The rise and fall of John Gay
JOHN Gay first came to the public’s attention when he fronted the Royal Commission into the Edmund Rouse bribery scandal in 1991.
The brash, no-nonsense boss of Gunns Kilndried Timber Industries was ordered to present his 1989 work diary, but turned up to the commission to explain he could not find it.
He instead provided his 1990 diary, which was next to useless for the commission’s purposes.
Gay was mercilessly grilled by the commission’s senior counsel Richard Chesterman over the diary, and about a phone call he took from then premier Robin Gray, two days before the bribery scandal broke in June, 1989.
The timber boss said he remembered little of the phone call, and so Mr Chesterman reeled off chapter and verse of the conversation.
“Obviously you’ve had my phone tapped,” Gay retorted.
The phone bugging accusation made big news.
Gay had been ordered before the commission as a witness because Rouse’s company had a stake in Gunns.
The commission built the case that Rouse feared a hung parliament, with Greens MPs in power, would threaten his timber interests, and so he posted Labor MP Jim Cox $10,000 in a bid to get him to cross the floor to the Liberals.
Rouse was jailed for two years for the bribery attempt.
Gray was found to have acted “deceitfully and dishonestly” and his conduct was described as grossly improper but not unlawful.
For Gay, the inquiry gave the public its first taste of a gruff timber boss who would become arguably the state’s most powerful man.
Born in Deloraine, Gay is the son of a sawmiller. His first job on leaving Hobart private school Hutchins was as a benchman in his dad’s mill.
Gay liked a beer and a round of golf but rarely indulged, preferring to work seven days a week. He was a hard man who called a spade a spade.
A Mercury reporter wrote in 2001: “Gay responds to questions more like a block splitter than a sawmiller’s blade — his style is blunt and direct.”
He joined Gunns in 1973 as manager of its Waverley sawmill. The business was set up by John and Thomas Gunn, sons of a Scottish farmer who emigrated to Tasmania in 1840.
In the late 1980s, Gay oversaw the merger of Gunns with Kilndried Timber Industries, resulting in the company being listed on the Australian Stock Exchange, and the acquisition of Hobart sawmiller Kemp and Denning.
However, it was after the bribery scandal that Gay began an ambitious expansion strategy. With the state economy in the doldrums, and residential building at its lowest level in 10 years, he went hunting.
Gunns bought North-West hardwood producer Kauri Timber in 1993. The next year it paid $7 million for Tasmanian Veneers and $1.7 million for French’s Pine World.
Then, in 1994, Gunns was granted a licence to export woodchips.
The massive expansion was reflected in the 1994 profit of $5.7 million, compared with $740,000 the year before.
Heads turned, and premier Ray Groom appointed Gay to the Tasmanian Development and Resources Board in 1995.
In 1996, ex-premier Gray joined Gay on Gunns’ board.
Gay’s expansion strategy exploded in 1999 with Gunns’ first overseas acquisition, buying the New Zealand wood-veneer industry for $6.5 million.
It also bought Boral’s Tassie sawmill interests for $23 million, with mills at Austins Ferry, Western Junction and Killafaddy, and Luck Brothers Investments, and its Mitre 10 stores in Devonport, Ulverstone and Port Sorell.
In 2000, it bought Boral’s forestry assets in a $72 million deal, including a woodchip export facility at Long Reach.
Gunns’ profit for the year was $8.7 million.
But it was in 2001 when Gay made his most audacious move, outbidding Kerry Packer to grab control of Tassie’s biggest chip exporter, North Forest Products, for $335 million. North once held more than 40 per cent of Gunns.
With the acquisition came chip mills in Burnie, Triabunna and the Tamar Valley, and 175,000ha of land.
Gay was now driving one of the world’s largest hardwood chip exporters.
In 2001, it made $18 million profit, and was in the ASX’s top 200 companies.
In 2002, with $53 million profit, Gunns was named the nation’s second-best performing company in a survey that showed it returned 577 per cent over the past three years.
The spoils were great and Gay’s salary rose to $686,000 in 2002, from $364,000 the year before –prime minister John Howard was on $284,000.
