Australia’s porn merchants screw up the law

The Melbourne Age, February 11 1995

Some years ago in California, a man calling himself Bill Majors took a young woman with long blonde hair to his house, stripped her, cuffed her hands behind her back, chained her ankles to a mechanical hoist and hauled her up until she hung upside down from the ceiling. “Ask me to hit you,” he said.

For an hour, Mr Majors and a second man wearing a black leather hood attacked the woman. Sometimes they used sticks and belts to beat her breasts and back and groin. At other times they put clothes-pegs on her nipples and pulled them tight or clamped rat traps to her breasts and whipped them.

In the beginning, she was pleading with them to stop, but the man in the hood ordered her to smile to show how much she was enjoying it and, later, when mascara tears started running across her face, he put a metal gag like a horse’s bit in her mouth to stifle her crying.

While all of this was happening, there was another man in the room, holding a video camera and recording every last moment of the episode. 60 minutes of it. The video eventually found its way from California to Melbourne, where it was offered for public sale under the title “Gwen’s Tit Torment – The Agony”.

On paper, this could not have happened. The Victorian state parliament has repeatedly considered the issue of pornography – in 1958, 1971, 1976, 1984 and, most recently, in 1990; and, like every other part of the nation except the Northern Territory and the ACT, it has always concluded that scenes like this must not be sold.

On paper, Victorian law allows the sale of pornographic videos only if the censor has classified them ‘R’, and the censor will grant that only if the sex scenes are simulated. In theory, this should have meant that no one in Victoria was doing anything to support the new industry in hard-core and sometimes violent pornography that has developed dramatically in the United States and northern Europe in the past 15 years, using as its raw material the growing number of women trapped in drug addiction and poverty.

And yet the young woman from California found her place in Melbourne’s video stores, alongside the woman who was strung up between two posts in an attic while two men tore off her clothes, urinated on her face and took it in turns to have sex with her before covering her face in semen and more urine (sold in Melbourne as ‘Roped and Raped’, price $64.95); and the pregnant German woman in bondage (‘Schwanger ist Geil’); and the woman being beaten until she bled (‘Slave Sex’) and ‘Gang Bang Girl’ and ‘Beaten and Buggered’ and ‘Shit Lovers’ and thousands of other hard-core videos, all of them supposedly banned from sale in the state.

Among the hundreds of dealers and buyers who have encouraged this industry to sink its roots in Victoria, two brothers have done more than any others: Kenneth and Eric Hill of Bourke Street, Melbourne, millionaire businessmen, generous benefactors of local charities, active members of the Rotary Club, owners of book shops, cinemas, peep shows and strip joints – the biggest pornography salesmen in Australia.

This is the story of a battle. At first sight, it is one of classic simplicity, in which the forces of good confront evil in defence of the defenceless. But, on closer examination, it proves to be more unusual, first because it has been fought in the middle of Melbourne for two years and yet few have known about it; and second, because despite apparently having strength and justice on their side, the forces of good have been humiliated.

It is a story of greed and exploitation, in which businessmen have grown rich and built a life of comfort out of the pain and humiliation of hundreds of women, and it is about the law’s failure which has been so overwhelming that even the state Attorney General, whose department was responsible, described it as ‘outrageous’.

In one sense, the story begins shortly after midday on Monday September 14 1992, when six members of the Victorian police gaming and vice squad knocked on the door of shabby, two-storey building not far from the railway bridge in Racecourse Road, Flemington. The building was a warehouse and office complex which belonged to a company called Calvista Australia. The policemen had a warrant to search it.

Calvista’s staff had been told that they were never to talk to the police, and so they looked on in silent horror as the six officers swept through the building, collecting videos from shelves and racks and boxes. It took hours but by the time they left Calvista that evening, the police had seized nearly 6,000 videos – enough to fill a three-tonne truck – and they had their first glimpse inside the growing empire of Kenneth and Eric Hill.

