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10-05AD ASIC brings charges against Opes Prime directors

Monday 11 January 2010

The directors of Opes Prime Stockbroking Ltd (OPSL), Mr Lirim (Laurie) Emini, Mr Julian Smith and Mr Anthony Blumberg have been charged with directors duties offences following an investigation by the Australian Securities and Investments Commission (ASIC).

On 27 March 2008, OPSL was placed in administration and receivers and managers were appointed. Opes Prime had more than 650 active client accounts and creditors were owed approximately $630 million when OPSL collapsed.

Mr Smith, 47 of Wentworth Falls, NSW was arrested on Friday 8 January and appeared in the Downing Centre Local Court, Sydney. Mr Blumberg, 42 of Cheltenham, Victoria was arrested today and appeared in the Melbourne Magistrates Court.

They were granted conditional bail to appear in the Melbourne Magistrates Court on 29 January 2010. Conditions include that they surrender any passports, do not apply for any further passports and do not attend any point of international departure. Mr Emini, 46 of Templestowe, Victoria has been charged on summons to appear in the Melbourne Magistrates Court on the same day.

Messers Emini, Smith and Blumberg have each been charged with two offences of breaching their duties as directors of OPSL and two offences of breaching their duties as directors of Opes Prime Group Limited (OPGL).

ASIC alleges that shortly before Opes Prime collapsed, the directors signed financial documentation with ANZ Bank to obtain a term loan for OPSL and OPGL and pledged the companies' assets as security to meet the obligations of a third company, Leveraged Capital Pty Ltd.

ASIC alleges that in doing so, the directors were intentionally dishonest and failed to exercise their powers and discharge their duties in good faith in the best interests of OPGL and OPSL. It is further alleged that Messers Emini, Smith and Blumberg dishonestly used their position as directors of OPGL and OPSL with the intention of directly or indirectly gaining an advantage for themselves or for someone else.

Each offence carries a maximum penalty of five years imprisonment.

The Commonwealth Director of Public Prosecutions is prosecuting the matter.

Apart from the criminal investigation detailed above, ASIC’s investigation into Opes Prime has also considered how any return available to the creditors of Opes Prime might be maximised.

ASIC entered into a formal mediation process with the Opes Prime liquidators, ANZ Bank and Merrill Lynch to consider a commercial resolution to claims by ASIC and the administrators.

On 6 March 2009, (refer MR09-37), ASIC announced that that it would provide the necessary releases to allow a settlement offer to be put to Opes Prime creditors. Following a meeting of creditors, on 4 August 2009, (refer AD09-135) the Federal Court approved the Schemes of Arrangement. The Schemes are expected to deliver a sum of $253 million and a return of around 37 cents in the dollar to Opes Primes creditors. An interim dividend of 30 cents was paid by the Scheme administrators on 16 December 2009.

ASIC’s investigation also considered issues arising from the disclosure obligations of the Opes Prime financiers and the ANZ's internal review of its securities lending/equity financing business. On 6 March ASIC announced that it had put in place an Enforceable Undertaking (EU) from the ANZ which required ANZ to complete a program to remedy deficiencies in operational procedures across the ANZ Custodian Services business, including its securities lending operations.

Editor's note:

On 29th January, the Court decided that a committal mention would be held on 28 May 2010 for all three defendants. Bail conditions continue as before for Smith and Blumberg.

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