But Gay’s empire was under attack.
Acclaimed Tasmanian author Richard Flanagan said Gay was selling Tasmania’s soul and Planet Ark spokeswoman Olivia Newton-John said Gunns was “cruel and evil” to poison animals.
Critics fumed when Gay, interviewed on Jana Wendt’s Sunday, agreed Gunns poisoned protected species, saying there were “too many”.
Nine Network’s A Current Affair and the ABC’s Four Corners aired damning exposes of Gay and Gunns.
Gay, under pressure to drop one of his roles as chairman and CEO, was compelled to write to shareholders to defend the firm’s logging.
But Gay fought on and in 2003 Gunns bought Tamar Ridge Wines for $14 million, and three WA sawmills for $11 million.
Gay was now seriously rich, worth $51 million on paper.
In June 2003, he was seen with deputy premier Paul Lennon at Sisco’s restaurant in Hobart. On the table was a document, “Gunns Pulp Mill”.
So began Gay’s bid build a Tamar Valley pulp mill.
As Gay was being named an Australian Export Hero at an awards ceremony at Government House in Melbourne, British MP Norman Baker urged tourists to boycott Tasmania for logging old-growth forests.
Tasmanians also had concerns. Tasmania Together, a social program based on the aspirations of locals, tried unsuccesfully to stop old-growth logging by 2001. It wanted to phase out old-growth logging by 2010.
Gay was furious, saying it would cut Gunns’ sawmilling operations by half.
Mitsubishi Corporation, a Japanese firm that imported 400,000 tonnes of woodchips a year, condemned Gunns’ old-growth logging.
But the money kept flowing and in 2004, Gunns unveiled a profit of $105 million — earning Gay a $1.3 million dividend windfall. Gunns was exporting more than five million tonnes of chips a year.
However, contractors — log truck drivers and forest workers — were unhappy with their share of the spoils.
Gay then went to war with sawmillers Auspine and French Enterprises after they suggested more jobs could be created by stopping old-growth logging to focus on plantations.
Gay fired back: “Their comments have been extremely damaging to themselves and their future in Tasmania.”
Gunns then took legal action against protesters and environmentalists, claiming $6.3 million in damages.
Known as the Gunns 20, the group included Greens MPs, a doctor and members of the Wilderness Society.
But a rising Australian dollar was a tougher opponent and, to compound matters, Mitsubishi Paper Mills stopped buying old-growth chips.
In 2005 contractors’ harvest quotas were cut by 20 per cent, just before Gunns announced an annual profit of $101 million.
Gay raised concern about the high dollar and called for Forestry Tasmania to drop its prices. Woodchips from Ecuador, Uruguay, Vietnam and Brazil were winning market share, and Gay was forced to temporarily shut chip mills.
By 2006, most contractors had business cut by 40 per cent. They complained they had subsidised Gunns’ $87 million profit. Woodchip sales fell from 4.4 million tonnes to 3.5 million.
Sydney businessman Geoff Cousins slammed Tasmanian logging practices, and Gay hit back, threatening to review any business he had with any board on which Cousins sat.
Cousins suggested Gay was unfit to be a CEO.
Gay’s personal fortune continued to grow, receiving a $200,000 increase in salary in 2007 to take it to $1.4 million.
His shares, worth $66 million, kept him entrenched in the BRW Executive Rich List.
After a profit of $67 million in 2008, Gunns shed 129 jobs, closed a sawmill and put plantations on the market.
The company’s shares took a belting and by 2009 it was looking at redundancies.
Gay sold 3,404,178 shares in December 2009, yielding $3.09 million, before the shares fell dramatically after the half-year result was released in February 2010.
The Crown alleged Gay knew the profit would fall radically as a result of a downturn in chip prices in 2009 — Gunns’ profit fell from $56 million in 2009 to $28.5 million in 2010.
Under intense market pressure, Gay was forced to cut all ties to Gunns in May, 2010.
Gunns went into receivership in September last year.
After pleading guilty to insider trading last week, Gay is now waiting to be sentenced.
Sourced from The Mercury
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