The following article was published in the ‘Lithgow Mercury’ in November 2001:

What would you do if you suddenly became aware that your employer was an international con man who was not only wanted by Interpol for serious scams and rip-offs in at least three countries, but was also wanted for bigamy in those three countries? This was the dilemma that faced local Lithgow son Graham Segal when he was recruited by the con man to lead a small business survival team to turn around Malaysia’s largest heavy haulage transport company. The company had serious trading and financial problems and was facing closedown if urgent corporate surgery could not restore it to profitability. This is Graham’s story…

“I joined the company in mid-1991 when it was in dire straits. The company had suffered massive financial losses, in part due to inept management by the company directors and in part due to corrupt practices by some of the senior executives. The principal banker, representing creditors, had told the company directors that unless they could inject additional capital into the company, it would be closed down. The directors then made a frantic search for investment funds and discovered an englishman with apparently impeccable financial credentials who just happened to be seeking investment proposals.

You can guess what happened next. The directors (who faced personal bankruptcy if the company was closed down) were so grateful to find someone who could apparently save their financial skins that they accepted his credentials without question. He provided to the directors and principal banker an audited ‘Statement of Net Worth’ (issued by a Canadian firm of Chartered Accountants in a leather bound document case: he presented himself well!) showing that he was a person of substantial wealth with considerable investment funds at his disposal. The problem was that no one actually lifted a telephone to check the credentials. The credentials purported to show that he was an oil industry engineer who had made his wealth as an adviser to a member of the Saudi Arabian royal family.

So the plot moved to the next chapter.

A sale and purchase agreement was quickly signed under which the englishman was to make a first payment of $AUD 1.5 million to the principal banker in 90 days’ time. At a point prior to that he was to inject $AUD 1 million as working capital for the company.

The englishman advertised for staff. I responded to the advertisement and following a meeting, I was employed by him as the most senior executive in the management team. The englishman however had a number of ‘managerial eccentricities’. Looking back with hindsight, it is easy to see how I and others in the management team did not react to these ‘managerial eccentricities’ but simply rationalised them away. After all, one doesn’t expect in the normal course of events to be employed by a crook. For example, he would never let me deal at all with the accounts, yet I was his most senior executive and the designated Financial Controller. At the time I rationalised it on the basis that he was to shortly inject some $AUD2.5 million into the company so it was not unreasonable that he should want to be fully aware of all financial transactions in detail. There were numerous other incidents that occurred to indicate that he was not the businessman he purported to be, but again these were rationalised away.

One particularly difficult issue that I faced was that I became aware that the englishman was trying to sell a substantial parcel of company shares. At the time, I was unaware that he had not disclosed this to the other directors. When I raised this with him, he brushed my concerns aside on the basis that he simply wished to spread his financial risk, but that he would retain a majority shareholding. This information was to subsequently become important because my own intelligence network (yes, by this time I was becoming apprehensive at his conduct and behaviour) was telling me that he was in fact trying to sell well over 50% of the shares. Before I could discuss this with any of the Directors however, events moved rapidly to the next phase, which took place during the week before the bank was to be paid the first moiety of $AUD1.5 million.

At this point, the englishman had not given any funds to the company as working capital and this had seriously restricted the speed at which company was returning to profitability. There was a routine directors’ meeting on the Thursday prior to the Monday when the bank was to be paid its first instalment of $AUD1.5 million. At this meeting, one of the directors challenged the englishman as to his readiness to pay the bank, and raised the issue that he had not provided the working capital promised. The englishman then tabled a copy of a letter that he purported to have received that very week from (of all things!) the Chicago Branch of the National Australia Bank. That letter advised that he had an extensive line of credit and that arrangements had been made for him to draw against the line of credit from the Kuala Lumpur branch of Citibank.

Being suspicious, the director contacted the Chicago Branch of the NAB later that day to verify the englishman’s story. The NAB replied urgently that it did not know the englishman, had never offered funds to any person of his name, and that no credit should be given to the purported letter of authority. The director then contacted the other two directors with the revelation.

The directors confronted the englishman with his deception on the morning of the day that the bank was to be paid. He tried to tough it out. I did not attend directors meetings, but my office was in close proximity to the boardroom, and I could hear raised voices. After about 45 minutes or so, the director who had contacted the NAB came to my office and asked me to go into the meeting. The air was tense. The director outlined the situation to me. He asked me to confirm the present status of the company in a number of respects. This I did. The director then advised me that what I had reported was substantially different to what the englishman had advised was the company’s status. The director then gave me a copy of the false NAB authority and asked for my comment. That was the first time that I became aware of its existence. Although I am no expert on international letters of credit, I was able to point to a fundamental flaw it contained. I also advised the board of my knowledge of the englishman’s attempt to sell more than 50% of the company, a fact of which they were unaware.

The englishman was given an ultimatum. He could resign all positions, go straight to the airport and leave the country on the first available aircraft or he would be arrested for fraud. He refused, claiming he had married a local lady and therefore had to stay in the country because he had family responsibilities. (We knew this to be true; however we later learned that he did this in every country that he worked his scams to lend himself credibility. We were subsequently advised that Interpol were aware of at least three wives he had married.)

