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The rise and fall of an Australian dynasty

The Packers maintained their wealth and power through almost four generations. Then things went wrong

Rodney Tiffen 22 November 2021 4671 words

Yesterday’s man: Kerry Packer (right) arrives with his son James at a Publishing and Broadcasting Limited annual general meeting not long before his death in 2005. Paul Miller/AAP Image


Wealthy families cycle from rags to riches and back again within three generations — or so goes the old saying. But that hasn’t been the case for that uniquely Australian dynasty, the Packers, whose cunning, drive and ruthlessness have sustained a family fortune over the four generations since its founding a century ago.

The fourth generation’s James is unlikely to return to rags, but after last month’s damning findings about his management of Crown casinos, his business ambitions are in ruins. His future in Australian corporate life will now be severely circumscribed, and his political clout and public prestige much diminished. Gone is the kind of power and influence wielded by his great-grandfather Robert Clyde Packer (known as R.C.), his grandfather Frank or his father Kerry.

Like many dynasties, the Packer family owes its fortune as much to luck as to skill. The person who lifted R.C. Packer from the ranks of knockabout journalists was the wealthy Sydney identity and hotelier James Joynton Smith, who was launching a new — and later legendary — paper, Smith’s Weekly.

Having been ousted from his seat on the Sydney City Council, Smith established the weekly at the suggestion of journalist Claude McKay. He assigned its day-to-day running to McKay and R.C. Packer, who between them produced a lively and visually attractive paper.

In 1921, after Smith’s Weekly had become profitable, Smith generously gave Packer and McKay one-third each of the paper’s ownership. Two years later, with the company’s profits still rising, the pair added a new title to the stable, the Daily Guardian. Although it initially struggled against the established morning papers, the Sydney Morning Herald and the Daily Telegraph, the new paper did well thanks to Packer’s marketing strategies, which included the first Miss Australia competition and free insurance for readers. But relations between Packer and McKay were stormy, and in 1927, after more conflict, McKay sold out to Packer and Smith.

By 1929 Smith’s interests had shifted. He began negotiations to sell the Daily Guardian to Hugh Denison, who owned the dominant afternoon newspaper, the Sun, as well as the Sunday Sun. Thanks largely to his other business activities, Denison was probably the richest newspaper proprietor in Australia at the time. He had made a fortune from his involvement in Amalgamated Wireless (Australasia) Ltd, better known as AWA, and British Tobacco. In both cases he prospered by buying and assimilating the competition — actions that would now be illegal under antitrust laws — to form a near-monopoly. But the success of his strategy in those industries led him to make serious miscalculations with his newspapers.

To entice Denison to buy the Daily Guardian, Smith and Packer announced they planned to start a Sunday Guardian to compete with Denison’s Sunday Sun. Denison bought them out of the two Guardians for the equivalent of around $12 million in today’s money, about a third in cash and two-thirds in shares in his Associated Newspapers. Smith promised not to start another newspaper for twenty-one years.

Packer’s share of the deal was a huge windfall, and accusations were later made that he kept more money than he should have. Encouraged by McKay, premier Jack Lang, with whom Packer shared a mutual hatred, unsuccessfully attempted to legislate retrospectively to force him to return much of it.

Although Packer was rich on paper, much of his fortune was tied up in Associated Newspapers shares, and as circumstances changed his stake in the company threatened to become worthless. Six capital city dailies had died in the years before 1930, and another three disappeared as the Depression continued.

Denison’s papers were performing badly, and he even owned competing titles in the same markets. Despite ill-health, Packer agreed to become managing editor. He closed some titles, fired many employees including Denison’s son, and caused huge ill-feeling, but he saved the company.

By this time, the person who was most like R.C., and was closest to him, was his son Frank, who had been born in 1906 and was now in his mid twenties.

