It was all a con.
Eliot ‘ET’ Forbes didn’t turn the financial position of Tasmania around by $9.8 million.
The accountants did.
The year before ET saddled up as CEO he had been the Chief Operating Officer, and had talked his boss into booking up a $5.7 million impairment loss.
Impairment is a technical term that simply put means a write-down on your previous estimate of a thing’s value, in this case the thing being a racing control body.
To try to make it simple to understand imagine that you bought a BrisVegas Yellow Cab in 2005 and paid $500 000 for the licence. At the time you bought it it was returning profits of $100 grand a year, so it was reasonable to assume that its value over twenty years was 20 x $100 000 = $2 million.
Then Uber comes along and rather than prosecute them for breaching about a dozen different Acts and laws the Government cops their political donations with a smile and turns a blind eye, and later makes their illegal business activities lawful.
All of a sudden your annual profit on the cab drops to $50 000 and it twenty year projected value becomes 20 x $50 000 = $1 million.
Your investment in the Yellow Cab is now impaired.
The difference between the original $2 million twenty year value and the post-Uber infiltration $1 million is the amount of the impairment.
The $1 million impairment to your cab business is recorded in the accounts as a one-off expense, and comes off the top of your revenue when calculating the yearly profit. You take a bath, but gain a sh*tload of tax credits that mean you won’t be paying the taxman a dime on your earnings for the next 10 years until you use them all up.
But if Uber is suddenly outlawed by a new government taking its political donations from the taxi lobby, and in the absence of competition you start earning the $100 grand a year profit again, then you are required to reverse the impairment amount and turn it into a revenue figure in the accounts.
But because you are running a private business and don’t want to pay tax, you apportion the reversed impairment over the full 20 years so it becomes an annual income figure of $1 million divided by 20 = $50 000, and that’s the number that goes into the accounts.
Like I said, ET Forbes talked the outgoing CEO into recording an impairment of $5.7 million in the TasRacing accounts in 2011/12, just months before he started wearing the number one saddle cloth in the joint.
The $5.7 million was recorded as an expense in the TasRacing financial accounts for the 2011/12 year, and it formed a large part – more than half – of the $10.38 million annual loss that TasRacing recorded.
Then a couple of months later Eliot Forbes became King of the Betfair sponsored fairy castle, and ET waved his fairy wand, and something magic happened.
The accountants decided that they’d been mistaken about the value of the impairment, and reversed their previous year’s estimate by just under $2.5 million.
The $2.47 million was included in the financial accounts as revenue.
And because it was recorded as a one-off, the $5.7 million impairment disappeared.
In an instant the TasRacing financial position had been turned around by $5.7 million + $2.5 million = $8.2 million, without ET having to achieve a single thing except having talked the old boss into the impairment and then employing a clever accountant.
Then ET rolled up his shirt sleeves and set to work, and this is what he did
- Borrowed another $500 000 and masked it by use of contributed equity in the form of the Tassie Government stepping in and making the repayments
- Recorded an additional $100 000 in the books as sponsorship, even though it was really 100 large that Tatts Bet had put up as a bonus for any horse winning both the Hobart and Launceston Cups (no horse did that year: Gee Gee’s Blackflash bolted in winning the Lonny beer mug, but only managed 3rd in the ‘Bart)
- Reduced the depreciation value on the TasRacing assets by $80 000
- Lifted $385 000 from TasRacing’s employee defined benefit Superannuation fund
- Reduced Workers Compensation premiums by $640 000 by using state-wide legislative changes to push the costs of insurance back onto the jockeys
- Slashed staff numbers and saved $500 000
- Reduced admin costs by $100 000 thanks to the reduced number of employees
- Slashed prize money by $460 000 while telling everyone he had actually increased it by $340 000
He spent a bit of the savings here and there – $100 extra on marketing, a $700 000 write down on obsolete assets – but when you added the extra revenue from the reversed impairment, the Jack the Slasher approach to staff numbers, and the legal but devious accountancy fiddles to the plus side of the ledger, and took off the $5.7 previous impairment expense, the actual numbers were amazingly nearly exactly the same.
Yet the accounts showed a positive turnaround that Eliot Forbes has boasted about as his personal and absolutely incredible against all odds ‘I’m a Black Caviar of a CEO’ achievement.
What a goddamn miracle!
What an absolute con.
A con that Gee Gee fell hook, line and sinker for, and so now here we have a bloke whose sum total of management experience is holding the roles of:
(a) Head vet for a Dictator-run racing association located in a wind-swept Arab desert state boasting only 5 racecourses; and
(b) CEO of a racing control body on a small island that has only 5 racecourses, one of which – Longford – only races once a year
and this man with the vastly limited top-level industry management experience, but a hell of a good self-promoters spruik, is in charge of the racing industry in the nation’s third most populous and second largest State with 120 race courses under his control.
It’s madness isn’t it?
The next thing you know we’ll be having a Racing Minister who’d never even been to the races before she was given the job in charge of it.
Or a CEO of the BrisVegas race club who hadn’t either, except when someone had slipped him some gratis tickets that included free fang and booze.
Or a stud master with a single horse who almost bankrupted the breeding industry by taking a court case about the accidental death of a stallion named Brave Warrior being elected unopposed (because no-one else was interested, except this writer who the stud master and his mates wouldn’t allow to run) as Chairman of the same Vegas club.
Or a bloke being appointed as boss of the Racing Control Body whose only involvement ever with the industry had been to invest a couple of million bucks in some breeding outfit that’s name he can’t remember for the sole purpose of gaining a personal and corporate tax advantage.
What’s that Mum.
We already do?
Come off the Eagle Farm grass you old chook!
Sat that again dear?
You can’t, because it doesn’t have any?
Jesus bloody Christ, I feel like my beloved Queensland racing’s been overtaken by aliens.
I’m coming with you!