work and willingness to push the boundaries of legality and morality. Pratt will simultaneously be remembered as one of the country’s finest businessman, most generous donors and the man who operated Australia’s largest ever cartel.

Womens Agenda

loading...

Smart Company

loading...

StartupSmart

loading...

Property Observer

loading...