Opes situation a 'huge opportunity'
As Laurie Emini resigned as the head of broker Opes Prime on reporting a $116 million black hole in the accounts of key client Chris Murphy, director Julian Smith saw "huge opportunities", a court has heard.
Mr Smith has pleaded not guilty to two charges of dishonestly breaching his duties as director of companies in the Opes Prime group. Each charge carries a maximum jail term of five years.
Opes Prime, which had more than 650 clients, collapsed in March 2008 owing creditors about $630 million.
The trial heard that Mr Emini told fellow directors Mr Smith and Anthony Blumberg that he had "let them down" while reporting the $116 million shortfall in the account of high-profile Sydney lawyer Mr Murphy.
The email from Mr Emini, dated March 9, 2008, read: "I cannot tell you how I feel but I guess you can both guess because I let you both down and frankly don't know where to turn next.
"I didn't realise how far it had got. I've been thinking long and hard. Obviously my thoughts are not clear, but it may be best that I step down if this would help the situation with [lender] ANZ.
"In any case, I think either or both of you should take control as I don't believe I am capable any longer."
The court heard that Mr Smith responded to Mr Emini by saying "one for all, all for one".
Mr Smith said the decline in the share price of Mr Murphy's favoured stock Challenger was "temporary and a huge opportunity".
"I was thinking today it would be great to see if we could engineer a short squeeze. It might be tough, we might need assistance but borrowing as much CGF [Challenger] as possible to take it off the market and initiate recalls is a massive opportunity. Once we have got ANZ off our backs we can think about that," he wrote.
The court heard that Opes Prime and Leveraged Capital - another company associated with Mr Smith and Mr Emini - had approached financier Merrill Lynch to refinance their business and to take over a significant part of the portfolio that was with ANZ.
Prosecutor Greg Lyon, SC, said Mr Smith's response to Mr Emini's email demonstrated that he had a "very clear understanding of the situation facing Opes". "His email expresses no surprise or uncertainty. His email expresses no reproval," Dr Lyon told the court.
The Crown alleges that as Opes Prime teetered on the brink of collapse in March 2008, Mr Smith wrongly pledged assets belonging to two Opes Prime companies in order to secure a $95 million loan from ANZ to Leveraged Capital.
The court heard earlier this week that Opes Prime's risk committee had identified the company's reliance on ANZ and the influence of Mr Murphy and another key customer, the mining identity Norm Seckold, as risks.
The trial, before Victorian Supreme Court judge Justice Simon Whelan, continues.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free