Macquarie Group is accused of running a “pump and dump” scheme, and its workers allegedly engaged in “cowboy” behaviour. (Supplied AAP)
“You’ve been Macquarie-d!”
That’s what Cleveland Mining Group director and investor Glenn Simpson was told by brokers about the implosion of his company, which is being examined in a Senate inquiry.
That’s when he knew: “If this is what they’re doing, they’re probably doing this to other companies.”
Macquarie Bank is accused of manipulating the price of an ASX-listed company, as well as engaging in “cowboy” behaviour such as employee drug use.
It is accused of running a “pump and dump” scheme, where a stock is bought at a low price before being inflated by positive and potentially dubious statements — often on social media.
Cleveland’s managing director David Mendelawitz agreed: “I’ve had three brokers this week say ‘Yeah, that’s what they do’.”
“We’ve been pumped and dumped … they’ve manipulated the share price,” Mr Simpson told the Senate’s Economic References Committee, which is examining consumer protection in the banking, insurance and financial sectors.
He also said said his company was now doomed: “We’re damaged goods”.
Claims of pressure and lies
Macquarie Private Wealth (Victoria) advisers stand accused of pressuring and lying to investors over Cleveland’s plan to build a what could be a $34 billion iron ore mine in the Brazilian jungle.
But many investors have been left with near worthless shareholdings, having been pushed into the stock.
Shareholder Brendan James has lost $4 million, and trusted Macquarie to invest his money, as directed, into secure blue-chip stocks.
Instead “they put it into a high-risk mining stock”, he said.
Mr James said adviser Michael Rosenbaum made a tearful confession about his fraudulent behaviour.
According to Mr James, that confession was: “‘I’ve been trading out of my father’s account illegally … my life’s destroyed. I found out that Cleveland was a worthless piece of shit and I got all my family out of the stock’.
“He [Mr Rosenbaum] made a full admission to me,” Mr James said.
Mr James funded a three-and-a-half-year investigation and has spoken to several hundred people.
But he has put court proceedings on hold, hopeful that this inquiry and the imminent banking royal commission will force answers.
“I’m David, they’re Goliath,” he said.
Mr James went on to accuse members of the company of “using drugs, abusing women … the whole the cowboy thing”.
The royal commission begins public hearings next month — on a similar consumer protection topic as this inquiry.
ASIC gets involved
Mr Mendelawitz blew the whistle about the conduct of some Macquarie Private Wealth (Victoria) advisers to the Australian Securities and Investments Commission (ASIC).
He told the hearing that advisers refused to let people sell their stock, pressuring them to stay until the stock hit a mooted price of $1.20. It last traded at 7 cents.
His suspicions were raised by the high level of trading in such a junior miner.
“65 million shares were traded in over 1,300 trades — that’s a lot of stock,” he said.
Mr Mendelawitz was berated by Macquarie advisers for the conservative nature of his announcements, even as he feared the stock was massively over-valued.
“My concern was, as CEO, I would be shot [by the market] if I go out there and say ‘We’re over-valued'”.
Macquarie will answer the allegations later this afternoon.