It is a truth, universally acknowledged, that an Australian in possession of a good fortune must be in want of a Swiss banker. It’s a spiritual thing. In the postmodern world, the unconditional regard and trust that once characterised relations with a priest, and in later times with a psychiatrist, for many can now be expressed only through close communion with their offshore financial advisor. A banking relationship goes so much further than discussing mere money. In the banking confessional, anything can be said. Ernst Imfeld—‘Dear Earnest’, as some of his clients called him—understood this. It was Imfeld who told Rene Rivkin that his father really loved him; who assured Walter Rivkin that ‘there is always a solution to a problem’; who handled the sensitive matter of Rivkin’s secret $500 000 bequest to George Freris; and who, in 1997, was helping Rivkin and his fellow investors set up a better way to hide their activities from Australian authorities.
Ernst Imfeld is one of those people born to smile. Two of the most famous pictures of him show him with a table of ten in an upmarket Zurich restaurant in December 2000, sitting next to Swiss Attorney-General Dr Valentin Roschacher. Imfeld is a picture of solid respectability—distinguished greying hair, white shirt and tie, square features and the rounded cheeks of the professional luncher. The stilted poses in the first picture suggest a mild awkwardness between the two key figures: Imfeld seemingly genial but looking off into the middle distance, while the Attorney-General shows a hint of stiffness—a politician mixing in an unfamiliar crowd. The second shot, taken several hours later, captures the quintessence of conviviality. Imfeld is grinning broadly, his tie undone and his collar open, his body turned to share something with Roschacher. The Attorney-General is turned to Imfeld, his tie a little askew and his face full of amusement as he enjoys the joke, hanging on what Imfeld is saying. Later Roschacher would wish he had remained uptight. Weeks after the picture was taken, Imfeld and two others at the table would be under arrest while the pictures of the Attorney-General at play were splashed across the Swiss dailies.
‘Ernst Imfeld was an important man in the bank and he was an important man in Switzerland,’ was all Leumi spokesman, Yona Fogel, would say of the picture. Imfeld could charm the birds out of the trees. He had been fired by the Union Bank of Switzerland (UBS) in 1989, after he rushed through two transactions without doing the paperwork. He did it as a favour for clients who wanted a quick investment, only to see them renege when the deal went bad. At least that’s the way the story went. His appointment as private client manager at Bank Leumi in Zurich galvanised this little Israeli outpost. He became widely recognised as a share-market genius and he pushed Leumi to the top of the Swiss currency trading table. But it was his manner that won clients.
‘I found him the most colourful banker in Zurich,’ Rivkin said later. ‘I must say we all liked Mr Imfeld. Richardson liked him, Kennedy liked him, and I did too . . .We always agreed with each other. I had the impression that he liked me. I liked him very much.’
There was a ritual to seeing Ernst. It began, Brent Potts told Zurich DA Nathan Landshut, with a phone call to Imfeld’s secretary to set up an appointment. For such visits Potts liked to stay in the swanky Bauer au Lac. Rivkin favoured the picturesque Eden au Lac or the more discreet Neues Schloss. Just a short stroll away from either hotel squats the Leumi building on Claridenstrasse, like a white concrete bunker. Its entrance is through two armoured glass doors.
‘Right at the entrance was a lady behind a glass partition,’ Potts said. ‘I had to identify myself and she would then admit me to the reception room.’ Imfeld’s secretary would bring clients into his office. A view of the Uetliberg peak beckoned through the window on the left. A Hebrew poster—a verse from Ecclesiastes, ‘A time to every purpose under heaven’—hung high on the right. Between them would be the portly figure of the great man himself: informed, witty, scathingly wry.
‘I would arrive at the bank at 11.30 a.m.,’ Potts said. ‘That was the time Mr Imfeld always preferred. I would spend about twenty minutes in his office and then we would go out for lunch.’
It was a natural progression; clients were ushered out of the bank with minimal delay and were then tying on the bibs at the exclusive Bauer au Lac Club for a little culinary bonding at Leumi’s expense. If Potts needed travellers cheques or cash, one of the Leumi people would hand it to him while Imfeld lectured Potts on the danger of discovery from using his Leumi credit card. Imfeld understood the finer points of schmoozing. For Potts and Rivkin there would be the courtesy Mercedes limousine.
