He was one of corporate Australia’s highest flyers, until he crashed to earth with debts of more than $1 billion. Less than a decade later, Malcolm Edwards is on the comeback trail. AMONG the gum trees on the banks of a beautiful backwater of the Murray River stand what look like the overgrown ruins of a small village ravaged by warfare the skeletons of buildings without windows or roofs, rusting girders, weed-strewn piles of rubble.
“The locals call it Beirut,” chuckles Colin Joss, a builder from Albury, 70 kilometres to the east. “If you saw a donkey or a camel wandering through, it would not look out of place.”
In fact, contrary to appearances, the “ruins” are not a cluster of buildings being demolished, but the construction site for what was once ballyhooed as the region’s premier tourist and conference resort a $46 million, 142-room complex.
That was then. Last June Joss, who had been awarded the building contract, walked off the job claiming he had not been paid $3.5 million for the work he had done. Desperate attempts to refinance the project have so far failed, lawyers have been called in, and the corporate watchdog ASIC (the Australian Securities and Investments Commission) is interested.
To people in faraway Sydney who have been following the career of Malcolm Leslie Edwards, entrepreneur extraordinaire, all this has a familiar ring. The chain-smoking Edwards has been out of the headlines since 1993 when he was declared bankrupt but now, surfing the crest of Australia’s greatest peacetime economic boom, he is back from the corporate dead.
“I had heard that,” said his former receiver in bankruptcy, the formidable Max Prentice of insolvency specialists Prentice Parbery and Barilla.
“Malcolm is like a rubber ball, he always bounces back.”
From a tastefully wood-panelled office in North Sydney across the road from a police station and the Union Hotel’s Blah Blah Blah Bar Edwards has again hung up the shingle of his flagship Essington group, and is again dreaming great dreams, though so far on a rather more modest scale than during his hey-day in the 1980s.
Back then, he was one of the country’s boldest entrepreneurs, a director of no fewer than 279 companies involved in $1 billion worth of projects across Australia and around the Asia-Pacific region.
He was the man behind such extravaganzas as plans for a space-port on Cape York Peninsula, the world’s tallest building in Brisbane, and luxury hotels around the South Pacific.
It was an invisible empire built on debt. None of these great projects was ever built indeed, you would have to search to find even a country outhouse with Edwards’s name on the foundation stone and when Essing ton came crashing down, his creditors were left reeling.
No-one, except possibly Edwards, has any idea even today what the total losses were, but they were spectacular even by the standards of those desperate times when entrepreneurs and the bankers who recklessly financed them were going down like ninepins.
Four separate firms of accountants were involved in the liquidation of the group, and dozens of lawyers were involved in the subsequent bitter court battles.
Anthony Lehmann, of the Adelaide accountancy firm Sheahan Coope which was responsible for liquidating the two largest companies in the group, Essington Ltd and Essington Developments Ltd says the net loss was between $750 million and $770 million. Add to that the $180 million owed to creditors of Edwards’s personal bankruptcy, and the grand total must be well in excess of $1 billion.
The big losers included most of the major banks, led by the Bank of New Zealand and the then State Bank of NSW, Farrow Mortgage Services (part of Victoria’s collapsed Pyramid Building Society group) and even such astute investors as media billionaire Kerry Packer’s Consolidated Press Holdings, which lost $25 million Edwards is no longer referred to as a “MOK”, a “mate of Kerry’s”.
Also out of pocket was the Swiss Banking Corporation, which won judgment against Essington and its bankers in the Federal Court over the proceeds of an astonishing 1989 sting in which $23 million of $70 million electronically looted from the bank’s headquarters in Zurich finished up in Essington’s bank account and was spent.
The judge disbelieved Edwards’s claim that he was the innocent victim of a gang of international conmen, saying, “[He] is altogether too intelligent a person, too experienced a businessman, too astute in financial matters to have really fallen for [this] quite brazen and barefaced trick”.
When the time came for Edwards to bare his soul to his creditors, there was precious little left for them to seize.
In 1989 this grandson of a scrap-metal merchant had been ranked by Business Review Weekly as Australia’s 101st wealthiest man, with a “minimum net worth” of $38 million and as well as property development interests in tourism, bloodstock, entertainment, motor parts manufacture and wine production.
And he had gained some of the social acceptability he finds important: vice-president of the Australian Institute of Company Directors ; trustee of Sydney Church of England Boys’ (as it then was) Grammar ; a member of the council of the Royal Far West Children’s Health Scheme.
Four years later when he was declared bankrupt his only assets (apart from some unrecoverable loans and shares in his busted companies) were $64 in the bank, a gold membership of the Sydney Cricket Ground, a few other odds and ends and 100 pairs of cufflinks. The racehorses turned out to be owned by one of his companies; the 560 SEL Mercedes (MLE 000) in which he brazenly turned up at a creditors’ meeting was in his wife’s name. And so on.
However, it would be unfair to lump Edwards in with the rest of the fallen entrepreneurs of the 1980s, a breed once described by the former corporate regulator Henry Bosch as “scum floating on the broad river of commerce”.
Unlike Alan Bond, he didn’t finish up in jail ; unlike Christopher Skase, he didn’t flee into exile ; unlike Laurie Connell, he didn’t, as far as anyone can discover, hide any ill-gotten gains.
