Merlin Can’t Possibly Possess Enough Magic for Gutnick’s Great Escape, ASIC Turns Up Heat On Diamond Company

ASIC liquidator push turns up the heat on Diamond Joe Gutnick

Australia’s corporate watchdog has sought Federal Court approval to wind up Joseph Gutnick’s publicly-listed company, Merlin Diamonds, and flagged an inquiry into whether the colourful Melbourne businessman has breached his director’s duties.

The Australian Securities and Investments Commission’s (ASIC) move against the man known as “Diamond Joe” due to his appetite for outback diamond and gold deposits confirms the worst fears of Merlin Diamonds’ shareholders, who have already endured a seven-month trading ban on the company’s stock.

Joe Gutnick.
Joe Gutnick. CREDIT:JOHN WOUDSTRA

Court filings released to The Age and Sydney Morning Herald on Tuesday show ASIC is seeking an order to appoint Deloitte as liquidators of Merlin Diamonds, which had a market capitalisation of just $20 million when its stock was banned from trading last October.

ASIC has for months been probing how Merlin Diamonds has loaned $13 million of investor money to a private company, AXIS Consultants, which has long been associated with Mr Gutnick.

“The loans have been used to fund private companies associated with Joseph Gutnick and provide no discernible benefit to Merlin Diamonds,” ASIC said in a statement on Tuesday evening.

In one example cited by ASIC, it alleges Merlin Diamonds in October 2016 received $900,000 from a Mr Gutnick-linked company, Chabad Properties, for convertible notes and options issued to Chabad.

“The ultimate source of the $900,000 paid by Chabad, through a series of transactions involving related companies, was Merlin Diamonds. Mr Gutnick is a former director of Chabad,” ASIC’s media statement revealed.

Mr Gutnick, who resumed the chairmanship of Merlin Diamonds after emerging from a self-imposed bankruptcy last year, and his wife, Stera Gutnick, are also named in the ASIC’s court filing to wind up Merlin Diamonds. Mrs Gutnick is not a director of Merlin Diamonds and is not understood to be personally under investigation.

ASIC has asked the liquidators to examine and provide an opinion on whether Mr Gutnick and other past and present Merlin Diamonds directors and officers, have breached the Corporations Act.

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Merlin Diamonds, Not So Magical Now – ASIC Move to Liquidate Company – Follow the Money…

 

ASIC media releases are point-in-time statements. Please note the date of issue and use the internal search function on the site to check for other media releases on the same or related matters.

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Tuesday 14 May 2019

19-113MR ASIC moves to appoint provisional liquidator to Merlin Diamonds Ltd

ASIC has applied to the Federal Court of Australia to wind up ASX-listed public company Merlin Diamonds Limited (ACN 009 153 119) (Merlin Diamonds) and for the appointment of provisional liquidators to report to the court pending hearing of its application for final relief.

The application arises from ASIC’s concerns which include:

  • since 2012, Merlin Diamonds has advanced substantial funds to Axis Consultants Pty Ltd (Axis), a related management services company, without shareholder approval ($13,752,124 owing as at 30 June 2018) (Loans);
  • the Loans have been used to fund private companies associated with Mr Joseph Gutnick (a current and former director of Merlin Diamonds and Axis respectively) and provide no discernible benefit to Merlin Diamonds;
  • the terms of the Loans appear to be unreasonable, uncommercial and non-arm’s length. No security for the Loans has been provided by Axis or any third party and the Loans are being fully provisioned (impairment provision) each financial year;
  • the Merlin Diamonds auditors have been unable to obtain sufficient appropriate audit evidence to be satisfied that Axis is likely to be able to repay the Loans;
  • in October 2016 Merlin Diamonds received $900,000 from Chabad Properties Pty Ltd (Chabad) for convertible notes and options issued to Chabad. The ultimate source of the $900,000 paid by Chabad, through a series of transactions involving related companies, was Merlin Diamonds. Mr Gutnick is a former director of Chabad;
  • audited accounts of Merlin Diamonds for the half-year ended 31 December 2018 (due 18 March 2019) have not been lodged with ASIC, a contravention of s320 of the Corporations Act;
  • the financial position of Merlin Diamonds as at 30 June 2018 raises concerns over the company’s solvency;
  • there has been no company secretary of Merlin Diamonds since 8 January 2019, a contravention of s204A(2) of the Corporations Act; and 
  • corporate governance of Merlin Diamonds falls far short of the standard expected of an ASX-listed public company.

ASIC seeks from the Court:

  • the appointment of Mr Salvatore Algeri and Mr Timothy Norman, of Deloitte Financial Advisory Pty Ltd as joint and several provisional      liquidators of the company; and
  • orders requiring the provisional liquidators to provide a detailed report to the Court that sets out, among other things:
    • the way in which Merlin Diamonds has made the Loans;
    • the recoverability of the Loans from Axis;
    • the $900,000 transaction involving Chabad; and
    • the financial position of Merlin Diamonds
  • for the Court’s consideration at a later date, orders to wind up the company and appointing Mr Algeri and Mr Norman as liquidators.

