Twiggy (7 page)

When Justice Margaret Beazley finally
delivered her ruling in April 1995, she became the first of several judges to shine an uncomfortable light on Forrest’s business methods. Beazley found that although Forrest had attempted to answer questions during the trial honestly, he “demonstrated that he would conduct his business in a way to achieve his commercial ends, even if that involved threats and falsehoods”. The judge was referring to
evidence Forrest had given in which he admitted that claims he made in a letter to Melbourne barrister Chris Wren, an investor in the scheme, were not what he believed at the time but were justified because they were for “negotiation purposes”.

Beazley also found that Forrest presented in the witness box as “self-assured and at times amused by his own evidence”. It was not a good look for
Forrest, who by the time the judgment came out was about to become the chief executive of Anaconda Nickel, a listed public company. But the judge’s comments did not shock many of those who had encountered the slick salesman in business dealings over the years. Forrest strongly rejected Beazley’s comments in an interview in 2001: “Anyone who knows me will tell you I’m a passionate, enthusiastic individual,
but I’m not a person who gets through life through threats and falsehoods.” Forrest lost the first round of the alpaca case, but he appealed the ruling and won. Ben Ensor, who by that stage was representing himself, then asked the High Court for leave to appeal, but this was rejected in 1996. Victory was Forrest’s at last.

The alpaca scheme may have had its difficulties – and been superseded
in Forrest’s hyperactive mind by bigger enterprises – but the breeding stud at Mittagong survives today and is still run by Janie. Adler says FAI managed to recover its money and even made a small profit but the business venture was “quite marginal”.

After leaving Intersuisse in 1990, Forrest began looking around for another job in the financial world. He picked up some freelance work negotiating
on behalf of local entrepreneurs who were in trouble with the banks during the recession of the early 1990s. And he began spruiking an audacious proposal to create a $100-million trust to invest in goldmining ventures. It was a typical Forrest plan to take on the world, although the weak markets at the time prevented it from ever happening.

During this period, he met Warwick Grigor, a thoughtful
32-year-old who had earned a law degree but become a leading mining analyst at investment bank County NatWest Securities in Sydney. Grigor had, by chance, been assigned to help Forrest with the gold trust he was trying to get off the ground. When he was made redundant in April 1991, he phoned Forrest, who asked Grigor to meet him later that day at the Royal Hotel in Paddington. Over a few
schooners, Forrest pitched the idea of setting up a company to advise and finance small miners. Grigor would be the analyst, Forrest would be the salesman and they’d both become rich beyond their dreams. “Everyone advised me not to do it – they didn’t trust Andrew,” Grigor says. “But what I liked about Andrew was his positive style. He was obviously smart. I didn’t know how successful it would be,
but I said, ‘Yeah, why not?’”

For the conservative Grigor, it was to be the wildest ride of his life. The pair launched their new investment bank, Far East Capital, in the basement of Forrest’s newly acquired house in Suffolk Street, Paddington. Money was tight. They bought desks and office equipment for the business from auctions they would attend in The Rocks. At the end of the first year,
they had paid themselves only about $20,000 each in salaries. Grigor says Forrest was heavily distracted for the most of the time at Far East Capital by his alpaca scheme. “In the first three years I brought in most of the income,” he says. “It was my hard work that made the money because he was off playing with his alpacas. It wasn’t until Anaconda came along that he started to deliver.”

Forrest did, however, cultivate some wealthy young clients at Far East, including British financier Nick Barham, who at the time was the son-in-law of the nation’s richest man, Kerry Packer. Forrest later became friendly with Packer’s son, James, attending his $10-million wedding to Jodhi Meares in 1999 and his second wedding to Erica Baxter on the CÔte d’Azur eight years later, even drinking shooters
around the hotel pool with the groom on the day before the service. Another scion of the Sydney establishment, Rodney Adler, who at age twenty-nine had stepped up to succeed his late father as the head of FAI, was also a client of Forrest’s at Far East. For years afterwards, Forrest would be able to boast of his close links to both the Packers and the Adlers, two of Sydney’s best connected
families.

