18 JANUARY 1991: ANSWCU92: RICHARD RAXWORTHY TALKING TO JOHN F RICHARDS, ACCOUNTANT TO THE CREDIT UNION MOVEMENT FOR MANY YEARS.
I have already interviewed you, Mr Richards, for the Sydney Credit Union and the tape numbers are SCU 34 and 35, for reference purposes.
I will just ask you briefly where you were born and when?
JF: I was born in Coffs Harbour, 31 May 1933.
You went to school up there?
JF: School at Casino.
To refer back to the Sydney Credit Union tape, you really did talk about your childhood and your schooling. I also went into how you first came into the credit union movement. Perhaps we could go back to that a little bit. How did you first come into the credit union movement?
JF: Well the first real entry I guess was in about 1961 with the Belmore Parish Credit Union, where I acted as the Honorary Auditor, at the request of one of my neighbours, Maurie O’Brien. Maurie was then with what was then the Council of City of Sydney. They formed a credit union in 1963 and I was invited then to talk to their Board and subsequently then became the auditor of what is now the Sydney Credit Union. My association with Belmore Credit Union was not what I would call a real satisfactory appreciation of credit unions, but the Sydney Credit Union was quite the opposite.
When did you first come to have any dealings with the New South Wales League of Credit Unions, as it was in those days?
JF: I think it was about 1965. I was asked to become Treasurer of the Association. This was not an elected job, it was merely a glorified bookkeeper I guess. Look after their records and prepare their accounts and so forth. Then there were only two employees in the League, Clarrie Murphy and Esme, I forget Esme’s other name, down at the Fauveaux Street building that Universal occupied up on the first floor.
Had you had anything to do with Universal before hand?
JF: No. Not at that stage.
Had you other credit union work at that time?
JF: Only the Council of City of Sydney.
That was an honorary job as well, wasn’t it?
JF: Oh no. That was paid from day one. Not very much, but it was paid. Depending upon what Dermot decided was reasonable I guess.
There is a story about an Annual Meeting proposing to double the pay.
JF: That was at AFCUL. That was the meeting AFCUL held in Surfers Paradise I think in 1968. Dermot moved that the auditor’s fee be doubled. This got a rather stern rebuke I think it was from one of the Queensland delegates. He said it was no way to conduct the election and the auditor setting his fee and he would like to see some justification for doubling the fee. At that stage Dermot pointed out if it was nothing last year, then it would be double that this year. This did me a favour because the gentleman immediately jumped and said he thought that was unfair that there shouldn’t be anything and he was proposing that an auditor’s fee be paid. So it backfired on Dermot, they fixed a fee.
Well as far as the League was concerned, who was the President then do you remember?
JF: I think Beresford Calverley was.
He was President until 1967.
JF: I think he was the President then.
Then after that Ken Miller took over in 1967 to 1974. It could have been on to the 1968 year of course.
JF: Was Don Harvey President what year?
Don Harvey was President just 1964/1965.
JF: Well I don’t know whether it was Don Harvey who was President the first year that I went there.
Did you hear anything about the elections for that 1964/65 year. Stan Arneil had been President before that?
JF: No, I can’t recall, I may have.
Didn’t hear the reason for Don Harvey standing?
JF: No I didn’t. I do recall Stan thumping the table a lot and shouting a lot at Don subsequently and Don seeking the protection of the Chair from Beresford. But I can’t recall the circumstances of Stan’s demise.
How often did you have to attend as Treasurer?
JF: I used to go to each Board meeting.
They were at Devonshire Street then, were they?
JF: No. They weren’t. They were held down at the Irish National Association building, just further down Devonshire Street. Not in the League building.
Can you remember why they were held down there?
JF: I thought it was for room because they had a large open space with a trestle table that we used to occupy. The building up in the top of Devonshire Street was pretty small.
So you think that Beresford Calverley, or Don Harvey was President?
JF: I think it might have been Don Harvey. I am sure it was about two years after. Who did Don take over from, from Stan? Yes.

Well it was when Don was President. Well that pins down fairly carefully then, because it was only during that one year that Don Harvey was in, 1964/1965. Then Beresford Calverley after that. Do you remember the meetings under Don Harvey?
JF: All of the meetings, those with Don Harvey, while Stan was on the Board, were somewhat akin to mayhem. If Stan didn’t get his way he pounded the table and he shouted. The only one who had any control over him was Dermot Ryan when he went on the Board. He used to be able to seem to goad him and placate him.
I think Dermot went on that year.
JF: That’s exactly right. We started at the same time. I think Ken Miller went on the Board that year also. The first Board meeting I went to was Ken’s first Board meeting.
Who talked you into being Treasurer?
JF: I have an idea it was Dermot. At that stage he was going on. I remember talking about it after a meeting of the Catholic Club. It was decided and I went along to the next Board meeting and it was ratified.
I don’t have any Treasurer’s names down after you, from 1965 to 1972 I have got you down as Treasurer. After that I don’t know.
JF: By 1972 they had a full-time Accountant, full-time staff and the job just wasn’t necessary. Then we became Auditors in about 1977, I think. So between 1972 and 1977, I think it was 1977 we took that up.
Yes I have that down as Connolly Richards from 1974 to 1977.
JF: That’s right.
J F Richards from 1978 to 1982. Richards and Andrews from 1982 to 1984.
JF: 1974? I didn’t think it was that early. Yes it was 1974. Pat Connolly and I were in partnership then.
That is what I had it down as. The one in between, while you were Treasurer, was first R Thompson Lang and then K O’Neale. I have only taken it off the paper work.
