Twiggy (25 page)

One of the traditional
owners, Donna Meyer, said her people were ecstatic at the tribunal victory because they were “constantly being pushed and pulled by the whims of mining companies”. But Fortescue appealed the tribunal’s decision and ended up winning the legal battle against the traditional owners in the High Court. The impact of Fortescue’s victory worried some indigenous groups, which believed it weakened the ability
of claimants to secure compensation because miners would now be able to avoid talking about any substantive issues during the six-month negotiating period.

One PKKP elder, Nyaparu Jeffries, believed Fortescue had never made a genuine effort to negotiate. “While mining companies make billions of dollars out of our traditional county, we are still living below the poverty line,” he said. “FMG
never began any substantial negotiations towards an agreement with our people; they just went through the motions. It makes our people sad that a company that promotes itself as helping indigenous people was putting a case to the courts to make us powerless in our own country.”

The PKKP eventually ended up with a land access deal, but, like Fortescue’s other native title agreements, it involved
minimal monetary compensation. For the traditional owners, the process of negotiating with Fortescue had been “extremely distressing” and they believed that mining on their traditional lands would have a detrimental impact on their way of life, culture and traditions.

As these examples illustrate, Forrest appears to have subverted some of the original intention of the Mabo ruling. The High
Court found in 1992 that native title is a property right – in the same way that other forms of property rights are held by millions of Australians. In other words, Aboriginal people should be entitled to receive fair compensation for access to their traditional land. Yet Forrest has come to view the native title system as a useful vehicle for him to deliver a range of social benefits to indigenous
people, rather than as the recognition of a legal right to monetary compensation.

Forrest’s efforts to improve the lives of Aborigines are beyond reproach, but his demand that his charitable initiatives become a condition of Fortescue’s land access deals is highly contentious. His opposition to throwing large sums of money upfront at Aborigines might be understandable, but he has never explained
why Fortescue cannot structure its payments so that money is put into a trust and can be used only by future generations when mining has ended on their land.

Forrest’s critics also point out that wages paid to Aborigines for their labour should not be seen as a legitimate form of compensation for native title. “It amazes me to hear some people in the mining industry suggest that wages are
a benefit for native title holders,” said Griffith University professor Ciaran O’Faircheallaigh. “They are payment to people for their work. You can’t use them to compensate a community, you can’t use them to foster culture, you can’t use them to set up new businesses, you can’t use them for educational scholarships.”

Simon Hawkins, Forrest’s old sparring partner who is now chief executive
of the renamed Yamatji Marlpa Aboriginal Corporation, says negotiating with Fortescue over the years has proven more difficult than with other miners because of the company’s insistence on forcing its own agenda on indigenous groups. “They want to force upon indigenous people their own values associated with what they consider welfare,” he said. “Other companies tend to have a more sophisticated
approach that balances commercial interests with legal obligations and corporate social responsibility, which ultimately creates stronger agreements for traditional owners.”

Forrest’s policy of making lowball offers and driving hard bargains also risks overshadowing much of his excellent philanthropic work. And it has given his critics ammunition to argue that his mission to get Aborigines
into work is driven by his own commercial motives. Some also say his championing of the indigenous cause is just part of another slick Forrest campaign to boost his public image and cosy up to governments.

Michael Woodley, one of his fiercest critics, says people should see through Forrest’s crusading style and realise that the only reason he wants to be seen as supporting the Aboriginal
cause is because he wants to mine their land. “If he didn’t have a mining company, we wouldn’t even fall on his radar,” Woodley says.

Plenty of other Aboriginal leaders, however, are convinced that Forrest’s approach, while not perfect, is generally the right one. Clinton Wolf is a former AFL footballer who has worked on both sides of the fence in Western Australia: first as the head of a
major native title representative body in the Pilbara and now with a Perth mining contractor that has won contracts from Fortescue. He says people initially questioned Forrest’s plans to boost indigenous employment and deliver contracts to Aboriginal firms, but he has delivered on all his promises while managing to bring an important issue to national attention.

