The Senate Standing Committee on Economics

The Senate standing committee on economics

“Money has a way of exposing the basic instincts, and people will debase themselves by lying cheating and stealing in order to advantage themselves at the expense of others’.

Honourable Senators,

I am making this submission in respect of what I considered to be the grossly inadequate and underperformance performance of ASIC. It is my hope that as a result of submissions arising from this inquiry something positive will emerge. As it is structured ASIC are simply not capable of fulfilling performance duties that are exhibited in the ASIC charter. If the good Senators are not familiar with this Charter, the following link will take you directly to it. http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ASIC-service-charter-published-12- September-2012.pdf/$file/ASIC-service-charter-published-12-September-2012.pdf

From this site we are directed to another site advising us of the “Strategic Framework” http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Strategic_framework-June- 2013.pdf/$file/Strategic_framework-June-2013.pdf

The issues I have directly challenge the so-called strategic priorities on virtually all fronts; I would dearly love to be in a position to challenge any one of the personnel whose photos appear on this website on a range of issues at the forthcoming interrogation. Failing that I propose to contact a wide ranging group of people including creditors of the Opes Prime group who have been so shabbily treated as a result of ASICs actions and actively urge them to canvass their local members or Senators for a review of this matter.

The grievance that I have is divided into two sections, unfortunately for me there happens to be a direct linkage between the two.

Initially, I would ask you to visit the previous Senate enquiry into banking and financial services, Chaired by the Hon Bernie Ripoll and Deputy chair the Hon Brett Mason.

The web address is below and I would ask you to read the section relating to Opes Prime, ASIC, the ANZ Bank and my submission, Ref, 120 In the name of Robert and Marie Fowler http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Ser vices/Completed_inquiries/2008- 10/fps/submissions/~/media/wopapub/senate/committee/corporations_ctte/completed_inquiries/ 2008_10/fps/submissions/sub120_pdf.ashx

http://www.aph.gov.au/binaries/senate/committee/corporations_ctte/fps/report/report.pdf

I would ask you to re-read the section relating to Opes Prime, also the sub-sections relating to “the role of the ANZ Bank and the Position of the Bank, and the position of the regulator”.

Senators, I am not only angry but also deeply and grossly offended, as I, along with many of the retail creditors at the way ASIC conducted itself throughout this matter. It appears that the entire scheme of company arrangement which has allowed the ANZ Bank to commit a gross act of malfeasance has avoided public scrutiny of the CEO, Senior Executives and the Directorate. The scheme has been founded on deception.

In the explanatory statement outlining details of the proposed scheme of company arrangement (available upon request by individual creditors) dated 3rd July 2009, issued by the liquidator.

Section 1.4 was headed.

Potential claims by ASIC.

ASIC has foreshadowed claims against the contributing banks, OPSL (Opes Prime Stockbroking Ltd) and the directors of OPSL. In a press release dated sixth of March 2009, ASIC stated that it had identified two potential actions available to it being:

(a) a potential claim for compensation due to an alleged contravention of the managed investment scheme provisions of the corporations act by OPSL and alleged involvement in the contravention by the contributing banks: and (b) Potential civil penalty and compensatory claims against the directors of OPSL and ANZBGL for breach of director’s duties and involvement in the breach, respectively.

The contributing banks have denied any liability in relation to the ASIC claims.

Managed investment scheme claim.

In its press release dated 6 March 2009, ASIC expressed the view that, between about 26 July 2006 and 27 July 2008 OPSL may have operated an unregistered managed investment scheme in contravention of the corporations act. ASIC believes that OPSL may have been operating a managed investment scheme because the business involved: The provision of equity finance and stock lending services to investors:

The aggregation of cash and securities obtained from investors: and

Obtaining collateral in the wholesale markets by reference to the aggregated pool of assets obtained from investors.

In these investigations into OPSL’s business model, ASIC considered the following two issues:

Whether the contributing banks had actual knowledge of OPSM’s possible contravention of the requirements for registration of managed investment schemes: and

Whether any managed investment scheme operated by OPSL could have been operated without the participation of the contributing banks.

ASIC stated that it believed that this claim if it were to succeed it had the potential to provide compensation for investors.

Action under section 181 of the corporations act.

In its press release ASIC also stated that its potential civil penalty and compensation claims against the directors of OPSL and ANZBGL related to a number of transactions between OPSL and ANZBGL, on or about 20 March 2008, shortly prior to OPSL’s collapse ASIC investigated whether the transactions involved a breach of directors duties by the OPSL directors and whether ANZGBL was involved in the breach in contravention of section 181 of the corporations act.

ASIC must act with utmost fairness (AFR Jan 6th 2011)

The Court of Appeal did not invent the obligation of ASIC to act fairly. As far back as1912, Griffith CJ , in the High Court case of Melbourne steamship Co Ltd v Morehead referred to” old-fashioned traditional and almost instinctive, standard of fair play to be observed by the Crown in dealing with its subjects”. It is not the role of ASIC to play with people’s lives by initiating or maintaining a legal action that is not soundly based in established law and all relevant evidence. The court is not to be used as a platform for advocating a change of law., (To my untrained eye ,this is exactly what has happened ,the scheme of company arrangement ,as structured and sanctioned before Finkerstein J was a radical departure from previous liquidation arrangements.

As I read this draft copy of the scheme of company arrangement, I am unable to determine whether to file this section, 1.4, in the Scheme of Company arrangement, under Smoke and mirrors, more flim-flam from ASIC, or just department bullshxt to create an illusion that ASIC were actually representing the creditors of Opes Prime.

This scheme of company arrangement was drawn up by the banks solicitors with a clear understanding that the creditors accept the scheme or else fight the banks through the court system up to the full bench of the High Court. Mediation which formally commenced in August 2008, before retired Court of Appeal judge, the Honourable Alex Chernov OA QC. The creditors were kept totally in the dark regarding so-called mediation discussions, in fact were treated like the proverbial mushrooms, kept in the dark and fed Bullshxt. I wonder if there was full disclosure of all the facts relating to this matter, that this whole affair was based on lies, trickery and deceit. Did the solicitors for the bank explained in the course of mediation they had deliberately sought to advantage themselves at the expense of the Opes Prime creditors. It should not go unreported that an eminent QC, representing a small group of investors who had been wilfully deceived by the directors and staff of Opes Prime, into believing they

were receiving a conventional margin loan in which they had the equity of redemption. He advanced the logical and balanced argument as to why it was grossly repugnant by ordinary commercial standards that a reputable bank or investment house should have been prepared to allow its name or funds to be applied in support of such an enterprise. No experienced investor familiar with the ways in the markets and of licensed brokers would have imagined it possible. Certainly no experienced investor who understood the potential consequences would have participated, as far as is known, no Australian trading bank has ever previously lent its name or financially facilitated such an unscrupulous scam. The ANZ bank acted with great haste and without giving notice to the clients of Opes Prime although they would have been fully aware of the dreadful impacts it had upon those clients. It would appear there purpose in acting precipitously was to prevent the Opes Prime clients from having any effective opportunity to prevent the sale of their shares. The suggestion of immediate mediation was raised, the name of the honourable Michael McHugh. AC, QC, a former Justice of the High Court’s to act as an independent mediator and arbitrator. For reasons unknown to the writer, the honourable Alex Chernov OA QC was chosen. That both these respected QC’s could have handled the task in most fair and balanced manner is beyond question, assuming they have the full facts presented to them by all parties. I would suggest the honourable Alex Chernov was deceived inasmuch as he was unaware of how this whole affair had unfolded. I do not believe this gentleman would have been involved with this mediation, had he been aware of the blatantly dishonest scheming. That the ANZ bank had sought to disadvantage the Opes Prime creditors and profit by its actions.

. Whilst scouring the Internet for all things relevant to the scheme I came across this article. http://www.vicbar.com.au/GetFile.ashx?file=BarCouncilChairFiles/Ferguson+J+Welcome+final.pdf

I mean no disrespect to the honourable judge who not only have I never met but would not recognise her if she passed me in the street. Reading this welcome address it is apparent that she negotiated extremely hard and forcefully on behalf of the ANZ bank against the liquidator. Was the good lady at the mediation meetings and acting for the bank?. One can only speculate if she was in full possession of the facts relating to the Opes Prime insolvency. How much was known by her about the dodgy dealings of the CTC, the ANZ banks risk committee? I would sincerely hope that upon conclusion of the Senate enquiry, my contacts with all the creditors of Opes Prime will be sufficient to have them request a judicial review of the actions of ASIC and the liquidator and details of the mediation.

Senators, during the recent trial of Opes Prime Director Julian Smith in the Victorian Supreme Court, ASIC were directed by the Court to hand over in excess of 16,000 documents to his Barrister, repeat 16,000 documents. I feel sure somewhere in those documents would have been the minutes and attendances of the ANZ banking group’s credit and risk committee. Those in attendance and the matters discussed together with all emails relevant to the Opes Prime affair, together with the discussions on this matter at the board level and further down the line .I suspect there would not be one scintilla of discussion that ANZ were running a managed investment scheme, ,more than likely was how do we cover

our arses after we have got away with this massive theft , who can help us from going to court to defend our actions?.

It is a fact that the ANZ had conspired to develop a secret agenda to sink or scuttle its entire share lending partners long before 28 March 2008. As reported in the Fairfax press 26th October2011 “ANZ misled Primebroker”, court hears”

The counsel for Primebroker principals, James Elliott SC told the Victorian Supreme Court that the ANZ was prepared to go to “extraordinary lengths “to prevent any close out of its securities lending arrangements at the time, because a “netting off” of its positions with troubled share lenders such as Primebroker and Opes Prime would have cost the bank many millions of dollars”.

The expression, “extraordinarily lengths” must be examined in great detail. Articles published in the Fairfax press described how senior ANZ executives were able to bypass honest and transparent investigations into the collapse of Opes Prime.

Through what can only be described as deceitful and illegal manoeuvrings by the bank through persons some may regard as corporate heavyweights have been able to influence ASIC in obtaining a mediated settlement against alleged contravention of the managed investment provisions of the corporations act. All in all this is being a pretty sordid saga, ASIC has allowed the ANZ bank the opportunity to not go before the courts and explain whether it had knowledge of the Opes Prime’s possible contravention of the law relating to operations of unregistered schemes and whether this scheme could have operated without the ANZ bank’s participation

ANZ sought to advantage themselves at the expense of the Opes Prime creditors.

At the recent trial in the Victorian Supreme Court, ASIC, through the DPP, in the prosecution case against Julian Smith, the liquidator, Mr Lindholm of Ferrier Hodgson advised that changes to the Australian Masters securities lending agreements (AMSLA) had cost the Opes Prime clients between $205 million and $270 million “That is our estimates of the cost to the company of the varied AMSLA agreement and the (ANZ) having first “dibs” on the money as a secured creditor. It was really the AMSLA that cost the money” he said. “So rather than being a debtor for the business at $195 million, they sold all the security down and said, we are still owed $77 million.

What the ASIC investigation would have uncovered about the ANZ’s modus operandi would be a list of shortcomings that were made several years earlier in what was known as the NAB Foreign exchange scandal (An interesting read, however in this case there are no rogue traders, merely guys working in the securities lending arm, performing their normal duties.as they had for a number of years). They had been made redundant and used as scapegoats by the ANZ in an attempt to sanitize the affair. More than one of the employees was using the facility of stock lending in exactly the same fashion as other retail creditors.

ASIC would have also found that the ANZ had poor reconciliation processes, a total breakdown of proper compliance processes, inadequate resourcing and risk management overridden by a culture of greed, and a poor compliance culture. ASIC would also have discovered that there were ‘inadequate processes for identifying, monitoring and resolving potential conflicts of interest between ANZ employees and clients in the course of securities lending and inadequate processes to ensure that trades settled on time and failed trades were not investigated to get to their cause and prevent their re- occurrence. To claim all this happened in the securities lending department of the ANZ bank and that the credit and trading risk committee were unaware is just so much arrant nonsense. ASIC would have been aware that the risk management committee comprising senior executives had examined the bank’s controversial securities lending program and had approved the associated risks at least 16 months before the collapse of Opes Prime, when it was briefed on a plan to increase the ANZ exposure to stocks through the equity financing by as much as $ 2 billion over a three-year period. That the previous CEO, John McFarlane was not aware of the existence of securities lending is so much bunkum, as a person who was on the risk committee (until his departure and replacement by Mike Smith) would have been fully cognisant of these matters and the aim to increase the turnover to billions as cited by Steve Targett, further in this submission.

The previous Senate enquiry into financial services including Opes Prime and Storm Financial made this statement

“It is important to emphasise that the committee is not a judicial body and has no power to make criminal findings or to make judgement in relation to individual claims that have been brought to its attention”

‘It should also be noted that the committee’s terms of reference focus on financial products and services. A broader array of issues surrounding the collapse of Opes Prime including market supervision aspects and operation of the voluntary administration provisions will not be reported on explicitly”

Honourable Senators, I am under no illusion that this committee, as it is structured cannot reverse previous event, but what it can do is to examine the information in this submission in detail . What I am explaining ,are the events preceding and subsequent to the Senate enquiry into financial services, for you to understand the circumstances and background into Opes Prime and in all honesty challenge ASIC as to why they issued an enforceable undertaking to the ANZ bank, after the bank had seized all the assets of the Opes Prime Group , conduct a fire sale of all assets to secure its perceived indebtedness through Deloittes as receivers for the ANZ Bank ( for which there has been no disclosure of what assets were sold, to whom and for what value, ) after which the creditors of Opes Prime were compelled to accept a trumped up company scheme of arrangement and accept it or fight is all the way to the High Court. Should my comments sound churlish, acerbic or malevolent then please consider it from my perspective?

It is my intention to present information that was not available to me at the time I lodged my submission in the previous Senate Enquiry into Financial Services, nor had this information been included by the ANZ bank or the ASIC submission.

I would like to point out that as a retail creditor of Opes Prime I have served both on the committee of inspection and the creditors committee, attending all meetings. This has given me an overview of the mechanics of the insolvency industry, and how favouritism, pragmatism or sheer blatant opportunism comes into play. I would venture to say that I have read virtually every word published by the media on this matter from “A” grade financial journalists, some of whom have been assailed by the propaganda issued by the ANZ’s banks PR department, to some of the less noteworthy who are now in the process of trying to rewrite the facts claiming that Opes Prime had damaged their brand. It is not known publicly that the bank withheld advertising from the Fairfax group for a considerable time due to what they perceived as unfair publicity. The odium was intense. It was all well and good when they were releasing details of Mick Gatto and his cohorts in an attempt to portray everybody involved with Opes Prime as some sort of Neanderthal thugs, tax cheats, or whatever. Public relations have moved on since the time of Joseph Goebbels in the propaganda department, in as much as it can be a little more subtle. In the halcyon days of the global financial crisis the press are always out for an easy story. Alan Kohler was spot on with his comments in April 2008 titled.

“The real villains”

“It’s about time more pressure came on ANZ and Merrill over the Opes Prime and Lift Capital affairs.

Mick Gatto’s fruitless foray to Singapore last week following the money trail was a wonderful circus but he was looking in the wrong direction: Mick should have been following the trail up not down, and he and his mates should have shown up at 100 Queen Street to pay a visit to the CEO of ANZ, Mike Smith.

The money from these brokers came mainly from ANZ and Merrill Lynch using Opes and Lift as intermediaries. There has been a lot of discussion about the use by Opes of Australian Master Securities Lending Agreements to secure the collateral for their loans, thereby transferring full title of that collateral to them and into the ultimate lenders ANZ and Merrill Lynch.

