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If MONA is our Guggenheim, does Walsh deserve a free pass?

The Museum of Old and New Art, or MONA, has been in the news of late. But not for its art.

The sleek modern fort on the banks of the Derwent is home to one of the best collections of international contemporary art anywhere in the country. Probably the best, in fact. Prominent Australian art historian Rex Butler tells Crikey that “in both the good and the bad sense, that is in an interesting sense, there are really only three significant galleries in Australia: GoMA in Brisbane, White Rabbit in Sydney and MONA in Tasmania … the museum down there is one of the possible futures of museums in the 21st century: a privately-owned cabinet of curiosities, an updated Soane”.

It’s become a magnet for interstate tourists; on some metrics it is now the state’s most-visited attraction. MONA’s Delia Nicholls told Fairfax in January the gallery had 330,000 visitors in its first year of opening, 46% of whom were from interstate.

It’s a result that has made politicians fall over themselves in praise. “Our statistics show that an average visitor who comes to see MONA actually stays around about nine nights in Tasmania,” Premier Lara Giddings told the ABC’s Lateline last week. “So the flow-on for our restaurants, our wider tourism community is very big.”

For decades, Australian arts ministers have longed to build an Australian Guggenheim, an iconic attractor to rank with Bilbao. Now someone’s done it for them, with not a cent of public funding.

But MONA has a bit of a problem. Its founder and owner, the charismatic polymath David Walsh, is fighting a bitter battle with the Australian Tax Office for $37 million in unpaid taxes, plus interest.

Walsh made his millions by gambling, and we’re not just talking about an idle punt here or here. As the documents lodged with the federal court by the ATO establish, the ATO believes Walsh was one of the leaders of a multi-billion dollar gambling syndicate that operated like a sophisticated hedge fund.

For years, the operations of the punters’ club were shrouded in mystery. But thanks to the Federal Court and a compelling investigative series by The Australian Financial Review’s Angus Grigg and Hannah Low, we now know some fascinating details about how it functioned. Because of the discounts available to the syndicate — negotiated in return for the vast liquidity it offered to wash through various totes and TABs — the operation made most of its money with losing bets. “You bet to lose, so that you actually turn over more money and the win comes from the rebates,” exiled syndicate leader Zeljko Ranogajec told a civil court in 2008.

The scale of the operation is such that the ATO now appears to have strong evidence that Walsh’s club is not, as claimed, a hobby. It is in fact closer to a sophisticated proprietary trading desk, gambling at high volumes and running large hedged positions across the gambling systems of many countries. The techniques employed appear closer to the hi-tech wizardry of Wall Street “quants” than the old-fashioned examination of Saturday’s form guide.

As a result, as former ATO auditor Chris Seage wrote in Crikey last month, the ATO appears to have Walsh and several of the other members of the club “by the short and curlies”, to quote a source close to the investigation cited by Seage.

What does all this have to do with the art? Quite a lot, actually. Walsh appears to be using MONA and its storied collection as a key argument in his very public fight to avoid a crippling tax bill. Walsh has hinted he might have to close MONA, or sell some of its valuable artworks, if the full $37 million bill is demanded. In the meantime he is spending up big on legal fees as he fights the settlement. There is even talk of a High Court case to settle the legalities of whether the ATO has the right to levy taxes on gambling winnings in this matter.

The argument has won over a number of prominent supporters. Recently retired Greens leader Bob Brown told Fairfax in July the Tax Office “couldn’t give two hoots about the Tasmanian economy or about this magnificent MONA which is attracting people from around the world”.

In one interview Walsh gave to the media recently, he pointed out that building MONA was only possible because he wasn’t paying tax. “It’s fair to say that I wouldn’t have been able to build MONA in the timescale that I did; in fact it may be that I wouldn’t have been able to build it at all if I had have been — you know, if I had have been paying tax throughout that period,” he told Lateline’s Hamish Fitzsimmons.

Let’s step back for a minute and examine the broader implications of MONA’s tax problems.

MONA is not like other public art museums in Australia. Not only is it not state funded, it is not a charity or non-government organisation either. MONA’s legal structure appears to be that of a private business. The art is owned by Walsh. The gallery staff are paid by Walsh. The visitors pay a fee to Walsh.

Crikey asked MONA’s Delia Nicholls about the legal structure of MONA. “Your point is correct,” she replied in an email. “[David Walsh] is the funder, as well as the founder, of MONA.”

Because of this structure, MONA is far less transparent than most large arts institutions. There is no public statement of accounts or an annual report. There is no indication of the degree to which the gallery might represent an arm of the gambling syndicate, or whether the funds invested in it were sourced ultimately from the proceeds of tax evasion, as Walsh implied on Lateline.

