Tuesday, 8 April 2008

Opes Prime: Arbitrations and Mediations all the way to the Underbelly

Imagine you are a creditor of recently failed Australian margin lender, stockbroking, and wealth and asset management firm Opes Prime and have just been advised you may only receive 30 cents for each dollar you had invested with the firm. What do you do?

  1. Hope that the receivers, liquidators and ASIC find out exactly what the irregularities were that brought Opes down and with it some money?
  2. Sue ANZ, as one of the three main lenders to Opes, to prevent them enforcing their security and selling all the shares you thought you owned? (see also this article)
  3. Call in an ex-gangster (complete with convictions for burglary, assaulting police, racketeering, possessing firearms, and obtaining financial advantage by deception) to track your money down?

Opes was a small firm that catered to very high net worth individuals and was unknown until last week. It has since been dominating the Australian business pages. It has been fascinating to follow the twists and turns of the story (see the links above), but the latest twist today is the most bizarre.

That's right, after giving up on option 1 above, failing on option 2, investors have moved to option 3 and brought Mick Gatto on to get some money back. Desperate times call for desperate measures. It is apparently AU$1bn at stake.

But what is it they are hoping to achieve by hiring Gatto? I have not been able to find Arbitrations and Mediations's (the company run by the Gatto) website, so do not know exactly what services Gatto offers, but looking at the article in the Age, I don't think the services are of your usual corporate insolvency and recovery kind. According to Gatto:

''We said we're interested - we're certainly not police, we're not there to uncover any fraud... we just want to recoup the money and do the right thing and ultimately finish with a bit ourselves".

So he is not investigating any wrongdoing, presumably they are leaving that to the receivers and ASIC. Although he is heading overseas beyond the Australian authorities immediate jurisdiction, I cannot imagine him rocking along to High Court of Singapore or the High Court of Justice of the British Virgin Islands to seek the return of a preferential transaction. Gatto says he performs a simple service where:

''we go and see the client and we say... 'we really think that you should pay', and it's all done amicably and 9 times out of 10 it's settled and the client's happy and we're happy and of course the bloke who owes the money is happy to have that weight of his chest".

Call me a pessimist but if they don't legally have to return it (as if they did, why not just wait for the receiver to recover it), why would a conversation with an ex-gangster prompt someone to give money back just to get a weight off their chest? I guess it depends what the weight is.

By the way, Gatto is featured on the infamous (in Australia anyway) TV series Underbelly, based on the Melbourne gangland wars of 1998 - 2006, that everybody can watch, but those of us in Victoria (TV3 has the rights in NZ).

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