ILC ignored explicit warnings not to purchase ARR

In Australian Cultural Exports, Australian Domestic Tourism, Government, Northern Territory

Ayers Rock Resort: Uluru Aboriginal investment damned by indigenous leader

From Fri 22nd Nov 2013

The new chief executive of the Indigenous Land Corporation (ILC) says he cannot understand why the previous board bought the Ayers Rock resort for $317 million.

Michael Dillon has told a Senate estimates committee hearing that the previous ILC board had borrowed almost $200 million to make the purchase of the Northern Territory property in October 2010.

He said write-downs on the value of the resort have already led to $109 million in losses.

“How the former board made this decision is inexplicable and perhaps inexcusable,” he said.

Mr Dillon said that former finance minister Penny Wong and Indigenous affairs minister Jenny Macklin had written letters to the ILC strongly advising against the purchase.

“Ministers Wong and Macklin wrote separately and strongly worded letters expressing reservations and concerns about the purchase,” he said.

“These letters were among the strongest worded letters, indeed were the strongest letters, I have ever seen from a minister to a statutory corporation in my 30 years of public sector experience.”

He described the response of former ILC chair Shirley McPherson as “paltry”.

“I would liken it to as paltry as a bandicoot’s breakfast,” he told the committee.

“It was pathetic.”

Coalition Senator Dean Smith questioned Mr Dillon’s assertion that Ms Wong and Ms Macklin did all they could to prevent the purchase.

He told the hearing the ministers had ignored an ILC request for an investigation of the deal to be conducted by the Australian National Audit Office.

Ayers Rock Resort: Uluru Aboriginal investment damned by indigenous leader


The head of the Indigenous Land Corporation has accused her own organisation of presiding over ”perhaps the largest single evaporation of public money in the indigenous policy domain, ever”.

Aboriginal leader Dawn Casey, the chairwoman of the corporation, has questioned the sense of its $320 million purchase of the Ayers Rock Resort, the group of five hotels that look onto Uluru.

Dr Dawn Casey.
“This is perhaps the largest single evaporation of public moneys in the indigenous policy domain ever”: Dr Dawn Casey. Photo: Alex Ellinghausen

A report by auditor Deloitte has identified a breakdown of corporate governance in the 2010 acquisition, championed by some of the most influential figures in business and politics, including David Baffsky, a stalwart of the tourism industry – and until last month a long-time member of the corporation’s board – and Labor powerbroker Mark Arbib, the former minister for indigenous employment.

Three years later, amid a downturn in flights and tourism into the Northern Territory, the value of the resort has been slashed by $62 million, with a further downward adjustment expected from an official valuation under way.

The corporation has $200 million in debts on the resort and – while being deemed a stand-out success in terms of indigenous jobs training – there is argument over the profitability of the business.

David Baffsky.
David Baffsky: Led the purchase negotiations. Photo: AFR

The resort is forecast to make an operating cash profit of $14.5 million this year but Dr Casey, who became chairwoman in October 2011, said the decade of interest payments – which she believes will push the total cost of the purchase past $400 million – should be considered in judging the success of the venture.

”In the absence of an extraordinary turnaround in market conditions, the ILC board will have no choice but to reallocate funds from other land management priorities to repay the borrowings, which will significantly reduce our ability to meet the expectations in indigenous communities across the nation,” she said.

”This is perhaps the largest single evaporation of public moneys in the indigenous policy domain ever.”

Questions are being asked as to why the corporation got itself into such a bold venture in the volatile tourism market and whether the $320 million was excessive.

A 70-page report by Deloitte has raised a question about the appointment of Sydney merchant bank and corporate adviser Grant Samuel, which handled the drawn-out purchase process between 2008 and 2010.

Grant Samuel was on a monthly retainer worth more than $50,000 and an agreement based on a percentage of the sale that saw it make $3 million on the deal.

Deloitte found the corporation’s purchasing protocols were broken when the contract to advise on the sale was not put out to tender.

”Since Ayers Rock Resort was, in dollar terms, ILC’s largest-ever indigenous land acquisition, and the value of Grant Samuel’s service was expected to be in excess of $400,000 (based on expected purchase price, with final fees being in excess of $3 million) it meets two of the requirements for tendering, being a non-standard and high-value purchase,” Deloitte found.

”Through inquiries from management and inspection of board minutes, there is no evidence to suggest that a tender process was followed or any written quotes were sought and/or obtained.”

Dr Casey said the current board could find no records ”which allow us to understand the basis for the engagement of Grant Samuel or the fee structure adopted”.

Mr Baffsky, who led the purchase negotiations on behalf of the corporation and was a strong advocate for the deal, along with Sam Jeffries, an indigenous former director of the corporation, did not wish to comment but has argued strongly in recent days that the resort remains a profitable business despite the tourism downturn and high Australian dollar.

Grant Samuel chairman Ross Grant also declined to comment but sources close to the company said the corporation effectively ”inherited” it as adviser because it had been advising Wana Ungkunytja, a body representing indigenous communities around Uluru which had the last right of refusal on any deal to take Ayers Rock off then owner GPT.

Mr Grant, Mr Baffsky and Mr Arbib are directors of the National Indigenous Culinary Institute, a charity backed by high-profile chefs Neil Perry, Matt Moran and Guillaume Brahimi that aims to get Aboriginal trainees into the kitchens of the finest restaurants in Sydney and Melbourne.

Fairfax Media has learnt that Mr Arbib’s lobbying for the Ayers Rock acquisition inside government was not matched by former indigenous affairs minister Jenny Macklin, who wrote to the corporation urging caution about taking on such large debts as part of the acquisition.

Mark Arbib. Photo:

In 2010, Mr Baffsky became inaugural chairman of Voyages Indigenous Tourism Australia, the subsidiary company created to run the resort on behalf of the corporation.

He brought on to the board a former chairman of GPT, Richard Longes, former Qantas chief Geoff Dixon, property executive Peter Barge and former boss of Indigenous Business Australia Ronald Morony. All four were sacked last month in the board clean-out instigated by Dr Casey.

The chief executive of Voyages, Koos Klein, quit in protest.

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