Ben Hills
When Larry Oliver, an age pensioner from Perth, looked like losing his life savings, his house and even his car, he turned in panic to the only people he thought could help him the national corporate watchdog, the Australian Securities and Investments Commission.
Notes in his meticulously kept logbook show that he had no fewer than three conversations with one of ASIC’s investigators, in which he poured out a story of how he had been persuaded to mortgage himself to his humble hilt, $22,000, to a loan shark to invest in a cockamamie scheme involving nuclear waste and bonds in a bankrupt American railway company.
The vast returns promised the railway bond offered by way of security, was said to be worth $US750,000 ($1.4 million) had failed to eventuate, and the creditors were now beating on the door of the modest brick veneer house in the suburbs where Larry lives with his wife of nearly half a century, Lesly. “I really thought we were going to lose everything … I was frightened out of my wits,” he says.
Oliver is 73 now, a retired public service clerk with no experience in investment of any sort, not a single share. His dream with his 1996 investment was to earn enough money to buy a pub on the bank of a salmon stream in his native County Antrim instead, in the twilight of his life, he finds himself still paying off debts and “living on the smell of an oily rag”.
Approached by an intermediary, a long-standing family friend who also lost money on the deal, he had been persuaded to place his money in what has become one of the most notorious get-rich-quick schemes of the 1990s a scheme which ASIC, in spite of several complaints, has yet to take any action to stop.
The man Oliver trusted with his money is Brian William Ivey, 56, a poorly educated former farm worker with a taste for the high life, who comes from the West Australian wheatbelt town of Mukinbudin.
Ivey has been living at a luxury London hotel for the past six months while he continues to seek investment in various schemes he declined an invitation to present his side of the story.
Over the past 10 years, Ivey has been associated with dozens of whiz-bang sure-fire money-making schemes from krill-fishing to dealing in World War I bonds to selling dried meat to the Sultan of Brunei. Twenty companies of which he has been a director have been deregistered during that time, and another 20 are still operating, including one registered in London called Save The Earth Foundation Plc.
Investigations by the Herald over the past month have found that more than 250 people in three States across Australia have lost money by investing in enterprises controlled by Ivey. More than $20 million is missing much of it from small-time ma-and-pa investors such as the Olivers, but also several amounts of more than $100,000, and one extraordinary loss of $7 million by a major bank.
The moral of this story, however, is not how easily financially unsophisticated people can be parted from their money – Ivey, by all accounts, is an amusing and persuasive man who brags of friends in high places, boosting his credibility by producing endorsements from people as prominent as the Premier of Western Australia, Richard Court.
It is the failure of Australia’s corporate watchdog, ASIC – which has on the cover of its annual report the slogan “Protecting you” to take any effective action to stop Ivey’s activities, in spite of complaints against him going back seven years.
Ivey, in fact, boasts that the only time ASIC investigated him he was “cleared”.
ASIC, for its part, says that it did investigate one of Ivey’s schemes, tried unsuccessfully to take his passport, and even hauled him in to give sworn evidence before deciding that there were not enough complainants and it would be too “difficult to obtain sufficient evidence”.
Oliver admits that although he made several anonymous phone calls to ASIC throughout last year, he was too frightened to make a formal written complaint because Ivey had threatened that he would “lose everything, including the house”. But he can’t understand why the regulators have still done nothing.
“We are broke because of what this man has done to us,” says Oliver. “We will be paying off the mortgage for years, and we have even had our pension cut because of this wonderful investment.
“I realise we probably won’t get our money back now, but why doesn’t ASIC stop him before some other poor bugger cops it?”TO SAY that ASIC has had a bad press of recent times would be an understatement. Key “ASIC” and “toothless tiger” into the Newslink database of Australian newspapers and you get 15 matches in the past two years alone, 15 articles containing both phrases.
ASIC, established a decade ago, was given a beefy budget and a brief to crack down hard on corporate shonks and cowboys when it took over from the deeply discredited National Companies and Securities Commission (NCSC), whose only success in prosecuting insider traders during the raging boom-and-bust years of the 1980s was jailing one of its own employees. Today ASIC’s own record is attracting increasing criticism.
As fraud squads of the State police forces have been gutted NW is even considering outsourcing corporate crime investigations and consumer protection has been fudged into “fair trading”, ASIC has increasingly become the place of first and last resort for victims of corporate crime. Yet, as it has been handed more responsibility- policing the dot coms, licensing the finance industry – ASIC’s funding has been slashed, in keeping with the Howard Government’s “light touch” regulatory philosophy.
In the past financial year, ASIC took a $7 million cut on its $146 million budget, sacked 70 of its 1,200 staff, and closed its entire small-business section although its chairman did receive a pay rise to more than $290,000 a year, and its chief executive moved up into the $310,000-$320,000 pay band.
