Jozef Imrich, name worthy of Kafka, has his finger on the pulse of any irony of interest and shares his findings to keep you in-the-know with the savviest trend setters and infomaniacs.
''I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can't see from the center.''
-Kurt Vonnegut
The board-ordered investigation found mining billionaire Chris Ellison had at times failed to act with integrity and financial benefits flowed from Mineral Resources to parties, including his daughter. Shares drop more than 8 per cent.
Mineral Resources managing director Chris Ellison is being shown the door at the company he founded after a damning investigation into his role in a tax evasion scheme and other dubious business dealings, but at least one big investor wants him to stay.
A board-ordered investigation found the mining billionaire had at times failed to act with integrity and that financial benefits had flowed from MinRes to related parties, including his daughter.
The board found Mr Ellison also ordered company employees to work on his boat and properties as well to manage his personal finances.
Perth-headquartered MinRes said Mr Ellison would remain managing director pending an orderly leadership transition in the next 12-18 months. MinRes shares tumbled 9.6 per cent or $3.91 to $36.70 on the news, wiping almost $770m from the company’s value and more than $88m from the mining magnate’s almost 11.5 per cent stake.
L1 Capital’s Rafi Lamm led calls for Mr Ellison to stay at the helm for longer. Macquarie said an external successor was required given the holes in the company’s corporate governance.
Mr Ellison is back in Perth after an extended stay overseas. It is understood that as recently as last week he was telling investors he intended to ride out the tax and other scandals.
However, it remains unclear how long Mr Ellison and other board members can survive given the extent of the governance issues exposed by the investigation and with the ASX and Australian Investment and Securities Commission already on the case.
Chairman James McClements, who has been on the board since 2015, intends to depart next year after presiding over governance failures laid bare in an investigation carried out by Herbert Smith Freehills over the past two years.
In regard to the tax evasion scheme, the board pointed to an attempted cover up of dealings with Far East Equipment Holdings Limited (FEEHL), British Virgin Islands-registered company linked to Mr Ellison.
“It has recently come to light that a number of company emails relating to FEEHL were deleted in 2019. The board has concluded that this was an attempt to avoid information regarding FEEHL becoming public,” it told the ASX on Monday.
“These actions were taken at around the time that Mr Ellison commenced the process of self-disclosing to the Australian Tax Office, and before the ultimate voluntary disclosure and settlement with the ATO.”
Mr Ellison will incur board-imposed financial penalties of $8.8m, and loss of remuneration of up to $9.6m, amid the corporate governance and reputational crisis engulfing the company.
Mr Ellison apologised for his actions and said he accepted the board’s punishment and leadership succession plan.
“I am deeply sorry for the events that have occurred and the impact they have had on MinRes’ reputation. I apologise to the rest of the board and to our people, who expect and deserve better from me,” he said.
“I acknowledge that I made mistakes, some of which were driven by my wish to keep private certain events that cause me great personal embarrassment. I am committed to the leadership succession that the board has announced, and I will work tirelessly to win back the confidence of investors and our whole MinRes team.”
It took a whistleblower to alert the board to Mr Ellison’s settlement with the Australian Taxation Office over a scheme that involved buying and selling mining machinery through a company registered in the British Virgin Islands.
Mr McClements condemned Mr Ellison’s actions and said that “with the interests of shareholders absolutely front and centre” there had to be a change of leadership.
“There can be no doubt that the actions, decisions and behaviours of Mr Ellison have been profoundly disappointing and require sanction and penalty,” he said.
L1 Capital said there was widespread support among big investors for Mr Ellison to stay at the helm in the medium term. L1 with 6.54 per cent is the largest shareholder in MinRes behind Mr Ellison, who owns about 11.5 per cent of the stock.
“L1 Capital is supportive of Chris Ellison remaining as CEO with a more appropriate corporate governance structure in place,” Mr Lamm, the investment fund’s joint managing director, said.
“We have engaged with many large MinRes shareholders in recent days and we understand there is widespread shareholder support for Chris remaining as CEO over the medium term given his track record of delivering enormous shareholder value over many years.”
Australian Super, which sold down part of what was a significant holding as the scandal broke, said much more work was needed to lift governance standards at MinRes.
‘The independent review into MinRes outlined a series of clear and very disappointing governance failings at the company,” an AustralianSuper spokesman said.
‘The fund supports the board’s initial response to these failings, in particular the establishment of an independent ethics and governance committee and its scope to further consider the independent review’s findings.”
Australian Council of Superannuation Investors stewardship boss Ed John said the board should engage with ASIC on the findings.
“The board’s announcement raises serious concerns about the use of company resources for personal benefit, deleting of company emails and related party transactions,” Mr John said.
A major focus of the investigation was Mr Ellison’s settlement with the ATO, where he sought undertakings details would not be passed on to ASIC or the federal police.
