Alittle money has a wonderfully restorative effect on a culture. While the Bendigo Mining plotters were coming unstuck, happiness was breaking out all over a rising share market. For six years, market players had sat stranded as the stock market went sideways. The All Ordinaries Index had ended each financial year since the 1987 Crash back at 1500. But now the old crocodiles in the trading rooms felt the wash of a rising tide. By December, the All Ords had topped 2000 for the first time since Black Tuesday in 1987. Brent Potts’s Swiss bank account, that bellwether of economic change, reflected the giddy new era. Rivkin’s old partner had been reduced to investing his offshore cash on the money market, with an occasional trade through Remgus, his Bank Leumi account with a Liechtenstein address. All that changed as the market turned. By July, Potts was using Remgus almost daily to dip into mining stocks like Zapopan, Coplex Resources and Dominion Mining, aided by the amiable Ernst Imfeld, the client manager at Bank Leumi.
It was a time for new beginnings. In April, Michael Kroger put his political ambitions on hold and opened a boutique merchant bank, J.T. Campbell. Rodney Adler was his first client. Life was also looking up for another of Adler’s partners, Phuong Ngo, who prevailed upon Governor-General Bill Hayden to open the Mekong Club in Cabramatta on 6 August. Adler was encouraged enough to go into a Vietnamese newspaper start-up with Ngo.
Market booms—and the traders who make them—follow a set pattern. As former ASX Surveillance Director Jim Berry would put it: ‘The guys are back. They’re like fish who sit in the mud while it all dries out but then it rains again and they’re swimming around. And they’re shoaling.’
There is an old British investors’ joke that goes: What do you call an Australian mining operation? Answer: A hole in the ground owned by a liar. That’s the British for you—they have no imagination. Two centuries have established the surest way to success on the Australian share market is to build a better gold mine. In early 1993, Australia’s favourite ultra-Orthodox mining entrepreneur went one better than this. Rabbi Joe Gutnick produced, with a little flourish . . . a diamond mine. Actually it was pretty tight timing because, after losing his shirt in the 1987 Crash, Gutnick had remade his fortune supported by a prophecy from Lubavitcher Rebbe Menachem Schneerson in New York that Gutnick would find huge gold and diamond deposits by 1 October 1993. And who would want to mess with the Rebbe?
Gutnick had wangled the first leg of the prophecy when he snared one of the country’s biggest gold prospects, Bronzewing, near Mount Keith in Western Australia. His Great Central Mines company then announced it had found a handful of tiny diamonds at its Nabberu joint venture in Western Australia. The stock soared to $18 and Great Central’s market value went to more than $1 billion. Regrettably, it turned out that the micro-diamonds he discovered were so small and sparse that laboratory staff were still using optical equipment to try to find them again after one of them sneezed. But Gutnick’s supporters decided that it was close enough to fulfil the prophecy.
By now gold mines were so last week. Even before the market had thrown itself into micro-diamond madness, there had been a new tack . . . Diamonds at Sea! In December 1993, the share price of a tiny company called Cambridge Gulf Exploration took off amid wild rumours that it had found diamonds the size of golfballs in the Joseph Bonaparte Gulf off Australia’s northern coast. After the stock exchange suspended the shares, Cambridge reported some very promising results from its dredge, the Lady S—so promising that the company might be able to earn up to US$1.3 billion profit a year from diamonds, plus another US$135 million from mining gold, platinum and palladium. Cambridge shares surged when they came out of suspension on 23 December. By the following day, the company’s shares were worth $417 million, before they began a slow descent.
Unhappily, the diamonds the Lady S had found were worth only $815 and it turned out later the crew had made a mistake and had been dredging on someone else’s lease. As Christmas Eve 1993 rolled around, the record for spec stocks was looking a little tatty. Reopening old gold workings, Lubavitch prophecies for microminerals and swimming for diamonds were all investment concepts whose time had not yet come. Who would believe then that on this very night it would turn out that the best little spec stock of the year belonged to Rene Rivkin, who had managed to turn his printing business into a veritable El Dorado.
On Monday 4 October—as Charles Sweeney began worrying about his quick turn in Bendigo Mining; as Kerry Packer was deciding he had really gone off foreign currency trading; as Joe Gutnick was sweating on the Rebbe’s prophecies; and as the crew of the Lady S on Bonaparte Gulf were getting mixed up about where to take gravel samples—no one noticed a new addition to the workforce. Gordon Wood, indolent gym instructor turned man about town, put on his best togs and set off to report to his new boss, Rene Rivkin.
