Part 71 — Original Chapter: Chapter 20: The Reaction to a Fruitless Inquiry
This article forms part of the serialised republication of Panthers, Passion & Politics – The Roger Cowan Years.
Among the most complicated allegations examined by the Temby Inquiry were those concerning Phyro Holdings. The arrangements between Phyro and Panthers dated back to the early 1970s, making their reconstruction particularly demanding. Cowan says,
One of the criticisms that Temby made was that the Club didn’t really know what it owed me, and in 2002, I probably wasn’t sure either
From the time that the arrangement with Phyro began, I had always kept meticulous records of the work it did for the club. The trouble was, from about 1998, I had allowed myself to be drawn into conflict with some directors. By mid-2001 things were really starting to go downhill between Board and management. Then I had a heart attack and a bypass operation in January 2002. Six weeks later we were in the middle of a major conflict and I was back at work, full bang into the fight. They called Boon in, we had the aborted election and it was almost an all-in brawl a lot of the time.
Conflict in the boardroom was taking a lot of my time and energy. It started to dominate my thoughts and I began to take short cuts. I always made sure I was taking less than the contracts stipulated but sometimes I would put off doing an exact invoice because of more pressing issues. There was a time when the board executive used to come in every month and tick everything off, and the auditors used to check it regularly. My biggest regret during the inquiry was that I had not continued to maintain that quality of accounting.
The difficulty, as Cowan described it, was not the absence of records but the need to reconcile historical transactions with the contractual entitlements they represented.
Terrence Lynch says it was obvious from the outset that Phyro would be a contentious issue. In the months leading up to the announcement of the Inquiry the media had focused on its arrangements with Panthers. Michael Egan had made a number of comments on it, both in parliament and to the media. Phyro had been the subject of a front-page story and a feature article in the weekend Herald in September 2003, mentioning $2.9 million which had been paid by the Club to Phyro. This sum would be trotted out again and again by Herald journalist Paola Totaro in her stories covering the Inquiry, even after the facts surrounding it were brought out in evidence.
Most of the $2.9 million had been paid to third parties. More than $1 million went towards publishing and distributing 140,000 copies of Panthers Magazine each month, while another $1 million or more was spent on advertising. These were two examples of where the money went.
The contracts, in fact, spelled out very clearly that Cowan could not use his position to push more business to Phyro. How did this work? It was actually a quite simple arrangement. The contracts placed limits on the remuneration Phyro could receive from specified advertising and sponsorship activities. Those limits were intended to prevent Phyro’s financial benefit from increasing indefinitely as Panthers’ business expanded. However, the adequacy of the auditing and accounting arrangements would itself become an issue during the Inquiry.
Cowan agrees that it would have been inappropriate for his private company to hold open-ended contracts that could have been fattened by his decisions. That was never the case. He adds that if that had happened, it would certainly have come out in the extensive questioning and in the tens of thousands of pages of documents in the Temby Inquiry.
But from the day that Phyro started doing work for the Club, there was a limit on profit, and that was set in concrete by agreement with the Board executive. The Herald made continuous reference to a payment of $2.9 million to Phyro. It would have made no difference whether the sum was $2.9 million, or $29 million. The Phyro benefit would have been the same.
By the time the book was published in 2007, Phyro was no longer providing those services, and Panthers was paying other suppliers directly.
Allegations about Phyro in recent events could be countered readily enough. But Phyro’s longevity and Cowan’s insistence on confidentiality in his contracts obliged the Club’s counsel to rely on Cowan’s records for earlier years. Lynch describes how it was done:
Roger had told us that he had kept all these records, so very early in the piece, we actually forced him to go back over the previous ten years. We asked him to work out month by month what he was charging the club, and what he was getting over that entire period. It took some to-ing and fro-ing for Roger to get the idea of what we wanted, and the process was happening through the first part of the inquiry.
Something becomes obvious in Roger’s testimony if you read it – maybe if you didn’t see it happening, you wouldn’t know – but I could see it. As the reconstruction exercise progressed and clarified, Roger’s self-confidence in the witness box grew. At times in those first days, he sounded hesitant and fumbled over answers. One of the great fears you have when you face something like this is that you’re going to get a question about things eight years ago without notice. In that instant, how do you know whether you did something that long ago?
Reconstructing what he had done month by month was reassurance for himself, to let him know what he had done. So by the time they tried to drop a bundle on him, he had a very strong sense of how he had conducted himself.
And I believe that Temby responded to that. I think at some stage it started to dawn on him. I’m sure that at first, he probably did think there was corruption, but it dawned on him that there were deals, and some hanky panky accounting, but not corruption. No taking of money. For instance, when Roger said the figures were arbitrary in those first days, it sounded really bad, and everyone made a big issue of it, including the media. But through the process it came out, and Temby eventually got this, that the arbitrariness was about how you describe it, not about the actual figures. It was an arbitrary description that had nothing to do with dishonesty or corruption.
Cowan says there was one lucky break for him amongst all the blackness of the time.
I was becoming frustrated by questions that seemed to go around and around in circles, go nowhere, but leave the impression that I had taken more than my entitlements under the contracts. It was maximising the value of the inquiry for the media and making me look dishonest. Several times I gave evidence that I had taken less than my entitlements, and that the club owed me money. But of course there was no news value in that.
I asked John de Mestre, my legal counsel, to write a letter to the inquiry and offer a way to bring it to a head. The letter told them that they could select any forensic accountant of their choice to carry out a thorough audit of Phyro. I said I would pay for it, and I would make everything available to assist in such an audit. They refused my offer.
I thought it weird at the time, but now I wonder whether my goal – of killing off media speculation – was one they preferred not to pursue.
Later, I discovered that the exercise would have cost me around $200,000, so they did me a big favour.
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