One Last Favor - How Graham Richardson's Career Ended
The Age
Monday February 12, 1996
A sex scandal on the Gold Coast marked the beginning of the end for Graham Richardson as a Labor powerbroker. This extract from a new biography by Marian Wilkinson details his downfall.
THE telephone rang in the Pintari Apartments on the Gold Coast on the night of 10 August 1993. Sarah Gee, a slight, blonde young woman picked up the receiver. On the end of the line was her boss from Premiere Companions, the escort agency that offered young ladies to meet ``your highest expectations".
The instructions were clear and simple. The agency had a very important client in town who needed to be treated well.
Another girl would be joining her for the booking. The driver would collect Sarah and take her to Spargo's Restaurant in Surfers Paradise. From there Nick, the owner, would drive the two girls to the client's hotel.
There was good money in the job for Sarah, who had been with the high-price agency only a few months after escaping some of the less salubrious joints on the coast. She left her apartment and hopped into the car, reassured by the fact that the driver for Premiere Companions was her boyfriend, Ricky, from Tai-Pan Security. It was not long before they arrived at Spargo's.
Until that night, Sarah Gee had not met Nick Karlos, but he and his restaurants were well known to Premiere Companions.
Nick Karlos frequently procured prostitutes on request for selected friends or patrons who came to his famous seafood restaurants on the coast. Karlos was a real Gold Coast identity.
In the 1980s, all the big stars who visited the local clubs - Tina Turner, Tom Jones or Rolf Harris - would come to eat after the show at the Fisherman's Cove or the Black Whale.
But it was not just the stars that made the now greying, 60-ish Greek playboy the talk of the town. It was his political friends. The former Prime Minister, Bob Hawke, dined at Karlos's restaurants. His photo, showing him locked in Karlos's embrace, adorned the wall at the Fisherman's Cove, along with the snapshots of faded cabaret stars.
Karlos's political connections came through his mateship with the boys from the NSW Right, and one of his great mates was Graham Richardson, whom he had known for nearly 15 years.
Richardson managed to ignore the fact that Nick Karlos had been publicly accused of having serious criminal connections.
In fact, Karlos had been named in the NSW Parliament as a long-time friend and associate of the Sydney crime boss Lennie McPherson. And although no snap of Lennie was stuck up on the wall of the Fisherman's Cove, Nick Karlos could still describe him as ``a nice man". ``I take him as I find him," he would say.
When Sarah Gee met Nick Karlos at Spargo's restaurant that August in 1993, he was not at his best. He was drinking and, unknown to the young prostitute, he was also going broke.
The escort agency, among others, had been hassling him to pay his bills.
Sarah and her co-worker, Leanne, got into Karlos's car to be transported to their important client. Sarah would later tell of a rough ride to the luxurious Hyatt Hotel at Sanctuary Cove, with Karlos veering all over the road. According to Sarah, when they finally arrived, a tubby man in his 50s, with grey hair and grey eyebrows, came over to the car and peered through the window. He was apparently checking out the two girls before they were taken up to his room.
Five months later Sarah Gee sat in a room with Queensland police officers. She pointed to a photograph of Senator Graham Richardson, the Minister for Health, identifying him as the client she met that cold August night at Sanctuary Cove. It was this allegation by a 20-year-old prostitute that would mark the beginning of the end of Graham Richardson's political life.
Ten years earlier, in May 1983, two months after Bob Hawke was elected Prime Minister and Graham Richardson went into the Senate, Nick Karlos came to Sydney to attend a $150-a- head fund-raising dinner for the Labor Party at the Regent Hotel. The Prime Minister was the guest of honor.
Accepting an invitation with Nick Karlos was his new partner in the Gold Coast restaurant business, Bob Burgess. It was here that Richardson probably met Burgess for the first time, although amid the sea of faces that night, Richardson cannot recall saying hello. But 10 years later they would be the best of mates. Bob Burgess and Nick Karlos would play the lead roles in the final act of Richardson's political career.
Behind this mateship between Graham Richardson, Bob Burgess and Nick Karlos is a tangled tale of defence contracts, political lobbying and a sex scandal. It was this volatile mix that exploded in Richardson's face one week before he approached the Prime Minister, Paul Keating, in March 1994 to say he was permanently resigning from political life.
Graham Richardson liked Burgess a lot. Burgess was a rough kind of man, about Richardson's age and size, whose early career was in the trucking business in Newcastle. Burgess had met Karlos when he worked with Karlos's wholesale meat company in Sydney.
