Dirty Rotten Scoundrels

by Matthew Benns

  None of this endeared him to Australians. The TV presenter Andrew Denton even organised a subscription for viewers to chip in to pay for a bounty hunter to kidnap Skase and bring him back. While Denton conceded that Australians have some affection for those on the wrong side of the law, he said, ‘Skase hasn’t even had the decency to be a decent outlaw. He’s not only ripped us off, not only lied to us, but now he has the gall to go overseas and whinge to us about how we’re treating him.’

  In May 1998, the Australian government cancelled Skase’s passport. He was ordered to leave Majorca by July, but appealed and then pulled another rabbit out of the hat by becoming a citizen of Dominica. He likened giving up his Australian citizenship to throwing away a pair of ‘smelly socks’.

  He had avoided prison in Australia, but then became a virtual prisoner in Majorca, spending his time bitterly blaming everyone else for his downfall and never, ever taking responsibility for what he had done. Van der Plaat claimed Skase became furious at Pixie’s constant references to their previous life before the shit hit the fan. Just how many of van der Plaat’s claims are to be believed is unclear, as it was obvious he had an axe to grind — he even alleged Skase was having a homosexual affair with interior decorator Barry Peters based on the uncorroborated sight of Skase leaving Peters’s guesthouse once in the early hours of the morning.

  And just how much money Skase managed to spirit away is also in doubt — if it was really in excess of $30 million, why did he have to sell his step-daughter Alex’s London home? And why, in 2001, did Skase and Pixie move from La Noria to rented accommodation? Where was the money? Mr Donnelly was still on his tail in 2001 when, ironically, just as the Australian government renewed efforts to extradite him, Skase really did fall ill. He died from stomach cancer aged just 52.

  His death left divided loyalties. Broadcaster Derryn Hinch told the ABC he had ‘mixed feelings’; while Hinch had personally lost a large amount of money through his involvement with Qintex, he also pointed out that Skase had had a hand in the ‘fantastic’ Mirage resorts and the rehabilitation of Channel Seven.

  Pixie said: ‘We had a wonderful, passionate relationship and our marriage was exhilarating. The sorrow and grief I felt after his death was all-consuming. I felt totally lost; it was like my whole heart had been wrenched out and I didn’t think I could live without him.’

  But she managed, returning to live in a two-bedroom flat in Melbourne that was bought with Skase’s $1-million life insurance policy. It took her almost ten years to offer any kind of sympathy or form of apology to the people her husband had ripped off. She told the Australian Women’s Weekly in 2010: ‘I feel desperately sorry for the shareholders, as did Christopher. The only time I have ever seen him cry was when he was discussing the impact of the collapse on the shareholders with Robert Holmes à Court, who was a dear friend.’

  That half-hearted ‘apology’ was dismissed as crocodile tears by the conned shareholders and investors who had watched Skase dodging justice and living the highlife in Majorca for almost a decade.

  Bernie Wotherspoon from Brisbane was one of 160 workers who lost $500,000 in entitlements when Lloyds Shipping Holdings collapsed in 1989. ‘I’d like to see what sort of swish nightlife Pixie still lives,’ he told the Herald Sun after hearing Pixie’s begrudging apology. ‘It’s water under the bridge for me now and it wasn’t her fault, but how much of the Skase artwork is still hanging on her walls?’

  City Slickers: Insider traders

  BEFORE Lukas Kamay’s downfall, he was invited back to his old private school, Loyola College in Melbourne’s northern suburbs, to give a speech on how he overcame adversity to rise to his current enviable position.

  His speech centred on the worst day of his life so far. He had picked it to demonstrate to the boys how you can rise above adversity, as he had, to become a success. ‘I vividly remember that day,’ Kamay told the rapt students. ‘They called me up to the boardroom, sat me down and gave me the bad news, then directed me straight out of the building. My desk would be packed up and sent to me via courier. I think this would have to be the lowest point of my very short career, standing out the front of 101 Collins Street with less than a year’s experience and feeling as if all that hard work I had put in was for nothing. I mention this to you today because at some point during your life you will experience something similar to this, whereby you are knocked down or fail to achieve something you really want.’