Father and son had one more hugely profitable trick to play on Denison. The Australian Workers’ Union owned an afternoon paper, the World, which was losing huge amounts of money. In 1932 the union asked legendary Labor politician Edward “Red Ted” Theodore to sort out the mess. Theodore had been premier of Queensland before moving into federal politics; he became treasurer in the Scullin government in 1929 but was forced to stand down while a scandal was investigated. Having moved to New South Wales, his political career ended when he lost his seat in the 1931 anti-Labor landslide.

Theodore turned his considerable talents to making money. When he heard that Frank Packer was a potential buyer of the World, he suggested they team up. They made an offer for the paper, declaring they had plans to expand it greatly and undercut the price of the Sun. Incredibly, the person Denison sent to head off this challenge was Frank’s father, R.C. To stop Frank and Theodore’s bid for the World, which had lots of bluff and almost no money behind it, R.C. paid them over $7 million (in today’s money) not to proceed. When they heard, Denison and Associated Newspapers’ board members were furious, but they could not undo the deal.

The agreement included taking over the financial disaster that was the World, which Associated Newspapers immediately closed, dismissing its 280 employees. Frank Packer had been talking of great expansion plans right up until the deal was announced. The AWU had to meet the bill for the redundancies. The Packers were very unpopular but much, much richer.

R.C. Packer died in 1934. Thanks to Smith’s generosity, Denison’s gullibility and their profits from deals that most would judge as fraudulent, he had laid the foundations for the Packer empire.

FRANK’S EARLY TRIUMPHS

The deal with Denison prohibited Frank Packer and Theodore from starting a new newspaper for three years. Theodore went back to his goldmines in Fiji, in partnership with Packer and the controversial Melbourne business figure John Wren, among others.

After considerable indecision Packer started a new women’s periodical, whose driving force was one of his senior journalists, George Warnecke. The idea of a women’s newspaper was gaining traction, and some early starters had already appeared. But Packer’s Australian Women’s Weekly, edited by Warnecke and launched in 1933, was a much more professional and attractive publication. It quickly became the biggest-selling and most profitable magazine in the country.

With the three-year prohibition coming to an end, and cashed up with the success of the Women’s Weekly and the Fijian goldmines, Packer was keen to get back into newspapers.

Here, Hugh Denison re-enters the story. Associated Newspapers was still struggling financially. Denison regarded the afternoon Sun as the company’s major paper, and sometimes neglected the morning Daily Telegraph. After Packer and Theodore floated the idea of an afternoon paper, Denison invited them to buy the ailing Telegraph. Merging the paper with the Women’s Weekly, they formed a new corporate umbrella, Australian Consolidated Press.

When Packer, aged twenty-nine, took over the Telegraph in 1935, the Sydney Morning Herald’s circulation was almost two and a half times the Telegraph’s. Packer spent large sums of money on his new venture, employed some of the best journalists, subscribed to an international news agency and bought more modern printing equipment. Within a few years the two morning papers were level-pegging, and during the second world war the Telegraph overtook the Herald — a lead it has maintained ever since.

This period from the mid 1930s until the early 1950s was the golden age of the Daily Telegraph. As Packer became older, even more right-wing, more set in his ways, and stingier, the paper lost the verve of the first decade and a half of his reign.

He was not at all capable of embracing the changes and challenges of the 1960s. After one demonstration in America, the Telegraph editorialised, “If every time Negro revolutionaries decided to burn and kill, those maintaining the law killed 500 Negroes the Negroes might decide to stop burning and killing.”

By 1972, the Telegraph had a daily circulation of 316,000, less than half the 648,000 copies sold (in a smaller city) by its Melbourne equivalent, the Sun News Pictorial. While the Melbourne Sun sold around 440,000 more copies than its competitor, the Age, the Telegraph sold only 40,000 more than the Sydney Morning Herald.

But Packer maintained his reputation as a kingmaker. One of his best-known journalists, Alan Reid, once told me that Packer presided over a one-paper empire because it commanded the attention of the politically involved. Packer had a close relationship with prime minister Robert Menzies, and had been active in the formation of the Liberal Party in the mid 1940s. He was a keen player in Liberal politics for the rest of his life. Menzies wrote that Packer was the newspaper publisher he knew best. In a gushing foreword to a gushing biography, Menzies observed that all Packer’s faults were “masculine” faults.

