Millions Lost As Broker Crashes

The Age

Saturday March 29, 2008

Vanessa Burrow, Markets Reporter

HUNDREDS of investors have lost millions of dollars, several listed companies have been forced into trading halts and criminal investigations are possible after the collapse of Melbourne-based broker Opes Prime.

The company's main lenders, ANZ and Merrill Lynch, are liquidating more than $1 billion in shares, which were secured against Opes Prime's borrowings.

But the fate of about 1200 client accounts, some of which were previously with ailing broker Tricom, is unclear.

They will be frozen until receivers, administrators and the Australian Securities and Investments Commission complete their investigations.

ASIC said a "special team" had been formed, while Deloitte has sent at least 10 forensic investigators to Opes Prime's Collins Street offices.

State police may also be called in if breaches of criminal law are suspected.

Deloitte partner Chris Campbell, who has been appointed an administrator and manager of Opes Prime, along with colleague Sal Algeri, said there had been a "number of transfers between what appears to be related organisations".

"I'm hesitant to say that there's been funds stolen. We don't have that proven at all at this stage," he said.

Before Easter, the Opes Prime directors detected an "irregularity". ANZ agreed to extend its exposure to about $650 million, with another loan of less than $100 million, as long as Deloitte was employed to iron out any problems.

But the problems were bigger than expected. Opes Prime principal Laurie Emini was sent packing.

By Thursday afternoon, John Lindholm of Ferrier Hodgson had been appointed as voluntary administrator, and Mr Campbell and Mr Algeri had been called in.

Yesterday, the Australian Securities Exchange suspended Opes Prime, and reassured investors that recent trades would be honoured through Berndale Securities.

ASX spokesman Matthew Gibbs said Opes Prime's "stock and cash movement irregularities" were not related to the liquidity issues that boutique broker Tricom faced.

"Tricom continues to be a going concern and is meeting its obligations, albeit under close supervision. Opes Prime has been suspended immediately," he said.

Yesterday, base metals explorer Admiralty Resources was placed in a trading halt, citing problems caused by Opes Prime's demise.

Admiralty's ASX statement said director Phillip Thomas had a margin-lending arrangement with Opes Prime valued at $2.85 million, with 55% gearing, although shares had already fallen almost 15%.

Clothing manufacturer Austin Group, which has links to Opes Prime through unlisted private investment vehicle Hawkswood, was placed in a trading halt without explanation.

Hedley Leisure and Gaming Property Fund requested a trading halt because of an unexplained "special crossing" of 10.8 million shares, believed to be related to Opes Prime's unravelling.

The broker had planned a back-door listing, through the purchase of ASX-listed Reco Financial Services.

But Reco was also placed in a trading halt yesterday. "The appointment of administrators to Opes Prime has come as a complete surprise to Reco and its directors, who were led to believe that Opes Prime was a profitable and solvent business," the company said in a statement.

Australian Shareholders Association chief executive Stuart Wilson said given that the company had assured its investors that it was healthy only a few weeks ago, it was likely Opes Prime clients would take legal action if they lost money.

Opes Prime employs about 80 people in Melbourne, Sydney and Singapore. It's most recent recruit was Felix Sim, a Singapore-based hedge fund manager.

Correction: In Saturday's article, "Millions lost as broker crashes", BusinessDay incorrectly said Admiralty Resources had been placed in a trading halt. Admiralty Resources is not in a trading halt, and will trade as usual on the Australian Securities Exchange today

© 2008 The Age

Back to News Index | Back to Home