How Lex Greensill tapped into the ‘Liberal mates club’
The Morrison government has been accused of being too cosy with collapsed controversial financier Greensill capital.
Business
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The Morrison government has been accused of being too close to Greensill Capital, potentially blinding it from taking action to rein in controversial supplier payment methods that have now put 7000 Australian jobs at risk following the financier’s collapse.
Opposition Industry spokesman Ed Husic attacked what he labelled the “Liberal mates club”, which facilitated a high-powered meeting between Greensill founder Lex Greensill and then finance minister Mathias Cormann at the World Economic Forum in Davos last year.
The Australian revealed last July that former foreign affairs minister Julie Bishop, who became Greensill’s Asia Pacific chair after leaving politics, arranged the meeting for Mr Greensill to pitch his wages on demand offering to Mr Cormann.
The move would have seen Greensill pay the wages of more than 150,000 Commonwealth public servants ahead of their nominated pay cycle, with the government repaying Greensill at a later date.
But Mr Cormann dismissed the idea after the Finance Department said it was “economically similar to payday lending”.
Although nothing eventuated from the meeting, Mr Husic is concerned the government may have been blinded to the sustainability of the controversial payment method, given the financial troubles of Greensill’s clients, including Sanjeev Gupta’s GFG Alliance, which operates the Whyalla steelworks.
“This is of deep concern to Labor. We have been raising for some time our concerns around whether or not this is a sustainable arrangement to be had in place in terms of the supply chain financing,” Mr Husic said.
“And in spite of all this, founder Lex Greensill can go and have meetings set up by Julie Bishop at Davos with former finance minister Mathias Cormann encouraging similar sort of arrangements to potentially be embraced to pay 150,000 Australian Commonwealth public servants
“It shows the depth of contact that has existed between Greensills and the government. I liken it to the Liberal mates club that have been very easy at setting up those contacts and using their networks to get meetings with decision makers in government.
“I do wonder whether or not that closeness has prevented earlier and more timely action by the Morrison government to deal with this issue.”
But Industry Minister Karen Andrews’ spokesman said: “It would not be appropriate for the government to speculate about the finances of a private company. We are, however, monitoring the situation closely.”
Small Business Ombudsman Kate Carnell said she had fears for GFG’s suppliers and said some were already experiencing late payments of their invoices.
“You can imagine how concerned these businesses are and your heart has to go out to them because they’re worried that it’s all going to happen again,” Ms Carnell said.
“Some businesses who would have expected to be paid haven’t been. It’s too early to say if that’s systemic. But in the current environment, even if you’re paid a little bit late, you’re worried.
“You hope GFG can get new finance so that these businesses can continue.”
Mr Gupta — whose wealth remains a mystery — bought the Whyalla steelworks and iron ore operations out of administration in 2017 for a rumoured $700m.
His GFG Alliance is seen as most vulnerable to Greensill’s collapse, given Greensill has financed GFG’s acquisition of a string of global assets, including the €740m ($1.14bn) acquisition of ArcelorMittal’s struggling European steel mills by Mr Gupta’s Liberty Delta in 2019.
Greensill administrator Grant Thornton is now trying to recoup $US5bn ($6.5bn) GFG owes to the financier, while Mr Gupta is racing to secure refinancing so he can save about 7000 Australian jobs.
Ms Carnell said Greensill were “the good guys” in what she described as a “tragedy”.
“Greensill was a successful business with Australian origins.”
She praised the company, founded by Bundaberg farmer turned financier Lex Greensill, for making “huge strides” in ensuring its supply chain financing platform wasn’t abused by its clients.
The controversial payment method had attracted strong criticism after Telstra, Rio Tinto and CIMIC among others used it to blow up payment terms beyond the standard 30 days, charging their smaller suppliers a fee if they wanted to be paid earlier.
But after The Australian exposed how the payments system was crucifying small and medium sized businesses, Telstra and Rio began scrapping the payment platform, while Greensill declared it would not do business with companies that used its platform to blow out payment times by more than 30 days.
“Greensill were the good guys in this. They really came to the party to ensure that their platform wasn’t used inappropriately for slow payment times. They made huge strides to exclude businesses who abused supply chain financing,” Ms Carnell said.
Originally published as How Lex Greensill tapped into the ‘Liberal mates club’
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