Alan Reid may have thought it was a one-paper empire, but it was just one paper, and was unable to take advantage of all sorts of economies of scale. Moreover, the growing profits of the company’s magazines and, since 1956, TV stations meant the paper was becoming a steadily less financially important part of the empire. In 1972 Frank’s sons, Clyde and Kerry, persuaded him to sell the Telegraph to Rupert Murdoch.

While this was obviously wise in a business sense, Frank’s reputation and indeed his main satisfactions came from the Telegraph and the way he could play politics with it. He had been involved most recently in the machinations that saw John Gorton replaced as Liberal prime minister by Packer’s long-time friend, William McMahon. Now he had to watch all but helpless as Gough Whitlam and the Labor Party swept McMahon and his colleagues aside. His frustration during the election campaign had led to Channel Nine’s taking the unprecedented step of delivering an editorial, which alleged that Whitlam’s campaign speech “sounded like the marijuana dreams in a Utopian Disneyland.” It isn’t clear whether he changed any votes.

DOMINATING TELEVISION

While Frank’s stewardship of the Telegraph was mediocre in financial terms, it mattered less because the company had made the important corporate step into television. Packer succeeded in securing one of the two original commercial licences in Sydney, and his TCN-9 was the first station to go to air in 1956. His key success, however, was in securing Melbourne’s GTV-9 in 1960.

To understand the importance of this move we need to remember that no one company was allowed more than two TV stations, irrespective of the size of each station’s market. Sydney and Melbourne comprised 43 per cent of the national audience, and effective networking between them was the key to national success.

The GTV-9 licence had been awarded to a company headed by Sir Arthur Warner, a senior minister in Henry Bolte’s Liberal state government. Warner was also a major business figure, and his main company, Electronic Industries Ltd, manufactured Astor radios and televisions. Experiencing health problems, he decided to sell the business, but Electronic Industries’ new owner, British company Pye, could not legally hold an Australian TV licence.

Despite fierce competition, Packer won the licence — even though Warner also promised the station to Fairfax, which was offering the same amount of money.

GTV had been a much more successful station than TCN, but it was also a more expensive operation, and Packer’s main concern was to cut costs. He was also very hostile to its most successful star, Graham Kennedy, because he was gay.

Packer had gained the key advantage of the Sydney–Melbourne axis. The two Seven stations, by contrast, were split between Fairfax and the Herald and Weekly Times, in a fractious relationship. Nine could bid higher for popular American series and pay top dollar for local variety stars.

KING KERRY

Frank died in May 1974. His older son Clyde had so badly fallen out with him that he had emigrated to America and was leading a sort of right-wing hippie lifestyle supported by his business investments.

Kerry’s inheritance was an empire probably worth around $100 million. Just as importantly, it included almost unassailable strategic assets: the most successful commercial TV network and the biggest and most profitable magazine stable.

Kerry enhanced Nine’s dominance with sound managerial appointments and a greater willingness than his father to invest in programming. His most radical step was launching World Series Cricket in 1977, which lured leading players from Australia and other countries to play in a separate competition. After a couple of years of disruption, cricket unified again, and Nine dominated cricket broadcasting for the next four decades.

In the early 1980s Packer privatised the company, buying out the public and institutional shareholders at rock-bottom prices. A major attraction of full ownership was that he no longer had to account to anyone for his business decisions. But this resentment at ever having to explain himself would help to lead him into the major crisis of his career.

In an episode full of ironies, Packer’s magazine the Bulletin had exposed criminal elements in the Painters and Dockers Union. The royal commission into this rogue union, set up by the Fraser government and led by lawyer Frank Costigan, soon shifted its focus from petty crime to the union’s involvement in a large-scale tax avoidance industry, some of it legal, much illegal.