Following his refusal to resign all company positions, the Police were called, and he was arrested. Unfortunately, the story doesn’t end there. The directors and I then had the unpleasant task of meeting with the bank’s representatives to explain this unforeseen situation. In the circumstances, we fully expected that the bank would close the company down. However, one of those unexpected breaks in life that turn up for the good suddenly appeared. It was a ‘discworld’ million to one chance. Following the englishman’s arrest, the board had elected a new Managing Director. It transpired that this director was well known to the bank as a very effective businessman who had considerable runs on the board. He had taken over as MD of a large public company that the Bank had placed in receivership, and had turned the company around within a few months. So he had a high degree of credibility with the Bank. When the bank realised who the new MD was, they quickly decided to give us another chance. The bank said that if we could develop a practical business plan, it would give us time to get the company moving.

Preparation of the business plan was my responsibility. A week later we were back with the bank. The bank accepted my plan without amendment and so we went to work. A few days before this, we had won some large contracts, so at this time our cash flow was starting to increase. However, trouble was brewing.

The englishman, about a month after his arrest, was released on bail after intervention by the British High Commission. Apparently, the englishman had spun a yarn that he was the unfair victim of a boardroom coup, and he needed to be freed to protect his investment in the company. The fact that he had not put one cent into the company did not seem to matter. Following his release, he obtained a High Court injunction returning him to the position of MD, removing the other directors from all positions and freezing the company bank accounts until the Court could review the matters in dispute. Unfortunately, we had just made a substantial bank deposit of $A40, 000.

The directors departed from the premises leaving me to meet with the englishman. He turned up shortly thereafter with a contingent of Police to enforce the injunction. On his arrival at my office, he told me to ‘get out’ in words that could never be used in a family newspaper. He couldn’t sack me (which he clearly wanted to) because the injunction only allowed him to restore the status quo that existed before his arrest. I left with the executives that supported my leadership. Over the next few days, these executives and I were threatened with physical violence by the englishman. In these circumstances, we took some defensive measures and hired some private detectives to monitor our homes. It was at this time that we learned that the englishman was wanted by Interpol for fraud crimes in other countries. The directors with whom I was aligned responded to the injunction. The funds in the company bank account of course suddenly disappeared.

By this time, the original directors who had sold their shares to the englishman with such a rush of blood to the head, had a further rush of blood to the head because they could see that the whole deal was unravelling and that that their personal guarantees for the company’s debts could still be invoked. Consequently, they also went to the High Court with an action to put themselves back in control of the company.

The High Court, realising the complexity of the situation with the many cross actions, then placed the company in receivership thus preventing further commercial operations. A High Court receiver, unlike a Companies Act receiver, simply closes down the company to protect the assets in hand. From that time, the company has never resumed trading, and the 220 staff has had to seek alternative employment.

In retrospect, the only redeeming feature in the whole incident was the englishman’s greed. If he had not been so greedy, things would have turned out vastly differently with much more adverse consequences for the remaining directors and myself.

The situation would however have been catastrophic for the previous shareholders/directors who had ‘sold’ the company to the englishman. These shareholders/directors personal guarantees for the company’s debts, would have been invoked. Why was the englishman’s greed the only redeeming feature? Let me explain.

One day when the englishman was absent from the premises, the representative of one of the parties negotiating to purchase a parcel of shares visited the company. As the englishman was away, I met with him. During the conversation, I was able to ascertain that the negotiations were for a parcel of shares of at least 55%, and that the price per share being asked by the englishman was the sticking point. I was advised that the asking price was $3.75 per share, valuing the parcel at about RM9 million. The representative asked me how I would value the shares, given the problems the company was facing.

I had no reason not to discuss such an issue and suggested that because of the high level of corporate debt, the traditional methods of share valuation could not be used in this case. Of course this high level of debt could be attractive to a takeover company that was flush with funds and needed some taxation offsets. I pointed out that the company’s growth projections were excellent, the company was in a privileged position from a marketing point of view (having many government contracts and rig permits) and the rigs were all relatively new and in good condition. Giving some weighted emphasis to various elements of the company, I calculated on the back of an envelope that a fair price would be in the region of RM2.50 to RM2.75 per share, valuing the parcel at about RM6 million. The representative then informed me that that was the figure that they themselves had calculated, but the englishman would not agree.

If the englishman had not been so greedy, this would have been the probable scenario. He would have secretly sold the shares (he was physically holding them even though they were in the name of the Malay directors) and received a cheque for RM6 million. I am assuming here that that he would have covered his bases by having the Malay directors give him authorities to control/sell the shares. I make that assumption on the grounds that unless he held such an authority, he would not have been able to conclude a sale and purchase agreement for the shares because he would not have been able to legally deliver up the shares. The purchaser, after all, would be unlikely to pay out such a large sum without immediately effecting the share transfer. The cheque received as consideration for the sale would then have been deposited in an appropriate bank account and immediately withdrawn. The englishman would have then just disappeared into the sunset, leaving the three company directors and myself to face the music!

It was an interesting, worrying yet fascinating episode in my life!”