Morgan Mellish had a cracking five page “special investigation” in The AFR
today about Rob Gerard’s dodgy tax arrangements. The story will have
severely embarrassed Treasurer Peter Costello, who appointed the
Adelaide Rich Lister and prominent Liberal party donor to the Reserve
Bank board in March 2003.

Using what looks like a combination of
court documents and leaks from the ATO, Mellish has delivered a
knock-out punch which will surely put pressure on Gerard to either
resign from the Reserve Bank board or be sacked.

How on earth
could Peter Costello appoint someone to the Reserve Bank board who has
been in dispute with the tax office for 14 years and only later
admitted his liability and stumped up $150 million, which is one of the
largest ever settlements by an individual?

Mellish has some
devastating quotes from the ATO’s investigatory reports, including that
Gerard had made false and misleading statements and should face the
highest possible penalties. There was everything from round robin
insurance payments in Bermuda dressed up to be FAI Insurance and film
schemes that cost $9.5 million but saw Gerard’s outfit claim $56
million in tax deductions.

After one of the longest fights in
Australian history, Gerard eventually surrendered and agreed to sell
his 50% owned Clipsal electrical empire to French multinational
Schneider for $750 million a few months after he joined the Reserve
Bank board. Schneider wrote out a cheque for $150 million that went
straight to the tax office, so BRW’s estimate that Gerard is worth $384 million is probably on the high side.

story has been keenly followed this morning and will undoubtedly get a
decent airing during Question Time this afternoon. Check out ABC Online, AAP and AM from this morning.

key question for Costello is his knowledge of Gerard’s poisonous fight
with the ATO at the time of the RBA appointment. The Treasurer told TheAFR
that “prior to his appointment, Mr Gerard had provided confirmation
from the ATO that he had no current disputes with the ATO in respect of
his personal tax affairs.”

That might be a cute way of saying
that all the scandal was in the Gerard Industries corporate structures.
However, the same story quotes Gerard saying: “I told the Treasurer to
check with all the departments before I went on the board. He rang me
back and said, ‘I know there’s an issue with the Tax Office but I don’t
have a problem with you on the board’.”

Hmmm, so Peter Costello
is on his high horse about James Hardie not receiving special treatment
to tax deduct its ongoing asbestos compensation payments, but many
years of very dubious tax scheming in places like Bermuda by Rob Gerard
is no problem at all. Cynics rightly point out that Gerard has donated
$1.1 million to the Liberal Party since 1998 and not a dollar to Labor.
Are our politicians really that cheap? Attempts to diddle the taxpayer
seem to be ignored when big cheques are sent to a political party.

Gerard is undoubtedly one of Australia’s most successful
industrialists, but Peter Costello should not have elevated him to the
pinnacle of Australian business when he also appears to be one of the
nation’s bigger tax rorters.

Even worse, when caught he tried to
cover it up. Let’s hope Cossie doesn’t try to cover up his own mistake
by allowing Gerard to serve out his full five year RBA term until March
2008. Gerard should be gone by the end of the week.