An intriguing sidelight to the charges that RAMS Home Loans founder John Kinghorn is facing for $30 million tax fraud and dishonesty is the light that his case may throw on the ICAC tapes.
The phone tapes were the highlight of ICAC’s Operation Jasper hearings in 2012, catching Kinghorn discussing a coal deal involving Labor powerbroker Eddie Obeid with his partners Travers Duncan and former Labor staffer Greg Jones (whose salient contribution on the tape was, “Can I have two poached eggsand some bacon, thank you, and toast, thank you”).
Behind the $430m Wickenby saga
Philanthropic businessman’s career marred by RAMS mortgage debacle
JOHN KINGHORN: 1941-2023
John Kinghorn, a one-time billionaire who made it to Australia’s Rich List, was an enigma. The businessman whose recorded conversation at one point hardly qualified him for genteel society nevertheless founded a family philanthropic foundation that delivered many millions of dollars to the less fortunate, including $25 million to a cancer research centre that bore his name.
He did a business deal that cost others their life savings. Though it was never established that he was at fault on that occasion, he was a participant in some arrangements which brought him before the Independent Commission Against Corruption (ICAC).
John Alan Kinghorn was born on June 3, 1941, the eldest of three sons of a Commonwealth Bank branch manager, Harry Kinghorn, and Mona (nee Brown). He was raised on the north shore of Sydney and attended North Sydney Boys’ High School and studied for a degree at the University of NSW before taking an accountancy apprenticeship with the global firm Price Waterhouse. (Do all roads lead to the big four?)
In 1968 he married Jill Glenwright, with whom he would have two sons and a daughter. Qualifying as a chartered accountant, he was sent to work in the firm’s London office, and on his return joined one of Australia’s first investment banks, Delfin Finance Corporation, headed by his wife’s uncle, Sir John Marks. He went on to become CEO of Delfin, then the largest listed investment bank in Australia.
In 1979 Kinghorn, wanting to branch out on his own, founded Allco Financial Services, which did specialist packaging equipment leases for aircraft, shipping, mining and heavy transportation. Kinghorn also joined the Development Finance Corporation, which dealt in the capital market. In 1982, he and his wife bought a waterfront home in Mosman for $1.3 million, and he became a member of the Balmoral Beach Club.
He became interested in home lending, which had been the domain of Australia’s big banks, but was now opened up by financial deregulation, opening the way for companies like John Symond’s Aussie Home Loans. In 1991, he founded Registered Australian Mortgage Securities (RAMS), which became known as RAMS Home Loans.
By 1995, working with a former lawyer, David Coe, Kinghorn made Allco an outstanding success. Then he decided to break up the company, with Coe staying with Allco’s core business and Kinghorn focussing on RAMS. RAMS grew to become at one stage being the largest non-bank originator, funder and servicer of home loans in Australia.
Riding on this success, 2005, Kinghorn and his wife established a family philanthropic foundation, dedicated to education, medical research and poverty alleviation, with an initial contribution was $5 million. Also in 2005, he became a director of Felix Resources Ltd.
In 2007, Kinghorn made a seemingly extraordinary financial coup, floating RAMS on the share market in late July at $2.50 a share. The float, heavily promoted, was quickly taken up and Kinghorn pocketed $650 million for the 74 per cent stake he offered, keeping 20 per cent and staying on as chairman. “Making money is fun,” he told The Australian Financial Review.
Then disaster struck. Three weeks after the float, a crisis in the US subprime mortgage market wiped three quarters off the value of the shares, which fell to 55 cents, a development The New York Times described it as “the worst initial public offering [IPO] of the decade”. In October 2007, Westpac bought the company for $140 million. Shareholders were devastated, some losing their life savings. From the sale to Westpac, Kinghorn was repaid the $28.5 million he had made in personal loans to the company. Kinghorn told The Australian Financial Review: “We had a fabulous business. I was so proud of it and events outside of our control have basically meant that we can no longer fund ourselves for lending.”
But the question rose: did Kinghorn know that the funding was about to dry up before he sold the business to the unwary public? He said no, and the Australian Securities and Investments Commission did not pursue it. Rumoured class actions never got off the ground.
Almost half the money he made from the float went into the family foundation, which was then worth $300 million. It went on to distribute about five percent of its asserts, or $15 million, a year. It would give tens of millions of dollars to microfinance group Dia Vikas Capital to help lift families in India out of poverty. Kinghorn said: “It seemed like a much better use of the money than to give it to the Australian Taxation Office [ATO].” Conservative in their leanings, the Kinghorns committed $500,000 a year for five years to the influential right-wing think tank The Centre for Independent Studies. He had other interests. In 2009, he became a director of the Hooker Corporation.
