ABC Radio National — Interview

INTERVIEW WITH PETER DOWDING ABC Radio National — Premiers Past — Sunday, 18 December 2011

ANDREW DODD: Today on Premier’s Past, we meet Peter Dowding, the Labor Premier of from 1988 to 1990. Peter Dowding was the leader just after Brian Burke, the Premier who would later go to prison, and just before , the nation’s first female Premier. It was a period dominated by the scandals known as WA Inc, and Dowding was right in the thick of things as the government did increasingly desperate corporate deals with characters like and . Peter Dowding took on the role after Brian Burke chose to step down, but he had to bide his time before taking over. PETER DOWDING: Oh, it was really quite bizarre and very uncomfortable. Brian, as always, wanted to orchestrate the whole thing, and to his own personal climax, and it was always, therefore, going to be very difficult to be a sort of Premier-in-waiting. I mean, unless I’d hopped on a plane, basically, and gone oversees, I was going to be around for that period between December and February, and he was insistent that he wanted to do his term through to a complete conclusion for his, you know, autobiographical date. ANDREW DODD: It seemed that he wanted to notch up the five-year time line. PETER DOWDING: Look, the whole thing was orchestrated, and from that time on, it became clear over the couple of years that I was there that Brian was always in the background wheeling and dealing and doing deals with the feds. And, in fact, I think, although he has never admitted it to me, I have pretty good reasons to think that he orchestrated my downfall as well. ANDREW DODD: Well, we’ll talk about that in a moment. Not long after you’d been in office—we’re going forward now to April 1988—there was a poll that showed that nearly half of the respondents, 48 per cent, said they had no opinion of your performance as Premier. What was going on that they would have no opinion? PETER DOWDING: [Chuckles.] That was terrific, wasn’t it? [Chuckles.] Look, I don’t think that’s very unusual, is it? The point is that the public, generally, don’t have much knowledge of people who aren’t in the leadership position and it takes a while for the leader to stamp his or her position and become known and accepted, and I had always played a bit of a role in public life, but I hadn’t been a really high profile minister. I’d had some very high profile ministries, but they’d always been overshadowed by the way Brian really ran the joint and I think a lot of people just didn’t know who I was. ANDREW DODD: We’ll talk about WA Inc in a moment, but I think it’s important before we do that to acknowledge that other things happened in your term in office. What were your priorities walking into government? What did you want to try and achieve taking over from Brian Burke? PETER DOWDING: What had drawn me into politics in the first place was, really, the Court of Disputed Returns. I did a court case for Ernie Bridge in the Kimberley—the Court of Disputed Returns. It went for nine months, basically, up and down the Kimberley hearing witnesses, and Ernie asked if I would stand as his running mate for the North Province, the Kimberley–Pilbara Region—at the next election, and that is when I agreed to enter politics. My heart was really in social issues, and, to a significant extent, in Indigenous issues. And when I was Premier, one of the priorities I put in place was to try and elevate Indigenous issues in the way in which government made its decisions, and I formed a special cabinet subcommittee which everything had to go through which focused on ensuring quality responses to Indigenous requirements. ANDREW DODD: I want to look at something that happened early on in your term as Premier. It centres on a $5 000 donation which had been made by the Teachers Credit Society to the ALP, and this opened a can of worms in which it was revealed that there’d been a loan of some $25 million to the Teachers Credit Society and that that body was deeply involved in loans and big corporate deals that had been playing at the big end of town and racking up tens of millions of dollars in bad loans. This ended up in being exposed and the donation going back to that body. What was going on? PETER DOWDING: I don’t remember the donation going back, but the Teachers Credit Society was like a lot of organisations, financial institutions, in the 1980s, coming out of a mini-depression in the early 80s and thinking that they could play with the big boys and, of course, there was a couple of areas in which loans were made where Rothwells was involved, and, basically, there just wasn’t a proper level of prudential attention, and in some cases there were worse things going on. ANDREW DODD: This idea of people being ill-equipped to deal with the big boys at the big end of town could also be said of state government, couldn’t it? This is the issue: that Brian Burke had taken you into a policy