JF: That is spot on. One interesting thing was that the first year, I believe, or certainly very early when I was Treasurer we had the Annual Report prepared and they were sent to the printers and the printing was done on the cheap in those days. Clarrie was the Manager. The printer decided in the interests of getting things nice and tidy he printed one half of the Balance Sheet on one page and put the other half of the Balance Sheet over on another page. Of course it was absolutely ridiculous. So I got down to the League office in Devonshire and had a look at this and of course blew a fuse. Clarrie said, ‘It is too late, they have all gone.’ It had to be the first year. I said, ‘Well you had better get them back.’ He said, ‘Well we can’t.’ I said, ‘If they go out like that Clarrie, I will bloody well sue you.’ So Clarrie rang Don Harvey and Don Harvey said, ‘Well you had better get them back.’ So Clarrie had to go down to the Mail Exchange and retrieve all the Annual Reports. Then we had to have an insert printed so that the Accounts went in by way of an insert. So they were in the Annual Report all arse up and two sets of Annual Accounts in there. Clarrie was pretty upset with me over that for a while.
I take it was mutual.
JF: Once we got them back and got it fixed up, it didn’t matter.
Dermot came in that year onto the League. He was on the League back in 1960 at Lidcombe, briefly.
JF: Yes when he was associated with the Lidcombe Parish Credit Union. But I think that was again when there was a split. It was a bit before my time, but I think the old parish priest, Father Gallagher, and Dermot was representing that, there was a break between Lidcombe and the rest of the movement, or the rest of the movement as it was then, there weren’t too many.
Did you know anything about that?
JF: No.
Well apparently Father Gallagher was against the League. I just wondered if you knew anything about how Dermot managed to get on the Board of the League just briefly as he did.
JF: I think he and Stan were fairly close at that stage.
As early as 1960?
JF: No, 1964 when he came on.
It is a bit baffling as to how he came to be on the League Board in 1960 from Lidcombe Credit Union. There must have been some sort of battle going on in there, because Father Gallagher definitely didn’t agree with the League or the credit union being in it.
JF: I don’t think Dermot agreed very much with Father Gallagher. I think there was, from what I gather, a great clash of personalities there too.
So the Board meetings, can you remember any of the issues on the first Board meetings that you attended at the League?
JF: No not really. The only thing I can recall is that there seemed to be tremendous personality clashes and a lot of people trying to get their way. I don’t remember any major issues at that point.
That was the year that they founded AFCUL. Did you go to the Newport School where they originally talked about that?
JF: Yes. I don’t think they founded AFCUL that year though. They started talking about AFCUL. AFCUL’s first year was 1966 or 1967 if I remember correctly.
The first Annual meeting was 1966. We have got the date in 1965, actually.
JF: 1965 was it?
But you don’t remember it at that time?
JF: Well I was the Foundation Auditor of it so I guess I was there. The Auditor of AFCUL since its conception. No that’s not quite right. Noel Kendall was the Auditor the first year. The Treasurer was up in Queensland, a Queensland delegate.
Merv Callaghan.
JF: Merv Callaghan, that’s correct. Noel was the Auditor. I think 1967 was the first year we took it over. Yes I was at the Newport School.
The first one that was run by the League?
JF: By the League, yes.
I think that might have even been in 1964.
JF: Yes it was very early in my exposure. I don’t remember all that much business, it was all done after hours in the rooms, the motel rooms.
Do you remember the room number?
JF: No. I am sure that somebody does.
19.
JF: Yes they were pretty wild days. Who remembered that? Bannister.
Everybody remembers Room 19. I mean it became a euphemism for entertainment, shall we say. Also for discussions on the principles of credit unions.
JF: Certainly the politics of it.
So the year that you first went to the Newport School do you remember if Father Ganey was there or not?
JF: Yes I believe he was.
Well that was 1965 because he certainly wasn’t there in 1964.
JF: That was the one. Father Ganey was there.
There was one in 1964. Two in 1965 and two in 1966. But the first two were not run by AFCUL because it didn’t exist. They were run by the League.
JF: It would have been the 1965 one I would say. It is all getting pretty hazy, Richard.
That is why we are after doing this. When did you first meet Father Ganey?
JF: It would have been at that School.
Did you ever go over to Fiji to have a look at his operation over there?
JF: No. I met him many times here, but not in Fiji.
Have you ever assisted over there as an auditor or as an accountant? Nor in Papua New Guinea?
JF: No.
In the days when the Sydney Credit Union was donating fairly well to the League, was this excessive do you think?
JF: Well yes. As a matter of fact I would say, and Dermot would Panzer me for this, his jumping up and volunteering the Sydney Credit Union for first and foremost brought he and I into conflict. As the auditor of Sydney in a letter I wrote to the Board he took some violent disagreement to it.
We have already recorded the result of that for the Sydney Credit Union.
JF: Yes, we don’t need to go over that painful episode again. It has been well-documented. Even the facts have merged into myth I think.
But you must be one of the few auditors who have been forced to fight for your principles in that way.
JF: Such was the nature of the credit union at that stage. Very emotional and very passionate.
When you were first Treasurer of the League were there any similar alterations that you remember between Dermot and anybody else?
JF: Not that I can recall no.
Were you there on an occasion when there was reported to have been something similar, well it was merely a threat made, between Stan Arneil and Dermot Ryan?
JF: Oh there were plenty of threats. Dermot was never beyond making a threat to anybody. I never ever knew whether he carried them out.
This one was supposed to be in Sydney Tattersalls too.
JF: I wasn’t there for that.
The words were supposed to have been, ‘Arneil, I’ll have you here and now.’
JF: No. I wasn’t at that one.
Although Stan Arneil when I mentioned it to him on the phone said, ‘Oh I think I remember that.’
