Alan Bond was born in 1938 in London, and spent his early childhood in Wales before moving to Western Australia with his family at the age of 12. He left school two years later and served part of an apprenticeship as a sign-writer before founding Progress Development Organisation (later Bond Corporation) in 1959, originally to pursue real-estate development. During the 1960s, 1970s and 1980s, his empire grew to encompass brewing, mining, television and even a private university. In 1983 his sponsorship of the winning Australian team in the America’s Cup later earned him the Order of Australia.
What was the scam?
From the start of his career, Bond based his entire empire on large amounts of debt, frequently buying properties before going to the bank for the money for a deposit. Initially this worked well, but in the 1980s his empire began to experience financial problems. Undeterred, Bond used a variety of accounting tricks to give the impression that his empire was more profitable than it actually was, such as understating the true amount of debt it had. As Bond Corporation’s situation grew more desperate, Bond transferred A$1.2bn from Bell Resources (a listed company that Bond Corporation had a 52% stake in).
What happened next?
In 1988 Bond Corporation attempted a hostile takeover of the resources conglomerate Lonrho, which released a 100-page financial analysis of the Bond group as part of its defence, pointing out the shaky foundations of its finances. The unwelcome publicity, along with pressure from banks worried about the company’s mounting debts, led to him being ousted as chairman in 1990, though this didn’t prevent Bond Corporation going under in 1991. Bond himself was declared bankrupt, owing A$1.8bn, a year later. In 1997 Bond was sentenced to up to four years in jail for the Bell Resources fraud.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Lessons for investors
Shareholders in both the Bond Corporation and Bell Resources were wiped out, although those investing in the latter company received some compensation after a legal battle lasting over two decades. Bond’s creditors fared little better. Generally, it’s a good idea to avoid companies with high levels of debt – it is not only a sign of weakness and poor management, but raises the temptation for managers to fudge the books.
-
Four income funds to add to your ISAAdding one of these four income funds to your stocks and shares ISA ahead of tax year end could pay dividends
-
Are regular savings accounts worth it?A 7% interest rate is eye-catching, but how much can you save in a regular saver account and how does the interest rate work exactly?
-
Three top-notch Taiwanese companies cashing in on the advent of AIOpinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
-
Weight-loss drugs could revolutionise the economy – the investments to buy nowThe new generation of weight-loss drugs are a boon for the overweight, but they also promise to change our relationship with food and revolutionise the economy
-
Find tomorrow’s Asian giants while they are still smaller companiesOpinion Nitin Bajaj, portfolio manager of the Fidelity Asian Values trust, picks three Asian companies to invest in.
-
AI will maintain Moody’s market lead, says Stephen ConnollyOpinion Veteran data provider Moody's has adapted well to the modern world, and is one of Warren Buffett’s longest-held investments
-
Is BlackRock World Mining gearing for a recovery?Opinion After a frustrating year, BlackRock World Mining is positioned for growth and to capitalise on the sector's recovery
-
Should you limit exposure to US tech stocks?An end to the AI boom would shake both US funds and global trackers. Here’s one way to trim exposure to US tech stocks
-
The mystery of America’s gold and why an audit mattersHow much gold does the US actually have? Dominic Frisby explains why it matters
-
Art vs AI: artists’ uprising takes on the botsAI performs impressively, but it’s all based on human work that was taken without payment. The government thinks this is fine. Copyright holders beg to differ
