re: goblin and gominer -stolwyk Here's the articleHot water from...

re: goblin and gominer -stolwyk Here's the article


Hot water from thin air
By Michael West
September 20, 2003
Ron Perry has spent the past three years ensconced in the Moonie Beach Caravan Park amid the tropical palms and lush headlands north of Coffs Harbour, NSW, trying to figure out what happened to his dream of running his own company.

He ended up there after losing his company, Quantum Energy Systems, a maker of promising water-heating technology. It ran into difficulties with large debtors and Perry's hopes of a new life as a manufacturer vapourised.

Worse, the collapse of the business left him bankrupt and unable to work as an accountant - something he did for 30 years in an unblemished career. It was a rude shock. Perry and his wife Debra lost the lot - the house, the boat he had taken nine years to rebuild, and of course the business. They live on Debra's pension, a legacy of her 20 years in the Royal Australian Air Force, which she left as a squadron leader.

The paradox is that Quantum, and the men who now control it through Crisp Holdings, a collection of executives and clients from the accounting firm Hall Chadwick, were worth $1 billion - more than Ten Network, Aristocrat Leisure or the Bank of Queensland - when Quantum shot through $1 a share on the stock market a few weeks ago amid fevered speculation of "massive" contracts in China.

That's just two and a half years after Quantum was sold by its liquidator, also from Hall Chadwick, for a mere $1.1million.

Hall Chadwick partner Richard Albarran, acting as administrator-liquidator, accepted an offer from Phillip Sidney's Crisp Holdings - a company registered in Vanuatu - and sold it Quantum Energy P/L, "a company to be formed by the promoter, Phillip Sidney," according to the contract.

Albarran says the Quantum sale was normal insolvency practice.

"It was sold to a client of the firm who provided us with the largest return available to the creditors so we don't have an issue".

In November 2001, less than a year after Quantum was sold, it was onsold to a stockmarket shell called Wellworth China Investments for $61.1 million.

Three months later Crisp emerged as the major shareholder in Wellworth China, later renamed Quantum.

The principals of Crisp are Phillip Sidney (Quantum's chief executive and a client of Hall Chadwick NSW), Drew Townsend (a director of Quantum and Hall Chadwick accountant) and Leo Respinger (chairman of Quantum and principal of Hall Chadwick Corporate (NSW).

It is the latest public incarnation for Respinger, who has been involved with a number of interesting stockmarket ventures over the years and his expertise has helped shape the remarkably rapid "success" of Quantum.

It seemed a huge transformation, and when asked whether a year of his work was really worth $60 million, Quantum managing director Phil Sidney, said simply "yes".

Yet Hall Chadwick Queensland - acting as investigating accountant to the float - later signed off in the prospectus for Quantum's float on the writedown of the assets from $61 million straight back to zero.

No matter, after the $61 million valuation Crisp had 87 per cent of shares in the new Quantum. That is escrowed stock so the large number of shares on issue do not show up easily when perusing Quantum's details on the ASX information services. The stock looks "tight".

Wellworth was renamed Quantum, and stockbroker Bell Potter raised $4 million from its clients to float the 25c shares in May this year. Amid a rash of glowing press releases and ASX announcements the stock took off.

Its devotees in the internet chatrooms such as Crove, Homer, Krill, Big K, Goblin and Gominer whipped Quantum into a frenzy.

"It's a biggie," scrawled Crove on Commsec. "Some huge news on QTM (Quantum). Great profits, great new contracts, great new joint ventures. I have never been so bullish on QTM than I am now. I believe QTM will be $1.20 in a week or so."

When the much feted announcement to the ASX from Quantum did arrive on August 8, with the shares hovering at 70c, there wasn't a $50 million contract as mooted by Crove. It was for $3.4 million.

Meanwhile, chairman Leo Respinger and CEO Phil Sidney were selling their shares.

The whole episode has been uncomfortable viewing for Perry. "I'm angry but I'm not about to let it consume me," he says. "I spent six years getting through my accounting course working two jobs with two young children. I put my life's work into Quantum. Now this."

He'd lost it all so quickly. When things had gone sour in 2000 - a major debtor didn't pay and the costs of expansion crippled his business around the time of the Sydney Olympics in September - Perry had turned to Hall Chadwick for help.

He needed a corporate caretaker to revive the business or hand out what was left for creditors. He got not one red cent.

The sale of the business raised enough to repay the National Australia Bank $550,000.

The balance went to the liquidator, Hall Chadwick, in fees.

And, after the sale, Phil Sidney gave Perry the sack.

Although he is passing his days now doing the things he loves - fishing and surfing - he "didn't expect to be doing it just yet".

And he has been amazed by the spectacular rise in Quantum's share price since it was listed in May - and the paper riches that have come to the new backers.

Quantum chairman Leo Respinger is a director of Hall Chadwick Corporate (NSW) - the advisory arm of the firm - and a major shareholder of Quantum through Crisp and Chicago Ltd. Quantum CEO Phil Sidney is a major shareholder, an associate of Respinger in other ventures and a client of Hall Chadwick.