Calvista was still assessing the damage when, eight days later, on September 22, the police moved again. This time, they took a warrant to a block of offices in South Melbourne where, as far as neighbouring workers were concerned, a 45-year-old man ran some kind of film business with a receptionist who answered the phone at the front desk. It all seemed harmless. The businessman’s 13-year-old daughter even used to come in to help him during school holidays.

But when the police arrived that morning and talked their way past the receptionist, they found a small pile of pornographic master tapes; a four-drawer filing cabinet full of hundreds of pornographic video covers, known in the trade as ‘slicks’; and, in the back room, a bank of 40 video recorders, all lined up on shelves, all linked to a central television screen, all quietly humming away duplicating one of the master tapes. It was a factory for hard-core videos. Police took away invoices which showed that their client was Calvista.

From the mass of material which they had by then accumulated, the police selected 25 tapes at random and sent them to Sydney to the Commonwealth censor, who looked at them all and reported that, with the exception of one tape which turned out to be blank, the tapes contained illegal pornography. They were either classified ‘X’, which meant that they could be sold in Canberra and Darwin but not in Victoria; or they had no classification at all, which meant that it was illegal to sell them anywhere in Australia. Many of them included acts of sexual violence.

It was at this point that the police began to plan for Operation Jack, the biggest offensive against pornography in Victorian history and, for all practical purposes, it was this decision that really marked the beginning of the battle which was to be fought over the next two years.

But in another and possibly more important sense, this all started several years earlier, when Kenneth and Eric Hill, now aged 43 and 49, first had their bright idea.

Back then, they were still just a couple of dreamers struggling for success. They had worked as Telecom engineers and then tried their hand as entrepreneurs in the 1970s by opening several drive-in movie theatres in the Melbourne area. They made a little money and then realised that they were in the wrong business when video started to steal their customers. By 1983, they had sold their drive-ins and started selling videos.

At first, they handled mainstream entertainment but soon they found their own special niche, opening the first of their Club X book stores. They grew fast. They registered Club X with the Australian Companies and Securities Commission and opened stores all over Melbourne: Russell Street, Collins Street, Elizabeth Street, Spencer Street, King Street, Swanston Street (three of them), St Kilda, Sunshine, Footscray, Clayton and Box Hill.

Staff believe they financed their expansion with a massive loan from a Dutch pornographer, Ari van der Heul,who runs a company in Rotterdam named Calvista International. Close associates of the Hills say they borrowed nearly $6 million from the Dutchman in the late 1980s and had to repay him at the rate of $11,000 a week. They say the Hills frequently fell behind with payments and in 1991, the Dutchman flew to Melbourne to lay down the law.

The Hills pushed their staff to bring in more cash, offering them 10 per cent of the cover price of every pornographic video they sold and running a competition to find the best-selling store, with a free holiday in Queensland as a reward. In search of expansion, they teamed up with two brothers, George and Joseph Sobota. They argued with George and persuaded him to move to Sydney to open Club X stores in New South Wales, but they kept Joseph as their right-hand man in Melbourne. Soon, the Club X chain had 28 different outlets, spread through every state except Queensland.

They set up an umbrella company called HGC – the Hill Group of Companies – which diversified, along with the Sobota brothers, into a brothel called Club 77 in Racecourse Road and three cinema-and-strip joints in the central business district – the Shaft, the Dendy and the Crazy Horse.

Club X was a cash cow. Staff say that they have seen Eric Hill, the more dominant of the two brothers, counting fat bags of money from some of the Melbourne stores and that each of the stores was expected to turn in $10,000 a week. Associates say that, at a conservative estimate, they were earning $200,000 a week from the stores alone. And there was more.

They opened a mail-order business and a second, smaller chain of sex stores for women, called Femme. They earned themselves a double-barrelled income by setting up their own wholesale business, so that they were supplying the stores themselves. This was Calvista, another cash cow, based opposite the brothel on Racecourse Road. It started selling not only to the Hills’ outlets but also to independent stores all over Victoria and then throughout other states.