JF: I have no doubt it happened.
This story about people taking their coats off in Sydney Tattersalls has been told by different people to be firstly between you and Dermot and secondly between Dermot and Stan Arneil. Different people tell it differently.
JF: Well I can tell you the coat episode certainly happened in the dining room between Dermot and myself. Probably the funniest things at the time, and the waiter really meant it to be funny. It came to him naturally, such a perfect stopper.
Well we are supposed to be on the League, so we had better confine ourself to that. What do you next remember once you had become Treasurer but not an auditor. Do you remember any real problems?
JF: I suppose the major blow-up at that time was the CUNA Mutual-CUMIS which took a lot of time and was very divisionary. It almost split the movement. Well I guess it did to some extent. The other thing prior to that, something that was always a problem, was the establishment of membership fees. It seemed like in the early stages of the League whenever a credit union got to a certain stage it felt it was able to find its own way if it didn’t get its way on the Board, or they would find some reason for leaving the Board. Most of it I think was because of having to pay the dues. It was such a short-sighted attitude that many of them had.
Do you remember any of the arguments that went on, particularly between the Port Kembla people, who formed the Southern Association, and the Association?
JF: Yes vaguely.
Did it start over the dues?
JF: I think it did, yes.
Who were the main protagonists down there?
JF: Oh, Richard the names now escape me.
Tom Hanson?
JF: Yes.
You don’t remember his attitude?
JF: Not really, no.
Well his attitude generally was that the big BHP would provide and they didn’t need anything else.
JF: Well that’s true. That was fairly typical of a lot of industrial credit unions. Also some of the government credit unions where the department or the company gave them free accommodation and subsidised some of their staff. Use of the computer systems. That was a fairly common attitude.
What about the attitude to the starting of a savings stabilisation fund, Savings Protection Fund as it became?
JF: Well I think the two people who can take full credit for that are Les Robinson and Ken Miller. Les became General Manager late in 1968.
I think it was still 1967 when Les Robinson started.
JF: This of course was modelled on the US version.
It was Dermot who wrote the report originally.
JF: After a trip to the US.
That was 1976. He and Ken Miller came back and they had a number of reports that year. Do you remember the others at all? I must admit the most important one was that stabilisation fund, as it was called. Did you have anything to do with it after that?
JF: Yes we were involved in helping to put the thing together.
Exactly how?
JF: Oh that I guess was as Treasurer. I worked with Les in setting up the rules and so forth.
Later in 1973 I notice you were Chairman of the Savings Protection Fund Committee. Inaugural Chairman.
JF: Yes. The reason was because of the involvement in it and the fact that they needed to have somebody outside, who seemed to be removed from the elected body. I don’t know how many years that went on.
Oh it went on for a number of years. But I have only got you down as Chairman for the one year. It went on until 1982.
JF: Yes. I don’t remember how long I was Chairman of that.
A D Howe, do you remember anybody who was a D Howe.
JF: Well Bill.
Well it could be, because I mean I am talking about 1982 and that was the last one. So I don’t know who it was. Anyway I don’t think you were involved in it then. What do you remember of the early period? Can you remember the argument there was over how it was going to be funded?
JF: Yes. Initially it was going to be similar to the Foundation where the moneys would go in and the interest and so forth would be there to fund them. I know there was always debate about the rebating of interest back, returning of income back to the credit unions.
Dermot was putting the point I believe, according to my reading of the Minutes, that they should use these insurance rebates. Quite a number of the others, including Ken Miller, wanted a capitation fee.
JF: That’s right. At that stage the insurance rebates were quite hefty. You would get more about it out of the Minutes than you could from me.
Well mainly Dermot used to stand up and say that at least it ought to be funded partly by the rebates. They shouldn’t be giving this money back.
JF: That was always a real bugbear of his, that you never ever gave anything back once you got it.
Well they voted it to them and he asked what they were going to give it back to them for. But there were arguments as to whether this was fair if everybody wasn’t in it.
JF: That’s correct, because you only had part of the credit unions, but they were using the League’s insurance system. That’s quite right.
Did you get involved in the argument at all?
JF: No because at the Board meetings I wasn’t allowed to talk. I was merely there as an observer and to answer questions. I was never a Director as such in this role. So, as was Les, I was merely a voice to be asked, not to put forward.
Were you involved at all with Les Robinson re the setting up of the central banking?
JF: Yes.
End Tape 1A: 3446 Words: 1 hour 30 minutes.
18 JANUARY 1991: ANSWCU92: RICHARD RAXWORTHY TALKING TO JOHN F RICHARDS
As far as that period is concerned, particularly with the development of the insurance split as it happened, do you remember that period? Did you go to the meetings at that period?
JF: Yes to some of them. The thing I recall most about that was I guess the distrust. There was a complete agreement of CUNA Mutual-CUMIS coming in to Australia and becoming the insurance arm, shall we say. I always remember Dermot and Ken came back from the United States where they had found that there was a big split in the movement over there because according to Dermot and Ken, the tail was wagging the dog. CUNA Mutual and CUMIS because of the vast amount of money that they controlled were really running the Leagues. They had representatives out in the field and they were really doing the job that the Leagues were supposed to be doing. That furore was here. Also there was a tremendous animosity developed then of course towards Stan, who had taken over as the Managing Director of CUNA Mutual, CUMIS. Everybody saw that Stan saw this as a way to control the movement as he couldn’t control it through the League. That was the major concern.
Did you have any dealings with Stan Arneil in the very early days?
JF: Oh, only again through the Association. I didn’t have any personal dealings with him, no.
What about AFCUL?
JF: No, not really.
