Forum Topics MIN MIN Management

Pinned straw:

Added 2 months ago

There were already some red flags, but understanding the article below has confirmed a lot.

You want 'honest and competent' management and I think this highlights Chris is definetly not honest.

I'm not sure how I feel about it re MinRes as a shareholder. I see the opportunity for MinRes given the set up, and Chris is key to the story, but there are also some serious red flags.

Chris Ellison’s offshore secret

An investigation by AFR Weekend has uncovered how Mineral Resources chief executive Chris Ellison, one of Australia’s richest men, allegedly evaded tax for years.

It was August 2007 and Chris Ellison received bad news in the mail. A year after he floated his iron ore and lithium company, Mineral Resources, the Australian Tax Office wrote to say it wanted to discuss his personal tax returns spanning “a number of years”.

It was terrible timing for the blunt-speaking New Zealander who has become one of Australia’s richest people on the back of the resources boom.

Coincidentally, Ellison was preparing to reshuffle his offshore business holdings. He decided not to tell the Tax Office about the scheme, which allegedly enabled him and four other MinRes executives to earn secret income while avoiding paying millions of dollars in Australian taxes. The scheme also meant MinRes shareholders missed out on millions in profits.

Twelve years later this omission would come back to haunt him. Fearing the scheme was about to catch up with him, he asked his lawyers to cut a deal with the ATO. He offered to share his secrets with the ATO, pay back any tax owing plus a multimillion dollar fine to avoid serious penalties.

Chris Ellison has cultivated an image as a straight-talking man of action.

The deal he proposed to the ATO contained an important condition: the tax office would never reveal its existence or its investigation to anyone including the Australian Federal Police or the Australian Securities and Investments Commission.

In a document obtained by AFR Weekend, the tax commissioner concluded this year one of the executives involved in the scheme exhibited “behaviour that amounted to evasion for the income years ending 30 June 2004, 30 June 2007, 30 June 2008 and 30 June 2009”.

Ellison has cultivated an image as a straight-talking man of action who has gone where others wouldn’t to build a multi-billion-dollar mining company based in Western Australia.

But an investigation by AFR Weekend demonstrates the scheme raises tough questions for Ellison. It also raises questions about the readiness of the Tax Office – itself under scrutiny over its settlement with beleaguered accounting giant PwC – to cut generous deals with powerful players rather than expose questionable conduct.

In response to questions from AFR Weekend, MinRes chairman James McClements said: “The MinRes Board acts in the best interests of shareholders and has full confidence in the company’s executive team.

“The Board takes seriously allegations regarding corporate governance practices and, where appropriate, investigates allegations with the assistance of external legal advisors.”

Building a fortune

A self-made billionaire, Chris Ellison boasts a brilliant career track that was recognised in 2022 with an investiture as a member of the New Zealand Order of Merit for his services to New Zealand-Australia relations.

Ellison built Mineral Resources out of three startup companies he launched in the 1990s, listed it as a $108 million company in 2006, then grew it to a business valued at $9 billion today thanks to ambitious iron ore and lithium plays.

He grew up in Dunedin in New Zealand’s South Island, leaving school the day he turned 15 and working on a farm, then a cattle station.

As Ellison tells it, when he came to Australia in 1977 aged 19, he and his brother would tell prospective employers they could do anything. Which meant, he explained on a MinRes video: “Well, we can ride pretty good, we can drive anything.”

Getting a crane driver ticket in Darwin set Ellison on his way. He moved to Port Hedland and in 1978, aged 21, started his first company, providing cranes for worksites, just as work on the North West Shelf exploded. “I was making $550,000 a month that I was banking as profit,” he says on the MinRes video.

Ellison sold out in 1982, aged 25, and went on to start a series of other businesses. In July 1992, “I decided I wanted to start another private company, so I started up MinRes,” he said on the 2023 corporate video. “I had $10,600 in the bank … but I had a credit card that had a $50,000 limit on it. I used all of that credit that I had to its absolute maximum. And I learned to appreciate it.”

That credit evolved into three businesses. First in 1993 was PIHA Pty Ltd, with former pipeline mechanic Bob Gavranich. PIHA built pipelines and site infrastructure for mining projects.

In 1995 Ellison founded Crushing Services International, which provided contract crushing for miners. And in 2003 he started the Process Minerals International business, after buying rights to low-grade “reject” manganese ores mined from the Woodie Woodie tenements in north-west Australia.

These three businesses – PIHA, CSI and PMI – would merge to form Mineral Resources for its float in July 2006.

Ellison worked with a tight group of senior executives who had shares in the three businesses. They went on to buy property together in joint holdings, which was then leased by the businesses that became MinRes.

But according to ATO documents, Ellison offered other remuneration to this close-knit group as well. It was offshore, and access was on a need to know basis.

The extraordinary events that followed can only be told because in 2021 and 2022 Ellison’s tax advisors provided extensive records to the ATO in their attempt to strike a deal. The Tax Office used these documents to produce a detailed summary of how the offshore remuneration scheme worked.

Mineral Resources CEO Chris Ellison in his early years.

Going offshore

In the 1990s RSM Bird Cameron in Perth was the auditor for CSI, PMI and PIHA. But it was another member of the global RSM network, RSM Nelson Wheeler, in Hong Kong, that introduced Ellison to the offshore world.

Nelson Wheeler’s corporate secretarial business traded as Asialink Services (HK) Ltd. Asialink set up a series of companies for Ellison and other MinRes executives domiciled In the British Virgin Islands, with nominee directors and shareholders. The British Virgin Islands are a tropical archipelago east of Puerto Rico in the Caribbean, with turquoise waters, palm-fringed beaches and a history of pirates. But the territory is better known for the zero tax rate it applies to companies domiciled there.

The ATO documents lay out an elaborate corporate structure that was constructed in the early 2000s. It enabled Ellison and his senior executives to move money into accounts held by the BVI companies, thereby avoiding paying Australian taxes, and to use credit cards to spend it.

At first, when MinRes was still a private group, the big loser in this secret arrangement was the Australian tax man. But after MinRes floated in July 2006, the BVI profits were not only untaxed, they were paid from shareholder funds without being disclosed to MinRes directors.

ATO documents show the first two British Virgin Island companies, International Mining Supplier Limited (IMSL) and International Equipment Rentals, were operating by 2000.

The ATO documents don’t detail the activities of these two companies, but both had bank accounts in Hong Kong, and both held hundreds of thousands of dollars for Ellison, according to handwritten notes seen by AFR Weekend.

According to an ATO position paper produced this year, on May 27, 2003, Nelson Wheeler set up a third British Virgin Islands company called Far East Equipment Holdings Limited (FEEHL). And it’s this company which became the focus of a years-long ATO investigation.

FEEHL was owned by a nominee company on behalf of a trust set up for the five MinRes executives including Chris Ellison. Ellison took 51 per cent of the FEEHL earnings, while the other four executives held shares ranging from 5 per cent up to 21 per cent.

Just six weeks after FEEHL was set up, Crushing Services International (one of the original three Ellison companies that later formed MinRes) transferred $150,000 to the company on July 2, 2003.

FEEHL immediately sent $139,000 of this to one of the other BVI companies, IMSL, which in turn passed $5000 to the third BVI company, International Equipment Rentals.

IMSL had set up a string of Visa Gold credit cards. One of the cards went to Ellison, and two monthly statements obtained by AFR Weekend show how widely he used it.

His Visa billing statement for October 2003 shows he spent $7900 on shoes, curtains and paying $6866 in school fees at All Saints College Bull Creek, one of Perth’s top schools.

In February 2006 he spent $18,800, pulling the card out at Bunnings, flower shops and restaurants, spending $10,500 with Rosendorff’s Diamonds, and booking a $4800 New Zealand skiing vacation.

None of this could be traced back to Ellison as taxable income.

But the money funnelling into these companies was being used for more than just Ellison’s personal expenses.

Back in 2003, Crushing Services sent FEEHL a further $500,000 in August, then $400,000 more in September.

Chris Ellison as a teenager on a New Zealand cattle station.

At the time, Crushing Services (CSI) was regularly buying used mining equipment, sometimes for its own operations, sometimes to resell to other miners.

CSI bought Svedala scalping screens and belt feeders from the closed Mount Todd Gold Mine in the Northern Territory. There was a ball mill and small batching plant from St Barbara Mines, and five gyratory crushers from Mount Leyshon gold mine.

But when the paperwork went through – and without the knowledge of some of those who handled the deal – it turned out it was FEEHL that had bought the machinery, using CSI funds, so it was FEEHL that earned the profit from the resale.