It was a thriving trade. Although they also sold magazines and sex toys, which caused no legal problem, videos accounted for some 70 per cent of their turnover. Store managers would turn up at Calvista, grab a trolley and walk around the store-room helping themselves to handfuls of tapes, all of which were logged on the computer by the store manager, Ian, who prided himself on his ability to spot police and turn them away before they got close to the collection. If a stranger walked in and saw any of the illegal videos, he would tell them they were just samples for their mail-order business which obeyed the law by supplying only from Canberra.

In their search for material to satisfy demand, they linked up with the two biggest legitimate importers in Australia – Gerry Hercus in Darwin and Jeff Morton in Canberra. They reached abroad to companies in Nevada and California, some of whom were suspected by local police of being run by organised crime groups, and they leaned heavily on their sister company, Calvista International, in Rotterdam, from where Ari van der Heul air-freighted them consignments of pornography.

Unknown to some of their suppliers, they were routinely copying the videos they were sent. They opened their own copying factory in Flemington and commissioned more copying from the little office in South Melbourne, whose salesman used to turn up at Calvista with heavy boxes of illicitly copied videos, complaining that he had a bad back and he couldn’t possibly carry so many tapes upstairs on his own.

On several occasions, they came close to being caught. Once, when they returned a tape to Jeff Morton in Canberra complaining that it was damaged, he noticed that it was a pirate copy of a tape on which he held the copyright. Then some of the American suppliers started to suspect they were being ripped off, and Joe Sobota had to temporarily cancel orders for US pornography.

By the time the police came knocking on their door in September 1992, the Hill brothers were living in luxury. Each had a sprawling home with a swimming pool in the rural, rich suburb of Warrandyte. They were driving American Chevrolets, sending their children to private schools and spending weekends at their holiday home in East Gippsland, playing on the lakes with their speedboats and yachts. Their associates say they had no idea the police were moving in on them.

For five months after the original raid on Calvista, it was business as usual. Within four weeks of the raid, they had splashed out nearly $30,000 to buy some 3,000 videos to replace some of those that had been seized. They held a summit meeting of directors at which their lawyer told them how to handle the police. Ken Hill gave a talk on security, and they summoned staff to explain new security procedures to them.

Joe Sobota, who managed the Calvista operation from day to day, explained that they would no longer keep videos in the warehouse. They would show trusted buyers the video slicks, take written orders and supply the tapes from another site. But within weeks, staff say, the videos were back, discreetly tucked away in a side room which was supposed to be locked against prying eyes but which was soon left unlocked as the managers came to believe that they were out of danger.

In the meantime, the gaming and vice squad was discreetly watching their every move, sending plain-clothes officers into their stores and cinemas, phoning their mail-order numbers, gathering intelligence on the stock they were selling, the films they were showing, mapping the lay-out of the stores and tracing the ownership of their web of companies.

At 10am on February 26 1993, Operation Jack hit the streets. They called in every available officer, not only from the gaming and vice squad but also from the local CIBs and the district support units. That day, 22 teams of officers set out to raid every single known outlet for hard-core pornography in the city. By noon, they were inside the Calvista warehouse and causing turmoil in 21 stores either owned or supplied by the Hills. It was clear that they had caught their targets off-guard.

In stores across the city, staff found themselves selling a hard-core video in what appeared to be a normal transaction, only to find 10 minutes later that the buyer was back with a warrant and a camera and several other officers who proceeded to box up every video and every available piece of business paper in the store, while customers vanished out of the door.

One store manager later boasted that he had managed to tear several pages out of the front of a business diary and swallow them before police could stop him. Almost all the Club X stores staff obeyed their repeated instructions not to talk to the police. They say they were afraid they would lose their jobs and that the Hills would give them no help with their legal costs if they broke the rule. The few who did start to talk soon stopped as managers called round to remind them.

By early afternoon, when police launched a second wave of raids, they had lost the element of surprise. Stores were locked and deserted. Staff had often left nothing more than dusty outlines on shelves which earlier that day had been lined with pornographic videos. A few managers were caught in the act of packing up their goods. One claims he received at least 12 phone calls during the morning from other stores who wanted to warn him that the police were on the way.