The basic problem here is that borrowing again shares and other securities is less regulated than borrowing against real estate and cars. There is no justification for that and it should never have happened

What’s more both ANZ and Merrill need to answer for using this regulatory loophole to take advantage of people.

ASICs attention is focused on the principals of Opes and Lift but the real culprits, in my view are ANZ and Merrill. They are the lenders here. Their contractual relationship might not have been with the borrowers—who are now coping with loss and stress-- that their moral relationship was with them.

It was their money being borrowed and they were using clowns and spivs as intermediaries to market their money.

And the other group that has a lot to answer for, especially in the case of Lift capital are the financial advisers who were recommending them. What due diligence were they doing for their clients or was this just another case of commissions getting in the way of duty,

This whole Opes Prime affair has been hashed and rehashed in such a fashion that it is no longer clear and easy to understand what happened. I would invite you again to read my submission as a starting point. As a considerable length of time has passed, I have been able to obtain additional information which I shall disclose. My previous submission to the Senate was made prior to action in the Federal Court whereby I challenged the liquidator John Ross Lindholm a partner in Ferrier Hodgson about the validity of the scheme for which the ANZ bank paid to him $1 million to have the scheme drawn up and sanctioned. This scheme was drafted by Allen’s, solicitors for the ANZ bank.

The ANZ bank and ASIC in the Federal Court wiped the floor with me, and to ensure I would offer no more resistance to the scheme of company arrangement, I was invited to sign a declaration that I would not pursue this matter to the High Court. Should I do so I would have to bear the adverse costs of court action. The fact that the Federal court would even suggest I pay the adverse court costs caused more than the odd legal eyebrow to be raised, this scheme was quite radical inasmuch as it had never before been used previously in this type of situation, it’s only redeeming feature was that it allowed the ANZ bank to slide through the hole in the net designed to catch fraudsters.

I signed the undertaking as I had not the financial firepower to take the matter further, also to be contemplated was pressure coming from a variety of sources such as creditors were absolutely desperate to receive some funds, however small to relieve the financial pressure. Death threats were being made if funds were not distributed promptly, whether these were factual I do not know that they were rumoured came from a couple of sources.

Up to this point in time I have not mentioned this undertaking given to the ANZ bank, but in light of subsequent information received I feel it right and proper that all matters relating to the Opes Prime affair should be out and on the public record.

Naturally I would not of entered into litigation without insurance against an adverse costs decision, at this point in time I do not propose to identify the parties involved, save to comment that any action by the bank would be a Pyrrhic victory.

In between the time Opes Prime ceased trading on the 28th of March 2008 and the date of the scheme being sanctioned in the Federal court by Finkelstein J, Ferrier Hodgson partners, John Lindholm and Adrian Brown (who has subsequently left Ferrier’s to join ASIC as a part of the insolvency section) claimed to have made several efforts at mediation with the ANZ bank. Efforts at having the matter resolved after prolonged mediation was unsuccessful and to get some money back for the long suffering creditors John Lindholm and Anthony Troiani went to Sydney to discuss the matter with ASIC as a precursor to taking legal action... They also met up with Mr Julian Smith, a director of Opes Prime. Mr Smith was shown two pages of charges that were to be brought against the ANZ bank. My recollection of discussing this matter with Mr Smith was that ASIC did not wish charges to be laid against the ANZ bank and would not support the liquidator .If this is so, then this is most alarming .As most insolvency practitioners work closely with ASIC, often to the detriment of creditors it does not require much imagination to realise Ferrier Hodgson had to dance to the tune orchestrated by ASIC and the ANZ bank. Previous rumours floating around from insiders had

indicated initially a 70%-75% return to the creditors was being negotiated, but with ASIC in their corner the bank could play hardball. Had a realistic and sensible offer been made there would not have been the level of acrimony generated that currently exists against the ANZ bank.

After listening to the proponents of the Scheme of Company Arrangement in front of Finkelstein J in the Federal Court a great many objections were raised, There had been a number of cases run to test the validity of the stock lending scheme which Opes Prime had skilfully sold as a plain vanilla margin lending scheme, whereby people retain their portfolio.

Had actions been taken by retail creditors who were deceived by their brokers I believe the outcome would have been vastly different. Unfortunately these cases had been run by persons with much deeper pockets than I

There is clear evidence that officers of the ANZ bank were aware of the promotional practices and of the business model of Opes Prime, and were willing participants in the scheme

Numerically there were a great number of people who had entered into this stock lending arrangement through their brokers and in most instances it was not made clear to them by their brokers that the scheme was totally different to what they had believed they were entering into. Of the grouping that became involved ,and were fully aware that this was not a normal margin lending arrangement was a public company director, who had been previously been employed by ASIC , this person was one of a number who voted in favour of the scheme. There were others who sought to use this scheme by pledging their shares for a variety of other purposes, such as Dr Soh, the Singaporean gentleman.

http://www.news.com.au/business/singapore-client-sues-opes-prime/story-e6frfm1i- 1111116641965

Inserted in the scheme (scheme of company arrangement) was a clause whereby if a creditor sought to sue his broker who had misadvised him of the nature of his involvement with Opes Prime, the bank could co- join with the broker and he would effectively have to sue both. Suing the fourth largest company on the ASX by capitalisation, one would have a greater chance of winning the lottery on three consecutive times than succeeding .I know of one instance whereby a well-known broker falsified emails to escape legal action. This had the elements of criminal fraud. Had this matter been followed through by the creditor it could have meant a jail sentence for the guilty party. Again the cost of litigation was the issue and whilst the plaintiff received a grossly inadequate settlement (the brokers insurance company paid the bill) this action was pursued by a person who had the resources to further his claim after being advised the ANZ would not become involved.

Acceptance of this scheme has been described by many legal practitioners as cavalier, adventurous and novel, inasmuch as it had never been used previously in a situation such as this. In fact when subsequent barristers sought to use this case Fowler V Lindholm (the ULR is below) as a precedent, the High Court would not recognise this judgement as a precedent... I could quote several references. “Whether adequate nexus between release and indemnity and the relationship between the creditors and the company-whether an intelligent and honest creditor, properly informed, acting alone, my to approve the scheme’s.” http://www.allens.com.au/pubs/insol/foinsolaug10.htm#Ibid4

FOCUS: HIGH COURT LEAVES THIRD-PARTY RELEASE DISTINCTION BETWEEN SCHEMES AND DOCAS UNCHALLENGED

19 AUGUST 2010 In brief: In two recent decisions, the High Court of Australia has refused to entertain criticism of the Full Federal Court's decision in Fowler v Lindholm, in which it was held that creditors can be bound by a scheme of arrangement under Part 5.1 of the Corporations Act in relation to debts owed by persons other than the company. Partners John Warde (view CV)and Michael Quinlan and Lawyers Catherine Zahra and Patrick Crisp report.

http://www.austlii.edu.au/au/cases/cth/FCAFC/2009/125.html

The barrister who acted on a pro bono basis for me in this matter recounted that the solicitor lodging the appeal my against the scheme had told him, that when the registrar at the Federal court contacted Finkelstein J the judge was less than happy at having his sanctioned scheme challenged expressed displeasure.

Knowing this I entered the court like Daniel into the lion’s den, had not the expression kangaroo court been invented I would have done so that day. Well I was certainly given the rounds of the kitchen in no uncertain fashion, I am left wondering to this day whether this judgement had been made well before we entered the court room, and the object was to get the scheme operational, which in the circumstances is understandable. Was I being cynical in my beliefs? Any delay in withholding funds that were rightly due to the creditors was seen as an abominable act and the prospects of regaining 25% of the money lost, and the balance trickled out over the next four years to a total of 37% was considered a great achievement by ASIC who co-joined in the case against me in the Federal court. When Finkelstein J asked the barrister for ASIC, Mr Tomo Boston and his associate if they were seeking legal costs against me they had the good sense to demur. I’m not a violent man by nature but I can tell you without equivocation my nature would have changed that day, This learned gentleman lists on his CV that his work within the trade practices includes “misleading and deceptive conduct claims arising out of financial transactions, product disclosure statements and prospect as is, unconscionable conduct claims under the competition and consumer act”. Obviously these matters were not on his mind on the day he appeared in court against me.

As ASIC might argue, the scheme was voted in by the required number of creditors and monetary values to carry the scheme across the line, but a closer inspection of the circumstances surrounding how they managed to get that number of people to vote in favour requires more than a little scrutiny.

Firstly, after waiting such a length of time for monies they had entrusted with Opes Prime the majority of creditors were absolutely desperate to receive something back from the carnage; there have been a number of mediations and threats of court action which had amounted to nothing, also the creditors were desperately in needed of cash for urgent commitments. By holding so-called mediations over an extended time had effectively forced the creditors to accept the scheme drafted by the bank. This selfish greedy act by the ANZ bank in obtaining possession of all the assets of the Opes Prime group and conducting a fire sale has been directly responsible for marriage break-ups, homes having to be sold up, and worse still suicides.

Second, a number of legal actions testing the validity of the securities lending arrangements had been less than fruitful. These actions were ultimately financed by the Opes Prime creditors pool which offered restitution of all legal costs incurred previously by creditors and in Beconwood, a test case run by Melbourne investor Paul Choiselet upon acceptance of the Scheme of company arrangement, which was contemplated earlier. Initially there was doubt that a Scheme of Company Arrangement would be accepted by the court, as it would require a sympathetic and adventurous member of the judiciary.

Third, class-action lawyers had appeared on the scene, and as I mentioned in my previous submission, like the Pied Piper of Hamlin were able to draw a substantial number of creditors to present a solid voting bloc to gain a seat at the negotiation table. As the honourable Senators who have had legal training would know, there has not been a class action in Australia that has been to court and been successful. Effectively all bark and no bite. Regardless of the creditors personal beliefs it was presented that it was as good as it gets. The case against the banks, conducted by the litigation funders was run on the proverbial smell of an oily rag. The litigation funders walked away with $2.8 and $1.0 million respectively, a handsome reward for a minimal effort. Legal fraternity get paid, ANZ bank believe they have put the matter to rest with a minimal outlay (obtained a Global Solution) and corporate lawyers believe, courtesy of the Federal court they have redefined how a scheme of company arrangement can be accepted by the courts.

The question remains, was settlement induced by the various lawyers with the threat of class action or by ASIC’s involvement re the managed investment scheme.

I suspect the ANZ have been able to recover certain costs from their insurers in this matter and have profited quite handsomely from the Opes Prime insolvency .Should my suspicions be proved correct ,this act ,together with the tax avoidance matter in New Zealand will only highlight these persons are not to be trusted. http://www.couriermail.com.au/news/anz-cba-nab-and-westpac-in-17bn-nz-tax-settlement/story- e6freon6-1225813353004

http://www.bloomberg.com/news/2010-12-24/anz-contests-australia-tax-office-bid-for-vanuatu- customer-bank-data.html http://www.businessspectator.com.au/article/2012/9/13/interest-rates/false-dawn-bank- regulation.

Quotes

“But it would be worth the Senate committee’s time to go back to 2009 to really consider a significant but underreported tax avoidance case involving our largest banks that prompts questions about tax avoidance and the role of regulators”.

We can all remember comments by “the world’s greatest Treasurer” making claims of how good the Banks were and how we had avoided the worst excesses of the GFC, perhaps it was unaware of the comments the New Zealand judge made in the tax case against various banks and stated they were very lucky to have a very accommodating banking regulator.

To jog the Senators memory, in January 2004, National Australia Bank announced that the bank had lost$ 360 million in the now infamous ”rogue trader scandal ” , which caused APRA to snap into action kicking off to independent enquiries. The names of Frank Cicutto, David Bullen, Luke Duffy, Gianni Ray and Vin Ficarra will mean nothing to this reference committee but by the time the enquiries had reported their findings of Risk management deficiencies throughout the bank, the chief executive and chairman had resigned, the board had been reorganised, senior staff had retired or been sacked and proceedings were begun against the rogue traders.

With Opes Prime, only the lower order at the ANZ bank got the sack. What are the conditions or contracts the ANZ has with these so called “gardeners” ,what agreements were signed? Were there any treatments given such as has been given to Don Nguyen, ex CBA planner where he is still receiving a salary ?.

Good question to ask ASIC, probably on file at the banks solicitors.

This article is as telling about APRA as it is against the ANZ bank and the other three pillars.

The Labour governments under Mr Rudd has been generous to a fault in supporting the banks during the GFC, throwing the lifeline out less than a week after Macquarie group boss Nicholas Moore posted a dinner for the financial services Minister, Nick Sherry .

The following day treasury executive Jim Murphy was emailed requesting the state of the global financial markets and a day later Macquarie emailed ASIC several times on the state of the global financial markets and short selling. Two days later ASIC imposed a ban on short selling of financial stocks, prompting a surge in Macquarie stocks. Naturally ANZ and the other pillars benefited by this comfort. http://www.abc.net.au/news/2009-05-25/short-selling-ban-was-politically-motivated- trader/1694010

“Politically Motivated”

“ASIC has admitted why the ban was on in the first place. I believe the ban was politically motivated, and I do know there was a lot of lobbying going on by the ANZ and Macquarie bank to have the ban put in place” said Tom Elliott

Prices of ANZ went from $30.10 in Oct 07, $22.55 in Mar 08, $18.75 in Sept 08 and plummeted to $13.77 in Feb 09. Indeed it has taken six years to regain the price it enjoyed in 2007.

As the short selling ban came into being in October 2008 together with the deposit guarantee and wholesale funding agreement to shore up the banks, what caused the share price to slump after this date? Viewing it from a non-bankers eye one may have been of the belief, that the bank had discarded sound lending policy for hubris in the pursuit of greater profits.

Knowing what I do about this whole affair I feel extremely bitter that my unsuccessful attempt to usurp this scheme of company arrangement had established a precedent which I would sincerely like to invalidate. My legal action was designed to force the ANZ bank to negotiate a better outcome for the retail creditors. Alas, the Liquidator and ASIC turned from being the solution to being the problem.

At the meeting of creditors, held at the Melbourne Convention Centre whereby a proposal for the scheme of company arrangement to be adopted was being put by the liquidator, and comments for and against were to be submitted to Finkelstein J to assist in his ruling on the scheme. Whilst one retail creditor was voicing his opposition to the scheme a broker stood up, interjected, and said he had over 170 proxies so forget about opposing the scheme. A clause in the Scheme had been inserted stating that any creditor who sues his broker may have the ANZ Bank co-join with the broker to mount a defence against any action. One can only speculate why this clause was inserted in the scheme, could this have anything to do with the Chairman of the ANZ being involved in the world of Broking, or was it means to get the scheme “over the line” .This may possibly be another query to be raised with ASIC. Together with the “Yes” votes cast at the meeting, and the voting in the affirmative for those who did not lodge proxy voting intentions, John Lindholm of Ferrier Hodgson was instrumental in ensuring the scheme was approved.

On occasions such as this I fail to understand why Barristers and members of the judiciary make comments which only cause hurt and distress, is it to satisfy their vanity. One barrister, after confirmation of the scheme remarked to the bench “that a good decision is where both parties are unhappy” or words to that effect. I regard that comment as obsequious, in the same vein as Finkelstein J’s comments through out the hearing confirming acceptance of the scheme, which may well have been directed at the larger corporate players, such as the Singaporean Dr So and other Professional Directors was felt more hurtfully by the smaller retail creditors who had been grossly deceived at being entrapped into this stock lending scheme.