More frequently FEEHL sold the equipment to one of the MinRes companies for as much as five or 10 times the original cost.

The Tax Office has concluded that FEEHL cleared $1.69 million profit in the 2004 financial year. But this does not seem to include almost $1 million which the ATO says was transferred to International Mining Supplier, which funded Ellison’s Visa Gold credit card, and $1.5 million which was transferred to an Australian trustee company that Ellison controlled, World Wide Infrastructure.

FEEHL’s activities slowed down in the two years leading up to the August 2006 float, when the newly merged MinRes group faced heightened governance and accounting scrutiny. The Tax Office concluded that FEEHL actually lost $1.3 million in fiscal 2005 and another $190,000 the next year.

But according to the ATO documents, soon after MinRes floated on July 28, 2006, FEEHL returned to making money for Ellison and his close-knit group of executives, at the expense of MinRes, the new public company.

The ATO position paper states that on August 30, 2006, just a month after the float, MinRes subsidiary Crushing Services paid $1.895 million to FEEHL, marked as “first payment for purchase of plant and equipment Ref 4704”.

Any such transfer involved the publicly listed company’s money. The ATO says it was an undeclared related-party transaction, a secret transfer arrangement that delivered huge untaxed profits to Ellison and the four execs, at the expense of MinRes shareholders.

MinRes was using the inflated prices it paid to FEEHL for machinery to claim depreciation at elevated levels. This was also at the expense of taxpayers.

FEEHL earned $1.8 million profit in the MinRes group’s first year as a public company, the ATO says. Six weeks later, in August 2007, the Tax Office knocked on Ellison’s door.

The auditors knew nothing of Ellison’s offshore activities. They were more concerned with apparent discrepancies in the multiple trusts and holding companies which held Ellison’s assets in Australia.

Ellison had other problems. The offshore accounts were now run by Singapore-based Boardroom Corporate Services, which bought Nelson Wheeler’s corporate secretarial arm Asialink Holdings (HK) in 2005.

On October 11, 2007, a MinRes executive instructed Boardroom “to close all the credit card accounts” in International Mining Supplier Ltd (the other BVI company, International Equipment Rentals Ltd, would be deregistered in May 2008).

That same day email correspondence shows Ellison asked Boardroom to set up a new sub-account for him at Standard Chartered Bank: “From time to time I will provide you with fund transfer instructions together with the relevant supporting documents.”

Ellison’s new sub-account would be held in the Asialink Holdings account at Standard Chartered.

Chris Ellison after the Mineral Resources AGM last year.

Ellison added a Letter of Wishes, which instructed Boardroom that in the event of his death the funds should be transferred to his then-wife, Debbie Ellison, and if she pre-deceased him, to his children.

Within a week similar sub-accounts had been set up by Asialink Holdings’ account for each of the other executives as well, with new credit cards. In December 2007, $2 million was transferred into these sub-accounts from FEEHL, of which $1.09 million went to Ellison’s sub-account, the ATO says.

But the Tax Office wasn’t going away. In early January 2008 they requested a meeting with Ellison. He agreed to meet them on Friday, January 18, in the Perth offices of accountancy firm RSM Bird Cameron.

Bird Cameron was in an awkward position: it was the auditor for Mineral Resources, while it was providing personal tax services to the CEO, Ellison.

The tax officers had a long list of queries for Ellison: trust records showing the wrong trustees, asset revaluations, loans to associates, and discrepancies in the reporting of transactions.

Business as usual

None of this attention from the tax man appeared to affect Ellison’s activities offshore.

Just three days after the meeting with the ATO, a statement of receipts for FEEHL dated January 21, 2008, showed: “’Funds received from Mineral Resources Limited for final payment for purchase of plant and equipment (ref. 4704) in the amount of $1,895,303.71.”

Almost all of it went straight to Ellison and the four executives. On January 30, 2008, Ellison instructed Boardroom to distribute $1.88 million in the FEEHL account to the five men. Ellison’s share was $958,800. The money was in their Standard Chartered accounts in Hong Kong by the next day.

There were further cash transfers to the five men, according to the ATO.

In August 2008, with new anti-money-laundering laws coming in, Boardroom notified the MinRes executives that they were no longer willing to house the five sub-accounts.

“Under advice from Boardroom Corporate Services the individual accounts had to be closed,” one of the executives advised the others in a handwritten note seen by AFR Weekend. “All the monies have been transferred back to FEEHL. Individual accounts have now been set up within FEEHL (see attached for details of your account).

“Authority is given that any individual can operate on his own individual account without the approval or reference to anyone (see attached – I leave it to you should you wish to set up a password).”

FEEHL closed its own account at Standard Chartered and opened a new one. Boardroom would administer “child accounts” for each of the new five executives within the new account. And everything was back to normal.

Meanwhile, the ATO completed its audit of Ellison’s personal tax affairs, finding he owed a modest amount of money – some say it was as low as $20,000. He told colleagues he counted this as a victory.

The ATO position paper does not detail any records for FEEHL after 2009. The company was deregistered in 2014.

But according to the ATO’s calculations, based on documents provided by Ellison, in MinRes’s first three years as a public company it made regular payments to FEEHL from which the British Virgin Islands company earned $6.6 million in profits. These profits were split between the five executives. Ellison’s share was $3.38 million.

This does not include multiple transfers from FEEHL to International Mining Suppliers, and to World Wide Infrastructure in Australia.

The Tax Office documents refer to a total of $13 million in undeclared income associated with the British Virgin Islands scheme, which appears to include MinRes’s claims for depreciation on the inflated purchase prices.

Staying ahead of the game

None of this might have come to light, but in December 2019 Mineral Resources executives began to worry that details of the British Virgin Islands companies might be exposed.

Ellison turned to well-known Sydney tax accountant Christopher Batten.

Correspondence shows that on December 16, 2019, Batten met with a director of integrated compliance at the ATO and two other tax officers to discuss a voluntary disclosure by five taxpayers OF undisclosed offshore income. Under Australian law, voluntary disclosures of undeclared income qualify for an 80 per cent reduction in any penalties that apply.

A month later Batten nudged the tax officer: “I hereby request a letter outlining the Commissioner’s agreement not to refer a disclosure that my clients intend to make to law enforcement agencies as well as other Federal Government agencies,” he wrote on January 14, 2020.

“The agencies are to include but not limited to the Australian Securities and Investment Commission, the Australian Federal Police and the office of the Director of Public Prosecutions.”

On February 4 the ATO wrote back to Batten: “The Commissioner will agree not to refer the disclosure to other Government agencies subject to the following conditions …”

These included the absence of any current criminal investigation, and that the five executives would disclose “approximately $10 million in income from Hong Kong previously not disclosed by five individuals resulting from transfer pricing concerning mining equipment; the excess depreciation claims of companies in relation to the mining equipment acquired from Hong Kong; [and] a finding of evasion resulting in amended notices of assessment for the years 2005-200? [sic]”

There was a lot at stake. ATO documents suggest that without the disclosure discount, a 75 per cent penalty could be applied to the unpaid tax.

Based on initial estimates that the undeclared income totalled $7.5 million, the nightmare scenario was that Ellison and the other executives could have faced a tax bill of up to $17 million. This would include tax and penalties, but the biggest cost would be the interest accrued over a decade.

If the deal was agreed, however, the base penalty would be 80 per cent lower. This saving, which would also lead to lower interest costs, would cut up to $5.8 million from the total tax bill owed.

But as Ellison’s advisors gathered more documents and records, estimates of the undeclared income jumped from $7.5 million to $10 million, then to $13 million, which would have produced even higher tax, penalty and interest payments.

On February 24, 2020, Batten was asking again: “Are we any closer? I have some anxious taxpayers.”

It wasn’t until May 2021 that Ellison’s advisors delivered the first tranche of documents to the Tax Office, the clearest signal that a deal with the ATO had been struck. More documents followed in September, then January 2022.

AFR Weekend has been unable to independently confirm if the deal was actually agreed. Neither the ATO nor Ellison would comment.

The documents provided by Ellison are the basis for a 98-page summary paper prepared by the Tax Office this year, which provides granular detail of the FEEHL transactions, and highlights Ellison’s role in orchestrating the scheme. His name appears 53 times in the document.

The explosion in the MinRes share price since 2006 has created share market windfalls worth tens and for some hundreds of millions of dollars for the five executives.

In comparison, the proceeds from the British Virgin Islands scheme are small beer. It begs the question why men who were wealthy even back then would engage in something so risky.

For Chris Ellison, public scrutiny is part of running a listed company. Last month he shrugged off concerns raised by governance group Ownership Matters over an estimated $10 million earned by his daughter’s shipping agency, which MinRes requests shipowners use when carrying its ores.