Moreover, MONA is not a philanthropic organisation. When rich individuals give artworks to a public gallery or institution, they derive an entirely legitimate tax deduction for it. MONA is not a public gallery, and the art remains owned by Walsh. He hasn’t given it away.

Whatever the legalities, there’s a moral point that most of Walsh’s many fans in the art world have been only too happy to ignore. Can charity wash clean the stigma of “dirty” money? And should a wonderful tourism outcome for a struggling region matter when it comes to the rights and wrongs of tax evasion?

In many ways, Walsh’s case recalls that of the late Richard Pratt, a billionaire philanthropist who engaged in the largest price-fixing cartel in Australian history. Pratt’s ambiguous example reminds us that cultural philanthropy — and let’s remember that MONA is not philanthropy — is often undertaken for the PR value and public acclaim it brings.

As Walsh himself wrote in the art book Monanisms: ”I invent a gambling system. Make a money mine. Turns out it ain’t so great getting rich using someone else’s idea. Particularly before he had it. What to do? Better build a museum; make myself famous. That will get the chicks.”

Crikey requested an interview with Walsh for this story. We were informed he’s “in a legal meeting” and that “it is unlikely he will be in a position to talk with you until the matter is resolved”.

18
  • 1
    Posted Friday, 3 August 2012 at 11:26 am | Permalink

    I love MONA and doubt that it could have been established by a government. However, I agree with this argument that notwithstanding the founder’s public spiritedness, he should pay tax like everyone.

    Of course Walsh’s dispute with the tax office is rather more complicated than stated here. He got a private ruling from the tax office which he wishes to hold the office to, but the office claims that the ruling was granted on the basis of incomplete or possibly misleading information. The public can’t judge that without far more information and probably extensive tax expertise: it is better to trust the courts to reach the just result.

  • 2
    mikeb
    Posted Friday, 3 August 2012 at 11:43 am | Permalink

    A couple of points. First Pratt was engaged in an illegal activity - i.e. price fixing in which customers effectively pay more than they should in a truly open market. Walsh and his partners are engaged in a pursuit with an acknowledged risk of winning or losing. The fact this he has shortened the odds of losing in his favour does not change that. That being said Walsh should pay the tax that is due - and to my knowledge Walsh does not dispute that. What is disputed however is whether the tax department can go against previous advice and historical understandings to claim a retrospective liability. The outcome of that decision would be very interesting. I’d be more worried about the big companies using offshore tax havens and legal loopholes to avoid paying tax which would amount to billions of dollars annually. Walsh is chicken-feed compared to those players.

  • 3
    Posted Friday, 3 August 2012 at 11:47 am | Permalink

    There’s no problem with tax avoidance - reducing tax by legal means. But I think the ATO is alleging that Walsh engaged in tax evasion - the criminal non payment of tax liabilities.

  • 4
    Paul Bendat
    Posted Friday, 3 August 2012 at 12:02 pm | Permalink

    Unless it’s evasion, worst case might be that Mr Walsh donates all or part of what is MONA, gets more than what he owes as a legit deduction and works out some deal to keep his vision going for this amazing Australian asset.
    BTW totally agree with MikeB

  • 5
    Jackman
    Posted Friday, 3 August 2012 at 12:21 pm | Permalink

    Must say, Ben Eltham, I’m disappointed with your article here and feel it’s not as balanced and complete as one would expect a Crikey article to be. The real point of contention here is that David Walsh received from the ATO a private tax ruling which he legitimately relied upon in order to not pay tax. Of course whether that ruling was achieved with or without disclosure of full information to the ATO is a point which will likely be decided by the courts. But my concern here is that Ben Eltham failed to highlight this critical point in his article. Gavin Moodie and MikeB picked it up in their comments straight away, which can only leave one to question why Mr Eltham neglected this point in his article? Any way you view this omission in the article, it looks poor, and is a disappointing effort.
    And how about viewing this issue another way?: Despite an assurance from the ATO that he did not need to pay tax, David Walsh has done the right thing and given back an awful lot to the Australian people by building MONA. That is a lot more than can be said for his partners in the gambling syndicate, and an awful lot more than can be said for the many corporations that use tax loop holes to avoid/evade tax (Texas Pacific Group with their Myer profits, anyone?? Those profits disappeared from Australian within 24 hours I believe, and no taxes were ever paid).