In a remarkable plea for help, its recently retired chairman of the past seven years, Alan Cameron, acknowledged in the 1999 annual report that “we are under strain … the increasing volume of our traditional work is outpacing our capacity to deliver”.
Statistics bear this out. Last year a record 5,534 people made “misconduct allegations” to ASIC, but more than half of these complaints were “recorded only”. Only 1.5 per cent, an extraordinary one in every 66 complaints, were properly investigated, and the number of “enforcement actions” fell from 564 to 461.
Just how ASIC selects those cases it will investigate and those it will ignore is impossible to judge, since the “case selection criteria” are secret. The commission justifies this on the grounds that it may tip off the crooks, but it also means there can be no public accountability for particular decisions such as the much-criticised investigation of the so-called Yannon transaction involving the former chairman of Coles Myer, Solomon Lew.
Senator Stephen Conroy, Labor’s spokesman on financial services, believes that the funding cuts have made Australia much more vulnerable to “spivs and cowboys”. He says: “There is a strong feeling right across the interest groups shareholder and consumer organisations, the media, corporations themselves that ASIC is ineffective and has neither the will nor the resources to do the job.”
Earlier this year, the Insolvency Practitioners’ Association of Australia wrote that because of the funding cuts, “more directors of small companies will be encouraged to avoid the provisions of the corporations law, and the level of malfeasance, fraud, fraudulent gifting and insolvent trading will increase, to the detriment of creditors and consumers, and ultimately to the detriment of the economy”.
In Conroy’s mind, Ivey is the classic example of the kind of case which is slipping past ASIC. Interrogating ASIC’s national director of enforcement, Joseph Longo, at a Senate estimates committee hearing last week, he said he was “intrigued” by the case, which appeared to involve $20 million of investors’ money, and remarked: “My office is clogging up because people are beginning to feel that the only way to get your attention is to come to a politician.”
Longo replied: “It is regrettable, but thousands of schemes of this kind come to our attention every year around the country. This one is on my mind because I believe we took the step of issuing that public warning.”
Regrettably for Longo, this was wrong. No “public” warning was issued by ASIC about Ivey and his amazingly unlucky schemes only a warning to investors who had already done their money buying worthless bonds not to try to resell them. Longo took the rest of Conroy’s questions on notice, and the committee is eagerly awaiting his answers.
OVER in Perth, Rick Mincherton would like some answers, too. Mincherton, a professional financial consultant, made the first known complaint about Ivey to ASIC’s Perth office in 1993, after losing lots of money investing in a colour photocopying franchise that was one of Ivey’s first big-time business failures.
Ivey had moved to Perth in the late 1980s after several unsuccessful forays into business he had a tyre dealership at one stage, an agricultural chemical supplier, a crop-spraying operation and a real estate business. Colour photocopying was the Next Big Thing, he became convinced.
In August 1988 Ivey formed a company named Instant Colour Pty Ltd, negotiated a deal to buy copying machines from Canon and began leasing premises across Australia from which to operate them.
Mincherton was one of half a dozen investors persuaded to put money into this “sure-fire” investment, and he mortgaged his house and some property, eventually handing over $270,000.
The business expanded rapidly, and at its height had 15 outlets in Perth, Melbourne and Sydney. Then, after less than two years, it collapsed.
One of the franchise-holders in Melbourne was so distraught after losing everything that he committed suicide.
There was a bitter dispute over who was responsible for the collapse of the business Ivey blamed Canon for machinery breakdowns and for over-stating potential profits, Canon said it was bad management but at the end of an exhausting six-year battle, the Australian Federal Court ruled against Ivey.
Including the cost of running the court case, Mincherton believes the losses ran to several million dollars.
In his complaint to ASIC in 1993, Mincherton claimed that he was induced to invest in the business by false representations about the results and the potential profits. ASIC, after a cursory “assessment”, thought otherwise and wrote to him: “The issues are essentially private dealings between you and the directors and former directors of Instant Colour. In the circumstances, the commission does not propose to further investigate this matter … If you wish to pursue this matter it is suggested that you seek legal advice.”
Without the money to pursue Ivey in court he, too, almost lost his house Mincherton wrote it off to experience. But he is still wondering whether, had ASIC paid more attention to that first failure, hundreds of investors would have been saved from loss after disastrous loss as Ivey pursued new schemes over the following seven years, right up until today.
ASIC’s WA regional commissioner, Jamie Ogilvie, still maintains that it was a civil contractual dispute, and “it was not a matter that ASIC either should involve itself in, or would involve itself in, if it had met the case selection criteria, which it didn’t”.
Unfortunately, it is impossible to test this assertion, since the case selection criteria are secret.
