(Photo : News.com.au)
“RACING IS ABOUT AS ORDERLY AS AN EARTHQUAKE”
Summerhill CEOOur story “A certainty, whatever the odds” has attracted a good bit of comment, much of it involving two masters of the Australian turf, Bart Cummings and Tommy Smith, and the trouble they found themselves in during the heady days of the late 80s, when tax schemes and racehorse investment syndicates were the rivals to the plantations, airplane and film “fantasies” dreamed up by local accountants at the time. I don’t know about Tommy Smith, but I do know of at least two books about Australia’s “Cup’s King”, Bart Cummings, one by his official biographer, Bruce Montgomerie, the other by my personal “pick” of racing’s scribes, Les Carlyon. To give you a brief idea of the man Cummings, he’s won no fewer than 12 Melbourne Cups, a record which is not only likely to stand the test of all time, but defines Cummings as the outstanding horseman of his era, if not in the history of the game. This is a legend in the proper sense of a word which has been much debated in recent times, but a man about whom very little is still known.
Cummings has never courted the media, never employed a public relations man, never taken on affectations, and he’s never taken himself too seriously away from the training tracks and stables. Yet he doesn’t do a sports babble, he doesn’t throw tantrums, there is nothing contrived, nothing theatrical. They tell us he is just the same today as he was almost sixty years ago, when he first took out a license, much the same away from the camera as he is in front of one. He has won hundreds of Group One races, yet he seldom leads in his own horses after a big race, one exception being his exquisite colt Beau Zam, after he’d won the St Leger at Randwick in 1988 by ten lengths. Cummings has never been about show, and he never will be. It is as though too much show is a form of bad manners, and anyway, post-race hysteria tends to frighten the horses, and the horses are the real heroes. Cummings belongs to the era of Don Bradman, when it was thought proper for sports heroes to be humble, and when they didn’t use social networking sites and a forest of exclamation marks to tell us about their trip to the supermarket. Modern fame, you suspect, still baffles Cummings. He is a man formed in another era. And like us, he understands that there is a danger to victory. Being gracious in defeat, as in victory, is not a characteristic that defines the modern sports era. I’m sure he often asks, what happened to being a good sport?
To get back to the tax schemes, by the time Bart and Tommy found themselves in hot water, our local Minister of Finance, Barend Du Plessis, had already shut ours down, just about a year before. The premier New Zealand yearling auction takes its place in the international racing calendar in January every year at Trentham, just outside the harbour city of Auckland. The Wrightson’s Bloodstock sales in an earlier generation, were the stomping grounds of Chris Smith, Cyril Hurwitz, John and Mary Liley and Herman Brown Senior, from the loins of which sprung the likes of Sledgehammer, Sun Monarch and Frisky, the latter winding up at Summerhill as a foundation mare for our long serving management team, Greig and Michele Muir.
That day at Trentham, money didn’t seem that important to Cummings, his purchases accounting for a quarter of the day’s takings. It was all about beating the other fellow and getting the right horses. Cummings was buying for his new Cups King Syndicate, and Cummings, the peerless horseman, had become a financier, a “packager” of horseflesh. He had strayed from the place he knew so well, the racecourse, into the world of men in suits, leveraged buyouts, debt and tax-effective deals. This new place was much more dangerous than the racecourse, and the rules were different. A handshake didn’t mean much here. By the time of the New Zealand sale, it had become commonplace to call racing an “industry” rather than a sport, and people were said to “invest” in it. In one sense this was absurd. Industries are rational and ordered, or at least try to be, so it’s possible to draw up a business plan, to make a list of reasonable expectations and assumptions, even to predict a likely yield or dividend. Racing isn’t like this, never has been, and never will be. That’s why it’s interesting. Whoever saw a piece of share scrip maim itself on a fence, then stand bewildered and uncomprehending, as the vet pushes the stitches through with plyers and bloodied fingers, and says, yes, there’s a chance this particular investment might make it to the races?
Racing is about as orderly as an earthquake. You breed the best to the best with the intention of selling the offspring, and the resulting colt comes out with misshapen forelegs and straight away, you’re out a couple of hundred thousand Rand. You breed an unfashionable stallion to a non-descript mare, and out comes Politician. Racing is proof that two plus two, doesn’t always come up as four.
There was another factor at work which had nothing to do with racing. The 80s was the era of deregulated money markets, of entrepreneurs, merchant bankers, company raiders and all manner of paper shufflers. They stalked the land trailing huge lines of credit. They were audacious and hungry and all over the business pages of newspapers, the new buccaneers.
Above all, this was an era when, as an American writer put it, the financial system slipped loose from its moorings, just as the collapse of Lehman Brothers five years ago, served as a bit of déjà vu about the frailties of humankind. For centuries, debt was considered something to be avoided, or at least entered into modestly. These days, debt is fashionable, and those who don’t embrace the idea are considered passé. What have been called the four most dangerous words in the English language were being spoken again “It’s different this time”. The new financiers of racing, or more specifically, the buying of yearlings, racing’s raw material - were accountants, lawyers, the young and brash movers and shakers of the new financial world. They were not necessarily steeped in the language of racing and horses. Oh, yes, they thought horses chic, but for reasons that had to do with leverage and tax avoidance.