Caroline Byrne had left Wood a month before. She told her father Tony Byrne, who was a property manager, that Wood spent his time doing nothing and going nowhere. ‘There’s no future with Gordon,’ she told him. ‘He lies in bed until lunchtime [and] apart from a few gym classes he doesn’t work.’ Wood was distraught over the breakup and even approached Tony Byrne for a job as a concierge. At thirty, Wood was older than most of the crowd he hung out with at City Gym and Joe’s Cafe. He was born in Bath in 1962. His family had emigrated to South Africa, then moved to Queensland in 1978. His friends would find the stories he told about his past colourful, but hard to believe. ‘He said he lived in Cape Town—he said he went to the Bishops School there—you know, the elite school,’ an English friend said later. ‘Yet he also went to a grammar school here. A lot of the things didn’t make sense. I could never distinguish what was true . . . He’s obviously incredibly intelligent.’
In the seven years since he had graduated from the University of Sydney with a Bachelor of Economics in 1986, Wood had acted in small bit parts in television, worked as a ticket seller at the Sydney Opera House and later an aerobics instructor at Club World of Fitness, and been a personal trainer for patrons of City Gym. While popular with women, they sometimes had an ambivalent response to his tall, blond physique. ‘He’s obviously incredibly good looking,’ said a workmate who knew him in Britain in the late 1990s. ‘My wife said he was probably gay. He was so fastidious. The way he would shine his shoes and wear clothes that were fitted. His tie he would tie and retie until it was absolutely right. He was always coming up and adjusting the knot on my tie. He was always commenting on what men were wearing. The males, not the women.’
Almost immediately after breaking up with Wood, Caroline Byrne began a new relationship with a Polish baker and part-time model called Adam Baczynski. Meanwhile, Wood had heard that Rivkin needed a replacement for George Freris, his twenty-five-year-old driver/gofer. Big George Freris, who would remain a Rivkin favourite for the next decade, was the smartest of the young men hanging out at Joe’s Cafe and City Gym. He was a former nightclub bouncer with a slow John Travolta smile and a knockabout past. His curriculum vitae included experience in building work. His sometime business partner, John Compagnon, ran a string of companies with names like ‘Compagnon’s Commandos Plant and Equipment Hire’, ‘Blasting Dynamics’ and ‘Demolition Engineering’. Freris was a man of many talents and, in September 1993, Rivkin offered to set him up as a tattooist. In November, Freris received planning authority to open his tattoo shop, Skins and Needles, which he ran with a New Zealand friend, Gary Redding. Meanwhile, auditions were on for Big George’s replacement as Rivkin’s gofer. So Gordon Wood put on his briefest gym outfit and headed off to Joe’s Cafe. Rivkin already knew Wood— that spring he had taken half a dozen of the Joe’s Cafe crowd on a holiday with him to North Queensland, including Wood. Gordon caught Rivkin’s fancy, and life suddenly changed.
It had been a quiet year for Rivkin, with nothing much to do besides overseeing a rather mundane printing operation. Stroika had renamed itself Offset Alpine Printing Group. Offset Alpine/ Stroika had made two capital repayments to shareholders in 1992. This had channelled $8 million into Rivkin’s Swiss accounts and $4 million to his Australian company, Timsa 69. But Rivkin was still deep in debt to FAI and to Rodney Adler, although he would never admit it to anyone. He still had his boat, the Troika (the precursor to Dajoshadita), and his London apartment at St James, and could always be counted on for a story about his latest extravagance, but his Swiss bank accounts told a different story. Underneath all the appearances Rivkin was basically broke, at least by his standards. He had no serious money and for the next two years he would fund his lifestyle by selling Offset Alpine shares. Timsa 69 would sell about $500 000 in Offset Alpine shares every six months. According to Timsa’s corporate filings the shares were supposed to be still under mortgage to FAI. That must have been an oversight. Rivkin seems to have forgotten the paperwork again.
In fact, Rivkin was selling these shares to himself. On 21 September 1993, Timsa 69 sold 200 000 Offset Alpine shares for $176 000. The buyer was Rivkin’s Stilton account at Bank Leumi, which shows an entry of $179 202.41 for Offset Alpine shares. So the share sales went on, month by month, sometimes selling to Bank Leumi, sometimes to his accounts at EBC Zurich as Ernst Imfeld and Axel Fundulus, his accommodating Swiss bankers, advanced him the money to buy the shares. Really what Rivkin was doing was borrowing money in Switzerland and transferring it to Australia to finance his lifestyle, a transfer he disguised as share sales. This wasn’t just self-indulgence. Rivkin needed the money to keep up the appearance of wealth and success until better times came. Rivkin’s life was about playing for time.
