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 A hard pill to swallow 

A hard pill to swallow

10/10/2008 10:00:01 PM

SECRET plans drawn up by the failed fuel technology company Firepower to take advantage of high-profile figures in the world of sport gambled that people would jump at the chance to make money and that nobody would stop to check the facts.

Before the creditors massed outside the company's locked doors, before gavels pounded in courts, before corporate regulators warned that shares in the enterprise should never have been sold to members of the public, some big names signed agreements with fictitious entities.

Thousands of internal emails and documents obtained by The Herald detail the staggering tale of Firepower's deceit in promoting their magic fuel pill to everyone from Hollywood movie star Russell Crowe to Wallabies that played in the Rugby World Cup.

Under a three-year agreement drawn up for the Rabbitohs rugby league team - owned jointly by Crowe and the millionaire Peter Holmes a Court - the club was to receive 50 per cent of all gross profits made from any business brought to Firepower. The sales commission was on top of a $1 million-a-year sponsorship.

The documents indicate that Firepower's fuel pills - said to dramatically increase fuel efficiency but later exposed as little more than mothballs - were to be branded and marketed using images of the Rabbitohs players.

"Peter Holmes a Court has asked if he and Russell can get a supply of pills to test/promote," reads one email sent by Christopher Green, an employee of a firm hired by Firepower, to Firepower chairman Tim Johnston on October 6, 2006 - shortly before Crowe revealed the Firepower sponsorship on the Jay Leno TV show in the US.

"They are both very enthusiastic about the potential of the pill and want to try it for themselves. Can we get a box sent to Souths?

"Peter has already begun his sales role, he's in Fiji on holidays and sent me a note saying he'd had dinner with a ship owner who buys two million gallons of diesel a year, and he wants a trial ASAP. Peter says he knows many of the largest ship owners in the world and he'll be tapping them all for Firepower."

But like the pills themselves, the planned contract with the Rabbitohs was legally flawed. It was drawn up using a company name - Firepower Pty Ltd - that bore no relationship to Firepower. The name was borrowed from a small family business in Queensland that installs security screens - but nobody checked.

Green, who now works with Holmes a Court at The Passionate Group, said no Firepower product was ever sold. "The 50 per cent gross profits was a standard clause in all their sponsorship contracts - or so they told us - and we never received a cent from this initiative as we didn't try to make any sales," he said.

"The reference to Peter speaking to shipping companies in Fiji was not entirely accurate. Peter was in Fiji on holidays at the time the email was sent and I was engaging in some banter with a new sponsor. We did request some pills to try, but we were unable to draw any conclusions from the tests on the pills and formed no opinion about the product ever."

Some of the personal agreements with individual sportsmen were also questionable. For instance, one Wallabies player - it is unclear who - entered a $50,000-a-year sponsorship deal with the same fake Firepower entity - Firepower Pty Ltd - as the Rabbitohs. The Herald understands he was not the only one.

The "heads of agreement" with the Wallaby allowed for a more modest 5 per cent commission on the value of all business the player brought to Firepower, on top of the $50,000 annual payment.

The documents indicate that Firepower's strategy of targeting successful sportsmen to market the fuel pills was to be repeated across each of the other high-profile franchises sponsored by Firepower, such as the Sydney Kings basketball team and the Western Force Super 14 team.

There were also plans to sell the pills through the Adelaide Crows AFL team through its charitable arm - the Crows Foundation. The foundation was to receive $1 for every packet of pills sold.

And Firepower's ambition did not end at Australian borders.

The company drew up plans that canvassed possible sponsorship of Chelsea Football Club in the English Premier League and of the formula one racing driver Mark Webber.

Firepower had a pressing issue at the time. It had raised more than $80m from investors, including hundreds of thousands of dollars from high-profile players linked to the Crows, on the understanding that everyone would get spectacular returns once the company listed on London's secondary stockmarket.

The proposed sponsorship of Chelsea was to leverage "significant London influence" to help make that happen.

