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«COMMERCIAL RADIO INQUIRY Report of the Australian Broadcasting Authority Hearing into Radio 2UE Sydney Pty Limited February 2000 Sydney ISBN 0 642 ...»

-- [ Page 14 ] --

2UE appointed Mr Brennan to monitor compliance with the Codes. At the same time, however, he was responsible for ensuring that presenters on 2UE were kept ‘psychologically number one when they do their program’.351 Mr Brennan gave evidence that one of the management systems employed at 2UE designed to ensure compliance with the Codes, was the conduct of ‘spot tests’.352 Mr Brennan was unable to properly carry out ‘spot tests’ of Mr Laws’ program, however, as he had not been given the names of any of Mr Laws’ sponsors known to 2UE.353 Nor had 2UE sought the names of any other sponsors of Mr Laws.354 Findings

–  –  –

Transcript, Mr Laws, p. 881.

Transcript, Mr Laws, p. 909.

2UE Submissions, para. 61.

JL.0003.0506.

Transcript, Mr Brennan, p. 1235.

Transcript, Mr Brennan, p. 1222.

–  –  –

DECEMBER 1998 E-MAILS REGARDING THE BANKERS’

ASSOCIATION

In an e-mail from Mr Moltzen to Mr Conde on 24 December 1998, Mr Conde was notified that an arrangement was proposed between the Bankers’ Association and Mr Laws. The email indicated that the arrangement involved the payment of a fee of $500,000 to Mr Laws as well as the purchase of advertising time on 2UE, but that the Bankers’ Association did not want to pay 2UE’s normal live read rate, because that would involve them ‘paying twice’.355 The contents of Mr Moltzen’s memo clearly indicated that Mr Laws was negotiating a contract that would infringe station policy,356 and Mr Conde claimed to be astounded357 at what he said was an ‘alarming possibility’.358 In replying to Mr Moltzen’s e-mail, Mr Conde attached a draft of a letter to Mr Laws on the matter.359 Mr Conde and Mr Moltzen had also discussed the matter, and had concluded that the draft letter was probably not appropriate. In

the e-mail to Mr Moltzen, Mr Conde said:

In the cool light of day the less one says to Lawsie the better because he is so much better with the pen than I am.360 2UE submitted that ‘the e-mail from Mr Moltzen suggested, as one possibility, that Mr Laws was contemplating a breach of station policy but Mr Conde found it hard to believe in the light of Mr Laws’ previous acceptance of the principles stated in the 14 May 1998 letter.’361 The Panel does not accept this submission: having been alerted to the possibility of such a breach, Mr Conde could not dismiss it so readily.

In an e-mail from Mr Moltzen to Mr Conde dated 29 December 1998, Mr Moltzen informed Mr Conde that he was not going to send Mr Conde’s draft letter.362 Messrs Moltzen and Conde gave evidence that the possibility had arisen that the Bankers’ Association might be Transcript, Mr Brennan, p. 1238-1242.

Transcript, Mr Brennan, p. 1238-1242; Transcript, Mr Conde, p. 1350-1352.

2UE.0025.0233; Transcript, Mr Stewart, pp. 162, 163, 590-592; Transcript, Mr Conde, p. 1384 ff.

Transcript, Mr Conde, pp. 1386-1388.

Transcript, Mr Conde, p. 1384.

Transcript, Mr Conde, p. 1391.

2UE.0025.0235.

2UE.0025.0233.

2UE Submission referring to Transcript, p. 1563.

Transcript, Mr Conde, p. 1329.

persuaded to convert to an Olympic Sponsorship deal, which would have alleviated their concerns that Mr Laws was negotiating in breach of station policy.363 Mr Conde went on holidays from 4 January 1999 until late January 1999,364 and was briefed on his return by Mr Moltzen on 28 January 1999.

The problems surrounding the Bankers’ Association were not discussed,365 and Mr Conde gave evidence that, upon his return from holidays, he had forgotten all about the matter.366 On 19 February 1999, Mr Laws sent a memorandum to Mr Brennan (with a copy to Mr Conde) referring to a memo by Mr Brennan concerning ‘McDonald’s commitment of $170,000 to 2UE’.367 Mr Laws’ memorandum continues:

I would like to bring to your attention that the Australian Banking Association is about to spend $707,000 on 2UE and the Network due to some great work by me. I, however, don’t rejoice in the commission but somebody who didn’t sell, in sales, will.

Could I respectfully request, given the memo concerning McDonald’s, an assurance that Messrs Jones, Stanley, Carlton, Zemanek, et al, will not make any derogatory comments about the banks?