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ABC Radio National — Peter Dowding Interview position where, effectively, the government was playing at the big end of town and playing in a corporate sense. Did you back his strategy when he initiated it and took it on? PETER DOWDING: I don’t think the government was playing in that way as you describe. In the 80s people did not have an experience of financial institutions falling over, and the idea of financial institutions that were not banks falling over didn’t concern the federal government because it didn’t control or manage those financial institutions. So, when the government originally went in and, with business, agreed to bail out Rothwells when it fell over and support the Teachers Credit Union, this was because the institutions represented places where lots of people had money on deposit that was suddenly at risk, and people felt the government had a responsibility to get in and try and help people work their way out of that situation. ANDREW DODD: Well, you raise the topic of Rothwells. This is really the thing that was at the centre of all of the allegations about WA Inc—the government’s preparedness to help Rothwells out of its own financial difficulties, first, by offering a guarantee of $150 million, and then through a series of very convoluted loans. How heavily were you involved in that negotiation and the setting up of the deals with Rothwells initially? PETER DOWDING: I was called into a meeting with a number of other ministers on a Saturday or Sunday, I think, in which the parlous state of Rothwells was laid out, and Burke’s response to it was to say that if the captains of industry were prepared to put money into assist it, then so would the government by way of a guarantee. The individual ministers had very little detail on the material, and there were merchant bankers and various advisers there who were making assertions about the state of Rothwells, and on that basis it subsequently went to cabinet and was approved. And that’s really the beginning of a very long and unpleasant involvement with Rothwells and the fallout from it. ANDREW DODD: It just seemed that the government kept on digging—you know, that old adage that when you’re in a hole, you shouldn’t keep digging. Well, that’s exactly what you were doing because it kept escalating into a worse and worse situation, ending up with the bright idea of trying to tie the rescue package for Laurie Connell’s Rothwells bank to the purchase of the Kwinana petrochemical plant. Whose idea was that? PETER DOWDING: When you say, ―you keep digging‖, that’s precisely what happened. You make a commitment, and once you’re in for $50 million or whatever the number is, and suddenly it is said to you that there’s another short-term liquidity problem, what do you do? Do you say, ―I’m going to close you down‖, and run the risks associated with that, or do you say, ―Well, we’ll find a way to support you through this liquidity period‖? If you believe that Rothwells was rotten to the core, you wouldn’t give them anything. And in the December before the election, after I had brought in my own people to look at the situation and was convinced then that Rothwells was rotten to the core, I pulled the pin on it—and to the great dismay of a lot of my colleagues and, I’m sure to the great dismay of some of the people involved in it. It was obviously a very difficult decision because the election was coming up. ANDREW DODD: My understanding of it is that under the deal, received $50 million for his half-share of this Kwinana project, Laurie Connell received $350 million for his half-share but the quid pro quo was that Laurie Connell was meant to buy off loads of dodgy Rothwells loans, thus averting the collapse of the bank and saving some 700 jobs. That was the thinking behind it, wasn’t it? PETER DOWDING: The thinking behind it was that all of that money would do a big round robin in a completely transparent way, but a big round robin back to pay advances that the government or government agencies had made which would otherwise have been completely lost. ANDREW DODD: Do you accept that a lot of the money that went into that project ended up going to Alan Bond? PETER DOWDING: Some of the money went into Bond but the money that went into that project, as I said before, was all designed to do a round robin back to repay the state. The Bond group’s role in this was not transparent, and at the time I think that many people who were involved in the decision making either had information about that withheld from them or they were deceived about the money. ANDREW DODD: Well, the petrochemical plant at Kwinana was finally closed down in September 1989 after your government petitioned the Western Australian Supreme Court to do so. You argued that the cost blow-outs had made your contract null and void. Bond Corp then responded by lodging writs against the government demanding that it kept providing finance to keep it going, so this got very ugly, didn’t it? PETER DOWDING: It sure did. All through 1988 we had in place the advisors, effectively, who had been left behind by Burke, and we didn’t have new and independent voices giving us advice. Towards the end of 1988, I brought in—actually, he mightn’t like to be reminded of it, I guess—Malcolm Turnbull and Neville Wran and Whitlam. The three of them had a merchant bank, and so they came in and started to advise in relation to these matters. I personally began to take a very hard view against Rothwells and against Bond, which culminated in