As part of its investigations, the commission interrogated businessmen Brian Ray and Ian Beames about their activities. It discovered that Ray, at the time a declared bankrupt, had given an interest-free loan of $225,000 in cash to Kerry Packer and had never received any repayment. In trying to probe this decidedly odd state of affairs, the commission uncovered very curious business dealings, aimed at tax avoidance and evasion.

Packer sought to obstruct the inquiries in every way he could — by flying documents from one country to another rather than surrender them, for example, and using delaying tactics in court. The Hawke Labor government, which had taken office by now, was impatient for the Costigan commission to finish, and imposed a deadline on its activities. Because it had not completed its investigations into Packer by that time, the commission prepared case summaries for its successor, the National Crime Authority.

Summary material relating to Packer was leaked to Fairfax’s National Times, which referred to him under the codename Goanna. The more spectacular of its assertions related to a murder passed off as a suicide and the allegation that Packer, or at least his cronies, had been involved in drug smuggling. When these claims were found to be baseless, Costigan’s whole case against Packer was discredited. Despite being fully vindicated, Packer lived under a cloud for almost four years. His obstructionism had worsened his position, but he was also clearly the victim of false accusations.

Packer was launched from the very rich to the mega-rich by two people, Paul Keating and Alan Bond. The first step came when the Hawke Labor government, led by Treasurer Keating, rewrote the media ownership laws in 1987–88. The new laws banned cross-media ownership between television and newspapers, and lifted the TV ownership limit from two stations to a percentage of national reach (60 per cent to begin with). The effect, and perhaps the intent, was to advantage Packer — who had no newspapers — and Murdoch — who had to sell out of television because he was no longer an Australian citizen. In contrast, two companies that Keating and many of his colleagues saw as enemies, Fairfax and the Herald and Weekly Times, owned both newspapers and television stations in ways that made it impossible for them to expand in the new environment.

Many people saw this as the last opportunity to buy into television, and within months all three commercial networks had changed hands. Murdoch sold his two Tens and Packer his two Nines. One stockbroker estimated that their combined price before the policy change would have been $800 million, but they now sold for $1.9 billion — a government-generated windfall of $1.1 billion for the two moguls.

Alan Bond bought Packer’s two Nines for just over a billion dollars. A few years later, Bond’s failing corporate empire couldn’t pay Packer the final $200 million, and Packer regained control at virtually no cost. He had been paid around $800 million, and in the end still had the TV network. “You only get one Alan Bond in your life,” he famously remarked.

During the media policy moves, Hawke was reported to have told ministers that if the new laws passed, Labor would win the next election. Keating told caucus that Packer was a “friend of Labor.” Whatever help Labor received from Packer, his quid was much more obvious than their quo.

Packer was now at the zenith of his power. The other two TV networks were deeply in debt, but he was all cashed up. From then until his death, Packer had many business opportunities but managed few business achievements.

At first he seemed to acquire assets almost randomly — to the extent that he eventually had to call in American Al “Chainsaw” Dunlap to rationalise them. He lost huge sums of money — with little or no public attention — on misplaced currency trading, in 1993 alone losing half a billion dollars.

His major policy win was in delaying the advent of pay TV. Although the Australian Broadcasting Tribunal had recommended in 1982 that pay TV be introduced “as soon as possible,” it didn’t begin until 1995, and wasn’t allowed to carry advertising until 1997. These delays were a major win for Packer.

Indeed, just before the 1993 election, a company led by former reporter Steve Cosser was threatening to launch a new service using microwave technology, which the government had previously endorsed. Keating dramatically intervened to reverse Labor policy in order to stop this challenge to Packer’s aims.

Packer’s bullying style became ever more pronounced. When the NSW government was deciding which company would be given the casino licence, James rang members of the government: “The old man told me to ring… This is the message: if we don’t win the casino, you guys are fucked.” Despite this eloquence in his calls to members of John Fahey’s Coalition NSW government, the Packers did not win the casino licence in 1994.

The state government was more impressed by the fact that the Packers’ main rivals, the construction company Leightons and the American casino operator Showboat, were offering $80 million more.

