CBA, David Ryan, Madoff, Collingwood AGM, Aussie Ponzi, Christmas video, ASIC jail list and share trades
February 2, 2010
Dear Mayne Reporters,
First up today, click on this video link to view a collection of 4 Christmas dance routines with 4 of our favourite combatants - James Packer, Peter Costello, Kerry Stokes and Rupert Murdoch. Enjoy!
And speaking of Rupert, he's just moved News Corp's primary listing from the New York Stock Exchange to the NASDAQ, presumably to try and create the impression his empire is all about the digital future. Truth be known, it also happens to be the world's biggest newspaper empire. No fresh coat of paint can hide the distinctly old media feel about News Corp.
Worst week ever for CBA
The Commonwealth Bank is having the worst few days in its history. After getting widely pilloried for bludgeoning too many companies into receivership, the bank has now botched a $2 billion capital raising in one of the greatest capital raising fiascos in Australian corporate history.
After supposedly completing a $2 billion capital raising at $27-a-share last night, the following terse statement was released at 3.17pm today:
The Commonwealth Bank today announced that it had terminated the share placement agreement with Merrill Lynch International Australia Limited on the basis that Merrill Lynch did not inform potential investors of the various disclosures made by the Bank in its announcement released to the ASX at 7.30 pm on Tuesday 16 December 2008. Under the terms of the agreement, Merrill Lynch was required to provide full disclosure to all potential investors before investors were required to commit.
What the...? Since when is it the responsibility of the world's biggest stock broker to issue a profit downgrade on behalf of Australia biggest financial conglomerate which is also supposed to understand continuous disclosure laws as the nation's biggest fund manager?
CBA was effectively sanctioning a selective disclosure to Merrill Lynch clients. And, by the way, wasn't it insider trading for CBA to be tipping out its own stock as late as yesterday for the PERLS conversion. Another concern is that ANZ shares were aggressively sold off from midday yesterday after fund managers were sounded out about the CBA placement. ASIC should be crawling all over this one.
The 3.17pm announcement was followed up at 3.33pm with this statement, including the following lines:
The Commonwealth Bank Group today confirmed that it is in the process of finalising a $2 billion capital raising comprising:
* $1.65 billion through a placement at $26.00 underwritten by UBS; and
* $357 million raised under the VWAP placement at $28.37 per share.
The Commonwealth Bank confirmed that it had terminated the previous placement arrangements made with Merrill Lynch International Australia Limited. It also confirmed the termination of the remainder of the VWAP placement as previously announced.
So, investors get a 6% profit downgrade but only a 4% price discount in the offer. No wonder they are struggling to get it away. There are a lot of institutions who were going to take stock at $27, that have said no at $26 and I wouldn't be at all surprised to see CBA hit $24 tomorrow just because of the reputation damage and loss of trust.
Alan Kohler has summed up the fiasco nicely on Business Spectator this afternoon. His colleague Giles Parkinson also produced this cracker. Oh dear. Bad debts are blowing out, the bank couldn't properly disclose it, the relationship with Merrill Lynch is shot and the brand damage is huge. Couldn't happen to a nicer bunch of bankers after what they tried to do to Centro. Thankfully, this ploy failed as the rollover news came through last night and we'll start discussions about that board seat on Centro Retail once the documentation is all finalised in January.
Today's CBA debacle, and especially the bad debt blowout, just reconfirms the risks that our bank shares could very easily plunge from here. As Business View listeners heard last Friday in this exchange, we shouldn't rule out government bailouts of banks in 2009. Australia is leveraged to the eye balls and it is the Big Four banks with the most to lose.
Time to crank up the pressure on ABC Learning chairman David Ryan
With the dust settling after the most dramatic AGM season in years, it is time to focus some pressure on the nation's most sackable chairman.
It has taken a while to gather it all together but we've now got all the audio involving ABC Learning chairman David Ryan, who was re-elected as Transurban chairman with 64% in favour on October 28. I predicted that Ryan would be gone from Transurban by Christmas, but he is still hanging on.
The same goes for former Centro chairman Brian Healey who remains deputy chairman of Incitec Pivot. After not fronting up to last year's Incitec AGM, let's hope Brian is there on Friday.
We've now got the audio from the dramatic Transurban AGM are the ABC Learning mentions were as follows:
Chairman, how did you hang onto your Transurban shares when margin called at ABC Learning?