Despite all the joviality and fine dining, Potts told Landshut, he never actually got any statements for his account. After doing this for twenty years he didn’t feel he needed them. And where would he keep his Swiss bank statements? ‘Clearly I wouldn’t want to take them back to my country,’ he said. Imfeld would merely pass him three or four pages that listed how much money Potts had in his account, then detailed all the shares he held in alphabetical order. Potts traded regularly through his brokerage, PG Intercapital, on behalf of Leumi and other clients. When the shares were for his account, Potts would add his codename, LAC, to the sale documents and Imfeld would know they were for him. Potts carried the details of all this around with him in his laptop. When he rolled back into his hotel room after lunch with Imfeld he would check Leumi’s list of his shareholdings with his own record. ‘If I found a discrepancy, when for instance shares were listed that did not belong to me, I called Ernst from my hotel, he then checked it out and called me back to say I was right, and eliminated it from my portfolio,’ Potts said. ‘It was always just a tiny discrepancy, in 99.9 per cent of the time his and my lists corresponded.’
According to Potts, Imfeld was a stickler for procedure and forms:
I remember well how often Mr Imfeld asked me for my signature. The thing is that occasionally I would want to have money transferred, for example to the university where my sons studied. Mr Imfeld would ask me to sign certain forms—I mean when I called him from Australia to ask him to transfer money to my sons, he would tell me it was no problem but that, on my next visit, I would have to sign an order for it. He went to great lengths to explain to me that such written orders were important in order to prevent unauthorised transfers, that he needed them for internal audits. Sometimes he would tell me to send a fax when I asked for a transfer. Oddly enough Mr Imfeld wanted the fax sent to his home address . . . As I recall, I never signed a blank sheet.
How do you account for the way hard-headed businessmen all over the world walk into an offshore banking office and lose all sense of caution? When does hard-headed become bone-headed? ‘These guys have no idea what they are getting into,’ commented one advisor who regularly sets up offshore facilities. ‘They go offshore and they think everything is rosy. It goes wrong, and they are devastated.’
Maybe it’s the intimacy that comes from sharing a secret. One of the comforting aspects for Australians as they walked into Swiss banks in the 1990s was the assurance they were not alone. All through the Rivkin saga there were hints, allusions and suggestions of other accounts, other account-holders, a solid rank of Australians—probably in the thousands—making their annual pilgrimage to Zurich to check up on their nest eggs. It’s not that everyone who has a Swiss account is a tax evader or involved in anything illegal. There are legitimate reasons to hold such accounts. But most clients don’t want the account to be known. And discretion is the better part of Swiss banking; never more so than when something goes wrong.
‘When my husband dumped me, he took the British bank accounts, I kept what was in the Australian accounts, and he kept the Swiss accounts,’ the ex-wife of a senior Australian executive said. The Swiss accounts? ‘The bank was very unhelpful when my lawyer contacted it during the divorce.’
The Silence of the Clams. Then there was the high-profile Sydney family who were drawn together in grief after the death of their father—until the siblings discovered several years later that the eldest son had taken over their father’s Swiss accounts. He hadn’t told them about this money and neither had the bank.
It didn’t take Rene Rivkin long to adjust to the world after Offset Alpine. On 29 December 1995, his Stilton and EBC Zurich accounts were credited with $26.6 million from the sale of the Offset shares, after Justice Sackville’s order to release the money. This was just a nominal entry; in reality the money remained frozen in two Credit Suisse accounts, jointly administered by the ASC, EBC and Leumi, while the case went to appeal. Rivkin, however, was already in spending mode.
On 2 January, Rivkin began buying shares in a little miner called Coolawin Resources, which had just received a takeover bid from Plutonic Resources. By February, Rivkin had spent $2.4 million and owned 13 per cent of Coolawin. All the old crowd of Rivkin supporters at Offset Alpine had piled in to buy stock— Trevor Kennedy, FAI, Bruce Corlett, Ray Martin, Nora Goodridge and Bart and Ronald Doff—in the expectation that Plutonic would be forced to raise its takeover bid and give them a quick profit. Instead Plutonic dropped its bid, leaving Rivkin and his friends stuck with their stock. Coolawin Resources would be renamed Morgans Gold and later Abednego Nickel. Despite these transformations it sat on Rivkin’s books like lard. It would take him four years and $12 million to get out of this hole.
At last it seemed that Rivkin was about to get his money from Offset Alpine. On 18 September 1996, the Court of Appeal upheld Sackville’s judgment and the funds were about to be released. Rivkin celebrated by transferring $433 000 from his Stilton account to UK yacht broker Cavendish White as a deposit for a new boat. But what happened next was like the last-minute twist in a horror movie—the beast has been slain, the heroine is safe in the arms of the hero and the credits are ready to roll when, suddenly, skeleton hands reach out from the grave to grip her ankles. Yes, it was the tax man.
Counsel for the Australian Tax Office bobbed up at the final hearing, saying that the plan to ship the money off to Switzerland was ‘a little bit cute’. ‘Transmitting it to Zurich to invest in Australian dollars is a curious thing to do,’ he said, and—ahem, ahem—when were they thinking of paying income tax on this splendid windfall?
