NEARLY 20 years on and the ghost of the Victorian Economic Development Corporation still haunts Victorian governments, especially its Labor treasurers and finance ministers.
It was the final nail in the economic coffin of the Cain/Kirner governments; a venture-capital fund that tried to pick winners but racked up losses estimated at $110 million.
It came on top of other economic scandals — Tricontinental and State Bank, the National Safety Council and Pyramid Building Society — and gave the Liberal Opposition its biggest free kick on the way to winning government in 1992.
The scandal contains a salutary lesson Treasurer John Brumby is determined the Bracks Government should learn.
The VEDC and its sister, the Victorian Investment Corporation, were created to back new industries to replace outdated smokestack manufacturers.
Belatedly they were credited with helping Amrad Corporation and Biota Holdings keep world-class medical technology in Australian hands, although this was not appreciated at the time.
The VEDC collapsed under poor management and an absence of political accountability after it had provided $450 million of loan and equity assistance to business.
At the time, tourism was all the go and all Australia's state governments had high hopes ot attracting increasing volumes of big-spending overseas visitors.
The VEDC supported the successful Dinner Plain resort near Mt Hotham but it funded other tourism ventures that had little prospect of success. They were easy targets for Roger Pescott, a aggressive and relentless opposition frontbencher.
The State Government still holds 18 per cent of Amrad, the former Australian Medical Research and Development Corporation. It is the result of a $15 million VEDC investment in 1987 that has over the years returned almost half of the VEDC's losses, including $20 million from its initial public offering.
Yet another Biotech in the VEDC portfolio was the infamous Wallace International, which collapsed spectacularly putting yet more political pressure on the Labor government.
Wallace was trying to develop Psorin, a treatment for psoriasis, and, following the release of an over-optimistic prospectus, it floated not long after the 1987 sharemarket crash.
The offering, sub-underwritten by the VEDC, was saved by a $20 million investment from the Gas and Fuel Corporation's Superannuation Fund; from which Wallace repaid $10.7 million to the VEDC.
In its first year the company lost $6 million from trading operations, and continued losses ensured that its shareholders, mostly small investors, former Wallace directors and the State saw nothing in return.
Founder Bruce Wallace, a pharmacist and researcher, was caught with his hand in the till, having used $600,000 from the company bank account to buy a house for himself in Lorne.
In a strange twist of events, Wallace International outlived the VEDC, which Liberal treasurer Alan Stockdale closed down in 1993.
Wallace International was acquired by a new research and development syndicate, relocated to Brisbane, renamed Analytica and refloated. It owns the intellectual rights to a retractable syringe and intravenous burette devices that it is developing for the market.