Nor did the Packers accept defeat graciously. Using information they supplied, Labor opposition leader Bob Carr raised a number of allegations in parliament, particularly about US police concerns that Showboat had links to organised crime.

Packer’s reliance on bullying probably cost him more opportunities than it secured. Not only did he fail to get the Sydney casino licence, he also failed in his efforts to get control of Fairfax and the West Australian newspaper, or to gain a strategic holding and role in Westpac. His pay TV venture with Optus was on course to fail until an expensive misstep by the Murdochs gave him a quarter of Foxtel and equal partnership in Fox Sports.

Eventually even Keating had had enough, privately calling Packer “a bottom feeder.” After Packer endorsed John Howard for prime minister, Keating publicly but ineffectually railed against the proprietor whom he had done so much to enrich.

Packer was increasingly a corporate dinosaur. His daughter wasn’t allowed to be involved in running the company, and he insisted that neither of his children attend university.

BETTING THE HOUSE

When Kerry died in 2005, he was said to be the richest man in Australia. According to the business magazine BRW, his son James inherited $6.5 billion. In contrast to Kerry’s inheritance, however, James received assets whose value had already peaked.

James was determined to move the empire out of media and into casinos. He saw that media stocks were overvalued and gaming stocks undervalued, and he saw chances to build internationally. Less than a year after his father’s death, on the very day — 18 October 2006 — the House of Representatives passed more permissive media ownership laws, he announced the sale of half of Publishing and Broadcasting Limited, as one of the family firms was now called, to private equity company CVC Asia Pacific for around $4.5 billion. By 2012 James had sold all his media assets, usually at a good price, and was cashed up.

Casinos suited James perfectly. Because they have very high initial costs, his ready access to capital was a big advantage. In most jurisdictions, they are limited in number, so competition is circumscribed and political connections crucial. And they tend to be guaranteed money-generators, requiring little management agility.

The high point of James’s success — and the peak of the political influence he had inherited — was winning permission to build a second Sydney casino. By this time he had interests in Crown casinos in Melbourne and Perth, and properties in Las Vegas and Macau. NSW premier Barry O’Farrell recommended he use the government’s “unsolicited proposals policy,” which allowed companies with a proposal attractive to government to gain an agreement to lock out all other competitors.

The policy enabled Packer to secure approval for his Barangaroo project without facing a tender process or an independent public review. His plan was for a very large, new “six star” hotel, some parkland and a casino at Barangaroo, on the northwestern edge of the Sydney CBD. The casino would target overseas “high rollers,” especially from Asia, particularly China.

Whatever the merits of the proposal, Packer’s lobbying for its approval was spectacularly successful. Not only did the state’s Coalition government support it, but so did the Labor opposition and even the Christian Democrats’ Fred Nile, as well as the self-anointed high priest of Sydney development, Paul Keating. This lobbying was no doubt helped by the parade of right-wing Labor apparatchiks — Peter Barron, Graham Richardson, Mark Arbib and Karl Bitar — who were now working in what Richardson described as the financially greener pastures of the Packer organisation.

But that was the peak of Packer’s lobbying power in Australia, never to be repeated.

His problems began in late 2016, when he was hit by overlapping crises. Investigators in Israel were looking at whether a series of very generous gifts Packer had given to prime minister Benjamin Netanyahu had broken Israeli laws. He was worried about the overall financial health of his empire. He experienced a much-publicised break-up with the singer Mariah Carey. And, most dramatically, nineteen Crown employees were arrested in China.

Crown had been operating in China’s “grey area.” Casinos are illegal there, and advertising them is also illegal, but promoting “resorts” is not, and China-based companies called “junkets” were arranging overseas trips whose sole purpose was to facilitate gambling for heavy gamblers. In theory Chinese were only allowed to take $3200 into Macau, but casinos there made lines of credit available to big gamblers. Crown seems to have blithely ignored warning signs that the Chinese government was becoming sick of this deliberate dancing around the law. In Los Angeles, Packer’s response to news of the arrests was to go on an alcoholic binge.