After some haggling, the ATO released $13.9 million to Leumi and EBC on 25 October and froze the rest while negotiations continued. For the moment, the tax office was keeping 48 cents in the dollar.
In his December 2002 interview with Zurich DA Nathan Landshut, Rivkin described the Offset position as follows: ‘The shares of Offset Alpine, which this was originally all about, were for the most part, let’s say 81 per cent mine, and about 7 per cent Richardson’s. Twelve per cent were held by Kennedy. The numbers don’t square exactly.’ In practice that meant Rivkin kept all of the money paid to Leumi, and two thirds of the payout to EBC. True to form, Rivkin began spending the money even before it reached him. On 24 October 1996, Rivkin’s Stilton account paid $625 000 to buy 2.5 million more shares in Morgans Gold from his Australian holdings. Once again Rivkin was using share trading to launder money from overseas back to Australia.
In December, Rivkin took delivery of a 31-metre motor cruiser registered in the British Virgin Islands that he named Dajoshadita (a combination of the names of his four children). Rivkin’s Stilton account shows a $2 million transfer on 17 December, half of the purchase price for the boat. The rest of the money presumably came from his EBC account. Next Rivkin set up a new trading account using an entity in the Channel Islands called Mallard Holdings: ‘That’s a business . . . [that] was established for me by a bank in Holland by the name of Insinger,’ Rivkin told Landshut. ‘That bank also has an office in London and my representative there is a lady called Amanda Chon. The business belongs to me and trades in shares.’
As his offshore share trading took off, however, Rivkin faced bad news at home. Walter Rivkin was diagnosed with terminal cancer; he died on 5 April 1997. Walter had reconciled with his son before his death, but Rene was in the United States when the end came. ‘I wasn’t here for his death,’ Rivkin later told Andrew Denton:
I decided not to be here intentionally. It wasn’t a very pretty death. It was a thing called multiple myeloma, which is basically cancer of everything . . . I felt that I could add nothing to the disastrous state he was in. He’d lost basically all his faculties, functions and what else have you and it was very sad to see, and I . . . if I can avoid sadness, I will. And I did.
Rivkin told Landshut that his father took his own life. Despite Rene’s brave words, the loss of this powerful figure in his life must have affected him. He dealt with the loss as he had with other personal crises: he went shopping. On 11 April, Imfeld transferred US$325 000 to cover bills that Rene had run up in the US buying furniture, antiques, carpet and a BMW, which he charged to his father’s account. Rene now ordered Imfeld to liquidate the shares and bonds in Walter’s 8405 account and transfer them to Stilton. After probate was granted on his father’s will on 4 July, Rivkin set about selling his father’s extensive Sydney property holdings.
Across town, Trevor Kennedy was breaking out the champagne. Ozemail listed on the American Nasdaq exchange at US$1.50 on 29 May, raising US$46.9 million in new capital. Sean Howard’s shares were now worth US$49 million, while the twin investments of $450 000 that Kennedy and Turnbull had made nineteen months before were each now worth US$24.5 million. It dwarfed Kennedy’s $4.5 million payout from Offset Alpine, half of which was still tied up in the courts. Aglow with moral virtue, Kennedy used his chairman’s address at the Oil Search annual meeting in Port Moresby on 7 May to thunder at the ‘growing levels of corruption’ in the Papua New Guinea government. If they could only be more like Kennedy’s company, which practised only ‘the highest levels of corporate governance and ethics’.
Rivkin was on the brink of one of his most successful ventures. On 6 May 1997, the great and mighty were summoned to a cocktail party on the Dajoshadita to launch Rivkin’s new subscriber tipsheet, the Rivkin Report. While Rivkin was away in the US the previous month, Bruce Corlett had used Rivkin’s power of attorney to sign a $6 million mortgage over Rivkin’s house at Bellevue Hill, perhaps to help fund the new venture. It was a fabulous affair on the boat, captained by Rivkin’s favourite tattooist, George Freris. All Rivkin’s friends were there, most particularly the names that featured in the share registers of Offset Alpine and what was now called Morgans Gold—Trevor Kennedy, Graham Richardson, Rodney Adler, Ray Martin and the usual media crowd. It was a triumph. Thousands of Australians would subscribe to the tipsheet because they believed in Rene Rivkin.
‘My business is very much show business,’ Rivkin later told Kerry-Anne Kennerley on the Midday Show. ‘It is because of the show business aspects of my life that I am successful at what I do, partially. I also have brains and a lot of luck.’
He had made the name Rivkin synonymous with success and high living. ‘If I lost my wealth tomorrow I would feel suicidal,’ Rivkin told the Financial Review that year. ‘There is no question of that. Because I would have lost most of what is me.’