In mid-1993, Rivkin had smelt the change in the market. He did a few quick trades in his Bank Leumi account in stocks like Independent Holdings, Valiant Consolidated and Hydromet. Then he made a shrewd options play on Advance Bank, where his friend Robert Whyte had made a lot of money, and cleared $102 000 five months later. It was hardly Master of the Universe stuff. But Rivkin didn’t have much money to trade with. In fact, he had little to keep him occupied besides his new friends at Joe’s Cafe, who still treated him like royalty when he threw a little pocket money their way. They were the very best of friends. They were so easy to please.
Offset Alpine had ordered $11 million of new presses to replace its ageing equipment to be able to meet the new printing contract with Australian Consolidated Press. The new presses were due to arrive in early 1994. When the company’s insurance policy fell due for renewal on 31 October, it made sense that the new policy would cover the replacement value of Offset’s old presses—$6 million for the building and $33 million for plant and equipment—rather than their actual value. The presses were in the books at just $3 million. The policy also covered the cost of any lost business while a claim was processed. Offset’s insurance broker, Sedgwick James, placed the policy with Commercial Union Assurance Co. of Australia (which would later become CGU, and later again be part of IAG, the former NRMA Insurance), which took 33 per cent of the cover. FAI took 7 per cent of the slip.
There was nothing unusual in this. Offset Alpine’s deputy chairman, Bruce Corlett, had resisted the temptation to steer a little insurance business towards his company, FAI. Corlett said later that he did not even know that Offset Alpine had taken out new insurance: ‘I had no involvement at any stage in FAI’s general insurance underwriting activities.’
There had been some unhappiness reported at FAI over the policy. An FAI manager who inspected the plant complained that the equipment was old, the presses badly laid out and the operation antiquated. ‘As soon as we got there we knew the place was a very ordinary insurance proposition,’ the manager told Jennifer Sexton of the Weekend Australian. In a statutory declaration quoted by Sexton, the unnamed manager said, ‘In my report to my superiors I advised that Offset Alpine represented the highest possible insurance risk and I therefore recommended against writing the business.’ Perhaps for this reason FAI reinsured most of its cover, cutting its own share of any payout to less than 1 per cent.
The last member of the family that founded the Offset business, thirty-six-year-old Garth Hackett, left the company on 30 November. His father Ron had left on 30 June. With challenging times ahead, it was not unusual for the Offset board to issue share options on 1 December to two directors. Kerry Packer’s cousin Rob Henty, who had joined the Offset board in June, received 50 000 options exercisable at 77 cents. Bruce Corlett picked up 200 000 options. Similarly there was nothing unusual in issuing 500 000 options to Offset employees on 23 December. It was a little unconventional that no options went to the other two board members—Paul Obeid and the chairman, Rene Rivkin—but then again Rivkin probably didn’t need any incentivising because by this time he secretly controlled 66 per cent of the company. He had sold shares in Australia, but his Swiss holdings now accounted for 48 per cent of the share register. Obeid, however, must have later regretted that he did not insist on being part of the options pool.
The annual meeting had approved a share issue to help pay for the cost of the new presses. On 23 December, Offset announced it had placed 4 095 000 shares at 69 cents. The biggest parcel would go to FAI, which was putting up $1 million for 1.45 million new shares. Bankers Trust put its hand up for 800 000 shares.
Friday 24 December was a scorching summer day as lastminute Christmas shoppers formed queues in stores across the city. Trying to get service on Christmas Eve is a long row to ho, ho, ho. The buying was no less frantic on the stock market, where Cambridge Gulf was defying gravity to reach its all-time high. The Adler family had their own concerns. Lyndi Adler was busy signing a cheque for $150 000 to the Mekong Club. Nine months later, when it came to light during a Liquor Administration Board investigation, the cheque would raise eyebrows. The cheque, which helped the club pay licensing fees, was banked as petty cash and noted as a director’s loan in the club accounts, which it clearly wasn’t. In any case, loaning money to Phuong Ngo at the Mekong Club was a risky business.
Nine weeks later, on 3 March 1994, Vinh Loc Nguyen, a Vietnamese businessman who was pressing Ngo to repay a $300 000 loan, was forced at knifepoint in Ngo’s office to forgive the debt and sign over another $300 000. Then he had his right hand staked to a telephone book with a hunting knife. Ngo gave his victim a towel and a band-aid, Malcolm Brown reported in the Sydney Morning Herald. Ngo also had some innovative ideas about how to use the petty cash drawer. Apart from extracting cash advances of $68 000 from the club, in April 1994 Ngo used Mekong Club funds to buy a .22 Ruger, a .22 rifle, a .32 calibre pistol and, later, a .45 Magnum. He spent that month organising his first three failed attempts to shoot the State Member for Cabramatta, John Newman, whom Ngo didn’t really like. Clearly Lyndi Adler had no idea of any of this when she signed her cheque. Neither did her husband Rodney. Somewhere along the line, his Rolodex of business partners had lost the quality control button.