In August 2019, an investigation led by the Age’s Nick McKenzie, which had obtained tens of thousands of leaked documents and interviews with key informants, identified how Crown sought to attract high rollers from China, described Crown’s relationships with the junkets that arranged the trips, and revealed that some of the junkets had links with triad criminal gangs. McKenzie and his colleagues reported that Crown had turned a blind eye to money laundering; had provided sex workers and drugs for high rollers; and had connived in circumventing Chinese gambling laws. A former senior Australian public servant revealed that two government ministers had lobbied him to relax controls over private jets bringing Crown’s high rollers into Australia, where their distasteful behaviour included shooting wombats on rural properties.

Official action was slow to start, but eventually three states set up commissions of inquiry.

The year-long NSW inquiry, under Supreme Court judge Patricia Bergin, reported in February 2021. It found Crown had been indifferent to the threats to its employees in China, had facilitated money laundering by criminals, and had engaged with junkets that had links to organised crime. As a result of the findings, the company’s chief executive and some of its directors resigned.

Most fundamentally, Bergin found that Crown was unfit to run its Barangaroo casino, which meant the new casino would remain closed indefinitely. Moreover, the crackdown by both China and Australia on junkets, as well as more general trends in Australia–China relations, put Barangaroo’s business strategy into great doubt.

Once Bergin reported, the Victorian government set up a royal commission under former judge Ray Finkelstein, which reported last month. Very quickly, according to Finkelstein, the inquiry discovered conduct that was “variously illegal, dishonest, unethical, and exploitative.”

The commission found further evidence confirming Bergin’s findings that Crown had not taken adequate measures to protect its Chinese staff — or its staff in Malaysia, Singapore, Taiwan, Indonesia and New Zealand — who were likely to be working illegally, and had used criminally associated junkets and facilitated money laundering. It found Crown had knowingly and deliberately underpaid tax due to the Victorian government. Crown has now paid $62 million owing, while another $200 million or so is still in dispute. Crown had deliberately exploited problem gamblers, the commission found, with some staying on poker machines for over twenty-four hours.

The commission also found widespread indifference to their responsibilities by the board and senior executives, and concluded that one of the key influences on this culture was Packer and his Consolidated Press Holdings, which put profit above all else.

Finkelstein recommended that instead of closing the casino — with its 12,000 employees (some working in the casino, some in other Crown operations including hotels and restaurants) — the government should place it under a state-appointed manager who would have ultimate control for the next two years. Crown’s fitness to continue would then be reassessed.

He also recommended that Packer be given three years to reduce his stake from 36 per cent to under 5 per cent. While some commentators thought this was generous, it should also be seen in the context that no one group would now be able to have more than 5 per cent of the shares, a stipulation that may deter many of the companies that normally invest in casinos. Such a requirement for dispersed ownership was present in the original casino legislation but was quickly waived, and has never since been enforced. It will be interesting to see if it endures.

Still ongoing is a royal commission into Crown’s conduct at its Burswood Casino in Perth, which quickly uncovered yet more cases of Crown ignoring warnings about money laundering. When he was interviewed, Packer repeatedly referred to breaches of the laws and regulations as “oversights,” but their sheer number suggests they were standard practice. Crown was determined not to know anything that might disrupt its business opportunities. Although he was Burswood’s chairman, Packer revealed that he didn’t attend any board meetings during the three years from 2013 to 2016.

In a sense, Packer’s downfall is the apotheosis of a corporate culture that has been building over four generations. R.C., Frank and Kerry would probably have made the same decisions as James in the same situations. They all thought that rules only applied to other people; that a law only matters if it can be enforced; and that connections and backroom deals matter more than rational public debate. And now it has all come crashing down. •

This article draws on books, articles and other research by Bridget Griffen-Foley, Paul Barry, Sally Young, Richard Cooke, Henry Mayer, Damon Kitney, Mark Westfield, R.S. Whitington, Sally Neighbour and Mark Maley.

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