Wolf, 43, also knows from
first-hand experience that the influx of mining money in the Pilbara hasn’t solved any of his people’s deep-rooted problems. “When I was a kid, everybody worked and all the kids, black and white, were at school,” he recalls. “Everyone had pride in themselves and carried themselves in a dignified manner. I look at the amount of money that’s been paid out in royalties throughout the Pilbara and I’m
struggling to see any improvement in lifestyle. Where you do see improvement is where people have got jobs and are earning good money and are feeling like they’re worthy. Their kids pick up on that and say, ‘That’s what I want to do when I get older.’ Now, that’s improvement.”

Only his harshest detractors accuse Andrew Forrest of not being genuine in his desire to lift the lives of Australia’s
indigenous people. Those who know him are convinced he is sincere. But it’s clear the methods Forrest has employed at Anaconda and Fortescue in trying to help indigenous people have left an unnecessary legacy of bitterness and division.

As with everything else he has done in life, Forrest’s strident views and sense of righteousness have often inflamed rather than healed. Yet he sees bravado
and force as the only proven methods of achieving the impossible. It’s how he built two mining companies from scratch, and it’s how he believes he will solve Australia’s greatest moral disgrace.

I have no wish to die rich.

—ANDREW FORREST

When Andrew Forrest signed a public pledge in 2013 to give away most of his fortune to charity – a promise that could make him Australia’s greatest philanthropist – he revealed the biggest inspiration for his giving: the Bible. Forrest’s devout Christianity is unusual for a prominent Australian
entrepreneur, perhaps especially so for one who thrives on risk and adopts a win-at-all costs approach to business. But none of Forrest’s friends doubt his piety. They have experienced enough Forrest-led prayer sessions, or caught him sneaking a quick read of his Bible during enough hectic overseas business trips, to understand that belief in God appears to guide his every waking hour.

Forrest
“found” God as a nine-year-old boy in the sandhills near Minderoo. He grew up in a family of Anglicans, but the Forrests were not overtly religious. Late one afternoon, Andrew was riding his motorbike miles from the homestead when he decided to throw the key away in the dunes to see if he could find it again. As he now relates the story, he couldn’t find the key despite several hours of frantic
searching and was preparing to brave the elements as sunset approached. As a last resort, he decided to pray. Miraculously, the key turned up right in front of his eyes.

To non-believers the story might sound faintly absurd, but for the young Andrew Forrest it was a seminal event. He relayed the anecdote in 2012: “One of the reasons I became a Christian and am still a Christian now is because
after about three or four hours of fruitless search amongst the spinifex and the hot sand for this key which I was probably never going to find, I tried everything, every physical thing to find the key. And eventually when I had given up all hope, I knew that Mum and Dad were going to come out in their four-wheel drive and probably start to search about sundown and get to me about midnight,
and my hide would be quite properly and fairly tanned for throwing away the key to a motorbike. I prayed. And when I came up from praying, there was the key between a little petrol overflow hose and the carburettor on the motorbike. Now there’s not a snowflake’s chance in hell that I threw it there; I threw it over my shoulder. So I just thought okay, that’s cool, we’re showing off a little here,
God. That’s a very obvious sign, I won’t ever test you again – and I haven’t.”

As an adult, Forrest has never hidden his religious beliefs. When he opened the Murrin Murrin nickel plant in 1999 alongside prime minister John Howard, he asked the 300 guests to bow their heads as he recited a lengthy prayer. And in 2012, after beating civil charges laid by the Australian Securities and Investments
Commission, he told a gathering of friends and colleagues that he had triumphed because God was on his side. Chief executives of major companies will usually reel off a long list of well-known business texts when asked for their favourite books. But Forrest says all the guidance he has ever needed as an entrepreneur is derived from the Bible. He told a Christians in the Marketplace function
in 2010, “I get all the inspiration I ever need just from reading the New Testament. That has so much [on] how to run businesses and how to work with people … I don’t have to go to all those other texts. It’s really all there for me.”

Despite the encounter with God as a kid near Minderoo, none of Forrest’s old friends recall him being overtly religious as a teenager or a young adult. His
piety seems to have flourished only after he met Nicola, who hailed from a devout Christian family and had a moral compass that Forrest needed badly at the time. “He wasn’t really religious until he got married,” says one old friend. “Nicola is a big part of why Andrew has embraced Christianity.”