By the end of the day, police had hit 37 addresses and had four trucks containing an estimated 14,000 videos, countless thousands of video slicks, as well as computers, computer discs and a hoard of invoices and receipts. As the Hills’ staff began to log the losses, they discovered that police now seemed to have enough evidence to destroy the whole empire.

The paperwork alone was a threat, since the police could now take the lid off the Hills’ secret world and find out exactly what they had been doing. The vice squad would be able to trace all their supply lines, possibly threatening their viability.

For example, in the six months before the wave of raids, the Hill brothers had been negotiating a series of new deals with legitimate suppliers in other parts of Australia. They had agreed to take a minimum of 2,000 videos off Gerry Hercus in Darwin every six weeks at only $10 each and a further 1,200 a month off Jeff Morton in Canberra at $15. Since they would sell them for up to $70 each, the potential profit from these deals alone was more than $30,000 a week.

They had also approached a Canberra company named CIA – Computer Images for Adults – to secure rights to distribute pornography by computer. These dealers were working within the law, but would the deals survive the police attention?

However, for the pornographers, the real worry was that the police now knew exactly what they were selling. They had tried to be careful. They had put their own censors’ stickers on some of the videos to persuade customers that they were legal, but the police would soon check with the censor and find they were phony. Some of them were a joke among staff: they used stickers with an ‘R2’ classification which applied only to books and never to videos.

They had also avoided writing the names of illegal videos on their invoices and simply used a code, 0119. But staff knew that among the thousands of illicit videos, they had sold a handful of legitimate R-rated ones, such as the Video Lovers Guide, and that these had been named on invoices. It would not take police long to understand the significance of the code. And, anyway, the police had got the videos.

Between them the Calvista warehouse and the Club X stores had been holding rack after rack of legally troublesome material. A lot of them were the kind of explicit sex which would be given an X certificate in Canberra or Darwin, but some of the others were the kind of material which would be illegal almost anywhere in the world, like The Voyeur, with its shots of a woman whose breasts were pierced with syringe needles; or Teenage Perversions, where the woman was made to drink her own urine and rub excrement on her body; or Magma Lady Bizarre, with its enemas, anal and vaginal; or Submissive Girl, where the woman was tortured with hot wax and cigarette ash and then with cigarette burns on her nipples. They had all been in stock when the police came. And more which were just as risky.

Even worse, the police had taken away several big carboard boxes of video tapes which had been lying in a corner in the Calvista warehouse gathering dust. These were damaged tapes which had been returned by dissatisfied customers and, although they might have seemed insignificant, they were potentially lethal: many of them carried Club X price stickers and included receipts of sale, all of which would prevent Calvista from pretending that their illegal tapes were merely samples which they were keeping to advertise a legitimate mail-order business.

And it was clear that the police were still not finished. They were tracing staff, trying to persuade them to talk, and some of the store managers believed they had seen more undercover officers in their shops.

At the end of April, two of their cinemas found themselves being raided. They were showing hard-core pornography and, without warning, each cinema found a pair of men leaving the audience, presenting a warrant and seizing the video which was being shown. In one case, it turned out that the film, The Fine Art of Fellatio, had been previously submitted to the censor who had taken one look at its contents and refused to give it any kind of certificate at all. The other, Sex Hammer, had never even been submitted.

In June, police carried out formal interviews with Kenneth and Eric Hill, and with Joe Sobota and their financial controller, David ‘Hui’ Newnham. All refused to comment. On 26 July 1993, all four of them were charged with conspiracy to distribute offensive and unclassified videos in Victoria. Each man’s indictment ran to 40 counts, covering the alleged sale, display, exhibition and distribution of pornography. It looked as though the police were winning the battle. The truth soon emerged.

The various store staff who had been charged with selling pornographic videos after the big raid in February 1993 were due to come before Melbourne magistrates. The Hills hired a prominent lawyer, Peter Allaway, to represent them and, when the first case came to court, Allaway produced an argument which paralysed the proceedings.

