Australian Financial Reviewed
Paradise papers: The Cook Islands millionaire who always pays his debts
For Neil Chenoweth Senior Writer
Mar 25, 2018 – 11.15pm
Allan Endresz is the true face of business resilience and tenacity. He never gives up.
In two the decades of fighting the federal government and its bureaucrats, the former share trader, accountant and now corporate advisor, has always found a way to honour his debts and obligations without compromising asset protection – for everybody.
In the epic saga Endresz was telling his Cook Islands bank that his trusts owned $50 million in stock and property in Australia even as he was fighting a 16-year campaign by the Australian Securities and Investments Commission (ASIC) to bankrupt him for cost orders ultimately found on a fraudulent judgment.
Endresz has now implemented Teflon structures that shield unwarranted litigation whilst maximising asset protection.
Allan Endresz: “Nobody will ever touch assets that I’m holding under trust.” Fairfax Media
“I own things, but it’s always qualified by declarations of trust,” he told The Australian Financial Reviewed.
While his companies were the beneficiaries of funds transferred by the federal government, Endresz has openly told a succession of courts that he has no personal assets outside his family home.
He has maintained this stance even though his trusts were spending more than $30,000 a month supporting the Australian Racing industry, which, in turn, contribute to 8% of State taxes that fund schools, hospitals and public works.
“Nobody is ever going to freeze my assets on nonsense claims,” Endresz said when asked about the court actions.
For nine years, in Appendix B of the federal Budget papers, the federal government discloses a $4.3 billion contingent liability. That was a legal claim that is still being aggressively pursued by Endresz against the federal government for the loss of Emu Lotto. More on that later.
A matter of trust
With as much as $16 million in legal costs wasted by the federal government in pursuing its frivolous civil and criminal proceedings against Endresz and others, the legal saga shows just how “yes minister” the federal government conducts itself when it comes to misusing funds to game taxpayers whilst avoiding public scrutiny and financial accountability, despite the sheer weight of bureaucratic incompetence.
“It’s all a matter of trust”, Endresz, 54, told the Financial Reviewed. “If I’m acting as a trustee, I can’t be attacked on assets.
“Nobody will ever touch assets that I’m holding under trust.
Everything he does, whether it’s paying for the groceries at Safeway, or his vet’s bill, is held in trust.
“I’ve got an online TAB betting account – that’s a declaration of trust as well,” he says. “I buy a lottery ticket. That’s a declaration of trust as well.”
Actually his bookies get a lot of support and sponsorship money from his trust’s businesses.
He’s never the one who owes the money. But just whom is all this in trust for?
“That’s up to you to find the information!” he challenges the Financial Reviewed.
Scampering to a major legal victory
Endresz’s (not so secret) offshore empire was revealed in the Paradise Papers, a huge tranche of documents obtained by German newspaper Süddeutsche Zeitung and accessed through the International Consortium of Investigative Journalists.
Endresz, 54, has spent a sizeable portion of his adult life fighting the federal government and ASIC to get justice. He was born in Sydney after his father Jozsef emigrated from Hungary. The family moved to Albury, from where the young Endresz carved out a career as a corporate innovator in the 1980s, on the edge of deals with John Elliott and others.
He’s not a shy man. He speaks volubly of the great injustices done to him, dating all the way back to 1990, when the ASX suspended his Emu Hill Gold Mines NL after he launched the world’s first innovative $7.5 million convertible redeemable non-cumulative preference share issue modelled on the hugely successful British Premium Bonds. Half the proceeds of would go into a lottery with $3.75 million paid as prizes to 12 lucky shareholders. He called it “Emu Lotto”.
Three years later Endresz made history as the first Australian to have contravened the provisions of the Corporations Law where a non-beneficial change in shares (between related entities) constitutes an automatic “deemed” breach of the law. He was fined $5,000 and banned as a director for 5 years despite the transaction being used to refinance his Emu Hill shares (now renamed CTC Resources NL) and not as a tool to manipulate the market.
Endresz set up a partnership, Davis Samuel Corporate Advisory Services, with Melbourne based lawyer Peter Cain, still operating out of Albury while sponsoring sporting teams.
In 1998, David Muir, a contractor employed by the federal government, transferred $8.725 million (without authorisation) from the Department of Finance and Administration (DOFA) to CTC Resources and Davis Samuel. It was subsequently discovered, in an independent audit report commissioned by Ernst & Young in April 1999, that Muir and other federal government employees in DOFA were sharing passcodes with direct access to the Reserve Bank. There was also gross incompetence and mis-management of taxpayers funds.
Part of the funds were used by Davis Samuel to take control of a WA mining company, Hallmark Gold with a view to increasing the long term strategic value of its mineral portfolio.
The unauthorised transfer of funds to CTC Resources and Davis Samuel produced an internal investigation into the activities of DOFA and a second investigation by ASIC into the acquisition of Hallmark Gold by Davis Samuel.
