Sacre Bleu! Le Bail-out Ruffles Us Feathers

The Age

Thursday July 17, 2008

Mark Hawthorne

BLUE-CHIP stocks are tumbling, the US Government is in crisis talks over home loans, and armed police are standing guard out the front of US IndyMac branches amid a run on the bank.

For those who like to try to pick the bottom of a market, signs are this might be a good time to jump.

Just look at some of the comments that came out of this week's Congressional hearings, at which Treasury Secretary Henry Paulson had to face the music over his plan to bail out Fannie May and Freddie Mac with taxpayer money.

"I fear we're sitting on a financial powder keg," murmured Republican senator Richard Shelby.

"When I picked up my newspaper yesterday, I thought I woke up in France," grumbled senator Jim Bunning. "But no, it turns out socialism is alive and well in America."

While mums and dads queue outside IndyMac Bank branches across the US, Wall Street has decided it's the season to go bear hunting.

On the Securities and Exchange Commission's hit list are investors that go by the amusing title of "naked short-sellers".

Short-sellers borrow stock and sell it - betting that the share price will drop. If right, they can buy back shares at the lower price, repay who they borrowed from, and make a profit on the difference. Naked short-sellers do exactly the same thing, except that they don't actually bother about owning the shares.

In a sign that market armageddon is nigh, SEC chairman Christopher Cox announced plans to go bear hunting - the SEC will curtail short-selling in major financial company shares.

That list of 19 companies includes Fannie Mae, Freddie Mac, Bank of America, Citigroup, Lehman Bros and Credit Suisse.

The SEC has already charged two short-sellers for market manipulation this year - for spreading false rumours about financial institutions in the hope that their share price will fall. The latest move ensures more will come.

Miner debt call

ANOTHER week, another Opes Prime-related courtroom drama.

Listed mining explorer Admiralty Resources has been hit with a demand to pay back $10.39 million that it borrowed on June 4, 2007, from Hawkswood Investments.

The demand has come from Salvatore Algeri and Chris Campbell of Deloitte, the receivers of both Hawkswood and Opes Prime.

Hawkswood is the investment company owned by Opes Prime directors Lauri Emini, Anthony Blumberg and Julian Smith.

According to court documents, the loan was ostensibly working capital to help Admiralty expand its mining venture at Cia Minera Santa Barbera in Chile.

According to an affidavit filed by Admiralty boss Phillip Thomas, and another by Blumberg, the loan was extended on June 4 last year so that Admiralty did not have to pay until it either received its first income from the mine, or by September 30 this year.

According to his affidavit, Blumberg stated that he executed that loan agreement by Hawkswood to Admiralty - a listed company that he was also a shareholder and director of. But Hawkswood's receivers say that Opes Prime going belly-up changed that and hit Admiralty with a demand for the money in June.

They say the debt was payable at June 5. If the receivers are right, it will leave a rather large hole in the books of Admiralty.

Blumberg quit as a director of Admiralty in March this year.

A conflict of interest, perhaps? Of course not - Blumberg cited his "significant involvement in the pending float of Opes Prime, one of Australia's largest and most successful margin lending and internet stockbroking organisations" for his departure from the Admiralty board.

Blumberg must have plenty of free time these days, now that Opes has crashed, and its planned float is a dashed dream. Wonder if the board of Admiralty is pondering his return?

Living technology

CREDITORS of Bill Express will meet tomorrow at the Marriott Hotel on Lonsdale Street to hear the latest news on the company's fate.

While Bill Express sinks further into the mire in Australia, Full Disclosure notes the apparent success of a near-identical company operating in Dubai and, apparently, the Philippines using the very technology that supported the Bill Express network.

A company called ipay4all.com operates using technology developed by Dial Time - the company from which Bill Express was born.

How identical? Well, until this week, Bill Express and its holding company, On Q, were listed as "strategic partners" of ipay Holding, the Dubai-based company that runs ipay4all.com.

All mention of the Australian companies seems to have gone missing from the iPay4all.com website this week. Thanks to Google, it's all cached, and can be found.

The main shareholder of iPay Holding is Dubai-based Al Othman Group - the purported white knight that pulled the pin on Bill Express last week.

Full Disclosure also notes that Brian Christiansen, brother of Bill Express chief executive Ian Christiansen and recently deceased On Q chairman Hal Christiansen, just happens to live and work in the Philippines.

It makes you wonder if administrators PPB might be able to track down some overseas value for Bill Express shareholders.

Just don't hope to discover who owns the ipay4all website. It's registered to Whois Privacy Protection Service Inc of Washington, a company that helps keep the identity of website owners away from prying eyes.

© 2008 The Age

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