As far as the meetings are concerned, of the League in the early days when you were attending, when you became Auditor of course you wouldn’t attend meetings apart from the Annual Meeting.
JF: No that’s right. Or unless requested by the Board for some specific point. In the late 1960s I didn’t really attend too may Board meetings at all. I was pretty caught up and I didn’t really get back heavily involved with the League until about 1972.
We were discussing before, and we didn’t really finish it I should have finished it when we started this side of the tape, the setting up of the central. What was actually your part in that? Did you work with Les Robinson?
JF: Yes really on the systems and the concept. Well the concept was established, but just the systems and the operation of it.
Was there any argument about how it would be done or was it set up between you two?
JF: Well Les was really the main driver of it, I merely assisted in the accounting side of it. But Les was very definite on the way he wanted it done. I don’t recall if there were any major differences.
There was a time in Quest they had an article which I showed you and you said it was totally wrong. This was in 1973, when you became involved. Was that actually a restructuring proposal for the League?
JF: Yes. Whoever wrote that certainly missed the whole point of the report. The report was designed to centralise some of the major services. Data processing was one and insurances. The aim was to try and reduce the cost of the State duplicating services, whereas it could be centralised. As far as getting into land development and real estate it was proposed that some of the associations could look towards buying their own buildings, and some of the credit unions buying their own buildings. But that was not the central thrust of the report at all. As a matter of fact looking at it now, it just amazes me. That report, which was delivered to the AFCUL meeting at the beginning of 1973, was set out. The report was endorsed. There was another meeting set for six months later and it was held in Noah’s. It became apparent in the meantime that the individual States didn’t really understand what was being proposed. When they did understand that it was going to take away from them some of the power-base it just couldn’t get off the ground. Actually Ken Miller and myself went to each of the States to explain what was proposed and it just didn’t work. It really, in a very modest way, was similar to what Project Renewal is trying to do now in a total major restructure. This was merely to organise the service end of the business.
Have you been involved in Project Renewal as it is at the present?
JF: Yes. I together with David Daniels did the implementation report. The method of actually implementing the Project Renewal proposals. This was accepted by the Steering Committee early last year. I was also involved in some of the Committees that then looked at those proposals.
What are the objections now? Who is challenging?
JF: Oh the objections come from a few. In New South Wales eighty-five to ninety per cent of the credit unions are in favour of it. A couple of the smaller credit unions are objecting. Most of these individual credit unions feel as though the federal body is taking over. Also I think that any objections that come from the regulatory bodies in New South Wales is based on concern that New South Wales, at the moment a very strong sector of the movement, may become weakened by trying to support the weaker States. This of course is fallacious because the whole basis of this is to support all of the credit unions, not to look on it on a State by State basis, by giving the weaker States the advantage of combining with the stronger States and all becoming stronger. The concept of Project Renewal is not only excellent, it is essential. The survival of credit unions in Australia in a deregulated atmosphere depends entirely upon Project Renewal being successful.
Project Renewal is after restructuring the services, is it not. But does it need to go as far as it does to restructure the representation?
JF: Absolutely. If you don’t have both the governance and the service centralised then one can get away from the other. I mean if you have a decentralised governance and you have centralised services, then who is going to be controlling what? As you no doubt know, Richard, and you most probably know more about this movement than anybody after what you have been doing, the history of splits in the credit union movement have been monumental ever since AFCUL has been established. Annually there have been one or two States that are out of step with the other States. Now the whole idea of this is to get rid of State borders, virtually. That means that representation won’t be representation on a State basis it will be representation of an organisation. Therefore the best people can be recruited. Also it means that you won’t have any vested interested groups in a State trying to limit anything. The classic example of course is data processing. The number of different systems that have existed and the number of attitudes that have persisted towards data processing. Yet here in New South Wales, FCS and GCS developed an excellent system. It is now used widely through the States. But still there was the people who tried to introduce new systems. Once you have that area, the communications area, being controlled by one group under one direction then you are going to use all the resources in one direction. Hopefully it will be in the right direction. If it is not of course then it is very quickly highlighted. Whereas you can have all the others going around State by State just spending money foolishly. The same with the use of funds. CUFSAL has been an outstanding success. But of course it only has limited membership as yet. We are still looking to get Victoria, which is the second largest State. Queensland.
How have you been involved in the setting up of CUFSAL, for instance?
JF: Well not that involved with the setting up of CUFSAL. CUFSAL was set up by AFCUL. But you know it is just an extension. Reg Fowler, who was the Finance Controller at the Association, I think he was General Manager Financing was his role, who as General Manager Banking and Finance in the Association is a very talented money-market man. The idea of having to duplicate a Reg Fowler in the other States, particularly the smaller ones, you have got to have the funds to do it. The only other State that really has the funds to afford it would be Victoria. But to have somebody with this man’s skills directing the whole operation from a central base has just so much logic that anything else defies any recognition.
During the setting up of the FCS systems around the place, how much were you involved with that? Can you sort of give us an idea of how it developed?
JF: Well I wasn’t involved at all in the setting up of the FCS systems. GCS, which is an independent company, developed an accounting package that they were selling. They eventually sold the software to FCS, which is the computer arm of the association at that point. They then continued to sell and maintain that system whilst developing and enhancing the system. Eventually some of the other States got involved in FCS as it penetrated more into their States.
Did you know about the early time in Western Australia when it was first brought over and who brought it over and how that happened?
JF: Oh Nigel Gallop and his two partners, Dean, there were three involved.
What about Les Robinson’s part in it?
JF: Yes.
He was a partner.
JF: In GCS?
Well in the precursor of it. I mean according to Les Robinson he was part of the outfit that brought it over here and he virtually had his involvement removed from him.