  Kamay was referring to the time he was bounced out of Goldman Sachs in 2010, halfway through his internship. The dirty financial giant was tightening its belt in a global financial crisis that it had helped to create with its dodgy deals and cynical trading of junk securities. Kamay was the victim that time, but he did not intend to be again.

  His old boy’s speech to the Loyola students was meant to uplift. After all, he had gone on from that setback to join the foreign currency exchange desk at the National Australia Bank (NAB) and was what Tom Wolfe called, in his 1987 excoriation of New York greed The Bonfire of the Vanities, ‘a master of the universe’.

  The speech would later take on a different meaning. Evidently, Lukas Kamay had picked up a lot more at Goldman Sachs than his first taste of failure. He would go on to become Australia’s own ‘Wolf of Wall Street’ — a young man from a privileged background who became consumed by money. A year after giving that speech, Kamay, 26, was jailed for seven years for pulling off Australia’s biggest ever insider trading scam. It was a simple con that earned him $8 million in just nine months.

  The former house captain of Loyola College, Kamay dreamt up the scam over a beer in a trendy Fitzroy pub with Christopher Hill, 25, an old friend from Monash University. Hill was an analyst with the Australian Bureau of Statistics (ABS) and had access to sensitive job, retail and building figures for up to a week before they were released to the market. Kamay was the brash over-confident financial whizz kid with an expertise learnt on the floor at NAB. He knew exactly how those ABS figures would affect the market and drive the value of the Australian dollar up or down.

  Together they decided to use their combined knowledge to make currency gambles, with the understanding that they would stop once they had made $200,000 from their initial $1000 investment.

  Kamay opened his first trading account with Pepperstone Financial in August 2013 and promised Hill $20,000 for handing him the sensitive information that Hill had copied out by hand inside the ABS. Then Kamay opened up another account without Hill’s knowledge. Hill would see just $19,500 of the $8 million net profit Kamay made from 45 shady transactions.

  Kamay’s first big deal came in December 2013 when he made $38,000 on a gamble just before the ABS released the labour force figures. In February 2014, Kamay made $500,000 in five minutes when the release of the unemployment figures sent the Australian dollar down.

  But those dramatic bets on the Australian dollar moments before major economic announcements did not go unnoticed. In the Melbourne office of Pepperstone Financial, the deals were brought to the attention of owner and founder Owen Kerr.

  The bets on the dollar were all or nothing, bigger than Kamay’s account could sustain, and were being made sometimes just 30 seconds before a major economic announcement. Kerr started digging. He looked up Kamay’s gold LinkedIn account and saw he was friends with old uni pal and ABS employee Christopher Hill.

  ‘That was when it suddenly clicked that this guy was only trading ABS data and had a man on the inside,’ Mr Kerr told the Australian Financial Review afterwards. His first instinct was to close down the account, but once he reported it to the Australian Federal Police (AFP), they urged him to keep the account open.

  The AFP launched Operation Leith, monitoring the two men with surveillance cameras and wire taps as they obliviously carried on with their deals. In March, Kamay made more than $2.5 million profit in a single day. He used the money to buy a European sports car and then paid $2,375,000 — dramatically over the reserve — for the apartment designed by twins Al
isa and Lysandra Fraser on hit TV show The Block.

  But he was also starting to twitch. He was worried the money in his account was not moving quickly enough — unaware that the delay was because the team at Pepperstone Financial were contacting the AFP for permission to let the trades go ahead. He began making losing trades to try to throw the authorities off the scent.

  It was to no avail; the police swooped in May. Both men were charged and appeared before the Victorian Supreme Court.

  ‘I’ve let down my family, my friends, my work colleagues, who all trusted me. I’m deeply apologetic,’ Kamay said in court. ‘I understand that my actions were illegal. The money really consumed me.’

