Rinehart Children May Have a Stake of Up to $4.7 Billion in Family Trust
By Joe Schneider – Mar 12, 2012 9:01 AM ET
Gina Rinehart’s four children may have a stake of as much as $4.7 billion in a trust at the center of a dispute where the three eldest are suing to oust their mother as trustee, according to Bloomberg calculations based on court documents.
Jay Newby, chief financial officer of Hancock Prospecting Pty, calculated the value of each child’s share of the trust at A$600 million ($632 million) in a Sept. 4 e-mail, based on an estimated net worth of A$10.3 billion for Asia’s richest woman. Rinehart’s current net worth of $20.2 billion, according to the Bloomberg Billionaires Index, would put each child’s stake at about $1.18 billion based on Newby’s calculations.
“Given the developments on hand in the group, this is a modest figure,” Newby said, referring to the A$10.3 billion estimate. The e-mail was among more than 800 pages of documents released by the New South Wales Supreme Court yesterday in the family litigation after Rinehart lost a final bid to block their release at Australia’s top court. Hancock Prospecting holds the majority of Rinehart’s fortune including stakes in some of Australia’s biggest coal and iron ore mines.
Hope Rinehart Welker, Bianca Rinehart and John Hancock sued their 58-year-old mother in Australian state court in September seeking to have her removed as trustee, accusing her of misconduct by threatening their financial ruin, giving them a single day to sign an accord extending her control of the trust and lying to them in a bid to sign the agreement.
“Suggestions that Mrs. Rinehart threatened any of John Hancock, Hope Rinehart Welker or Bianca Rinehart with bankruptcy are incorrect and offensive,” her lawyer, Paul McCann, said in a March 10 e-mailed statement.
Capital Gains Tax
Newby said in the Sept. 4 e-mail to Bianca, that based on the A$600 million estimate of her stake, she would have to pay about A$142 million in capital gains taxes.
“It is important to note that whatever value we might ascribe is irrelevant — the tax office would obviously be keen to ascribe a far higher value in order to collect more” capital gains taxes, Newby said at the time.
Newby couldn’t be reached by phone, a receptionist at Perth-based Hancock Prospecting said yesterday, and the company didn’t immediately respond to an e-mailed request for comment on the valuation of the trust. McCann declined to comment on the estimated valuation of the stake in an e-mailed reply to Bloomberg News. Andrew Bell, a lawyer for the eldest children, didn’t immediately respond to a request for comment left at his office after regular business hours.
Rinehart had attempted to persuade the children to sign the new agreement allowing the trust to remain in place until 2068, with her as the trustee, according to the documents. She had said they would face bankruptcy with the pending tax bills if they allowed the trust to be dissolved on Sept. 6, the 25th birthday of youngest child Ginia, who has sided with her mother in the dispute, as the trust’s rules had required.
“Bankruptcy is not in the financial interests of the beneficiaries,” Rinehart wrote in an e-mail urging the children to accept the new agreement. “It may however be reasonably arguable that personal development-wise it would be in the best interests of the beneficiaries to force them to go to work and reconsider their holidaying lifestyles and attitudes.”
Rinehart changed the terms of the trust, extending the vesting date to the maximum allowed under law to 2068, according to the documents.
For the Grandchildren
The three children suing accused her of “falsely representing by implication to Hope Rinehart Welker that she had not varied the trust – and that Hope Rinehart Welker would face the financial consequences” as far as bankruptcy even though the vesting date had already been changed.
The Hope Margaret Hancock Trust was created by Rinehart’s father Lang Hancock for the benefit of his grandchildren. The trust holds 23.45 percent of the voting shares of Hancock Prospecting and receives dividends from the company, some of which are distributed to the children.
The company, with iron ore and coal projects in Australia, has 6,000 voting shares with Rinehart holding 4,593 and the trust 1,407, according to a statement of defense filed by Rinehart’s lawyers.
Rinehart has full and ongoing control and management of the company and would lose it if a new trustee were appointed, the lawyers said.
She wouldn’t have the “ability to pass circular resolutions without the involvement of other persons,” according to the documents.
The three children suing sought to have at least one of them appointed as the trustee to replace Rinehart, a suggestion rejected by their mother who said none of the children had the required trust, independence or ability for the job.
None of the children “has ever held any paid position in the resources industry, other than as arranged or paid for” by Rinehart, according to the statement of defense.
Rinehart inherited iron ore mining assets from her father and has an agreement with Rio Tinto Group under which she collects royalties on properties in Western Australia mined by Rio. She agreed in August to sell coal projects in Queensland to GVK Power & Infrastructure Ltd. (GVKP) for $2.2 billion.
Rinehart’s wealth has more than doubled in the past year, as soaring demand for coal and iron ore from China has made her mining assets more valuable.
Among those attempting to convince Hope Rinehart Welker to drop the lawsuit was Senator Barnaby Joyce, according to the released documents.
“You are a family Australia needs,” Joyce wrote in a Sept. 11 e-mail. “All good families have their problems but before it gets really out of hand, I would try to get it back in house and out of public view.”
Alby Schultz, member of parliament for Hume, also wrote to Hope, calling the lawsuit a “horrific step.”
The case is Hope Rinehart Welker v Gina Rinehart. 2011/285907. New South Wales Supreme Court (Sydney).
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