(Fortune Magazine) -- After 50 years building one of the world's largest packaging companies -- and with it, a $5 billion fortune -- cardboard-box king Richard Pratt should be luxuriating in a reputation as one of Australia's most successful entrepreneurs and most generous philanthropists.
Instead, the 73-year-old Melbourne tycoon, a onetime football star who fled the pogroms of prewar Europe, is being publicly tarred as a thief. His privately held Visyboard Group was busted by regulators for operating a cartel in Australia's $2 billion box-making industry along with its main competitor, Amcor, and creating a duopoly that robbed customers of millions of dollars.
Says Graeme Samuel, chairman of Australia's Competition and Consumer Commission: "Anyone who has bought a bar of chocolate or a piece of fruit packed in a box made by Visyboard or Amcor has probably been ripped off."
It's a sorry end to a glittering career. In September, just as the case was headed to trial, Pratt pleaded guilty to one count of breaching Australia's antitrust laws, and his company admitted to 37 violations, settling for $35 million. Pratt wouldn't comment, but his personal assistant, Tony Gray, says, "We regret what has happened."
Regulators say executives at Visyboard and Amcor, which control 90% of the box market between them but had spent the 1990s fighting a bruising price war, met in 2000 and agreed to keep prices artificially high.
Over the next four years executives met clandestinely every few weeks -- lunches in sleazy pubs, booze-ups in motels -- to ensure the other side kept its end of the conspiracy. Sometimes the plotters strolled together in parks, worried they might be under surveillance. It turned out they were -- by themselves.
The cartel, estimated to have cost customers and consumers as much as $1 billion, ended when Amcor's board blew the whistle in 2004, as it was losing market share to Visyboard, and turned over its tapes to the government.
In return, Amcor got immunity from prosecution, and regulators went after Pratt, one of the biggest donors to Australia's ruling Liberal Party. Pratt protested Visyboard's innocence for two years. But the Amcor tapes were damning. Last month, just as legislators were proposing to criminalize cartels, Pratt caved in.
Amcor sacked its senior executive team long ago, but Pratt has stayed loyal to his wrongdoers, paying their fines and keeping himself on as executive chairman. Prime Minister John Howard says he likes Pratt, describing him as generous. "We don't have any proposal to return his donations," he says of the millions Pratt gave to the Liberal Party during its decade in power.
The fine against Visyboard, although a record, looks cheap for Pratt. And the company is healthier than ever, having increased its market share from 45% when the cartel began to 60% today. Its annual revenues are up by $300 million.
"The fine sounds a lot to the average person," says Brent Mitchell, research manager at Melbourne's Shaw Stockbroking, "but Visyboard will call it a business expense."
With admission of guilt by Visyboard, a bigger concern could be a succession of lawsuits brought by customers. Melbourne law firm Maurice Blackburn Cashman is leading a class action seeking as much as $600 million in damages.
New Zealand regulators have also launched an investigation into the two companies, which control 70% of that country's box market. Visyboard denies customers were overcharged and says it doesn't anticipate any reputational fallout in the U.S. Shaw's Mitchell says future contracts will be "toughly negotiated by customers." Perhaps, but not nearly as tough as Pratt's battle to salvage his reputation.