  • 6
    zane
    Posted Friday, 3 August 2012 at 12:27 pm | Permalink

    Does Walshy (who I notice has a nice new haircut for his photo ops since “the troubles”) deserve a free pass? No, pay up.

    Is MONA “special” in any way? In Australia, yes, but only just, and only because Arts Policy in Australia is so boring and risk averse. Worldwide MONA is just another contemporary art space with a rather conservative (yes, really) curatorial focus.

    Poverty levels in Tasmania are still disgusting, regardless.

    MONA/FOMA on the other hand, IMHO, is the most interesting festival in Australia to have emerged in the last 20 years. So for that, thank Brian Ritchie, who unlike Walshy actually knows what he’s doing. Leave Walshy to his just deserts.

  • 7
    mikeb
    Posted Friday, 3 August 2012 at 12:35 pm | Permalink

    So should Walsh be fixing poverty in Tasmania?
    There’s be no Mona/Foma without Walsh and he also employs BR? Quite a visionary appointment in hindsight.

  • 8
    zane
    Posted Friday, 3 August 2012 at 12:47 pm | Permalink

    MikeB

    I am not suggesting Walshy should fix poverty, but there has been considerable noise about how fantastic the gallery has been for the Tasmanian economy has there not? Hyperbole IMHO.

    Is that the best Tasmania can do….cry on and on about a private gallery run by a rich bloke? Really? For goodness sake, it’s a private gallery attached to a winery!!!!

    Is that it Tasmania, is that honestly all you’ve got to cry about? How about getting ambulence services to poor people 45mins out of Hobart? That might help.

    Pathetic.

  • 9
    bobm
    Posted Friday, 3 August 2012 at 2:20 pm | Permalink

    For decades, Australian arts ministers have longed to build an Australian Guggenheim, an iconic attractor to rank with Bilbao. Now someone’s done it for them, with not a cent of public funding.”

    Well, according the ATO the public funding amounts to $37 million, plus interest.

    MikeB, if that’s chicken feed I want the feathered suit.

  • 10
    mikeb
    Posted Friday, 3 August 2012 at 2:27 pm | Permalink

    @BOBM. You’ve judiciously chopped of a couple of crucial words when referencing me - those words being “compared to”. Presumably you’ve been learning too much from News Ltd rags.

  • 11
    Paul
    Posted Friday, 3 August 2012 at 2:53 pm | Permalink

    Few miners pay tax, they rip out Australian resources and get subsidies by the truck load. They give nothing back that does not directly benefit them.
    Tasmanians do not pay to visit Mona, they have shared events with the like of the TSO, subsidized by Mona. Mona Foma brings world class performers to Hobart and subsidises the ticket prices.
    Per dollar invested they probably employ 3 times as many people as miners, and they are trained to be some of the friendliest attendants imaginable.
    You do not pay for the special exhibitions and they have free music every Sunday. $20 gets you a return ferry ride from Hobart.
    The fact that Mona is private makes it possible to have works that are not allowed in publicly funded galleries.
    Children can run around and make noise and the building is simply superb.
    I think that does make it special and I agree with Bob Brown, get off his case.
    He is giving something back to Tasmania that no other person comes close to, it is probably true of the rest of Oz also.
    The world is full of greys not black and whites and I object to Forrest paying no tax but I do not object to Walsh paying no tax. One is a rent seeker the other is giving an enormous amount to his community.
    If Walsh has to pay tax then make Packer and his mates do the same, or let them build a true cultural monument to Australia.

  • 12
    Rob
    Posted Friday, 3 August 2012 at 5:53 pm | Permalink

    Whatever happens to MONA and Mr. David Walsh, yes Mr. Ben Eltham, David has a first name and a prefix just like you. Whatever happens, MONA should be continued. The passion and originality that has been built into MONA deserve it to go on for as long as possible.

    Very few things in Australia have the quality, insight and innovation as MONA.

  • 13
    by the sea
    Posted Friday, 3 August 2012 at 6:09 pm | Permalink

    see it before it disappears, culture is like that. MONA is bloody fantastic. It demonstrates that nothing drive culture like the private sector and individuals. Few of the private sector gets a knee up for culture. Fair enough culture is not sustainable. Is it. Better just stick to mining.

    Walsh’s MONA is a master piece, but won’t last long, sadly

    Better dash down and see it, quickly, if not to say I saw it while it lasted. Art can be like that

  • 14
    paddy
    Posted Friday, 3 August 2012 at 8:41 pm | Permalink

    @ByTheSea Has it in one. See it before it’s gone.
    It’s not often that something so special is open to view.
    This is not actually a story about tax.
    It’s about a stunning collection of beauty that’s on public display.

