When the music finally stopped

GLENN Wheatley's hit-and-miss business practices made his downfall inevitable.

IT was a surprise to see Glenn Wheatley and his wife Gaynor at the APRA Music Awards in Melbourne last month. The event, which celebrates the work of Australian songwriters and composers, is one of the biggest on the music industry calendar and Wheatley would have known many of the movers, shakers and artists mingling in the grand surroundings of Melbourne's Town Hall.

The couple's presence was unexpected, given that Wheatley's trial was a few weeks away.

Clearly they had a lot more on their minds than picking the song of the year. It was a brave face, but it wasn't convincing. Throughout the evening Wheatley was affable and talked about various projects, including his management role in Neighbours star Stephanie McIntosh's fledgling music career. He spoke enthusiastically about his son Tim's development as a professional musician and about the Wheatleys' closest friends, the Farnhams.

At one point he expressed anxiety about the weeks ahead and suggestions he could be sentenced to 20 years' prison. Yesterday, he received 15 to 30 months for tax evasion.

The sentence brought to an abrupt halt the career of one of Australia's most prominent music business figures of the past 30 years.

Wheatley grew up in Brisbane and got his first break as a guitar player in a blues-rock outfit, Bay City Union. The band relocated to Melbourne, but was shortlived. Wheatley had already switched to playing bass before he joined Masters Apprentices, which became one of Australia's most popular rock bands.

He made his first million in the 1970s, when he gave up the life of a musician to manage artists. The Wheatley Organisation looked after an emerging new group, the Little River Band. Wheatley, who by then had spent a couple of years working in the American music business, used his experience to promote the band in the US. They became one of Australia's most successful rock exports.

From the '70s onwards, a pattern emerges in Wheatley's approach to business. From speaking to him over the years it's clear he's a music fan. But his sense of what might be successful was offset by what, on reflection, was commercial naivety. He even admits it.

Wheatley displayed a gung-ho nature in building his business empires and has been frank about his shortcomings when those empires fell. His career has had more ups and downs than his mate Farnsy's hit singles. His 1999 autobiography Paper Paradise, which he had begun writing 20 years earlier, included several references to financial misadventures.

Among the most notable was his decision in the late '80s to go into business with his brother-in-law Clinton Casey and invest $12million in a nightclub called The Ivy in Melbourne. "This would prove to be a disastrous decision," he wrote.

"I had a premonition that storm clouds were brewing over my life. What I didn't know was that it would be a full-force cyclone."

For every business disaster, however, Wheatley had several successes. In 1985 he mortgaged his house to finance John Farnham's album Whispering Jack. The album rekindled Farnham's career and remains the biggest selling Australian album. His association with Farnham through his album sales and concert tours has raked in millions.

Following the success of Whispering Jack, Wheatley was sitting on a small fortune. But his tendency to take high-stakes risks, which payed off for clients the Little River Band and Farnham, caused him financial devastation.

In the late '80s, after the failed Ivy investment, Wheatley was on the brink of bankruptcy. Despite selling all his assets and entering into a contract that bound him to continued payments to creditors - including his beloved Sydney Swans football club - by 1993, The Ivy's trustee had watched Wheatley's fortunes change and began making demands. The music promoter again struck gold with two successful promotions - Farnham's Chain Reaction Tour and the musical Jesus Christ Superstar.

The trustee believed Wheatley was capable of repaying his creditors in full. Despite liabilities of almost $17 million and assets of only $64,400, Wheatley agreed in 1994 to pay a third of his earnings to creditors over a period of three years.

"I had negotiated a deal I just couldn't afford," he told the Australian Crime Commission last year. "They knew I was earning $150,000 a year. I offered $50,000 a year for the next three years plus a third of my additional earnings. I offered shares in the Hard Rock Cafe, my superannuation, any personal tax refunds that were due.

"The reality of the proposed deal was that tax on my salary was roughly $70,000. I was handing over $50,000. That left $30,000. I was spending that on school fees alone, let alone rent and other living expenses."

It was this financial black hole that led to his involvement with Jersey-based accountant Philip Egglishaw, who offered a system of Swiss trust account hideaways so complex they were virtually guaranteed to be beyond the reach of the tax office.

