Ansett barter intrigue
By LEONIE WOOD
Friday 23 November 2001
There certainly was a "smoky" bidder for Ansett. One that wanted the whole kit and caboodle, and didn't give a damn about poring over the business' books.
A bid that involved huge barter deals, swapping billions of dollars of jet fuel for three-quarters of Australia's second-ranked carrier. And it was all engineered by a German living at the Sheraton Hotel in Beirut.
If everything went to plan, that bidder would trump the $1.1 billion offered by Melbourne businessmen Solomon Lew and Lindsay Fox - in fact, trump it several times over.
Just like the Fox-Lew bid, there was talk of upgrading the airline. But the proposal, by a Finnish company called Wimco-Erica, which has an address in Russia and operates from Lebanon, was ignored by Ansett's administrators, who decided it was not exactly kosher.
Wimco-Erica's president and 50per cent shareholder, German national Horst Hamm, sent letters to Ansett administrators Mark Mentha and Mark Korda, of accounting firm Andersen, outlining a plan to swap $US2 billion ($A3.9 billion) of jet fuel for 75 per cent of Ansett.
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Mr Hamm also offered certificates of deposit with a face value of $US1 billion, which are said to be locked in a safe at a Beirut insurance company.
In his quest, Mr Hamm commissioned the help of New Zealand-born Dugall Lamont Harcourt, an engine inventor who lives on the outskirts of Brisbane, and John Philip Rivett, a Queensland business associate of Mr Harcourt who runs SME Venture Capital Brokers.
Mr Rivett said Mr Hamm, who is in his 70s and lives at the Sheraton Lancaster Hotel in Beirut, had lived in South America, South Africa and Nicaragua where, Mr Rivett said, "he was actually kidnapped by the Sandanistas and nearly executed".
Mr Hamm claims to own 50 per cent of Avangard, a Russian-registered company that owns 80per cent of BaltPort, a company developing a port and oil refinery near Primorsk, on the Baltic Sea.
He wants to sell Ansett's administrators 38 million barrels of aviation fuel each month for a year for $US2billion or, as he claimed, about 1.2US cents a litre off his normal sale price.
The administrators must draft contracts to buy the fuel, then get "your bank or the Australian Bank (sic)" to issue stand-by letters of credit in favor of Wimco-Erica and the administrators.
The letters of credit would be cashed at European banks for say, $US1.8 billion, or 10per cent below face value. The proceeds would pay for 75 per cent of Ansett.
"So we have the airline fuel starting and we can build a more profitable airline as the other major airlines (sic)," Mr Hamm wrote in late September. "The stand-by letters of credit pay all your debts and the fuel is what makes your airline profitable because it stays between you and me.
"We are able, ready and willing to do this transaction immediately ... In my opinion, this is the fastest way to pay your creditors and then your airline can work in that new joint venture 25/75 per cent. This transaction can be done in five banking days."
In effect, Ansett's creditors were being asked to cash in 456 million barrels of Russian fuel. Exactly why Wimco-Erica could not do this itself was unclear.
Attached to Mr Hamm's proposal was a reference from Hassan S. Harb, chief executive and leading shareholder of the Lebanese United Insurance & Reinsurance Company SA (LUI), who said Mr Hamm was "a well-known person to us: we have been doing business for the last few years". Mr Harb did not state the nature of that business.
Mr Harb also claimed that Mr Hamm "has successfully closed with our government a very big gas fuel deal and in this moment his company is bidding for other tenders. All documents from (the) Russian Government and product proof were presented without any problem."
Unfortunately, Mr Harb's letter did not explain what documents might have been required from the Russia Government nor, indeed, why they were needed.
However, Mr Harb insisted that $US1billion of cash deposit certificates, available to Mr Hamm to use for "whatever reason or business deal he wishes", were housed in LUI's safe. "These certificates are issued by a first-class bank," he wrote, neglecting to specify which bank. Helpfully, LUI could arrange insurance for the administrators, if required, once the deal began.
The administrators did not respond, so Wimco-Erica's Australian agents kicked in. In a letter to "Mark Menthor" (sic) dated September 27, Mr Harcourt claimed Wimco-Erica was offering up to $US1billion of loans to Ansett (against the Beirut certificates of deposit) plus $US2 billion of jet fuel.
"The offer by my principal is no flash in the pan," Mr Harcourt wrote. "I have been researching major acquisitions for him in A-NZ for several years and he has held the ambition of making a substantial investment in the region for that time."
Mr Harcourt, whom Mr Rivett described as an inventor, met Mr Hamm three years ago. It seems Mr Harcourt had designed a new engine and "he's been chasing Horst to back this new engine", Mr Rivett said.