  • 15
    michael r james
    Posted Friday, 3 August 2012 at 10:57 pm | Permalink

    @BOBM at 2:20 pm

    MONA was remodelled at a cost of $75 million and the total ensemble is valued at north of $250M, so actually Walsh’s asset is valued at almost 7 times the ATO claim, and certainly is bringing in more income into the Tasmanian economy than the $37M even if the Fed invested it all in the apple isle.

    As to the Bilbao Guggenheim, that building may be of wide renown but IMO the art inside leaves a lot to be desired. In fact I would not particularly encourage people to pay the really quite high entrance fee (as it happened when I visited there was something not functioning properly so they gave visitors a big discount, I think $20, afterwards I appreciated it).

    On the other hand there are people all around the world talking about MONA and mostly about what is on display. As Lara Giddings said, the typical MONA visitor is spending a lot more than the average visitor to Tassie. I don’t know what that $ figure is but multiple by the 530,000 visitors since opening (remodelled version) in Jan last year and it is $53 million for every $100 spent; I can’t see less than $100M.

    I don’t recommend it as a strategy but if DAvid Walsh threatened to close it tomorrow I strongly suspect various political powers would intervene. (Just in passing, is there an Ecuadorean embassy in Hobart?)

  • 16
    Posted Saturday, 4 August 2012 at 7:45 am | Permalink

    I agree that the Guggenheim Museum Bilbao is a great gallery building which unfortunately doesn’t house much art worth seeing. One should spend an hour or so wandering around it and walking across the bridge to see it from the other side of the Nervión River, but then amble 20 minutes to the Doña Casilda Iturrizar park and spend the rest of the day reviewing some of the magnificent collection of the Bilbao Fine Arts Museum (Euskara: Bilboko Arte Ederren Museoa, Spanish: Museo de Bellas Artes de Bilbao).

  • 17
    Ben Eltham
    Posted Sunday, 5 August 2012 at 1:16 pm | Permalink

    Just want to respond to a couple of the comments.

    Firstly I acknowledge that Mr Walsh received a private ruling from the ATO on these matters. I also linked to a number of articles which establish the details of Mr Walsh’s predicament quite clearly, so it’s rather disingenuous to claim I deliberately failed to mention the private ruling in order to skew the article in some manner. As everyone realises these matters are before the Federal Court and, as I understand, have now gone to mediation.

    It’s not surprising that he media is reporting on these matter. It’s clear to me that the crux of the issue here is the argument that the Punters Club is somehow only recreational gambling. The ATO apparently accepted this at one stage but has now obtained new information that suggests it was indeed a sophisticated multi-national operation. Just as the ATO pursued the private equity firms that handled the Myer privatisation, so too it is now pursuing Mr Walsh and the other members of the Punters Club. You’d expect it to do so. Government agencies re-open investigations all the time. Simply because the ATO has changed its mind is not a particularly strong defence.

    My intention in this article was to point out that there are some moral issues involved in the operations of the Punters Club and its members actions, even aside from the legal issues. Yes, MONA has been a wonderful thing for the Australian arts community and the state of Tasmania. But there are also significant and potentially unlawful tax minimisation activities that are alleged to have been carried out. The ATO’s statement in the Federal Court alleges that the club deliberately withheld information from the Tax Office in an attempt to give the impression it pursued only recreational gambling.

    In summary, just because Mr Walsh has built a lovely gallery, that doesn’t mean his business activities don’t deserve public scrutiny, or that arts journalists shouldn’t ask some hard questions about the provenance of the funds used to construct cultual institutions.

  • 18
    gomaxwell
    Posted Wednesday, 8 August 2012 at 4:08 pm | Permalink

    Wow, Crikey Ben

    Thanks for the heads up.

    And I thought he had a great system using Mathematics; stupid, gullible me?

    I also thought all gamblers on Government facilitated betting shops for horse racing were using the same book at approximately 117% and made their bets against that book; stupid, gullible me?
    It turns out that several State Governments are actually running an SP book under the table by adding the betting money of the Government onto the account of a couple of shysters so that these shysters bet against me in an entirely different playing field and make different bets to steal money from me in this sneaky form of race fixing. The Government then allows them the proceeds of this race fixing for some misguided ideological or mythical reasoning. As the final piece in the scam, States and the shysters must fail to tell the Feds of the second book else the scam falls over.

    My own personal gut feeling when something is so secretive is the criminality of the contract; which if proven of course makes the contract null and void and then some some huge cocky feathers would fly? This action is what I expect; stupid, gullible me?

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