JF: Yes I do recall something on that.
He was by this time out of the League. He had been ill.
JF: Yes I do recall that Les did have an involvement in it, yes.
But you don’t know anything about it?
JF: No. I wasn’t really that involved.
I was looking for another view, you understand. I have got Les’ view and his view is a personal one, naturally. I think he feels a bit hard done by.
JF: One thing I would say. I had the greatest respect and admiration for Les Robinson. Before Les was on the scene the League itself had no professionalism in the operation. Les brought to it a professionalism. Got it to the stage that when Les left the Association, I felt, was still underway but it had reached a stage that he understood he couldn’t take it any further. It reached its real professionalism when Reg Elliott took it over. He brought to it the next level of professionalism.
We are jumping around a bit here. Clarrie Murphy when he was Manager did he have any particular strengths when he was in the job?
JF: Yes Clarrie was a nice guy. But I don’t know that he ever really had the professional skills.
He appears to have developed a number of credit unions, in other words starting credit unions.
JF: Clarrie had plenty of philosophy but I don’t know that he had the actual professional skills, the day-to-day skills, to be able to get it past a certain stage.
When he left, I don’t think he was very happy about being supplanted.
JF: Well I guess that is a natural reaction.
He started selling insurance which provided an alternative to CUNA Mutual-CUMIS in actual fact. Do you know anything about that?
JF: Again I knew that he did sell insurance, but not too much. I know that Clarrie was unhappy and he seems now to have overcome that. You have spoken to Clarrie?
Twice. In addition to that he became involved again with Punchbowl Credit Union, which was his originally, and he took it into the Southern Association. Do you remember anything about that?
JF: Well no more than you know.
They became extraordinarily active. In fact it was during the period he was involved with the Southern Association. The Central and Northern Branches were started. Although he was never Chairman of that Association, he was a Director.
JF: Yes I don’t know that you could say he was the motivater. I think he merely joined it because of his dissatisfaction with his treatment.
I don’t know about that. Not wholly that. He reckoned he had some philosophical disagreement too. I think he would acknowledge the other side of it too. You haven’t got anything to contribute in that area. We still haven’t finished the movement of the setting up of the financial services as it went through the period. I mean you must have been involved at all stages. First with the central in Les Robinson’s day and then through the period when Reg Elliott was there when they were setting up other services?
JF: Not really. We were certainly in an advisory capacity at that stage. But as I say by the time Reg arrived you had Reg Fowler and Stuart Glees and these people already in place. What he did was bring to it the banking expertise. Also these guys developed under him. Reg Fowler is a guy that I have watched. Reg must have been in the Association about twenty years. I used to find it interesting because Reg, when he was the Accountant at the League, at that level, he could do his job in half a day. But there was nothing happening that really caused him to have to go any further. I mean he was probably at the point where he was as knowledgeable, if not more knowledgeable than Les. The job that Reg had was not one that gave him any challenge. I thought they may lose him which we were dreading. Auditors like to see good staff in place, it makes life a lot easier for them. So when Reg Elliott arrived I said to him, ‘You’ve got a young guy out there that if you don’t do something with him quickly you are going to lose him and it would be a shame.’ It didn’t take too long for Elliott to realise Fowler’s potential. He then got them motivated because he started building it again. He started to make it into an organisation that they could be proud of. So over that period between Reg’s arrival in 1977 and until he left to go into AFCUL, 1985 I think, 1984, it was safe to say that at that time we felt more comfortable about just taking on any credit union that wanted to come in. Prior to that we were a little more sceptical of some of the credit unions, some credit unions that I would have been nervous about. It brought a degree of professionalism not just to the League but to the whole of the New South Wales credit unions.
During the turbulent period of the Common Board at the League can you remember how the idea developed for helping credit unions that were in difficulties or moribund and how the business of deficit budgeting came about?
JF: Well, deficit budgeting went way back into the sixties. Credit unions then, before the League had funds to assist, were developing at a fast rate. They couldn’t just go out and establish an organisation. I mean they really had to use some of their own funds, some of the members’ funds so they could start. So deficit budgeting in the initial period of a credit union I didn’t believe, and don’t believe, it was a bad thing as long as it was planned. The only thing was that deficit budgeting got a little out of hand and people mistakenly thought that credit unions weren’t supposed to make profits. It was a dirty word. The concept of deficit budgeting was nothing more than a start-up, the funding of start-up costs. The old saying is a non-profit organisation. It didn’t set out to be, it just became one. Now during the sixties there was some heated debate. Some people said that credit unions should never deficit, should never budget for a deficit. But credit unions would not have got off the ground if they had not, because there was nobody there to put the seed funds in. The League certainly didn’t have the means to put seed funds in to develop them. There was no help. Credit unions were developed by a group of people, or usually one or two people, who wanted to start up a credit union. Getting some more Directors together and then getting help from the Association by way of direction and getting some people to come out from the Association to help them get rules together and so forth. Then it would be a voluntary organisation usually during that period because they had no expenses, operating from somebody’s office until they got some members. Sydney was one where they used an office there in the lower Town Hall in the Health Area. I don’t think they paid any rent for that to start with. Jack Luscombe was a very strong supporter of the credit union. Then they would reach the point where they had to incur expenses. Usually they hadn’t reached a level where they were generating enough income. Some of that was to do with the fact that there was a philosophy, and I think it was born from the teachings of Stan Arneil. As a matter of fact if I remember correctly in one of the books he wrote I think he even spelt it out that a credit union should never charge more than 12 per cent interest and it should never pay more than 8 per cent on savings. Now there were credit unions that followed that slavishly into the 1970s, when it had no bearing on the current market value for borrowing or lending. So they worked in this deep philosophical thing that the borrowings had to be at the lowest possible rate and you shouldn’t give the depositor too much. They kept the borrowings down but they had to raise the deposit interest. Interest spreads became low so all of a sudden deficit budgeting continued on and it got away from the original concept. It got to the fact that they were either inefficient or their spread wasn’t sufficient to cover their expenses. Now that sort of deficit budgeting was never countenanced by the League.