In my opinion Finkelstein J appeared to exhibit very little empathy to the retail creditors.

That Ray Finkelstein QC is a highly regarded commercial barrister is beyond dispute, an eminent figure in the commercial litigation world, no doubt deriving his fees from acting in the interests of

large and powerful corporations. I would have much rather had this eminent QC acting on behalf of the creditors, as a Tier one barrister he would have been able to present a formidable case. In the financial hothouse conditions that existed at the time one could be forgiven for thinking of the words of 1st Viscount Nelson, sent from his flagship, HMS Victory “England expects every man will do his duty” One cannot help but muse if this case had been conducted in front of the Justice Steven David Rares that the outcome would have been quite different.

Indeed it required a member of the judiciary, unconnected with the Melbourne corporate world to critically examine the securities lending documents. The chief Justice of the Supreme Court in Queensland, the Right Honourable Chief Justice Paul de Jersey AC did just that in a recent case, and on appeal to the full bench of the Supreme Court his judgement was confirmed. His ruling was based upon the corporations act and he set aside what I consider weasel words, the judgement referred to the Opes Prime Securities Lending and Borrowing Financial Services Guide as being barbarously expressed and Byzantine in complexity. I would heartily commend examining this judgement. Whilst the case was run by Samuels Holdings against the Securities Guarantee Corporation, (a corporation established by an act of Parliament governed by the Corporations Act but administered by the ASX) the reasoning in the judgements by Chesterman J uses a counterfoil of logic and common sense to defeat the spurious arguments presented by the SEGC. I shall make comment regarding claims made to this corporation at a later stage. The section relating to claims against the SEGC made relevant to current economic and trading situations. http://www.austlii.edu.au/au/cases/qld/QCA/2011/228.html

To this day I found it puzzling why Finkelstein J was not prepared to differentiate between the various creditor groupings. There were clear distinctions that had been made by Charles Sweeney QC. One comment Finkelstein J made whilst pleadings were underway was in relation to discovery of documentation in the records of the ANZ Bank. His words were “there will be no fishing expeditions in my court” or words to that effect.

Were these comments interpreted too literally by the class action barrister for IMF, did they conduct any discovery whatsoever into the records of meetings at the ANZ bank.

I suspect not, and it is only when the ANZ bank becomes involved in litigation with another of its former clients Primebroker securities that we can understand how the ANZ bank executives function. Below are two links, leaked to the press which give an alarming insight into how this financial behemoth conducts its business affairs http://www.smh.com.au/business/anz-plotted-dirty-tricks-campaign-20110704-1gz2l.html http://www.smh.com.au/business/anz-execs-cleared-opes-risk-20110706-1h2tk.html

I would invite you to examine some of the comments made by Mr Chris Page, who was the chief risk officer with the ANZ bank, a senior position (earning some $500k plus) and the comments attributed to him in the above. “In this regard someone like the QC on Opes and Lindsay Maxsted might help us with our thinking”. This to my way of thinking indicates Maxsted had a significant influence, together with the legal scheming of the law firm who act for the ANZ Bank.

If my memory serves me correct the QC was Mr Allan Archibald, a top tier barrister who may possibly be generating fees in excess of $5 million per annum, and Lindsay Maxsted is a Westpac Bank Director the CEO and ex-partner of KPMG, his principal area of practice was in insolvency/working out and turnaround engagements, a person who through all his directorships and contacts made through KPMG would be in a position to communicate to regulatory authorities what is in the best interests of the ANZ bank.

A little background courtesy of Crikey in their calculations of powerful people who REALY run Australia, so when the good folks of Australia vote for their elected politicians these are the guys are really pulling the strings. When they say to the politicians jump, the politicians say how high. http://www.crikey.com.au/2012/12/11/the-power-index-biz-directors-lindsay-maxsted-at-4/

““He’s just fastidious … the reason he’s valued is he pores over numbers until he can engineer required outcome,” one leading proxy adviser told The Power Index.”

He gleaned some important friends along the way, especially from chums David Ryan and David Crawford. ”David [Crawford] was the doyen of insolvency at the time and I hung onto his coat-tails,” he once confided to industry peak body the Chartered Accountants.

It’s that notorious Melbourne clubbiness that maddens critics — three stars who made their mark dealing with distressed firms during the early ’90s “recession we had to have” remain at the upper echelons of business 23 years later. At least for now.

“I look at that cabal and it’s all very Melbourne and cosy … but I think it’s starting to break down,” a close observer of the clique told The Power Index, noting receding hairlines and recent debates about smashing the so-called “directors’ club” through quotas.

But while the magic KPMG/Allen’s Arthur Robinson circle (Crawford is an Allen’s director) could be coming to an end, the comparatively youthful Maxsted is likely to press on regardless.

Comment –The trifecta that carried Opes Prime over the line, with the help of ASIC,

Maxsted, Crawford (KPMG) Allen’s > < Linklaters

That Christopher Page could suggest that ANZ could provide “regulatory interference” sends a chill down my spine. When one steps back and contemplates---Who are the Regulators???

To the best of my knowledge ASIC is the regulator of financial services with an overview being exercised by Treasury. No doubt the Treasury Deputy Sec Jim Murphy a man well regarded in business circles would have been aware of the Opes Prime issues and one can only speculate if he had any involvement I read in the Sydney morning Herald 4/7/2013 that Mr Murphy had been appointed to the position of chief of staff for Mr Rudd in his bid for re-election.

When I was informed that ASIC were not going to support the liquidator’s legal actions against the ANZ Bank the issues that exercise my mind were.

1. Was ASIC on a frolic of its own in supporting the ANZ bank or were there more powerful forces acting in the misguided belief that this action against the bank would cause severe

embarrassment and disrepute to one of the four pillars of our banking industry. It seems there are cover-ups all round for when I try to obtain a transcript of the case Fowler V Lindholm, to confirm my recollections of the pleadings by the defendants, certain utterances were missing. The expression “general averages clauses” had been employed which viewed in its original context suggests to me that the Opes Prime creditors be sacrificed for the good of the ANZ bank. I would be more than interested in who had instructed this QC in his reasoning 2. ASIC were aware the liquidator had not the funds to mount a serious challenge to the ANZ Bank but could have used its powers to reveal the the truth behind the document that altered the whole way this matter has evolved. (the revised AMSLA or deed of co-operation) This document effectively altered the financial arrangements that were in place (referred to as the AMSLA). This document allowed the ANZ Bank to send in Deloites ,as Receiver-Managers to take control and dispose of all the assets and the Opes Prime pledged securities (the amended AMSLA enabled the securities to be disposed of at fire sale prices). This incidentally is one of the reasons why the stock market slumped in late March, April 2008, only to recover two months later.

ASIC have used the services of Ferrier Hodgson in obtaining material for the prosecution of Julian Smith, relating to the alleged breaches of the corporations act. The costs relating to providing this information would be many thousands of dollars, however it is noted that the costs of providing this information has been born by the creditors, further reducing funds available for distribution

In late July the trial of the third director of Opes Prime, Mr Julian Smith was conducted in the Supreme Court of Victoria; Whelan. J was the presiding judge.

This proved to be most illuminating as ASIC has spent many millions on endeavouring to convict the directors of Opes Prime, not for theft but for breaches of the corporations act.

Laurie (Lirim) Emini who was a Director and the CE0 of Opes Prime accepted liability for trying to hide a$116 million shortfall by manipulating stocks from other accounts; this played a significant part in OPSL’s collapse. In a plea bargain he accepted a penalty of two years, out in 12 months. As no assets of significance were held in his name it became convenient to go bankrupt. I understand now is now seeking a release from bankruptcy.

Anthony Blumberg, also a Director of Opes Prime was able to negotiate a more favourable deal with ASIC as he had no part in the stock manipulation, he agreed to 12 months jail, but out in six months. Blumberg could not wait to go to jail as it meant he would be out of jail in time to spend Christmas with his family as this was preferable to trying to defend the charges in court which would have been at a cost of several millions dollars as ASIC had to be seen to be doing something and would have litigated till the cows came home, ASIC have an amazing propensity to expend vast funds on litigation which not infrequently makes them look like prize dills. (E.g. Andrew Forrest, $30 mil.)

The prosecutor for ASIC, Dr Greg Lyons SC argued that Emini and Blumberg’s behaviour was not unrelated to the collapse of Opes Prime but Justice David Beach in the Victorian Supreme Court would have none of that saying “the pair will be sentenced for the criminal conduct they’ve admitted to and not for the Opes Prime collapse. (It would appear he was able to see through the charade of using the collapse of Opes Prime and using these fellows as scapegoats for the loss of funds. At the pre-trial of the case against Julian Smith, the counsel for ASIC was invited to re-submit his opening presentation on three occasions , as it was remarked by the Judge , that if he could not understand it , then the jury would be in a similar situation.

In the course of the trial ,the council for ASIC was invited to discontinue ,as the Judge felt there was no case to answer, understandably ASIC demurred , having spent so much time and money on this action .It was likened to a quest for the holy grail in obtaining a conviction. Comments expressed to me indicated counsel was less than enthusiastic in proceeding with the case , I suspect he was fully aware of the injustice of trying to convict the wrong Smith!!!.

This of course begs the question as to who was responsible for the Opes Prime collapse and could other measures have been adopted to resolve the issue in a more equitable manner. ASIC has sought to lay the entire blame for the collapse of Opes Prime on the three directors, Emini, Blumberg and Smith, the court however has interpreted the situation differently. Having been at the pre-trial hearings , being aware of the obsequious wheeling, dealing and threats that were being made to extract admissions of guilt from these fellows and deflect the focus from where it rightly should have been, the ANZ bank and the revised AMSLA, or whatever name it has been given which allowed such corporate bastardry to take place.

The trial of Mr Julian Smith was estimated to take some 10 weeks and I was hopeful that more detail relating to the ANZ bank’s actions would be revealed however this trial was to convict Mr Smith on breaches of the corporations act, other items would not be examined.

Julian Smith however is the nail in the plank that refuses to be knocked down. He was fortunate to have obtained a skilful advocate from the public defender’s office so the taxpayer has paid for this circus in its entirety. Not one of these three fellows has gained financial advantage of any significance, they not thieves inasmuch as they have not stolen money, but were working in an environment where thieving and deceit is not only tolerated but highly rewarded. By this I mean stock lending, whereby one can borrow shares for a fee, and sell them with the explicit intent of market manipulation. This could be a segue into my next grievance, but there are other aspects of ASIC’S underperformance I would like to raise, one of which is the issue of enforceable undertakings.

This matter has an excellent coverage in the Journal of the Australasian Law Teachers Association under an article entitled “Who is watching the Watchdog? A critical appraisal of ASIC’s Administrative Powers. The author is Margaret Hyland, a Lecturer in Law at the University of Western Sydney.

This is a well-constructed article, appropriately referenced, covering the issuance by ASIC of enforceable undertakings and infringement notices. Regarding the issuance of these items this legal academic raises a number of points as to why ASIC should be held accountable of which two are Transparency and Accountability suggesting that better administration and more rigorous and lawful decision-making may result when regulators such as ASIC realise their decisions are reviewable.

Whilst I recognise this honourable Senate committee will probe ASIC on a number of points seeking answers that have been introduced into the public arena by financial journalists I recognise the constraints upon time and procedure. Especially with regard to ASIC’s handling of the Opes Prime insolvency in which neither accountability nor transparency was exhibited to the creditors. It would appear to me that an external judicial review should be sought to remove what can only be described as stain on the record of corporate watchdog. I commend this sixteen page article, the URL is below. http://www.alta.edu.au/resources/PDFs/2009/03_Who%20is%20Watching%20the%20Watchdog_A SIC%20s%20Administrative%20Powers_Hyland.pdf

This document appears in the journal of the Australian law teachers Association, and I would ask the good Senators to have a good read possibly suggest that ASIC reacquaint itself of its duties.

Citation

“AS ASIC exercises broad discretionary powers, this may promote a reasonable apprehension within the regulated and wider community that ASICs determination lacks impartiality and therefore may not be readily accepted. This is especially the case where a regulator such as ASIC, performs the role of both the investigator/accuser, controls the hearing procedures and then determines the most suitable sanction to apply. It is important within such a context that the regulated community can test ASIC’s decision to apply these administrators sanctions by review particularly before an independent review body.”

Another dissertation by Associate Professor Evan Jones, (a retired political economist who taught at Sydney University from 1973-2006) penned October2010, titled.

Business to business unconscionability-- ASIC missing in action.

In this article Jones points out that the Federal government has dramatically enhanced ASIC’s responsibility as an aftermath of the so-called global financial crisis in response to the abject failure to root out dodgy insolvency practitioners:, impeding class-action against banks for misdemeanours;, and in general being reactive when malpractice has been identified to the extent they are considered a joke, indeed a bad one that.

Whilst ASIC claimed to be embarking on a “new responsible lending regime” one area that ASIC has left fallow is business to business unconscionability. ASIC was allocated responsibility for this area with respect of financial services in March 2002. Given bank malpractice against small business this neglect by ASIC is curious.

Senators , I am not Crusader rabbit, I have no power to right the wrongs of the financial world, all I can do is to bring these things to the attention of the responsible authority charged with ensuring honesty and justice prevail. What I seek, indeed what I demand from a government and the departments under its control is honesty and transparency, and this is what separates us from Third World countries where graft and corruption are endemic Indeed I become annoyed when I read in the paper articles such as this.

. http://www.smh.com.au/business/heavy-hitters-take-abbott-to-task-on-ir-20131010-2vbi7.html

These unelected Corporate Bovver Boys “should be stared down by the Prime Minister, if these corporate types seek to change the world, then let them stand for Parliament. The Prime Minister was elected on a mandate to govern fairly and equally for all Australians, not a selective few. Against a whole litany of complaints, ASIC has scripted a series of response’s by which the recipients is left pondering, several examples

“The issues you have raised will receive careful consideration…Please finds enclosed a brochure, “your complaint counts”. (This was mailed to me in response to my detailed submission to ASIC, regarding the Opes Prime matter)

“After careful consideration of all the issues you have raised with us this time and the numerous documentation which you have provided, ASIC has decided we will not take any further action into the issues you have raised”.

“ASIC conducts an assessment of every complaint we receive. In determining which factors we will select for further action consideration is given to a range of factors including the availability of any evidence to support the allegations and the likely regulatory effect of any available action.”

“ASICs decision to take action will be influenced by whether there is evidence of systemic concerns, so whether it is in the public interest to take action and, when action is likely to have a significant regulatory impact”…

“As ASIC does not comment on operational matters, we are unable to provide further details regarding what if any action we may or may not take in relation to the concerns you have raised, please note that ASIC will only contact you again in relation to your complaint if we require further information or evidence to assist in our inquiries.”.

“We have recorded the information you have provided in a confidential internal database. This information will assist others if we receive further similar complaint’.

The ASIC Act (s .12gf) states that a person who suffers loss or damage by conduct that breaches this or other sections of the ASIC act may recover the amount of loss or damages by court action and that a breach of (s.12da) of the ASIC Act,, misleading and deceptive conduct in relation to financial services, is not a criminal offence.

This is all very well if one has deep pockets, meaning millions of dollars to expend in court actions, however when a person has been duped by an act of malfeasance and are left with little or no funds

the formulaic reply that ASIC counsels is that you as a complainant seek alternative remedies such as go to the Financial Services Ombudsman or pursue any other civil remedies.