Rivkin now had the perfect combination for the 1990s. He was his own brand name. The different parts of his public life were all meshing—his discount broking business, his tipsheet and his carefully orchestrated media profile. Rivkin was all over the gossip pages. While he was a great media performer, his ubiquity also reflected the lengths to which he went to court journalists. In 1998, BRW journalist Ali Cromie was contacted by a public relations firm who offered her a free weekend at Hamilton Island. The only proviso was that she write that she had seen Rivkin there.
In his weekly column in the Sun-Herald, Rivkin joked about Swiss gnomes that he knew. He used the column and his tipsheet to talk up Morgans Gold, which had been proving up its nickel reserves at its Abednego deposit in Western Australia. With Rivkin’s support, the stock rocketed from 40 cents in May to $1.70 in September. Rivkin’s buy-in price was 30 cents and he was sitting on another $10 million windfall.
Everything Rivkin touched was turning to gold. On 12 August 1997, $3 million was transferred into his Stilton account. Another $2.48 million was received on 3 September. The first appears to have been a transfer from his father’s account. The second may have been a settlement that EBC Zurich had made with the Australian Tax Office (Leumi’s negotiations with the ATO would drag on until December). On 15 August, Rivkin set up Rejoleer, the company which would run the Cave Nightclub at Star City Casino, in partnership with Joe Elcham, who had long since sold Joe’s Cafe. The plan hit a snag later that year, however, when the Casino Control Authority found Elcham was not a fit and proper person to be licensed to run the casino nightclub. Rivkin felt for his friend. He bought Elcham a $327 000 new yellow Ferrari, while in Zurich he transferred assets worth $550 000 to a Leumi account he set up for Elcham.
‘I gave him the car to cheer him up because through no fault of his own he failed probity at Star City—which means he could not run my new nightclub there,’ Rivkin told Ros Reines at the Sunday Telegraph.
Ernst Imfeld at Leumi and the lawyer Benno Hafner now believed they had solved the problem of hiding the tracks of their Australian clients, if the ASC came calling again. Graham Richardson would be the first to test their strategy. Rivkin testified to Landshut:
I have explained to you that Mr Richardson had a specific slice of the [Offset Alpine] shares. He held those via the bank August Roth within his own account. I remember I gave Mr Richardson one of my inactive accounts at the bank August Roth . . . Graham Richardson . . . didn’t want to open an official account in his own name and for that reason we had a portfolio opened within my [Leumi] account labelled Cheshire.
EBC Zurich had run into problems with Swiss authorities in 1996 for providing banking services without a licence. It was agreed that Bank August Roth would take over the EBC business. This made little immediate difference—the accounts continued to be administered by the same people in the same building. What the clients didn’t know was that, by April 1997, EBC’s private client manager, Axel Fundulus, had begun embezzling funds. It was purely fortuitous that Richardson’s share of the Offset proceeds were being transferred out of EBC. His money followed a tortuous path, first to an account at the ANZ Bank in Melbourne, which was operated by Credit Suisse for Leumi, then back to Zurich.
Richardson had $1.44 million in cash in the Swiss funds. The EBC accounts also held 2.27 million Morgans Gold shares that Rivkin had bought the previous year, for about $700 000. They too would end up in the new Bank Leumi account that was being set up for Richardson. By late September 1997, when the Morgans Gold share price touched $1.70, this packet of shares in the EBC account was worth $3.9 million. When Richardson hosted Bob Carr’s fiftieth birthday celebrations on 28 September at the Hotel Intercontinental, his Swiss holdings in cash and shares were worth $5.9 million.
Hafner had convinced Imfeld that the best way to shroud the identity of clients was to set up accounts in the name of Scottish partnerships. These strange corporate structures have a limited partner, who is a front man, and a general partner, who owns and controls the assets. If the general partner is offshore, the partnership escapes British tax. Edsaco, a tax advisory service on the Isle of Man originally owned by the Union Bank of Switzerland, was selling Scottish partnerships, which all had the same business address in Lothian Road, Edinburgh. The addresses for the limited and general partners were in two adjoining buildings in Regent Street, London.
In the offshore tax world, older is better. The price for an offshore shelf company goes up US$1000 for every year since they were set up. The reason is that when an offshore investor buys an already established company it becomes harder for authorities to trace when the offshore investor became involved. But there’s a trap for unwary players here. Most people like to put their own name on their companies. It defeats the purpose when you buy a pre-aged tax haven company to rename it. The name change gives regulators a date to track you from. Richardson and Trevor Kennedy would both make this mistake.