“We’re a public company, we’re open to scrutiny . . . and I need to be held to account, there’s no doubt about that,” he told The West Australian.

Bear77

Added a month ago

Friday 15th November 2024: The Hits keep coming. We have another AFR article today (below), hot on the heels of the latest MinRes reply to another ASX "Please Explain" letter - which MinRes released after the market had closed yesterday - Response to ASX Compliance Letter - this one pertaining directly to compliance (or non-compliance) with ASX rules, specifically Continuous Disclosure obligations and more specifically the disclosure of related party transactions, regardless of their size and the financial impact that the MinRes Board believed they had on MinRes as a company...

I don't think the ASX is going to accept the MinRes argument that yes, they should have disclosed that stuff at the time, but no, they don't believe they need to amend anything now because they don't believe the dollar values involved were material. And because of that, they also don't think a reasonable person would consider that any of those matters constituted price sensitive information. Meaning, the MinRes Board is of the opinion that the market was operating in a fully-informed environment regardless of the fact that MinRes were failing to inform the market of matters that they were bound to report under the ASX listing rules.

It's also interesting that the MinRes Board claim that they reviewed the rents that MinRes were paying to entities that were either fully or part-owned by Chris Ellison, and that they came to the conclusion that the amounts being paid were fair and reasonable, i.e. NOT above market rates, which is a direct contradiction of the AFR's reporting of that last week. Fair and reasonable to who? Possibly not to MinRes shareholders if the rates were significantly higher than rents paid by other companies for similar properties.

Leaving aside those rents, because at least those WERE disclosed in the Annual Reports, and moving on to the non-disclosed related party transactions; I could be wrong, but the opinions of the Board as to the materiality of the matters in dollar terms make bugger-all difference to their disclosure obligations, so I would be surprised if the ASX drop this based on that response last night (link above) from the MinRes Board.

And now for today's drip-feed from the apparently ongoing AFR Investigation:

Investigation

The $45m MinRes property deal – with the Ellisons on the other side

Neil Chenoweth and Mark Di Stefano, AFR, Nov 15, 2024 – 5.00am

In the last weeks of May, as Mineral Resources began to struggle under a $4.4 billion debt load, the iron ore and lithium miner’s managing director, Chris Ellison, pulled out the company chequebook to do a deal worth tens of millions of dollars. It turns out he had personal skin in the game.

But the big investment in rezoned industrial land north of Perth would remain a mystery to shareholders, mentioned only in passing in the company’s annual report published three months later.

In that report, MinRes said it had acquired 49.04 per cent of the Northern Gateway Master Trust. It did not say any more, or how much the company had paid; only that it was valuing its stake at $17 million on its books.

The Australian Financial Review can reveal that MinRes paid $45 million for the stake in the Bullsbrook industrial park – the land owned by the trust – buying out Goldman Sachs’ Austreo Property Ventures.

Chris Ellison, MinRes’ managing director, and other investors in the Bullsbrook development project.

According to documents and conversations with past investors, the other 51 per cent of the trust is held by Northern Gateway Investments, a corporate vehicle majority owned by Mr Ellison and his wife Tia. Northern Gateway Investments’ other investors include former MinRes chairman Peter Wade and another former director, ex-Goldman Sachs banker Kelvin Flynn.

That MinRes spent $45 million buying a stake in an industrial property in which its managing director and founder was also shareholder is the latest in a string of transactions that have favoured Mr Ellison and his associates, revealed as part of an investigation by the Financial Review.

Earlier this week, MinRes admitted that an offshore tax scheme run by Mr Ellison and others – selling machinery to the miner at inflated prices – should have been disclosed to investors.

A long-running board investigation into that transaction and other issues related to Mr Ellison – also not disclosed until recently – resulted in the billionaire announcing he would step down in the next 18 months.

The company has sought to reassure investors about its governance – the group representing major industry superannuation funds has called for the board to invite the Australian Securities and Investments Commission to consider the issues raised – by describing Mr Ellison’s actions as “profoundly disappointing”. MinRes chairman James McClement is also leaving.

The MinRes board also said Mr Ellison had “confirmed” there were no other transactions, or “no matters not already known” to them that could influence whether he is a “fit and proper person” to be managing director.

The company told some investors this week that inquiries were continuing, and said that “the historical processes in place” to manage related-party transactions were “not as robust as they could have been”.

But the purchase of a stake in Northern Gateway, the joint owner of the industrial property with Mr Ellison, only happened in May.

Goldman Sachs declined to comment.

A MinRes spokesman said the group had been “pursuing the development of strategic industrial land near transport corridors in the Bullsbrook area for a number of years to better accommodate the company’s growth”.

“As part of that strategy, MinRes acquired ordinary and preference shares of Northern Gateway Master Trust for $45 million from Austreo Property Ventures Pty Ltd, which is an unrelated third party,” he said.

The land owned by Northern Gateway has been part of a decade-long dream to build a $1.2 billion transport infrastructure on Perth’s outskirts.

In 2014, Kelvin Flynn’s Sirona Capital acquired 186 hectares of rural land that had been rezoned for industrial use near Bullsbrook, north of Perth’s CBD.

Mr Flynn, a former Goldman Sachs banker who would later become a longstanding MinRes director and chair the board’s audit committee, promoted the site as a future intermodal freight terminal.

It took a certain breadth of vision to see the future. The land sits at the end of the runway of Pearce RAAF base, which means there is a height limit on buildings at the site and continual aircraft noise.

Mr Flynn was unfazed. Containers unloaded from the port in Fremantle would go by rail to Bullsbrook and would be loaded onto trucks heading north on the new NorthLink WA highway that will connect to Darwin.

To turn the dream into reality, Mr Flynn needed backers. He convinced Mr Ellison, MinRes executives and others to invest $15 million into the project, then structured as the Sirona Gateway Investment Unit Trust.

But the big fish was Mr Flynn’s former employer, Goldman Sachs, and its subsidiary Austreo Property Ventures. In November 2015, Austreo agreed to invest $45 million into the site and a second site further north, at Muchea.

When Goldman Sachs came on board, Mr Flynn restructured the holdings. The units held by the MinRes executives and others were exchanged for shares in Northern Gateway Investments. Mr Ellison ended up with 58.6 per cent of Northern Gateway Investments, while his wife Tia held 3.4 per cent.

This company would hold 50.96 per cent of the units in the newly created Northern Gateway Master Trust, with Austreo holding the remainder.

As the years passed, and with the land still undeveloped, the Ellisons gradually increased their stake in Northern Gateway Investments. They ended up with 67.7 per cent. Former chairman Mr Wade held 23.1 per cent, which meant the combined holdings would reach just beyond 90 per cent.

On the other side, Goldmans’ Austreo held 49.04 per cent of the master trust. It would pay $27.9 million for preference units which acted like debt.

And that’s where it stayed for eight years.

Last year, the West Australian government finally ruled against the unsolicited proposal for an intermodal container terminal. Bullsbrook was judged too far from the port – it would take trains an hour to get there before the containers could be put on trucks. Documents show that Goldman Sachs wrote down Austreo’s investment in the trust.

Still, there was a flurry of construction on roads and concrete surfacing.

Mr Ellison’s hands were tied given Austreo’s bearish view on the development. The agreement between the parties meant they all had to agree before any more work was done. And Austreo’s preference shares fell due in 2026, something that could have diluted Mr Ellison’s stake.

So a buyer was found for Austreo’s stake, one that still believed in the vision of turning the site into a big development.

On May 20, MinRes committed to buy out the Goldman Sachs venture. At the time, even with the company’s share price at a year-high level, investors and analysts were already beginning to grumble about MinRes’ big debt pile.

The purchase of Goldman Sachs’ share landed in a way that minimised its size. The MinRes annual report showed the ordinary units that it acquired as the equity accounted value of the deal, $17 million. The company treated the $27.9 million spent to pay out Austreo’s preference units as debt.

“The preference shares have a fixed maturity date of 28 February 2026 and therefore are treated as a financial asset (loan receivable to MinRes) under AASB-9, with ordinary shares treated as an equity accounted investment under AASB-128,” the MinRes spokesman said.

“MinRes discloses individual transaction values for material corporate transactions. The acquisition is not considered material as it represented 0.4 per cent of total assets at 30 June 2024, while the equity component was disclosed in the 2024 Annual Report as an interest in a joint venture.”

What the accounts never disclosed were the identities of those already in the Northern Gateway Trust. The $45 million buy-out of Austreo, taking on its debt-like preference units, was a financial coup for Goldman Sachs.