What chairman David Ryan said about ABC Learning in his formal address
Speaking against David Ryan's re-election at Transurban
Final observations after dramatic AGM
David Ryan disgrace at Lend Lease AGM - have a listen
One of the most disappointing moments during the AGM season was when David Ryan was also re-elected to the Lend Lease board in Sydney on November 13 with 71% in favour, no questions from the floor and a strong round of applause. Have a listen and weep!
I was otherwise occupied in Melbourne that day producing this account of the dramatic ABC Learning revelations from the Commonwealth Bank AGM. The CBA has already written off $445 million on ABC Learning and I reckon today's bad debt increase probably reflected further hits on both Centro and ABC Learning.
Lend Lease chairman David Crawford should hang his head in shame for protecting his old Adsteam mate David Ryan and scoring him another 3 years on the Lend Lease board despite his record as the long-serving chairman of the ABC Learning audit committee.
Cranking up the pressure on Eddie McGuire
Paul Bendat's www.pokieact.org website has done some excellent research on pokies in Victoria which provided the following information for today's scene-setting story in Crikey ahead of the Collingwood AGM tonight:
President Eddie McGuire has just presided over an $8 million write-down courtesy of a poorly managed $18 million push into the pokies business, yet he wants to remain in power for the foreseeable future.
There are plenty of issues to explore around Collingwood's appalling pokies practices and losses. Whilst the Diamond Creek Tavern and The Beach hotel in Albert Park have now been jettisoned, pokies remain a big part of its operation.
The venue in Caroline Springs is still a mile shy of its promised $1.45 million charitable contribution, Woolworths runs the club's Coach & Horses Hotel in Ringwood which is pitched as a "Family Entertainment Centre" and The International in Lilydale is developing a retirement village right around the pokies venue.
As a Broadmeadows boy made good, Eddie should know how regressive the pokies are in targeting poor addicts and get Collingwood right out of the industry altogether. If not, he should stand aside for someone who will.
The AGM starts at 6.30pm in the Olympic Room on level two of the MCG and should be very interesting. If you know of anyone with a spare membership card or an interest in attending and asking questions, please drop us a line to stephen@maynereport.com.
Meanwhile, this what Paul Bendat posted on one of the Collingwood forums as debate raged about the $8 million loss and the future of President Eddie McGuire:
1. The bad decision to buy the pubs was a certain result of Eddie, our board and our management who are not dealing with their own money; going into a business none of them knew anything about. But this misses the point about the financial engine of their investment and what that says about the morality of the decision makers. The financial engine was the pokies at each venue.
What these men did was to utilise everything the Collingwood Football Club has stood for to make a dollar by luring Magpie fan base into these pokie places inevitably turning a portion of their own supporters into pokie addicts. Overwhelming evidence shows time and again that it is the pokie addicts who return a disproportionately large percentage of pokie cash to the pokie operators. It is over simplistic but true to say that the growth in revenue from these pokie places may well ultimately depend upon how many 'Pies fans became pokie addicts.
Collingwood Football club does not need money gained from preying on addictive behaviour whether it be smokers, alcoholics or pokie addicts. Sell the pubs, put the money in the bank and get back to focussing on our players, members and sponsors.
2. Our conduct of these pokie pubs also lacks morals and makes the involvement even worse.
a. The luring of seniors to The International in Lilydale (our pokie club acts as the office for retirement village sales) and young fans into The Club in Caroline Springs and the Coach and Horses and exposing them to pokie gambling should not be what the Collingwood FC is all about.
b. The Magpie pledge on web site for The Club to donate $1.45 million over the next ten years to support the Caroline Springs region with focus on special projects involving local community and sporting associations looks unlikely to be met. These broken promises tarnish the image of the Collingwood FC.
Pies' tradition and the positive values that each AFL stands for should mean a lot. They should not be compromised for pokie profits.
The Madoff files
Bernard Madoff, the former NASDAQ chairman, has been charged with defrauding his clients through a massive pyramid-type investment scheme. There has been a lot of demand for media comment and here are the relevent links:
Listen to interview on the ABC program The World Today.
Listen to chat with Tim Cox on ABC Tasmania.
Listen to regular chat with Deborah Cameron on 702 ABC Sydney, including the Madoff scandal.
Listen to chat on 774 ABC Melbourne with Libby Gore.
