The position of chairman of the Australian Competition and Consumer Commission is powerful and one that produces many enemies among the business community. When the financial high-flyer Graeme Samuel took on the job in 2003 he turned from poacher to gamekeeper.
Having worked at Hill Samuel (now Macquarie Bank), he became the Samuel from Grant Samuel - the boutique corporate advisory firm. It was laudable for him to step from high-earning corporate stage to the high-profile but relatively low-earning position at the regulator .
The trouble is, the past can catch up you. In taking on the ACCC job, Samuel needed to completely distance himself from his extensive business investments, placing them into a blind trust and relinquishing control. Blind trusts require blind faith in his business partners.
The $50 million investment he now stands to lose in the Direct Factory Outlets (DFO) chain appears to be have been made, unaware to him, by his corporate partners.
There is a clear suggestion from his camp that he thought his money was ringfenced in certain DFO developments that were trading well and that he had no idea that the company in which he has 25 per cent, Austexx, had geared up and plunged significant capital into a $700 million complex in Melbourne's South Wharf.
The group is now teetering and the corporate doctors KordaMentha has been called in to advise a group of lenders, including the National Australia Bank, on how or whether this disaster can be averted. The for sale signs on South Wharf have been up for while - but no takers yet.
The strategy of overly aggressive expansion is nothing new and insiders have been aware for a while that the group has been in trouble.
Exactly when Samuel worked this out is anyone's guess. Uncharacteristically, he was not talking yesterday - nor was his recently appointed trustee, Guy Jalland.
Jalland replaced Samuel's previous trustee, Geoff Porz, who was also the chief executive of Austexx. There were two others, Bill Kelty and Michael Kroger.
The saga raises two important questions. Why would Samuel, with his extensive business knowledge, invest in operations outside his knowledge and control? And why would he place as one of his trustees the chief executive of this company?
His competition credentials may be good but it appears his corporate governance and risk procedures leave a lot to be desired. Surely it would be better to dictate the blind trust invest in government bonds or even a bank term deposit. The returns may be a bit less handsome but the management would be safer. And the conflicts would be nil.
So why did Samuel pour his money in a venture that could subject him to a conflict of interest? When it comes to the ACCC, there is no end of potential conflicts.
Take the most recent example. A lender to the troubled Austexx, NAB, is also the subject of a controversial investigation by the ACCC into its proposed takeover of the Australian operations of AXA Asia Pacific. There would be endless deals under ACCC scrutiny in which the NAB had a potential (lender) role.
In the past, Samuel's partners in Austexx have called for an ACCC inquiry into the concentration of ownership of the shopping centre industry after Westfield announced a planned takeover of AMP's shopping centre portfolio.
More difficult still was Supreme Court and later Federal Court litigation by the rival discount retailer Brand Depot in the ACT under the Trade Practices Act. This action accused the Austexx-owned DFO of misleading conduct.
In neither circumstance was there any suggestion that Samuel acted in his personal rather than professional interests.
Indeed the relationship with Austexx partners, David Goldberger and David Wieland, became strained some years ago when they unsuccessfully challenged the introduction by the larger supermarkets of shopper dockets in partnership with a couple of large petrol chains to supply discount fuel. (Goldberger and Wieland were also investors in a separate venture, the independent petrol supplier, Liberty Oil.) The talk is that Goldberger and Wieland have not spoken to Samuel since.
Samuel clearly enjoys the power and status of running the ACCC. It has come at a cost - which might have been avoided had he recognised the potential pitfalls of putting so much money into a venture over which he had no control. He is now attempting to recover part of his fortune and some of his reputation.
Frequently Asked Questions about this Article…
What happened to Graeme Samuel’s reported $50 million investment in the Direct Factory Outlets (DFO) chain?
According to the article, Samuel had about $50 million tied up in the DFO chain via his 25% stake in Austexx. It appears his corporate partners geared up and invested heavily — notably in a $700 million South Wharf development — and Samuel says he was unaware of those moves after placing his holdings in a blind trust. The Austexx group later ran into trouble, sale signs went up for South Wharf, and KordaMentha was called in to advise lenders, including NAB.
How does a blind trust work and why can it be risky for investors like Samuel?
A blind trust requires the investor to relinquish control and trust appointed trustees and partners to manage assets. The article highlights the risk: Samuel put his investments into a blind trust to remove conflicts when he became ACCC chairman, but ended up reportedly unaware of major decisions by partners that exposed his capital to risk. Blind trusts can shield from conflicts but leave you dependent on others’ actions and disclosures.
Why is trustee selection important for someone using a blind trust?
Trustees make the investment decisions on your behalf, so conflicts of interest or close business ties can influence outcomes. The article notes Samuel’s trustees included company insiders (the previous trustee was Austexx CEO Geoff Porz) and later Guy Jalland replaced him. Choosing trustees with potential conflicts or direct links to the underlying business can undermine the purpose of the blind trust.
Can an investment in a private company create conflicts of interest for a regulator like the ACCC?
Yes. The article raises that Samuel’s investments in Austexx/DFO could create real or perceived conflicts while he chaired the ACCC. It points out a concrete example: NAB — a lender to Austexx — was also the subject of an ACCC investigation into its proposed takeover of AXA Asia Pacific, illustrating how lender roles and regulatory oversight can intersect.
What lessons about corporate governance and risk management does Samuel’s situation offer everyday investors?
Key takeaways in the article include: avoid concentrating large sums in ventures you don’t control; be careful who you appoint as trustees; consider lower-risk holdings (government bonds or term deposits) for assets meant to be conflict-free; and ensure strong governance and transparency so you’re not blindsided by partners’ decisions.
What was the South Wharf development and how did it affect Austexx and its lenders?
The article describes a $700 million South Wharf complex in Melbourne that Austexx and partners heavily financed. That aggressive expansion reportedly left the group teetering, with for-sale signs on the project and no buyers. Lenders became concerned and KordaMentha was brought in to advise a group of lenders, including NAB, on options to avert the disaster.
What roles did KordaMentha and NAB play in the unfolding Austexx/DFO problems?
KordaMentha was appointed as corporate advisers (corporate doctors) to help lenders assess and manage the troubled Austexx group. NAB is mentioned as one of those lenders. The article also notes NAB was simultaneously the subject of an ACCC investigation into its proposed AXA Asia Pacific takeover, underlining overlapping relationships between lenders and regulator scrutiny.
Were there legal or competition issues involving DFO or Austexx reported in the article?
Yes. The article mentions former calls by Austexx partners for an ACCC inquiry into shopping-centre ownership concentration after Westfield’s planned takeover of AMP’s shopping-centre portfolio. It also cites Supreme Court and Federal Court litigation by rival retailer Brand Depot in the ACT under the Trade Practices Act, accusing the Austexx-owned DFO of misleading conduct.
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