The whole point of having ASIC as an active regulator is to achieve victory in the courts against lender malpractice, to establish legal precedent and change the rules for credit providers including bankers and dodgy stockbrokers promoting stock lending schemes under the guise of margin lending.

Unfortunately ASIC has disassembled and stonewalled persistently, denying and ignoring its responsibilities legislated by Parliament under the amended act August 2001. Evidently ASIC has neither the skills nor the culture to tackle business to business unconscionability in financial services. I could phrase it in a different way and say they are too lazy or too stupid or corrupt, any or all of the above, take your choice.

In all truthfulness certain items that have been in the press over the last few years have left me wondering if anybody in the government pays any attention to the activities of ASIC.

When I look at the high standards Mr Howard, the Prime Minister in the previous Liberal government set for members of his government in the years 1996-1997, three members resigned over conflicts of interest and four resigned over claiming inappropriate travel allowances, contrast that with the article that appeared in the Sydney morning Herald (Businessday) 31 March 2011, by Scott Rochfort, Michael West and Ian Verrender under the heading,

The watchdog, his wife and their winery.

http://www.smh.com.au/business/the-watchdog-his-wife-and-their-winery-20110330-1cgca.html

There are many aspects in this article that give me great concern, after reading this a number of times I can clearly understand why so many issues with ASIC remain unsolved

. The usual suspects to use the expression, Ferrier Hodgson, the ANZ bank, ASIC and with the cooperation of the Minister, whoever that might be, have participated in what I considered to be an outrageous scandal. If anyone thinks that comment is over the top, I would suggest you have no place in sitting on this inquiry. I repeat, this has been an outrageous scandal.

I have lost total confidence in ASIC and its ability to perform the duties it is charged to perform.

I could reference several other instances of highly questionable behaviour between ASIC and various liquidators and I feel sure these are been brought to Senator Williams attention previously.

Should other honourable Senators have missed this article I have included the link below. I have incorporated this in my submission as an example of how the ANZ bank conducts its business affairs. http://www.smh.com.au/business/fee-hunters-grab-56m-in-14-months-20121202-2aoz4.html http://www.theaustralian.com.au/business/anzs-role-in-oswals-rise-and-fall-is-questioned/story- e6frg8zx-1226024302688

In my opinion ASIC requires a root and branch restructure, one would hope a panel of independent academics could conduct a review of the shortcomings that will be evidenced by the submissions received at this inquiry. It is my fervent hope that this inquiry turns out to be more than a gabfest or an opportunity to give a big slap to the Commonwealth Bank for defrauding the current treasurer’s mother-in-law. My previous submission to the Senate Enquiry into financial services allowed me to state my case of how I had been robbed by the ANZ bank but at the time was unaware of actions that were taking place between the Regulators the Liquidator and the Banker.

Honourable Senators, as I have mentioned before, I have taken a deep interest in the Opes Prime matter, as a creditor who lost a significant amount of money I have made it my business to follow all the proceedings, all the utterances in all the media, having been a member of the committee of inspection and the creditors committee in the insolvency of Opes Prime, attended relevant court proceedings and discussed many aspects with the relevant participants. I have accumulated newspaper clippings, computer printouts transcripts of relevant court judgements had conversations with various persons to glean information that has not been aired in the public arena, and all matter of things I have deemed relevant to furthering my action in receiving just compensation.

Allow me to refresh the memory of some of the honourable Senators who may be aware of the Opes Prime affair but, may be unaware of Snippets and Minutiae of the matter that may have entered your consciousness but over the years they may not have assembled themselves to give a picture of how the ANZ bank was able to profit at the expense of the Opes Prime creditors (with the assistance of course, of ASIC).

For your edification I submit a number of newspaper articles.

I believe it is worthy of mention that the ANZ bank withheld advertising from the Fairfax media group for a considerable period as a means of expressing displeasure at reports that caste odium on the way they had handled the Opes Prime matter. This would no doubt be painful to the bottom line of the Fairfax group who are struggling with the advertising dollar.

ANZ bank could have saved about $200 million in settlement costs and untold damage to its reputation if it had followed an internal recommendation in early 2007 to exit the Opes Prime business instead of ramping it up.

One article published in the Australian on 17th of August 2009 by Katherine Jimenez under the heading,

“ANZ bank ran an unacceptable risk on Opes”, says Targett. http://www.news.com.au/breaking-news/anz-bank-ran-unacceptable-risk-on-opes-says- targett/story-e6frfkp9-1225762424912

Speaking for the first time since leaving the bank in June 2007 former institutional banking chief Steve Targett said he had concerns about the banks custody business, which included the securities lending arm that lent money to troubled stock lending firms Tricom Opes Prime and Chimaera, and said the division had been running ”unacceptable operational risks”.

Mr Targett, who is at the centre of a multi-million dollar legal battle with ANZ over alleged misleading and deceptive conduct and breach of contract, said informal talks about selling the business, had taken place, but he refused to comment on speculation that he advised the board to exit the business in early 2007.

“It” (the custody business) had a poor market position, substandard systems and processes, too many temporary staff, and therefore ran unacceptable operational risks” he told the Australian.

Despite internal consideration of exiting the custody business, Mr Target said, the mandated direction was to stay in the business and in fact look at opportunities”

Mr Target said a lot of the problems at the bank including the custody business, involved” poorly defined strategy, Poor management, poor processes, poor communications and so on-- matters that had been approved by the credit and trading risk committee which was the biggest strategy and risk approval body in the bank”

“We held informal talks with potential buyers, but instead I was encouraged to explore options of acquiring a like business from a competitor to grow market share rather than selling the custody business”

He said an exit “would have involved a hit on the revenue line”

ANZ’s controversial securities lending division attracted attention after the spectacular collapse of Melbourne stock lending firms Opes Prime and Chimaera, and the near failure of Sydney firm Tricom, which almost brought the stock market to a standstill in late January when ANZ forced the broker to unwind its $1 billion stock lending book.

ANZ’s subsequent Crawford enquiry saw the departures of eight staff, including Mr Targett’s successor Peter Hodgson, and a decision by the bank to extricate itself from securities lending.

Peter Hodgson was sacrificed to save the collective Arses of Mike Smith and the board of directors. Smith’s claims that the CTC were unaware of the risks are a load of doggy poo. Peter Hodgson, an experience Banker as the URL cites in the medial release was responsible for the strategic leadership of risk management within ANZ including policy governance reporting an independent functional management of risk management activities within ANZ’s business divisions. http://media.corporate-ir.net/media_files/irol/24/248677/mediareleases/2004/ANZ-MediaRelease- 20041026b.pdf

The clowns upstairs knew what was going on when the cash was rolling in through the front door but these guys in securities had to get the “chop “. Dead men tell no tales.

The Crawford report identified several failures and deficiencies in relation to the banks equity finance business, including a failure to report the gravity of the relevant issues to the Chief Executive and board. Also cited in the report were three internal audits on the securities lending business between 2005 and 2007 that produced an” adverse or serious adverse rating. Commenting on those audits and what the board knew, Mr Targett said:” they went through audits, the risk chain, and to the risk committee of the board

“They went through what I would consider the normal processes”

“People would have been aware of the corrective action being proposed to this part of the business”.

He said there were three influential people on the bank’s main credit and trading risk committee, who set the tone and culture of the bank”

The current ANZ chief executive Mike Smith arrived after Mr Targettt’s departure

ANZ finance Chief Peter Marriott, who sits on the banks credit and trading risk committee, was recently appointed a non-executive director to the Australian Securities Exchange board. (ASX)

Mr Marriot’s appointment has attracted a lot of criticism over a potential conflict of interest from brokers, and senior banking executives who asked not to be named.

They argue that while Mr Marriot joined the ASX after it had completed its investigation into Opes Prime and Tricom, it still sends out a message of a cosy relationship.

“It is not appropriate for ANZ to comment on Mr Targett’s views given he chooses to remain in litigation with the bank”, an ANZ spokesman said.

There is a further article in the Australian on the same reporter dated August 17 2009, headed

Bank exec breaks his silence after falling out with the ANZ.

Steve Target came to the ANZ bank with a strong international banking pedigree in hopes of becoming the banks next chief executive officer,

Instead, the career banker left the institution just three years later with his reputation shredded and his corporate career in Australia virtually finished.

“You Google my name and it’s all there”, Target says in his first interview since his bitter exit from the bank on the 7th of June 2007. “It’s something I have to live with but it just seems so unfair”

“It’s pretty much impossible for me to get a job in Australia, which may or may not be a bad thing”

Target is now in the fight of his life to save his reputation locked in a multi-million dollar legal battle with the ANZ

“You take on a big organisation and the largest legal firms won’t touch you”, he told the Australian. Most global firms won’t touch you and so on, because ANZ are a big powerful imported wallet to them.

“It’s a very lonely place at the moment. I’ve taken a very tough path”

Targett is suing ANZ for allegedly misleading and deceptive conduct and breach of contract.

He claims the bank misled him about the state of the institutional business and that he was lured away from a top job in Britain with the alleged promise that he might succeed former ANZ chief

executive John McFarlane. Targett missed out on the chief executive role, which went to HSBC Asia- Pacific boss Mike Smith, who joined after Targett left.

For two years Targett has stayed silent about his unceremonious departure. He is now ready to tell his side of the story.

Target describes ANZ’s culture as “a little too collaborative, clubby and lacking discipline”

From the outset, ANZ appeared to be hitting all the right notes. At the time, it was the darling of the banking sector, delivering a stunning profit numbers year after year.

But Target offers a different perspective.

“I felt that going into an economic downturn, the culture at ANZ would have been a problem, because it was an ill-discipline business culture “he says “lots of meetings, lots of talks, lots of people feeling good about each other. Not enough discussion on clients, deals and competitors.

“I just felt it lacked a bit of a hard edge, but you weren’t popular for saying that”

For Targett, the career-ending moment came on April 26.

McFarlane let it be known publicly that he was unhappy with the performance of the institutional business. Handing down his final interim profit, McFarlane said the result would have been an “absolute stunner “if not for an inferior performance by the institutional division.

“At the time I knew my career at ANZ was over”, Targett says, but adds that ANZ chairman Charles Goode remained supportive.

He is keen to set the record straight on a number of facts. For one, he insists he was not sacked.

Targett claims he initiated the separation, and sought to leave the bank on terms he claims he had agreed to before he joined the ANZ.

He also defends the performance of the institutional business under his watch, saying that on average he “exceeded the net profit after tax target that was given to me on a stretch basis over the three-year period, without any new investment in the business”.

Targett says McFarlane didn’t see him as ANZ’s next chief executive and they had” very different leadership styles”.

“He probably knows that I would have changed a lot of things that he did, whereas--- and this is only a guess--- he would have preferred Brian Hartzer as his internal replacement”, Targett says.” I think he saw Brian as a better candidate and a smoother transition”.

McFarlane and Targett deferred over more than banking matters. “You’ve read in the press (that) John liked things like feng shui. Targett says “he loved that sort of stuff; I guess I am a different person. It worked for him but it wasn’t for me.

“I didn’t need to see the feng shui consultant come around and put little elephants in the corner of my office and tell me to give money to 10 beggars in 10 days and the like, otherwise I would have had bad luck. I’m not that sort of person”

Had he ascended to the top job at ANZ Target says he would have made changes, including the Asian strategy.

“I would have either focused on getting only a few countries right or really trying to acquire something of scale”.

“I actually think the only way ANZ can succeed in Asia is to acquire something cheaply”.

Targett says that because the internal focus was on earnings growth there were a lot of “short cuts taken” in terms of processes, back office and technology spend.

“I would have had a decent go to try to fix that because you run too much operational risk if you don’t spend adequate investment dollars and constantly try to cut corners and grow your revenue line, he says.

“However, to say that money needs to be spent on technology and processes and sorting out the back office can Indicate that people before you haven’t done things thoroughly, so I think gaining the right levels of investment to address these problems would have been a hard sell to the board”.

He also says ANZ’s wealth management strategy needs an overhaul when the ING joint-venture agreement expires---“unwinding the joint-venture with ING and upgrading the Private Bank”

Further comments in the Australian dated 30 November 2009 by Richard Gluyas.

Bank of Beirut Hires Steve Targett as head of London units.

ANZ bank’s former institutional boss Steve Targett, who is suing the big four bank for $57 million, has accepted a much smaller role as head of the bank of Beirut’s operation in Britain

In a Federal Court writ, he has alleged that the bank reneged on a promise that he would succeed former chief executive John McFarlane.

In a statement of claim filed in the Federal court, Mr Targett lays the blame on the poor condition of the division when he arrived in 2004. It was understaffed poorly structured and receive fewer resources than other parts of the bank, he says.

Amongst the 12 alleged misrepresentations by five senior representatives of ANZ, including the chairman Charles Goode are.

That the bank would help Mr Targett expand his CV in readiness for a chief executive role, and that he would make “an ideal “successor to Mr McFarlane.

That Mr McFarlane at a meeting in Melbourne in February 2004 promised to groom him as a chief executive by involving him in the wider ANZ business and finding him an outside directorship such as a seat on the board of the retailer Woolworths.

Mr Targett recalls meeting that month with Mr Goode and the ANZ director Margaret Jackson in Perth. He says Mr Goode expressed a preference for an internal candidate and said that owing to the age and inexperience of ANZ executives there was no logical successor.

Ms Jackson “said words to the effect that it seemed to be fate that brought Mr Targett to ANZ and that Mr Targett would be ideal for the role of CEO because he was both an Australian and a well- grounded banker”.

Last year, Mr Targett wrapped up his damages claim from $2 million to $57 million, complaining poor references from the ANZ had stopped him from getting a new job in Eastern Europe.

Despite speculation to the contrary ANZ has repeated it will strongly defend Mr Targett’s action.

Mr Targett said in an interview with the Australian in August that his reputation had been shredded as a result of his ANZ experience.

“ANZ are first- class at spinning issues to the media. It’s pretty impossible for me to get a job in Australia, which may or may not be a bad thing”

Mr Targett alleged he was lured from a pound stg,1 million a year job at Lloyds TSB in London into the role of institutional boss at ANZ, where he was paid less.

The attractiveness of the new job, however, was allegedly enhanced by promises from various members of the ASX board and management that he will be the front runner to succeed Mr McFarlane.

Amongst those to promise higher duties, according to the Federal Court writ were Mr McFarlane, Chairman Charles Goode and former board members including Margaret Jackson, Jerry Ellis and John Dahlsen.

While Mr Targett was considered for the top job, he was ultimately passed over in favour of HSBC bank’s Mike Smith

The size of the damages bill relates to the difference between likely earnings forgone as ANZ chief executive, and his remuneration if he had continued at Lloyds TSB.

If the bank does not settle the claim, Mr McFarlane, Mr Goode and others could be asked to take the witness stand.

Reported in the Sydney morning Herald sixth of March 2010, by Mark Hawthorne

ANZ in out-of-court deal with Targett

The ANZ bank has agreed to out-of-court settlements with former institutional boss Steve Target, who sued the bank for $57 million after being passed over as chief executive.

The parties yesterday agreed ”in principle” to a settlement with Mr Targett , just a week before the former executives claim of misleading or deceptive conduct against ANZ was due to be heard in the

Federal court. Mr Targett’s solicitor Andrew Pill of law firm Trindale Farr & Pill, , has travelled to London to put ANZ’s settlement offer to his clients who is now the head of the bank of Beirut’s British outpost .Once Mr Targett has signed the agreement it will end two and a half year legal dispute.,

An ANZ spokesman, Paul Edwards described Mr Targett’s claim as “groundless and said “naturally we will be strongly defending it” when the legal proceedings were first filed in 2007.