IVEY was certainly not lacking in imagination. An early prospectus for his “Chase Pacific group of companies” says that the corporation could access international “prime bank” finance to invest in schemes including a $50 million krill-harvesting scheme in the Antarctic, building a $300 million nuclear waste storage facility in Russia, a revolutionary rock crusher, “brokering” oil and minerals, and a device for drying abattoir offcuts to make dehydrated meat for export to Asia.
Improbable as they may seem now, Ivey’s schemes attracted some impressive backers.
“On behalf of the Western Australian Government I would like to welcome Chase Pacific International in their venture to establish krill harvesting in Albany,” wrote the Premier, Richard Court, offering “our support” in a 1994 letter Ivey is still using to reassure investors.
But it was the Synroc project that raised the most money.
Ivey set up a company in London, Synroc International Ltd, which he persuaded a British earl to head and which, he says, raised $9 million from the public to build a nuclear storage facility in Russia, in spite of the fact that he has no rights to the technology the Synroc patent is owned by the Australian National University where it was invented.
Like the Olivers, Fred and Cheryl Lynch had few assets apart from the family home when Ivey came to them in 1993, begging for money to get his Synroc project off the ground.
So they mortgaged their house and gave him the $150,000 they raised on the promise that Ivey would repay it in 21 days, with $1 million in profit, plus 25 kilos of gold, worth about $20 a gram.
“I know it sounds ridiculous now,” says Lynch, a 67-year-old retired businessman who lives at Berkeley Vale on the NSW Central Coast.
“But we thought he was our friend. He said to me, I tape-recorded it, `You won’t lose your bloody house because I’ll sell mine before you lose yours.”‘
Of course, the money let alone the enormous windfall profits never arrived.
Ivey, after months of pleading from the Lynches, did repay $90,000 of the mortgage, but the balance of $60,000 hung around their necks like a millstone as Ivey flitted around the world and the mortgage-holder became increasingly impatient.
Eventually, after six years of this, Lynch’s health broke down, his marriage broke up, and the house had to be sold to repay the debt. He now lives alone in straitened circumstances in a rented house, regretting the day he ever met Ivey.
But it was not only small inexperienced investors who fell for Ivey’s schemes. In the early 1990s, Ivey got to know a man named Brian Dunn, who was the West Australian manager of the Bank of New Zealand, now subsumed by the National Australia Bank after a disastrous collapse.
Using various colourful securities – one of them a certificate of deposit in the Agricultural Investment Bank of Bulgaria, authenticated by a now-defunct bank in Transylvania – Ivey and several associates persuaded the bank to advance them about $7 million, Dunn says.
The securities turned out to be worthless, but Dunn’s greater shock came two years later when the Perth police knocked on his door and eventually charged him but no-one else involved in the loans debacle on a number of counts of theft.
Dunn intends to vigorously defend himself when the charges come to court in Perth next year, a case in which ASIC says Ivey will be an important prosecution witness.
And the $7 million? Well, there are more twists and turns to the plot, because it turns out that Ivey himself appears to have been conned on this occasion by an American fraudster who is serving a five-year stretch in a Federal penitentiary in the United States.
Millions of dollars of the Bank of New Zealand’s money were shuttled around the world on Ivey’s directions, through solicitors’ trust accounts, and dummy companies based in tax havens such as the Isle of Man, eventually finishing up in the hands of Geoffrey Chris Clement, a long-haired Denver entrepreneur with a liking for snakeskin boots.
Clement said he was going to invest the money in a high-interest “prime bank” program. Instead, it turned out to be a scam.
In May 1996, the penny appears to have dropped. Ivey wrote an anguished letter to Clement saying: “We have now … reached the conclusion that our funds have been misappropriated … we demand that the total funds be returned to the Bank of New Zealand without delay … you can be confident that we will not leave one stone unturned to expose yourself and Mr —- for what you are if you fail to respond to this demand.” But it was too late.
In September 1996, a grand jury in Denver, Colorado, indicted Clement on 36 counts of wire fraud and money laundering, related to other bond swindles, and involving more than $US1 million. He was later jailed for five years in a plea bargain after forfeiting 10 properties and a Mercedes-Benz. They do not muck around in America.
BACK in Australia, meanwhile, an angry Adelaide veterinary surgeon named Doug Treharne was jumping up and down, demanding action from ASIC over his investment.
Treharne had been persuaded to pay Ivey $US75,000 for 11/2 bonds in the Marietta and North Georgia railway company, and had just discovered that the railway had gone bankrupt more than a century before, and the bonds were advertised on the Internet for $US25 as memorabilia.
On June 26, 1998, Treharne faxed “Renato Sburlati c/-Joe Longo” at ASIC’s fancy headquarters at No 1 Martin Place, Sydney, giving details of his investigation into the phoney bonds.
The fax concludes: “I hope theASC [sic] can assist in this matter, which may involve up to $US8.5 million of Australian investor money (170 bonds @ $US50,000 each).”