Was it that they didn’t understand what deficit budgeting was?
JF: I would say to some extent. But others I don’t think they knew how to do otherwise. When they came up with a shortfall it was a way out. They could budget again what they had lost.
It was about that period when there were a lot of credit unions in difficulties and they pulled them into the Common Board. Whose idea was that do you know?
JF: Look Richard I couldn’t tell you as a matter of fact. It is amazing that the Common Board concept has sort of gone out of my mind. You just brought it back then, that period.
Well some of them are still in Metropolitan, which is what it sort of ended up with the last one, wasn’t it?
JF: Yes.
I mean Tom Kelly still reckons they should have made the Common Board Universal Credit Union and pushed them all in there.
JF: What was the name of it before it was called Metropolitan?
There was a number of them. I can’t remember. It was in the same premises in Burwood.
JF: Yes.
Were you involved in an advisory capacity throughout the Common Board period?
JF: Didn’t have a great deal to do with them.
End Tape 1B: 3321 Words: 1 hour 20 minutes.
18 JANUARY 1991: ANSWCU93: RICHARD RAXWORTHY TALKING TO JOHN F RICHARDS
The credit union I was trying to think of was Central Mutual wasn’t it. I asked you while the tape wasn’t running whether you knew about the start of mutual credit unions in New South Wales via David Nelson?
JR: Well I hadn’t realised that he had laid claim to being the inventor of mutual credit unions.
Do you think that could have been correct. I mean he claimed that he didn’t originate the idea particularly, but he did get it from elsewhere, but in New South Wales what he did was concocted this set of rules to register their credit unions, the Southern Mutual down in the Wollongong area, and he put it into the Registrar. The Registrar didn’t say yes, he didn’t say no, he just didn’t say anything. So they threatened to sue him and he put it through. Do you think that could have been so? It seems from the records that it might have been.
JR: Well I wouldn’t be able to say, ‘No, it is not so,’ put it that way. So if the records indicate that, that is the way is was.
Well it supports what he says but of course there is no way of actually knowing. I mean you can say he did threaten to sue them. The question which I haven’t been able to research is whether those were the first, which I think seems likely, rules that were written like that.
JR: What year was Southern Mutual formed, do you know?
I can’t immediately call that to mind from my records.
JR: I was of the opinion that Central Mutual would have been the forerunner. When that was put together I don’t know that he had any input into that at all. So whether or not they were established in parallel.
He was briefly a Director but I understand that he was not looked on kindly as a Director. Did you know him?
JR: Only briefly. I didn’t have any dealings with him.
He has a manner which can be off-putting.
JR: A little ?????
Sometimes, yes.
JR: That is the only thing that I can recall. At some Annual Meetings I do recall him being somewhat outspoken and critical.
The principle of mutual credit unions, did you have anything to do with that, did you advise on it?
JR: No not really. Again my involvement there was somewhat after the fact. The concept was brought about by the need, as we discussed earlier, of smaller credit unions who were just not able to operate profitably. They were brought in under this Common Board direction.
Have you any idea where they got that from?
JR: No, not really.
I can’t help feeling that the mutual thing has got to be somewhere in there, that’s all. The idea of a Common Board, you know if you have got a bond, an individual bond. Now the Registrar, and I haven’t interviewed Charlie yet who was the Deputy Assistant Registrar for a while.
JR: He was a judge of credit unions.
Right. I haven’t interviewed him yet, but I hope to get a bit of that. Were you involved at all with the Registrar?
JR: To what extent?
I mean in your dealings with credit unions and auditing.
JR: Only when necessary. Put it this way, yes we would have, our staff would have, dealings with Registry staff. Registry staff would contact us about different points. But we never had any day-to-day, or hand-to-hand relationship with them, no.
What about the setting up of the Savings Protection Fund, you were involved with the beginning of that, what about later on were you involved in the negotiations to get the Reserve set up?
JR: No. After we became auditors, our role changed. In the later stages, say between the late 1960s through until 1972, 1973, I didn’t have as close an association. I went out of the profession from the period 1964 through to 1971 or 1972. I worked in commerce. I found it very difficult to get to as many Board meetings as possible. When I came back into the Association, it was in that period that I was involved initially in the Savings Protection Fund, closely involved then. Then in 1974 we took over as auditors, my role changed again. I tended more to have not as direct an involvement. So the transfer to the Reserve Board and so forth, I wasn’t very much involved in that at all.
Yet you see you have been involved in auditing credit unions for years, I can’t see how you couldn’t have had some contribution to the way credit unions went overall in the way they conducted their accounts?
JR: Of course. But it was not in a structured way. I mean as far as putting together that very thing on deficit budgeting, we were very heavily involved in that because of other concerns for credit unions. With the Savings Protection Fund, in the establishment of that. With Central Mutual. On the concept itself, I don’t remember sitting down and saying, ‘Well here is a great idea.’ I don’t think any of those things ever emerged out of somebody having a great idea, they evolved from somebody saying we had to do something about it. It was more of a contribution by a group rather than individuals. I would say that Les would have had a great input into that. But I had involvement perhaps in the actual establishment. The same with the Registrar. Sure I had a good relationship with Charlie, but nothing specific that you would say that we sat down and worked on this together or worked on that together. It was more any incident that you needed to talk to them about, or any happening that you needed to talk to them about.