And for Mr Ellison.

More from the MinRes investigation

Chris Ellison’s offshore secret An investigation has uncovered how Mineral Resources chief executive Chris Ellison, one of Australia’s richest men, allegedly evaded tax for years.
MinRes scheme enriched execs, allegedly at investors’ expense Peter Wade failed to disclose his interest in Chris Ellison’s tax evasion scheme, which cost shareholders more than $7 million.
Chanticleer | ASIC eyes Mineral Resources as Ellison circles the wagons The regulator is now taking an interest in the crisis, even as investors have been reassured by the company’s explanations.
Rear Window | Chris Ellison, hubris? That’s for someone else If the Dark Lord of Dunedin is a rotten Scrabble player, well, his chairman is all word salad.
MinRes sold Chris Ellison farm equipment at steep discount The company’s managing director and another director bought the machinery for their New Zealand property at a bargain price.
Chanticleer | ‘Inconsistencies’ in Ellison investigation will haunt MinRes board A week after declaring their confidence in their founder, directors are suddenly singing a very different tune.
MinRes paid a 70pc mark up to rent Chris Ellison-owned properties Valuations the owners of the industrial facilities commissioned indicated that the leases were well in excess of market rates.

Correction —An earlier version of this story stated that MinRes valued its stake in the Northern Gateway Master Trust at $18 million. The correct figure is $17 million.

Neil Chenoweth is an investigative reporter for The Australian Financial Review. He is based in Sydney and has won multiple Walkley Awards. Connect with Neil on Twitter. Email Neil at [email protected]

Mark Di Stefano is Rear Window columnist, based in the Sydney newsroom. He previously worked at BuzzFeed, the Financial Times and The Information before joining the Financial Review as a media and tech correspondent. Connect with Mark on Twitter. Email Mark at [email protected]

--- ends ---

There's every reason to assume that this ain't over yet.

Disclosure: Not held.

Bear77

Added a month ago

Also on Friday 15th November 2024, in the afternoon:

MinRes flags role in related-party rent relief scheme

Mark Wembridge, AFR Resources reporter, Updated Nov 15, 2024 – 4.53pm, first published at 12.21pm (on Nov 15th)

Mineral Resources has admitted that it should have informed shareholders about a decade-long rental relief scheme involving companies linked to the daughter of billionaire founder Chris Ellison.

The beleaguered ASX-listed miner said the rental relief scheme that benefited companies associated with Kristy-Lee Craker between 2012 and 2023 was considered related-party in nature, and that shareholders should have been told of its existence.

The Australian Council of Superannuation Investors – which represents the country’s largest pension funds – called on MinRes to offer more details after The Australian Financial Review separately reported on MinRes’ $45 million investment in rezoned industrial land north of Perth, and the deal’s personal links with Mr Ellison.

“This is yet another concerning revelation. It leaves investors asking – who signed off on the transaction? The board must provide a clear response,” said Louise Davidson, ACSI chief executive.

MinRes defended its historical silence on rent relief by suggesting that the board considered the scheme “not materially price sensitive, particularly given the quantum involved, as well as MinRes’s ability to seek repayment”.

“Accordingly, MinRes did not consider that there was a requirement to make retrospective disclosure in the annual report for 2022-2023,” MinRes said in response to queries from the ASX.

MinRes said the companies that benefited from the scheme were required to repay $158,000, which the miner said was “calculated by applying the annualised rent value at estimated prevailing rates by the number of years for which the rent relief was in place”.

MinRes approved rental payments totalling $32 million to Mr Ellison and other co-owners of commercial properties, and denied that it had paid above market prices.

“The board conducted a rigorous process in 2024 to understand whether the current rental arrangements are at a fair market value and is satisfied that this is the case,” it said.

The miner said it would continue to investigate Mr Ellison’s use of company resources for his personal benefit, such as demanding MinRes staff work on his $30 million boat, his mansion and his personal finances.

MinRes also admitted that it had “procured goods and services on behalf of Mr Ellison for his personal benefit”, but reasoned that this was above board because “procedures existed to obtain timely repayment from Mr Ellison for these goods and services”.

The admissions are the latest in a string of revelations from MinRes, Australia’s largest crushing contractor and a major lithium and iron ore producer.

The company has been pressured by shareholders, proxy advisors, superannuation funds and market authorities over a corporate governance scandal that enriched Mr Ellison and several executives at the expense of the company.

The Australian Securities and Investment Commission launched an investigation into the allegations, and the scandal has claimed the scalps of its managing director and chairman, who will both step down within the next 12 to 18 months.

MinRes shares, which have lost half their value in 2024, closed down 5 per cent at $35.53 on Friday.

--- ends ---

Meet Chris Ellison’s personal accountant

Yenna Ong, the number cruncher who managed the Mineral Resources founder’s private affairs, rapidly gained great power. Then just as suddenly, she was gone.

Yenna Ong has resigned from MinRes after being confronted by directors over her personal work for the company’s founder Chris Ellison (right). Michaela Pollock

Neil Chenoweth, Senior writer, AFR, Nov 9, 2024 – 5.00am

The eyes are compelling, the smile carries a hint of mystery, but most of all the full-page studio portrait in the Mineral Resources 2023 annual report underlines the power that Yenna Ong wielded in the iron ore and lithium mining giant.

It’s a name few outside the company know. But Ong had the showcase treatment in the annual report given to members of the miner’s top executive team, intermingled with photos of a dozen Indigenous elders, all with inspirational quotes.

“Leadership means staying grounded but always keeping an eye to the future” was Ong’s contribution. And there’s a second picture of the director of international trade and strategy in a hard hat at the back of the report.

Ong is not just head of shipping and marketing. She is an accountant – the accountant, who manages MinRes founder Chris Ellison’s personal affairs from her office on level nine at the group’s Osborne Park headquarters, complete with a purpose-built document storage room that is kept locked.

She is also the first executive casualty in the governance crisis that has enmeshed MinRes and forced its directors to announce last Monday that Ellison would step down as chief executive in the next 18 months.

Ong was nowhere to be found in the 2024 annual report released two weeks ago. AFR Weekend can reveal she resigned from MinRes after directors confronted her over her personal work for Ellison.

The board had learned that in addition to her MinRes salary, Ong had a second employment contract, earning hundreds of thousands of dollars for managing Ellison’s private business.

While announcing Ellison’s exit last Monday, chairman James McClements said he would also step down before next year’s annual meeting. The announcement came two weeks after AFR Weekend’s revelation that Ellison and four other senior executives operated an alleged tax evasion scheme from 1993 to 2014, costing shareholders millions.

The five men are accused of selling machinery to the company at huge mark-ups through a British Virgin Islands company, Far East Equipment Holdings Limited, before cutting a sweetheart with the Australian Taxation Office in return for disclosing $6.7 million in unreported profits.

The news wiped 25 per cent off the group’s share price before the stock rebounded. It’s currently down 16 per cent.

Further Financial Review reports showed that MinRes was paying nearly $1 million a year, or 70 per cent above market rates, for four properties leased from Ellison and other executives since 2006. In 2017 MinRes sold machinery to a luxury New Zealand property, Halfway Bay Station – owned by Ellison and fellow director Tim Roberts – allegedly for well below current value.

After initially reporting on October 21 that “the board has full confidence in Mr Ellison and his leadership of the MinRes executive team”, last Monday directors said that Ellison had failed to be forthcoming with the board, had not acted with integrity, had not made timely disclosures of potential conflicts of interest, and had used company resources for his personal benefit.

The board confirmed many of the allegations made in an anonymous whistleblower’s complaint made in June 2022, which claimed that much of Ellison’s lavish lifestyle had been “paid for at the expense of MinRes shareholders”.

Directors said Ellison will repay $3.79 million that MinRes paid to the British Virgin Islands company Far East, donate $5 million to a charity over five years, and forfeit $6.5 million in long-term incentives that proxy advisers say had been unlikely to vest.

The board’s catalogue of Ellison’s misuse of company resources included “directing a company employee to manage his personal finances”.

McClements told fund managers on a telephone hook-up on Wednesday that the board recently “confronted” an unnamed executive, and told them that they had to choose between working for Ellison and working for MinRes.

In response, the employee handed in their notice, but for the moment continues to work on “mission-critical” matters. MinRes sources confirmed that the executive was Ong and that she had resigned.

It’s a stunning reversal for Ong, whose brief as Ellison’s corporate “fixer” went well beyond shipping and marketing. When Ellison needed someone to act for him for his property plays or his barramundi farm in the Northern Territory, Ong was his representative. When MinRes sold machinery to Ellison’s Halfway Bay Station in April 2017, it was Ong who organised for it to be shipped to Dunedin on a bulk carrier named Himawari K.