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ABC Radio National — Peter Dowding Interview

1989 to the former senior executive of the group, Peter Beckwith, actually uttering some fairly severe threats to me personally and — ANDREW DODD: This is the threat that he would bring down the state government? PETER DOWDING: That’s right. ANDREW DODD: A threat that actually surfaced because Malcolm Turnbull made it public. PETER DOWDING: Absolutely, yes. So I had to hold my nerve and had to hold the nerve of my colleagues, who were getting very iffy about it all. ANDREW DODD: Well, the liquidator Kevin Carlson estimated that Petrochemicals Industries Company Ltd, the Kwinana project, was worth a grand total of $11 million. You’d invested—well, you know, there are so many different figures on what you invested, but let’s say it was $175 million, to avoid a $150 million loan guarantee to Rothwells. This had completely failed. PETER DOWDING: No, that’s not right; that’s not right. The range of government and government agency exposure was much greater than that because the SGIO had put money up which was exposed. ANDREW DODD: I went for the low end of the figure; it’s actually much higher isn’t it if you count all the agencies? PETER DOWDING: Absolutely. You see—it is exactly the same position as we were at when we were originally discussing whether or not to bail Rothwells out. Once you’re in, the question is: do you keep going? And I recall, for instance, that I called Ferrier Hodgson in to the Rothwells situation—I think it was December 1988—because we were still being told then that it was a short-term liquidity issue. And one of the things that the royal commission castigated me for was not stopping a further advance on a Friday evening at four o’clock when I think it was the SGIO had been told that if they didn’t put it in, Rothwells would fall over, and if they did put it in, Rothwells had a chance of surviving. Now, I’d called Ferrier Hodgson in on the Friday at four o’clock. I said to them, ―You’ve just come in guys; what should we do?‖ They said, ―We won’t be able to tell you till Monday.‖ And, of course, the SGIO had to make the decision, ―Well, it’s all over if we don’t put it in on Friday; it might be okay on Monday should we put it in.‖ And that’s exactly what happened with the petrochemical project. The petrochemical project went on, and it would have, potentially, been able to be rescued by (a) the injection of funds and query replacing Bond with somebody else, but I think the whole thing had become so mired in the deceits that we just had to say, ―We’re not prepared to do it any further‖, and call the liquidator in, which we did. ANDREW DODD: Meanwhile there’s another series of deals which are both in one sense disconnected but also connected going on involving the State Government Insurance Corporation, which purchased about 20 per cent of the shares in Robert Holmes a Court’s Bell Resources. The Bond Corp did the same thing. The government— your government—paid $2.50 a share; Bond Corp, $2.70. The shares at the time, however, were trading on the market at $1.70. Then the SGIC and Bond were accused of collusion, all of which was discussed in the Western Australian royal commission. What was going on there that SGIC would be getting into Bell Resources like this? PETER DOWDING: Well, I think, if I recall, those transactions were very early in 1988. They were really things that were already, in a sense, on track and decisions were being made in the light of all of the commitments that had been made to date in order to try and ensure that there was a financial stability. ANDREW DODD: But it was fatally flawed to begin with, wasn’t it—going into bed with Alan Bond in a way like this and then of course there was the asset stripping of Bell Resources by Bond Corp to try and pay off Bond’s massive debts in brewing. It was never going to work, was it? PETER DOWDING: You’ve transcended the moments in time of the known facts in 1988. I think that you have to understand, when you’re looking at why people behaved in a certain way, what their knowledge was at the time and — ANDREW DODD: But, I mean, didn’t you do due diligence on it because Bond Corp — PETER DOWDING: Yes, of course, because, Andrew, the auditors have been accused of misleading both the public and ourselves. I mean, the fact is we had no information which was correct. The information we did have was fatally flawed and the people who we ought to have been able to rely upon for truthful information were misleading us. ANDREW DODD: The royal commissioners didn’t completely agree with the idea, though, that you shouldn’t have known. That was one of the points they made with regard to Rothwells—that you should’ve known better. PETER DOWDING: Well, look, three judges whose experience of excitement involved having a drink in the Weld Club on a Friday night just don’t understand, with respect to them, the real world. They were simply

