Mr KELVIN THOMSON(4.36 p.m.) —The House has probably heard about Jeff Kennett riding in on a white charger to save Ultrafine, the Victorian knitting company, and how he bought the machine personally after telling the agent, `If you don't sell it to me, I'll get the unions to black-ban this machine and prevent it from leaving the country.'

The Liberal Party spends fully half its intellectual energy trying to denigrate, blacken and bad-mouth the role of unions. Yet when the chips are down and the Premier of Victoria and the Western District establishment

really need help, who do they call? The trade union movement!

The House has probably also heard how Mr Kennett misused his resources as opposition leader, using the opposition leader's car and driver to collect and deliver wages to Seymour and how he held Ultrafine board meetings in the opposition leader's parliament house office.

The House may even recall him saying as opposition leader at the launch of Ultrafine products back in 1991:

I would sooner be involved in a knitting-led recovery than a gambling-led recovery.

Well, Premier, look at you now!

But what the House won't know, because it has never been put on the public record before, is what happened to two of my constituents, David and Josie Powers, after the Kennetts decided to get out of the Ultrafine business.

In October 1991, Jeff Kennett told Mr and Mrs Powers, the founders of Ultrafine, that he wanted out of the business. They were able to buy him out with a Commonwealth Development Bank loan. The books provided by Felicity and Jeff Kennett claimed that Ultrafine had recorded a $5,000 profit over the previous seven months. But Kennett would not allow Mr and Mrs Powers to examine the books until 9 January 1992, the day before settlement was due.

When David and Josie Powers did examine the books, the books did not seem right. They quickly discovered a $10,000 error. They faxed this information to the Kennett solicitors insisting on a $10,000 adjustment and a clause in the agreement which would force Mr Kennett to make good any further errors uncovered on a more detailed examination of the books.

After the settlement, Mr O'Sullivan's brother, a chartered accountant, went through the books thoroughly. Instead of a $5,000 profit, the company had made a $166,000 loss. No wonder the Kennetts wanted out. Mr O'Sullivan, the accountant, made the observation that a child of three could have kept a better set of books. An account of $6,500 had been presented twice. But the biggest payment was of over $50,000 to KNF, the Kennetts' own company. The invoices to KNF had been written out one after the other immediately prior to the sale, clearly after the Kennetts had realised that they were going to be bought out.

The state election was approaching in 1992. The Powers wanted to recover the $160,000 from the Kennetts. They were prepared to go public on the matter. However, Mr O'Sullivan, a staunch Western District Liberal, was having none of this. He insisted that the matter be dealt with behind the scenes and offered to use his Liberal Party connections to set things right.

Clearly, publicity before the state election would have taken the gloss off Kennett's knitting mill venture and the strong inference that Kennett had attempted to defraud his business partners would have been very damaging to his reputation in small business and the general community. It probably would not have looked too good either if KNF's figures had come out prior to the 1992 election. Over the previous three years, it had made a loss. Mr Kennett could not run a small business successfully.

Mr and Mrs Powers had concluded that, during the years of opposition, KNF was simply a front and that there was no advertising work being conducted at the Warrigal Road premises. But the matter was hushed up.

After the election, Mr O'Sullivan did write to the new Premier pointing out the errors in the accounts and seeking redress. The Premier's solicitors wrote back telling him to get lost. So the Powers and the O'Sullivans sought legal advice. That advice suggested that they take legal action against the Kennetts and seek to recover $120,000. But that advice was never acted on because a set of events was about to unfold which would destroy the Powers' business interests completely and cause them to regret the day they met Jeff Kennett on the steps of Parliament House.

Enter Philip Gardiner, financier and founding director of the Macquarie Bank, the very bank which is financing Crown Casino and Transurban City Link—Mr Kennett's two favourite projects. Mr Gardiner's assets are believed to exceed $20 million and his company involvements are many. Why would he be interested in being a shareholder in this small struggling company?

Mr Gardiner and two wool growers offered to invest in Merino Gold, a subsidiary company of Ultrafine. They offered to buy 38 per cent of Merino Gold on the basis of 300,000 shares at $1 each. Strangely enough, when the Powers went back to them and said that the cost of the shares would be $1.42 each, they did not bat an eyelid. Mr Gardiner was obviously very keen to get in on this company.

When the new shareholders got in, what did they do? Mr Gardiner immediately proposed that Ultrafine be dissolved and that the company be run through the Merino Gold subsidiary. This was an illogical proposal except for one thing. Ultrafine was the company which had the right to sue the Kennetts. With Ultrafine dissolved, the Premier could go on his merry way free of the fear of litigation and free of being unmasked as someone who had attempted to defraud his small business partners.

Mr and Mrs Powers resisted this move, so Mr Gardiner and the other new shareholders also moved on the other part of their plan—to get rid of Mr and Mrs Powers. Given that the Powers had all the technical expertise of the company and that it was their baby, this move was very strange. Nevertheless, Mr Gardiner proceeded. In January 1995, Mr and Mrs Powers were dismissed as managing directors and the locks on the Ultrafine building were changed. Employment contracts which had been drawn up for them were terminated.

Mr and Mrs Powers' subsequent action for wrongful dismissal was an uphill battle. The new directors of Ultrafine and Merino Gold were holding a loaded financial gun at their heads. They could at any time liquidate the companies and the Powers would lose everything. The case was resolved with the Powers' properties being released from mortgage and them receiving three months pay of a two-year contract.

On 7 May this year, David and Josie Powers had the minor satisfaction of winning a court action brought against them arising from the boardroom coup of January 1995. They represented themselves, while the other side hired a QC. So a director of the Macquarie Bank has the time for this!

So David and Josie Powers, two hard-working and decent private sector people who each had highly paid jobs and technical expertise which had them set for a comfortable retirement, are now both unemployed. David is being badmouthed around the wool industry by the Merino Gold directors and their lives have been consumed by litigation. All their income from the Merino Gold venture has been consumed by legal fees.

So their lives have been all but ruined. How did this happen? Jeff Kennett, that champion of small business, that champion of the little man, rode into their lives on that white charger of political opportunism, took over their finances and then left them for dead when they were no longer of any use to him.

Day after day in the Victorian parliament I heard his sanctimonious lectures about the importance of the private sector and small business. In the last few weeks, I have learnt that his business dealings with two of my constituents have been nothing short of scandalous.

Section 1309(1) of the Corporations Law makes it an offence to make available or furnish information to another director which is false or misleading in a material particular. Section 1309(2) makes it an offence if a director fails to take reasonable steps to ensure that information supplied to another director is not false or misleading.

Section 232 of the Corporations Law imposes on directors a duty to act honestly and a duty to exercise care and diligence. If the information provided to me is correct, the Premier has in all probability breached these laws. This apparent attempt by Jeff Kennett to defraud his small business partners should now be examined by the Australian Securities Commission.

In addition, the Senate committee inquiring into casinos should also examine this transaction as part of a general investigation of the links between the Macquarie Bank and the Crown Casino. How fortuitous it is for Premi er Kennett that a director of the Macquarie Bank—the same bank that has just made $36 million from financing Kennett's City Link project—should have got rid of David and Josie Powers from Ultrafine and Merino Gold so that Kennett's own little sandwich shop could be swept under a woollen carpet. The Premier's lack of ethics in business or anywhere else needs to be the subject of the closest scrutiny. (Time expired)