Watch interview on SBS World News.
ASIC jails Ponzi scheme merchant from Moonee Ponds
Dame Edna Everage was the most famous Moonee Ponds resident but the Melbourne suburb has today produced an operator of a Ponzi scheme who will spend the next four and a half years in jail.
Check out the ASIC press release as it includes the following lines:
Mr Spartaco Fasciale of Moonee Ponds, Victoria, has today been sentenced in the Melbourne County Court to six years imprisonment on charges brought by ASIC. He will serve a minimum of four and a half years.
ASIC found that between March 2004 and May 2006 nine people invested over $1.4 million with Fasciale Futures on the understanding that some of the funds would be traded on the Australian Securities Exchange and other money would be held in trust. Investors were also advised that Mr Fasciale would generate returns between three and five per cent every month.
Mr Fasciale subsequently lost over $250,000 of investors' money trading on futures contracts and used the remaining money to pay investors their returns as well as cover his own lifestyle expenses.
Fasciale Futures was typical of a ponzi scheme, which promise investors a very high return on their investment. A ponzi scheme works such that investments by subsequent investors are used to pay interest and/or redemptions of earlier investors. Mr Fasciale did not hold an Australian financial services (AFS) licence nor was he authorised to represent an AFS licensee.
Meanwhile, we've updated the ASIC jail list and 2008 has turned into its best year since 2004. If they can put two more corporate crooks in the slammer before December 31, it will amount to two a month, something that has only previously been achieved in 2000 and 2004:
Sell-down continues with BB Power and News Corp
I'm still a bear on the sharemarket and have been gradually selling down, including most of the News Corp shareholding. You need to own $US2000 worth of News Corp shares continuously for 12 months to put up a shareholder resolution under US rules, so I've surrendered this opportunity for the 2009 AGM.
The sale of the remaining Babcock & Brown Power shares was done for legal reasons that will become apparent in the coming days. Anyway, here are the sales so far this week:
Dec 17: SAI: sold 146 at $2.36
Dec 17: Citigold Corporation: sold 1250 at 25.5c
Dec 16: Gazal Corporation: sold 220 at $1.19
Dec 15: Babcock & Brown Power: sold 100 at 5.5c
Dec 15: News Corporation: sold 290 at $12.99
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
First up today, click on this video link to view a collection of 4 Christmas dance routines with 4 of our favourite combatants - James Packer, Peter Costello, Kerry Stokes and Rupert Murdoch. Enjoy!
And speaking of Rupert, he's just moved News Corp's primary listing from the New York Stock Exchange to the NASDAQ, presumably to try and create the impression his empire is all about the digital future. Truth be known, it also happens to be the world's biggest newspaper empire. No fresh coat of paint can hide the distinctly old media feel about News Corp.
Worst week ever for CBA
The Commonwealth Bank is having the worst few days in its history. After getting widely pilloried for bludgeoning too many companies into receivership, the bank has now botched a $2 billion capital raising in one of the greatest capital raising fiascos in Australian corporate history.
After supposedly completing a $2 billion capital raising at $27-a-share last night, the following terse statement was released at 3.17pm today:
The Commonwealth Bank today announced that it had terminated the share placement agreement with Merrill Lynch International Australia Limited on the basis that Merrill Lynch did not inform potential investors of the various disclosures made by the Bank in its announcement released to the ASX at 7.30 pm on Tuesday 16 December 2008. Under the terms of the agreement, Merrill Lynch was required to provide full disclosure to all potential investors before investors were required to commit.
What the...? Since when is it the responsibility of the world's biggest stock broker to issue a profit downgrade on behalf of Australia biggest financial conglomerate which is also supposed to understand continuous disclosure laws as the nation's biggest fund manager?
CBA was effectively sanctioning a selective disclosure to Merrill Lynch clients. And, by the way, wasn't it insider trading for CBA to be tipping out its own stock as late as yesterday for the PERLS conversion. Another concern is that ANZ shares were aggressively sold off from midday yesterday after fund managers were sounded out about the CBA placement. ASIC should be crawling all over this one.
The 3.17pm announcement was followed up at 3.33pm with this statement, including the following lines:
The Commonwealth Bank Group today confirmed that it is in the process of finalising a $2 billion capital raising comprising:
* $1.65 billion through a placement at $26.00 underwritten by UBS; and
* $357 million raised under the VWAP placement at $28.37 per share.