In the early 1980s they became co-directors in the hospitality business in the tourist mecca of the Gold Coast. But by 1989 the restaurants were in financial trouble. Like many others, Karlos and Burgess had borrowed big in the boom. They were $3 million in debt and paying interest rates of 20 per cent.
In late 1991, Burgess decided to radically change the direction of his business interests. After a tip-off from a government source, Burgess set up a meeting with a dynamic electronics whiz-kid on the Gold Coast whose company desperately needed capital.
The company was Integrated Memory Systems (IMS), a small computer firm based at Bond University on the Gold Coast. It was run by a Californian named Peter Rovazzini. Apart from having an obsession with computers and electronics, Rovazzini had one vital asset. He had a friend in critical management position with a giant American defence supply company, the McDonnell Douglas Corporation.
Burgess thought he had hit a gold mine. At one of the first meetings between Burgess and Rovazzini to discuss his new investment in IMS, Burgess raised his friendship with Richardson and indicated that he had already discussed the company with him.
Burgess would later claim he did discuss getting a Federal Government guarantee for the factory with Richardson but he was rebuffed, and Richardson told him to try the Queensland Government Investment Development Corporation instead. ``We are not a f--- benevolent society. We don't guarantee people in companies, Bob. Try the QIDC," Burgess recalled Richardson saying.
From January to March 1992, Richardson would go out of his way to help his mate's curious foray into the world of high- tech defence contracts. He would sign an elaborate letter of support for Burgess under his ministerial letterhead. This letter was then used to set up a meeting between Richardson and a senior executive of McDonnell Douglas in Washington, where Richardson would discuss Burgess's interests.
Richardson explained his motivation as purely an act of mateship and wanting to get some industry into Australia. ``Why would I say no?" was his view. Richardson had no concerns that Burgess might be exploiting their friendship, blatantly using his links with one of the Government's most senior Cabinet ministers to get business with one of the Government's most important overseas defence contractors.
Nor was he concerned about how McDonnell Douglas would read his lobbying for his friend. ``Obviously Burgess was getting some kudos by knowing me, but I can't help that. Lots of people have got kudos by knowing me," he quipped. It was exactly how Richardson had treated his mates from the 1970s right through to the 1990s.
How involved Richardson became in Burgess's affairs was later revealed in a pile of documents taken from IMS by various law-enforcement agencies.
Just how far Burgess deliberately exploited his friendship with Richardson when dealing with McDonnell Douglas is impossible to know. But clearly Burgess used his friendship with Richardson at critical times and allowed McDonnell Douglas and his Australian partners to believe he could call on Richardson when needed.
But by mid-1993 trouble was looming for Burgess, and his friendship with Richardson was about to become a liability for them both.
In June 1993, Queensland detectives began a major investigation into organised prostitution on the Gold Coast. Code-named Operation Hacker VI, it had as its targets two well-known madams, Jackie Leyden, a former modelling student, and Gayle Ashton, reported to be a one-time Penthouse centrefold. The women, in their 30s, operated four well-known escort agencies: Premiere Companions, Elite Escorts, A Touch of Class, and Casino Girls - employing about 15 girls. The police also had their sights on the agencies' driver, Ricky McLachlan of Tai- Pan Security, who often delivered the girls to their clients.
After months of pressure, McLachlan decided to cooperate with the Queensland police. Not long after, Sarah Gee, the prostitute Nick Karlos had brought to Sanctuary Cove a few months before, walked into the Brisbane police headquarters of Operation Hacker and began talking.
In late January 1994, senior officers from the Queensland Police Force called on the state's crime fighting body, the Criminal Justice Commission, and delivered a lengthy briefing about their investigation. Their report referred to Nick Karlos and his involvement in procuring prostitutes and revealed that one of the prostitutes claimed ``a prominent identity had received sexual services". The police also cited intelligence reports from other agencies around the country, detailing Nick Karlos's association with Lennie McPherson, then under investigation by the National Crime Authority in Sydney. A search of Karlos's phone records revealed that McPherson had regularly called him at his Gold Coast restaurants or on his mobile phone from August 1993 to January 1994.
