Michael Kroger and a big bucket of cash

A GROUP of leading Melbourne businesspeople is standing between Michael Kroger and about $70 million, writes Terry McCrann.

Michael Kroger at the Liberal Party state council in Melbourne.

BACK in our own rollicking down under wild, wild, west days of the “greed is good” 1980s, you were well advised not to stand “between Laurie Connell and a bucket of money”.

Connell, who died bankrupt and owing hundreds of millions of dollars in 1996, had operated at the very centre of the web of fast money and political influence in the Western Australian Labor Government that became known as WA Inc and ended up costing WA taxpayers billions.

The other co-CEO, so to speak, of WA Inc was of course Alan Bond, who outlived Connell by 20 years and did not die bankrupt as he had been smart enough to pre-emptively “invest” some of his “interestingly acquired” millions in overseas tax havens.

Indeed it was Bond himself who sagely coined that advice.

At the same time, back here in Victoria, John Elliott was riding the same crazy wave, merging fast money and faster politics.

Indeed, in the mid-1980s, he was tossing up between taking over Australia’s biggest company BHP or seizing the leadership of the federal Liberal Party on the way to becoming, he assumed, prime minister.

He would choose the first. But just as for all the 1980s fast-money entrepreneurs — Bond, Skase, Hawkins and a dozen others whose names have faded into history — it would also end in tears.

Also at that time, a young tyro was on the make in Victoria but in the backroom political space. He became something of a protégé of Elliott who continued to chase both personal wealth and political influence.

When Elliott became president of the federal Liberal Party in 1987, the tyro became president of the Victorian state branch, the party’s absolute heartland. His name? Michael Kroger.

Fast forward 30 years and the same Michael Kroger is once again president of the state Liberal Party and he has his eyes on a bucket of money. A very big bucket, something like $70 million.

But a group of leading Melbourne businesspeople, including former chairman of the ANZ, Charles Goode, are eschewing Bond’s advice about Connell. They are standing between Kroger and the bucket.

The “bucket” is the Cormack Foundation. Interestingly, it not only had its birth smack in the middle of the 1980s, but as a direct consequence of the 1980s at its craziest: the mad frenzy, as I noted yesterday, to buy media companies.

People were advised not to stand “between Laurie Connell and a bucket of money”.

In this case it was then Melbourne radio station 3XY. It was sold for a very lucrative $15 million to one of those media-wannabes.

As a consequence of a fascinating story which goes back to the 1930s when radio station licences were being handed out, while loosely linked to the Liberal Party, neither 3XY or the $15 million it was sold for were “owned” by nor directly controlled by the Liberal Party.

Indeed, the decision as to what precisely to do with the $15 million was in the hands of one man — former Liberal Party senator Sir Magnus Cormack who was then in his 80s and maybe thinking of his legacy.

THERE’S a very, very big 1980s lesson, absolutely relevant to Kroger’s present-day grab for the bucket, in what happened to the $15 million.

Sir Magnus was talked out of breaking it up into smaller sums and handing them out to “good political causes” by then Liberal state treasurer, Melbourne stockbroker John Calvert-Jones. Calvert-Jones persuaded Sir Magnus to instead keep the money in a newly structured investment company — a clue to his persuasive argument is in the name “suggested”.

This could give the Liberal Party a secure funding base to at least partly match the millions that Labor got from the unions every year.

Importantly though, the Cormack Foundation would still not be part of or controlled by the Liberal Party but by an independent board. This did two things: it kept opportunistic political hands off the money and it grew the money.

Cormack started with $15 million. It’s now around $70 million — and that is after handing out all the income each year, importantly, mostly but not entirely, to the Liberal Party.

There are two critical bottom lines.

Without that successful intervention by Calvert-Jones back in the 1980s, supported by leading Melbourne businessman and policy thinker Hugh Morgan, the Liberal Party would not have got something like $60 million — an average of $2 million a year — over the years since.

This included, importantly, money to help bail it out after its then-state director Damien Mantach stole $1.5 million from the party, before Kroger came back as president in 2015.

And there would not be something like $70 million still sitting there to generate income in perpetuity, almost all of which will continue to flow to the Liberal Party.

Despite the success of the “hands-off” independent control of Cormack and its money, Kroger wants to get the Party’s collective hands on the money, to put it to “good uses” in a variety of “good idea at the time” political spending splurges.

The only “good idea” is to say no.

Quite frankly — as former Liberal minister Peter Reith was wont to say — you would have to be crazy to concede, and the Cormack directors led by Goode, Calvert-Jones and Morgan and which include people such as top lawyer Stephen Spargo and company director Peter Hay (without all of whom, there wouldn’t be a bucket of money) haven’t and won’t.

The status quo should be self-evidently in the best interests of the Liberal Party long-term — if indeed, there is going to be a Liberal Party long-term, something that increasingly can’t be taken for granted — and when all present players on both sides have departed the scene.

Indeed, that’s precisely what Goode, Calvert-Jones, Morgan & Co propose: to maintain a rigorous governance structure — of both Cormack and the Party. Cormack grows the assets and feeds $3 million or so a year into the Liberal Party.