The Commonwealth Bank confirmed that it had terminated the previous placement arrangements made with Merrill Lynch International Australia Limited. It also confirmed the termination of the remainder of the VWAP placement as previously announced.
So, investors get a 6% profit downgrade but only a 4% price discount in the offer. No wonder they are struggling to get it away. There are a lot of institutions who were going to take stock at $27, that have said no at $26 and I wouldn't be at all surprised to see CBA hit $24 tomorrow just because of the reputation damage and loss of trust.
Alan Kohler has summed up the fiasco nicely on Business Spectator this afternoon. His colleague Giles Parkinson also produced this cracker. Oh dear. Bad debts are blowing out, the bank couldn't properly disclose it, the relationship with Merrill Lynch is shot and the brand damage is huge. Couldn't happen to a nicer bunch of bankers after what they tried to do to Centro. Thankfully, this ploy failed as the rollover news came through last night and we'll start discussions about that board seat on Centro Retail once the documentation is all finalised in January.
Today's CBA debacle, and especially the bad debt blowout, just reconfirms the risks that our bank shares could very easily plunge from here. As Business View listeners heard last Friday in this exchange, we shouldn't rule out government bailouts of banks in 2009. Australia is leveraged to the eye balls and it is the Big Four banks with the most to lose.
Time to crank up the pressure on ABC Learning chairman David Ryan
With the dust settling after the most dramatic AGM season in years, it is time to focus some pressure on the nation's most sackable chairman.
It has taken a while to gather it all together but we've now got all the audio involving ABC Learning chairman David Ryan, who was re-elected as Transurban chairman with 64% in favour on October 28. I predicted that Ryan would be gone from Transurban by Christmas, but he is still hanging on.
The same goes for former Centro chairman Brian Healey who remains deputy chairman of Incitec Pivot. After not fronting up to last year's Incitec AGM, let's hope Brian is there on Friday.
We've now got the audio from the dramatic Transurban AGM are the ABC Learning mentions were as follows:
Chairman, how did you hang onto your Transurban shares when margin called at ABC Learning?
What chairman David Ryan said about ABC Learning in his formal address
Speaking against David Ryan's re-election at Transurban
Final observations after dramatic AGM
David Ryan disgrace at Lend Lease AGM - have a listen
One of the most disappointing moments during the AGM season was when David Ryan was also re-elected to the Lend Lease board in Sydney on November 13 with 71% in favour, no questions from the floor and a strong round of applause. Have a listen and weep!
I was otherwise occupied in Melbourne that day producing this account of the dramatic ABC Learning revelations from the Commonwealth Bank AGM. The CBA has already written off $445 million on ABC Learning and I reckon today's bad debt increase probably reflected further hits on both Centro and ABC Learning.
Lend Lease chairman David Crawford should hang his head in shame for protecting his old Adsteam mate David Ryan and scoring him another 3 years on the Lend Lease board despite his record as the long-serving chairman of the ABC Learning audit committee.
Cranking up the pressure on Eddie McGuire
Paul Bendat's www.pokieact.org website has done some excellent research on pokies in Victoria which provided the following information for today's scene-setting story in Crikey ahead of the Collingwood AGM tonight:
President Eddie McGuire has just presided over an $8 million write-down courtesy of a poorly managed $18 million push into the pokies business, yet he wants to remain in power for the foreseeable future.
There are plenty of issues to explore around Collingwood's appalling pokies practices and losses. Whilst the Diamond Creek Tavern and The Beach hotel in Albert Park have now been jettisoned, pokies remain a big part of its operation.
The venue in Caroline Springs is still a mile shy of its promised $1.45 million charitable contribution, Woolworths runs the club's Coach & Horses Hotel in Ringwood which is pitched as a "Family Entertainment Centre" and The International in Lilydale is developing a retirement village right around the pokies venue.
As a Broadmeadows boy made good, Eddie should know how regressive the pokies are in targeting poor addicts and get Collingwood right out of the industry altogether. If not, he should stand aside for someone who will.
The AGM starts at 6.30pm in the Olympic Room on level two of the MCG and should be very interesting. If you know of anyone with a spare membership card or an interest in attending and asking questions, please drop us a line to stephen@maynereport.com.