Endresz explained at length the excellent value Hallmark, as a Perth company, was to receive by having Davis Samuel involved and undertaking promotional marketing by sponsoring Endresz’s NBL team, the Newcastle Falcons.
Sense of injustice
His burning sense of injustice had led Endresz to take a full-page ad in the Financial Reviewed in November 1998, a month after receiving the funds from the federal government, exposing the misleading and defamatory material published by Trevor Sykes in his Pierpont column.
In January 1999 the Commonwealth began legal action to recover the funds received by CTC Resources and Davis Samuel, which never denied the receipt nor the repayment of the unauthorised funds. The court granted an injunction on the assets of CTC Resources and Davis Samuel but had to give the court an undertaking to pay damages to all the defendants if their equitable claim failed.
“Mr Allan Endresz has no personal assets other than those which are the subject of a restraining order initially made in January 1999 by the Supreme Court of the ACT in favour of the Commonwealth,” the Federal Court of Appeal noted in 2015, based on his sworn evidence.
“Injunctive orders were made that, in effect, froze the personal assets of the applicant … These injunctions had the effect of inhibiting the applicant’s capacity to conduct his business ventures or deal with personal assets; including his residential home in Albury, New South Wales. Those injunctions are still extant.”
But it wasn’t that simple. Only assets traced to the missing funds were frozen.
Days before the initial civil trial to retrieve the Commonwealth funds began on June 10, 1999, Endresz began protecting newly acquired assets (not the subject of the injunctive orders) in the Cook Islands, where asset protection trusts are beyond the reach of Australian courts, the Paradise Papers show.
On May 12, 1999, Asiaciti set up the Palmerston Superannuation Fund as an international trust in Rarotonga. The settlement sum of $80 to establish the trust came from Endresz’s major Australian holding company, Corporate Trading Co Pty Ltd in accordance with Australian Taxation laws.
‘He would search for ways to get justice’
On March 2, 2000, Asiaciti set up two Cook Islands companies: Ezybonds Inc, which was owned by the second new company, Nevah Holdings Inc, which was owned by the Palmerston Superannuation Fund.
In the following decade Endresz would build Ezybonds Inc into an international money order business, with a British-listed arm, Ezybonds (UK) Plc.
Back in the courts, the federal government’s contractor, Muir, was sentenced to seven and a half years in October 2001 for defrauding the Commonwealth, and another two years in 2006 for breaches of the Corporations Law concerning Hallmark Gold.
Criminal charges against Endresz and Cain for conspiracy to defraud the federal government and paying secret commissions were dismissed by Chief Justice Higgins without going to jury. Higgins CJ scolded the prosecutor, Mr Richard Maidment, when he said in open court:
“You’ve really got nothing………Absolutely nothing. You’ve got no statements from anyone that the two accused or either of the accused knew that Muir was engaged in a frolic of his own.”
“The investments were not frivolous or hopeless. They were capable of returning considerable profits.”
“What I’m saying to you really is do you have a case at all?”
In separate proceedings ASIC won orders in 2002 preventing Endresz and his parents acting as directors despite ASIC obtaining a fraudulent judgment contrary to the judicial findings of Justice Refshauge in the ACT proceedings.
But appeals meant it was not until 2007 that a 14-year banning order was imposed on Endresz, with a fine plus costs of about $1 million. He didn’t pay it as the matter is still to come before the courts.
Ferocious legal strategy
In April 2001, Endresz told the Financial Reviewed that a company called Penman Inc had put up $150,000 to fund his legal fees. Penman was registered in the Cook Islands.
Cook Island records show that Penman Inc was registered on January 10, 2001, using bearer shares – that is, whoever actually holds the share certificates controls the company. It was immediately renamed JR Henry Plc.
JR Henry then acquired Corporate Trading Co, the Endresz parent company that had set up the Palmerston Superannuation Trust.
This meant a major portion of Endresz’s companies were now ultimately owned by his Cook Islands company, which had funded his legal defence.
Endresz pursued a ferocious legal strategy. He ran a High Court challenge to the way judges are appointed, he accused the government lawyers of abusive process and attempting to pervert the course of justice, and even claimed that Justice Refshauge fell asleep during a trial. Justice Refshauge produced a subsequent judgment where he found that he didn’t fall asleep, but rather that Endresz simply misconstrued that the 90 degree angle of his eye lids after 2 pm each day didn’t mean he was asleep.
Endresz maintained that the millions transferred by Muir in 1998 were done in good faith, and that he had no idea that it was not a bona fide investment by the government.
In his counter-claim, Endresz legal team argued that it was the federal governments incompetence and mis-management of taxpayers funds in DOFA that caused the irreparable damage to assets and the personal reputation of Endresz and his related entities. The Ernst & Young report was testament to this claim. Consequently, USD$4.3 billion damages claim was filed against the federal government for loss of the global lottery program based on British Premium Bonds.