A shipping agent tells The Australian Financial Review that shipping costs for such a package would typically run to $250,000, raising questions about why Halfway Bay Station did not buy the machinery in New Zealand. MinRes did not respond to questions about whether the group had paid for the cost of Himawari K.

Ong was not part of the offshore tax evasion scheme operated by Ellison and four other founding executives from 2003 to 2014, which has engulfed the group in a governance crisis. But she did receive a personal, unrelated mention in the June 2022 whistleblower complaint that the company says first alerted directors to the offshore scheme. Additionally, the complaint focused on the MinRes ship chartering operation.

A 2022 investigation for MinRes by Herbert Smith Freehills concluded that the complaint against Ong was not substantiated. The complaint did not hinder her smooth path to becoming one of the group’s key executives.

In December 2022, as her role at MinRes expanded, Ong set up her own company, Cacti Consulting Pte Ltd, in Singapore. Three months later, she joined the boards of new MinRes subsidiaries VP Minerals, Norwest Energy and Westranch Holdings Pty – and in China, she set up two new MinRes companies, Ningbo Greensko Lithium and Greensko Lithium (Jiangsu) Co Ltd, with combined registered capital of $US80 million.

In her shipping role, Ong has grown close to Chinese giant Cosco. On July 17 this year, she was at the Dalian Cosco Shipping Kawasaki plant to name two 82,000 deadweight tonnage bulk carriers with another Cosco executive, Xue Xiaobei. In September 2018, Ong was named “godmother” of another Cosco 400,000 deadweight tonnage carrier, the Yuan Yi Hi, at its launch.

It’s been a heady rise since Ong moved to Australia in 2004. Up to that point, Singapore corporate records show, Ong’s history had been more chequered – which is how she came to be mentioned in the whistleblower complaint filed in June 2022.

The complaint made a range of allegations against Ellison and other senior MinRes executives – including the offshore tax scheme and the above-market rate rents. In Ong’s case, the complaint referred to a $6 million fraud case before the courts in Singapore in which she became embroiled.

In 1992, Ong was sentenced to six months in prison in Singapore for helping a company director misappropriate $S282,000. Her conviction was overturned by Singapore’s High Court a year later, which found that while Ong had pleaded guilty, the prosecution’s statement of facts failed to include critical details.

Later the young accountant was joined as a party in a civil case brought by a PwC liquidator that dragged on past the year 2000. This saw the court award $S5.2 million in damages against Ong’s former boss for fraudulent conduct, which included false invoices that Ong had unwittingly signed.

How did it come to this?

In 1989, Ong joined Hong Lam Marine, owned by chief executive Lim Teck Cheng. Lim was expanding from refuelling ships (known as bunkerage) to building small bunker tankers for oil companies such as Shell, through a new entity set up in mid-1989 called Wyno Marine, in which Lim held a 42 per cent stake.

Ong, as accountant for the group, was appointed to the boards of Hong Lam in September 1989, Wyno Marine in November, and Hong Lam Chartering three months later.

But Lim had a cash problem. He had a contract to produce a $S4.2 million bunker tanker, but the finance firm insisted Hong Lam commit $S500,000 of its own money – money that the company did not have.

The answer, which unfolded in June 1990, was that Lim would tap Wyno Marine’s money. On Lim’s instruction, Ong, as an officer of Wyno, unwittingly signed two bogus purchase orders for Lee & Kong Engineering Works.

Lee & Kong then invoiced Wyno for the fictitious work. Ong raised a payment voucher, which Lim signed, and the money went from Wyno to Lee & Kong, who promptly handed it back to Lim Teck Cheng. Ong’s boss told her to deposit the money in Hong Lam’s account marked as a loan from Lim.

Lim repeated this process with another set of false invoices, which did not involve Ong. She said that when she left the business in March 1991, she became aware of the fraud and urged Lim to repay the money, though he never did. Wyno went into liquidation eight months later.

In May 1992, Ong pleaded guilty to abetting fraud and was sentenced to six months in prison. She was released on bail of $S15,000 after she appealed.

In February 1993, Chief Justice Yong Pung How found that the facts presented by the prosecution after she pleaded guilty did not show that she had intentionally committed the offence. He said while “the activities described seem undeniably highly suspect … [it] cannot make up for an improperly drafted charge or statement of facts”.

Nine months later, Lim was convicted of making a misleading statement to Wyno’s auditors and fined $S10,000. However, in 1996, PwC liquidators appointed to Wyno brought a civil case against Lim. Court records show that Ong was added as a party to that case.

In 1999, the high court awarded $S5.2 million in damages against Lim for a series of fraudulent acts.

Ong was not found responsible for any of this, some of which took place after she left her job.

A MinRes spokesman in September dismissed questions about the case: “The legal matter you raise from 32 years ago in relation to Ms Ong was resolved more than a decade before she joined MinRes and has no relevance to her role with our company.

“The High Court of Singapore dealt with the matter in 1993 and Ms Ong was cleared of any wrongdoing.”

Ong said she did not know about the $S5.2 million judgment against Lim or that she was named in court documents as a party to the case, which continued into 2000 – or even that she had been a director of Hong Lam Marine.

Ong, by now 39, moved to Australia and in September 2004 joined Process Minerals International (one of the three core businesses that became MinRes). Her job as accountant quickly expanded to include arranging ship charters to carry ore.

Secrecy over maritime contracts is standard throughout the industry – and is reflected in MinRes’ shipping documents from 2014 obtained by the Financial Review. The Maritime Anti-Corruption Network, a governance network that includes more than 200 global shipping industry groups, stresses the importance of transparency and due diligence in the sector.

Pandora Papers, a 2021 leak of offshore documents obtained by the International Consortium of Investigative Journalists, revealed bank letters of credit covering sales of iron ore from Rio Tinto, Fortescue and MinRes to Chinese steelmaker Du Shuanghua through its Singapore hub, Bright Ruby Resources.

The conditions in the letters of credit are identical for the three Australian miners with one exception. Mineral Resources’ sale price and trade terms could not be disclosed: “All documents except drafts, invoice must not indicate L/C No [letter of credit number], L/C issuing date, name of bank, Invoice No., unit price, value of goods and trade terms.”

The reason for this extra layer of secrecy isn’t clear.

In the last four years, MinRes has spent $1.4 billion on shipping costs. “MinRes has a process in place to ensure its shipping arrangements are in line with the market, and at commercial rates,” a company spokesman said.

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Source: https://www.afr.com/companies/mining/meet-chris-ellison-s-personal-accountant-20241107-p5kopt [9-Nov-2024]

MinRes saga exposes ESG’s existential crisis (and here comes Trump)

Scandals at Mineral Resources and WiseTech raise hard questions for investors who care about governance and culture. Now Donald Trump’s win raises existential problems for ESG.

When push came to shove at MinRes, it’s clear many investors prize the returns Chris Ellison could deliver over governance concerns. Left to right: MinRes’ chairman James McClements, founder Chris Ellison and L1’s Raphael Lamm. Harry Afentoglou

Patrick Durkin. AFR BOSS Deputy editor, Nov 9, 2024 – 5.00am

When Vas Kolesnikoff began writing his advice to investors on how they should vote at this month’s general meeting for the crisis-torn Mineral Resources, he faced a dilemma.

Yes, the chief executive Chris Ellison involved the company in a decade-long tax evasion scheme; enriched himself from a series of related party transactions; told staff to work on his personal properties and boat; but shareholders don’t get to vote on him directly.

You could argue the buck stops with MinRes chairman James McClements, but he is not up for re-election either.

The two directors who are up for election at the November 21 meeting are both new: former KPMG partner Denise McComish and the former BHP executive Jacqui McGill. They were not a part of the board who were made aware of this scandal as early as June 2022.

Investors can protest over the company’s remuneration report and the $8 million of bonuses paid to Ellison – and Kolesnikoff’s global proxy firm, Institutional Shareholder Services (ISS), has urged MinRes investors to do just that – but the vote is non-binding and doesn’t change much.

Ellison and McClements agreed on Monday to step down within 18 months and 12 months respectively, following a review by Herbert Smith Freehills and reports of the tax evasion scandal, first revealed by AFR Weekend.

An investigation by the corporate regulator and a Moody’s downgrade on Friday will add to pressure for more board changes.

Still, the company spun their exits as a major mea culpa. The Perth billionaire who founded the $7 billion company and remains its largest shareholder was “deeply sorry”, will forfeit bonuses worth up to $9.8 million, and will make charitable donations totalling $5 million.