Forrest also helped position the bank to focus on the rise of China, which was taking tentative steps in the early 1990s towards opening up its long-dormant economy. Albert Wong remembers speaking to Forrest after he had set up the new venture. “He said to me, ‘Albert, you know the future is Asia. Come to my office, I’ve even got an Asian girl as a receptionist. And that’s why I’m
called Far East Capital.’”

As the firm started to do more deals, the cash came rolling in. Just as they had planned at the Royal Hotel a few years earlier, Forrest and Grigor became rich. Andrew and Nicola, meanwhile, got married in October 1991 in a relatively low-key affair at the NSW southern highlands property owned by Nicola’s parents, Tony and Brooke Maurice. Forrest’s best men were
his brother, David, and his old schoolmate John Morrison.

The Maurices, however, harboured a secret of which few of the wedding guests were aware: they were key figures in the Australian League of Rights, a far-right Christian group regularly accused of anti-Semitism. In 1991, as Andrew and Nicola exchanged vows, the Human Rights and Equal Opportunity Commission issued a report describing
the League as “undoubtedly the most influential and effective, as well as the best organised and most substantially financed, racist organisation in Australia”. Tony and Brooke Maurice had been hosting meetings for the League since the early 1970s. A front group created to contest the 1983 federal election, the Christian Alternative Movement, was formed at the farm they owned at the time in western
NSW. In the 1980s, Nicola’s elder sister, Katrina, married David Thompson, who went on to become the League’s national director. Thompson told League members upon his appointment in 1992: “In order for the Christian faith to command its place in the sweep of history, its practical application in every field of human endeavour is essential.” He also courted controversy by organising Australian
speaking tours by the British academic David Irving, the infamous Holocaust denier.

Andrew Forrest may also have fallen under the League’s spell. In 1994, his colleague Warwick Grigor was taken aback when Forrest invited him to attend a League of Rights meeting in Sydney. Grigor recalls he told Forrest it “probably wasn’t a good idea” to attend such a meeting because of the League’s poor
public image. To this day, he can’t be certain of whether Forrest had any involvement with the group. Forrest’s apparent interest in the League’s activities does not suggest he held any racist views. As the HREOC noted in its 1991 report, the League’s extremism was concealed by its espousal of family values, patriotism and nationalism – all qualities Forrest has long embraced. “The League represents
the respectable face of racism. Its advocacy of traditional values may have won it mainstream support from people who are unaware of its racist and extremist ideals,” the report said. Perhaps Andrew and Nicola were attracted to the League’s evangelistic Christian courses, which were run at the time by Jeremy Lee, a key figure in the Christian Alternative Movement launched at Nicola’s childhood
home.

Forrest got on well with his brother-in-law David Thompson. When Thompson stood down as head of the Australian League of Rights in the late 1990s, Forrest even hired him as the external relations manager at Anaconda Nickel, a senior role that involved lobbying the company’s powerful shareholders in a bid to keep Forrest on the board. Thompson, who had learned plenty about politics and
campaigning during his long association with the League, remained with Anaconda until Forrest was eventually forced out in 2001. Today, he insists he doesn’t recall Forrest ever being personally involved in the League, but he says they have remained in touch and share a commitment to Christianity.

By the time they were married, Andrew and Nicola were mixing increasingly with Sydney’s wealthy
eastern suburbs set. Their first child, Grace, was born in mid 1993, just six weeks after they bought federal Liberal Party leader John Hewson’s mansion in the upmarket suburb of Bellevue Hill for $1.02 million. It was an impressive amount for a relatively unknown 31-year-old banker to pay, considering the median house price in Sydney that year was just $188,000. Today, the Fairfax Road property
is worth more than $4 million. Built in 1900, the sprawling two-storey house has five bedrooms, a dining room with seating for twelve people, a morning room, a den, a formal sitting room and a piano room. Outside are parking bays for several cars, a swimming pool and a self-contained apartment. To top it off, the house is just 250 metres from Sydney Harbour and a relaxed stroll to the plush boutiques
of Double Bay.

