AWA COMPANY CRASH 1987: MEDIA SCAN's May 2010
Andrew Koval made big money at AWA - for himself.
Extradited from Texas, he now faces fraud charges, writes Elisabeth Sexton.
Ten months ago, an assistant United States Attorney, Quincy Ollison, asked the US District Court for a secrecy order.
''The United States submits that public and premature disclosure of the complaint at this time could hinder law enforcement's ability to arrest the defendant, a fugitive from Australia,'' he told the court.
The application was granted as Andrew Clement Koval went about his business in his adopted home of Houston, Texas.
The next day, July 31, he was arrested by US authorities under a 1974 treaty with Australia.
Koval appears to have been taken very much by surprise.
The fraud charges behind his arrest relate to 19 transactions between January and October 1986.
He was then 23, in charge of foreign exchange for Amalgamated Wireless (Australasia) Ltd and on the verge of setting off a corporate scandal.
Koval unsuccessfully fought his extradition on the basis that the Australian government had "slept on its rights for two decades".
His lawyer, Sean Buckley, told the District Court in Houston his client had never tried to hide his movements and had renewed his Australian passport in 2000, giving authorities "notice of his specific whereabouts in the United States".
Koval arrived in Sydney on December 21, charged by NSW police with 49 counts alleging he misappropriated $US1.5 million from his former employer, AWA.
Eleven of the counts carry a maximum of five years in prison; the remainder, 10 years.
Released on $75,000 bail and banned from leaving NSW or taking a job in the financial services industry, Koval will be tried in the Downing Centre Local Court in September.
He hit the headlines in March 1987 when AWA's December 1986 results showed that a third of the venerable electronics company's earnings came from his foreign exchange dealings.
Koval was described as "unassuming" about his "amazing feat" and his employer, founded in 1913, as "one of Australia's larger, albeit somewhat sleepy, public companies".
The plaudits faded four months later when AWA said the forex earnings might have been overstated and it was facing a $30 million loss, later revised to $50 million. Koval was dubbed a "rogue trader". The company sacked him and sued to recover $86,000 in commissions. His annual salary was $30,000.
A subsequent damages suit by AWA against its auditor, Deloitte, became a landmark case on the differing duties of auditors, senior management and non-executive directors to prevent such debacles.
Justice Andrew Rogers found AWA had no internal controls over foreign exchange dealings and the books and records were "a shambles".
The NSW Court of Appeal upheld the conclusion.
Two weeks before that case was due to be heard in the NSW Supreme Court in 1992, AWA's lawyers told Justice Rogers that they had just uncovered what appeared to be the diversion of $US1.5 million in foreign exchange profits to a trust company account in New York.
At the time, Koval's lawyer told Justice Rogers his client had authority to use AWA's money to do forex deals for himself and keep the profits.
When AWA successfully sued to recover the $US1.5 million, Koval did not mount a defence, saying he was insolvent.
"I assure you I have got no money," he told the Herald in March 1993. "All I've really got is the house [heavily mortgaged and up for sale], my clothes and my toothbrush."
The house, a terrace in Darling Point, was auctioned the following month.
The allegations levelled by the NSW police relate to the same $US1.5 million, as Koval's Houston lawyer pointed out during last year's extradition hearings.
"From the early 1990s until August 2009, Andrew Koval lived under the reasonable belief that nothing more would come of his prior Australian civil litigation (the subject of which now forms the basis for the extradition), which concluded in approximately 1992," Mr Buckley told the court.
Police allege Koval "fraudulently misappropriated funds for his personal use and benefit totalling approximately $US1.5 million from 19 foreign exchange settlements which represented profits from hedge funds utilised by the company in the foreign exchange market.
Additionally, Koval made false statements for the purpose of obtaining financial gain from those foreign exchange settlements."
He is charged with 19 counts under section 173 of the NSW Crimes Act, that as an officer of AWA he "fraudulently applied to his own use property of AWA," being various sums in US currency totalling $US1,478,000, between January and October 1986.
A further 19 counts relate to section 176A of the Act, that as an officer of AWA, by failing to return the money he "omitted to do an act with intent to cheat and defraud".
Eleven counts allege he breached section 178BB because, by signing a letter that falsely implied AWA had properly authorised payment, he "knowingly made a false statement with the intent to defraud for the purpose of obtaining financial gain".
In an interview with The Australian Financial Review in February
1993, Koval said he was "the scapegoat of a company that was shockingly badly run".
"What it all has shown is that I am a good forex dealer.
I made a lot of money and saved AWA from takeover," he said. In 1986, AWA was the subject of an unwelcome bid by the late Christopher Skase.
"It seems to me that I was the one who was taking all the risks for the company, saved the company and … I got shafted."
During the civil case against him in February 1993, AWA's barrister Tom Bathurst, QC, said the unrepresented Koval had claimed he was authorised by a former general manager of AWA to deal on his own account and take profits to boost his remuneration package because he was doing such a wonderful job for the company.
"Any proposition that such authority was given is absurd," Mr Bathurst said.
According to documents the NSW police provided the US District Court, Koval left Australia permanently in June 1993.
Warrants were issued for his arrest in May 1998.
Eight years later, the then Justice Minister, Chris Ellison, signed an extradition request.
Koval was deported from the US after a further three years.
Koval told the Houston court he first arrived on a tourist visa in 1991, married in 2003 and qualified for residency in 2006.
He was "employed as a trader/analyst in America, receiving about $US7000 per month", court documents show.
Buckley told the court in September that "the Australian government's delay in seeking Andrew Koval's extradition upon a factual basis evident in 1986 was excessive and inexcusable, and the [court] record … demonstrates prejudice to Andrew Koval, as well as third-party United States citizens including Koval's [family]."
His client would not have started a family or taken on a home mortgage, car and credit card debt if he had known he faced extradition.
"Australia had a reasonable opportunity to avail itself of its rights under the extradition treaty, and Australia instead slept on its rights for two decades," Buckley said. "Australia's inaction created a reasonable expectation in Andrew Koval that led to the creation of an American family that Australia now seeks to capriciously destroy."
Koval did not respond to the Herald's attempts to contact him this week.
THE TIMES AND TRIALS OF ANDREW KOVAL
Andrew Koval, 22, put in charge of foreign exchange at AWA, on a salary of $30,000.
AWA announces a $30 million pre-tax profit for the six months to December 1986, of which $10 million came from foreign exchange.
AWA says the December profit may have been overstated and it is facing a foreign exchange loss of $30 million.
Koval is sacked.
AWA says its
foreign exchange loss before tax in 1986-87 was $50 million.
Sues Koval to recover $86,000 in commissions.
AWA sues its auditor, Deloitte, for negligence.
AWA says pre-trial work on the Deloitte case has uncovered evidence indicating $US1.5 million fraud by Koval.
AWA sues Koval to recover the money. Koval says his trading was authorised.
Koval says he is insolvent and can't run a defence.
Judgment entered for AWA. Koval says he has no money.
Koval travels to the US.
Koval is charged by warrant on 49 counts of fraud relating to the $US1.5 million.
Koval marries a US citizen.
Koval obtains US residency.
Justice Minister Chris Ellison signs extradition application.
US authorities arrest Koval in Houston, Texas.
US District Court dismisses Koval's challenge to his extradition. Papers forwarded to US State Department.
Koval flown to Sydney, charged with 49 counts of fraud, released on conditional bail.
Directions hearing sets trial date set for September.
Link to on line SMH article