opes kept laywers account active

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    Opes kept lawyer's failed portfolio aliveBy Adele Ferguson
    April 11, 2008 07:40am
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    THE flamboyant Sydney lawyer Chris Murphy has been thrust into the centre of the collapse of stockbroking firm Opes Prime with the revelation that unprecedented levels of credit were used to keep his failed $200 million share portfolio afloat.

    Share portfolio statements obtained by The Australian show that Opes kept alive Mr Murphy's broking account with margin lending of 95 per cent after it had lost almost all its value by July last year.

    The decision contaminated the rest of the broker, and may have contributed to its collapse.

    The portfolio statements obtained by former underworld boss Mick Gatto and associate John Khoury, and provided to The Australian, show that Mr Murphy, through two of his companies, Sarah Brown and Cardiac Jolt, had margin calls after losing virtually all the equity in his $200 million share portfolio even as the share market was at a peak in July.

    The Australian revealed earlier this month that Mr Murphy, reputed to have been a high-rolling gambling associate of the late Kerry Packer, was the highest-profile victim of the share market shake-out when his massive share market portfolio was wiped out with the collapse of Melbourne-based broker Opes.

    Mr Murphy, an ardent trader, has boasted in the past on the HotCopper online day traders' chat site about his successful share market exploits.

    But documents with details of his portfolio show he was receiving margin calls on a portfolio run out of Sarah Brown, a company he owned in a joint venture with Hawkswood Investment. Hawkswood is owned by three directors of Opes: Laurie Emini, Julian Smith and Anthony Blumberg.

    Mr Murphy was also getting margin calls on a portfolio of shares he had registered in his company Cardiac Jolt.

    Opes had lent him up to 95 per cent of the value of his shares, which is extremely rare in margin lending. The usual level is 65 per cent on blue-chip stocks, and much less on mid-capitalised stocks.

    In Mr Murphy's case, he was given 95 per cent preferential treatment on his entire dealings with the firm, leveraging on high-risk stocks such as Ebet, Heartware and Australian Pharmaceutical Industries.

    When asked about the content of his portfolio statements, including borrowings of 95 per cent of his share market stake, Mr Murphy declined to comment last night.

    At this stage, it remains a puzzle why the directors of Opes kept Mr Murphy's account running in July, long before the broker planned to do a backdoor listing on the Australian Securities Exchange with a market value of $100 million. It was during this time that ANZ Bank and investment bank Merrill Lynch, the main bankers to Opes, were increasing their level of security in the business.

    For reasons not yet clear, Opes made a decision to keep Mr Murphy and other similar client accounts alive, apparently by using money from other people's trading accounts to mask a massive deficit and avoid margin calls.

    Jay Moghe, the sole director and shareholder of the shadowy British Virgin Islands company Riqueza, through which Mr Emini conducted many of his trades, was given similar treatment to Mr Murphy on his share portfolio of $124 million. Mr Moghe had significant holding in small companies, including Kings Minerals.

    Portfolio statements released exclusively to The Australian reveal that Mr Moghe had available margins of $106 million in one account, and a margin call of $23.7 million in another account.

    Mr Murphy made his name in the late 1980s and 1990s as a criminal lawyer. While his firm still carries his name, he is now an active share trader. From the state of his trading accounts in July last year, he was having significant problems with margin calls, despite having leverage of 95 per cent.

    Earlier this month, he sold 15 million Challenger shares through Cardiac Jolt at an average price of $1.70, well down on the company's $6.55 peak in October last year.

    Mr Murphy has denied receiving a margin call. "I didn't have a margin call, I merely reduced my position,'' he said.

    On March 5, speculation started to emerge that Opes was in trouble. Some people, including Tom Karas of State Securities, acted and moved their Opes Prime accounts into a nominee company at Opes, called Green Frog.

    By March 17, Mr Emini had taken sick leave and the next day Mr Blumberg and Mr Smith met ANZ officers to ask for an emergency loan of $95 million.

    The British Virgin Islands company had gone from having a $124 million market value last July to a $102 million margin call.

    Ten days later the administrators were called in, followed by receivers. Now unsecured creditors will be lucky to get 30c in the dollar.

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