Ever the promoter, Forrest was quoted in the
Australian Financial Review
in 1993 as saying he believed his new digs would prove to be a sound investment since houses around the $1 million mark represented the “softest” part of the Sydney market. As it turned out, Forrest never made the big gains on the property he had predicted, selling it three years later for $1.16 million
– or around 14 per cent more than what he paid.

Looking back, Grigor reckons the accumulated stress of working with Forrest for five years took its toll on him and contributed to some major health problems. Many of the tensions between the pair at Far East – and plenty of their successes also – arose from the fact that Grigor and Forrest were polar opposites. While Forrest was partying with
his wealthy Sydney mates, Grigor was happily ensconced at his family home in suburban Sutherland, twenty-five kilometres south of the CBD. When Forrest was out zealously spruiking the latest mining stocks, Grigor was carefully poring over data in balance sheets. Forrest’s main mission in life at that point was to make pots of money, but Grigor, who speaks Gaelic and plays the bagpipes, says that
has never been his main motivation.

Grigor says he spent a lot of time dealing with the Australian Securities Commission and the Australian Stock Exchange about Forrest. “He had a fairly cavalier approach,” Grigor recalls. “With my legal training I’d have to come in later and sweep up after him a fair bit.” In 1996, when Forrest became chief executive of Anaconda Nickel, he said publicly
he’d be stepping back from his role at Far East Capital to concentrate on the new job.

Within months of that 1996 announcement, however, Forrest had decided to leave Far East altogether and return to Perth to run Anaconda, a company he had been advising for three years. It was a big punt but he was convinced Anaconda was a pathway to great wealth. He offered Grigor the role of chief financial
officer of Anaconda, which Grigor turned down. “At that stage Andrew was a little bit out of control and I didn’t want to work for him,” Grigor says. “I didn’t want to be an employee because he’d be too unreasonable – it was challenging enough having him as a partner. The liberties he would take would conflict with my conservative side.”

The split with Grigor was amicable at first but soon
turned nasty after a dispute erupted between the pair over the ownership of a pile of Anaconda shares worth millions of dollars. By now, these sorts of clashes were becoming common for Forrest. Just as he had fallen out with Albert Wong at Intersuisse in 1990 and then become embroiled in a bitter legal fight with his associates over the alpacas, so too his once-close relationship with Grigor fell
apart in late 1996.

When Forrest left Far East Capital, the assets of the firm were split between the two partners. These included 9 million options in Anaconda Nickel that could be converted into shares if the stock price hit 30 cents. Grigor says he exercised his 4.5 million options and sold the shares in April 1996, when the stock was trading at about $1.30, pocketing a cool $6 million.
But the shares soared to $4.50 within six months, meaning Grigor had potentially missed out on a much bigger payday. Grigor claims he was convinced to sell his shares by Forrest and his fellow Anaconda director Michael O’Keeffe, the local boss of Swiss commodities trader Glencore, which had invested in the nickel company.

Grigor claims Forrest had long been angry that the two men had the
same number of shares in Anaconda even though Forrest had done most of the work in advising the aspiring nickel producer. To this day, Grigor has a bad taste in his mouth over his decision to sell the shares at $1.30 just before they soared.

A separate disagreement between the two men over Anaconda shares ended up in the NSW Supreme Court in early 1997. Grigor will say only that the pair
resolved the dispute over a bottle of scotch, and he is no longer bitter towards his old partner. They even catch up occasionally for a chat these days. “Andrew had a favourite term, ‘Let’s bury the hatchet,’” says Grigor, who credits Forrest with teaching him plenty about business in the 1990s. “He doesn’t like to bear grudges.”

I’ve met a lot of managing directors, but I don’t think I’ve met a more self-evidently enthusiastic and dedicated managing director than I’ve met in Andrew Forrest.

