It was a particularly significant month in Malcolm Turnbull’s tenure as Prime Minister: he announced sweeping new foreign interference laws, unveiled a new cabinet, and Australians voted for marriage equality.
And in December 2017, the then Prime Minister also found time for another engagement: a meeting at his home between his son, Alex, and a longtime friend, former business partner and colleague Russel Pillemer.
Alex Turnbull and Pillemer were in business together, through investment firm Pengana Capital, until February 2016, but the relationship had become strained.
Pillemer had repaid a $ 6 million loan to Turnbull, thus ending the business relationship. Alex Turnbull said he accepted money to repay the loan, rather than holding shares in Pengana, as Pillemer had convinced him that holding shares would be of little value.
But after Pillemer subsequently completed a merger that more than doubled the value of the company, Alex Turnbull said it would be fair if he paid the Turnbulls at least $ 3 million more.
When the additional payment was not made, Alex Turnbull took legal action, and this week the family’s business dealings ended up in the New South Wales Supreme Court as well as on the front pages newspapers across the country.
More than three years after the meeting at Malcolm Turnbull’s, the discussion that took place underscores a key part of Pillemer’s defense: that Alex Turnbull wanted to step down from the company, no matter how much money it cost him, because that he was afraid to protect his father.
Alex Turnbull disputes this, saying any concerns he had about possibly negative media coverage of his business relationship would have been more than outweighed by the financial benefit of making a more lucrative deal than Pillemer had suggested.
Pillemer claims that Malcolm Turnbull has made statements to him before that underscored this need for sensitivity.
In an affidavit filed as evidence in the case, Pillemer said that shortly after Turnbull became Prime Minister in September 2015, the couple had a telephone conversation in which Turnbull said: “It is essential that we kept the loan and transfer confidential.
“While my disclosures to Parliament complied with the law, the details of the loan have the potential to cause immense damage if they fall into the public domain. My enemies would almost certainly claim that I misled Parliament and the public.
Turnbull said in his affidavit that he did not utter the words attributed to him and that they were “the product of the imagination of Mr. Pillemer”.
Alex Turnbull’s claim in his case against Pillemer is that he owes damages of up to $ 8.7 million.
Co-founders of Pengana Capital
Malcolm Turnbull and Pillemer met in 1997 at Goldman Sachs, where Pillemer, an investment banker, worked under Turnbull, the chairman and managing director. In 2003, they founded Pengana Capital. Turnbull was elected to Parliament as MP for Wentworth the following year.
When he became Prime Minister in 2015, Turnbull donated his shares in the company, worth around $ 6 million, to his son, Alex, and daughter, Daisy, through another company. that they controlled, Maurtray (there is no suggestion that Turnbull had done wrong, and the correct parliamentary disclosures appear to have been made at the time).
Pillemer says, however, that Alex Turnbull let him know soon after that he wished to withdraw from the business altogether. Pillemer said Alex made it clear to him that Malcolm’s “enemies” would be keen to exploit any perception that the extended business interests of the Turnbull family were inappropriate.
In October 2016, an opportunity arose for the Turnbulls to have their loan repaid. Alex Turnbull and Pillemer discussed the plan further at Indigo, a Double Bay cafe, on December 14, and it continued to develop over the following days.
But on Boxing Day, Pillemer said he heard some interesting news: A key shareholder in another firm, Hunter Hall, had resigned, suggesting it may merge with Pengana.
The accounts of Pillemer and Alex Turnbull diverge considerably at this point.
Pillemer says he informed Alex Turnbull as much as possible about the merger and encouraged him to stay involved with Pengana, as the changes were likely to mean an increase in the value of his shares. But he says he couldn’t tell Turnbull everything because he feared he would break insider trading laws and because of the confidentiality agreements he signed when negotiating the merger. He says Turnbull has made it clear on several occasions that he wants to pull out, whether or not the merger has taken place, due to the risk of exposure.
Alex Turnbull argues that under the loan agreement, Pillemer had an obligation to disclose any information that would have a real impact on the value of the loan. If he had known how much he had to make, Turnbull said, he would not have sold – regardless of any concerns he had about the backlash on his father.
Supreme Court evidence
The NSW Supreme Court heard testimony from Alex, Malcolm Turnbull and Pillemer this week. Both Alex Turnbull and Pillemer were asked about exchanges that were no longer electronically recorded and have conflicting memories.
Alex Turnbull testified that he used burner phones while traveling to China for work – and cut other exchanges – because an Australian diplomat in Singapore warned him in 2013 that his communications could be targeted by Chinese intelligence services.
Pillemer said he cut some exchanges following another court case involving Pengana.
Malcolm Turnbull testified about an extraordinary email sent by Pillemer last November in which he pleaded one last time for the former prime minister to intervene.
Pillemer said his father claimed that the day Turnbull was appointed Prime Minister was one of the happiest of his life, following the birth of his three children and his marriage.
He went on to write that it would make no sense for Pillemer to decide to betray the Turnbulls for financial gain just days after he and his wife felt honored to be seated at “the best table in the room.” during a lunch the first of the time. minister in honor of his visiting Israeli counterpart, Benjamin Netanyahu.
“We were at the height of our lives after that lunch, in awe of the great man and friend you were to us – that in a large audience of some of Australia’s most important people, it was the two of us. you paid the most attention to.
Turnbull said he found the email threatening and that Pillemer’s latest offer for a resolution outside a courtroom failed. Both teams have hired high-level legal teams and their own media consultants.
The case before Judge Kate Williams has been adjourned until October 21, when final written submissions from both sides are expected.