“There was a suspicion that he may have hidden something away,” says Max Prentice.
“We had a good look, but I think he was basically telling the truth he has done his arse on speculative ventures like launching sputniks from Cape York Peninsula. He’s a gambler, and he lost.”
Now aged 50, Edwards boasts of his modest lifestyle: he has worn the same watch for more than 20 years, and he still lives in the same house in Balgowlah that has been the family home for 30 years, a brick bungalow that has been extended over the years “with the emphasis on space, with little regard to aesthetics”, according to the valuers. He still has the same wife, Pam, whom he married in 1968, and two sons, Brett and Troy, who have now been brought into the family business as shareholders.
And, one final, crucial, difference between Edwards and the others: he is back in business. In fact, even during his bankruptcy he couldn’t stay away from the wheeler-dealing, prompting Prentice to warn him he risked a $5,000 fine or a year in prison for taking part in Essington’s management while an undischarged bankrupt. He promptly transmogrified into a “consultant” to the group.
In 1995 he was discharged early from the humiliation of his bankruptcy after promising to pay his creditors the handsome sum of $500,000 over the following five years, about one third of a cent in the dollar of his $180 million personal debts. Edwards managed to lay his hands on the final payment of $290,000 late last year, and is now free to resume his business career.
And his social life has been rehabilitated. He is back in the racing game in a modest way, through his wife’s part-ownership of a gelding named Grace wick. And he was spied by a social writer hob-nobbing with guests at businessman Chris “the Golden Greek” Kyriakou’s pre-Christmas spit-roast at his property near Exeter.
However, his corporate comeback has not been without its problems.
First, ASIC says it is “looking at” Edwards to decide whether it should take action under section 600 of the Corporations Law, which allows the regulators to ban anyone who has been associated with two or more failed companies in the past seven years from taking part in the management of a company.
Edwards has been rather more unlucky than this. The first known failed business of which he was a director was a finance company, Roward Pty Ltd, back in 1974 when he was 25. Nine years later a fast-food company of which he was a shareholder and director, Heraton Foods Ltd, went into liquidation with debts of $6 million.
And then, a decade later, Essington. Eventually, almost all the 279 companies in the group went into receivership or simply ceased to function and were struck off the ASIC register. All except Essington Asia-Pacific Ltd, and its “ultimate holding company”, Essington Investments Ltd, which are the new corporate face of Malcolm Edwards.
Although the Edwards family controls the companies through its majority shareholding, there is one other familiar face from the 1980s on the board that of Dr Bungo Ishizaki, one of the most colourful of the Japanese “bubble” entrepreneurs.
Ishizaki is best known in Australia as a frontman for the EIE corporation, which bought up large chunks of the continent, including Bond University, Sydney’s Regent Hotel and Sanctuary Cove resort, before it collapsed with debts of a staggering $11 billion and the prosecution of its principal, Harunori Takahashi, for fraud.
So far, the reborn Essington group has been keeping a fairly low profile. It claims to have an interest in managing a construction project in Samoa, and to be trying to rescue an abandoned hotel development which went close to bankrupting the tiny Cook Islands nation in the 1990s. But it is the Murray River resort project which has attracted the most attention.
The site is a scenic two hectares on a large man-made lake formed by the Yarrawonga weir near the Mulwala Services Club, which owns the land. In 1998 the club formed a co-venture company with Essington Asia-Pacific and announced plans for the resort, which would be sold off as units to investors and then leased out to holidaymakers and conventioneers by a management company.
A $17 million construction contract was signed with Colin Joss, but with the work only a quarter completed, and after interminable delays in his payments, Joss decided to cut his losses and pulled his men off the site. The part-completed buildings have stood there abandoned for the past seven months while Joss considers legal action to recover his $3.5 million.
The club’s chief executive officer, Michael Mullarvey, says that the project had been beset with problems almost from the start first Edwards’s finance “fell over”, attempts to raise alternative funds failed, then Hilton Hotels, which had agreed to manage the resort, pulled out. Another international hotel group, Sheraton, has still made no public announcement about replacing Hilton, and a company spokesman said there were “certain conditions” to be met first.
As for the money, Mullarvey says that the National Australia Bank has now agreed to finance the project but the devil is in the detail. Before any money is advanced to build the resort, says Mullarvey, all the units have to be presold “off the plan”.
It spite of this, Mullarvey (and Edwards, who declined to comment on the saga) remain confident that the resort will be completed … though not about when.
Five years ago, at a creditors’ meeting, David Barnett of Consolidated Press was philosophical about his company’s $25 million debt.
“He [Edwards] has risen once; we just have to be patient,” he said.
“He might rise again, and whilst he owes us something which kept compounding we lived in hope of being repaid. ”
Those who have followed Edwards’s career believe Barnett should not hold his breath.
Pub date: Thursday 10 February 2000
Section: News And Features
Word count: 2052
Classification: Company/Essington Group
Geographic area: Australia
Photographs: Andrew Taylor, Wallace Bruce
1. Out of the shadows … Malcolm Edwards is back at the wheel
2. The stalled Edwards resort on the Murray River