  But Justice Elizabeth Hollingworth was unmoved by his tearful performance in the box. ‘That was not a dazzling display,’ she fired witheringly from the bench.

  Kamay’s lawyer blamed Kamay’s avarice on a ‘Wolf of Wall Street’ culture on NAB’s trading floor, where a bell was rung every time there was a trade over $10,000. A trade over $30,000 heard the bell toll three times.

  Hollingworth was not impressed by that argument either. ‘Although the corporate culture that existed in NAB’s foreign currency division when you, Mr Kamay, were working there may have been unduly focused on making as much money as possible, that does not justify your behaviour.

  ‘For both of you, your motivation for committing these offences was personal greed, pure and simple,’ she said.

  ‘[Kamay] was reluctant to concede a number of matters,’ she said afterwards. ‘He was still trying to drag [Hill] in and blame him for it. He was far less than owning up to his full responsibility.’ Psychologists examining Kamay described him as ‘displaying some symptoms of inflated self-esteem and narcissistic personality traits’ — not dissimilar, perhaps, to those displayed by Jordan Belfort.

  Justice Hollingworth accepted, however, that both men did feel considerable shame and embarrassment after pleading guilty to charges of insider trading, money laundering, abuse in public office and identity theft. Kamay was sentenced to seven years and three months, and will spend at least four and half years in jail. Hill was jailed for three years and three months with a non-parole period of two years.

  She also pointed out that insider trading was not a victimless crime. The ABS had to have an expensive major overhaul of its procedures and security, while NAB had been forced to remind staff of their ethical obligations.

  ‘Insider trading is a serious criminal offence because it can undermine the integrity of markets, and diminish public confidence in the commercial world,’ Justice Hollingworth said.

  * * *

  Lukas Kamay was treading a well-worn crooked path. Figures collated by Professor Ian Ramsay, director of the Centre for Corporate Law at Melbourne University, showed that dodgy dealers have been turning a profit through insider trading in Australia for decades. But, surprisingly, the corporate watchdog, the Australian Securities and Investments Commission (ASIC), was not nailing insider traders with anywhere near the success it was having with other white-collar crimes. Overall, ASIC reports a 90 per cent success rate for prosecutions. But Professor Ramsay said: ‘Over 40 years of insider trading prosecutions, from 1973 to 2013, the prosecution success rate was just over half at 51 per cent.’ A long way short of its reported batting average for nailing bad guys. However, the watchdog is improving, said Professor Ramsay: ‘It has been getting better, going up to almost two thirds of prosecutions for insider trading being successful after 2000 compared with just seventeen per cent before that.’

  The problem is that insider trading is a very tricky crime to discover, prove and prosecute. It is easily hidden. However, there are clues. Australia’s insider traders tend to come in a quite specific package. Professor Ramsay’s research found that the most likely people to commit insider trading fraud were males, aged between 30 and 49 and working as company directors in the mining industry. ‘What is surprising is the trivial amounts of money people are risking going to jail for. In 39 per cent of cases, they were risking jail time for between zero and $100,000. Only in seventeen per cent of cases over the last 40 years did they make more than $1 million,’ he said.

  ‘That is what made the Lukas Kamay case such a standout. It is the biggest profit from insider trading by far, and it is the longest prison penalty by a long way — only one case previously had seen the defendant being given a sentence of three years. You have to look at Hill who got less than $20,000 for his part in a $7-million-plus crime and still got a sentence of three years. They had a gentleman’s agreement, which just goes to prove the old saying that there is no honour among thieves,’ said Professor Ramsay.

  Perhaps Kamay’s dirty dealings should not have come as a surprise; NAB has shown form for it, after all. A few years before Kamay’s trial, four of NAB’s rogue foreign exchange traders had taken the bank on a wild ride that cost it $360 million, its reputation and the jobs of its chairman, CEO and members of the senior board. At the heart of the scandal lay the bank’s ‘greed is good’ culture and its complete lack of any oversight.