In September 1997, Edsaco reactivated a Scottish partnership called Laira Consulting Company, which had lain dormant since it was set up four years before. Its general partner was listed as Cedargrove Ltd, care of 169/173 Regent Street, London. Cedargrove’s real address appears to have been in the Cayman Islands. On 30 September, two days after Bob Carr’s fiftieth birthday bash, Edsaco filed an application at Companies House in Edinburgh to change Laira’s name to Laira Investment Company. The change was approved on Thursday 9 October. The following Monday, Imfeld opened a Leumi account in Laira’s name. A new Swiss law had been passed that month, designed to clamp down on money laundering and prevent bank clients from hiding behind obscure companies and trusts—which was the very thing Rivkin and co. were anxious to do. Under the new law, Imfeld was required to fill in a Form A, which listed the individual person, as opposed to an entity, who was the beneficial owner of the account. But this didn’t happen with the Laira account, which listed the beneficial owner only as Cedargrove Ltd. This was illegal. When Swiss authorities later questioned Imfeld and Hafner about it, each man blamed the other. Then they blamed Edsaco.
‘We had sent Form A and the other papers to England and they came back signed,’ Hafner testified to Landshut. Landshut didn’t believe him:
You know as well as I do, that limited or general partnerships in England and Scotland have absolutely no idea what the real intention is but they make available their services and structure and all the decisions that their boards take only have the status of recommendations. You cannot push the responsibility for what happened on to those people.
This would be the pattern for the Scottish partnerships that Imfeld and Hafner set up. But Laira had a twist. Within this account, which had no real owner, were two sub-accounts. One was operated by Rivkin and, behind that, was the second subaccount called Cheshire, which had been set up to hold Richardson’s money. In reality, Rivkin later testified, ‘Laira was Richardson.’
A minor hiatus followed while Rivkin had yet another financial windfall. Canadian securities house Toronto Dominion had opened negotiations to buy Rivkin Croll Smith. The deal was announced Thursday 23 October, for $24 million, half an hour before the Asian share crash paralysed world markets. Rivkin’s share of the money was $15 million. It really was his year. The irony in Rivkin’s story is that he would make more money from legitimate business—from his broking businesses and the Rivkin Report—than from all his dodgy dealing. But that never seemed to offer Rivkin the same thrill.
Arrangements in Switzerland were now complete. On Wednesday 5 November, Bank August Roth issued a cheque for $1.44 million from the Credit Suisse account with the ANZ Bank in Melbourne, sending the money to Switzerland where it was deposited in the Cheshire sub-account at Leumi. What happened next is detailed in a substantial shareholder notice that Laira filed with the Australian Stock Exchange on 11 December 1997, which was signed by Benno Hafner. As we have already seen, in addition to the $1.44 million, Richardson’s EBC account also held 2.27 million Morgans Gold shares. The company had changed its name by this time to Abednego Nickel. The 2.27 million Abednego Nickel shares were also transferred to Laira. Rivkin now proceeded to spend all of Richardson’s money.
The cheque from Bank August Roth was cleared in the Laira account on Friday 7 November. On the following Monday, Rivkin began an eight-day $1.4 million spending spree, buying more Abednego Nickel shares. The shares were all Rene’s idea. ‘Richardson knows nothing about shares, not even their names,’ Rivkin later told Zurich DA Nathan Landshut. In fact, it’s not even clear if Richardson knew what his very good friend Rene was doing. Richardson’s money was supposed to be invested in bonds, and that is what his accounts showed. However, Rivkin had used the bonds as security to borrow money for the new shares. It was a little like the way Rivkin had ripped off his father’s account in 1990.
Whether or not Richardson knew about it, by 11 December, when Hafner filed the substantial shareholder notice, Laira owned 3.8 million Abednego Nickel shares. Richardson also held shares through his family company in Australia, Erinrose Enterprises. Together with the Laira parcel he now owned 8.3 per cent of Abednego. He was the second largest shareholder after Rivkin. It’s the sort of stake that buys you a seat on the board. And indeed, eleven days later, on 22 December, Richardson’s long-time best friend, former Hawke advisor and now Packer lobbyist Peter Barron, was appointed a director of Abednego. Barron has since denied categorically any knowledge that Richardson was the second largest shareholder in Abednego, a stake then worth $4.2 million.
For Richardson it must have seemed the perfect cover. If ASIC ever tried to trace the Bank Leumi account, the trail led only to the Scottish partnership and behind that to the mysterious Cedargrove. If anyone pushed further, the account ostensibly belonged to Rivkin. Richardson would say, ‘I never owned the account, I never owned the shares.’ Richardson was invisible and took care to stay that way. When he withdrew cash from Laira, he would first transfer it from his Cheshire sub-account across to Rivkin’s Portfolio 1 and then withdraw the money from there. If challenged, he would say that the money was a loan from Rivkin.