But ISS says the “financial penalties” are a joke because the bonuses had little to no chance of vesting and the board had recently paid more than $8 million in bonuses to Ellison which it isnot clawing back.

It follows a series of long-runway exits designed to take the heat out of a scandal, such as the 12-month departure of Richard Goyder as Qantas chairman; Lendlease chairman Michael Ullmer’s five-month departure; and WiseTech’s Richard White’s transition from founder to consultant – with a 10-year contract.

Debby Blakey, who heads the $88 billion HESTA super fund, which owns 0.83 per cent of MinRes, announced on Friday it was putting MinRes on a “watch list”, along with Woodside Energy and Santos.

“We are very concerned about the CEO exit timetable but more broadly, the systematic governance failures at board level are extremely concerning,” Blakey says.

But when push came to shove over MinRes, it was clear that many investors prized the returns Ellison could deliver over governance concerns. The share price has risen more than 500 per cent in recent years, from under $15 in 2019 to touch $90 in early 2023. It fell 10 per cent to almost $30 on news Ellison was leaving on Monday.

Ellison’s friend and fellow billionaire client Gina Rinehart’s $1 billion plus deal with MinRes this month was also seen as a big vote of confidence in the CEO.

L1 Capital, the Melbourne hedge fund that owns 6.5 per cent of MinRes, has publicly urged Ellison to stay.

“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,” L1’s joint managing director Raphael Lamm said.

Another influential proxy adviser, Philip Foo from CGI Glass Lewis, has recommended in favour of the resolutions for the MinRes AGM.

Foo says he understands investors’ dilemma in weighing up environmental, social and governance (ESG) concerns with returns – particularly in relation to founder CEOs such as Ellison, White or Tesla’s Elon Musk, where Australian chair Robyn Denholm defended Musk’s $US56 billion pay packet as necessary to keep him motivated.

Add to that, most of the directors have been vetted by the founder who has usually helped to make them rich.

“You have to weigh up what’s in the best interests of shareholders, ESG and otherwise,” he says.

“I can understand the to-ing and fro-ing when it comes to founder CEOs, at other companies you can change the management – with much less direct impact on the investment case.”

He also says that not all governance scandals are created equal. “If a CEO is being dodgy for tax reasons, I think that is quite different to a mining company losing its social licence after blowing up an indigenous site,” he says.

It can also be near impossible for investors to work out what is really going on inside the company given the black box that is the country’s top corporate boardrooms; former WiseTech director Christine Holman resigned from the tech company’s board over her concerns in 2019, although no one knew why at the time.

Foo says that sometimes you just have to pick the target in front of you. “There is a logic that if you think the response is inadequate, you consider piling on pressure through director re-elections. Sometimes you have to pile pressure on the board.”

Proxy firms such as ISS can move up to 20 per cent of the vote alone. Its recommendation against Nine’s chair Catherine West, over the company’s cultural issues, triggered a 17 per cent protest vote on Thursday.

Kolesnikoff says most investors will give the companies the benefit of the doubt because it is not in their interests to create a bloodbath. “It is not usually in their interest to be kicking out CEOs and chairs,” he says.

He says if the whole board was up for re-election as in the US and UK, there are directors they would recommend against. It is something he would like to see in Australia’s governance framework.

But he says it also highlights the importance of investors, such as HESTA, the Australian Council of Super Investors, and proxy advisers such as Ownership Matters, working behind the scenes.

Taurus Funds Management’s Gordon Galt, an ex-managing director of Newcrest Mining, finds the hypocrisy of the investors when it comes to executive wrongdoing a bit hard to stomach.

“If a general manager at one of their sites got a kickback, they would be sacked and walked out in the blink of an eye,” Galt says.

Another big reckoning for ESG

Chris Ellison and Richard White have put a spotlight on ESG. David Rowe

More broadly, the MinRes and WiseTech sagas have sparked the old debate about whether “money talks and ESG walks” when the two come into conflict.

The entire ESG investing industry, which really took off after the Paris climate agreement, is facing an existential crisis amid a conservative political wave, which is certain to grow only more powerful with the return of Donald Trump to the White House.

In the first three months of 2023, $40 billion was withdrawn from ESG focused equity funds globally. The funds themselves had delivered returns of just 11 per cent, lagging the 21 per cent gain of conventional funds, according to The Global Treasurer.

Another fund manager, who asks to remain anonymous largely because his employer has its own ESG fund, says ESG funds are “not having a good time of it”.

“It was meant to result in as good or better returns, but history has shown that to be complete rubbish,” he says. He is frustrated at the “hypocrisy and contradictions” of ESG investors.

“South32 had a hard time getting mining leases approved for its Worsley refineries,” he cites as an example. “One of the impediments was the WA government department imposing offsets for scope 3 emissions in China.

“It could have forced the closure of the Worsley refineries, which have about half the emissions of comparable refineries in China. It was a classic case imposing ridiculous costs on relative clean supplies, despite being harmful for overall global emissions.”

There are also big political factors in play. This year’s European Union parliamentary elections marked a significant shift towards right-wing and nationalist parties that have thrown the EU’s ambitious ESG agenda into doubt.

Now the election of Trump in the US, where the ESG culture wars were already a major battleground, is expected to drastically shift the goal posts.

Trump has already hinted the Securities and Exchange Commission would likely curtail rules on climate disclosure, and former Republican candidate and biotech billionaire Vivek Ramaswamy is among the possible names being discussed to head the regulator.

If the Coalition were to win the federal election in Australia next year, it has also signalled its disdain for much of the essence of the ESG movement.

But Blakey, in The Hague for the World Pension Summit this week, remains supremely confident that ESG will outlast Trump and other sceptics.

“We are long-term investors and the short-term political sector does not change our view that corporate governance matters,” she says. “It can significantly impact the value of a company, and we are certainly seeing that in Australia right now.”

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Source: https://www.afr.com/wealth/investing/minres-saga-exposes-esg-s-existential-crisis-and-here-comes-trump-20241107-p5koo9 [9-Nov-2024]

MinRes mess shows money talks, ESG walks

Shareholder support for Mineral Resources to retain Chris Ellison suggests a limit to the zeal with which institutional investors adhere to ESG principles.

AFR Chanticleer, Nov 6, 2024 – 12.02pm

As my Chanticleer colleague, Anthony Macdonald, likes to say, it’s never the E in ESG that plunges a company into crisis, but the S and the G.

Who’s the last CEO to lose their job for an environmental disaster in Australia? But every single corporate mess of the past decade – the banks in the royal commission, the casino companies, PwC, Qantas, and now WiseTech and Mineral Resources – has come down to either a loss of social licence, a failing of governance, or both.

MinRes founder Chris Ellison will still be at the company into 2026. David Rowe

So you’d think investors would be acutely aware of the damage a social or governance crisis can do to the value of a company. And usually they are. There are very few traditional activist campaigns in this country – that is, campaigns designed to boost a sagging share price – that don’t involve some angle on board renewal and improved governance and accountability.

Often these pushes to improve governance are pitched as part of the broader focus that institutional investors have on ESG issues. There would be very few institutional investors in this country that don’t claim to have embedded ESG principles into their broader investment approach.

After all – or so the argument goes – good ESG investing is just good long-term investing.

But based on what we’ve seen play out at MinRes and, to a lesser extent, WiseTech in recent weeks, there appears to be a limit to the zeal with which our institutional investor class pursues good governance.

That the co-founders and chief executives of these two companies – Chris Ellison at MinRes, and Richard White at WiseTech – will stay on at the apparent behest of investors is surely a blow to the ESG credentials of the broader market.

It suggests there are still moments when money talks, and ESG walks.

Several institutional investors high on the MinRes register, including L1 Capital and Airlie, have detailed ESG policies on their website; the latter follows the United Nation’s principles for responsible investing.

Of course, the superannuation funds – and AusSuper is a major holder of both MinRes and WiseTech – have even stronger ESG commitments and larger ESG teams.

On Monday, after Ellison was allowed to remain at the helm of MinRes for 18 months, AusSuper released a nothing-burger statement suggesting there was more work to be done to improve governance. But the statement avoided any mention of Ellison, who has created the governance disaster – and will still be around well into 2026.

No one is suggesting that following good ESG principles is about cutting and running when bad things happen. Indeed, good investors with a long-term approach that encompasses ESG investing lean into problems and try to fix them.

But surely ESG is about consistency. While these are often nuanced issues, you can’t say poor governance is OK because you think it’s going to make you money.

That’s not long-term thinking, and it’s not what you promise your clients and your members in those ESG policies. Institutional investors either believe in this stuff, or they don’t.

