Business
Opes connections missed margin calls
By
Apr 11, 2008 - 11:58:27 AM

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.

The statements also suggest that Murphy was later able to increase his stakes in stocks despite being fully extended with his LVR.

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.

Source: The Sydney Morning Herald