The Forrests’ faith in God was fortified by the stillbirth of their baby girl, Matilda, in the
late 1990s. Nicola’s pregnancy had progressed smoothly and there were no outward signs that anything was wrong. Matilda would have been the couple’s third child and a baby sister to Grace and Sophia. The impact of Matilda’s death on Forrest was profound, although few of his colleagues at Anaconda Nickel knew of his private turmoil. Forrest took counselling from pastor Ken Drayton at the St Philips
Anglican parish in Cottesloe and began attending church more frequently.

These days, Forrest’s local priest at St Philips is Malcolm Potts, whose Sunday sermons are unconventional and laced with humour, delving into issues such as sex and wealth. In one of his recent homilies, Potts discussed his belief that once someone is earning more than $70,000 a year, having any more money won’t make
them any happier. Potts’s personal definition of rich is having the ability to go into the local supermarket and buy whatever he needs without worrying that he’ll have enough money at the checkout. “All but a few of us are rich by world standards,” he told his well-heeled congregation.

Potts’s richest parishioner, Andrew Forrest, wasn’t in church that particular Sunday morning for the sermon
on wealth and happiness. But if he had been, it’s unlikely he’d have been squirming in his pew. Because these days, Forrest’s opinions on money – or at least those he has espoused publicly – are very similar to his priest’s. Forrest says his greatest pleasure as a billionaire is derived from giving money away to those less fortunate than him. Friends say these views were actually formed long ago
through the prism of his religious convictions. Nicola even told one interviewer that the couple liked to give their money to Christian-based activities “because that is what gives life to people”.

Forrest’s views on wealth were entrenched by 2007, when his fortune on paper had already hit $4 billion. He told Perth journalist Mark Drummond that his three children knew they would never have
to worry about the “burden” of a huge inheritance. “What all my kids know is that they’re not going to inherit it and they’re happy about that. I have no wish to die rich, and my children have even less wish to inherit great wealth. We are not about creating a Forrest dynasty, we’re about helping others. If you’re pursuing wealth for the pursuit of wealth’s sake, you’re not going to die happy.
And the prospects of keeping your family together, and yourself whole and happy, will be very limited. I can understand public interest in wealth, but I also admire those people like Warren Buffett and others who use their wealth to help others. If I’ve ever found intense satisfaction out of wealth, it’s the ability to help others with it.”

A few weeks after these comments, Forrest embarked
on the first stage of giving away chunks of his fortune. He called a media conference in Perth to announce that he would give 1 million of his shares in Fortescue and 115 million options in a nickel mining company he chaired, Poseidon Nickel, to the Australian Children’s Trust (ACT), the charity for indigenous and other underprivileged children that he and Nicola had set up several years earlier.

The combined value of the Fortescue shares and Poseidon options at the time was about $85 million, making it the single biggest act of corporate philanthropy in Australian history. Forrest said he wanted to follow in the footsteps of the modern American philanthropists like Warren Buffett and Bill Gates, and he hoped his generosity would inspire others in Australia. “If this acts as an accelerant
in the thinking of others, of course I’d be deeply honoured,” he said.

Forrest also gave another 520,000 of his Fortescue shares – worth more than $20 million at the time but soon to be worth more than twice that – to his brother, David, and sister, Janie. In total, he had given away more $100 million in one day.

The $85 million in shares Forrest donated to the ACT was a generous gift.
But it didn’t end up being anywhere near as generous as Forrest had intended. As leading financial journalist Neil Chenoweth would later document, Forrest had saved himself a huge tax bill by electing to have the 115 million Poseidon options issued to his charity rather than to himself. “If the options had been issued to a Forrest company, it would have triggered a tax bill of at least $12.9 million
at a company tax rate,” Chenoweth explained in the
Australian Financial Review
, adding that senior accountants had backed his methodology.

Similarly, Forrest’s donation of his Fortescue shares to the ACT was, in the end, not quite what it originally seemed. The gift of 1 million shares was made through the Forrests’ family trust, the Peepingee Trust
,
and had a value at the time of $42.6
million. Within a few months, the value of the donation had soared and the charity was flush with cash. But a year later, the global financial crisis had arrived and the value of the shares held by the ACT had slumped to $26.8 million (the Poseidon options were worth nothing to the ACT because the share prices had fallen below the 40 cent price threshold for exercising them). The donation by the Peepingee
Trust would have produced a $42.6 million tax deduction for Forrest, according to Chenoweth’s calculations. At a 30 per cent tax rate, the tax benefit would be $12.8 million.

