Four Corners’ story on Multiplex’s Wembley Stadium contract in London was a fine effort – the full transcript is here – with the background legal documents obtained through a successful London court action which allowed Four Corners to report on the dodgy Multiplex contract.

So comprehensive was Four Corners’ legal win in the High Court in London that Multiplex was ordered to pay the ABC’s costs of more than $50,000.

So
what did we find out? That there’s a document now in the public arena
that casts doubt on just how early the Multiplex management and board
knew of the size of the cost problems at Wembley. ASIC knows of that
report, and now presumably so does the ASX, which hasn’t covered itself
in much glory on Multiplex, Telstra and a host of other market
supervisory issues in the past year.

Based on the Four Corners
report last night, a stiff “please explain” should have been issued to
Multiplex by the ASX first thing this morning. Here’s the crux of the
story:

TICKY FULLERTON: Many investors relied upon statements by
Andrew Roberts and his CFO, John Corcoran, seen here. And by law, the
prospectus, with forecasts that appear to assume Wembley was on track,
had to be accurate at least until 17th January, when the offer to
investors closed. But an internal Multiplex budget on Wembley from late
January is now in the hands of Four Corners. The cover memo
says the budget, sent by the Wembley project director, is for
discussion with JCR, the initials of John Roberts. It’s a complex
document but essentially, it contains two very different sets of
numbers on Wembley.

First, there’s the JCR costs. Next to that
is the likely site view. That’s typically how site managers see the
real costs of a project. Both versions predict heavy operational
losses. Multiplex plans to offset these losses by winning claims from
subcontractors. The best-case scenario, the JCR view, is a 13 million
pound profit. But the site view is much worse. Without successful
claims, it’s a loss of nearly 87 million pounds. And even with claims,
it’s a loss of nearly 48 million pounds. Remember, just 14 days before,
the prospectus had left the public thinking that Wembley was on-track.
So if the site view’s correct, it beggars belief that a 48 pound
million loss could have been suddenly discovered in just two weeks.

Four Corners
can’t say that a discussion with John Roberts took place or who else
saw the document, but no losses were announced to the market. In
February, Multiplex’s banker, UBS, valued the shares at a heady $6.60. “

TICKY
FULLERTON: Things had gone wrong. Someone in Multiplex had blown the
whistle. In mid-February, Multiplex’s accounting group general manager
raised concerns about the February accounts. In the week leading up to
the results, he wrote to members of the board and contacted ASIC, the
corporate regulator. ASIC launched an investigation.”

TICKY
FULLERTON: In late May, Multiplex confirmed what the internal January
document had warned four months earlier. Wembley was not in profit, nor
was it break-even, it was a massive loser. “

TICKY FULLERTON:
The next Monday in Sydney, the new loss was finally announced at an
estimated 45 million pounds, just shy of the 48 million pound loss from
the internal January document. When share trading resumed, the price
plummeted to a record low of $2.56. Compare that to what Multiplex’s
banker, UBS, was telling the market in February – $6.60.

And
yes, UBS, the leader in merger and acquisition advice in Australia for
the past couple of years and an aggressive broker, does look like a
dill and has paid for its Multiplex optimism by being taken off the
broking panels of some institutional investors.

Included in the background documents was this standard, narky letter
that all media groups receive from the legal representatives of
companies and individuals who are being investigated. The letter from
Multiplex’s London lawyers, Clifford Chance, is a typical attempt to
put the frighteners on a media group from the law firm said to be the
world’s biggest.

So what are we to make of the market reaction
which saw Multiplex shares up 15c in the first 45 minutes trading to
$3.37? That they were sold off late last week and yesterday ahead of
the Four Corners report and that it’s a rally based on relief
that there’s no more red ink? Or a rally in the belief that there will
be management changes after ASIC reports?