Honourable Senators, I have introduced the items published in the media regarding Steve Targett’s Tenure at the ANZ bank, and an insight into the workings of the institutional banking section.

I would also cite two articles one dated 17 January 2011, by Mark Hawthorne in the Sydney morning Herald (Business Day) and another co-authored by Eric Johnston. http://www.smh.com.au/business/285m-stoush-just-how-much-did-anz-board-know-20110116- 19si6.html http://www.smh.com.au/business/anz-risk-managers-knew-of-dangers-20110706-1h2kr.html

$285 Million Stoush: just how much did the ANZ board Know?

Just how much ANZ chief executive Mike Smith and his board knew about the banks equity finance business has become a central question after the bank filed its defence in a $285 million legal fight with the principles of failed margin lender Primebroker securities.

A senior ANZ risk management committee examined the bank’s controversial securities lending program and approved its associated risks at least 16 months before the collapse of Opes Prime.

In 2006 the banks credit and trading risk committee (CTC) was briefed on a plan to increase ANZ exposure to stocks through its equity financing on to as much as $2 billion over a three-year period.

According to widely distributed ANZ documents that CTC committee includes the positions of “chief executive, chief risk officer chief financial officer” and meets every week. It reports directly to the banks risk committee, which meets at least four times a year.

Current ANZ chief executive Mike Smith assumed the position on the CTC when he took over from John McFarlane in October 2007.

In the wake of Opes Prime’s collapse in 2008, Mr Smith ordered a review of the banks margin lending and equity finance businesses.

That review,-headed up by insolvency expert David Crawford-concluded that the CTC “was not provided with all relevant information” that would have helped it make “of the progress that had been made in the development of the securities lending business. Decisions on placing controls over the equities financing business

However, BusinessDay is aware of a November 2006 presentation that was prepared for the CTC that outlined an extensive chronology of the business.

The presentation also contained revenue projections for the banks equity finance business: it named customers: it provided a formula for calculating loan-two-valuation settings: and provided a measure for determining the bank’s financial exposure to equity finance.

The presentation also stated that Securities Lending remained a focus for ANZ’s custodian services arm, and set out a strategy to build the unit into an operation with earnings of up to $10 Million annually.

The confidential presentation concludes that the CTC was” kept informed” of the progress that had been made in the development securities lending business.

It also outlined the bank’s internal audit division had monitored progress on Equities finance business. In addition, the CTC presentation outlined a plan to perform a stress test of the business in each of the following two years.

Critically, the presentation said risks setting known as ”PCRE”-referring to “potential credit risk exposure”-of 10 per cent would be applied to the equities business policy.

One of the findings of the Crawford review was the CTC was “not expressly alerted to the fact that--- credit limits for equity finance were to be calculated on a potential exposure risk basis”

One of the effects of calculating the limits was to reduce the visibility of the Equities finance business within the ANZ, the Crawford report concluded.

BusinessDay has also learned that ANZ formed a separate Equity Risk Committee in2006 to keep tabs on its exposure to the growing equity finance business

At the annual general meeting held in Adelaide in 2010 a shareholder asked the ANZ chairman John Morschel “if he would confirm that the ANZ board had no knowledge of the equity finance business or product before the failure of Opes Prime, Tricom and Primebroker”

Mr Morschel replied:” I can confirm that”.

The findings of the Crawford report and the recent definitive statement of Mr Morschel differ from statements ANZ had provided in his defence of the Primebroker matter.

Primebroker principals Sal Catalano and Ian Pattison claim that at meetings with ANZ executives, the executives originally told them the ANZ board was committed to increasing the Equities finance business. The pair say the representations were made at Melbourne restaurants Momo in 2006 and then at a function during the Melbourne cup carnival in 2007.

When the Crawford report was published in 2008, the pair say they discovered the ANZ board in fact had no knowledge of the Equities finance business. The changed stories form the basis of their unconscionable-_conduct claim against the bank.

In its statement of defence, ANZ’s lawyers response to the points with; “ANZ denies that at the date of the alleged representation set out in… The statement of claim is equity finance business had not been approved by the board of directors”.

“We would certainly like to know just what ANZ meant by that statement”, a source within the Primebroker camp said. “Is the suggestion that ANZ’s board did know about the equity finance business all along? That would be a very interesting admission by them”

I guess the moral of the story here is, when one starts to tell lies, then one must have a good memory to recollect previous falsehoods.

ANZ has stated it will vigorously defend the claims by Primebroker.

A concluding article dated 22 November 2011 by Leone Wood in the Sydney morning Herald (BusinessDay) http://www.smh.com.au/business/anz-pays-20m-to-primebroker-20111121-1nqw1.html

ANZ pays $20 Million to Primebroker.

ANZ has agreed to pay $20.5 million cash to the liquidator of failed broking house, Primebroker securities. The settlements which was finalised yesterday, put a halt to a torturous and fiercely expensive series of six concurrent Victorian Supreme Court legal cases that threatened to drag on until at least February it also closes a difficult period for ANZ as it sought to defend its actions in early 2008 when as a share market plunged, it suddenly found some of its share lending counterparts—Primebroker, Opes Prime and Tricom-- in dire straits.,

ANZ paid the lion’s share of a $250 million settlement with Opes Prime liquidators in early 2009, but it was stuck with a $350 million claim for damages by the principals of Primebroker, Sal Catalano and Ian Pattinson, who claimed the bank falsely led them to believe it would stand solidly behind them.

Mr Catalano and Mr Pattinson sued the bank for damages. As part of the deal, ANZ will release numerous properties owned by the pair but which the bank had claimed as security

ANZ also will not claim in the insolvency for the estimated$150 million it says it was owed when Primebroker collapsed in July 2008. ,

This settlement means Mr Mike Smith and the other ANZ Directors and Executives will not be called to give testimony (So much for defending their claims against Primebroker vigorously,).

Also of interest is an article that appeared in the online publication dated 11 September 2008, written by Glenn Dyer under the heading

“ANZ job cuts good news for a select few”.

The article makes certain observations,

David Hiscoe, who was managing director of Esanda, ANZ’s stand-alone finance company, was on the Lending inquiry committee.

Chris Page, (a former HSBC workmates of Mr Smith) was head of risk, Asia-Pacific. Mr Page is now the bank’s chief risk officer, a significant promotion. (It should be remembered that Chris Page was mentioned in the ANZ dirty tricks articles) The inquiry into security lending also included Mr Smith and David Crawford, who is chairman of Fosters and a former director of Westpac.

The financial newsletter (The Sheet) observed on April 15 the day the inquiry was called that:

Short of a spectacular scandal -- top executives or directors in the thick of it, perhaps -- there is nothing in the affair that ANZ credit recovery and police work cannot resolve.

So why the props for Mike Smith?

The outsider is David Crawford, who when at KPMG, handled many workouts sorting out the end of the 1980s boom. Mike Smith, then the front person for HSBC in Australia, would have met him then.

Whilst David Crawford is a reputable figure in the corporate world, to call him in to do an independent review of the Opes Prime debacle has enough problems that I reckon it’s untenable, comments John Durie in the Australian:

But there are clearly important issues to determine, not least of which being the fact that unlike other banks, ANZ has had only one audit firm almost since the day the world was created. That firm is called KPMG, which is too closely linked to the ANZ, because that is where finance boss Peter Marriot learned his trade and key directors like Margaret Jackson also started life. At the very least this risk failure should prompt a change in firm audits. Ironically enough, the man chosen as the outside party to join Smith’s review is former chairman and chief executive of the aforementioned audit firm KPGM, David Crawford. The task of the role is even more surprising given he is already the chairman of Fosters and Lend lease whilst also serving on the BHP Billiton board,

We’ve long argued that the directors club gene pool is too shallow and there are too few doing too much and Crawford is already on a list of overburdened directors. Indeed Crawford produced one of the classic examples back in 2004- 05 (Chairman of National foods and Lend Lease) (Director of Fosters and BHP)

But the biggest arguments against Crawford’s appointment are a conflict of interest. As chairman of Lend Lease he would have been involved in the record-breaking $377 million deal for the developer to build ANZ’s new global headquarters at Docklands. It was quoted in a press release September 2006 gloatingly “the building will rank as the largest single tenancy, CBD commercial office development ever undertaken in Australia.

So David Crawford simultaneously chairing a company enjoying a record-breaking commercial deal with the ANZ whilst conducting an internal review which is done and if made public could cost the bank hundreds of millions of dollars.

Crawford remains at the absolute epicentre of the Melbourne business establishment ,-Scotch College, the MCG committee etc,etc. he’s also been the preferred corporate undertaker for Melbourne banks for a long time all of which means he is not fit to lead an independent review of ANZ.

One can regard the “Crawford Report “as something of a “curate’s egg”, disregarding any perceptions of impartiality.

My personal opinion is the review is not worth a knob of goat shit, its sole purpose is window dressing to try and disguise the fact that the bank sought to advantage itself at the expense of the Opes Prime creditors.

Mr Smith defended the bank’s decision not to release the full report of the review once it was completed.

A genuinely independent public review would have significantly changed the personnel who will be occupying the plush new ANZ officers at Docklands which Lend Lease is building.

In the Australian financial review the Opes timeline, was laid out

Oct 2007: ASX did on-site review and missed dodgy related party deals, director dealings plus breaches of loan ratios.

Late 2007: tri-annual audit starts with 40 question questionnaire, than five-10 day site observation. Missed everything.

Dec 2007: dodgy manipulation of client accounts begin

Jan 29: discussions about LVR ratios and loan classifications on same day as Tricom fails-

Feb 11: liquidity ratio crashed from2.06 to 0.61% and ASX advised of breach.

Feb 12: Opes finance director Tony Iremonger claim in a letter Merrill is changed LVR from 90% to 85%, plus ASX “methodology is inappropriate for our business”

Feb 15: ASX and Opes meets to discuss liquidity breaches, where ASX “encouraged “loan reclassification to avoid ratio breaches

March 17: Opes directors meet with ASIC expecting notices to produce books but nothing eventuated.

March 14: ASICs called Opes asking for copy of stock lending agreements and verbally advised ASIC would be taking no further action.

March 28: admin was appointed, punters to lose $300 400 million-

Senators , there is more than sufficient information available to prove the ANZ banking conspired to ensure that any losses caused by reducing their LVR ratios and obtaining an amended AMSLA would be born by Opes Prime and Primebroker, and as a result the creditors of O/P and Primebroker.

Whilst Finkelstein J, in the Federal court was telling a class action litigators “there will be no fishing exercises in my court” the Supreme Court adopted a more balanced and fairer attitude.

A small portion of the discovery process found its way into the media under the heading

Sydney morning Herald 5 July 2011 and 26 October 2011

https://www.google.com.au/#q=anz+plotted+dirty+tricks+campaign http://www.smh.com.au/business/anz-misled-primebroker-court-hears-20111025-1mi4l.html

These two articles are telling, in as much as it revealed the true intentions of the ANZ, long before March 2008.

It is my belief that the precise and detailed discussion of how the ANZ sought to advantage itself at the expense of Opes Prime, Lift Capital and Primebroker are in the minutes of the Credit and Risk committee of the ANZ, together with the minutes of the Board of directors meetings.

Had Crawford or ASIC sighted these minutes or investigated emails sent by members of the CTC, would the outcome have been any different? I suspect not. The intention was already there, the decision was taken; only the execution remained.

Chris Page, head of risk for Asia-Pacific, might learn from the head office fiasco. Page, note, worked with Smith at HSBC until recently.

Maybe Smith has other goals in mind: such as promotion for Page and David Hiscoe, the Esanda head who also joins the review.

Those are significant upgrades in their jobs and in their importance inside the bank, all for sitting on a committee that should have been totally independent. This investigation should have been conducted by an outside group who had no direct connection with the ANZ bank.

The report cleared the board, but a couple of directors worth taking aim at were at shareholders meeting in December: former BHP CEO, Jerry (Magma Copper) Ellis who is head of the audit committee and Margaret Jackson, who tried to pilot Qantas into the arms of the private equity group led by Macquarie bank and TPG . She was there during the step up in lending to the likes of Tricom and Opes Prime

And of course chairman Charles Goode, who continues to act as an executive chairman according to insiders, in the everyday running of the business. In fact some, staff report sightings of Mr Goode in the senior management car park some days checking the bona fides of people parking there. Is it a case of keeping out the little people from other floors was trying to move up the greasy pole of ANZ banking?

And finally, there are reports from inside the bank that the ANZ has settled with disaffected senior executive Steve Targett, and the sum of $ 20 million has been mentioned.

Honourable Senators, I have sound reason for quoting various media reports as part of my diatribe against the ANZ Bank, its Senior Executives and its Directorate.

As a retail creditor who has been harshly dealt with by ASIC in its handling of the Opes Prime liquidation let me say that I am totally disenchanted, in fact absolutely disgusted with this corporate crime which has been managed by high profile persons in the Melbourne corporate world.

As my fingers move over the keypad I am hearing radio presenters discussing various members of our legislature who are alleged to have falsely claimed various expenses. Whilst these amounts are a mere bagatelle, there is however a principal involved. As a couple of wise and clear thinking members have commented, if there was doubt in the voracity of the claim, repayments or reimbursements should be made, and made promptly, that should be the end of the matter. Politicians in general are not held in high regard due to the actions of a few , these matters only serve to diminish our legislators. There are serious and pressing items on the agenda other than nit- picking or pettifogging, the general public are not interested in “Four Weddings and a Funeral” replays, what they look for is honesty, accountability and good governance.

What I seek is not the party of the left nor the party of the rights but the party of honesty.

The fact is that ASIC have not been honest and transparent in their dealings with the Opes Prime matter is to the chagrin of the creditors.

To add insult to injury the ANZ spinning this matter that would leave Rumpelstiltskin green with envy, claiming that Opes Prime has damaged their brand.

When I see Advertisements stating “We live in your world”, well quite frankly I can tell you the retail creditors of Opes Prime would strongly disagree. It was an apt choice ,that of using Simon Baker,( he of Margin Call , a film about investment banking corporate bastardry )to promote the banks brand ,by stealing another person’s drink.

That the Opes Prime collapse has been one of the most controversial collapses in Australian corporate history is beyond doubt. It has involved references to underworld figures, stock manipulation, high-profile lawyers trading millions of dollars of shares on loans that were never margin called, unconfirmed report of at least three suicides of clients who had lost everything, interference by the corporate regulator to pervert the course of justice, the bankers acting with unconscionable conduct to deny creditors equity in the liquidation and a legal precedent has been established with the sanction of the scheme of company arrangement.. As I have stated before, had the ANZ bank acted in accord with their own ANZ employee code of conduct with regard to honesty and integrity I would not be lodging this submission.

As ASIC has been the prime mover in allowing the ANZ bank to conduct this audacious fraud I would raise a number of questions which should be directed at Mr Medcraft.