ASIC’s application will be heard in the Federal Court of Australia at Melbourne on a date to be fixed.

ASIC’s investigation into the affairs of Merlin Diamonds is continuing.

Background

Merlin Diamonds, a Melbourne-based company listed on ASX, engages in the exploration and development of diamond mining projects. Its flagship project is the Merlin diamond mine in the Northern Territory.

Merlin Diamond’s shares have been suspended from trading since 1 October 2018. Merlin Diamonds has 3.3 billion ordinary shares issued, and last traded at $0.006 per share – resulting in a market capitalisation of approximately $20 million.

Editor’s note:

The matter was listed for the first case management hearing on 4 June 2019 in the Federal Court, Melbourne.

Zambian Court Orders Liquidation of Leviev Company – Frango Finance Ltd. and Gemcanton Investments Holdings

Zambia Court Orders Liquidation of Billionaire Leviev’s Company

A Zambian court has ordered the liquidation of a company owned by Israeli diamond billionaire Lev Leviev as the fight with his local partner in an emerald mine rages on.

The Zambian High Court placed Frango Finance Ltd., which owns half of Gemcanton Investments Holdings, in compulsory liquidation after receiving a petition on Feb. 18, according to a statement published in the Daily Nation newspaper.

LEVIEV Store Opening

Lev Leviev

Photographer: Scott Wintrow/Getty Images

Leviev will contest the order, said his lawyer, Dickson Jere. “We have been served with an order which was issued without hearing my client,” he said in a text message. “We will be going to challenge it in court as Frango is not even a Zambian-registered company.”

Leviev and Abdoulaye Ndiaye became embroiled in legal battles soon after the diamond magnate bought half of what was previously known as the Grizzly emerald mine from Ndiaye in Zambia’s Copperbelt province in 2015.

More Dan Gertler and Glencore – WSJ

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LostMessiah – The Gertler, Fleurette, Katumba, Glencore…. Reported Long Ago

To our faithful readers and to the journalists and law enforcement who read our pages: 

We uncovered the abuses portrayed long ago. For a look into our investigations into Dan Gertler, Fleurette,  the death of Katumba, Glencore, the various violations and other unsavory practices, please go into our search bar and search the names. We reported about these issues nearly 2 years ago.

LM

Glencore-Controlled Miner to Be Fined by Canadian Authorities Over Congo Ops

Regulator expected to allege Katanga Mining hid risks of doing business with Israeli diamond merchant closely linked to Congolese President Joseph Kabila

Glencore GLNCY -3.44% PLC-controlled mining company and some of its current and former directors and executives have agreed to pay more than $22 million to settle Canadian allegations that they hid the risks of doing business with a controversial Israeli businessman closely linked to Congolese President Joseph Kabila, according to a person familiar with the matter.

The expected settlement between the Ontario Securities Commission, Canada’s biggest stock-market regulator, and Toronto-listed Katanga Mining Ltd. KAT -1.56% is related to the company’s business activities in Congo between 2014 and 2016, the person said.

The regulator is expected to name several of Katanga’s current and former executives and directors in the settlement and will focus, at least in part, on Katanga’s longstanding ties with Dan Gertler, the Israeli businessman who first invested in Katanga alongside Glencore in 2008, the person said.

The OSC is also expected to allege that Katanga lacked proper internal financial controls, leading it to overstate copper production and understate mining costs, potentially inflating the miner’s performance, according to the person familiar with the matter.

Glencore owns about 86% of Katanga. In 2017, Glencore purchased Mr. Gertler’s stakes in Katanga and another giant copper mine in Congo.

The settlement is expected to name Glencore’s former representatives on Katanga’s board, according to this person. Those individuals include Aristotelis Mistakidis, one of Glencore’s most senior executives and two other Glencore executives, Liam Gallagher and Tim Henderson. All three stepped down from the board in November 2017 after Glencore and Katanga confirmed the Canadian investigation. The probe was first reported by The Wall Street Journal.

Katanga said at the time it was shuffling the board to address weaknesses in its controls over financial reporting. Earlier this month, Glencore said Mr. Mistakidis would retire at year-end.

Katanga and the named individuals have agreed to jointly pay a fine of more than 30 million Canadian dollars ($22 million) to settle the allegations, according to the person.

The people named in the OSC settlement will be banned for certain periods of time from acting as a director or officer of a publicly traded company listed in Ontario, the person said.

The settlement is expected to be announced as early as this week. A panel of the OSC must approve any settlement agreement at a public hearing for it to take effect.