If Richardson had been dealing with anyone other than Ernst Imfeld and Rene Rivkin, this system would have been foolproof. As it was, Rivkin began transferring money out of Cheshire almost immediately. Imfeld, meanwhile, embarked on a series of foreign currency trades that saw a quarter of a billion dollars flow in and out of Laira. Even Kennedy would casually mention Richardson’s link to the Zurich District Attorney’s office in March 2002: ‘Mr Graham Richardson, yes. I can remember that I once knew that Mr Richardson possessed an account by Bank Leumi.’ Richardson was the very picture of the innocent abroad. All of his careful attention to secrecy had been overturned. But no one was telling him that.
While Richardson was trying to stay invisible and Rivkin was openly joking about his Swiss connections, their friend Trevor Kennedy had taken a different tack.
When ASIC investigators questioned him during a Section 19 examination on 1 and 2 December 2003, Kennedy was emphatic that he had known nothing about Offset Alpine shares. He recalled that in the 1980s he had set up an entity—a trust or company, he couldn’t remember which—called Brampton. It was set up by ‘some supposedly smart accountants and lawyers in London on the basis that I—what I was doing was strictly legal and that I had no ownership or—or authority over it. Beyond that I have no knowledge, and I don’t believe I ever had, of what it was.’
Someone had suggested that the Brampton structure might be useful, but he had forgotten who. He didn’t remember which country it was in, though he appeared to narrow it down to somewhere in ‘the Turks and Caicos and Netherlands BVs, Liechtenstein, Switzerland etc. What specifically I don’t recall.’ It was managed without reference to him. He didn’t remember why it was set up, or if he had ever received a payout from it. ‘I have an appalling memory, and always have had. I can’t remember what happened last Wednesday, let alone what happened eighteen months ago,’ he said. Some of Brampton’s money had ended up with EBC Zurich. It might be, he told ASIC, that Brampton held some Offset Alpine shares, but he didn’t think so: ‘I am—I don’t— as far as I know, Brampton had never held shares in—in—in Offset, if that’s—as far as I’m aware it—it—it wasn’t a—it wasn’t a shareholder in—in Offset Alpine.’
Did Rivkin have anything to do with Brampton?
‘Certainly not,’ Kennedy said.
Why not?
‘Privilege. Because I just know that he has never been involved in my—in anything like that with me. I mean, that’s, I would have thought, crazy stuff. Why do you ask that question?’ And again: ‘I am absolutely sure that Mr Rivkin was not involved . . . I don’t believe he would have even known about it . . . Because it was a very private piece of my own affairs.’
When ASIC searched Rivkin’s offices two weeks earlier, on 13 November 2003, they had found documents referring to an EBC account called Brampton holding Stroika shares in 1992 and 1993. Kennedy’s lawyers have since argued that the Brampton trading was conducted entirely by Rivkin. Kennedy knew nothing about it. Kennedy and Rivkin were working in adjoining offices at the time, with Kennedy unaware that his offshore entity was being managed by his next-door neighbour.
Justice Roger Gyles found in the Federal Court in March 2004 that Kennedy’s testimony before ASIC four months before was not believable:
It is not credible that any person, let alone an experienced business person, would set up a series of entities to manage investments overseas without having any idea as to the ultimate fate of the investments or their proceeds, which is the picture that Kennedy sought to convey in the answers to the questions asked to him during the examination.
What Kennedy did remember at his ASIC hearing was that there was more than one Brampton. In 1997 or 1998—he couldn’t recall when—some ‘smart lawyers and accountants in Switzerland’ had set up a new entity, which was also called Brampton:
The two companies are completely different in the—sorry, I withdraw the word companies. I don’t know what the actual status of the—the—of the entities are. But I can assure the Commission that the first Brampton has absolutely nothing to do with the second Brampton.
He didn’t remember anything about the second Brampton either, except that unlike Brampton 1, he had had some sort of management input into Brampton 2: ‘Whether and what the nature of my interest is after ’98 I am unclear, but I certainly had an influence over things like its choice of investment managers, etc.’
Kennedy had pioneered the ‘Bananas in Pyjamas’ approach to Swiss banking. The subtle distinction here is that it was the first Brampton, B1, that might have held Offset Alpine shares. Kennedy had no control or knowledge of B1 and when he told the ASC in 1995 that he knew nothing about Offset Alpine shares he was telling the truth. Kennedy did know something about B2, but that second entity had no connection with Offset Alpine. As Kennedy’s lawyer Tony Hartnell pointed out, that meant that ASIC was not allowed to ask anything about B2, because it was Kennedy’s private business and was unconnected with the terms of the ASIC investigation into the Offset Alpine affair.