The horse “packages” they came up with were different to what had gone before. The syndication of yearlings was not new: people like Wayne Alridge and Robin Bruss of Delta Bloodstock and Peter Youell of Equine Management, had been putting together syndicates in South Africa for some time with great success. These were the classic old-fashioned deals: one horse, one cash payment, no overt considerations of tax. Half a dozen people wanted to race a horse and have a bit of fun: if they also made money, that was a blessing. Neither was there anything new in trainers buying yearlings on “spec” in the expectation of passing them onto stable clients. That’s how Ever Fair was picked up by Johnny Nicholson for a “grand” and became the hero of the Johannesburg Summer Handicap, and how the diminutive “galloping goldmine” Grand National, found herself in the hands of a brotherhood of Lebanese racecourse “battlers” and wound up in the history books. In the Australian context, that’s how Tulloch, bought by Tommy Smith, came to be owned by an eighty-year old grazier from the little country town of Bathurst, in New South Wales.
What was new here was that the packages being fashioned in 1989 were about dozens of horses and millions of dollars, and were not aimed at traditional racing folk so much as business people, who wanted to trim their tax bills. The horses were simply the vehicles, just as oil exploration companies, (and as we’ve already said, films, aeroplanes and plantations) had been in earlier tax schemes. It was all about business and numbers: any fun was incidental.
By the late 80s, Cummings knew he could no longer sneak into New Zealand and pick up a potential Melbourne Cup winner for a couple of thousand dollars, as he’d done so often. He might pick one up for a couple of hundred thousand, if he was lucky, but he would more likely need half a million. He decided if he was going to compete, he needed to tap into all this deregulated money that was looking for a home. He got up the scheme with two well-known accounting firms. “I thought you couldn’t go wrong with such conservative, powerful names behind you”. And so the Cups King Syndicate was born, offering tax advantages to investors. In 1989, Cummings bought close to 90 yearlings for some $22 million at sales in Australia and New Zealand. He didn’t have to pay for them at once; the auction houses would extend credit until Cumming’s syndicate had sold their units to investors. A few months after the sales, however, it was clear to many that Australia’s wild boom, its love affair with debt and paper shuffling, was coming to an end, choking on its own excesses. Some, and they were not in the Federal government, saw a recession coming.
Supplies of speculative money were drying up, interest rates were high, big companies were crashing. The share market was skittish. The auction houses gave Cummings a final deadline for the end of June that year. After that, the horses had to be paid for. When the deadline came, Cummings still had 64 unsold yearlings on his books. He thought the risk was being shared by him and the two accounting firms. They told him though, that he was on his own. “I’d shaken hands with them” he wrote, “and made certain agreements which I believed we all understood together, but when they brought out the fine print on the contracts, they argued that when I thought I’d been doing this in a sophisticated risk-spreading way, I was actually doing what I’d been doing all along, putting up my money, taking all the risk myself”.
Cummings now had to sell 64 yearlings and, as he put it, he was caught in no-mans-land. People like to buy yearlings, fresh, untouched by saddles and riders. They also like to buy older horses with good racetrack form, but the horses Cummings was trying to sell, now rising two-year-olds, fell between these two poles, neither one thing nor the other.
William Inglis and Sons, who host the sale that spawned the likes of Igugu and Hollywoodboulevard for us, put the yearlings up at their Sydney stables in September 1989. It was a fire sale: no reserves. Someone with a black sense of humour came up with a title for the sale, “The Night Of The Stars”. Cummings sat in the auditorium, hunched in his overcoat with his wife Valmae beside him. For him it was the night of purgatory. The horses brought $9 million. At the end of the night, Cummings still owed three auction houses around $11 million. He took the accounting firms to the Federal court, and the hearing endured for six weeks. Some months later, the court ruled that no joint venture existed, and the debt was Cumming’s alone.
A five year repayment scheme was eventually worked out. Cummings conceded that it was at least better than bankruptcy. He sold his home in Vaucluse and Prince’s Farm at Castlereigh, which he’d bought only a few years earlier. The loss of the farm hurt him more than the loss of the family home, and anyone who’d savoured its beauty, would understand why. People were even beginning to think he was mortal. Bart was now 63, an age when most men are thinking about retirement, and when the one thing they’re certainly not thinking about, is starting over again. He’d won seven Melbourne Cups, made a lot of money and now with one wrong move, one that had nothing to do with horsemanship, he’d lost a great deal of it. Many in the sport at this point said, softly and without malice, that most of his future was behind him. He couldn’t come back to what he had been after a setback like this, not at his age, not with all that debt hanging about him like coils of a chain.
It’s a measure of the man that he’s since bounced back to win another five Melbourne Cups in less than two decades since this mess manifested itself, he’s overcome grave illness and recovered his beloved farm, and to this day, he’s at his yard before the sun rises and most days, leaves it when it’s almost set again.