A Dream in Tatters

6 minute read

Kerry and Kay Danes’ small world is defined by heat and separation. At seven o’clock in the morning, guards rouse them from their stifling communal cells and lead them and their fellow inmates into the dusty exercise yard of a Lao prison. Forbidden to speak to each other, the Danes communicate in stolen glances and occasional whispered words. This is not the way their new life was supposed to work out. Moving from Australia to Vientiane with their three young children, aged seven to 15, was to be an exotic adventure in a city of decaying French colonial mansions, golden stupas and languid monks wrapped in saffron robes. Once he had slowed down to the somnolent pace, Kerry felt his job as head of security company Lao Securicor was the perfect transition from soldier to civilian. A military man with a square build and a hard chin, he had spent 20 years in Australia’s Elite Special Air Service. Now he was giving orders instead of taking them.

The idyll ended abruptly last Dec. 23, the day Lao secret police entered Kerry’s office and arrested him. A half hour later, as his wife attempted to walk into Thailand across the Friendship Bridge with her savings of about $50,000 stashed in her dirty laundry, Kay was taken into custody, while two of her children stood helplessly by. The family had become a casualty in a war they didn’t even know they were fighting.

Two weeks ago, in a sweltering courthouse with broken windows, water-stained walls and seats splotched with mildew, a three-judge panel convicted the couple on charges of embezzling, destruction of evidence and tax evasion. They were sentenced to serve seven years and pay fines of more than $500,000, a sum the Danes say they don’t have. How did a lark turn into a legal quagmire? Blame a combination of naivety, inept legal advice and a complex ownership battle over a sapphire mine in a backwater capital where Western businesses remain a novelty, payoffs are routine and regulations nonexistent.

When Hong Kong-based Jardine Securicor hired Kerry to run its subsidiary, Lao Securicor, the company’s client list included the Settha Palace Hotel, the Australian embassy and a sapphire-mining company that, despite the appearance of its dirty, three-story office building on Sihom Street in Vientiane, seemed on the verge of success. Gem Mining Lao held sapphire mining concessions, estimated to be worth $100 million, in Bokeo province, a region of dense forest, green rice paddies and rusty tin shacks where farmers were known to find sapphires and rubies in the red earth after heavy rains. In the cozy world of expats in Vientiane the Danes came to know the owners, Bernie Jeppesen and Julie Bruns. They dined at the same restaurants, went to the same parties and were united by the shared frustrations of doing business among the corruption and cronyism of Laos. One expat, on the condition of anonymity, says: “If you want to get anything achieved here, you have to pay everyone involved. If you want a phone line installed, you bribe the clerk, the manager and the lineman. And even then it probably won’t work.”

But initially it wasn’t the government that caused Gem Mining Lao’s problems. A falling out between Jeppesen and his investors in late 1999he claimed they were bilking him out of his rightful share of the company, they alleged he was ripping off the best sapphiresresulted in the competing factions battling for support from the Lao government. It was a fight Jeppesen and Bruns ultimately lost. One insider says: “Bernie paid the wrong people off.” The pair fled in late May 2000, leaving behind unpaid bills, few friends and a letter appointing Kerry Danes “to handle all Gem Mining Lao’s affairs.” In a disastrous move, Danes took the advice of Gem Mining Lao’s lawyer and accepted the appointment.

“Look, Kerry Danes is a smart man within a narrow scope,” says his present lawyer Ted Tzovaras, who is paid by Jardine Securicor. “But when it comes to business, he’s completely naive.” Also on the advice of the Gem Mining lawyerwho has since fled LaosDanes cosigned a letter from Jeppesen accusing members of the Laos government of corruption, greed and collusion with the disgruntled investors. The move infuriated the government. Kerry, belatedly realizing his mistake, stopped representing the company.

By then it was too late. To Lao officials, Kerry and Kay Danes and Gem Mining Lao were one and the same. With Jeppesen and Bruns out of reach, the government arrested the only corporate representatives left in Laos, the Danes. Held for more than six months before they were charged, the couple was finally accused of embezzling and selling sapphires. Prosecutors at the one-day trial provided little evidence to support the claims, and the verdict was typed before the trial even started. The case has provoked outrage in Australia and, though negotiations continue, calls are growing to cut off aid to Laosabout $11 million last year.

Tzovaras has compiled statements from those involved with the business proclaiming the couple’s innocence, which the court refused to let him present. Even the shareholders who opposed Jeppesen believe the Danes did nothing wrong. “They’ve just wandered into the threshing machine through sheer inattention and ignorance,” says Gary Shugg, who helped orchestrate the financing deal with Jeppesen that went sour. The sapphire mine is shut and in the hands of the Lao government, Jeppesen and Bruns remain in hiding and investors hold stock in a company that has no access to its only asset. The Danes’ three children, living in Brisbane with their grandparents, can’t understand why their mom and dad are in prison. Also bewildered are the locals who used to work in the mines. “There are still many sapphires there,” says one worker as he walks in the rain not far from the mine’s gouged earth. “I don’t understand at all.” Neither do the Danes, who are now facing years in a Lao prison for their misunderstanding.

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