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ABC Radio National — Peter Dowding Interview wrong. They didn’t give any respect to the level of information that was available at the time, and the environment of the royal commission was not an environment in which anyone was going to listen to that sort of defence. There was a witch-hunt on, a floppy political Labor Party having put it up; every one of the survivors in cabinet running scared. No-one could remember, who was then in cabinet while the royal commission was sitting, anything about anything, and a whole lot of people who were not prepared to give political support to colleagues who carried the can in an as best a way they could early in the 1980s. ANDREW DODD: I guess something that backs you up on this was the very fact that on 4 February 1989 you won an election, so, clearly, the majority of Western Australians at that point were prepared to give you another term. PETER DOWDING: Having just closed Rothwells down, incidentally. ANDREW DODD: There’s one theory about that election though, and that is that Bill Hassel, one of the opposition members, had put out a story that Alan Bond had donated three and a half million dollars to the ALP’s election campaign. He then couldn’t back it up with any facts, and he was discredited. Do you give any credence to the idea that that gave you a bit of support in that election? PETER DOWDING: I think there’s no single thing that gets you through an election. It was a helluva time. I’d worked very hard throughout the period to do things while the elephant in the room was the Rothwells events, but, nevertheless, to work very hard indeed to build a political structure that was delivering and was seen to be able to deliver good outcomes to people, and we did that. I mean, there were lots of areas in which people were affected by government decisions which were good ones, and I think that is why they voted for us. ANDREW DODD: Why do you think that Brian Burke had a hand in the end you losing your post—your position as Premier? PETER DOWDING: The people who had picked up the vibes towards the end of 1989 told me that he had been encouraging the view that there needed to be a transition in order to help the federal government through its election, and that he had talked to Hawke and Keating about the low support for the Labor federal government in Western Australia and had put a plan to them which, by late December, early January, was a plan to have what Brian likes to describe as a circuit breaker, and the circuit breaker—I think we’ve become much more familiar with it over the years since—was to have the first female Premier in Australia, and he used that circuit breaker to up the chances of Labor retaining the seats in Western Australia for the federal election. ANDREW DODD: Do you think it’s inevitable that your legacy will be tied up with WA Inc, and I am wondering, if that is the case what do you think it should actually be tied up with? What should people associate you and your Premiership with? PETER DOWDING: Andrew, you’ll have to wait until my autobiography, I think, to deal with that! Of course it’s inevitable; there is no question of that. You could always (a) think about your druthers, and (b) you think about what could’ve been. I have no doubt that, as I had appointed an inquiry into Rothwells during 1989—I appointed Malcolm McCusker to conduct an inquiry. He did a very efficient and insightful inquiry with the powers of a royal commission, and that was completely overshadowed, of course, by the grand, hugely expensive, spectacle of the royal commission, which went on forever and embedded its events in the mind of the public. So, when you’ve got that sort of event and an enormously malevolent event—people trying to find a way of slotting as many people as they can. In fact, they did not slot people, including myself; I wasn’t slotted for illegality, and what we were left with was their opinion about what was proper. And, of course, that sounds very grand that the royal commission formed an opinion, but opinions are things that people can differ with, and I think McCusker’s report was far more valuable than anything Carmen Lawrence established. ANDREW DODD: Peter Dowding, thank you very much for talking to us. PETER DOWDING: Thank you very much, Andrew.

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