1. Opes Prime had been visited by ASIC and the ASX prior to the collapse in March 2008. The issues were a breach of the ASX settlement rules; this should have put Opes Prime on a watching brief. Was this so, if not, why not. 2. Opes Prime had been promoting the concept of what is known as margin lending in actual fact it was stock lending, this form of lending is described as equity financing where the client seeking a margin loan loses title to securities. This concept of financing had been offered to a number of brokers, the more astute saw it was fraught with danger and declined to be involved. Why did ASIC not alert the general public or ensure that market participants fully understood what they were becoming involved with. As you are aware the Opes client’s signed agreements were printed with the ANZ logo noting that the bank was custodian and bank to the Opes companies. Clients thought they were opening an standard

margin lending account and that everything the Opes staff said and wrote to them implied that the client had any official ownership of the shares. Little did they realise the stock they thought that was meant to be sitting in trust with the ANZ nominees was in fact being used by ANZ or Opes in their stock lending businesses. I repeat why did ASIC not make the investing public aware of the dangers of the stock lending business as this form of financing is not designed for the retail market 3. Mr Hugh McLennan of the litigation funder IMF in April 2008 raised a number of issues which strike at the probity of the issue. The method of marketing, the misleading financial services guide showing the ANZ logo noting the bank as custodian, the deceit of the Opes staff implying that clients had beneficial ownership of their shares; in fact Opes Prime would say almost anything to get new business. It did not take IMF long to collate a list of charges that could be laid against the ANZ bank, and ASIC who had an investigative team working on this matter would have been fully aware of this. There was not one responsible financial journalist who adopted the attitude that the ANZ had acted fairly and in good faith in this matter. When the documents referred to as ”the deed of co-operation” or something similar which overrode the existing AMSLA agreement and gave the ANZ bank charge over all the assets of the Opes Prime group and allowed a fire sale of all securities that had been lodged by Opes Prime creditors, this could only be described as” unconscionable conduct”. My question is why did ASIC allow this to happen, and why did it not compel the bank to act in a fashion that would have treat the creditors fairly. 4. Was ASIC alone in supporting the actions of the ANZ bank albeit their actions in the Opes Prime goes directly against their remit of offering protection in the Financial markets. 5. Would ASIC confirm that Lindsay Maxsted and or any other business person used any pressure, or make any representations that no charges should be laid against the ANZ bank in the Opes Prime insolvency. 6. Would ASIC also confirm that the Department of Treasury, APRA, or any politician was involved in ensuring the ANZ bank was not charged for offences connected with the Opes Prime insolvency. 7. To support its actions , would ASIC submit to a judicial enquiry with the powers of a Royal commission to obtain the truth about its actions in offering an enforceable undertaking ,and offer recompense to the retail creditors from its own funds after destroying or sabotaging all efforts to obtain an equitable resolution. Furthermore would ASIC presents the legal opinions to justify its action and involvement in the Federal court action , Fowler v Lindholm 8. In light of the excoriating article, “The watchdog, his wife and their winery” would ASIC identify the Minister to whom the chairman at the time had made “all the appropriate disclosures regarding the Oakridge Winery acquisition”. In light of their being a black hole in the company’s financial information there are numerous accounting irregularities, errors and omissions in the 2008 accounts. Ferrier Hodgson were called in as voluntary administrators the following day ANZ banking group appointed McGrath Nicol as the receiver-manager. (The usual suspects). Insolvency is “growth industry” and many practitioners are able to not only receive handsome fees but can frequently obtain special dispensations from ASIC that avoid public accountability and scrutiny. When accounts are incomplete it can allow sales of assets to be made to anonymous sources at less than fair value, thus depriving creditors of just entitlements.

Deloites, the receiver- manager for the ANZ bank in the Opes Prime took control of the $1.5 billion securities lending book and began selling stock at wholesale prices. These included a parcel of 10.79 million shares in Hedley group sold at half price also the retailer just group which was sold at $1.00 less than its market value. Rumours were abound as to who was loading up their saddlebags with bargain basement rates mate prices on securities. This trashing of share values was akin to throwing petrol on a fire, which helped to foster the global financial crisis story which the previous government has sought to claim credit for largely avoiding it. Has ASIC conducted any investigations into the disposal of the Opes Prime assets by Deloittes. Facts have shown that borrowers from the ANZ bank who have defaulted have had their assets stripped of beyond the amount of the loan,

http://www.smh.com.au/business/fee-hunters-grab-56m-in-14-months-20121202- 2ap08.html http://www.smh.com.au/business/kagara-creditors-in-the-dark-20130609-2ny3d.html Senator Williams will have some understanding of the liquidation matters in the above insolvency’s (Smacks of the Wild West!, Bushrangers and cattle duffers.)

What has been the cost to the taxpayer of ASIC’s involvement in the Opes Prime insolvency? Was the pursuit of Julian Smith and Anthony Blumberg an attempt by ASIC to justify its existence and to cover up its deceitful behaviour by not prosecuting the ANZ bank or compelling it to cancel the amendments to the AMSLA agreement? 9. Why did ASIC choose to ignore the affidavit of Paul Saliba, the former director of financial services at Lincoln Indicators when he claims at a meeting with Opes Prime directors Emini and Smith who stated that beneficial ownership of any Lincoln indicators shares lent to the broker would remain with Lincoln indicators. Saliba also stated in the affidavit that ANZ bank representative ,Nick Harding was present at the meeting and during the making of these representations did not disagree or seek to make comment. Vin Moulis, principal lawyer at Slater and Gordon’s Sydney office says, the evidence from Saliba is clear evidence that the bank had knowledge of the clients understanding ,that they believed they were retaining beneficial ownership. 10. At what point in time did ASIC determine ANZ bank could have been running a managed investment scheme, was this ever raised at the mediation session, if so by who. 11. In the light of ASIC’s investigations into Opes Prime, why have they sought to deny freedom of information requests from financial journalists on numerous occasions. 12. Did ASIC advise IMF and the Slater and Gordon that they would be no prosecution of the ANZ bank and they should negotiate a settlement arrangements with the liquidator? 13. Reporter, Matthew Drummond published an article on the 14th of April 2008, in the Australian Financial Review stating that “An investigation by the AFR has uncovered internal Opes Prime documents in which staff recorded discussions with regulators. The documents reveal that the stockbroking firm felt (encouraged) by senior ASX market supervision staff to exploit a loophole in the rules by hiving off its $1.3 billion worth of bank debts into a company that did not need an Australian financial service’s licence and was therefore out of the regulators sights’. There was a great deal more detail leading to the conclusion that the ASX was going to be sued by creditors and that ASIC had been incredibly slack.

14. Did ASIC investigate the shares in the Murphy account that were largely responsible for the demise of Opes Prime. Challenger financial services were a stock in his portfolio that had been shorted relentlessly, from $6.23 on October 2007 to $1.75 in March 2008. Who were the big holders of Challenger, and who profited by this action, was this stock in Murphy’s account being loaned out by the ANZ, and they contributed to the demise of Opes Prime. Will we ever know the truth about the Murphy transactions; ASIC compiled a file of some hundreds of pages but no action was ever taken or public examination ever conducted ,could it be that ASIC wants certain things kept out of the public arena. I believe Mr Murphy is called upon in front of a judicial inquiry reveal a great many things that known only to ASIC and the liquidator. 15. Did ASIC have an arrangement in any way ,shape or form with the ACCC, in that it wanted to have sole authority for handling all negotiations and court actions , notwithstanding there was clear cases of misleading and deceptive conduct in many instances.

Senators, the fact that the ANZ bank managed to evade court action for an act of unconscionable conduct or malfeasance in which creditors of Opes Prime lost hundreds of millions of dollars can be directly sheeted home to ASIC.

ANZ bank has clearly benefited but who else has profited? Did the government of the day give a wink and a nod to Treasury, did certain so-called “captains of industry” make representations to treasury who told ASIC there was to be no prosecution of the ANZ Bank. Were APRA and Treasury exerting influence on ASIC, Where does the truth lie?.

Where did the “blue chip “stocks finish up? Were there crossing to “special clients” at bargain basement rates as is the usual deal with any client of the ANZ who defaults ,and becomes insolvent.

Senators , the Opes prime insolvency literally Shrieks out for a Judicial investigation, ,the way things are conducted ALL of the insolvency staff at ASIC will be leaving to become Liquidators as that is where the real money is.(Partners and Principals charge out rate =$600 p/h , ) plus the pickings on the side!

As Senator Williams will recall the previous Senate enquiry into liquidators released a scathing report on the industry and the role of the corporate regulator, however previous government responded with a watered- down set of options. It’s patently obvious the serious problems have yet to be adopted we hear so much about the liquidator Stuart Ariff , but in terms of injustices and dealings, this guy was just piss ant.

. http://www.smh.com.au/business/can-investors-trust-asic-20111108-1n4wv.html

http://www.smh.com.au/business/asic-dances-around-the-real-questions-20130619- 2ohvp.html

If smoke and mirrors are the order of the day, then ASIC commissioner, John Price has it in spades.

Senator Ripoll said “I’m satisfied that ASIC has acted in accordance with its role as regulator”

All truth passes through three Stages.

First it is ridiculed,

Second it is violently opposed,

Thirdly It is accepted as self-evident

Arthur Schopenhauer (1788-1860)

Bernie Ripoll was the Federal Minister in charge of Corporate Law at the time!

I wonder if the good Senator had a clear understanding of this situation. , I would respectfully suggest he read the linkage “Who is watching the Watchdog”. There have been a number of instances where ASIC have granted relief from financial reporting obligations that have raised suspicions that things were not exactly “Kosher”. I sometimes wonder if ASIC has become emboldened by some of its actions, knowing that its actions would not be critically examined. This is particularly so during the last six years.

Staff movements that provide bonds between ASIC and the insolvency firms are a part of the problem. One source of bonding is ASICs secondment program where staff of insolvency firms work at ASIC for short periods of time.

It’s not hard to imagine where loyalties of secondment individuals turning up at the ASIC office block really lie. Follow the money trail. Liquidation is a path to liquid riches and one hardly impeded by the burdens of excessive accountability.

Another source of bonding may be the future work opportunities outside of ASIC available to an ex-ASIC officer. The recent head of the regulators national insolvency team, Stefan Dopking, is now making a living as a partner at Taylor Woodings, one of the firms that he was in-charge of regulating at ASIC up until recently.

Another matter which causes me great concern is the overt manipulation of securities on the ASX, and the lack of control by the corporate regulator who when these facts are pointed out appears to do nothing beyond issuing pronouncements that the matters raised are being investigated.

To clarify the issues I intend to raise please allow me to give you my interpretation of the stock market of which the ASX is the primary facilitator.

The stock market is a place where shares and other instruments are bought and sold by a variety of persons, be they investors, or speculators. It is also used as a means whereby corporations large and small are able to raise capital and also the trading of more esoteric items referred to as derivatives. The market brings together a range of participants, a range of traders of all shapes and sizes-- from

individuals managing their own personal wealth through to large funds managing many billions of assets of behalf of the Australian populace.

All participants in the markets seek to gain some degree of betterment by their involvement in trading, for the short or for a long-term, hoping to gain capital appreciation, dividends or both.

It has long been recognised and accepted that due to the vagaries of economic and other events some form of protection or insurance is necessary to protect one’s interests.

Instruments such as CFD’s or contracts for difference, options and short selling are usually considered the three main methods of asset protection in a falling market.

With the advent of computers brokers no longer need to dispatch operators to a trading floor and shout bid and offer prices to “chalkies “, who transpose these prices on a large blackboard.

Gone are the days when the broker’s adviser, after a morning briefing would ring the clients, update them with details of the morning briefing and garnish buy or sell instructions.

Electronic trading now means not only can the brokers deal directly with a supercomputer which has replaced the trading floor, but individuals who are managing their own personal wealth through to large institutions,( be they broker or investment bankers) be direct market participants operating in real time.

On the surface this form of trading would be light years away from the old system however a new element has been introduced which puts 99% of market participants at an extreme disadvantage. As Alfred Bushby places a purchase order on BHP there is something sensing this action and taking profit. As Audrey Bishop decides to sell a small parcel of RIO shares, she is unaware that something is happening which means the transaction does not represent true value to her.

What both persons are blissfully ignorant of is that the ASX has allowed a number of individuals to take over and manipulate all transactions running through the ASX. There are six” cuckoos” which are high speed servers installed to advantage the operators In fact this knowledge has been filtering through the marketplace for over the past two years. I could not describe it any better than the well- known financial commentator Alan Kohler,

The link is below; I would just like to add a few Power Points. http://www.abc.net.au/news/2012-04-11/kohler-high-frequency-trade-parasites-at-heart-of- asx/3943052

“One metre of optic fibre carrying data at the speed of light (299.8 million metres per second) - would give one share trader an unfair advantage over the rest. It suggests that something pretty quick is going on.

The question is whether it is fair to the rest of us: whether those six parasites with their suckers fastened directly into the heart of the ASX should be allowed to get away with it.

The ASX is no longer a regulator, just a business, so it says that if the practice is legal and it pays a fee-not to mention a handy rent in the data room that it cannot and won’t stop them.

What do the computers and their algorithms do. Well as my relatively low-Frequency brain can understand it, these machines constantly monitor order flow into the ASX servers, and the sophisticated programs can pick up patterns that indicate when a reasonably large order has been placed. What they then do, in effect, is “front-run”-that is they buy ahead of the order and make a small spread selling into it.

In other words, by operating at the speed of light they can ”feel” a buy order coming and can dart in front of them and ensure that the buyers pay a little bit more than they were going to without them noticing a thing.

These operators begin each day owning no shares and end each day in the same position, but they make a lot of money by doing thousands of trades every day: it is a high volume, low margin business.

It’s not known how much money the HFT traders make, but whatever it is, they weren’t making it 10-15 years ago, and stock-market returns have not gone up in that time, so whatever they make has come out of someone else’s pocket.

That someone, of course is you. The buy orders that the HFT operators are front running come from the superannuation funds in which ordinary people have their money. Now when they place an order, they usually end up paying a cent more than they would have because they are buying from someone who didn’t own any shares 10 microseconds ago and only bought them to make that cent.

Should something be done to stop it? I think so, but it’s too late.

HFT firms like the privately owned and aptly named Getco (global electronic trading company) the world’s largest HFT operator produce a large amount of self- justifying research material based around the proposition that they help investors by providing extra liquidity in the market. http://www.mtpredictor.us/2099/correction-came-but-how-deep/

73% of all trades on Wall Street are Algorithmic.!!

These parasites which are feeding of the general market movements on the ASX have a grossly unfair advantage. They take the form of six banks of servers directly connected by optical fibre pipelines to the ASX servers transmitting information at the speed of light.

Who owns these servers that feed into the ASX, well that is a secret known only to the ASX and they certainly aren’t telling, but what we do know is that these machines constantly monitor order flow into the ASX servers and sophisticated programs can pick up patterns that indicate when orders have been placed. What they do, in effect, is front run, that is they buy ahead of the order and make a small spread selling into it.

This is an abridged version of an article by Alan Kohler on the drum, ULR below which prompted 141 comments which the overwhelming majority were negative towards HFT. http://www.news.com.au/business/markets/traders-plunder-super/story-e6frfm30-1111115566981

In an article entitled “ Traders plunder super “ by Adele Ferguson 6/2/2008 , before the collapse of Opes Prime, Chimaera Capital , Lift Capital and the issues with Tricom, the ASX were demanding a review of stock trading rules amidst evidence that hedge funders were borrowing shares from superannuation funds to force down prices a practice that is mauling retirement savings.

