Therese Rein's blind trust
Therese Rein was forced to put her career on ice when Kevin Rudd became PM, and like Graeme Samuel, braved the blind trust minefield. Is Rein poised to bounce back into Australian business?
While Australia's parliament hangs in the balance, so too, it would seem, do Therese Rein's finances – though there are good reasons to think her business career has a much brighter future than husband Kevin Rudd has in politics.
Not only has the former Prime Minister's wife seen her once profitable European business turn into a loss-making venture as a result of the European economic crisis, but her portfolio of Australian shares has been languishing in a blind trust for over three years – a difficult predicament for a woman whose fortune was estimated by Business Review Weekly to be worth $50 million in April this year.
And as seen recently with Graeme Samuel's DFO holdings, the last few years have not been a good time to take your eye off the ball.
Back in early 2007, when it became clear that Kevin Rudd stood a very good chance of becoming PM, Rein hurriedly divested some of her investments to allay concerns relating to potential conflicts of interest.
Rein's welfare-to-work empire Ingeus Ltd, a recipient of lucrative government job placement contracts, announced it would offload local units WorkDirections Australia and Clements. In September 2007, Rein sold Clements for an undisclosed sum (thought to be in the vicinity of $25 million) to Total Recruitment Group. The sale of the WorkDirections unit to Angus Knight Group, for $25.8 million, was finalised shortly after Rudd's election as Prime Minister.
Rein, who holds a 97 per cent stake in Ingeus, retained the overseas units in France, Switzerland and the United Kingdom. She also held onto a portfolio of Australian shares, estimated to be worth between $1 million and $2 million.
The shares included a number of high-profile blue-chips including BHP Billiton, CSL, Publishing & Broadcasting Ltd [Crown], Toll Holdings, Ramsay Health Care, ANZ, NAB and Origin Energy. In terms of potential conflicts of interest, BHP Billiton and Rudd's doomed dalliance with the resource super profits tax appears to be the standout.
In July 2007, Kevin Rudd notified the Parliamentary Registrar that Rein's portfolio had been placed in a blind trust to be managed by independent trustees. Under the structure of the trust, Rein would retain sole equitable interest, while the legal title was vested in the trustees.
According to JB Were chief executive Paul Heath, blind trusts are probably the only option open to politicians and their spouses. However, he adds, "there's no question that there are risks associated with having your assets in a blind trust. You are separated entirely from the investment.”
Fortunately for Rein, there's a key difference between the state of her finances and Samuel's.
Samuel concentrated his $50 million fortune into a single holding – a 25 per cent stake in Austexx Pty Ltd, which owns the Direct Factory Outlets chain. After his appointment as ACCC chair he placed it in a blind trust. However, last month the company buckled under the weight of its $450 million in debts. According to reports, DFO will be split up and its outlets sold off individually to pay off creditors.
On the other hand, Rein, while having a large part of her tangible assets placed into a blind trust, retained her overseas units, and was able to keep abreast of developments.
And over the past three years, Rein has taken the money she reaped from the sale of her Australian units and embarked on a major international expansion.
Since selling the Australian arm of her business in early 2008 – during the height of the financial crisis – Ingeus has added units in Poland, South Korea, Sweden and Switzerland, expanded its business interests in France, Germany and the UK and ramped up its bidding for government contracts.
But Rein's business fell on hard times during the financial crisis as the number of potential job placements for clients in Europe dried up. Ingeus swung to a $9.4 million loss in 08/09 from a $15.2 million profit in 2007/08.
However, things appear to be getting back on track. In May the company reported that it had reduced its loss in the first half of 09/10 to $785,000 and was on track to post a profit in 2009/10 on the back of increasingly healthy revenues.
Despite this modest turnaround in fortunes, thoughts of a return to Australian business life may well be on the agenda. In November 2009, Ingeus 'beefed up' its local talent appointing highly regarded businessman David Gonski as Ingeus chairman. Gonski is also the chairman of the Australian Securities Exchange, Coca-Cola Amatil and Investec Bank.
According to Angus Knight chief executive Con Kikkos – purchaser of Ingeus' WorkDirections unit in 2007 – employment services providers in the welfare sector are finding the United Kingdom "particularly rough right now.”
"[In the UK] you've got the new Prime Minister David Cameron ripping up existing contracts and putting them out to re-tender … We even closed down our UK office last year because we were finding it too unstable. Profits are tighter overseas, whereas Australia is a much more stable market – it's the place to be.”
This sentiment is echoed by Sally Sinclair, CEO of the peak body of job placement providers National Employment Services Association, who says Australian private welfare-to-work companies are generating "sustainable profits”.
And in an industry where revenues are generated through employer demand (i.e. job placement 'leads') as well as placements, Australia, with its brighter labour market prospects and 'effectively privatised' employment services, looks increasingly attractive.
And political circumstances relating to her husband's position will have made the decision for Rein all the more easy.
According to Graeme Orr, Associate Professor at the University of Queensland's law faculty, Kevin Rudd's transition from Prime Minister to an opposition MP or a post outside of cabinet in a re-elected Gillard government would have removed perceptions of conflict of interest surrounding Rein's Australian interests: "There's no barrier for her [Rein] returning to Australian business."
But with the next batch of government contracts for job placement companies not up for re-tender until 2012, it's unlikely that we'll see Rein establishing any new businesses in the employment services sector in the next two years.
However, Rein can buy back her Australian businesses and she has $25 million in cash sitting on the books. In fact on Thursday, Ingeus spokesperson Belinda Egan could not rule out such a possibility.
Total Recruitment was not available to comment.
Kittos of Angus Knight says that his company had not been approached by Ingeus. However, Kittos conceded that "yes, I guess things have now changed.”