By the time authorities identified the hundreds of wealthy Australians, some of them household names, bound in the Egglishaw web, Wheatley's frauds had been going on for years.

The investigation known as Operation Wickenby had its genesis in an Australian Taxation Office probe into a series of tax scams. When it became clear the investigative brief was too large, the federal Government set its newly formed top-secret crime body, the Australian Crime Commission, on the case and threw millions into the project.

The ACC's use of coercive powers to summon suspects to secret hearings caused fury among the investigation's powerful targets, including Paul Hogan and longtime collaborator John Cornell as well as celebrity lawyer Michael Brereton, and involved the crime body in endless legal battles.

Wheatley didn't fight. He told his plea hearing in the Victorian County Court he was racked by shame. He confessed to the ACC and believed the word of prosecutors that they would not seek a jail term. Wheatley told the ACC his first contact with Egglishaw's firm of accountants, bankers and professional trustees, Strachans SA, was through a highly regarded Sydney lawyer connected with global management giant IMG.

After negotiating the crippling agreement with his creditors, Wheatley accepted a salaried position at IMG and agreed to share the profits of Farnham's next tour, Talk of the Town. At this stage, he owed the tax office $150,000.

The Sydney lawyer, who cannot be named, was an Egglishaw associate and suggested Wheatley take his profits from the Farnham tour offshore to solve his tax crisis.

In the 1994/95 tax year, Wheatley channelled $256,410 in profits from Farnham's tour to a Swiss trust account, "loaning" the money to an entity he controlled and then claiming tax deductions of $50,475 on the interest. By the time the loan was paid, his tax debt was paid.

In sentencing the music promoter yesterday, judge Tim Wood did not wholly accept the explanation of Wheatley's barrister, Robert Richter QC, that his client's crimes were born of "need, not greed".

Wheatley knew how easy it was to save hundreds of thousands in tax and when the opportunity came again, he took it. The music promoter had already met Egglishaw at Melbourne's Sheraton Hotel in early 1996 and could be in little doubt the accountant's schemes were breaking the law.

"He indicated that all my tours could be made to appear to be financed by an overseas entity," Wheatley told the ACC in a statement tendered to the court.

"This setup was not for the overseas entities to actually perform any services, but to be used as a vehicle to minimalise tax by sending profits to them under the guise of providing services that they in fact never did. He reiterated to me that this meeting should not be mentioned nor documented anywhere."

In 2003, when Wheatley promoted a fight between American boxer Jesse James Leija and Kostya Tszyu, Egglishaw's Australian associate performed another tax wrangle.

Using a similar system of fake loans, Wheatley sent $400,000 of the profits from promoting the boxing fight to Switzerland and withdrew the money in Australia and overseas using credit card transactions and debit card ATM withdrawals that could not be tracked by the tax office.

Judge Wood accepted Wheatley's conscience had haunted him for years, but showed little mercy in handing down a 15-month minimum sentence. The judge said the sentence would have been eight months longer had Wheatley not co-operated with authorities.

The judge accepted that Wheatley's statements could prove instrumental in future prosecutions of Egglishaw and the Australian-based lawyer, whose prospects of being caught by Operation Wickenby have dramatically increased thanks to Wheatley.

So far, the long-running operation that was supposed to net the tax office $300 million has only convicted Wheatley.

It's ironic that the man found guilty of tax fraud spent part of his early career trying to stop the prevalent culture of Australian musicians being ripped off by greedy promoters. It was in the late '60s when Wheatley was the bass player in Melbourne's Masters Apprentices that he learned the intricacies and unscrupulous dealings of the local industry. He became instrumental in bands such as the Apprentices getting a greater cut of ticket sales.

Throughout his career Wheatley has given the impression of being an adventurer, willing to take a punt no matter what the consequences. He has been naive, lucky and at times remarkably shrewd.

"Occasionally I would like to lead an easier life," he wrote in Paper Paradise, "but for the most part, it's not in my make-up to slow down. I've always tried to make my life as interesting as I can. I've never been bored, never fallen into a rut."

Wheatley has been down before, financially speaking, but he'll find it more difficult to bounce back from jail time than from any of his earlier business mistakes.