–  –  –

Mr Laws gave evidence that the memorandum was a tongue-in-cheek response to Mr Brennan’s earlier memorandum, which had requested presenters not to make derogatory remarks about McDonalds.369 Whatever the intention behind Mr Laws’ response, it was further notice to 2UE of his interest in the arrangement with the Bankers’ Association.

Mr Brennan’s reply to Mr Laws of 20 February 1999 congratulated him on ‘having signed off a very attractive deal’.370 Mr Conde gave evidence that when he received a copy of Mr Laws’ letter of 19 February 1999, he did not turn his mind to the fact that this referred to the same transaction that had been discussed in the December e-mails.371 On 22 February 1999 Mr Bowd, Agency Sales Manager for Sky Radio Sydney, wrote to Mr Laws confirming the arrangements for the Bankers’ Association live reads on Mr Laws’ program.372 Mr Bowd mentioned that he had been involved in negotiations since November 1998 and that Ms Clary would be handling the day-to-day running of the





account. He also wrote:

John it is obviously an understatement to say that you had a large role in the securing of the business and I write on behalf of the Sales Dept to express our thanks in convincing this client of the power of John Laws and 2UE. I have been made aware fully of your involvement with Chris [Stewart] & Bob [Miller] and obviously without you it would not have happened.373 Transcript, Mr Moltzen, p. 1297; Transcript, Mr Conde, pp. 1327-1328; 2UE.0025.0233.

Transcript, Mr Conde, pp. 1329, 1392.

Transcript, Mr Conde, p. 1392.

Transcript, Mr Conde, pp. 1390-1392.

Exhibit 51.

Exhibit 51.

Transcript, Mr Laws, pp. 767-768, 854-855.

Exhibit 51.

Transcript, Mr Conde, p. 1392.

JL.0003.0660.

JL.0003.0660.

At some time after the agreements came into effect, some confusion arose in relation to the recording of advertisements by Mr Laws for the NRMA. The NRMA was informed through its advertising agency that Mr Laws could no longer record advertisements for it because of his new arrangement with the Bankers’ Association. This message appeared to have come from 2UE.374 The chain of events from December 1998 to February 1999 indicates that 2UE senior management had knowledge of the existence of an agreement between Mr Laws and the Bankers’ Association months before the ‘Media Watch’ program of July 1999. The evidence also indicates that the management of 2UE did not seek to discover for itself, in light of the prospect that the policy might be breached, whether in fact it was so breached.

2UE submitted that even if Mr Conde had sought further information regarding the Bankers’ Association arrangement, no breach of 2UE’s policy of 27 July 1998 would have been

found.375 This submission is difficult to reconcile with:

♦ Mr Conde’s stated concern that on-air promotional contracts threaten the editorial integrity of announcers and would not be tolerated at 2UE;376 and Mr Conde’s admission that the December e-mails were an ‘alarming possibility’.377 ♦ 2UE had clearly stated concerns about the erosion of announcers’ editorial integrity.378 The lack of any follow-up action, therefore, after the December e-mails and the exchange of correspondence around February is, in the view of the Panel, more consistent with the explanation that the prospect of Mr Laws having a new sponsorship agreement was a matter of no real concern to 2UE.

2UE submitted that, despite the alarm that the e-mails in December 1998 caused in Mr Conde’s mind, the final form of the agreement between Mr Laws and Australia Street Consulting in which he was to provide services for the Bankers’ Association was not in breach of the station’s policy.379 The Panel has difficulty accepting 2UE’s submission that, if it appears in hindsight that the agreement between Australia Street Consulting and Mr Laws did not breach 2UE’s policy of 27 July 1998, there was no need for 2UE management to inquire further. It is difficult to accept that the possibility of such a striking breach of station policy went unnoticed at 2UE.

If it did, it raises fundamental questions about the station’s ability to discharge the responsibilities of a licensee. It appears that few if any systems exist to monitor compliance or even to ensure that outstanding issues are followed up.

Transcript, Mr Williams pp. 478-480.

2UE submission, para. 76.

Submission, Mr Conde, paras 1.24, 1.25, 1.35.

Transcript, Mr Conde, p. 1391.

Submission, Mr Conde, para. 13.2.

Submission, 2UE, para. 76.