Allco Finance collapsed and Kinghorn lost an estimated $90 million on Allco and related companies. But he was now into resources. He had plugged into a very profitable network of close business associates, who were riding the coal boom and making connections with China. Felix Resources Ltd was sold to China’s Yanzhou Coal for $3.5 billion. He joined his partners when they moved on to a new venture, setting up the stock exchange-listed White Energy, with Cascade Coal as a private investment company.
RAMS came back to haunt Kinghorn, who with an associate, Greg Jones, was investigated by the Australian Federal Police (AFP) and the ATO over millions of dollars in tax the pair allegedly owed following the float. There were problems elsewhere. In 2010. Krispy Kreme Australia Pty Ltd, which Kinghorn and partners had introduced seven years before, went into voluntary administration, and at least $18 million was written off by the private equity arm of the Soul Pattinson group.
But coal was promising. For payment of $1 million, Cascade Coal won a coal exploration licence in the Mt Penny area, near Mudgee in the state’s central west, where the former state minister, Eddie Obeid, had bought a property.
The ALP government’s minister for mineral resources, Ian Macdonald, had called to tenders for a coal exploration licence for the area, which could potentially dramatically increase property values and give Obeid a windfall of tens of millions of dollars. While the directors of Cascade Coal/White Energy were trying to get their deal through in 2011, the AFP was bugging Kinghorn’s phone on the RAMS inquiry. They took note of what they were saying about Cascade.
Unaware of the gathering storm, Kinghorn lived the high life. He was keen on golf and through his foundation contributed what would come to be $14 million to a Golf Australia rookie program. The Australian Golf Digest named him one of the 40 most influential people in Australian golf in 2010.
Cascade was to sell the licence to another coal company, White Energy, for $500 million, bringing a healthy profit to the directors of Cascade. It transpired that Kinghorn and four of his Cascade Coal co-directors were also director of White Energy, and each stood to make up to $60 million on the deal. When questioned on this, the board said they had declared their interest in the sale and an independent committee of their board, chaired by a director, Graham Cubbin, to investigate the transaction on behalf shareholders. There appeared to be concern behind the scenes to ensure that Cubbin would know nothing of the Obeid family connection.
In March 2011, the Liberal Party had come to power, and a Liberal government might not want to see Obeid and associates getting a windfall. If the licence was revoked, White Energy would have paid hundreds of millions of dollars in vain. In tape recordings, Kinghorn said: “We’ve just got to get [the deal done] … and then we’ll chop this arsehole’s head off”, referring to Cubbin.
In 2012, the ICAC under commissioner David Ipp inquired into the Mt Penny Affair. It was alleged that Obeid and Mcdonald had made a corrupt agreement: that Cascade had agreed to give Obeid and his family a 25 per cent stake in the company in exchange for inside information that would win it a coal exploration licence. Kinghorn said: “I’m absolutely appalled at what I’m learning about Obeid.” But the tapes revealed Kinghorn discussing the coal deal and the Obeid connection with partners.
Kinghorn was unimpressed by the proceedings. When counsel assisting, Geoffrey Watson, SC, asked why he had not told Graham Cubbin about the Obeid family connection to Cascade Coal, he replied: “It was not up to me to tell him how to suck eggs!” David Ipp described Kinghorn as an aggressive witness who was strongly opinionated and, on occasions, gave evidence that was “implausible”, “highly dubious” and “false”. He found him to be corrupt and concluded that he may have committed a criminal offence under the corporations law.
The effect on Kinghorn’s reputation was predictably devastating, even though in 2012 the Kinghorn Centre, a cancer research facility to which Kinghorn had donated $25 million, opened in Darlinghurst. The ICAC finding appalled Kinghorn’s neighbours, who put up stickers in the change rooms of the Balmoral Beach Club proclaiming “I Love ICAC”. Kinghorn found his tyres slashed, and some members approached the club board asking that Kinghorn be banned from the premises.
Kinghorn appealed against the ICAC finding and in November 2015 had it overturned. Justice McDougall said that even though Kinghorn might have been dishonest, that did not occur in his exercise of powers as a director.
Despite that, Kinghorn’s partners failed in their own appeals to the Supreme Court. For Kinghorn, the RAMS matter did not go away. He continued to have legal trouble over RAMS and over Allco, but due to his illness, charges against him were discontinued in March.
In 2018, he put his Mosman mansion up for sale. In 2019, he donated $100,000 to the campaign of Zali Steggall, who went up against former prime minister Tony Abbot in the Warringah seat in the federal election, but had not declared the eight individual financial pledges.
John Kinghorn died on October 5, bringing a heartfelt tribute from Golf Australia.
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