It’s unclear whether Katanga and the individuals admit to wrongdoing in the settlement.

Katanga Chief Executive Johnny Blizzard has also agreed to resign as part of the settlement, the person said.

Katanga’s settlement represents another reputational hit for Glencore and its operations in Africa. In July, the London-listed mining giant said it had received a subpoena from the U.S. Justice Department demanding records related to its compliance with American antibribery and money-laundering laws in Congo, Nigeria and Venezuela.

The Wall Street Journal reported that a focus of the probe is Glencore’s ties to Mr. Gertler.

Mr. Gertler in recent years has become a lightning rod for controversy. In 2016, he was a central figure in a $412 million settlement between the U.S. Justice Department and the Securities and Exchange Commission with New York hedge fund Och-Ziff Capital Management Group LLC. A businessman people familiar with the matter said is Mr. Gertler paid more than $100 million in bribes to Congolese government officials, including Mr. Kabila, to get beneficial terms for deals in the Central African country, the DOJ and SEC alleged.

A spokesman for Fleurette Group, Mr. Gertler’s main company in Congo, said it “has always acted appropriately and with integrity in the DRC. Nothing has ever been proven against the company or its executives in a court of law.”

A year ago the U.S. Treasury Department sanctioned Mr. Gertler, alleging he traded on a friendship with Mr. Kabila to amass a fortune through “opaque and corrupt” deals on behalf of multinational companies seeking to do business in Congo. Mr. Gertler has denied wrongdoing and has declined to comment on the Treasury allegations and Justice Department investigation.

The OSC is expected to allege that Katanga breached Canadian securities law by not disclosing the risks it faced by relying on Mr. Gertler to maintain relationships with Mr. Kabila, Congo’s president, according to the person familiar with the matter.

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Canadian regulator to fine Glencore-controlled miner over Congo: WSJ — peoples trust toronto

https://ift.tt/2GhMlTr December 16, 2018 (Reuters) – A Glencore PLC-controlled mining company and some of its current and former executives have agreed to pay more than $22 million to settle Canadian allegations they hid the risks of doing business with an Israeli man close to Congolese President Joseph Kabila, the Wall Street Journal reported on Sunday. […]

via Canadian regulator to fine Glencore-controlled miner over Congo: WSJ — peoples trust toronto

 

See Dan Gertler on LostMessiah

Leviev’s Gemcanton Mine – Where is Government Intervention?

Government should review Levieve’s partnership at Gemcanton mine

 

The continued diamond smuggling investigation of the Israeli-Russian Diamond Baron Lev Leviev by the Israeli authorities should make the Government of the Republic of Zambia also institute serious investigation and review his investment at Gemcanton emerald mine formerly Grizzly Mining Ltd on the copperbelt.

Mr El Nefussy a representative of Levi Levieve was deported by the Government of the Republic of Zambia in 2017 for purportedly engaging in serious human rights abuses at Gemcanton mine. Unfortunately, no serious arrests were made to make him unwearable to the law for subjecting the poor Zambians to inhuman torture at Gemcanton before a deportation decision could be arrived at. Government opted to deport him, and that decision has not set any disciplinary precedence to would be offenders.

To date,the issue of torture and human rights abuses at Gemcanton by Levi Levieve’s team has not been adequately addressed.

Many of the victims complain that government has not punished the offenders and feel such a precedence would escalate related acts in future. Zambia is among the African countries where the world diamond baron Leviev has massively invested in emerald mining with very little corporate social responsibility (CSO) going to the poor people of Chief Nkana and Lumpuma area where the emerald mine sits as was the case when the investment was wholly owned by Abdoulaye Ndyaye.

Apart from a lack of CSR, Zambia has been a victim of dishonest by many of the foreign investors who come in and ignore the plight of the local people.
The question of Zambians benefiting from some of the investors coming in the country is becoming a thorny one, as locals seem not to benefit. Whether or not some investors are worth hosting in Zambia has become a National debate. People are wondering whether some companies are genuinely investors or coming in to exploit the country’s resources.

Very serious government’s like Israel have investigated some diamond tycoons like Leviev with very little to leave unturned. The Zambian government , like Israeli government should consider thoroughly investigating Levi Levieve’s investment in Zambia.

What is worrying is a lack CSR at Gemcanton from the time Leveiev came on board as a share holder yet the company is making millions of dollars.
Additionally, the restrictions of the local people to the Gemcanton dumpsite has adversely affected the poor Zambians who were known to survive on such dumpsites at the time Gemcanton was called Grizzly Mines under Abdalaye Ndyaye .

It is the local people’s considered view that the speed at which government has let go of the black mountain in Kitwe for the benefits of the local people is the same speed at which government should influence Gemcanton mines management to allow the local people who are currently receiving nothing from Gemcanton under Leviev .