—JOHN HOWARD

Andrew Forrest got involved with a two-bit company called Anaconda Nickel because nobody else dared to touch it. In 1993, two Perth mining identities
– prospector Peter Salter and metallurgist Geoff Motteram – were desperate to find someone who would underwrite a public float of the company, which had some old tenements in the burning desert north of Kalgoorlie. After failing to convince almost every financier in Perth to back their plan, Salter and Motteram flew to Sydney to try their luck with Forrest at Far East Capital.

Anaconda’s
problem at the time wasn’t Motteram, who was respected in the industry after stints with big mining companies, including BHP and Western Mining Corporation. Rather, it was the presence of the burly Salter – or “Salty Pete”, as he was known around Perth. Salter had a colourful history in the city’s business and horseracing circles, having been declared bankrupt in the 1980s. He would later be banned
by the corporate regulator ASIC from serving as a company director for three and a half years for his role in a failed bottled-water venture. Salter returned to business only to be sacked as chief executive of a Perth-based gold explorer over a sexual harassment case a few years later.

Always keen on a gamble, Forrest was willing to overlook Salter’s tarnished reputation and embraced his
plan to develop mining leases near the abandoned town of Murrin Murrin, in Western Australia’s northern Goldfields. The relationship between Forrest and Salter would break down two years later in a haze of drunken punches, but for a brief time the pair shared a common vision of creating a wealth-generating oasis on the edge of the Great Victoria Desert.

Reclining in his office chair, Forrest
told Salter and Motteram that Far East Capital would underwrite the $6-million float of Anaconda. The money raised from investors would be spent on drilling tenements that had been pegged during the 1960s nickel frenzy by a company called Australian Selection, which eventually discarded them due to the frighteningly high costs and technical complexities involved in extracting what are known as
nickel laterites from the ore.

Up until that point, all nickel in Western Australia had been produced from sulphide ores, which are relatively high-grade and quite simple to process before being sold. The lower-grade laterite ores are weathered rocks found near the surface, which are easier to mine but far more difficult to treat. As a metallurgist, Geoff Motteram was aware of a little-understood
extraction method for nickel laterites called high-pressure acid leaching (HPAL) which had been pioneered in the 1950s at Moa Bay in Cuba. American mining giant Freeport built the Cuban plant but the project disappeared from public view when Fidel Castro seized control of the country in 1959, nationalising the nickel industry and naming one of the Moa Bay plants “Ernesto Che Guevara” after
the Marxist revolutionary hero. For the next thirty years, the consensus in the West was that the Cuban plant, which relied on Soviet replacement parts, was a dud. It wasn’t until 1994 that Canadian company Sherritt International, a specialist in HPAL, was able to invest in Moa Bay and begin to modernise the plant.

In 1994, Andrew Forrest was also launching his sales pitch for his $1-billion
plan to build the world’s first HPAL plant outside Cuba. Forrest’s message might have baffled a few investors, but it went something like this: Anaconda will build a nickel mine; the ore from the mine will be crushed and fed into a colossal processing plant; it will then be mixed with sulphuric acid at temperatures of up to 250 degrees Celsius at high pressure inside four huge boilers known as
autoclaves; the nickel and cobalt will then be leached out; and the end result will be small, pillow-shaped briquettes that will pop out the other end of the plant. The high-grade nickel and cobalt would then be shipped around the world to make stainless steel, jet engines, batteries and other necessities of modern life.

Besides his promotional zeal, Forrest brought to Anaconda a strong financial
awareness and a vision for the bigger picture. He understood that the world was running out of traditional sulphide ores, but also that the future industrialisation of Asia meant nickel would always be in demand. And he came to believe that the desert sands around Murrin Murrin contained a bounty of nickel laterites for anyone prepared to explore there. Forrest also realised that one of the
most important assets for an energy-guzzling nickel plant was access to cheap gas. And he knew that Richard Court’s newly elected Liberal government in Western Australia was promising to build a gas pipeline from the north-west of the state to supply the mining operations of the Goldfields. The pipeline arrived in the Goldfields in 1996 just as Anaconda was preparing to start construction.