On October 1, Mr Harcourt again told the administrators that Mr Hamm wanted to buy all of Ansett in "a fairly simple transaction ... We do not see the necessity for any extended due-diligence period. He is prepared for the problems".
Again, no response. Two days later, Mr Harcourt delivered another missive to Mr Mentha: "I can't believe that I read in The Financial Review on Monday that your partner was quoted as saying how difficult it would be to sell Ansett in the current conditions and yet you have ignored our genuine attempts to obtain information."
Mr Harcourt then tried some brinkmanship to grab Mr Mentha's attention. He withdrew the original offer and pledged that Mr Hamm "hereby unconditionally offers to beat any other genuine commercial offer for the companies, assets or business of Ansett by $A20million".
Mr Harcourt and Mr Rivett flew to Beirut where they stayed with Mr Hamm and his associates at the Sheraton Lancaster for four days examining the certificates of deposit issued by "a very strong", but still unnamed, bank.
Mr Harcourt rejected suggestions that copies of the certificates should be sent to the administrators "as they can be abused".
"You need only ring Mr Hassan Harb and confirm them, or you could do what I did and fund my own way over here and take a look," he wrote on October 6. He then threatened to convene a meeting of Ansett's creditors to discuss Mr Hamm's proposal, an extremely costly proposition for the administrators.
In desperation, Wimco-Erica's Australian agents approached some of Ansett's creditors directly. Mr Rivett wrote to National Australia Bank, which is owed about $100 million, and met a manager at a branch of Commonwealth Bank in Brisbane.
The banks politely told the businessmen that although they were interested to see an offer, it was up to the administrators to sell the airline.
Mr Rivett noted that while Mr Harcourt was in Beirut, he met the Australian Trade Commissioner "who was aghast that Mr Hamm's genuine attempt to invest up to $US3 billion into Australia were being ignored. A report to the minister will be on his desk by the end of the week".
Mr Rivett indicated to The Age that he knew little about Wimco-Erica, but he believed the cash certificates were credible. He did not know where Wimco-Erica was registered, but suggested it might be registered in several countries.
In 1994, Wimco-Erica raised a mention in The Nonproliferation Review, a journal published by the Centre for Nonproliferation Studies at the Monterey Institute of International Studies. The journal features policy debates and analysis about weapons of mass destruction.
The Review noted that Wimco-Erica in early 1994 apparently obtained a guarantee from the Reconstruction and Development Bank of Latvia to the value of $US4.5 billion to buy 32.9kilograms of osmium-187.
The journal noted: "In recent years, Latvia has become a conduit country between the former Soviet Union and the West in the illegal trade of radioactive materials."
Osmium-187 is a dense and expensive metal used for making pen nibs and light filaments. It has a long radioactive life and is used to determine the age of rocks.
Wimco-Erica also drew a mention in United Nations Sanctions Management: A Case Study of the Iraq Sanctions Committee 1990-1994 (Transnational Publishers Inc, NY) by Munich academic Paul Conlon.
The study indicated Wimco-Erica was a small group behind colossal barter deals - swapping Russian oil, say, for Cuban sugar.
In 1993, Wimco-Erica gained the apparent backing of the Finnish mission to the UN as it tried to land another mega-deal. At the time, Wimco-Erica wanted to sell the UN or Iraqi Government - it didn't seem to matter which - three million tonnes of sugar, packed in 50-kilogram jute bags, deliverable over the next year.
The sugar was valued at $US786 million - but for the UN, a special price of $US750 million. The UN (or the Iraqi Government, if the UN would sanction a deal with Iraq) had to supply a letter of credit from a "top 50 World Prime Bank".
As Dr Conlon noted, the sugar deal was huge - enough to satisfy Iraq's demand for six years - and a sugar trade association "identified the sugar ... as most certainly being of Cuban origin". Cuba's trade was severely limited by a US-imposed economic embargo.
Dr Conlon found that the chairman of the sanctions committee convinced the Finnish Government to withdraw its apparent support for Wimco-Erica, and scotched the plan in 24hours.
Mr Rivett this week refused to divulge the name of the bank on the cash certificates in Beirut, but lambasted Ansett's administrators for ignoring Mr Hamm's proposal.
Asked if he believed Mr Hamm or Wimco-Erica had enough credibility and expertise to run an airline, Mr Rivett said without a hint of irony: "The question of management and credibility is an issue, but he (Mr Hamm) said he would employ the best (management) in the world - and isn't that what Air New Zealand did?"