Meanwhile, this what Paul Bendat posted on one of the Collingwood forums as debate raged about the $8 million loss and the future of President Eddie McGuire:
1. The bad decision to buy the pubs was a certain result of Eddie, our board and our management who are not dealing with their own money; going into a business none of them knew anything about. But this misses the point about the financial engine of their investment and what that says about the morality of the decision makers. The financial engine was the pokies at each venue.
What these men did was to utilise everything the Collingwood Football Club has stood for to make a dollar by luring Magpie fan base into these pokie places inevitably turning a portion of their own supporters into pokie addicts. Overwhelming evidence shows time and again that it is the pokie addicts who return a disproportionately large percentage of pokie cash to the pokie operators. It is over simplistic but true to say that the growth in revenue from these pokie places may well ultimately depend upon how many 'Pies fans became pokie addicts.
Collingwood Football club does not need money gained from preying on addictive behaviour whether it be smokers, alcoholics or pokie addicts. Sell the pubs, put the money in the bank and get back to focussing on our players, members and sponsors.
2. Our conduct of these pokie pubs also lacks morals and makes the involvement even worse.
a. The luring of seniors to The International in Lilydale (our pokie club acts as the office for retirement village sales) and young fans into The Club in Caroline Springs and the Coach and Horses and exposing them to pokie gambling should not be what the Collingwood FC is all about.
b. The Magpie pledge on web site for The Club to donate $1.45 million over the next ten years to support the Caroline Springs region with focus on special projects involving local community and sporting associations looks unlikely to be met. These broken promises tarnish the image of the Collingwood FC.
Pies' tradition and the positive values that each AFL stands for should mean a lot. They should not be compromised for pokie profits.
The Madoff files
Bernard Madoff, the former NASDAQ chairman, has been charged with defrauding his clients through a massive pyramid-type investment scheme. There has been a lot of demand for media comment and here are the relevent links:
Listen to interview on the ABC program The World Today.
Listen to chat with Tim Cox on ABC Tasmania.
Listen to regular chat with Deborah Cameron on 702 ABC Sydney, including the Madoff scandal.
Listen to chat on 774 ABC Melbourne with Libby Gore.
Watch interview on SBS World News.
ASIC jails Ponzi scheme merchant from Moonee Ponds
Dame Edna Everage was the most famous Moonee Ponds resident but the Melbourne suburb has today produced an operator of a Ponzi scheme who will spend the next four and a half years in jail.
Check out the ASIC press release as it includes the following lines:
Mr Spartaco Fasciale of Moonee Ponds, Victoria, has today been sentenced in the Melbourne County Court to six years imprisonment on charges brought by ASIC. He will serve a minimum of four and a half years.
ASIC found that between March 2004 and May 2006 nine people invested over $1.4 million with Fasciale Futures on the understanding that some of the funds would be traded on the Australian Securities Exchange and other money would be held in trust. Investors were also advised that Mr Fasciale would generate returns between three and five per cent every month.
Mr Fasciale subsequently lost over $250,000 of investors' money trading on futures contracts and used the remaining money to pay investors their returns as well as cover his own lifestyle expenses.
Fasciale Futures was typical of a ponzi scheme, which promise investors a very high return on their investment. A ponzi scheme works such that investments by subsequent investors are used to pay interest and/or redemptions of earlier investors. Mr Fasciale did not hold an Australian financial services (AFS) licence nor was he authorised to represent an AFS licensee.
Meanwhile, we've updated the ASIC jail list and 2008 has turned into its best year since 2004. If they can put two more corporate crooks in the slammer before December 31, it will amount to two a month, something that has only previously been achieved in 2000 and 2004:
Sell-down continues with BB Power and News Corp
I'm still a bear on the sharemarket and have been gradually selling down, including most of the News Corp shareholding. You need to own $US2000 worth of News Corp shares continuously for 12 months to put up a shareholder resolution under US rules, so I've surrendered this opportunity for the 2009 AGM.
The sale of the remaining Babcock & Brown Power shares was done for legal reasons that will become apparent in the coming days. Anyway, here are the sales so far this week:
Dec 17: SAI: sold 146 at $2.36
Dec 17: Citigold Corporation: sold 1250 at 25.5c
Dec 16: Gazal Corporation: sold 220 at $1.19
Dec 15: Babcock & Brown Power: sold 100 at 5.5c
Dec 15: News Corporation: sold 290 at $12.99
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.