Forrest’s combined tax savings from the share gift and options issue came to $25.7 million. Forrest had made an $85 million donation but, thanks to tax benefits and the falling sharemarket, the net cost of the donation
to him was an estimated $1.1 million. “The ACT did indeed receive a huge donation, but the bulk of the wealth given to the ACT to spend on indigenous welfare was paid for by taxpayers,” Chenoweth reported. Of course, Forrest could not have known in 2007 that the global financial crisis would radically shrink the value of his donations.

One of Forrest’s previous charitable donations, however,
was closely scrutinised by the Australian Tax Office. When Anglo American and Glencore removed him as chief executive of Anaconda Nickel in 2001, Forrest came to an agreement with the board for it to donate $3.5 million to a company called Leaping Joey, the trustee of the ACT, in lieu of a redundancy payment. As Forrest would later testify in a court statement, he arranged the payment to Leaping
Joey because he wanted something positive to emerge from his bruising fight with the two foreign companies. “As I was driven into work I kept thinking about how I could make some good out of this disaster and this treachery,” he said.

But what appeared to be a noble gesture lost some of its shine when it emerged that the ACT had used the money to buy 7 million Anaconda shares from Forrest.
Moreover, the charity bought the shares for 85 cents each when the closing price on market was 74 cents. Forrest pocketed $3.5 million from the deal, although he also gave the charity an additional 2.9 million Anaconda shares for free. Five weeks after the deal, in January 2002, the debt-laden Anaconda announced a $457-million loss, and by mid 2002 its share price had sunk to 29 cents. Forrest
had given his charity $5.6 million worth of shares, which were suddenly worth only $2 million.

At that point, nobody was complaining. Forrest could claim a hefty tax deduction on the share sale and the ACT had $2 million of fresh funds in its coffers – although most of it was courtesy of taxpayers. But the Australian Taxation Office took a very dim view of the scheme, ruling that Forrest
was trying to avoid paying tax. The taxman viewed the $3.5 million from Anaconda as a termination payment to Forrest rather than a deductible charity donation. Forrest challenged the ATO ruling, but both the Administrative Appeals Tribunal and the full bench of the Federal Court agreed that the payment was subject to tax.

Just why a charitable foundation dedicated to helping underprivileged
kids was buying shares in a struggling nickel miner has never been fully explained. When the media revealed the nature of the deal, Leaping Joey said in a statement that Forrest had no input into the charity’s decision to buy his shares. But that claim was puzzling to many, given that ASIC documents showed that on the day Leaping Joey bought the shares in January 2002, its only board members were
Andrew and Nicola Forrest. An amendment lodged with ASIC about a month after the purchase listed Perth communications consultant Valerie Davies and Goldfields indigenous leader Sadie Canning as having been directors at the relevant time. The amendment stated that Nicola Forrest had resigned from the board at the time of the purchase. These were “administrative oversights”, according to company
secretary Walter Staniforth. When news of the transaction became public, Davies resigned from the Leaping Joey board within days. But Canning was later quoted defending Forrest: “Don’t we all do something for our personal tax gains?”

The Anaconda share deal was vintage Forrest: it may have been devised with good intentions, but it polarised opinion over his real motives and gave his enemies
another opportunity to attack him. When news broke of the deal, Forrest said he was hurt by criticism that he was trying to dodge tax and claimed he would have been better off financially if he had simply taken the $3.5 million as a redundancy payout.

His detractors didn’t believe him. Warwick Grigor, his disgruntled former business partner, went on national television to accuse Forrest of
hypocrisy. “The donation that Andrew sought to have put into Leaping Joey is how he’d like to be seen, as a philanthropist doing good for kids,” Grigor said. “But the fact that it bought shares off him is just more evidence that Andrew’s always got a hidden agenda and he doesn’t do anything totally … out of the goodness of his heart.”

Forrest despises any media coverage that raises these
sorts of questions about his philanthropy, claiming it will discourage others from donating. “If we were too sensitive, these recriminations would have inhibited our giving,” he told
Australian Philanthropy
magazine in 2012. “The media have a serious role to play here. If the press fosters this negative attitude, philanthropy will be kept behind a protective wall of privacy, and people won’t want
to give openly, and as a consequence are likely to give less than they possibly could. However, if philanthropy was celebrated, then we’d have an Australian psyche which would encourage giving of all types, openly and privately.”