SINGAPORE (May 20): The Australian Securities and Investments Commission (ASIC) is seeking judicial permission to wind down mining company Merlin Diamonds. The regulator is also probing into whether its chairman Joseph Gutnick failed in his duties.
Gutnick, who is known as “Diamond Joe”, is under investigation for a A$13 million ($12.3 million) loan made by Merlin to AXIS Consultants, a private company linked to him. Merlin shares have been suspended from trading since October 2018.
ASIC is seeking an order to appoint Deloitte to liquidate Merlin, owner of the Merlin Diamond Mine Project, which is apparently one of only three diamond mines in Australia.
Investors may remember Gutnick from his 2013 bid to sell Merlin to Innopac Holdings, which is part of the web of Singapore Exchange-listed companies with ties to the trading syndicate, allegedly with John Soh Chee Wen as the mastermind. Soh, who is now on trial for share manipulation, was managing director of Innopac (known as Inno-Pacific Holdings then) in the mid- to late 1990s.
See also: Compliance gaps, procedural lapses
Under the terms of the February 2013 deal, Innopac would pay A$59.4 million for Merlin, by issuing 1.67 new Innopac shares for each Merlin share priced at 28 Australian cents.
At the time of the deal, Gutnick owned Legend International Holdings, which was the largest shareholder of Merlin, with a stake of more than 40%. Gutnick sold Legend’s stake in Merlin on Jan 25, 2013, however, just a week before the deal announcement on Jan 31, 2013. He then went on to buy a 12% stake in Innopac, although exactly when he bought them was not clear.
This had raised questions and eyebrows then, for there was no immediately apparent reason for him to purchase Innopac shares, nor any reason to sell Merlin shares at a lower price than what Innopac had offered.
By March 2013, a number of individuals closely linked to Innopac had bought shares in Merlin, some long before the announcement of the deal was made.
Among them was Edwin Sugiarto, the largest shareholder and then-chairman of Annica Holdings. He bought nine million shares (5.12% stake) in Merlin on Jan 25, 2013, less than a week before the deal was announced. Innopac, via its subsidiary Jadensworth Holdings, is a shareholder in Annica.
Another individual was Lee Chai Huat, known to be Soh’s former assistant. He bought 24 million shares (a 13.65% stake) in Merlin through an entity called Newton Centre Development on Jan 17, 2013.
The other individuals who bought Merlin shares included Vernon Khoo Tiam Hock, former managing director of Kuantan Flour Mills. He bought nine million shares (5.12% stake) on Dec 31, 2012; Goh Hin Calm, then-senior finance and admin manager at IPCO International, bought 13 million shares (a 7.39% stake) on March 8, 2013. Lim Kuan Yew, whose account was allegedly used in the manipulation of Blumont, Asiasons (now known as Attilan Capital) and Liongold shares, also purchased 21.6 million shares (12.29% stake).
Together they held a majority stake, or 63% of the shareholding of Merlin, allowing them to outvote shareholders who might oppose the Innopac offer. The deal eventually fell through, however, and Inno-pac’s share price fell to below 12 cents from the March 2013 peak of 21 cents.
After the penny stocks crash in October 2013, Innopac shares fell from a high of 25.5 cents on the day the deal was announced, to less than three cents each. In early 2014, Blumont announced a plan to take over Merlin, but that offer was also eventually withdrawn, in January 2015. nick’s woes in Australia
