Topics: Debt, Merrill Lynch, Stock broker Pages: 3 (608 words) Published: April 2, 2013
The directors of Opes Prime, the stockbroker whose 2008 collapse revealed risk management failures at a major bank and a stash of Maseratis, are facing potential jail terms.

Julian Smith, who once headed Australia's peak body representing the stock-lending industry, was charged and appeared in Sydney's Downing Centre Local Court on Friday.


Fellow Opes Prime director Anthony Blumberg was charged and appeared in Melbourne Magistrates Court yesterday while the third director, Laurie Emini, was charged on summons.

All three face two offences of breaching their directors' duties and have surrendered their passports. If convicted they face a maximum penalty of five years in jail.

Creditors who lost money in the collapse were unimpressed with news of the charges, saying it would not leave them any better off financially. Those who spoke to The Australian Financial Review immediately turned the focus onto Australia and New Zealand Banking Group, Opes Prime's chief financier and a key player in its downfall.

"If criminal charges have been laid against the directors then surely now we should see transactions like mine being reversed," said Pat Loughan, a civil contractor who lost his life savings. "The association that the bank had with the directors was intimate."

Opes Prime trail-blazed a unique form of margin lending backed by stock lending agreements. Investors handed over legal title to their share portfolios in return for money to buy more shares. When the broker collapsed, the fine print of those agreements meant ANZ and Merrill Lynch, another financier, had complete control of investors' shares.

The banks sold off the shares, along with a collection of Maserati and Ferrari cars that had been imported by the directors under a side business, to recover their own debts. Investors shouldered $630 million in losses.

The criminal charges relate to a $95 million loan the directors took from ANZ during the broker's dying days in the hope that...
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