The Criminal Justice Commission had been set up a few years before with wide-ranging powers to investigate organised crime and corruption in Queensland. Only days after the police briefing, on 1 February, the chairman of the CJC, Rob O'Regan, QC, agreed that the commission should use its powers to investigate the claims about Nick Karlos and Graham Richardson. Operation Wallah was up and running. One of the first witnesses called to give evidence at a secret hearing of the CJC was Sarah Gee. Soon, the investigators were poring over the financial affairs of Nick Karlos, and Bob Burgess was also swept up into the investigation. On 23 February 1994, Burgess was served with a summons to appear at a secret hearing of the CJC. The summons made clear that the investigation had focused on Nick Karlos and his involvement with organised prostitution. As soon as Burgess received the summons, he telephoned Richardson.
According to Richardson, Burgess did tell him in this conversation that he had received a summons from the CJC. But, Richardson said, they did not talk about the CJC investigation. Instead, they discussed their mutual friend, Nick Karlos. Karlos was by then in a bad way and had been taken to hospital on the coast.
Richardson insisted that he had already decided to resign from politics by the time Burgess had received his summons.
On 8 March 1994, Burgess appeared at a secret hearing of the CJC in Brisbane. He was questioned intensely about his relationship with Karlos and Richardson, and allegations that Karlos procured prostitutes for Richardson. He did not deny the allegations about Karlos and Richardson. But the CJC could not establish why Karlos had arranged the girls for Richardson, especially as Karlos was broke and owing money.
More importantly, the CJC could not ultimately establish that Burgess had supplied prostitutes to Richardson, either through Karlos or personally. Indeed, Burgess and Richardson would both deny this. As a result, the commission was finally unable to conclude that Richardson's complex relationship with Burgess, including his representations for Burgess in Washington, involved anything that was legally questionable.
In early March, aware of the CJC investigation into his mates, Richardson began organising his exit from political life. Six days after Burgess was interrogated at the CJC hearing, Richardson went to the Prime Minister and told him he was resigning from Cabinet, from the Senate and from politics.
He was standing down from all his positions in the Labor Party. Keating was apparently upset and asked him not to go.
``We didn't have a long argument about it," Richardson recalled.
``We didn't have an argument about it. I mean, I just said, `Well, mate, I told you I was going to stay 12 months and it's 12 months and I'm off.' And he said, `We've lost too many people of weight.' He kept saying, `We've lost Dawkins, we've lost Button and we've lost this and lost that. Can you stay another six months?' I said, `No. Because if I do you'll say, can I stay another six months?' He said `Yes, I will.' I said, `Yeah, well this is the time and I'm going'.
" Curiously, Richardson said he did not tell Keating about the CJC investigation in Queensland into his mates or the possibility that he would be dragged into it.
``I didn't see that it would matter to him," Richardson said simply. He asked Keating to hold the news of his resignation for 10 days, until after the first anniversary of the Keating Government's election victory.
Despite the extraordinary timing of all these events, Richardson insisted that the CJC investigation had nothing to do with his resignation from politics.
He maintained that he had only wanted to serve 12 months in the new Keating Ministry before he left to enjoy what was left of his health and the good life. ``I know it wasn't important to anyone else but it was to me," Richardson said. ``I wanted to last until the day. I just timed it to coincide with that.
" But he was forced to concede that the timing of his resignation was convenient at the very least. ``This CJC inquiry was happening as well, and I mean obviously it was the fact that I was going was good, because it meant that I didn't have to go through another Marshall Islands, so I'm happy with that, but it was happening anyway." In June 1995, more than a year after Richardson had resigned from the Senate, the Federal Police presented a report clearing him of any criminal wrongdoing in his dealings with Karlos and Burgess. Paul Keating telephoned Richardson the day the finding was to be announced by the federal Justice Minister to let him know the news was coming.
The Federal Police report exonerating Richardson was questioned by some, although a subsequent judicial inquiry dismissed allegations that it had been a whitehwash.
It appeared that, because the detectives could find no evidence that Bob Burgess had procured prostitutes for Richardson, they found nothing wrong in Richardson's representations for Burgess and his company with McDonnell Douglas or anyone else.
They also found that Burgess's company had not acted illegally in any of its dealings with the Defence Department's offset credits program.
Although the Federal Police accepted the CJC's evidence that Karlos had procured prostitutes for Richardson, they apparently found this was not worth investigating because the CJC had provided no evidence that Richardson had made representations for Karlos, only for Burgess. As a result, they apparently did not explore any other questions arising out of the relationship between Richardson, Burgess and Karlos.
The Fixer: The Untold Story of Graham Richardson, by Marian Wilkinson, is published by Heinemann today, $35.
© 1996 The Age