Kennedy was already on record talking about his Swiss bank accounts. Like Rivkin he had been called into the Zurich district attorney’s office, fronting up on 11 March 2002. Assistant DA Bruno Stochli questioned Kennedy about an account he had opened with another Swiss bank, Maerki Baumann, on 11 March 1997. Kennedy said both he and his wife Christina held signing rights over the Maerki Baumann account, as did a Swiss banker called Hans Rudi Moser. Kennedy held a stake in a small investment bank in Basel run by Moser, who was a regular investor in Australian speculative mining companies with Kennedy.
None of this was out of the ordinary. What brought Kennedy to the DA’s attention was that, on 7 July 1997, Ernst Imfeld transferred US$500 000 into Kennedy’s Maerki Baumann account. The money came from a Leumi account that wasn’t supposed to exist. Imfeld operated the secret account as a slush fund for his dodgy deals. So why was Imfeld sending money to Kennedy? Kennedy said he thought the money was from Rivkin, but he couldn’t remember why. ‘I engaged in many transactions of this magnitude, mainly in Australia, with a group of my associates,’ he wrote to the DA. ‘It was not unusual for us to lend each other money or to have part or all of the loan and/or interest paid offshore.’
Rivkin denied any link to the money, though there was a matching payment between two of his Leumi accounts on the same day. Kennedy sued Bank Leumi in 2002 after the bank tried to reclaim the US$500 000—ultimately Kennedy got his money. ASIC raised the matter with Kennedy after the Australian Financial Review published his correspondence in October 2003. Kennedy said: ‘I have a recollection of writing a letter to the Swiss authorities.’
Did he write these words?
‘I may have. I have no clear recollection of writing those words.’
ASIC asked: ‘Were you or any person, company, entity, structure, trust, partnership associated with yourself, connected with Bank Maerki Baumann as at July or August 1997?’
‘Privilege. I cannot attest to the date, but I believe the new entity, the new Brampton, had an association with Bank Maerki Baumann,’ Kennedy replied.
This was the heart of the Bananas in Pyjamas defence. Kennedy had no role in B1 and couldn’t remember anything about it to help ASIC. He did have some sort of role in B2—but B2 had nothing to do with Offset Alpine, so ASIC wasn’t allowed to ask about it. Such a defence stands or falls on the timing. But Kennedy’s Bramptons seemed to overlap. The Maerki Baumann account, which he did have control over, was opened on 11 March 1997. On Kennedy’s account, B2 must have been set up before then. He described for ASIC how he came to set up the second Brampton: ‘Following a fraud at EBC where money was stolen from the—the—the entity, or misused or defrauded, or whatever, I had Swiss lawyers examine how I might get them to try and ensure that this didn’t happen further.’
In 2002, Kennedy told Stochli in Zurich: ‘I was a client of Bank August Roth when Mr Alexander Fundulus defrauded my account about three years ago, a substantial amount of which I was unable to recover.’
In 2000, Fundulus was convicted for embezzling client funds. The embezzlement, which began in early 1997, was uncovered in the northern summer of 1998. Thus the embezzlement which Kennedy told ASIC had led him to set up B2 had not been detected by the time he opened the Maerki Baumann account. If the embezzlement was what convinced Kennedy to set up the second Brampton, the earliest date you would expect him to be doing it would be late 1998. Kennedy’s comment to Stochli suggests an even later date.
In February 1999, Benno Hafner opened a new account at Bank Leumi. It was a Scottish partnership operating out of the same adjoining addresses in Regent Street, London, as Rivkin’s two other Leumi accounts, with its forms filled out in the same handwriting. The general partner was listed as Crabtree Enterprises Ltd. But the most significant fact was the date. Edsaco had set the partnership up in 1994 under the name Gazella Enterprises & Co. On 21 January 1999, the name was changed from Gazella to Brampton International & Co. This appears to mark the start of the second Brampton. It suggests that until this point, B2 didn’t exist.
What does that mean for the Maerki Baumann account opened in 1997, which Kennedy claimed was owned by the second Brampton? In his interview with Stochli, Kennedy referred to the account as ‘my money’ and claimed that he and Christina had signing rights over it. But if Brampton International didn’t exist as a name until 1999, it suggests that Maerki Baumann was Brampton 1, and Kennedy’s role in it was more active than he admitted. Kennedy’s lawyers declined to comment on the issue and it is not clear what his position on this has been with ASIC.
Kennedy has not commented publicly about Rivkin’s claim that Kennedy owned Offset Alpine shares. In mid-2004 he wrote to me via his public relations agent. ‘As you know, I am the subject of an ASIC investigation which has received extraordinary and disproportionate media coverage in which I have been unfairly vilified,’ he said. He had at the time begun legal proceedings against the regulators which had themselves ‘led to further unfair and derogatory media coverage of me and my affairs’. With these legal cases continuing, he said:
I have been advised that it would be improper and inappropriate for me to comment publicly, let alone to do so in the form of the question-and-answer scenario you contemplate, or to expand on what I have said. In addition, I do not intend to answer any questions from the media on an ad hoc basis, particularly when they have no factual basis supporting them or contain assumptions or inferences which are simply wrong.