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Source: https://www.afr.com/chanticleer/minres-mess-shows-money-talks-esg-walks-20241106-p5kocx [6-Nov-2024]

Bear77

Added a month ago

Moody’s downgrades MinRes as big investors demand board overhaul

[AFR, Mark Wembridge, Resources reporter, Friday Nov 8, 2024 – 9.16am]

Credit ratings agency Moody’s has cut its outlook for Mineral Resources to negative, citing the “potential negative implications of ... corporate governance issues” for downgrading the lithium and iron ore miner.

The downgrade will pile more pressure on the West Australian company’s board as it attempts to restore investor confidence after a tax scheme scandal that resulted in its billionaire founder Chris Ellison agreeing to stand down as managing director within 18 months.

Mineral Resources boss Chris Ellison will step down as managing director within 18 months.

The rating agency also cited concerns over elevated capital spending and weak lithium prices for the downgrade. “The change to negative reflects Moody’s expectation that leverage will remain high and above Moody’s … tolerance level for the rating over the next 12 months,” it said.

The “negative outlook also reflects expectation for negative free cash flow over the next 12 to 18 months”, the agency’s analysts said.

MinRes is the country’s largest crushing contractor and a major lithium and iron ore producer. It will sell its big gas development business to billionaire mining mogul Gina Rinehart’s Hancock Prospecting for $1.1 billion.

The downgrade comes as market regulators formally begin an investigation into MinRes and Mr Ellison’s conduct. A board review earlier this week found this conduct had a “significant reputational impact” and Mr Ellison had “failed to be as forthcoming with the board as he should have been”.

MinRes chairman James McClements will also leave within a year.

The Australian Financial Review reported last month that Mr Ellison and other senior figures had enriched themselves through an offshore tax scheme that sold equipment to MinRes at inflated prices.

ASIC deputy chairwoman Sarah Court said the watchdog had begun an investigation into MinRes. Penny Stephens

Mr Ellison reached a secret deal with the Australian Taxation Office to repay profits he made through the scheme registered in the British Virgin Islands.

The board review also found that Mr Ellison had asked MinRes staff to work on his private boat and industrial properties owned by Mr Ellison, charging MinRes rent at rates that were significantly above market.

Mr Ellison will refund $3.79 million to MinRes, lose this year’s $3.1 million bonus, and forfeit $6.5 million of unvested incentives due to the scandal.

Major investors have become increasingly concerned about the company’s governance standards. The Future Fund has asked its investment managers to discuss the issue with the board and report back.

The Australian Council of Superannuation Investors – which represents the country’s largest pension funds – said it had “serious concerns about the use of company resources for personal benefit, deleting company emails and related party transactions”, and urged MinRes to ask the corporate regulator to review these matters “to restore investor confidence”.

Sarah Court, the deputy chairwoman of the Australian Securities and Investments Commission, told a parliamentary hearing on Thursday that initial inquiries had turned into a formal investigation.

Industry superannuation giant Hesta has put MinRes in a special governance category for potential divestment. Hesta’s chief executive Debby Blakey said she was “very concerned about the CEO exit timetable but more broadly, the systematic governance failures at the board level”.

Influential proxy advisory firms that assist institutional investors in deciding which way to vote at annual meetings criticised the board for not clawing back more than $8 million of other bonuses paid to Mr Ellison and pushed for more MinRes directors to be dumped.

Mr Ellison and the MinRes board will face investors at the company’s shareholder meeting on November 21 in what is likely to be the billionaire’s first public appearance since agreeing to step down.

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MinRes board faces investor wrath for ousting Ellison

MinRes board faces investor wrath for ousting Ellison [updated]

Peter Ker, Mark Wembridge and Joanne Tran, Updated Nov 4, 2024 – 7.17pm, first published at 10.42am on that day.

The board of Mineral Resources faces a shareholder backlash after it said managing director Chris Ellison would step aside in 18 months following a review that found he had enriched himself at the company’s expense.

The billionaire MinRes founder’s exit will follow the departure of chairman James McClements, who vowed on Monday to step down in response to revelations about a British Virgin Islands tax scheme Mr Ellison and other senior figures at the company participated in.

The ensuing governance scandal had “significant reputational impact” on the West Australian lithium and iron ore miner, the board confessed.

Left to right: MinRes’ James McClements, founder Chris Ellison and L1’s Raphael Lamm. Harry Afentoglou

However, some of the company’s biggest backers say the board went too far. L1 Capital, the Melbourne hedge fund which owns 6.5 per cent of MinRes, wants Mr Ellison to stay at the helm, leaning on his history of value creation.

“As the largest shareholder in Mineral Resources after Chris Ellison, L1 Capital is supportive of strengthened corporate governance protocols and oversight. L1 Capital is supportive of Chris Ellison remaining as CEO with a more appropriate corporate governance structure in place,” said Raphael Lamm, its joint managing director.

“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.”

MinRes shares fell 9.6 per cent to $36.70.

“I think the negative share price response today is disappointment at the idea that Chris leaves the business in 12 to 18 months,” said Chris Prunty from QVG Capital, which owns MinRes shares. “We’d like to see Chris stay.”

That being so, Mr Prunty concluded: “The board has struck the right tone here. They haven’t sought to minimise or obfuscate Chris’ past behaviour and have put in place mechanisms to prevent a repeat in the future.”

The board’s decision was prompted by revelations raised by The Australian Financial Review last month. These included allegations that the BVI company on-sold machinery to the company at a mark-up, and that Mr Ellison and some of his executives charged above-market rates for industrial properties they privately owned and leased to the group.

The market regulator has confirmed a preliminary investigation into the alleged tax racket.

“There can be no doubt that the actions, decisions and behaviours of Mr Ellison have been profoundly disappointing and require sanction and penalty,” the board said in a statement.

“Mr Ellison has failed to be as forthcoming with the board as he should have been.

“There needs to be an orderly leadership transition, significant strengthening of governance protocols, and a financial penalty imposed on Mr Ellison.”

Financial penalties for founder

Mr Ellison will refund $3.79 million to MinRes, lose this year’s $3.1 million bonus, and forfeit $6.5 million of unvested incentives. He has also agreed to donate $5 million to charity over five years.

Mr Ellison is the latest founder to be shown the door due to their personal conduct, following the exit of WiseTech Global’s Richard White from the CEO role after he was accused of bullying and inappropriate relationships with women.

The board agreed that Mr Ellison had used MinRes resources for his personal benefit, including ordering company staff to work on his boat and properties, managing his personal finances and procuring goods and services for his private use.

Mr Ellison’s use of company resources did not cause “material financial detriment”.

The board also found that emails relating to the tax avoidance scheme were deleted in 2019 in “an attempt to avoid information … becoming public”.

MinRes was founded by Mr Ellison and has expanded from mining services to owning iron ore projects, lithium developments and energy assets. It has grown into a company with a market capitalisation of more than $7 billion.

Mr Ellison told the board he accepted its decision. “I am deeply sorry for the events that have occurred and the impact they have had on MinRes’ reputation,” he said in a statement.

“I apologise to the rest of the board and to our people, who expect and deserve better from me.

“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.”

Mr Ellison added he was “committed to the leadership succession that the board has announced”.

“I will work tirelessly to win back the confidence of investors,” he said.

AustralianSuper supports move

Industry fund AustralianSuper backed the board’s tilt at redemption, saying “the fund supports the board’s initial response to these failings”, but declined to articulate its opinion of Mr Ellison.

“The decision taken by chair James McClements to step down and for a new chair to be appointed in the near term is a positive step by Mr McClements and the board,” a spokesman said.

“However, there remains significant work to be done to improve governance standards at Mineral Resources so that it can return its focus to delivering long-term value to shareholders.”

AustralianSuper reduced its substantial shareholding in MinRes as the allegations related to the alleged tax dodge came to light.

In making its decision to sanction Mr Ellison, the MinRes board said it had to weigh “a high-performing, value-creating managing director” against “an array of governance issues”.

It hired Spencer Stuart to start the succession search.

The Australian Council of Superannuation Investors on Monday said it harboured “serious concerns about the use of company resources for personal benefit, deleting company emails and related party transactions” at MinRes.

“To restore investor confidence and ensure they have reached the right outcome, the board should be inviting ASIC in to review these matters,” it urged.

Analysts at Citi downgraded the stock to a sell rating and a price target of $35.