Rein is staying mum about her business intentions and the state of her blind trust for the time being, but after having had her Australian business plans put on hold by her husband's political position for three years, one of Australia's most successful entrepreneurs looks poised to make a comeback – this time without any restraints.
Not only has the former Prime Minister's wife seen her once profitable European business turn into a loss-making venture as a result of the European economic crisis, but her portfolio of Australian shares has been languishing in a blind trust for over three years – a difficult predicament for a woman whose fortune was estimated by Business Review Weekly to be worth $50 million in April this year.
And as seen recently with Graeme Samuel's DFO holdings, the last few years have not been a good time to take your eye off the ball.
Back in early 2007, when it became clear that Kevin Rudd stood a very good chance of becoming PM, Rein hurriedly divested some of her investments to allay concerns relating to potential conflicts of interest.
Rein's welfare-to-work empire Ingeus Ltd, a recipient of lucrative government job placement contracts, announced it would offload local units WorkDirections Australia and Clements. In September 2007, Rein sold Clements for an undisclosed sum (thought to be in the vicinity of $25 million) to Total Recruitment Group. The sale of the WorkDirections unit to Angus Knight Group, for $25.8 million, was finalised shortly after Rudd's election as Prime Minister.
Rein, who holds a 97 per cent stake in Ingeus, retained the overseas units in France, Switzerland and the United Kingdom. She also held onto a portfolio of Australian shares, estimated to be worth between $1 million and $2 million.
The shares included a number of high-profile blue-chips including BHP Billiton, CSL, Publishing & Broadcasting Ltd [Crown], Toll Holdings, Ramsay Health Care, ANZ, NAB and Origin Energy. In terms of potential conflicts of interest, BHP Billiton and Rudd's doomed dalliance with the resource super profits tax appears to be the standout.
In July 2007, Kevin Rudd notified the Parliamentary Registrar that Rein's portfolio had been placed in a blind trust to be managed by independent trustees. Under the structure of the trust, Rein would retain sole equitable interest, while the legal title was vested in the trustees.
According to JB Were chief executive Paul Heath, blind trusts are probably the only option open to politicians and their spouses. However, he adds, "there's no question that there are risks associated with having your assets in a blind trust. You are separated entirely from the investment.”
Fortunately for Rein, there's a key difference between the state of her finances and Samuel's.
Samuel concentrated his $50 million fortune into a single holding – a 25 per cent stake in Austexx Pty Ltd, which owns the Direct Factory Outlets chain. After his appointment as ACCC chair he placed it in a blind trust. However, last month the company buckled under the weight of its $450 million in debts. According to reports, DFO will be split up and its outlets sold off individually to pay off creditors.
On the other hand, Rein, while having a large part of her tangible assets placed into a blind trust, retained her overseas units, and was able to keep abreast of developments.
And over the past three years, Rein has taken the money she reaped from the sale of her Australian units and embarked on a major international expansion.
Since selling the Australian arm of her business in early 2008 – during the height of the financial crisis – Ingeus has added units in Poland, South Korea, Sweden and Switzerland, expanded its business interests in France, Germany and the UK and ramped up its bidding for government contracts.
But Rein's business fell on hard times during the financial crisis as the number of potential job placements for clients in Europe dried up. Ingeus swung to a $9.4 million loss in 08/09 from a $15.2 million profit in 2007/08.
However, things appear to be getting back on track. In May the company reported that it had reduced its loss in the first half of 09/10 to $785,000 and was on track to post a profit in 2009/10 on the back of increasingly healthy revenues.
Despite this modest turnaround in fortunes, thoughts of a return to Australian business life may well be on the agenda. In November 2009, Ingeus 'beefed up' its local talent appointing highly regarded businessman David Gonski as Ingeus chairman. Gonski is also the chairman of the Australian Securities Exchange, Coca-Cola Amatil and Investec Bank.
According to Angus Knight chief executive Con Kikkos – purchaser of Ingeus' WorkDirections unit in 2007 – employment services providers in the welfare sector are finding the United Kingdom "particularly rough right now.”
"[In the UK] you've got the new Prime Minister David Cameron ripping up existing contracts and putting them out to re-tender … We even closed down our UK office last year because we were finding it too unstable. Profits are tighter overseas, whereas Australia is a much more stable market – it's the place to be.”
This sentiment is echoed by Sally Sinclair, CEO of the peak body of job placement providers National Employment Services Association, who says Australian private welfare-to-work companies are generating "sustainable profits”.
And in an industry where revenues are generated through employer demand (i.e. job placement 'leads') as well as placements, Australia, with its brighter labour market prospects and 'effectively privatised' employment services, looks increasingly attractive.
And political circumstances relating to her husband's position will have made the decision for Rein all the more easy.
According to Graeme Orr, Associate Professor at the University of Queensland's law faculty, Kevin Rudd's transition from Prime Minister to an opposition MP or a post outside of cabinet in a re-elected Gillard government would have removed perceptions of conflict of interest surrounding Rein's Australian interests: "There's no barrier for her [Rein] returning to Australian business."
But with the next batch of government contracts for job placement companies not up for re-tender until 2012, it's unlikely that we'll see Rein establishing any new businesses in the employment services sector in the next two years.
However, Rein can buy back her Australian businesses and she has $25 million in cash sitting on the books. In fact on Thursday, Ingeus spokesperson Belinda Egan could not rule out such a possibility.
Total Recruitment was not available to comment.
Kittos of Angus Knight says that his company had not been approached by Ingeus. However, Kittos conceded that "yes, I guess things have now changed.”
Rein is staying mum about her business intentions and the state of her blind trust for the time being, but after having had her Australian business plans put on hold by her husband's political position for three years, one of Australia's most successful entrepreneurs looks poised to make a comeback – this time without any restraints.
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