Finding

–  –  –

2UE submitted that:

It is too easy for those who do not face the pressures of management of corporations to be critical of what may, with the benefit of hindsight, appear to be a failure to exercise strong management. It has been said, in another context, that courts should not readily substitute their judgment for those of directors who can be presumed to have much greater knowledge and expertise to evaluate the best interests of the company: See New South Wales Rugby League v Wayde (1985) 1 NSW LR 86 at 102 per Sir Laurence Street; affirmed by the High Court (1985) 59 ALJR798.

What underlies the principle stated in Wayde is that courts and tribunals should be slow to say, in the absence of clear and convincing evidence, that a director should have acted differently in the management of the company. We ask rhetorically: ‘What is there to say that Mr Conde was not telling the truth?’ While the Panel accepts that courts should not readily substitute their judgment for those of directors, the Panel notes that it is the role of the Authority to take responsibility for monitoring the broadcasting industry.380 This monitoring role is to be undertaken in the context of enabling public interest considerations to be addressed in a way that does not impose unnecessary financial and administrative burdens on providers of broadcasting services.381 The issue is not, however, that the Authority cannot impose financial or administrative burdens on a licensee, but that the imposition should not be unnecessary. The Authority has a legitimate role in the co-regulatory environment of ensuring that adequate systems are in place to address issues of public concern.

Finding

–  –  –

KNOWLEDGE OF MR JONES’ OPTUS AGREEMENT

Mr Jones gave evidence that Mr Conde was aware of the existence of arrangements between himself and Optus:382 ♦ the contract of engagement between Mr Jones and the company associated with him and 2UE refers at clause 5.9 to other activities of Mr Jones, including those relating to Optus, Optus Vision and Channel Nine; and Section 5(1)(a) of the Broadcasting Services Act 1992.

Section 4(2)(a) of the Broadcasting Services Act 1992.

Transcript, Mr Jones p. 1067.

♦ Mr Conde, in his statement, admits that he was aware of the existence of an agreement between Mr Jones and Optus ‘from about the time that relationship came into existence’.383 Mr Conde stated that his understanding of the nature of the relationship was based upon a letter from Mr Harry Miller,384 and that he was under the impression that Mr Jones’ agreement related to off-air activities (principally Mr Jones’ services for a subscription television broadcasting program).385 The existence of Mr Jones’ contract and the potential difficulties it posed for 2UE were certainly known to 2UE as early as February 1995, when Mr Conde sought to clarify Mr Jones’ position on Telecom. On 6 February 1995 Mr Conde wrote to Mr Jones asking whether Mr Jones had difficulty presenting commercials on 2UE for Telecom.386 Mr Conde was aware of the Optus advertising previously carried on Mr Jones’ program and had ‘no desire or intention to cause any problems with [Mr Jones’] personal credibility’.387 He said,

however:

… the facts are that in 1994 Optus spent less than a 1/3 of the money that they spent in 1993. Indeed, in 1994 there was minimal usage by Optus of advertising in either the Breakfast or Morning programs. However, the company respected our past association with Optus and our concern for not putting any individual broadcaster’s credibility at risk caused us not to seek to take advertising material from a competitor in a ‘live read’ form.

However, for your confidential information, we are in receipt of a very considerable advertising expenditure proposal from Telecom and I would like to know what impediments there may be, if any, to our considering such advertising for ‘live read’ presentation in your program.

Mr Jones sought advice from Mr Harry Miller by fax on 7 February 1995:

Please advise how I respond to the note from John Conde. I need to talk to you. In many ways Optus have been very disappointing.388 Mr Harry Miller responded on 17 February 1995, advising Mr Jones that the Optus agreement was due for renewal but he had not reminded Optus of that fact ‘in view of the

Murdoch/Telecom situation’. Mr Harry Miller considered that Mr Jones should:

hold fire until we hear from Sam Chisholm [Channel 9] and then punt … if we can’t lock up Telecom’.389 On 11 September 1995, Ms O’Neil, Director of Corporate Affairs at Foxtel wrote to Mr Conde, sending a copy to Mr Brennan and Mr Jones, in relation to Mr Jones’ contractual relations with Optus. Ms O’Neil complained about the treatment given to Foxtel by Mr Jones in an interview with Mr Geoffrey Cousins (CEO of Optus Vision). Ms O’Neil

said:

Submission, Mr Conde, para. 25.2.

Submission, Mr Conde, para. 25.2, and AJ.0008.1306 Submission, Mr Conde, para. 25.9.

AJ.0003.0577, Transcript, Mr Jones p. 1091.

AJ.0003.0577.

AJ.0003.0576 AJ.0008.1311, Transcript, Mr Jones pp. 1098-1100.



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