  The four characters operated in a macho world where they believed absolutely that they were completely bulletproof. They called themselves ‘the BOATs’ — the Best Of All Time — and everyone else ‘jubs’ because they had jobs but didn’t really know what they were doing. Little people followed the rules, but the BOATs lived in a high-octane world of giant trades, giant bonuses and giant cigars. The foreign exchange desk sat apart from the staid world of banking in a bubble of high profit and high risk. At night, they partied hard, and on the weekends, they chartered helicopters to corporate marquees to swill top-shelf liquor and live life large.

  The leader of the group was Luke Duffy: ‘the Tyrant’. He ran the Forex desk his way and demanded complete loyalty. An insight into his mentality came from a former colleague of his at his previous employer, the Commonwealth Bank. According to them, after work, Duffy would lead his acolytes to the back bar of the Fortune of War pub in The Rocks near Sydney Harbour, and perch in front of the poker machines to hold court. The next morning, after a hard night’s drinking and gambling, big Luke would come onto the trading floor and tell of how the machine had lobbed a couple of hundred dollars into his wallet. He never lost, he said.

  In a letter to online news site Crikey, the former colleague wrote: ‘Success as a trader comes to a large extent down to judgement, and when assessing the judgement of a trader who habitually and routinely pisses away an entire evening and pours hundreds of his own dollars into a machine which inexorably keeps one dollar out of every five, you have to question whether they really understand the odds they are being supported to play professionally with other people’s money.

  ‘As our hero would say, “Ask yourself a question.”’

  Clearly NAB didn’t.

  Working under this big former Sydney University second rower with an even bigger personality were three crucial cronies.

  In London was Gianni Gray: ‘the Automaton’. He did his master’s bidding and entered the sketchy trades into the system when the trading book passed from Sydney to London. Duffy nicknamed him ‘G-spot’, because he was so sensitive to the market. Gray’s complaints and worries about the deals they were making also led Duffy to call him and his junior trader, Dennis Gentilin, the ‘London Stench Boys’ because they were always complaining or making a stink about what was happening.

  Also in the team was David Bullen: ‘the Philosopher’. He eventually claimed to have been so disgusted by the money-grabbing hedonistic lifestyle that he became a Buddhist, grew a beard, moved to the bush and wrote a book about it all called Fake.

  And last, and also least, was Vince Vicarra: ‘the Patsy’. Duffy nicknamed him ‘Vinnie’ and later ‘Rat’ for daring to question him over his plan to trade the team out of trouble. He was the baby of the group, just 23 when it all unravelled, and was swept along by Duffy’s force of personality and view of the world. In his eventual trial, he tried to argue that some of the actions
were justified and was baffled why anyone would think him guilty — after all, everyone in the bank knew what was going on. And that was half the problem.

  Foreign exchange traders work in a high-pressure world of enormous gambles. They place ‘bets’ on currency fluctuations. Then they place more bets on those original bets to cover their losses. They then trade those bets, known as derivatives, in markets all over the world, and can bet against themselves and on the state of the market at any given point in the future. It is complicated, and can make and lose millions of dollars in the blink of an eye. It is little wonder financier Warren Buffett called derivatives ‘financial weapons of mass destruction’.

  In 2003, Duffy told his team the end-of-year review should say: ‘G’day guys, we had a great year, pay us loads of money.’

  Except they hadn’t. The team had just made a $5 million loss and was $42 million under budget. Duffy needed a way out of the mess and found it when junior dealer Vanessa McCallum entered an options trade that made a false loss of $1 million. When Duffy complained to the bank’s back office that the trade had sat there for a week untouched, he was told that it certainly wasn’t the back office’s job to be checking internal trades. The NAB bosses did not like to see big fluctuations in profits and losses, and now Duffy and his team of unconquerables had a way of smoothing out the peaks and troughs. The team closed the year with fake internal trades that artificially inflated the profit — they even got paid gigantic bonuses as a result. They were confident they would make the money up and could go back and wipe out the real losses. But like a gambler chasing a losing bet, the losses snowballed.