Hall Chadwick partners Drew Townsend, Robert Brassil, Bob Elliott and Geoff McDonald are either shareholders or directors of companies linked with Quantum, or both. There is a $623,000 loan to "director-related entities" in the prospectus. Also in the prospectus a related party company called Nece is controlled by Sidney, Respinger, Townsend and others. Quantum's registered office is c/- Hall Chadwick. Even Quantum's auditor, Charltons CJC, is the auditor of Hall Chadwick Corporate.

Ron Perry bought Quantum from John Siddons, a scion of the Melbourne business establishment and founder of Siddons Ramset, in April 1998.

Siddons had spent a lot of money developing a hot water system that didn't need sunlight to heat water.

As its marketing material claims, the Quantum technology creates "hot water from thin air".

Unlike a traditional solar system, which has panels on the roof, Quantum's unit is fired from ambient temperature. That is, it has panels filled with refrigerant that changes character with shifts in the temperature.

To expand Quantum, Perry brought in a client of his accounting firm, Steve Harmon, as a partner. Harmon expected to stump up his share of the capital, some $500,000 for a 50 per cent stake.

Though the Quantum product was selling, things went pear-shaped in three years. The cost of relocating the plant to Newcastle and trying to forge a national market blew out. Big debtors didn't pay. National Australia Bank was owed $550,000 and creditors were chasing nearly $2 million from Quantum. Then Harmon's money failed to arrive. (Even so, Harmon's wife, Gail Harmon, is now on the Quantum share register with $20 million of stock.)

On November 16, 2000, when Perry put the company in Albarran's hands, Albarran set out to find buyers for the business. In the end it came down to two bidders with matching cash offers.

One was Crisp, a Vanuatu-registered vehicle then controlled by Phil Sidney, according to Geoff McDonald, Hall Chadwick's managing partner. Leo Respinger, now Quantum's chairman, was at the time one of the people "authorised to deal with the controllers of the company", which, according to Mr McDonald, means "arguably directors or signatories or persons with an interest in the company".

The other bidder was Rheem - the water-heaters division of the giant Southcorp. Rheem was sold in 2002 as Southcorp moved to become a pure wine company.

"We were actively pursued by both Southcorp and Crisp but we eventually went with the Crisp offer because they promised to keep the factory in Newcastle," says Perry, who was the major creditor holding 70 per cent of the proxies. "It was better for the staff."

But it struck a hitch when John Siddons found out that Quantum was up for sale. He had his lawyers block the sale with an injunction over disputed warranties on faulty water heaters dating back

to Perry's purchase of the business.

At the creditors' meeting of January, 18, 2001, the offers from Southcorp and Crisp were discussed.

Albarran said both the Southcorp and the Crisp offers were fair and that he had received undertakings from Crisp that it would pick up the legal bill arising from the Siddons claim.

Perry went with the Crisp offer. The Deed of Company Arrangement (DCA) ensured Crisp would keep the staff in Newcastle, employee entitlements would be paid in full, creditors would get back 29.2c in the dollar.

Harmon and Perry would take a 25 per cent shareholding in the new company. The price? Just $1.6 million.

Southcorp walked, vowing to do its own R&D on a rival technology. Albarran said the deal with Crisp had to be finalised within 28 days - that's the law - or Quantum would lapse into liquidation.

It looked like a straight forward sale.

Without telling Perry or the other creditors, Crisp withdrew its offer, citing the litigation with Siddons as the reason.

Still, Crisp remained in the picture. It's unclear when Crisp's first offer was withdrawn, but on February 2, Richard Albarran got another offer from Crisp, this time for just $1.1 million, which he accepted. Creditor payments, employee entitlements, future shareholdings and Perry's directorship all vanished.

Perry and the other credi tors were not told that the business was to be sold and Quantum placed in liquidation until February 8. Time had run out. The company was put under on February 9.

Both John Siddons and Ron Perry have approached Hall Chadwick requesting copies of the minutes of creditors' meetings and advice on where the requisite newspapers ads announcing the sale might have been. No luck.

Hall Chadwick managing partner Geoff Macdonald told The Australian the firm has been unable to find records of the advertisements, but said there had been 14 expressions of interest at the initial stages.

Perry took it to The Australian Securities and Investments Commission. He says ASIC's Suzanne Halas sympathised with Perry but what Hall Chadwick had done was "not illegal".

Insolvency specialists Sheahan Lock Partners have come to Perry's aid. "A number of creditors have asked us to review various aspects of the administration and give them advice and the duties of administrators," the firm's principal, John Sheahan, told The Australian yesterday.

Meanwhile, Quantum announced its maiden results as a listed company last week - a loss of $62.6 million (including $63 million in writedowns) on revenue of $7.8 million. The company had burned through the $4 million raised earlier this year.

Directors announced a placement and share purchase plan to raise up to $13 million. Quantum said it needed capital to expand into the US.

On announcing the loss and the share issue, directors Sidney, Respinger and Townsend had sold 77,800 shares from their personal holdings in an option deal with Bell Potter, the brokers to the float.

If the placement is successful, Quantum will have more than 900 million shares on issue.

Also in the result, Nece, the company associated with four Hall Chadwick partners, Respinger and Sidney, was paid $366,942. Other costs to Quantum included a loan from directors for $622,916.

The stock closed yesterday at 48c, down 1c and just above the 45c placement price.