MinRes said its investigation found that between 2003 and 2014, Mr Ellison had an interest in FEEHL, which in 2003 and 2004 sold mining equipment to Crushing Services International.
Crushing Service was one of the private companies that formed MinRes when it listed on the ASX in 2006 but a liability to FEEHL was not disclosed in the prospectus, or at any other time, as a related party liability. MinRes then two payments totalling $3.79m to FEEHL in 2006 and 2008 to pay for the mining equipment.
Mr Ellison eventually made a voluntary disclosure to the ATO of income that he had earned from FEEHL, and in May 2023 paid the ATO $3.93m in unpaid taxes, including interest and administrative penalties.
Min Res said the ATO has not issued any amended assessments to MinRes with respect to depreciation claims made on assets acquired from FEEHL.
The board also confirmed that financial benefits had been provided to other parties linked to Mr Ellison, including rent on industrial property he part owned and rent relief that flowed through a company owned by his daughter Kristy Lee Craker.
The board said Mr Ellison had disclosed these matters but “failed to appreciate the importance of transparent and timely disclosure of matters that could give rise to a potential or actual conflict of interest”.
The board concluded that Mr Ellison had used company resources for his personal benefit. This included directing employees to work on his boat and properties; directing an employee to manage his personal finances; and using the company to procure goods and services for his private use.
However, the said it was satisfied that the use of MinRes resources and assets in this way has not caused material financial detriment to the company.
MINERAL RESOURCES MANAGING DIRECTOR CHRIS ELLISON (IMAGE: MINERAL RESOURCES/YOUTUBE)
There are two bodies that still need to explain themselves in relation to the revelations by the Financial Review’s Neil Chenoweth that mining billionaire Chris Ellison ripped off both his own company and taxpayers.
One is the Mineral Resources board. The other is the Australian Tax Office. Both look like they’re treating us with contempt.
The Mineral Resources board thinks it’s sufficient that Ellison will repay almost $3.8 million in funds owed, forfeit bonuses claimed to be worth $9.6 million and make charitable donations totalling $5 million over the coming years, before stepping down in the next 12-18 months, along with Mineral Resources chair James McClements.
Like the “LinkedIn Lecher” Richard White at Wisetech, Ellison’s is very much a Clayton’s sacking, with the 67-year-old basically allowed to take his sweet time moving on at his own convenience. And being forced to cough up $5 million in charitable donations — what a burden for a billionaire! (Presumably Ellison will avail himself of the tax loss status of those deductions to once again cut back on his tax.)
Mind you, at least the MinRes board thinks Ellison engaged in misconduct. Some investors, like L1 Capital, seem to think it’s neither here nor there that Ellison used its employees as his own personal staff and gave his family mates’ rates on company property, not to mention “using the company to procure goods and services for his private use”.
Hilariously, the MinRes board reckons a lot of these problems are because of “the company’s rapid growth, particularly in the last five years, placed pressure on its governance systems and processes.”
Yep, rapid growth will make you rip off your own company.
None of this would have come to light except for the hard work of Chenoweth. And the Australian Tax Office (ATO) was in on the cover-up, given it complied with Ellison’s demand that it not reveal his tax evasion to the Australian Securities and Investments Commission or the Australian Federal Police.
The line from the ATO is that it has to make these sorts of secret deals with big tax dodgers because it can’t litigate everything or audit everyone. That’s fair enough. But the ATO doesn’t seem to understand that the quid pro quo of it keeping such deals secret is that your average taxpayer needs to have faith that the ATO’s secret deals contain an appropriate punishment for people try to evade taxes.
And the ATO’s decision to fine Ellison just $3.9 million — including interest! — for a multi-year scheme that netted him $3.7 million starting two decades ago, can hardly be regarded as appropriate punishment.
As Michael Pascoe noted when the story broke, the ATO-Ellison deal stands in dire contrast to the treatment of tax-evading music promoter Glenn Wheatley, who as part of Project Wickenby pleaded guilty to dodging around $318,000 in tax .The prosecutor described his fraud as “sustained and sophisticated”. Wheatley was publicly humiliated, got a 30 month jail sentence and served 10 months.
Why isn’t Ellison in jail like Wheatley for hissustained and sophisticated tax fraud?
Instead, he got a promise from the ATO, the guardians of our tax system, that it would keep it all secret from the coppers, while Ellison gets to negotiate how much he pays.
Like the MinRes board’s idea of punishment for Ellison, the ATO’s response looks a lot like a special deal for a mate rather than a proper enforcement of the standards it is charged with maintaining.
In an era when there’s extensive alienation toward the political and economic system, and the belief that the system is skewed toward the rich and powerful is widespread, the kid-glove treatment of Ellison for dodging tax in amounts most of us can only dream of, and using a major public company as his own personal butler service and helping himself to its vast assets, is extraordinary.
