The NCSC Investigation

Ken Jarrett executed a purported Deed of Variation on behalf of the legal person, Elders IXL Limited, on the 26 August 1986 soon after the former National Companies and Securities Commission (NCSC) commenced an investigation in relationto the cross-shareholding deal between BHP and Elders IXL.


Elder Smith Goldsbrough Mort Limited was created in 1962 by the merger of the South Australian company Elder Smith & Co Limited and the Victorian company Goldsbrough Mort & Co limited.

During 1981 Elder Smith Goldsbrough Mort (ESGM), a major shareholder in Henry Jones IXL, became the target  of a hostile takeover by the financier Robert Holmes à Court and his company Bell Resources. It was conceivable that, if successful in acquiring ESGM. Bell Resources could easily gain control of Henry Jones IXL. When Bell had accumulated a 19.9% share of ESGM, a group of investors friendly to ESGM (which included Henry Jones IXL) initiated a defense by purchasing a separate 20% share. A bidding war became increasingly undesirable to all parties concerned. At that time a complex agreement was reached wherein a fourth company, Carlton & United Breweries, would acquire ESGM’s interest in Henry Jones IXL in addition to Bell Resources’ interest in ESGM. ESGM would then “acquire” Henry Jones IXL (the reverse actually occurred), to form a new company called Elders IXL. While ESGM did, in fact, acquire Henry Jones IXL for A$149 million, John Elliott and his management team assumed control of the new company. Carlton and United Breweries emerged from the compromise with a 49.4% “friendly” interest in Elders IXL.

Like Henry Jones IXL before John Elliott, ESGM was characterized by outdated and highly conservative management techniques. In the process of creating Elders IXL, Elliott set about to “correct” these perceived “problems“.

During the two years since its compromise agreement with Bell Resources, Elders IXL considered its shareholding arrangement with Carlton & United to be undesirable, but had never found an opportune moment to resolve the issue. Suddenly, in November 1983 Elders was threatened by an indirect takeover as a result of its relationship with Carlton & United. An Australian investment company called Industrial Equity Limited (IEL) indicated its intention to take control of Carlton & United, which still held a 49.4% interest in Elders IXL. If successful in acquiring Carlton & United, IEL could easily gain control of Elders.

Elders was forced to mount an immediate defence. Within a week the company raised A$980 million through a syndicated bank loan, and announced its intention to acquire Carlton & United. Elders succeeded in purchasing not only IEL’s interest in Carlton & United, but several other large blocks of shares. Elders emerged with a majority of shares, and six months later completed itstakeover of Carlton & United with the acquisition of all remaining shares.

Elders paid A$998 million for Carlton & United, using mostly borrowed funds and raising its debt-to-equity ratio to 5.3:1

Early in 1986 Robert Holmesa Court attempted to gain control over Broken Hill Proprietary (BHP), Australia’s largest industrial mining concern. Elders and BHP had a common interest in preventing the takeover. On 10 April 1986 John Elliott mounted a lightening share raid and acquired 18.6% of BHP. BHP then acquired a cross- shareholding in Elders IXL.

Elliott Cartoon  

Terry McCrann in an article published on the 11 April 1986 “Even if he’s down, do not discount Holmes a Court” stated that :

“It is now quite clear the NCSC will have to conduct and exhaustive inquiry into all aspects of the BHP defence and the arrival of John Elliott.”

On the 14 April 1986, the NCSC announced that it would conduct a public enquiry into the circumstances surrounding the acquisition of shares in BHP by Elders IXL, or by a company controlled by Elders IXL.

It was once the NCSC investigation got under way that Ken Jarrett executed the purported “Deed” dated 26 August 1986 to give some superficial resemblance to a purported set of “Rules” drafted a year earlier but have never been executed. It is likely that the Elders IXL Superannuation Fund had also acquired shares in BHP as part of the share acquisition program and therefore the Fund may have been included in the NCSCinvestigation.

The Harlin Bid for Elders IXL Ltd

Peter Scanlon, the strategist for Elders IXL headed an investment company called AFP (for Australian Forest Products), in which John Elliott was also a partner. In order to prevent corporate raiders from gaining control of Elders and selling its divisions at a premium, AFP began to accumulate options to purchase shares of Elders stock as early as September 1986. By the following August AFP held options to 40% of Elders, which, with the BHP cross-investment, thoroughly protected the company from a hostile takeover.

AFP along with Harlin Holdings became part the the scheme to privatise Elders IXL Limited.

The Elders IXL Superannuation Fund, controlled by John Elliott’s private company, Elders Superannuation Ltd, was the largest shareholder in Harlin Holdings Pty Ltd, with a stake of 37.1%. The 1990 Annual Report to Fund Members disclosed that the value of the shareholding which had been valued at $32 million on 30 June 1998 had been written down to zero and it was noted “There is no further expose to Harlin Holding Pty Ltd in the Fund“.

  Harlin Network  

The National Crime Authority Investigation

Mr Peter Faris Q.C., the then Chairman of the National Crime Authority, attended a meeting in November 1989 with Mr Henry Bosch and Mr Schoer, the Chairman and Executive Director of the National Companies and Securities Commission (NCSC). Mr Faris indicated that the Authority was looking to expand its activities into corporate crime. The Commission was, at the time, engaged in investigation the activities of Directors of a number of companies.

In a letter dated 16 November 1989, Henry Bosch responded to Mr Faris and in his letter noted:

“..there is one investigation that fits your criteria outstandingly well. We have been concerned about the way in which some directors of Elders IXL, have gained effective control of one of Australia’s major companies. It appears that there may have been breaches of the companies legislation, the Companies (Acquisition of Shares) Legislation and possibly State Crimes Acts.”

On 20 November 1989, Henry Bosch wrote to the Hon C.J. Sumner, the Chairman of the Ministerial Council which monitored the operations of the NCA and the NCSC and also the Attorney-General for South Australia, since Elder IXL Limited is a South Australian registered company.

This initiated a number of investigations by the NCA, including Operation Albert in conjunction with the New Zealand Serious Fraud Office.