THE WHITELEY
SCULPTURE
THE CULTURAL GIFTS PROGRAM
It has been claimed that the
Newcastle Art Gallery Foundation, the Art Gallery Director and his manager,
Wendy Whiteley and her advisors and by inference the Brett Whiteley Foundation,
made deliberate and considered arrangements to disguise the transfer of the
sculpture Black totem II from Wendy Whiteley’s ownership to Newcastle City Council, via the
Cultural Gifts Program, purporting it to be an unconditional gift when it was
not.
Some understanding of the nature of the gift and the rules that apply in
such circumstances might help to clarify
the situation.
The federal government’s Cultural
Gifts Program provides for the value of works of art donated to a qualified
public institution to be a tax deduction for the donor.
The program was established in 1978. It is
administered by the Ministry for the Arts. On its website it states:
The Cultural Gifts Program
encourages Australians to donate items of cultural significance from private
collections to public art galleries, museums, libraries and archives.
It does so by offering tax
incentives to benefactors. To date, works to the value of $680 million have
been donated to institutions across the country.
The program requires donors to
have clear title to the works and the donor and recipient are required to get
two valuations from independent valuers approved by the program.
To qualify for the program the
works must be donated voluntarily and unconditionally. The Ministry if
Arts website that describes the programs raises the issue
of conditionality in two places.
The Tax Office
may vary or disallow the deductible amount when the gift is given with
conditions that prevent or delay the institution having clear title, custody
and control of the art, or which invoke benefits to the donor other than the
allowable tax concessions.
and
The
Commissioner of Taxation may also disallow a deduction if the donor receives
any advantage of a material nature as a result of the gift (such as fees or
discounted entry or membership fees).
It is obvious from the above that the concern
relates essentially to direct or indirect financial benefit to the donor and/or
the retention of some kind of control over the work.
Tax ruling 2005/13 para 41 states: Only advantages or benefits that are
material will disqualify a transfer of property from being regarded as a gift.
Looking further at the Tax Office
rulings it is clear that the material aspect of the benefit is absolutely
crucial for the donation to be considered for disqualification. To breach the
rules the donation must elicit a material benefit to the donor or an associate.
An “associate” can be defined as someone through whom the donor can access the
benefit such as a close friend or a family member.
The key issues that would be taken into account in
determining this matter would seem to be:
1. Is
there a material benefit to the donor, either direct or indirect (via an
associate)?
2. Is
there a legally enforceable arrangement between the donor and the recipient?
3. Is
there a restriction on the control of the work?
4. Were
the donor and recipient acting on professional advice?
Newcastle Art Gallery Foundation
(NAGF) had been negotiating to purchase the sculpture for some time with the
expectation that it would be funded partly from Section 94A Development
Contributions as part of the Gallery’s redevelopment, and partly from
donations. When the extension was cancelled this left negotiations in limbo.
Lowensteins Arts Management, perhaps Australia’s leading taxation advisers in art
management, advised Wendy Whiteley (their client) to donate the work to the
Gallery through the Cultural Gifts Program and that the Newcastle Art Gallery
Foundation could make a donation of $350,000, which they had already budgeted
for the acquisition of the sculpture, to the Brett Whiteley Foundation (BWF) as
an expression of appreciation.
The Brett Whiteley Foundation is
a not-for-profit body administered by the Art Gallery of New South Wales and
chaired by a partner in accounting firm Deloitte Australia. Wendy Whiteley is
one of five directors of the foundation. Directors receive no remuneration.
The sculpture, initially valued at more than
$700,000 was eventually valued at $850,000 by two independent Commonwealth
approved valuers.
This donation would not be a
contractual matter nor was it enforceable.
It could not be considered conditional because NAGF could choose not to
pay it. The NAGF considered the matter at Board level, and the Board were advised by their honorary lawyer that
this proposal did not conflict with its constitution, trust deed or its
objectives.
It also considered the wider
ramifications of building a strong and active relationship with the BWF.
The Board requested that the
Chairman consult with Lowensteins, which he did. In an email dated 3 September , 2013, he reported to the Board
that Lowensteins’ representative had advised Wendy Whiteley that “the process
proposed was totally transparent and within the letter of current tax law”.
So while there was a loose
arrangement between NAGF, Wendy Whiteley, the Newcastle Art Gallery and the
Brett Whiteley Foundation, there is no way that the Foundation was anything
other than morally obliged to donate to the Brett Whiteley Foundation.
The clear understanding was that:
1. Wendy
Whiteley would receive no material benefit from the donation to the Whiteley
Foundation either direct or indirect.
2. The
donation was not compulsory nor could it be enforced.
This very clearly means that the
transaction did not transgress the rules laid out in the Federal Ministry of the Arts guidelines nor was it in
conflict with Tax ruling 2005/13. It was on this basis that the Foundation
donated $100,000 to the Brett Whiteley Foundation and they may well donate more
in the future.
It is absolutely clear that there
is no legal contract between the Newcastle Art Gallery Foundation or anybody
else over this matter. There was no “deal” as has been claimed by the Council
and no backdoor attempt to circumvent the rules. When the Chairman of the
Foundation is quoted as saying in an e-mail that the Foundation is at arms
length from the transaction he means exactly that. The Foundation was not a
direct party to the matter nor is it legally obligated in any way by the
donation of the sculpture.
