Opes connections missed margin calls
OPES Prime portfolio statements for Sarah Brown and Cardiac Jolt - the private companies linked with high-profile Sydney lawyer Chris Murphy and Opes Prime chief executive Lirim "Laurie" Emini - confirm that both men should have received a margin call in July last year.
The Opes Prime portfolio statements reveal the exact companies in which Murphy and Emini were both investing, and confirm earlier reports in BusinessDay that both men were given the generous loan value ratio (LVR) of 95%.
The statements also show that both men borrowed in excess of $167 million to buy highly speculative stocks at interests rates comparable to an average home loan.
Copies of the statements, seen by BusinessDay, were posted to Chris Murphy at his Elizabeth Street office address in Sydney, and cover the period from July 1 to 13, 2007.
One statement shows that Sarah Brown, which was co-owned by Murphy and Emini's Hawkswood Investments, had exceeded its LVR of 95%. Emini and Murphy were the sole directors of Sarah Brown.
The Sarah Brown statement shows the company's account had fallen almost $1 million into the red - it had borrowed $65,891,722.85 against a share portfolio worth $64,942,873.93. It was paying an interest rate of 7.85% on that loan.
A second Opes Prime statement for Cardiac Jolt, a company owned entirely by Murphy, shows the account was teetering on the edge of a margin call at 94.65%.
Cardiac Jolt's account for the period reveals that the company had borrowed $102,300,853.75 against shares with a market value of $108,080,937.07.
Its interest rate, on a loan exceeding $102 million, was 8.1%.
From July 13 to the collapse of Opes Prime on March 29, the value of the ASX 200 Index plummeted by 16.25%, plunging the margin loan accounts of both Sarah Brown and Cardiac Jolt into the red, and ultimately bringing the stockbroking firm to its knees.
Melbourne finance broker Tom Karas, who has links with underworld figure Mick Gatto, told BusinessDay on the day of the Opes Prime collapse: "Chris Murphy is the black hole. Chris Murphy and Sarah Brown - that's where all the money's gone. And it's all gone down the hole on Challenger."
Despite the poor financial state of the two portfolio accounts, both Sarah Brown and Cardiac Jolt were allowed to continue trading - amid allegations that Opes Prime staff were told not to put in a margin call to either.
On July 13 last year Sarah Brown and Cardiac Jolt had a combined holding in James Packer-controlled Challenger Financial Services Group that totalled 17.86 million shares - worth $102.71 million at the time. Challenger Financial was then trading at $5.75 a share.
A later statement to the stock exchange, dated August 2, 2007, announced that Cardiac Jolt had become a substantial shareholder in Challenger Financial on July 30, with 28.6 million shares, or 5.16% of the company. That stake was then worth $145 million.
It is believed that stake was bought with more money borrowed from Opes Prime.
Major problems with Cardiac Jolt's account are believed to have emerged on December 18 last year, when Challenger Financial's share price plunged below $5. The company last traded at $2.12.
The July 13 Opes Prime portfolio statement for Cardiac Jolt shows that Murphy also held 14.7 million shares of Australian Pharmaceutical Industries worth $29.9 million, 415,000 shares in Blackmores worth $8.7 million, 37.3 million shares in eBet worth
$6.5 million, 4.3 million shares in Heartware worth $2.7 million and 2.7 million Telstra shares worth $13 million.
Between the date of the statement and the collapse of Opes Prime, Australian Pharmaceutical's share price fell 34.5%, Challenger Financial fell 65.2%, eBet fell 65.7% and Heartware fell 35.6%.
Murphy was also allowed to borrow 100% of the share price to short Harvey Norman stock, which was trading at $5.49 on the date of the statement. It's one of Murphy's few deals that would have proved a success - Harvey Norman closed yesterday at $3.85 a share.
Sarah Brown held 10.8 million shares in Australian Pharmaceutical, 7.9 million shares in Challenger Financial, 9.6 million shares in eBet and 4.6 million shares in Heartware. The similarity between the two share portfolios is striking.
The fresh details about Murphy's shareholdings comes in the wake of revelations in yesterday's Age that the Australian Federal Police is investigating the alleged leaking of market-sensitive information about a planned takeover involving Golden West Resources and Fairstar Resources. The information was allegedly leaked to underworld figure Mick Gatto and his business partner Matt Tomas. Both men, and the directors of both companies, have denied any impropriety.
The Age also revealed that underworld figures and their associates had been among the top 20 shareholders of WA mining explorer Boss Energy. These include Amad Malkoun, a convicted heroin trafficker, and Adrian Pamplin, who was described in a NSW court in 2005 as a crime figure.
The chairman of Boss Energy, Robert Grover, said he had no knowledge of who were his company's top 20 shareholders. But it has also emerged that one of the company's two directors is a former long-serving Victoria Police officer, Joseph Obeid. Obeid was appointed a director of Boss Energy after working as the "head of risk assessment" for another WA explorer, Range Resources.
Range Resources managing director Michael Povey confirmed that Obeid had worked as a contractor for Range. Povey recalled that Obeid and two other former members of the Victoria Police had travelled overseas to carry out a "risk assessment" for Range Resources. Obeid left the Victoria Police in the late 1990s and has been involved in bars and restaurants.