None of these matters troubled the Offset Alpine staff as they closed up the plant at Silverwater for the Christmas break after a barbeque for the 150 staff in the loading dock. The company ran twenty-two hours a day year round, apart from this two-day break. There was a big order to fulfil on the day after Boxing Day; in preparation, double quantities of printers’ ink, rags and the fortylitre cans of solvent used in the offset process had been grouped around each of the eight presses ready for use. Staff had gone home by 4.30 p.m. The head cleaner, Tae Hun Yung, was the last out; he turned off the lights and locked up at 6.30 p.m.
The fire alarm inside the Offset Alpine building went off at 11.04 p.m. A fire had broken out in a drum that contained rubbish collected from the barbeque, plus some old rags and solvent. While parents across the city were wrapping up presents and practising Santa impressions, firemen on seventeen appliances from fourteen stations battled a fierce blaze at the plant for more than two hours. ‘The fire quickly increased in magnitude up to the second floor and through the roof,’ Silverwater fire station officer Dennis Hinchey said in a report for police. ‘The building was eventually totally destroyed.’
By the time the fire was finally extinguished at 1.20 a.m., the intense heat had melted the high-quality steel of each of the presses. While the new pre-press equipment that had just been installed was untouched, the old presses were a write-off. The police report described the cause of the fire as unknown. ‘Due to the intensity of the fire, causing major structural collapse of the roof over the greater portion of the building, examination of the fire scene was hampered,’ district fire officer William Powell said in his initial report. A week later he concluded: ‘Because of a lack of direct evidence, no determination could be made on a source of ignition for this fire.’ Police found there was no evidence of accelerant, nor any sign that the fire had been deliberately lit. A re-investigation of the fire in 2005 by police found no sign of arson. It was suggested that smouldering material from the barbeque probably had ignited the flammable printing chemicals in the drum. Privately, sources close to the new investigation said that, while it was possible someone had planned the fire, they could find nothing to suggest this.
Rene Rivkin was in Singapore when news of the fire reached him the following morning. He called Gordon Wood to tell him he was coming home immediately and to pick him up at the airport. Wood was spending Christmas with the Byrne family after winning Caroline back. Rivkin later claimed to have advised Wood how to woo her—though again, Caroline insisted both she and Wood be tested for HIV. Tony Byrne had walked into his apartment one lunch time and found Wood sitting with his daughter on the couch. ‘Daddy, Gordon got a job,’ Caroline had said. ‘He’s going to work for Rene Rivkin.’ She then moved back into Wood’s flat.
The young couple spent New Year’s Eve house-sitting the Rivkin mansion, Carrara, at Rose Bay Avenue in Bellevue Hill, while Rene and Gayle Rivkin were out celebrating. Not without cause. On 28 December, Offset Alpine had told the stock exchange that it had extensive insurance: ‘The company has been advised that the fire was accidental but at this stage no cause has been determined. Contrary to one newspaper report the cause of the fire will not affect the insurance.’ That is, even if someone started the fire, the company would still get the money.
The news saw Offset Alpine’s share price jump from 70 cents to $1.85. Around this time someone with smelling salts must have been telling the chief executive of Commercial Union, Philip Clairs, that the insurer was about to be hit with its biggest individual insurance claim in thirty years. The total payout would be $53.2 million, though after reinsurance Commercial Union’s share of the cheque was a fraction of this. In 1995, Rodney Adler told me that after its reinsurance cover FAI’s net payout came to $450 000. On the other side of the ledger, FAI was well ahead from the rise in the share price. FAI made a $4.2 million profit on the Offset shares that it had just acquired together with a parcel of old Stroika shares that it had bought from Robert Whyte in 2002 (FAI had bought more shares by the time it sold out in 1995 for a $5.9 million profit). The other plus was that Rene Rivkin was now in a position to pay off his debt to FAI. It would take time, but Rivkin would eventually raise $10.2 million from his Australian shareholding, and another $28 million from the Offset shares held in his Swiss accounts. Bruce Corlett’s options were worth $396 000, and Rob Henty’s smaller parcel would make $99 000. The employee options issued the day before the fire would provide a cool $1 million profit.
All in all it was ‘a very good fire’, Kerry Packer commented later, with no sign that he was amused. What was there to laugh about? He had lost a fortune on foreign currency, he had lost face on Bendigo Mining, and now Rene Rivkin had scored big on a lucky fire. In a crying injustice, Kerry Packer, the previous owner of Offset Alpine and its kindly benefactor, wouldn’t get any of it. Sometimes life is hard to bear.