The complaint was passed again to ASIC’s West Australian office, and in June 1999 Jamie Ogilvie wrote to Ivey and the people who had bought the bonds, confirming that they were worthless and that “any representation you make to a potential purchaser as to Marietta bonds having value (other than as memorabilia) may expose you to civil and/or criminal liability”.
In the meantime, however, Ivey had returned to Australia and persuaded his worried investors that the fabulous returns he had promised up to $12 million on each bond were just a matter of days away and that any interference by the authorities would result in disaster.
The bondholders sent a delegation to ASIC asking it to halt its investigation and, extraordinarily, ASIC agreed.
Treharne received a letter from Murray Scott, ASIC’s investigator on the case, saying that ASIC “has no evidence that [Ivey] is continuing to sell bonds, particularly after ASIC’s concerns were made known”.
The letter also said ASIC “has no evidence that the bonds were sold to you fraudulently” a statement Treharne finds astonishing in view of the ruling three months earlier that the victims would be liable to prosecution if they tried to sell the bonds they had bought from Ivey.
As for Ivey stopping his money-raising activities on December 10 last year, nearly three months after he received Murray Scott’s letter, Ivey finally completed the paperwork on Larry Oliver’s investment and wrote officially transferring one-quarter of a Marietta bond to him.
ASIC’s refusal to reopen the case is particularly puzzling in view of the fact that Wayne Bellew, the Australian Government solicitor in Perth, has according to Ivey’s creditors been collecting volumes of evidence from victims and writing to ASIC urging the regulator to take action.
He has even provided ASIC with a legal opinion from a leading Perth barrister, Stephen Hall, that a successful prosecution could be mounted.
Ogilvie, who recently announced that he would not be renewing his contract with ASIC a decision unrelated to the Ivey investigation disagrees.
He maintains that it would have been “very difficult though not insuperable” to gather sufficient evidence against Ivey, with most of the bondholders unwilling to co-operate.
He says extraditing Ivey from London would have been time- and money-consuming with no guarantee of success, and ASIC, in any case, believed that “there were no assets we could put our foot on on behalf of investors”.
ASIC had better uses for its limited resources than mounting a prosecution “just to give investors some kind of warm feeling,” he said.
In a later interview he said that to suggest ASIC had ignored complaints against Ivey for seven years was “absolute crap”.
A Life of Brian
Name: Brian William Ivey (left)
Born: January 6, 1944, Fremantle, WA.
Abode: Kardinya, Perth and (since May 2000) the Langham Hilton Hotel, London.
Early career: selling agricultural chemicals, crop-spraying, tyre dealer at Mukinbudin, WA.
Corporate history: 1990-2000 forms 40 companies in WA and Britain, 20 now deregistered.
Investment schemes: 1989-2000: colour photocopying, selling bonds, promoting nuclear waste-storage technology, meat-drying machinery. All failed.
Losses to date: At least 252 investors lose $20 million.
Off the Rails
1990: Brian Ivey’s Instant Colour photocopying business collapses with eventual losses of several million dollars.
1990-2000: 19 more Ivey companies are deregistered.
1993: Investor in Instant Colour lodges complaint with ASIC. ASIC says it is a “private dealing” and declines to investigate.
1996-1999: Ivey sells $9 million-worth of “marietta” bonds in a bankrupt railway to investors in three states.
1997: ASIC recieves information about Ivey selling Marietta bonds overseas; interviews two directors of his company, and takes no further action.
June 1998: Adelaide investor Doug Treharne (pictured above) complains to ASIC about buying Marietta bonds.
June 1999: ASIC tells Ivey and people who have bought the Marietta bonds from him that they are worthless and any attempt to sell them “may expose you to civil and/or criminal liability”.
September 1999: ASIC tells Treharne it intends to take no further action. It has “no evidence the bonds were sold to you fraudulently”. It says there is “no evidence (Ivey) is continuing to sell bonds”.
December 1999: Ivey transfers a part-share in a Marietta bond to a Perth investor.
1999-2000: Australian Government Solicitor in Perth sends ASIC a dossier on Ivey urging it to investigate. Later sends a legal opinion that a prosecution could succeed. ASIC declines to act.
December 2000: Ivey, living in London, continues to seek investment in his businesses.
Publishing Info
Pub: Morning Herald
Pub date: Wednesday 6 December 2000
Edition: Late
Section: News And Features
Sub section: Insight
Page: 14
Word count: 3590
Classification: Business/Securities Company/Australian Securities And Investment Commission/Asic
Crime/Fraud
Geographic area: Australia
Keywords: Profile Income Timeline
Caption: Two Illus: Fred Lynch … “We thought he was our friend”. Photo: Jessica Hromas
Joeseph Longo … “thousands of schemes of this kind come to our attention every year”. Photo: Steve Baccon