Did you ever have any arguments with Charlie Butler as Assistant Registrar?
JR: I can’t recall having any.
What about Horton?
JR: No not at all. As a matter of fact I thought he was a very easy guy to get on with. I think David was one of the finer gentlemen. I never had any trouble with him. But again it was from a different viewpoint. A little different trying to deal with him, I guess, if you were an administrator of a credit union, or an administrator of credit unions, wanting to get things done. One of the things we, as auditors of credit unions, are a part of that organisation. The last thing you do is go running to the Registrar saying, ‘Hey, look what these guys are up to.’ I mean you do everything possible to ensure that they are good shape so that the Registrar can’t come in and find anything. I mean never have we, and never will we, use the Registrar as some form of a bogey man, ‘Do it our way or we will go to the Registrar.’ Never had the need to.
Another area that I would like to canvas, the demise of the Supervisory Committees in credit unions. Have you as auditors had anything to do with this?
JR: I personally never had a strong view of Supervisory Committees. I did where they worked, and that was very, very infrequently. The problem with Supervisory Committees is they tended to lead Boards into a sense of false security. We would find mostly that you had a group of well-meaning guys, ill-equipped, that would go out and spend two nights a week turning over some documents and getting through a few hours of work and having a few beers and saying, ‘The Supervisory Committee reports that there is no problems.’
What about the hyper-critical ones? Dave Palmer?
JR: Oh well of course that is only another way of getting on the Board when you couldn’t be elected. Dave wasn’t alone. I mean it was known that a lot of people became Chairmen of Supervisory Committees so they could have a forum. I think it was a shame because a lot of them used to second-guess the Board. For example in the Association I had some great difficulty in that the Supervisory Committees had access to records such as salary records. I didn’t believe that to be right. They had the Board papers. Most of the Supervisory Committee were made up of Directors of credit unions and they could be privy to information that the rest of the membership of the Association wouldn’t necessarily be privy to and would use it. I don’t think that the function that they were supposed to carry out, that is checking the books of account, in some instances seemed to be the last thing they would do, and I am talking about the Association here. In the credit unions, in Sydney for example, had a Supervisory Committee that worked very diligently and we worked with them very closely with Keiron Tonge. Now in that Supervisory Committee we always used to write their programs and they would want us to monitor their programs, ask us whether they were doing too much work in this area. Then of course as computerisation came in this made them very limited. Where a credit union wanted to continue with their Supervisory Committee, what we tried to do was put them into areas that they could check, like loan applications to check that the applications were all properly approved and so forth. They could go through vast numbers of those and they were better off in those more sensitive areas where we had to do limited checking than to try and get out and cover the whole waterfront, where they didn’t know what they were looking at most of the time. Most of them ???
Now as far as the Supervisory Committee of the Association was concerned, you had quite a lot of people like Stan Brown from Sydney, John Gormley was on.
JR: Yes.
There was one time when Dave Palmer criticised the running of meetings, when Ken Miller was Chairman. Do you remember that?
JR: I don’t specifically, but that is Dave. He was one of them. His only role in the Supervisory Committee was not to get out and check the transactions it was to act as an audit on the Board.
Is there anything wrong with that?
JR: Oh if they are not elected why should they? Who gives them the right? If they were elected by the Board sure, but what makes them smarter than the Board? It is like having an internal auditor who criticises the Managing Director’s policies. I don’t know that is quite the role of an internal auditor. That was what the Supervisory Committee was supposed to be.
There is one area that you did mention you were involved with when I interviewed you for the Sydney Credit Union. The legal lobbying and negotiations firstly with Dermot Ryan when he was at AFCUL.
JR: Always with Dermot Ryan. It was always at AFCUL. That was an AFCUL initiative or a Dermot Ryan initiative.
What about now? For instance with the restructuring have you been involved with any negotiations?
JR: No we haven’t started yet. But yes there will be. I have just given an advice on what the possible capital gain and taxation implications will be upon this restructuring. First of all the enabling legislation has to be obtained, so there is no point in going to the Australian Taxation Office until all the legislation is in place or you know it is going to be able to be put in place. Then there will have to be revenue legislation to correspond with it. We have had one other negotiation with the Tax Office subsequent to 23(g). That was in the early 1980s where a credit union in Queensland won a Board of Revue case on the formula used in calculating their exempt income. We had prepared the original formula and agreed it with the Tax Office. This credit union felt that it should be prepared in a way that gave them a bit of advantage, gave the credit union an advantage. We were concerned because the AFCUL had agreed with the Tax Office that this formula would be utilised. So we went down to see the Tax Office to just get their feelings and see what was going to happen. Eventually we got agreement that they wouldn’t appeal the case and that they would adjust the formula to comply with the Board of Revue case. They issued a new directive to their officers and we issued a new directive, or AFCUL issued a new directive. So that is the only intervention that has been necessary in that area. If of course there is ever a move to eliminate 23(g) I am sure there will be some more discussions as to how to at least modify it, rather than eliminate it.
Going right back to the beginning after getting the New South Wales Act promulgated and the negotiations as to what form that Act would take, were you involved in any of that?
JR: A little. We were disappointed in the Act as to the regulations regarding auditing accounts and accounts preparation. The Registrar, and I don’t know why, wasn’t very supportive. We thought we would have got a lot more support at that stage. We wanted to introduce the same requirements for reporting and standards and all that as was in the Companies Act. But it didn’t happen. As a matter of fact the accounting and reporting standards in the Credit Union Act are deplorably low. Within our own firm we require the credit unions that we audit, or encourage and have got them to comply with the Companies Code in relation to reporting. I am not involved in auditing of credit unions any more, Neville Sinclair my partner does that. But I think there has been a great tightening up. They don’t subscribe to the Companies Code as yet, but there has been a tightening up.