It should also be understood that
all funds dispensed by NAGF arise from their own fund raising and from
donations. There is no access whatsoever
to ratepayers funds.
NEWCASTLE CITY COUNCIL
Without discussion or explanation
Art Gallery Director Ron Ramsey and his superior, Judy Jaeger, were suspended
by the General Manager in November 2013. The Manager then announced the
appointment of an independent investigator to examine matters. At that stage
there was no information made available to anybody, including Ramsey and Jaeger,
as to the reasons for their suspension.
Subsequently, the General Manager
formed the view that they had acted wrongly in negotiating the acquisition of
the Brett Whiteley sculpture. Ron Ramsey had already effectively been made
redundant the previous month by a restructure of council that deleted his
position.
In late January 2014 the General
Manager contacted the NAGF seeking details of donations, acquisitions etc for
the previous five years. Apparently no
explanation was given as to why these were required.
In mid-February the General
Manager convened a meeting at which PWC
Legal provided a briefing for the Foundation Board. Apparently PWC Legal formed
the view that the Gallery may have breached the guidelines applied to the
gifting of cultural works in a way that may impact its designated gift
recipient (DGR) status. They also formed the view that if the Foundation had
breached its deed of trust because of its contribution to the BWF, it may also
lose DGR status. This would deny tax deductibility to donors to the Foundation.
(A report of the General
Manager’s view of PWC findings was subsequently leaked to Newcastle media along
with some emails).
The Foundation offered to respond
to the matters raised within twenty four hours but the Council, on the advice
of the General Manager resolved on the same evening to suspend all dealings
with the Foundation. It is has not been possible to find anyone who has
actually seen a report, on PWC Legal
letterhead, detailing their complete view and recommendations and the basis for
them, nor has their been any visibility of the brief issued to PWC.
What has been seen suggests that
PWC Legal’s view was that the transaction may have breached the conditions
applying to cultural gifts on the grounds that it was conditional. They do not
attempt to demonstrate how Wendy Whiteley gained a material benefit from the
transaction. Nor do they explain how an informal and unenforceable arrangement
can be a “condition”.
Tom Lowenstein has stated
publicly that the transaction was lawful. PWC Legal has made no attempt at
rebuttal. Nor has PWC Legal made any public comment on the matter.
 |
| Judy Jaeger and Ron Ramsay |
THE DISMISSALS
It seems that Jaeger and Ramsey
were dismissed for negotiating a gift that may have jeopardised the
Gallery’s DGR status: a claim that has not been determined by the
only body that can do so, the Australian Taxation Office.
It is further claimed that they
should have advised the Council of the implications of the transactions when
the fact is that if the transaction is not in breach of tax laws then there are
no “implications” and therefore nothing to report.
The idea that they and the
Foundation “covered up” the matter is clearly not the case because one Newcastle City Councillor, as a Board
member, was privy to the entire Boardroom discussion. Even though Board
discussions are confidential, the minutes
of all meetings are distributed to Board members and therefore available
to Council via their representative.
The only conclusion that can be
drawn is that Jaeger and Ramsey were denied natural justice, they were
convicted of an offence and punished without recourse to a Tax Office
determination on the matter. Their “trial” will take place after their
“execution”.
WHAT THE HECK HAS ALL THIS BEEN ABOUT?
It is extremely difficult to
understand what Newcastle Council set out to achieve here. The planned
restructuring involved making the two council staff positions redundant but
Judy Jaeger and Ron Ramsey then spent three months suspended on full pay.
At the same time at least two
consultants were used (the independent investigator and PWC Legal that we know
of) and it is impossible to ascertain how much Newcastle ratepayers’ money has
been spent on this exercise. The Council could have saved the costs of
redundancy payments for Ramsey and part of the contract obligations for Jaeger.
It is very likely that the
overall cost of this affair is greater than the savings in money terms. However
the cost of the collateral damage in this matter is absolutely colossal.
Firstly there is the clear
inference, totally untested, that all of the participants from the Foundation
board right through to the Brett Whiteley Foundation have engaged in a process
to deceive the Australian Taxation Office. That is called tax fraud.
Secondly there is the assault on
the character and reputation of Judy Jaeger and Ron Ramsey, two individuals
whose reputations for professionalism and excellence far exceed any of those
involved in their persecution.
Thirdly there is a disgusting
attack by inference and even in the particular of the Chairman and the Board of
the NAGF. Some of these people have volunteered their services to the city for
two decades or more, contributed considerable time, energy and money in support
of our Art Gallery have had this thrown in their face in a spiteful and
vindictive way without even the opportunity to defend themselves.
Finally, and most crucially, the
other victim of this escapade is the Art Gallery itself and its standing in the
national and international community. The relationship with the Brett Whiteley
Foundation is at least fractured if not completely destroyed and it is
difficult to imagine donors of art works looking to Newcastle in the future in
the light of how Wendy Whiteley has been treated.
Novocastrians are renowned for
their sense of fair play and we should all be outraged at what has been done in
our name by our elected representatives on Newcastle City Council and their
servants. The treatment meted out to Judy Jaeger and Ron Ramsey would be a
disgrace to any employer let alone one representing the ratepayers of
Newcastle. The smearing and besmirching of innocent people far and wide must
not go unnoticed and the deliberate downgrading of our cultural institutions
must be reversed.
This matter must not be allowed to die and
with the help of our community it will not.