Forrest’s earliest backer at Anaconda was Rodney Adler, who by the early 1990s was a major figure in Australian business. Forrest met Adler one day to tell him about the nickel tenements in the Goldfields and the gas pipeline. Adler recalls: “He came to me and said, ‘Rod, I have the greatest idea I’ve ever come up with – I want to be a nickel producer. The pipeline will come through, we’ll raise
some money and we’ll start an operation. I’m telling you, it’s going to be one of the best things we ever do.’” Adler was sold on the idea and put some money in on behalf of FAI. He would eventually invest $4 million and end up with a profit of $65 million. The FAI stake would also provide Forrest with a crucial partner in later years as he battled other shareholders for control of Anaconda.

Anaconda had plenty of sceptics in the early days. Many believed that the ore body at Murrin Murrin wasn’t good enough and the extraction technology too complex and unproved. Others said a glib ex-stockbroker with no real mining industry experience would never be able to raise hundreds of millions of dollars from serious investors. The nickel industry in the 1990s was dominated in Western
Australia by Western Mining Corporation, whose chief executive, Hugh Morgan, was the embodiment of the conservative business establishment. WMC, which had banked its future on traditional sulphide deposits, let it be known that it doubted whether Forrest could make Murrin Murrin work. As he would do again several years later in the iron ore industry, Forrest cast himself in the role of underdog against
the might of the established nickel players.

The history of nickel laterite projects, both in Australia and overseas, has long been a chequered one. Although the Greenvale operation in Queensland had been a success since the 1970s, two other projects launched in Western Australia in the 1990s, Cawse and Bulong, were big disappointments. In 2009, even the world’s biggest mining company, BHP
Billiton, couldn’t make money out of nickel laterites, losing billions of dollars after walking away from its Ravensthorpe plant in the south of Western Australia.

But in the mid 1990s, Forrest had a story to tell. He declared Murrin Murrin would become the world’s fifth-biggest nickel operation, producing 45,000 tonnes of the silvery-white metal a year and feeding the world’s rapidly growing
stainless steel markets for decades to come. What’s more, Murrin Murrin would deliver shareholders juicy profit margins because it would be producing nickel for just $US1 a pound, well below the then market price of $US4 a pound. The dream also appealed to Forrest’s strong sense of a family destiny. John Forrest had ridden over the Murrin Murrin site in 1869 on his first inland expedition, even
naming a nearby prominent hill Mount Margaret after his future wife.

Forrest worked obsessively at drumming up interest in the Anaconda float, telling potential investors that the 20-cent shares were certain to soar to more than $1 in virtually no time (in fact, the shares would take two years to get to that point). Sure enough, Anaconda raised the $6 million and was listed on the Australian
Stock Exchange in March 1994. Forrest installed himself as chief executive the following year and stacked the board with his allies, including his sister Janie’s husband, Aldous Hicks, a one-time candidate for Liberal Party preselection against John Hewson in the federal seat of Wentworth. Forrest asked his accountant, Adrian Abbott, to be the inaugural chairman and an old contact from Sydney,
Peter Bennetto, to be a director. Geoff Motteram was also on the board for his technical expertise. But in reality, Forrest, the 33-year-old wunderkind, had absolute control over his older directors and it was rare for anyone to question him.

In the early years, Forrest promised that Anaconda would only ever focus on producing nickel – a pledge that was discarded as he unveiled what appeared
to be a series of hastily conceived plans to invest billions of dollars in rare earths, magnesium and phosphate projects. He also began to talk up an ambitious plan to create a “three-nickel province” around Murrin Murrin that would lead to Anaconda one day dominating global output of the metal. This predilection for hyperbole was again highlighted when Forrest declared in May 2000 that Anaconda
had “discovered” an enormous inland sea underneath the desert about 600 kilometres from Murrin Murrin. The water source, known as the Officer Basin, contained 2 trillion kilolitres of potable water, enough to supply a large Australian city for many thousands of years – or so Twiggy declared.

