Emini tells of juggling act in Opes Prime crash
Giving evidence in the trial of Mr Smith, Mr Emini told defence counsel Mark Regan the cash and securities transfers - covering two positions with the same stock - were done during a stressful time.
"I mean, obviously the [Sydney lawyer Chris] Murphy account was one, but there was other clients in margin call as well," Mr Emini told the Victorian Supreme Court on Tuesday. "We were going through a phase of change, so I just did what was simple ... what I knew, and what I knew was to deal with one account and then another and that at the same time collateralise that through another entity."
Mr Smith has pleaded not guilty to two charges of dishonestly breaching his duties as director of companies in the Opes Prime group. It collapsed in 2008 owing creditors about $630 million.
Under cross-examination, Mr Emini agreed he was the "relationships guy" at the firm, and he alone had a relationship with the mining identity Norm Seckold, whose shares were used to cover positions elsewhere in the firm.
Questioned by Mr Regan whether he had told Mr Smith in 2006 that Mr Seckold's account "might possibly be used for short-term liquidity funding", Mr Emini said he couldn't recall. But he told jurors that under the securities lending agreement, Leveraged Capital - a company associated with Mr Smith and Mr Emini - had "the right to do whatever we want with stock".
Mr Emini agreed Mr Smith was not included on the key email in December 2007 detailing a $20 million shortfall in Mr Murphy's accounts. The court was told this week that on learning of the shortfall, Mr Emini started using directors' shares and cash to prop up Mr Murphy's accounts. He said he did not hide this from fellow directors Mr Smith and Anthony Blumberg.
The prosecution alleges that as Opes Prime teetered on the brink of collapse, Mr Smith wrongly pledged assets belonging to two Opes Prime companies in order to secure a $95 million loan from ANZ to Leveraged Capital.
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Opes Prime collapsed in 2008 after a period of stressed trading and margin shortfalls. The firm went into receivership owing creditors about $630 million, with court evidence pointing to issues such as transfers that covered two positions in the same stock and a significant shortfall in at least one client account.
Key figures named in the trial include former Opes Prime chief executive Lirim “Laurie” Emini, director Julian Smith (who has pleaded not guilty), fellow director Anthony Blumberg, and client Chris Murphy. Companies mentioned include Opes Prime, Leveraged Capital (associated with Smith and Emini) and ANZ, which is linked to a disputed $95 million loan.
Emini told the Victorian Supreme Court he did not inform key colleagues that some cash and securities transfers involved covering two positions with the same stock. He said these transfers were done during a stressful period and described handling accounts and collateralising through another entity as what he did that was simple and familiar to him.
Julian Smith has pleaded not guilty to two charges of dishonestly breaching his duties as a director of companies in the Opes Prime group. The prosecution alleges that, as Opes Prime neared collapse, Smith wrongly pledged assets belonging to two Opes Prime companies to help secure a $95 million loan from ANZ to Leveraged Capital.
In December 2007 a key email detailed a $20 million shortfall in Chris Murphy’s accounts. Emini told the court that once he learned of the shortfall he started using directors’ shares and cash to prop up Murphy’s accounts. He also agreed that Smith was not included on that key email.
Leveraged Capital, a company associated with Julian Smith and Lirim Emini, was party to a securities lending agreement that Emini said gave Leveraged Capital "the right to do whatever we want with stock." That arrangement and how stock was used to cover positions is a central element of the courtroom testimony.
The Opes Prime evidence highlights investor risks around counterparty exposure, margin calls and the need for transparency from brokers and counterparties. The trial details — including shortfalls, use of directors’ shares and disputed pledging of assets — show how problems at a brokerage can create material losses for clients and creditors.
Everyday investors can take practical lessons from the Opes Prime case: monitor margin exposures, ask brokers about how your collateral may be used, seek clear communication about shortfalls or transfers, and be mindful of counterparty risk. The case also underscores the importance of corporate governance and director duties when assessing firms that hold or lend your securities.
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