Another company listed as a major initial shareholder in Boss Energy is Green Frog Nominees, which is a wholly owned private subsidiary of Opes Prime.
Probe into Gatto leak on takeover plan
- Nick McKenzie, Cameron Houston and Mark Hawthorne
- April 10, 2008
Mick Gatto in Singapore.
Police are investigating the leaking of sensitive information about a planned company takeover to underworld identity Mick Gatto, amid increasing concerns about infiltration of the stockmarket by organised crime.
Australian Federal Police are examining how information on a proposed takeover involving two WA-based companies, Golden West Resources and Fairstar Resources, may have been passed to Mr Gatto and his business partner in Elite Cranes, Matt Tomas.
The inquiry is also examining a suspected deal to allocate a substantial parcel of shares from an escrow, or holding, account to the two Melbourne identities.
The revelation of the police inquiry follows the $1 billion Opes Prime collapse and increasing calls for tougher scrutiny of the stockmarket.
Fairstar, Golden West and several other stockmarket-listed mining companies, including Boss Energy, are embroiled in the Opes Prime collapse.
Several of the shareholders of Boss Energy have also attracted the attention of law enforcement agencies: among its top 20 stock owners are a convicted drug trafficker and a Sydney bikie.
In connection to the Golden West and Fairstar probe, a taskforce from the federal police economic and special operations unit is believed to have information, including tapped phone calls, that shows market-sensitive information was leaked.
Police have been examining the activities of a Melbourne-based Fairstar Resources consultant, Nimrod Harell, in connection to the inquiry. Mr Harell has sat on the board of the Melbourne Knights soccer club with Mr Tomas.
A federal police spokesman said he could not comment on its investigation as it was ongoing. Mr Gatto told The Age last night that the AFP investigation was baseless. "There is nothing there. They are wasting their time. They have interviewed everybody and come back with zero."
Mr Gatto has been making headlines since 2004 when he shot dead Melbourne underworld hitman Andrew "Benji" Veniamin and was later acquitted of murder on the grounds of self-defence.
This week, with Mr Tomas and another associate John Khoury, Mr Gatto flew to Singapore, where he says he is trying to recover losses for unidentified Opes Prime clients. Mr Gatto has denied any of his finances have been affected by the stockbroker's collapse.
Golden West Resources chairman Con Markopoulos told The Age that federal police had removed files from the company. He said he had no knowledge of any illegal activities. "We have always given the AFP all access to information that they may require to do their job," Mr Markopoulos said.
Fairstar director Harold Paiker also said he had no knowledge of any impropriety. "We are not privy to any information it (the AFP) has and upon which they have formed these lines of investigation," Mr Paiker said.
In September last year, Fairstar launched its hostile takeover bid for Golden West. At the time Fairstar was valued at $36 million, and Golden West in excess of $120 million.
But Fairstar managed to secure 3% of Golden West shares due to the large number of common shareholders - most of whom accepted Fairstar's 7-1 share offer. Before Fairstar's bid, there was an aborted plan for Golden West to take over Fairstar.
In early February, federal police raided the offices of stockbroker Findlay Securities, which has had dealings with Golden West and Fairstar Resources. They also raided the homes of Findlay director Robin Armstrong and trader Jeremy Slater.
Findlay Securities' Melbourne office is located next to the office of Tom Karas, a financial services provider closely linked to Mr Gatto and Mr Khoury.
Among Mr Karas' other clients is alleged drug trafficker Horty Mokbel, the brother of crime boss Tony Mokbel.
In July 2007, Mr Karas and Mr Khoury were listed as among the top 20 shareholders of Boss Energy. Others on that list included strip club manager Amad 'Jay' Malkoun, who served a lengthy sentence for heroin trafficking in the '80s and who is well connected to Melbourne's underworld.
Another top 20 shareholder is Adrian Pamplin, a member of an outlaw motorcycle gang. Mr Pamplin was described in a 2005 NSW court case as a criminal figure with links to alleged former Sydney crime boss Karl Bonnette.
Another company listed as a major initial shareholder in Boss Energy is Green Frog Nominees, which is a wholly-owned private subsidiary of Opes Prime.
Boss Energy chairman Robert Grover said he was not aware that any crime figures were on his company's register or were among his company's top 20 shareholders.
The federal police investigation comes four years after the Australian Crime Commission uncovered stockmarket dealings involving underworld figures and their associates.
The ACC found evidence that underworld figures were leaked market-sensitive company information about a listed biotechnology stock. But the investigation broke down due to the inability of the Australian Securities and Investments Commission to access phone calls tapped by police agencies. Subsequent internal efforts at ASIC to investigate the dealings were blocked because of resourcing concerns.
The ACC investigation charged Perth underworld figure John Kizon in 2004 with insider trading. He will appear before a WA court to defend the charges later this month.
A well-placed source told The Age: "For ASIC to say organised crime is not involved in the stockmarket is just ridiculous. If ASIC can't conduct a criminal investigation and the police don't want to do it, then who is left?"
Several police sources said the nation's law enforcement agencies had failed to target criminal stockmarket manipulation.