David Bryant, group executive of investments at Australian Unity, which had $6.4 billion in funds under management, likened the practice to leaving a car in a car park, which lends it to local hooligans who return it damaged. The owner is left with a mess. “It really is that simple” he said ‘And if you put margin lending into the mix the practice adds to margin calls”

A fund that wants to engaging in short selling borrows a share and then sells it in the hope of repaying the loan of the shares by buying them back cheaper at a later date’.. The practice can put downward pressure on shares, triggering margin calls for investors who have borrowed to buy stock, potentially driving shares even lower.

The ASX chief commented that short selling was not the issue but the related stock lending activity. It lacks transparency, and depending upon how many links there are in a stock lending chain that has the potential to raise systematic risk issues. Various fund managers expressed disapproval with the stock lending process stating it should be curbed and regulated and stocks outside the top 100 should not be available for lending.

Paul Fiani, the fund manager who played a big role in stopping hedge funds taking over Qantas last year said investors get paid a small fee to lend out their securities to short sellers who then proceed to destroy value of the underlying securities that the investor owns’.

Mr Fiani, who runs Integrity Investment Management in Sydney, said the ASX was a huge beneficiary of hedge fund and margin lending activity, all of which serves to increase the turnover in the market I would like to see all regulatory roles out of the ASX, so that the ASX can focus on achieving better returns for its shareholders without distraction from the regulatory responsibilities that often conflict with this objective”.. Other fund managers , including platypus chief investment officer Don Williams, said share lending should be curbed and regulated. He said stocks outside the top 100, which are liquid and more difficult to manipulate should not be available for share lending.

Senators, the above article and comments were issued one month before the ANZ bank closed down Opes Prime. The main reason I would suggest was the stock lending and short selling of the Murphy portfolio, Challenger financial. Both the ASX and ASIC should have been active in taking a stand, instead both lapsed into somnolence, and like Rip van Winkle slept for the next several years..

This was also the time when the ASX and ASIC was scuttling around the sinking carcass of Opes Prime, which was experiencing liquidity problems brought about by the ANZ. Devious proposals were floated of how to transfer items to associated companies to create a false view of the records. ASIC nor the ASXMS has never been forthcoming about these events and possibly never will be unless asked to answer these questions before a judicial inquiry with full powers of a Royal Commission. I believe both ASIC and the ASX are both bumble footing around, oblivious to market manipulation and awaiting the next market meltdown.

I would imagine that were the honourable Senators asked to describe the requirements for a person able to write the software for high-powered computer programs you collectively would be at a total loss.

An advert in the Business Spectator call for a Python Guru with experience in Numpy and Scipy and a strong quantitative mind. A leading trading firm needs you now.

A leading global trading firm that has offices in multiple locations globally and a reputation for creating robust trading strategy employed in cutting edge technologies to capture financial market opportunities. The algorithmic systems team is one of the most business integrated technology teams in the trading firm they work closely with trader’s quants and analysts to come up with and implement trading strategy. They look to utilise high and ultrahigh frequency automated trading strategies so to rapidly I identify and execute gaps in the market for capital gain.

This type of software is helping high speed traders get really rich really quickly or to put it another way this is the dark side of share trading, proof that the dice are loaded against the average investor. This is the new breed of traders, they have no clients, and they trade their own money using high- powered computer programs like F1- Formula One, so-called because it is so fast-based on secret algorithms.

Financial publications the world over have devoted countless pages to the dark arts of “high- intensity” and “low-latency” trading and the world of “dark pools”.

These high speed traders set to work, seeking to profit on tiny price differences by buying and selling shares and other financial instruments, trading in hundreds of millions of dollars per day.

Senators , some 10 years ago, before the Opes Prime collapse and pre-the GFC short selling took on a new lease of life, in fact I would liken it to the spread of “Bufo Marinus”, which you would know by its common name as the cane toad. Short selling is an insidious affliction that has mutated into a means of controlling the entire securities industry in Australia. Current reports by Credit Suisse global Wealth report showed the Australians were the wealthiest people on the planet for the third year running. The largest portion of this wealth would be retirement and superannuation savings invested in the securities industry and over the next 10 years with increased contributions by the average Aussie worker and the professionals, who manage their SMS Funds, is calculated to be in the trillions of dollars. This is a honeypot, beyond Goldilocks wildest dreams or so it would seem to the increasing number of traders and hedge fund both large and small.

To me, as a person who puts his hard earned cash into the markets, buying securities with the hope receiving dividends or capital appreciation as the business grows I find it totally unacceptable that an operator can start the day when the market opens by releasing a series of high frequency algorithmic transactions that can scalp huge sums of money and exit the market at the end of the day not owning any securities.

These people are referred to as market makers and seek to profit on tiny price differences by buying and selling shares, futures, derivatives, options, trading in hundreds of millions of dollars every day.

A key executive of one of Australia’s largest retail stockbrokers has blown the lid on what he called “markets rigging”.

Managing director for Bell Potters wholesale division, Charlie Aitken believes the “market riggers”, the so-called high frequency traders are causing the community to lose faith in the Australian and world stock markets. Aitkin believes that high frequency traders account for at least 75% of Australian stock market turnovers. While nominally the HFT traders are mostly household names amongst institutional brokers Aitken believes these brokers are acting for shadowy anonymous overseas traders.

Aitkin says that it is a national scandal that 75% of ASX turnover is being conducted by unknown people who solvency is uncertain and could cause an Australian market meltdown if they collapsed. Aitkin says these unknown people not only manipulating the markets but the main cause of the violent share price fluctuations. In turn these fluctuations driving retail investors out of share markets.

Aitkin says that the justification that the “market riggers” provide liquidity to the market was simply incorrect. There are merely taking cream of the market-it’s a form of legalised scalping.

Aitken believes that this market rigging is starving companies of capital and the huge fluctuations it creates means that rights issues can no longer be underwritten.,

High frequency trading creates false and misleading markets by being both sides of the stock.

HFT or lead bids and offers asserted becomes apparent which way the flow is moving. Not only do they pull lead bids or offers but also transact more stock going the same direction as the perceived order to try and sell this stock act to the buyer a few cents higher this exacerbates the price moves and increases the market impact. http://www.hangthebankers.com/australian-stock-market-rigged-top-insider-speaks-out/

Senators, the ASX have no interest in exercising any degree of restraint or control of any market manipulative practices. What stands between the slow and steadily consistent leaching of the Australian shareholders pool of investments, or financial Armageddon is ASIC.

From all the recent pronouncements that ASIC have issued, it’s would appear they are tolerating activities which are highly detrimental to the securities industry.

I would wager my left gonad that ASIC are fully aware of every publication issued over the last several years and are fully cognisant of the level of anger that certain members of the financial community are feeling.

The Australian, 1st February 2012 Michael Bennett. http://www.theaustralian.com.au/business/markets/short-sellers-ring-up-72bn-profit-over-18- months/story-e6frg916-1226258831302

In their second study into the implications of short interest on stocks. Royal Bank of Scotland analysts yesterday confirmed that increased short selling leads to medium term underperformance from the stock.

Short sellers made a combined $72 billion in profits in the 18 months to last month as a number of stocks short sold increased.

The study also shows the massive profits that can be made, or alpha fund managers can generate by shorting successfully.

“We estimate short sellers of the current S&P/ASX 200 constituents made profits totalling 72 billion in June 2010 to January2012 when the S&P/200 index fell 4.98 per ‘,RBS analyst Alva DeVoy said.

Basic materials and media stocks also being heavily shorted, with RBS estimating Fairfax media short sellers generated profits of $2.4 bn or 135 per cent of its market capitalisation, as its share price almost halved from about $1.50 to .71c

This pales when compared with $8.2 bn in profits generated by BHP short sellers, the $7.2bn from Rio Tinto and $4.6 bn from the Commonwealth Bank.

Senators, I bring this article to your attention to highlight the enormous sums that can be taken out of the markets by non-stockholders. Understandably these stocks had to be borrowed from an investor or fund holder, and under the stock lending regime would normally be returned in a period of time, to the lender who would have received a fee for lending, the borrower having made a profit on repurchasing at a lower price. In a sideways moving markets these tier 1 shares may be considered safe were it not for algorithmic trading which can front buying and selling and taking fractions of a cent in every share transaction.

There is a general disquiet about what is known as high-speed trading (HST) by small and large shareholders and Fund holders. The worries are spreading from the intermediate industry, with the country’s top finance chiefs (under the banner of the group of 100) about to conduct a major review of the issue. Group of 100 president and Wesfarmers chief financial officer Terry Bowen said yesterday that he was worried about the growth in electronic trading which would undermine confidence in the stock markets.

“I think the claimed benefits of increased liquidity may be undermined by the negatives” Bowen said. http://www.theaustralian.com.au/business/opinion/fast-trades-make-markets-nervous/story- e6frg9io-1226452126680#

There are four big HFT traders in Australia—Getco, Virtu BNP and Barclays-- and they account for between 30 and 60% of trade on the ASX, depending on whose figures you use.

Getco and Virtu work through Chi-X, BNP trades under the UBS broker code and Barclays the Citibank code

What worries chief financial officers such as Bowen, is because each time you buy or sell on the ASX there is potentially a Computer between you and the other side of the deal that has clipped the ticket and run.

The HFT traders over the stocks for at best a few seconds...

In light of all the evidence that has been published I find it hard to rationalise that so-called market makers add any value to the amorphous mass of funds that represents “ the market “.

Each month hundreds of millions of dollars are invested in the markets by average Australians the day and employees or self-employed running their own self-managed super funds. On the periphery we have market participants, such as hedge funders and investment houses using a high-speed trading to scalp fractions of cents in milliseconds from the market. http://www.smh.com.au/business/cash-windfall-for-tibra-trio-as-they-take-time-out-20110206- 1aid1.html http://www.smh.com.au/business/the-fastest-guns-in-the-market-20091105-i0au.html

This article about Tibra Capital is illustrative of how the collective investment pool of Australian workers savings is being raided and plundered by sophisticated means.

The article reveals how a group of young men allegedly stole high-speed trading software and managed to grow $ 6 or $7 million into an estimated $230 Million in less than five years.

As a high frequency trader, Tibra is able to test prices using superfast computerised trading programs that can issue buy and sell orders that can be withdrawn in milliseconds, giving traders an idea of the market’s willingness to trade at those prices.

Senators, testing the markets and aiding in liquidity is a story that is peddled by the ASX as they attempt to justify high-speed trading, they do not mention however the hundreds of millions of dollars that are harvested as they go about their daily work. I am of the opinion that ASIC believe “the genie is out of the bottle”, HST is now a world -wide phenomenon, certainly in advanced economies, and to eliminate it is considered impossible. I share that view, however that does not mean a degree of control cannot be exercised, and bring some balance to the financial markets.

http://www.nytimes.com/2009/07/24/business/24trading.html?_r=0

Stock Traders Find Speed Pays, in Milliseconds by Charles Duping 23/7/2009

It’s the hot new thing on Wall Street, a way for a handful of traders to master the stock exchange, peak at Investor’s orders and critics say, even subtly manipulate share prices.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs or making so much money so soon after the financial system nearly collapsed. High frequency trading is one answer.

And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes-- software that a federal prosecutors said “could manipulate markets in an unfair ways”-- is only added to the mystery. Goldman acknowledges that it profits from high frequency trading, but disputes that it has an unfair advantage.

Yet higher high-frequency specialists clearly have an edge over typical traders, let alone ordinarily investors. The SEC says it is examining certain aspects of the strategy.

High frequency traders often confound other investors by issuing and then cancelling orders almost simultaneously. Loopholes in market rules give high-speed investors and early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits-- and then disappear before anyone even knows they were there.

As electronic trading became open to anybody with a desktop computer this was considered a fresh and innovative idea however these were no match the Wall Street CompuServe’s and their powerful algorithms on the or “algo’s” in industry parlance, that can execute millions of orders a second and scanned dozens of marketplaces simultaneously, being able to spot trends and change orders and strategies within milliseconds while markets as opposed to ensure transparency by showing orders to everyone simultaneously a loophole in regulations allows marketplaces like NASDAQ to show traders some orders ahead of everyone else in exchange for a fee.(Is ASIC aware of similar arrangements entered into by the operators of the six so-called “ cuckoo “servers.

Multiply such trades across thousands of stocks a day and the profits are substantial. The research firm, Tabb Group estimates high-frequency traders generated about $21 billion in 2009.

The head of the United States mutual fund and investment company that competes with a uses high-frequency techniques, said,” we are moving towards a two-tiered marketplace with high frequency arbitrage and the other guys. People want to know they have a legitimate shot at getting a fair deal, otherwise the markets will lose their integrity”. https://www.commondreams.org/view/2012/05/04-3 (May 4 2012)

Wall Street’s Demons: A 10-point Primer.

.A good read, Citadel Hedge Fund made $1 Billion in 2008, claims to account for 10% of global equities in one day. http://www.vanityfair.com/business/2013/09/michael-lewis-goldman-sachs-programmer

A most interesting read of how the U S markets work. A lengthy but scary read of how the vampire squid controls governments in the USA. For far too long these large investment banks and hedge funds have been able to manipulate stock markets across the world for the own selfish greed.

“But when a single high-frequency trader is paid $75 million in cash for a single year of trading (as was Misha Malyshev in 2008, when he worked at Citadel) and then quits because he is “dissatisfied,” a new beast is afoot http://www.theage.com.au/business/jpmorgan-first-domino-to-fall-in-bank-settlements-20131022- 2vz7t.html

The full force of the law should be applied to miscreants who deliberately set out to willingly cheat and steal. Jail should be considered as well as restitution and penalties.

Another item which Is causing me concern is the attitude of ASIC in regard to complaints made regarding the manipulation of a small shareholding my wife and I have in Cudeco (CDU), a copper

oriented , company moving from explorer to producer . Whilst the success rate of junior minors to producers is probably about 1% ,the CEO has shown “ Aussie Tenacity “ ,in taking it from a 2c stock to a top 200 stock ,on the cusp of mining. A little background on this “sourdough miner in this clip, an unprepared speech given at the Sydney Mining Club, Feb 1st 2007. http://www.brrmedia.com/event/18718/cdu-sydney-mining-club-mr-wayne-mccrae-chairman

This is background to the blatant manipulation of the stock price this company and its shareholders have had to experience. Through investigations on the Internet and speaking to the company CEO, I came across a blog prepared by another shareholder who was so annoyed at not only was the price been blatantly manipulated but that ASIC would not respond to dozens of complaints. The web address is below. http://www.scribd.com/doc/160561633/8-1-ASIC-Complaint-2013-1 http://www.scribd.com/doc/175891474/ASIC-Complaint-2013-3-CuDeco-Trading-Issues-January- Through-May-2013

The detailed research in this blog if prepared by a forensic accountant could well be approaching seven figures, and that this information has been provided to ASIC and at no charge I find simply amazing. Only ASIC have the authority to investigate further beyond this document, corroborate what appears to be market manipulation, lay the necessary charges and obtain a conviction(s).

It concerns me greatly that our corporate policeman is reluctant to use the powers he has whilst still demanding even more power. ASIC Commissioner, Greg Tanzer told a Parliamentary inquiry into national security that without access to logs of phone and Internet usage, the contents of emails, texts messages and Internet messaging conversations of individuals it was like fighting ”with one hand tied behind our backs”. I feel ASIC have to demonstrate that they can use the wide reaching powers they already have. Apprehending relatively small operators using CFDs for insider trading where they have profited by $1 million or so appears inconsequential when compared with market rigging in which hundreds of millions of dollars are being siphoned out of the market place on a daily basis. http://www.minterellison.com/media/20130703_court_hammer_share_price_actions/

The ruling really explains the concept of market manipulation significant “It gives ASIC a powerful tool as the principal market regulator”.

