/We got a little bank: Baillieu brokers Danish link

We got a little bank: Baillieu brokers Danish link

The would-be investor was a participant an international sting apparently designed to embarrass Macaw’s older brother, Stephen, the outgoing head of corporate finance at Melbourne stockbroker EL&C Baillieu.

Noma restaurant

The actor, who calls himself Mustafa Algali, replied to Macaw: “You’re owning a bank. You should have told me first. I wouldn’t have brought you here. I would have taken you to Noma!”

Laster in the conversation, the actor asked Macaw twice if he “has” a bank. Each time Macaw said that he did. “So, you are a bank owner!” the actor said. “Why didn’t you say?”

Macaw responded, laughing: “No, I’m not allowed near the bank!”

Macaw later walked back the claim. “I attended a dinner in London with ‘Mustafa’ with two friends who were in London at the same time, one of whom owns part of a small Danish baking [sic] business,” he said in an email. “I do not have any connection to this business other than knowing the owners.”

The short recording of the encounter, which appears to have been professionally edited, doesn’t include any voices other than Macaw and the pretend investor.

Din Andelskasse didn’t respond to an email asking if Macaw has any formal connection to the bank. The bank’s website doesn’t mention him.

As Macaw pointed out in the recorded conversations, and later in an email to AFR Weekend, a Danish banking licence allows the holder to provide financial services across the European Union.

Macaw’s older brother, Stephen, the outgoing head of corporate finance at Melbourne stockbroker EL&C Baillieu. 

“For those interested in banking the licence can be valuable and new licences are difficult to obtain,” he wrote.

‘Crazy’ system

According to the secret recordings, the Danish building society uses two quirks of European banking to raise cheap capital.

Interest rates are negative in some parts of Europe, which means banks charge investors to look after their money. At the same time, the state of Denmark guarantees the first 7500,000 kroners ($162,000) of bank deposits, a system Macaw described as “crazy”.

Investors get they money back even if the bank fails. At Din Andelskasse, according to Macaw, this allows the creation of “unlimited liquidity” from regular investors through a process he refers to as “play the game”.

Using a website that compares interest rates across Europe, the building society will raise around €5 million if it offers 0.25 per cent. If it wants €15 million, it will offer 1 per cent, according to Macaw.

Part of Macaw’s conversation, with a shady character obsessed with secrecy and tax minimisation, is about countries that offer low taxes for investors. “Denmark is like the – is the secret,” Macaw said.

What the building society did with the deposits is unclear. “The thing then is, ‘how do you use the money?’ That’s where it gets hard,” Macaw said. “Cause you’ve got to invest wisely but you’ve got so many rules on the solvency and stuff.”

Solvency is a problem for Din Andelskasse. In October, Danish regulators complained about a lack of provisions for large exposures to distressed loans. They ordered the building society to limit dividends and lending growth.

Kiwi connection

There is no evidence, other than his own words, that Macaw is or was involved in Din Andelskasse. He does, though, have history with a failed building society on the other side of the world.

Macaw was a director of the Kiwi Deposit Building Society in the early 2010s, along with another Australian and a Frenchman. The Auckland-based mutual society offered merchant banking, currency trading and asset management services around the world – but wouldn’t take deposits from New Zealanders.

In 2013, the “building society” shut down after ASB, the New Zealand branch of the Commonwealth Bank of Australia, ended its financial support. Deposits of $100 million were frozen. The society’s illiquid investments included a $15 million Swedish office building.

ASB complained, in court, that it was potentially being exposed to breaches of money laundering laws. One example it cited was the transfer of $US1 million from a Tunisian company to an Islamic bank in the United Arab Emirates, according to a New Zealand financial news website.

The failure of Kiwi Deposit and similar organisations has led New Zealand to propose changing the rules governing similar businesses. The Ministry of Business, Innovation & Employment has said it wants to require building societies to provide their services to New Zealanders only.