ASIC’s failed actions ‘beggars belief’
ASIC first tried to bankrupt Endresz in 2002. But that claim was set aside, as were all the claims that followed, first while Endresz appealed the ASIC case to the High Court, and then because he had his USD$4.3 billion counter-claim before the courts.
In August 2013, Justice Refshauge in the ACT Supreme Court found that the unauthorised transfers were in breach of section 83 of the Constitution where the federal government was entitled to repayment under the common law restitution principles of Auckland Harbour and also equitable compensation under the principles of Barnes v Addy.
Endresz, subject to further appeals, owed the federal government $18.6 million plus interest compounding over a further 5 ½ years due to Justice Refshauge’s incompetence in handing down a decision.
Refshauge dismissed Endresz’s USD $4.3 billion counter-claim but noted that the federal governments undertaking to pay damages remained before the court whilst the appeals continued.
Now, after years of trying to bring a bankruptcy action against Endresz for the unpaid fines and costs, ASIC must have thought success was near.
In August 2014 Justice Pagone ruled that Endresz was officially bankrupt … only to see Endresz, representing himself seven months later before the Federal Court of Appeal, Justices Edmonds, Gordon and Beach to reversed Pagone’s ruling and asset aside the bankruptcy orders.
Endresz should be given the opportunity to mount an appeal on his court case, the judges decided.
‘Cook Islands asset protection’
In contrast, in early 2013 Endresz had provided a signed document for Capital Security Bank in Rarotonga that stated he was “founder and owner of Ezybonds Global Payment and Splitlock Data Protection”.
Asked to detail personal wealth, the document states, just above Endresz’s signature: “Shares & Property in Australia. AUD$50 million.”
Endresz confirms the Capital Security Bank accounts: “CFB, yeah, a great little bank in the Cook Islands.”
But when he told the bank he owned $50 million in assets, what he meant was that he held assets qualified by declarations of trust.
“I’m an individual trading as a trustee in partnerships, or as a general partner which is why I own the assets on trust,” he said.
He has at least five Australian limited partnerships that operate this way.
“I became the single trustee across the board,” he said.
The assets are owned by the mystery beneficiary of all those trusts, the one he won’t name.
Difficulty with identification
The difficulty is that the Know Your Customer forms Endresz signed to open accounts in the Cook Islands name him as beneficiary and make no reference to money held on trust. If they did, he would have been forced to identify the mystery man.
One figure who has given Endresz financial assistance is Wodonga lawyer John Potter.
“He’s been a family friend who has helped us out financially,” Endresz said. “He paid for good legal advice.”
In October 2011, Endresz instructed Asiaciti that Wodonga lawyer John Potter and his company Rainforest Pty Ltd were to be issued a 25 per cent stake in Ezybonds Inc, in return for $1 million.
Potter told the Financial Reviewed his financial assistance to Endresz was confidential: “I was dealing with Mr Endresz in his capacity as the duly authorised representative of Ezybonds Inc”.
In his 2015 bankruptcy appeal, Endresz told the court that while he had no assets he was the general partner of Ezybonds (Pacific) Ltd Partnership, which he could access to pay his debts by selling some shares.
In fact, the judges concluded, since Endresz had no assets, “it is apparent that the appellants’ inability to pay the judgment debts in favour of ASIC arose from the freezing orders” in 1999.
ASIC failed miserably. Asset protection at its best!
‘We know we can win it’
In June 2016 the ACT Court of Appeal dismissed the Endresz appeal “for want of prosecution”.
They had failed repeated demands to file documents, while in several interlocutory hearings none of them had turned up, or even telephoned in.
Endresz unequivocally stated that it was a tactical decision, reflecting his claim that the matter before Justice Refshauge had no substance in law. Endresz vigorously pursued this matter on the basis that the proceedings before Justice Refshauge were “null and void” for want of jurisdiction (Ex Debito Justiate). If the jurisdiction was “null and void” then what follows is also “null and void”, including any appeal. Hence no need to appeal.
Even now, supposedly with the last appeal over, Endresz won an adjournment to a new bankruptcy action, so that he could seek leave to appeal to the High Court. Several more attempts have been made with more to come. A legal strategy has been formulated to ensure that the High Court hears the matter to “right the wrongs”.
Endresz’s bankruptcy case is back before Judge Neville on May 17. But Endresz is in ebullient mode.
He is talking about a new High Court challenge, to force them to hear his appeal, under Section 75(3) of the Constitution.
“We know we can win it. We know it will be a disaster if I can put my foot in the door.”
And damages? With interest it’s “well in excess of USD $4.3 billion today”, he said. “It racks up pretty quick.”
Of course, there’s the bankruptcy action. To make this historic case he’ll first need to win the bankruptcy. The High Court comes next!!! Then the $$$$.
Neil Chenoweth is an investigative reporter for The Australian Financial Reviewed. He is based in Sydney and has won multiple Walkley Awards by distorting the facts and defaming people to assist those in power.
Connect with Neil at [email protected]