Analysis

Was MONA built with the proceeds of tax evasion?

The Museum of Old and New Art, or MONA, has been in the news of late. But not for its art.

The sleek modern fort on the banks of the Derwent is home to one of the best collections of international contemporary art anywhere in the country. Probably the best, in fact. Prominent Australian art historian Rex Butler tells Crikey that “in both the good and the bad sense, that is in an interesting sense, there are really only three significant galleries in Australia: GoMA in Brisbane, White Rabbit in Sydney and MONA in Tasmania … the museum down there is one of the possible futures of museums in the 21st century: a privately-owned cabinet of curiosities, an updated Soane”.

It’s become a magnet for interstate tourists; on some metrics it is now the state’s most-visited attraction. MONA’s Delia Nicholls told Fairfax in January the gallery had 330,000 visitors in its first year of opening, 46% of whom were from interstate.

It’s a result that has made politicians fall over themselves in praise. “Our statistics show that an average visitor who comes to see MONA actually stays around about nine nights in Tasmania,” Premier Lara Giddings told the ABC’s Lateline last week. “So the flow-on for our restaurants, our wider tourism community is very big.”

For decades, Australian arts ministers have longed to build an Australian Guggenheim, an iconic attractor to rank with Bilbao. Now someone’s done it for them, with not a cent of public funding.

But MONA has a bit of a problem. Its founder and owner, the charismatic polymath David Walsh, is fighting a bitter battle with the Australian Tax Office for $37 million in unpaid taxes, plus interest.

Walsh made his millions by gambling, and we’re not just talking about an idle punt here or here. As the documents lodged with the federal court by the ATO establish, the ATO believes Walsh was one of the leaders of a multi-billion dollar gambling syndicate that operated like a sophisticated hedge fund.

For years, the operations of the punters’ club were shrouded in mystery. But thanks to the Federal Court and a compelling investigative series by The Australian Financial Review’s Angus Grigg and Hannah Low, we now know some fascinating details about how it functioned. Because of the discounts available to the syndicate -- negotiated in return for the vast liquidity it offered to wash through various totes and TABs -- the operation made most of its money with losing bets. “You bet to lose, so that you actually turn over more money and the win comes from the rebates,” exiled syndicate leader Zeljko Ranogajec told a civil court in 2008.

The scale of the operation is such that the ATO now appears to have strong evidence that Walsh’s club is not, as claimed, a hobby. It is in fact closer to a sophisticated proprietary trading desk, gambling at high volumes and running large hedged positions across the gambling systems of many countries. The techniques employed appear closer to the hi-tech wizardry of Wall Street “quants” than the old-fashioned examination of Saturday’s form guide.

As a result, as former ATO auditor Chris Seage wrote in Crikey last month, the ATO appears to have Walsh and several of the other members of the club “by the short and curlies”, to quote a source close to the investigation cited by Seage.

What does all this have to do with the art? Quite a lot, actually. Walsh appears to be using MONA and its storied collection as a key argument in his very public fight to avoid a crippling tax bill. Walsh has hinted he might have to close MONA, or sell some of its valuable artworks, if the full $37 million bill is demanded. In the meantime he is spending up big on legal fees as he fights the settlement. There is even talk of a High Court case to settle the legalities of whether the ATO has the right to levy taxes on gambling winnings in this matter.

The argument has won over a number of prominent supporters. Recently retired Greens leader Bob Brown told Fairfax in July the Tax Office “couldn’t give two hoots about the Tasmanian economy or about this magnificent MONA which is attracting people from around the world”.

In one interview Walsh gave to the media recently, he pointed out that building MONA was only possible because he wasn’t paying tax. “It’s fair to say that I wouldn’t have been able to build MONA in the timescale that I did; in fact it may be that I wouldn’t have been able to build it at all if I had have been -- you know, if I had have been paying tax throughout that period,” he told Lateline’s Hamish Fitzsimmons.

Let’s step back for a minute and examine the broader implications of MONA’s tax problems.

MONA is not like other public art museums in Australia. Not only is it not state funded, it is not a charity or non-government organisation either. MONA’s legal structure appears to be that of a private business. The art is owned by Walsh. The gallery staff are paid by Walsh. The visitors pay a fee to Walsh.

Crikey asked MONA’s Delia Nicholls about the legal structure of MONA. “Your point is correct,” she replied in an email. “[David Walsh] is the funder, as well as the founder, of MONA.”

Because of this structure, MONA is far less transparent than most large arts institutions. There is no public statement of accounts or an annual report. There is no indication of the degree to which the gallery might represent an arm of the gambling syndicate, or whether the funds invested in it were sourced ultimately from the proceeds of tax evasion, as Walsh implied on Lateline.

Moreover, MONA is not a philanthropic organisation. When rich individuals give artworks to a public gallery or institution, they derive an entirely legitimate tax deduction for it. MONA is not a public gallery, and the art remains owned by Walsh. He hasn’t given it away.

Whatever the legalities, there’s a moral point that most of Walsh’s many fans in the art world have been only too happy to ignore. Can charity wash clean the stigma of “dirty” money? And should a wonderful tourism outcome for a struggling region matter when it comes to the rights and wrongs of tax evasion?

In many ways, Walsh’s case recalls that of the late Richard Pratt, a billionaire philanthropist who engaged in the largest price-fixing cartel in Australian history. Pratt’s ambiguous example reminds us that cultural philanthropy -- and let’s remember that MONA is not philanthropy -- is often undertaken for the PR value and public acclaim it brings.

As Walsh himself wrote in the art book Monanisms: ”I invent a gambling system. Make a money mine. Turns out it ain’t so great getting rich using someone else’s idea. Particularly before he had it. What to do? Better build a museum; make myself famous. That will get the chicks.”

Crikey requested an interview with Walsh for this story. We were informed he’s “in a legal meeting” and that “it is unlikely he will be in a position to talk with you until the matter is resolved”.

*This piece was originally published by Crikey.


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