Neither the listing nor the sponsorships of Chelsea and Webber eventuated. And the only pills produced for sale - using images of Force players - were hastily withdrawn after adverse publicity forced regulatory authorities to investigate the company.

Firepower's global sponsorship strategy, drawn up in November 2006 by the Dynamic Sports and Entertainment Group (DSEG), outlined the spending of nearly $60m in 2007 and 2008. The Herald is not suggesting that DSEG knew what Firepower's real agenda was.

By coincidence, the same Melbourne firm later headed a critical review into the future of basketball after Firepower chairman Tim Johnston fatally wounded the National Basketball League by forcing the Kings - a club he owned - into liquidation.

The documents show how some of the sportsmen who were duped by Firepower were initially happy to climb on board the Firepower fairytale but later scrambled to rewrite their private deals after questions were raised about Firepower's alleged fuel technology.

For instance, Force coach John Mitchell was getting a payment valued at $100,000 a year from Firepower. The three-year agreement, which began in October 2006 but was ended early at Mitchell's insistence, allowed for him "to be paid in full or convert part of the fee to a combination of [Firepower] shares and/or personal holiday travel".

He had initially decided to take $60,000 in cash and $40,000 worth of Firepower shares, according to one document. But only days after the Herald 's first critical story on January 8, 2007, his agent, John Fordham, asked that the contract be changed. He now wanted the whole amount in cash. "John Mitchell will review his position concerning shares when the company determines its listing position," Fordham wrote.

Force player Scott Staniforth, who was getting $50,000 a year in payments from Firepower, also later requested his payment in shares be varied.

The documents indicate that, until the Herald began writing about Firepower, neither the Australian Rugby Union nor the Western Force was even aware of all of the arrangements in which its employees were entangled.

In the days after the Herald 's first story, Fordham, a player-agent, wrote to then Force CEO Peter O'Meara informing him that Firepower had deals with Ryan Cross and Cameron Shepherd.

"I had been meaning to provide you with this background before the start of the Super 14 season," he said, "but because of the recent publicity concerning Firepower, I thought it appropriate to bring this forward.

"These arrangements are based on each player's future career development and will involve them in making occasional appearances for Firepower that will not in any way involve above-line advertising or the usage of the intellectual properties of the Western Force or the Australian Wallabies. I felt comfortable making these private arrangements in view of Firepower being a major sponsor and supporter of the Western Force."

At the time, Fordham's two players were part of a group of up to seven Wallabies at the club who were being sponsored by Firepower. One of those was the Australia's brightest star, Matt Giteau. His record-breaking $4.5m transfer from Canberra - $1.5m a year in wages over three years - had largely been underwritten by Firepower.

But all of the players eventually appeared to have trouble getting paid, a fact repeatedly denied at the time.

For instance, in February 2007 Fordham wrote to Firepower to complain that payments due in November 2006 had not arrived until December. He began writing to the company several days before a new payment was due to remind Firepower of its obligations.

In May 2007, three days after the payments were late again, he wrote to Firepower warning the company that the Herald was asking the players whether they were being paid. Firepower cautioned Fordham "not to speak to the journalist in question, under any circumstances".

But the documents show that while the sportsmen and sporting franchises who were duped by Firepower were often made to wait for their money, Johnston was enjoying life as the new king of Australian sport.

He arranged for an employee at the taxpayer-funded Australian Trade Commission to source castles in the south of France so that he could enjoy the 2007 Rugby World Cup in style.

Johnston booked accommodation in a 19-bed chateau with a swimming pool built into an ancient trout basin for himself and a party of more than 10. He hired a private jet to shuttle between games and a number of other castles where he stayed.

Federal Court documents reveal that the last significant payments Johnston made were in December 2007, when he borrowed $1.3m from a Firepower investor to meet some of his outstanding obligations.

He used the borrowings to pay $605,000 to Giteau, $170,000 to Drew Mitchell, $110,000 to Scott Staniforth, $70,000 to Fordham (an invoice on behalf of a client) and $200,000 to the Force.

That, it seems, is when the Firepower roulette wheel had stopped.

Contact the reporter: gryle@smh.com.au

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