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Underbelly Inc: gangs muscle in on markets

Underbelly Inc: gangs muscle in on markets EXCLUSIVE: Gary Hughes and Adele Ferguson From: The Australian September 13, 2008 12:00AM

UNDERWORLD criminal networks and outlawed motorcycle gangs are exploiting weaknesses in corporate laws and poor regulation of financial markets, reaping multi-million-dollar profits from suspected share market manipulation, asset stripping and the snatching of control of companies they force into administration.

Five state and federal agencies - Victoria Police Purana gangland taskforce, the Australian Federal Police, the Australian Crime Commission, the Australian Securities and Investments Commission and the Australian Tax Office - are investigating financial deals and share transactions worth at least $100 million.

Legitimate business owners have alleged that standover tactics, including physical threats and intimidation, have been used in some cases to try to force through deals or stop people going to the authorities.

Detective Inspector Bernie Edwards, head of the Purana taskforce, told The Weekend Australian the business and finance sectors were rapidly becoming the new "powerbase" of organised crime.

Key figures in some of the investigations include the head of Melbourne's Carlton Crew, Mick Gatto, and his business associate John Khoury, financial adviser and loan provider Tom Karas, high-profile share trader Leo "The Gun" Khouri, who lost tens of millions of dollars in the collapse of stockbroker Opes Prime earlier this year, members of a notorious Melbourne crime family, outlaw motorcycle gangs in a number of states, including NSW and Victoria, and official administrator Stuart Ariff, who is being taken to court by ASIC over his involvement in a string of insolvencies. All have denied any wrongdoing.

In a number of cases uncovered by The Weekend Australian, so-called low-doc loans were used as a financial Trojan horse to force companies into receivership before they were allegedly legally plundered through the payment of excessive fees, had assets stripped out or were sold off to buyers with underworld links. Criminals and their business associates are known to have purchased shares in a number of small resources and biotech companies. The stock prices later jumped sharply after the shares were heavily traded through Opus Prime or off the back of favourable analyst reports, takeovers or rumours fuelled through the internet.

Trading in some of the companies later contributed to the collapse of Opes Prime, initially set up by the accountant whoonce worked for the head ofaMelbourne crime family.

Inspector Edwards said Purana, which is also working with the ACC, was using financial experts to track the dealings of suspected criminal identities and their business associates, although such investigations were "complex and lengthy" and could take years to complete. "Finance forms a powerbase for many organised criminal enterprises and is seen as a growing area of crime," Inspector Edwards said.

"We are unable to comment on any specific case. However, the Purana task force is aware of suspected financial crime and its links with underworld figures."

The head of the NSW fraud squad, Detective Superintendent Colin Dyson, told The Weekend Australian that organised crime was increasing its targeting of businesses and the financial sector, in some cases recruiting existing staff or infiltrating gang members to help on the inside.

"A business, particularly an incorporated company, is an entity, like a person," Superintendent Dyson said. "Accordingly it is possible for criminals to commit the same types of offences as they do against members of the community."

Bill Doherty, a company director who lost his business, Independent Power Coating, after it was placed into administration, said the lack of regulation in the insolvency industry had attracted a serious criminal element.

"The three bodies, the Insolvency Practitioners Association of Australia, the Institute of Chartered Accountants of Australia and the CPA Australia, resemble a dysfunctional hybrid of the three blind mice and three wise monkeys," said Mr Doherty, who has been interviewed by police about the possible role of organised crime figures in the loss of his business.

"They see no evil, hear no evil and do nothing. ASIC is critically under resourced and is known to ignore companies with turnover of less than $10million, which effectively excludes 95 per cent of companies from protection."

http://www.theaustralian.com.au/news/underbelly-inc-gangs-muscle-in/story-e6frg6of-1111117471374

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Sheeza