opes systematic manipulation trading accounts

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    * April 5, 2008

    THE bizarre billion-dollar unravelling of Opes Prime has taken a dramatic twist. It appears the onus for a $146 million margin call against shares owned by high-profile Sydney criminal defence barrister Chris Murphy was shifted from Mr Murphy to an Opes Prime subsidiary just days before the stockbroking firm collapsed.

    One week after Opes' shock collapse rocked the market, destroyed the fortunes of its clients, and triggered a $1 billion share-sale program by Opes' secured lenders, ANZ, Merrill Lynch and Dresdner Kleinwort, an affidavit released by the Federal Court has provided the first detailed insights into the desperate weeks and days before receivers took charge.

    It alleges a "systematic manipulation" of share-trading accounts at Opes, and indicates that a share portfolio owned by Mr Murphy had plunged so far into the red that it owed more than $146 million by March.

    The affidavit also indicates that the Australian Securities and Investments Commission is trying to fathom the role played by Opes chief executive Lirim "Laurie" Emini in transferring shares and cash between Murphy-related share-trading accounts and an account identified as "E", which is operated by a company registered in the British Virgin Islands and operating from Singapore.

    The affidavit, sworn by a senior ASIC investigator, Richard Vandeloo, earlier this week, alleges that Mr Emini allegedly gave instructions on behalf of the BVI company between December 18 and February, directing his staff to transfer shares or cash between the BVI company's account and those operated by Mr Murphy or other Opes clients.

    Mr Vandeloo's 29-page affidavit was edited by ASIC and its lawyers before it was released by Justice Ray Finkelstein of the Federal Court late yesterday. There is no suggestion in the affidavit that Mr Murphy had any knowledge of what was happening to his shares.

    The public version of the affidavit does not name Mr Murphy or his companies, and instead uses a series of single-letter pseudonyms to outline a trail of questionable transactions in Opes' share-trading accounts.

    ASIC also supplied the court with two volumes of exhibits, including a lengthy transcript of ASIC's formal interview with an Opes staff member last weekend, plus details of some share-trading accounts operated by Opes' clients. The exhibits have not been released publicly.

    The affidavit was released by the court several hours after ASIC secured a court order that extended a travel ban on Mr Emini by six months to October 3. He has already given two passports to ASIC - an Australian passport and one issued by the Republic of Macedonia - and the court ordered that he must give 48 hours' notice of any intention to request the return of those passports.

    ASIC also revealed that Mr Emini has given authorities a lap-top computer and his PDA device. Two other Opes directors, Julian Smith and Anthony Blumberg, have agreed not to travel overseas.

    Mr Vandeloo's affidavit noted that from his initial discussions with Mr Smith and Mr Blumberg, "at this stage it is unclear to me what level of assistance they may be able to provide in this investigation".

    Mr Vandeloo referred to evidence given by an Opes staff member to ASIC during a formal interview over two days on March 30 and 31. Emails obtained by ASIC relate to margin calls against share-trading accounts operated by "D", who BusinessDay believes is Mr Murphy, and that the emails included "requests to move stock to and from these accounts to cover the margin calls".

    The employee, identified only as "C", revealed how problems emerged at one of the Opes share-trading accounts around December 18, when the share price of Challenger Financial fell below $5. Mr Vandeloo said the drop in December "triggered an alert that there was going to be a margin call on accounts associated with 'D' ".

    Four months earlier, on August 2, 2007, Mr Murphy told the stock exchange that on July 30, his privately owned company, Cardiac Jolt Pty Ltd, became a substantial shareholder of Challenger, controlling 28.6 million shares, or 5.16%. At the time, his stake was valued at about $145 million.

    Mr Vandeloo said that about March 10, another Opes client (known as "A") wanted shares it had lent to Opes returned. But the shares, valued at about $100 million, were in the BVI company's account. Immediately releasing the shares would have triggered a margin call on the BVI account, but instead they were released gradually over the next two weeks.

    One week later, however, on March 18, Opes was in crisis. On that day, its chairman, Peter Gillooly, and company secretary and director Alun Stevens quit, Mr Emini had already been told to leave the firm, and fellow directors Mr Smith and Mr Blumberg were at ANZ trying to organise emergency funding.

    Opes staff held two meetings that day, the first in the absence of the directors. Mr Vandeloo said Opes staff discussed "the fact that there was a number of stocks sitting in the 'E' (BVI company) account that did not belong there".

    Hours later, Mr Smith and Mr Blumberg had returned to the offices and staff decided to shift the shares that did not belong in the BVI account, putting it $90 million in the red.

    On the same day, other share-trading accounts associated with Mr Murphy, including one identified as "F" (which BusinessDay believes to be a reference to Sarah Brown Pty Ltd, a company jointly owned by Mr Murphy and an Opes subsidiary, Hawkswood Investments), as well as the BVI account, were transferred to Opes Prime Technology Pty Ltd. (On March 26, the day before Opes Prime was placed in receivership, Opes Technology changed its name to Opes Prime Global Securities.)

    The effect of reversing the accounts was that the share-trading accounts related to Mr Murphy ended up facing a $146 million margin call on March 19.

    "On March 19, 2008, 'C' (the employee) was instructed to transfer the 'D'-related accounts margin call of $146,366,319 to an associated company called Opes Prime Technology Pty Ltd."

    Mr Vandeloo's affidavit sketched cash and share transfers during December, January, February and March backwards and forwards between the BVI account and Sarah Brown Pty Ltd. As well, it noted some 145.2 million shares in Admiralty Resources went into and out of the "F" account between December and March.

    It also noted that the employee said that after backing shares out of the BVI account that should never have been there, its "available margin" reversed by almost $200 million - from a surplus of $92 million to a deficit of $103 million.

    ANZ agreed to advance Opes $95 million on Thursday March 20, the afternoon before the Easter holiday break. In return, ANZ on March 25 commissioned Deloitte Corporate Restructuring specialists Sal Algeri and Chris Campbell to work inside the broking firm to monitor its proposed restructuring.

    The funding was a fixed and floating charge with a maximum liability of $800 million, and it was time-stamped as having been lodged with ASIC just before midday on March 27. Hours later, ANZ put Opes into receivership and directors appointed administrators.

    Both ASIC and lawyers representing Mr Emini objected to the release of the affidavit and two volumes of exhibits.

    Peter Almond, QC, for ASIC noted the exhibits included a transcript of a formal interview of someone by the regulator's investigators, some email exchanges that were discussed during the interview, reports by Opes' receivers about what they had uncovered at the firm, and details of personal share portfolios of Opes clients. Mr Almond said the regulator was concerned that if details of the emails were publicly released they might give somebody an "inside advantage" in future interviews conducted by the regulator.

    Deloitte is only representing ANZ in its bid to recover $650 million. ANZ has already taken control of a portfolio of some 200 million shares that Opes, prior to its collapse, had designated as collateral for ANZ, and broker Goldman Sachs has been gradually selling parcels of the shares.

    Opes' unsecured creditors will learn more about their dire situation on Tuesday, when Ferrier Hodgson's John Lindholm, the administrator appointed by Opes directors, hosts a series of six meetings over six hours at the Melbourne Convention and Exhibition Centre.
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