What about the next stage of legislation, when you were going for the tax exemption. You have told me something about the negotiations. There was quite a lot that we sort of didn’t get clear. You told me various stories about Dermot. How many times were you actually involved in meetings?
JR: Oh Richard. I would have gone to Canberra with Dermot.
Did you go with Vince Martin too?
JR: Well Vince went originally. I only went once with Vince.
Was his son one of the officers that they were negotiating with?
JR: Oh not directly, no. The two major people that we negotiated with was Keith Brigdon, who was then the Deputy Commissioner for Legislation.
In the Taxation Office?
JR: Yes. And Des Black, who is now the Deputy Commissioner for Legislation. We had some dealings with the Second Commissioner, he is now a barrister, Pat Flanagan. He was the hardest of all, he didn’t want the legislation. The other two were very reasonable and we didn’t have any format, the form became the thing. But Pat Flanagan he wanted no bar of it, he thought it would just open up the flood gates and he made it as hard as possible. We started out asking for total exemption, that is what we thought we would get, and we ended up with exemption just on members’ funds. Which, as it worked out, we then worked around the formula and were able to get a fairly good result out of it.
While the League was still working on court cases, were you involved at that level? On the South Australian case and the Water Board case?
JR: Yes. But the case was lost of course.
What about Father Gallagher’s case?
JR: No. I had no involvement.
He won.
JR: Yes. He won, but he didn’t win really. I mean the credit unions didn’t win. What happened was that the South Australian case, and again in the Water Board case, the principle of mutuality was found not to exist in a credit union.
But he managed to get a ruling to the effect that the mutuality was there in his Antigonish credit unions.
JR: But that was overruled.
He won that case.
JR: Yes but the point of law was overruled. It doesn’t matter now because they have 23(g). Credit unions were taxed, continued to be taxed on the basis that mutuality did not exist. One of the undertakings that was given as a part of this negotiation was that we would drop any further claims on mutuality because that was the intention to get total tax exemption. So there had to be an undertaking that the credit union movement wouldn’t persist in trying to achieve the mutuality principle.
So the actual meetings that you went to, the first one with Vince Martin?
JR: Yes, that was to see Frank Crean. But he and Dermot had been before. I had never accompanied Vince. Dermot and I would go together.
So how many times did you and Dermot go together?
JR: About half a dozen times. Dermot went up on other occasions.
The meetings were always with the same people were they?
JR: Yes.
What was the sticking point? What was the problem?
JR: Well the sticking point was trying to work out what form the legislation would take. We then came up with a formula which we had then to discuss with their people. I did have some discussions with one of the senior inspectors here in Sydney too on that. But they were just one-day meetings. They wouldn’t last all day. We would go down and spend a morning down there and take them for lunch and come home in the afternoon.
Well do you think those meetings were crucial? I mean wasn’t the decision political mainly?
JR: The decision to do it had been taken. Dermot worked it out with Vince Martin and Frank Crean. I am sure you are familiar with what happened prior to that election. Dermot went to Whitlam and he also went to the Liberal Party to see what their attitude would be on this. Now Whitlam undertook and actually put it in writing, which was printed on the front page of Quest do you have that?
That was before the election?
JR: That was before the election. That had a tremendous circulation at that point, it went to every credit union member. It was printed by New South Wales but it went interstate as well.
November 1972 that was, the edition of Quest.
JR: When the election was over Dermot immediately went to push it through and he wasn’t getting anywhere. So that was when Vince was drawn in. They went to see Crean. It was Crean who said that yes the Government would honour the promise. So by the time we started talking with the Tax Office it had been won politically. But Crean as Treasurer, of course, couldn’t move without his officers. So that is when we got into the format this should take, and the wording of the legislation.
I believe that the Labour Council, Mike Gleeson, got Frank Crean to ring me, which he did, and I recorded it. He agreed on that. But he was very noncommittal about the story of the bottles of beer. Could you repeat that about Dermot and the bottles of beer?
JR: There was Crean, Brigdon and Black and it was the first meeting I went to. Dermot was there with his brief case and he took out two bottles of DA. Keith Brigdon said that was the first time he had been compromised by a couple of bottles of beer. Crean said, ‘For Christ sake Des put it away before he wants to open them.’
What isn’t clear, was it the payment of a bet or what?
JR: No he just apparently at the previous visit mentioned to Dermot he liked DA and Dermot took him down a couple of bottles. No it was nothing very sinister.
You have been involved consistently for so long, it is difficult to know what you might know and what not. I think there are things I think you might have been involved in or know more about and you don’t and other things that you have that you do. What have you been involved in that we haven’t mentioned at all, can you remember? Any other legislation that you have been involved with?
JR: Not as directly as that, no.
What about different people for instance? I mean you have mentioned Les Robinson. Stuart Gillies for instance?
JR: Yes Stuart has been a real solid backbone type person out there. One of the things that both Les Robinson and Reg said was that the beauty of Stuart is that if they had anything that Stuart had prepared they had total confidence in. Since he has taken over as General Manager I think he has done a good job under difficult circumstances. He took over in a period when the Association was in a lot of turmoil. He took over from John Harper as you know. John was a very personable guy, I liked John very much. He did some foolish things. He was just not the man to run a financial organisation or a political organisation. I mean he was a great marketer, a great salesman.
End Tape 2A: 3587 Words: 1 hour 35 minutes.