When Honorable Bowman Lusambo was Copperbelt Minister, Gemcanton was restrained and started making headways towards restoring CSR, but upon his transfer to Lusaka, many of the strides made at Gemcanton were buried to the disadvantage of the locals.

There is fear that if government does review Leviev’s investments at Gemcanton, the people of Zambia will benefit nothing from the emerald mine investment.

While government is seriously looking at the empowerment of the local people in mining industries , it is the people’s considered view that the shares of Leviev at Gemcanton are reviewed to benefit the lower people .

Lack of regard for the local people in the area of Corporate Social Responsibility and unfair trading habits have made different stakeholders wonder whether there is serious scrutiny of some foreign investors’ investment record before they can be allowed to invest in Zambia by the powers that be.

Does Leviev Diminish the Reputation of the Diamond Industry?

Leviev Case Another Blow To Diamond Industry’s Reputation

November 08, 18 by Albert Robinson

For the diamond industry in general – and the heads of the bourses and the trade organizations in particular – the news this week regarding six of diamond tycoon Lev Leviev’s relatives and employees being arrested in connection with diamond smuggling allegations is exactly the kind of report that keeps them up at night.

The industry endlessly discusses the importance of showing that it is clean and operating transparently which, in the vast majority of cases, it is. But the idea that diamonds are being moved around undeclared and sold without passing through the correct channels and without customs duties and other taxes being paid is, unfortunately, one that appears to be fairly widely held by the general public.

In a very unscientific survey, my neighbors, family and friends seemed completely unsurprised, as if to say, that’s what we assumed the business was all about. My responses were greeted with knowing smiles as if to say: nice try but we’re not buying it.

Needless to say, the news was all over the Israeli media, with Reuters in Israel also reporting the case for their clients all around the world.

For anyone who hasn’t been following the reports, Leviev’s son Zevulun and brother Moshe are accused of being involved in a smuggling operation that led to about 300 million shekels ($80 million) worth of diamonds being illegally brought into Israel since 2010.

Lawyers for Zevulun Leviev said the allegations against him were “baseless” and his arrest appeared to be a tactic to “illegitimately pressure his father”. Meanwhile, Moshe Leviev’s lawyer denied in court that his client had any connection to the allegations.

Meanwhile, Lev Leviev himself is wanted for questioning on suspicion of involvement in the diamond smuggling, but he currently lives in Russia and reportedly does not intend to come to Israel any time soon for questioning. Reports say that investigators believe Leviev fled to Russia from London, where he has lived in recent years, after learning of the investigation against him. Lev Leviev denies the accusations and suspicions against him.

The reports are all the more astonishing given Leviev’s meteoric career He started out at the age of 15 as a diamond polisher and built an extraordinary empire built on the diamond business and real estate. The global financial crisis of 2008 struck a heavy blow to his businesses, however.

It seems this story has a way to go yet. As Israeli daily Ha’aretz wrote: “Why his [Leviev’s] group might be involved in smuggling diamonds in the first place is unclear. A diamond company’s tax is based on sales turnover, not profit. Therefore, there is no tax advertising [advantage] in smuggling diamonds into Israel unless they were then smuggled back out, and the sale was registered in some third country with lower tax rates (such as Belgium or Dubai).

“One reason to smuggle could be that the stones were of dubious origin; either their seller had no license to market them; or they were mined illegally, for instance. In any case, bringing them into Israel without declaring them is illegal.

“Another unclear aspect is how this case will affect Israel’s diamond industry. On the one hand, Leviev is one of the biggest rough diamond importers in the country; his businesses supply work to dozens of other companies that polish and market the stones through the Ramat Gan Diamond Exchange. These companies employ hundreds of people. If his business hurts, so may dozens more. And this is not a good time for the Israeli diamond business: demand has been tanking and profits are down.”

Indeed, one can imagine there was a great deal of anger at the Israel Diamond Exchange at the reports which, in one fell swoop, might have caused inestimable damage to the country’s diamond business. And all the more unfair given the IDE’s serious work over the past few years to rehabilitate its image after the discovery of the operation of a so-called pirate bank from offices in the bourse half a dozen years ago.

Among the genuine and sincere efforts it has made to show that the diamond trade is composed of honest, hard-working diamantaires was the creation of a Code of Ethics signed just last year which seeks to place the Israeli exchange at the forefront of global practices in terms of proper administration and transparency.

The Code of Ethics outlines the principles by which members of the exchange operate, including responsibility, trust, fairness, integrity, expertise, tradition, business pragmatism and more, all in the framework of human dignity and the rule of law.

But, as the Indian diamond industry discovered at the start of this year, the work of thousands of companies and the livelihoods of tens of thousands of people, or more, can be affected by the selfish and egocentric actions of a few individuals.