ASIC would be well aware of a recent High Court decision that has held that conduct with a dominant purpose of maintaining a price level of public securities constitutes unlawful manipulation. The prosecution was under section 1041A of the Corporations Act 2001. This prohibits trading which is or is likely to have the effect of creating or maintaining” an artificial price” for financial products

I would invite you to examine Page 6 of the Cudeco trading issues complaints January through May 2013. “The largest seller of down tick trades by a very wide margin, USB securities, averaged only 58 shares for the majority of its cell trades that had the effect of reducing the Cudeco share price,

I would make mention of my unsuccessful claim against the SEGC (Securities Guarantee Corporation) whereby I was deceived Opes Prime into transferring my securities by wilful misrepresentation, and have my claim rejected by the SEGC/ASX , who were relying on Finkelstein’s J decision re- Beconwood, that no claims were to be made in respect of Opes Prime creditors. The SCGC whilst having its own board of directors appear to be controlled by the ASX. I was less than impressed to find that two directors Russell Aboud and Shane Finemore had recently resigned from the ASX board as a result of the firm they founded Manikay Partners had been fined $2.6 million as a direct result of a regulatory crackdown in New York that had caught a number of firms breaching the regulations on short selling. Examining the previous history of these two gentlemen, both had involvement with UBS; I would hope there is no current involvement between UBS and Manikay .This could be an exercise for ASIC .Also earning his directors fees is Peter Marriot, the ex ANZ finance chief who was on the banks credit and risk control at the time of the Opes Grand theft.

If these three gentlemen are representative of the ASX board I am singularly unimpressed, I would be interested to find out if an enquiry is called into the Opes Prime liquidation, what were the board discussions regarding rejection of claims by Opes Prime creditors?.

An eminent QC made a number of enquiries and had discussions with the SEGC regarding claims

The Australian Shareholders Association submitted a paper on liquidity and high frequency trading to ASIC which I felt was well structured in its presentation. This submission covered a range of items that it considered unfair and do not appear to have been adequately addressed.

These listed in the conclusion on page 5, to which I am in total agreement.

Google –Australian Shareholders Association –Dark Liquidity and High Frequency Trading.

ASIC 18 March Report and Consultation Paper 202.

“At the present time we believe the market is not a level playing field for retail investors and we ask ASIC to examine and rectify the matters we have raised”

Ian Curry Chairman.

ASIC’s response to these issues I regard as being nothing more than “A sop to Cerberus”. Its comments upon high frequency trading which become relevant on 9th of February 2014.

“Market participants must consider additional circumstances in considering whether a false or misleading market has been created: the frequency with which orders placed, the volume of products that on the subject of each order and the extent to which orders are made or cancel or amended to the orders executed”

“Manipulative trading rules harmonised-market participants of the ASX 24 markets will need to comply with the requirements to prevent manipulated trading the same as currently applied to the ASX and CHI-X markets from 9th February 2014”.

Comment--what a load of rubbish! There are serious issues with trading currently existing on the ASX and ASIC are giving people who I regard as scum suckers another six months to continue their nefarious activities. Who profits by the short selling practice, in the main it is borrowers who have no

vested interest in the stock, just a desire to depreciate its market price, frequently using internet chat sites spreading spurious rumours, somewhat akin to writing graffiti on a toilet wall. Using the anonymity of the net it is easy to spread false and misleading statements which can cause damage to a company’s share price.

If ASIC was genuinely interested in ensuring the ASX was open and transparent there is one item it could consider, the introduction of the financial Transaction Tax to target securities lending. The introduction of an FFT would discourage excessive short-term trading, and allow ASIC to recoup costs necessary to maintain market integrity. There will of course be howls of protest from the institutions and superannuation funds who willingly lend securities receive and receive a payment for doing so, however to counterbalance the protests it will be apparent that Australia may have the most open and transparent stock market in the world. The damaging impact of short-selling which is used to disguise other forms of stock manipulation will be greatly reduced if not eliminated. Spurious claims which are made claiming HFT increases liquidity have to be counterbalanced against the destruction practices that are being caused in the market place. HFT enables short sellers to manipulate the market by various means with apparent ease. As the manipulation is so wide spread across the ASX ,I seriously wonder if ASIC have the resources to tackle the problem. It should be unnecessary to approach the government for additional funds to combat the problem, taxation of HST is the answer , expect to hear squeals of protest, but there is simply no evidence that conducting a fair ,honest and transparent market will drive genuine investors ,large or small away from the market. In all probability these HST/Market Manipulators are able to channel their daily “earning’s” ,profits or how you choose to describe it, to a tax haven. All governments need to increase their revenue and there are no better targets than those that offer no financial benefit whatsoever to the community. http://www.theaustralian.com.au/business/opes-ex-chair-i-quit-on-the-news/story-e6frgajx- 1111115948557

A former colleague of Mr Smith stated that he had moved from Britain to Australia in the mid-1980s and joined broker Ord Minnett where he was involved in the practice of stock lending.

“In those days it wasn’t about going short” said one observer, “It was about delivering stock on time”. “

‘If people couldn’t deliver the stock on time they borrowed the stock and everything will be sorted out very quickly’

“It has moved over the last 15 years from a facility of convenience to a facility of terror”.

Around the same time Dean Boyle, the chief operating officer of Opes Prime Stockbroking, wrote a letter to the Australian Financial Review explaining the benefits of covered short selling in the Australian market.

“This technique is not subject to the ASX short selling rules” he wrote.

“Australian investors have a unique opportunity in global terms as both naked and covered short selling is allowed”.

“But the lack of reliable information about short selling will continue to befuddle investors who need to know exactly what they are getting into”.

It could certainly help to rein in so-called ”market making” which allows firms to run riot across the securities market scalping cents or fractions thereof from each individual stock traded daily which may run into billions. It would also calm proprietary trading by the banks which there is very known.

Is it likely to happen? , well it may be a battle between good and evil, because in reality the Banks and the Securities Industry, (read that as the financial elite) are in total control. They usurp the government of the day, and dance to the beat of their own drum. Incoming politicians who are rookies with their training wheels on are largely spoon fed and brainwashed by the various government departments and agencies as they transition from the opposition benches.

Will things ever change, somehow I don’t think so the same players seem to change seats with monotonous regularity. Reading the press reports over the last seven or eight years all sorts of promises have been made but in fact very little has changed.

Memorandum of understanding, ASIC & APRA 12 Oct 1998 sets out how the two bodies will cooperate in the regulation of the Australian financial system, APRA responsible for prudential supervision of banks, life general insurance companies and superannuation. ASIC responsible for monitoring and promoting market integrity and consumer protection in relation to the Australian financial system, the provision of financial services and the payment system.

Memorandum of understanding, ASIC & APRA 18 May 2010 APRA responsible for Prudential supervision of banks, building societies and credit unions, life in general insurance companies and superannuation funds and the trust, also responsible for administering the financial claims scheme ASIC is responsible for monitoring, regulating and enforcing corporations Law and financial services and promoting market integrity and consumer protection across the financial services and payment including financial markets and trustee companies. Also responsible for administering the National consumer credit legislation, including licensing and conduct obligations on credit providers and intermediaries.

Well somewhere down the track somebody appears to have taken their eye off the ball if indeed they ever had their eye on the ball. In the boom time of 2006-7 when markets were overheating the boys must’ve been out to lunch, and a long one at that. It greatly concerns me that Opes Prime had warned both the ASX and ASIC in February 2008 that it was in breach of its liquidity requirements. Both of these organisations fail to act, indeed the ASX did a site visit to Opes Prime in October 2007 and failed to discover any irregularities , indeed according to one report Opes was encouraged by the ASX to exploit a loophole which allowed the collapsing broker to funnel $1.3 billion in liabilities to a company that did not require a AFS (Australian financial services ) licence .ASIC the supposed corporate watchdog knew this and elected to do nothing .in fact both ASIC and the ASX were fully aware as were most stockbrokers , that Opes Prime were touting for business , and one of the products on offer was margin lending but in reality people were being tricked into entering a securities lending platform ..

The link below gives an indication of the shenanigans between the ASX and ASIC.

http://www.theaustralian.com.au/archive/business-old/watchdog-hangs-back-on-asx-report- card/story-e6frg9j6-1111116427733

‘With volatility at record highs, hedge funds, short selling companies using stock borrowed from superannuation funds, and flagrant disregard of continuous disclosure rules, the equity market is facing a crisis in credibility’.

The travesty dates back to Tricom’s inability to settle with the ASX on time in late January due to problems with a $1.5 billion securities loan book, along with margin calls on $100 million worth of Tricom .stock. This put the wind up investors and brokers who question the effectiveness of the regulator, particularly when two weeks later, Tricom was still unable to pay out $200 million of stock to its clients on security loans that had been refinanced with other brokers.

The Tricom saga was followed by the Opes Prime disasters that wreaked even more havoc on the market. Since then, the market has been operating in a vacuum and the regulators appear to have sat back and done very little except put out a joint statement reminding companies of the duties.

The way ASIC have interfered in the Opes Prime insolvency has disadvantaged great number of Opes Prime creditors. Mediations were going nowhere, the liquidator was prepared to issue proceedings against the ANZ bank, ASIC became obstructive, would not support the proceedings and effectively compelling the liquidator to accept settlement on the banks terms.

When the small number of retail creditors made claims against the Stock Exchange Guarantee Fund they were rejected on the basis of the Beconwood ruling by Finkelstein J. http://www.smh.com.au/business/how-well-should-asic-shelter-retail-investors-20100628- zf79.html

ASIC, over the past few years has sought to distance itself from items and events, that were or should have been on its radar requiring its attention. The above ULR covers comments made by the chairman of ASIC in June 2010.I am sorry to say ASIC have been found wanting in nearly every one of the points highlighted

Disclosure ASIC has pushed disclosure regime to the limit (Gippsland Financial Investments, Banksia Securities. )

Enforcement ASIC takes numerous proceedings to deter illegal conduct. These range from banning and winding up unregistered managed investment schemes through two recent record numbers of criminal proceedings against those involved in market manipulation such as insider trading which prejudice the interests of retail investors. After reading section 1.4 in the scheme of company arrangement document regarding lack of intention to lay prosecution against what was considered a managed investment scheme, how ASIC expect to be taken seriously. Regarding proceedings against market manipulation, ASIC has picked the low and easy fruit. Superficially the unenlightened observer would think our corporate regulator was on top of his game. Far from it, every single day the market is open million are being skimmed off , masked under the guise of shortselling.

Compensation, I don’t believe people affected in the Storm Financial imbroglio would share the regulators thoughts on recovery. Nor would the victims of Opes Prime who are now realise to their

chagrin that ASIC was never in there to help them, but to ensure that the ANZ bank came out smelling of roses when it was under attack from short selling and to give cover after it had committed an act of gross financial deceit.

All in all, financial markets are fraught with danger and we must not enter if we do not understand the hazards that are omnipresent. National events of significance, government decisions and climatic cycles have a great impact on the market, but working silently, unobtrusively, are dark forces controlling share prices. Manipulation is rife across the ASX, stocks are manipulated or sold down on the slightest news. Any investor can quote the detail. Share lending must be one of the major causes of such a present share market condition on the ASX. This lending practice must be strictly regulated in as much as shares Not be lent without the true Owner’s consent. The concept of fair value has been diminished in many sections of the market ,profits are being made on computer generated programs , using intellect to value future projects ,based on company supplied information ,cannot compete with robot computers sending algorithmic buy and sell orders to lower the prices .

As a direct result of ASIC interfering with the Opes Prime settlement between the liquidator and the ANZ bank, I sought recompense from the Securities Exchange Guarantee Fund (SEGC) under the relevant Corporations Act which has been rejected both on the initial application and subsequent submission.

This inquiry is specifically aimed at the conduct and misconduct of ASIC as perceived by members of the general public and institutions which represents the public. The issues which I have with the ASX and its bastard lovechild, the SEGC will hopefully be the subject of a further Senate enquiry. I have a variety of issues that must be addressed, including an examination of the corporations act in relation to claims, which to my way of thinking is no longer relevant to the current times.

The submission by the SEGC dated January 2004 regarding compensation for loss in the financial services sector should be revisited. The conditions for making a claim are far too restrictive.

I hold the ASX and ASIC equally culpable alongside the ANZ bank for allowing the Opes Prime Ltd group to have continued to exist in its format until it imploded. Every broker who likes to consider himself a professional had full knowledge that they were guiding their clients into a scheme which was simply downright dangerous. The incentives to receive commissions on introductions, refunds of interest rates on margin accounts overrode what was in the best interests of their clients. The scheme of company arrangement drawn up between Allen’s and the ANZ specifically prevented broker’s clients from seeking restitution as a result of either greed or ignorance on the part of the brokers.

What has been learnt from this Opes Prime snafu as John Durie in the Australian so succinctly described it. Possibly very little, the same pigs have the same snouts in the same troughs.

The corporate swill , the top end of town, the regulatory authorities have walked away from this affair patting themselves on the back for a job well done, and consigning it to the dustbin of history, the top end of town who control the financial system continue to exploit it with impunity as if it

were a God given right, do a coterie representing the Melbourne business elite’s exercise such control they are able literally to thumb their nose at all who seek to challenge them.

Well distinguished Senators, I for one intend that this matter receives a full airing, comments by Mr Michael Smith, CEO of the ANZ bank made stating that “{when you shake the tree you don’t know what will fall out”) have proved to be totally false. As I have mentioned before this was a carefully planned scheme to advantage the bank at the expense of all the Opes Prime creditors.

A distinguished barrister, a QC, wrote a lengthy and detailed letter to all the directors of the ANZ and to Merrill Lynch by name and private address, together with a similar letter to the managing director of the ASX ,and to the partners of the receivers and administrators on behalf of a small group of retail creditors. It explained the circumstances and the unconscionability of the actions taken over several pages. All this was to no avail, as was visitation for discussions with the ANZ bank.

It is my sincere wish and also that of a great number of Opes Prime creditors that this committee at the conclusion of its investigation recommends a review of the Opes Prime insolvency.

The review should be conducted by a retired judge, with the powers of a Royal commission to examine the performance of ASIC and the involvement of any other persons who may be able to assist in establishing the truth behind this insolvency.

This Opes Prime affair has all the hallmarks of corruption and scandal going right to the heart of good federal governance and only publicly ventilating the actions of ASIC can this act of gross malfeasance be expunged.

The attached links portray a clear overview of the events leading to the demise of Opes Prime and notwithstanding the fact that the firm was clearly insolvent several months prior to the 28th of March 2008, it is the manner in which the insolvency was conducted.

I am greatly concerned that ASIC is either underfunded or simply slothful, as when actionable items are reported, either no action is taken or belated action when sufficient ire is raised.

The subject of market manipulation which when combined with short selling is a complex matter, detection and prosecution can only be achieved by an authority that has the dedication the ability and the resources. Sadly I believe ASIC have neither of these qualities.

Hundreds of millions, if not billions of dollars are being removed from the ASX every year by persons or corporations whose identity is not readily discernible. ASIC the only persons who can undertake detailed investigations and prevent this from occurring.

I sincerely hope this committee can improve the performance of ASIC for the betterment and benefits of all Australians who have their future invested through the ASX.

Australia requires and deserves better than it is currently receiving in respect of market enforcement and insolvency regulation.