He made it to the biggest and arguably most influential boardroom in the land — the Reserve Bank of Australia — but it seems that not even those weighty regulatory duties were enough to stop Frank Lowy from apparently pushing the boundaries on tax.
As Crikey’s Richard Farmer (the godfather of John Dawkins’ daughter so you can believe this Crikey snippet he contributed in December 2005) has pointed out, disputes over tax orginally kept Lowy out of the RBA:
Shopping centre mogul Frank Lowy must have watched with interest the arrival and departure of Robert Gerard as one of his colleagues on the Reserve Bank Board.
Back in 1992, Prime Minister Paul Keating promised Lowy that he would reward him with a Reserve Bank post. Keating told his Treasurer John Dawkins to make the arrangements but Dawkins was obviously more thorough and politically astute than current Treasurer Peter Costello.
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Dawkins discovered that Lowy’s Westfield group was in the middle of a dispute with the Taxation Office. Dawkins rang Lowy and persuaded him that until the dispute was settled it would not be appropriate for him to be on the Reserve Bank Board.
Current Caltex Chairman Dick Warburton got the gong instead. There was apparently some reluctance on Lowy’s part to accept the postponement but he was eventually given the job in June 1995.
Given what we now know from those stolen bank files in Liechtenstein, Frank Lowy did not heed the lesson from John Dawkins’ rejection and seemed to keep pushing the tax envelope.
In November 1996, a year after Lowy’s appointment by Keating and seven months after Peter Costello assumed responsibility for the Reserve Bank, Lowy began attending meetings in Sydney, London and Los Angeles to discuss new vehicles with the LGT Bank “because the Lowys have decided that they never want to travel to Liechtenstein or Switzerland in connection with these companies again”.
And despite the scandal of funding bogus community groups, leading to this extraordinary apology in February 2000, Peter Costello awarded Lowy a third Reserve Bank term in 2003, declaring that Australia’s second richest man “has been an active Board member over the past eight years, contributing vigorously to the Board’s deliberations.”
Frank had also been a very active and vigorous tax planner right through this period, whilst enjoying all the privileges and information that come from sitting on the Reserve Bank board.
The SMH’s John Garnaut produced this interesting feature on Lowy, which raised a stack of questions. For instance, if the Lowys have nothing to hide why do the LGT bank records include discussions about “file destruction” along with the following quote:
FL [Frank Lowy] is resolute about the establishment. Special caution is to be used, however, since he doesn’t believe the Australian tax authorities that the case with the payment of the $25 m is settled for good. The entire documentation and assembly is to be done in such a manner that FL and his attorneys can testify before court in Australia without hesitation.
It is richly ironic indeed that Mark Ryan is Lowy’s spokesman at the moment given he was one of Paul Keating’s most powerful staffers during Labor’s 13 years in office and presumably knows about the Reserve Bank/ATO deliberations in the early 1990s.
Ryan and Lowy would also presumably know a bit about the responsibilities imposed by the Commonwealth Authorities and Companies Act 1997 on Reserve Bank directors.
One section explains that a Commonwealth officer “must exercise his or her powers and discharge his or her duties with the degree of care and diligence that a reasonable person would exercise”.
The business judgment rule makes mention of Commonwealth officers requiring decisions to be made with “good faith for a proper purpose”.
Section 26 deals with “good faith, use of position and use of information” and section 27F goes to “material personal interest — director’s duty to disclose”.
If the RBA board ever discussed Commonwealth revenue, tax havens or related subjects it would be interesting to know if Lowy declared his “material personal interest” during his “active” and “vigorous” board contributions.
Meanwhile, Richard Farmer writes:
Justifiably tackling tall poppies. It restores your faith in the Australian political system to see that public servants are not always intimidated by the nation’s richest in going about their duty.
Recently we have seen Dick Pratt of Visyboard charged with perjury and now the Lowy family of Westfield wealth are at least being investigated for the taxation implications of their dealings in Liechtenstein. The Australian Competition and Consumer Commission in the first example and the Australian Taxation Office in the second have not found the political connections of the two men an impediment to taking action.
Statutory appointments clearly have their benefits. Officials who are dependent on the whims of ministers for their continued employment might not be as courageous as Graeme Samuel and Michael D’Ascenzo although it must be acknowledged that the actions of Mr Samuel in pursuing Mr Pratt occurred while he was awaiting re-appointment.
But then, the reaction of some in the Jewish community to the ACCC’s decision to pursue criminal proceedings suggests that Mr Pratt and any political supporters he may have did not believe any action was likely and therefore there was no need for lobbying of any kind. By the time the truth was known it was too late to stop the appointment proceeding through the federal and state bureaucracies.
That the patriarch of the Lowy family, Frank Lowy, is prone to a little lobbying on his own behalf is known from his previous efforts to get himself a post on the Reserve Bank Board back in the 1990s. I wrote about that in Crikey back in December 2005, as noted by Mayne above.
Mr Lowy, as well as becoming close to Paul Keating, was before that very pally with Prime Minister Bob Hawke although in some ways that friendship turned out to be to his cost rather than his advantage. It was Bob who persuaded the Lowy family to take over the 10 television network in what was to prove a multimillion dollar loss making venture. I must admit, though, that I was a beneficiary at the time moving from helping run a Hawke election campaign to a nice little earner advising on television news at one of the new Lowy stations!