Evoking the spirit of Sir John Forrest a century earlier, Forrest proclaimed he would green the desert.
This dream won him plenty of admirers in a state where water has always been a scarce commodity. A few sceptics, however, pointed out that the state government had actually known about the Officer Basin since the 1960s and still owned the resource. Many also drew attention to the huge costs of building a pipeline from the middle of the desert into Kalgoorlie to supply water to the town and
its nearby mining operations. Of course, if Forrest had been proven right, the Goldfields water pipeline from Perth may have been rendered redundant – and the history books would have recorded that he had trumped his great-great-uncle.

Forrest’s grandiose public statements and his bombastic style were beginning to grate on many people. The
Australian
quoted a stockbroker who quipped that
Forrest “probably feels a bit constrained by the size of the planet”. The key figures along St Georges Terrace still remembered Forrest’s antics in stockbroking in the 1980s and weren’t about to touch his speculative nickel play, no matter how polished the sales pitch.

Forrest responded to those who doubted his credibility with a typically brilliant example of spin, which may have left some
believing he’d never made an enemy in his life: “Everyone who’s done business with me either respects me and likes me or just likes me. I think a lot of people who are critical either don’t know me, or try to behave like they do when they don’t. There’s always baggage out of a boom. But there is no one who I know who can say they weren’t dealt with fairly or evenly by Andrew Forrest. I have a
philosophy with everyone I deal with and it’s come through from my early days as a jackeroo on a sheep station, right through to my broking days, through to now: that if I win, you win. I’ll never tolerate a situation where if we are both driving for the same goal, only one of us gets that goal.”

Forrest’s credibility was not only being challenged by some of his peers. It would soon be torn
to shreds by a Perth magistrate who had closely watched Forrest’s performance in the witness box during an assault case. The hearing in the Perth Magistrates Court arose after Peter Salter, the prospector who had the original Anaconda tenements, delivered a solid punch to Twiggy’s head after a long lunch in September 1995. The relationship between the pair had been steadily deteriorating since
their initial meeting in Sydney back in 1993. But on this day, it was to be damaged beyond repair.

Forrest met Salter at the Grand Palace Chinese restaurant in Perth’s CBD to arrange for the transfer of some important tenements to Anaconda from a junior explorer called Central Bore, to which Salter was a consultant. According to testimony given in court, Forrest began telling Salter over
lunch how Anaconda had tried to bring Central Bore to its knees as a way of forcing it to sell the tenements.

Salter decided to order another bottle of wine to see if any more information like this might be revealed. Forrest described in detail how Anaconda had contacted the Australian Securities Commission and the Australian Stock Exchange to raise concerns over a capital-raising Central
Bore was undertaking. He also boasted of how Anaconda had tried to manipulate Central Bore’s share price, sometimes using money from “Rodney’s Fun Fund” – a reference to the money Rodney Adler had ploughed into the explorer. Salter also told the magistrate he had become suspicious during lunch that Anaconda was behind legal action by a mysterious Sydney-based company, Richfile Pty Ltd, which was
seeking to cast doubt on Central Bore’s right to an interest in the tenements.

What’s not in dispute is that Forrest and Salter finished their wine and went back to Central Bore’s offices to sign off on the transfer of the tenements to Anaconda for $12 million. Forrest later insisted in court he was sober at the time – but, like much of his evidence during the case, this was rebutted by others.
“Always, in business lunches, I drink sparingly,” he told the magistrate. “I tend to sip wine at business lunches and where possible add water to the wine glass.” An employee of Central Bore, Paul Ducie, gave evidence that Forrest had trouble walking after the lunch. Even Forrest’s own colleague, George Macdonald, said in the witness box that when his boss showed up at Central Bore’s office,
“He’d clearly had a good lunch, he’d clearly had a drink.”

Forrest told the court that before the deal could be signed, Salter grew agitated and started to threaten him: “He said … I was pathetic, that he was going to get me and he was going to get my mates,” he told the magistrate. Salter then punched Forrest above his left eye and again on the cheek with the back of his hand. But Twiggy
didn’t draw on the pugilism he had mastered in his adolescence. Instead, he calmly left the office and lodged a complaint with the police, who charged Salter with unlawful assault. Unfortunately for Forrest, the action backfired disastrously when his honesty was closely examined in court.