He was acting on behalf of the manageress of the Club X store in Box Hill, whose name was Ngaire Makris. Allaway discovered that in 1976, when Victoria had asked the Commonwealth censor in Sydney to classify films and literature on the state’s behalf, they had drawn up an agreement which referred to films, defined as a sequence of visual images. However, this did not refer to videos, which were unheard of at the time and which were, by contrast, a sequence of electromagnetic impulses.

This agreement had never been updated. And since the most recent Victorian law, the 1990 Classification of Films Act, relied on this agreement, it followed that while there might be all kinds of restrictions on films, there was in law no regulation of videos in Victoria at all. The prosecution tried to fight back, but the magistrates accepted Allaway’s argument and dismissed the case against Ngaire Makris.

The prosecution appealed but, in the meantime, the entire collection of cases against the Hills, their associates and their shop managers was frozen. So, too, were the cases of a handful of other pornographers who were then awaiting trial. And, in the background, the gaming and vice squad was forced to suspend operations against the trade in video pornography in the state.

For the police, it was a disaster. When the Makris case reached the state Supreme Court in March 1994, the judges agreed with the magistrates: Victorian videos were beyond the law. The police and the prosecution refused to accept that all of the 20,000 videos they had seized and the hundreds of pages of witness statements and their hoard of receipts and invoices were worthless. For months, they argued and pressed for an alternative. At one point, they asked magistrates to take on the role of censor themselves, but it all came to nothing.

The police had spent two years in a battle, only to find they had been given dud ammunition by the law makers. At the end of last year, the prosecution was cancelled. Rubbing salt in the wound, the courts ordered police to return the videos they had seized and to pay the Hills more than $50,000 in costs.

In the state Parliament in November, the Attorney General, Jan Wade introduced a short Classification of Films and Publications (Amendment) Bill, which was intended to plug the loophole. Even though her department had been living with the loophole ever since videos became popular in the mid-1980s, she placed the blame for what she described as “this outrageous situation” on her Labor predecessor, Jim Kennan, who had been in office when the 1990 act passed into law. Mrs Wade’s bill came into effect in December and her office says that the porn law now has no loopholes.

But the streets of Melbourne tell a different story. In Club X stores across the city, the video shelves are still stacked with hard-core pornography. The law may now say that they can sell nothing more than simulated sex, classified ‘R’ by the censor, but there on the shelves are the video images that defy the law makers – oral sex, anal sex, group sex, sex with dildos, sex with fists, sex with bottles, sex with urine, dwarf sex, gay sex, transsexual sex – all of it explicit, none of it simulated. Thousands of hours of it, all of it shot with real women, somewhere in California or Hamburg or London, for the profit of the Hills and the pleasure of their customers.

This is not the fringe of Club X business. There are walls of videos in all the stores, and staff estimate that only one in every 2,000 tapes which the Hills sell is rated ‘R’. And there is nothing discreet about the way they sell them. Kenneth and Eric Hill may hide themselves from the limelight – their new head office at 130 Bourke Street is protected by a security camera in the outer lobby and by a lift that does not open on their floor – but their goods are propped up on the shelves for all to buy.

More than that, they are displayed in the private booths in their shops and, most open of all, on full-size cinema screens in the Crazy Horse and the Shaft, which they and Joseph Sobota control. Their store managers admit openly to customers that they are breaking the law. In their defence, they say that they handle no child pornography or bestiality and that, since the police raids, few of them will sell sexual violence and none will do so openly. Apart from that, they say, the porn law is there to be broken.

Those close to the Hills say that if the police try to enforce the law, they will escape through more loopholes. They claim they will challenge any prosecution by arguing that by banning the sale of X-rated videos, which are permitted in the Northern Territories and the ACT, Victorian law breaches section 92 of the Constitution which guarantees free trade across state borders. They claim, too, that Victorian law contradicts the new federal law on sexual privacy.

The Hills’ spokesman says Calvista has now stopped selling videos of any kind. He claims, too, that the videos which Club X sells are not illegal, but in Melbourne now not even the police claim to know what that means.