Back in 1997, such concerns seemed a world away. This was the golden summer of the Sydney networks. Five years before, everyone had been stony broke. Now it was payday for everybody. It had begun with the US Ozemail float in May. On 10 October, St George launched a takeover bid for Advance Bank. Robert Whyte sold out with a profit of more than $62 million (including his earlier sales). His old friend Rene Rivkin had a little happiness as well, spending $649 000 on Advance Bank shares and options in the three days before the bid was announced. Two weeks later he had cashed out for a $200 000 profit. Whyte made it clear he had not discussed the bid with Rivkin. Whyte and John Singleton were about to sell shares in the Ten Network, which they had bought in 1992. Ultimately they walked away with $133 million profit between them, but by early 1998 strains had appeared in their friendship.
John Desmond Singleton is a one-man variety show. He plays front man, straight man, funny man, audience, ticket seller and the fat lady singing, all in the one conversation. Gerry Harvey only makes him worse. I met them together in 2003, when Harvey arranged to meet for an interview in Singleton’s office after a board meeting of their Magic Millions horse auction business. Harvey had set up an elaborate practical joke on me with the receptionist. Then Harvey couldn’t come out because Singo had hidden his shoes. When Harvey did come out, Singo came out behind him to grab him, because Harvey had pinched Singo’s wallet. Oh these guys.
Singleton cultivates laid-back relationships with sharp-edged humour as a lubricant. With Robert Whyte, for example: ‘When I think of Robert Whyte, I think of a lifestyle of which I’m very jealous: one of basically cigar smoke, conversation, golf and massive amounts of delegation.’ Shortly after April 1994, when he turned fifty, Whyte had announced he was taking a twelve-month sabbatical to study comparative religions at Oxford University. It was either that or international relations—and really, what’s to tell the difference? He came back slimmed down and with a shorter haircut. Whyte’s relations with Rivkin were a little distant by 1996, but he was as close as ever to Kerry Packer, with whom he had endless wagers on card games and golf. One story has Whyte and Packer bogged down in a bunker on the back nine of the Australian course. God created sandtraps to separate male golfers from their money. ‘I’ll bet you $10 000 that you can’t get down in two,’ Packer said. Whyte proceeded to do just that, chipping his ball out of the bunker on to the green, then holing out with his second shot. Packer wasn’t happy. ‘I’ll bet you $10 000 you can’t do it again,’ he growled. It’s the sort of thing that makes comparative religion seem attractive.
When Singleton was looking to sell out of Ten, it was late 1996. On 10 October, the day St George announced the Advance takeover, Singleton told his fellow shareholders he was ready to sell at $13 a share. Izzy Asper, the head of CanWest Global Communications Corp, was the obvious buyer, but he was offering only $11.40. However, by 8 November, Singleton had had his way and was paid out for $59 million. Two weeks later Whyte and Jack Cowin put their Ten shares on the market at $15 a share. The Canadians said the price was outrageous, but Whyte also got his money. He had already sold a third of his stake in 1994 and the sale of the rest to CanWest brought his total profit from his four-year investment in Ten to $74 million. If you added together his returns from Ten, Advance Bank, and Manboom’s billboard business, Whyte had made more than $200 million. As an investor, he was in a league of his own.
Singleton and Whyte had sold the same number of shares to CanWest, but Whyte had got $10 million more from the higher price. Had Singleton discussed his plans to sell his Ten shares with Whyte? Neither of the two men commented on the deal. Whatever the reason, there seemed a growing coolness between them. When Andrew Griffin, Whyte’s long-time property chief, resigned in April 1997, he showed up a week later working for Singleton.
In June 1997, Whyte set up a new company, which would later be renamed Manboom 2, as a vehicle for his investments with Kerry Packer but not with Singleton. In the meantime, the main Manboom partnership with all three men continued, albeit a little subdued. There were no reports of high jinks at the Manboom board meetings—directors hiding each other’s shoes or stealing each other’s wallets or that kind of merry jape. But then Robert Whyte was never a shoe-hiding kind of guy. It’s hard to imagine him even in slippers.
It was still a triumph, a triumph upon triumph, as the pre-Boomers cashed out. Offset Alpine, Ozemail, Advance Bank, Ten and Manboom generated more than half a billion dollars profit for these refugees from the 1980s. They were Masters of the Universe again. They were back. And so was another nightmare from the 1980s called Jodee Rich.