More from the MinRes investigation

Chris Ellison’s offshore secret An investigation has uncovered how Mineral Resources chief executive Chris Ellison, one of Australia’s richest men, allegedly evaded tax for years.
MinRes scheme enriched execs, allegedly at investors’ expense Peter Wade failed to disclose his interest in Chris Ellison’s tax evasion scheme, which cost shareholders more than $7 million.
Chanticleer | ASIC eyes Mineral Resources as Ellison circles the wagons The regulator is now taking an interest in the crisis, even as investors have been reassured by the company’s explanations.
Rear Window | Chris Ellison, hubris? That’s for someone else If the Dark Lord of Dunedin is a rotten Scrabble player, well, his chairman is all word salad.
MinRes sold Chris Ellison farm equipment at steep discount The company’s managing director and another director bought the machinery for their New Zealand property at a bargain price.
Chanticleer | ‘Inconsistencies’ in Ellison investigation will haunt MinRes board A week after declaring their confidence in their founder, directors are suddenly singing a very different tune.
MinRes paid a 70% mark up to rent Chris Ellison-owned properties Valuations the owners of the industrial facilities commissioned indicated that the leases were well in excess of market rates.

Peter Ker covers resource companies for The Australian Financial Review, based in Melbourne. Connect with Peter on Twitter. Email Peter at [email protected]

Mark Wembridge covers resource companies for The Australian Financial Review, based in Perth. He formerly worked for the Financial Times in London and Hong Kong. Connect with Mark on Twitter. Email Mark at [email protected]

Joanne Tran is a markets reporter for The Australian Financial Review in the Sydney newsroom. Connect with Joanne on Twitter. Email Joanne at [email protected]

Bear77

Added 2 months ago

Thursday 7th November 2024: https://thewest.com.au/business/asic/asic-launches-formal-investigation-into-chris-ellison-tax-dodge-scheme-with-mineral-resources-gear--c-16668740

ASIC launches formal investigation into Chris Ellison tax dodge scheme with Mineral Resources gear

Neale Prior

The West Australian

Thu, 7 November 2024 11:42AM

Mineral Resources managing director Chris Ellison. Credit: Ian Munro/The West Australian

The Australian Securities and Investments Commission has launched a formal investigation into allegations related to Mineral Resources founder Chris Ellison’s tax dodge scheme.

ASIC deputy chair Sarah Court told a Senate committee on Thursday it had launched the formal probe after having examined allegations outlined in media reports about Mr Ellison’s financial affairs.

Ms Court said ASIC already “has some engagement” with the Australian Taxation Office and “the investigation will follow the normal course”.

The ASIC [interest] has been triggered by media reports about a secret deal that Mr Ellison finalised with the ATO last year after voluntarily disclosing a scheme involving equipment sales through a British Virgin Island company.

That deal reportedly involved Mr Ellison being assured that information gathered through the voluntary disclosure process would not be forwarded to the Australian Federal Police or other regulators.

The MinRes board on Monday stunned investors when it released damning findings of a long-running, secret internal investigation that found “at times Mr Ellison has not acted with integrity” and he “failed to be as forthcoming with the board as he should have been”.

The board’s report on co-owned offshore companies that allegedly profited on equipment sold to the listed mining and services group.

This came a fortnight after Mr Ellison issued an apology over the scandal, saying: “I deeply regret and apologise for these actions, and have since ensured that I have put the matter right with the ATO”.

The billionaire described the failure to declare the revenue as “a poor decision and a serious lapse of judgment”.

He has agreed to step down within 18 months and pay a multimillion-dollar fine and donate $1 million [per annum] over five years to selected charities.

Mr Ellison told the ATO about the equipment rort in 2021 under voluntary disclosure provisions that give the offenders an 80 per cent discount on any of the normal penalties charged for non-payment of tax.

After probing senior tax officials about their dealings with Mr Ellison late Wednesday, Senator Barbara Pocock turned her attention to ASIC’s inquiring into allegations the MinRes founder was involved in tax evasion for more than a decade.

She said “real concerns exist about Mr. Ellison putting his personal financial interests ahead of shareholders”.

Having said a fortnight ago that ASIC was inquiring into the issues reported by media outlets, Ms Court said her agency had since commenced a formal investigation.

Ms Court said ASIC would liaise with the tax office and the consider using its compulsive evidence gathering powers.

“We will look at the information that we obtain, and then we will make an assessment as to whether or not we think there’s been any contraventions of the laws that ASIC administers,” she said.

When asked how she would characterise MinRes’s co-operation with her agency’s inquiries, Ms Court said it was “too early to give any comment about that”.

“It really is a matter of a week or so that we have had a formal investigation ongoing,” she said. “Potentially next time we’re before the committee, I might be able to give a bit more information, but things are at a very early stage.”

MinRes declined to comment on Ms Court’s evidence.

--- ends ---

MIN closed up +$1.21 (+3.25%) @ $38.46 today.

Disc: Not holding.

Bear77

Added 2 months ago

7-Nov-24: On a slightly different topic, but still on MinRes, after the market closed on Tuesday (Nov 5) MinRes released this: Change-in-substantial-holding-for-WC8.PDF which is a notice that their combined relevant interest in Wildcat Resources (WC8) had decreased from 19.85% to 18.82% (so by just over 1%) entirely due to WC8 issuing further shares, i.e. through dilution rather than MinRes selling any of their WC8 shares. Nothing noteworthy there except I was struck by the sheer length of their list of "MinRes Group Entities" in Annexure A, which runs for 5 pages, as follows:

Just an observation. Nothing illegal about having 107 subsidiaries, 101 of which have a registered address at either 14 or 20 Walters Drive, Osborne Park (shown in the Google Maps streetscape image below), and 23 of those having no registered company name other than their own ACN with "Pty Ltd" tacked on the end, but it does seem a little excessive. Good for making asset ownership a little harder to pin down, if you like a certain level of opaqueness.

Disc: Not held.

Bear77

Added 2 months ago

Monday 4th November 2024:

MinRes’ Chris Ellison finds another way to reduce his tax

Myriam Robin, AFR's Rear Window editor

Nov 4, 2024 – 8.40pm

Mineral Resources founder Chris Ellison has been known to fly a helicopter to work.

He lives in a palatial riverfront compound on the Swan River that when purchased for $60 million in 2009 broke Australian property records. He’s ridden out headlines in Los Angeles and the south of France. And last year he spent somewhere near $165,000 to host the prime minister for dinner (which he ended up doing in September this year).

Chris Ellison will depart as Mineral Resources managing director within 18 months. Trevor Collens

The point is he’s a billionaire in both number and deed. And yet has come undone, after using his public company to derive benefits worth … well, a fraction of his bottom line.

His greed is as perplexing as it is damning. And proves that when it comes to hustling for every dollar, the man really is a class above.

Even the company’s six-page mea culpa contains the seeds of more sharply considered negotiations.

Principally, it reveals the broad strokes of his misconduct, and how in response, the company is (eventually) moving him on.

More immediately, it is docking him millions. He’s giving up the possibility of achieving long-and-short term incentive grants (worth $6.5 million). He’s paying back a further $3.7 million derived from payments the company made to his offshore tax scheme. And a $3.1 million resolution due at the company’s next AGM is no more.

Giving Ellison a bonus for good work after all this would beggar belief. But Ellison is paying a further penalty, being a $5 million donation to an undisclosed charity staggered over the next five years.

Said charity, to be chosen in consultation with the board, will surely be an outfit reputable enough to offer tax deductions to patrons. The result of which will almost certainly be Ellison reducing his taxable income by roughly half the $5 million he intends to donate.

From a man who admitted to involvement in a British Virgin Islands tax scheme, we’d expect nothing less. And while there’s nothing in the least bit improper with the use of lawful and tax-deductible charitable donations to reduce one’s taxable income, it is a double blow for the Australian Tax Office, which hardly looks good in all this.

After all, it was approached in 2019 by Ellison’s tax advisers who offered to voluntarily disclose the scheme in return for an 80 per cent cut in penalties, as well as an assurance of no further referrals to other Commonwealth agencies.

Did it send him packing? Nup! The ATO did settle with Ellison, and Mineral Resources shareholders had to wait years for this to come out.

Clearly lessons were learned. Having played such a blinder on the ATO once already, having it forfeit part of the cost of his contrition seems the least Ellison could try.

--- ends ---

Ellison should leave MinRes, today. Investors gave him a reprieve [Nov 4, 2024 – 12.04pm]

Chris Ellison, hubris? That’s for someone else [24-Oct-2024]

Tuesday 5th November 2024: Here's what the ASX20 and our Aussie sectors have achieved today by mid-day:

Yet MinRes (MIN) is up +4.5% at 3:27pm AEST, swimming against the tide. Mind you, they did fall -9.6% yesterday.

There are buyers out there today, despite the ongoing revelations.

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