Stuart Washington Trio/ Astarra Articles

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Byline:Stuart Washington Keyword: Trio Capital Duplicates: Identical Range: All ALL SOURCES
Software sends profits down the YouTube Regulator concedes it fiddled while Trio burned Scoundrels, and how to avoid them Come and clear up this cornucopia of calumnies Trio 's Richard jailed for 2 years over stolen super Andrews given nine-year ban, Richard facing time in the can Andrews given nine-year ban, Richard facing time in the can Burning questions remain over super theft Words will not save Richard from jail time Trio front man 'Shawny Cash' heads to prison A company is made in its owner's image Planners banned over Trio fiasco How regulator missed chance in Trio debacle Parliament to probe Trio Capital fraud claims DIY funds need compensation too Cold comfort for forgotten victims of Trio Capital fiasco Super industry shouldn't fool itself: Trio Capital could happen again Opportunity still knocks - be sure to read the fine print Investors deserve a softer landing than concrete Couple of clowns duped in super scam muddy waters for true victims DIY super funds given cold shoulder in Trio payout Fraud victims get $55m back, but some left empty-handed Ombudsman's name and shame list a bold step forward DIY super fund investors warned of no compensation from fraud Astarra frontman pleads guilty Self-managed super and the Trio trap Trio Capital manager faces jail after guilty plea
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Let's hope this time there is a difference Investors deserve comfort of savings made for rainy days Three pennies in the fountain of Trio Capital losses Super thief caught up in US fraud How to grow rich stealing super cash Trio identity still controls financial planner Murder and threats make for reluctant testimony Revealed: Trio 's links with Michael McGurk Cowboys watched as millions disappeared How Trio scandal slipped under ASIC's radar Pair plays it cool as court hunts for $400m 'Marketing allowance' paid to planner Kickbacks kept coming as Trio manager sent investors' funds offshore Funds manager admits lying I am only a puppet, says Trio director Trio Capital principal tries to stop public examination Trio Capital - a long, slow car crash List of alleged Trio offences sent to ASIC Lack of independent trustees could hurt investors, critic warns ARP Growth liquidator finds assets are worthless ASIC probity inquiry puts Trio adviser in spotlight You wouldn't read about it Racecourse workers lose savings in super fraud Judge says Trio fraud Corporate regulator investigates former directors at Trio Capital No safety net for self-managed super Fictional resemblance to a heist Astarra funds custodian got around legal barrier Out of the shadows
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Astarra hunt shifts to HK Astarra to be wound up ASIC refuses to release Trio details Case being prepared for Trio government compensation Astarra asset trail leads to Caribbean Astarra fund millions sent to dodgy dealer Pensioners caught in freeze of Trio funds Trio 's failure could ensure Cooper's success in review of conflicted super industry ASIC must move quickly on Trio fund Fraud fear in Trio fund's lost $45m Mystery deepens over missing Trio funds Majority of Trio 's assets 'accounted for' Murder, intrigue and missing millions Astarra shares Hong Kong link to broking scandal Trio Capital holding $1.5m 'risky' asset Trio problems are a failure on the part of its gatekeepers Blogger who blew the whistle Trio : from the boiler room into the fire Mystery deepens over Trio 's missing $118m Details sketchy on Trio 's $118m Trustees track Trio Capital 's offshore vehicle APRA moves on super fund Trio Capital 's $426m Warrants close, holders lose all
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Business Software sends profits down the YouTube STUART WASHINGTON 922 words 5 September 2011 The Sydney Morning Herald SMHH CTGDJC First 6 English 2011 Copyright John Fairfax Holdings Limited. I have been showing my kids music film clips from YouTube on television. It's pretty easy. The iPad downloads the stuff over the home Wi-Fi network. Then you use a cable to hook the iPad into the back of the television. Then you listen to the music.
TD And in the background, if you listen closely, you can hear the sounds of the business models coming crashing down. There goes the profit margin for the record industry. My kids are listening to this stuff for free. And as the music plays there is another small incursion into the ad-driven profit margins of commercial free-to-air television. We're watching television all right, but we're not watching commercial television. And, while I'm at it, all forms of traditional commercial media are suffering as my kids watch YouT ube on television. We aren't sitting around listening to the radio, watching movies or reading newspapers. Our time is being diverted by free content downloaded from the internet. (We also aren't sitting around playing board games and enjoying more carefree pursuits, but I will leave the topic of poor parenting to another day.) In a recent article in the Wall Street Journal, the co-founder of pioneer internet browser Netscape, Marc Andreessen, went much further with this kind of analysis, boiling his argument down to the pithy one-liner: "Software is eating the world." Andreessen spells out a collapse in the costs of providing services over the internet. Such radical reductions allow software challengers to emerge in all sorts of industries previously seen as the preserve of traditional "real-world" companies. In the challenger camp - and companies Andreessen discloses he has invested in through his venture capital firm Andreessen Horowitz - are online coupon business Groupon and online telco Skype. Andreessen's argument is familiar because we have seen it happen before our eyes. He cites the by now familiar examples of Blockbuster's video hire business knocked over by online order business Netflix, and bricks-and-mortar bookseller Borders knocked over by online bookseller Amazon. Andreessen also gives the almost obligatory nod to Joseph Schumpeter and his much-celebrated observation about entrepreneurs and their penchant for creative destruction - old businesses making way for aggressive young start-ups. (Funny how the entrepreneurs always focus on that remark of Schumpeter. They never seem to give much weight to some of Schumpeter's other observations, such as his prediction about the end of capitalism, because the society produced by capitalism fosters values that do not allow capitalism to be sustainable.) Page 4 of 159 2011 Factiva, Inc. All rights reserved.
John Hempton, an indefatigable blogger, fund manager with Bronte Capital and fraud buster, agrees with Andreessen's argument, and raises the notion that the world is becoming "appified". I know, it's a terrible word, but it attempts to convey software doing jobs as an "application" that used to be done by something in the real world. For example, using the map function in an iPhone rather than leafing through the Gregory's. In a recent post, Hempton inspects the case of hardware firm Cisco talking about 50 billion devices in the world needing to be connected to the internet - but failing to convert that astonishing figure into sales of the hardware routers it manufactures. The reason? Because software is "appifying" Cisco's hardware business - software is doing the job that its routers used to do. "If the output of your hardware is information or the manipulation of information then you are going to get eaten. If the output is something else then you are not," Hempton writes. And that's also Cisco's business model you can hear crashing down in the background of the You Tub e music my kids and I are listening to. And just for the record, we were listening to Gotye's Heart's a Mess. I might buy the record from iTunes. Not all business models are collapsing. --STAYING with John Hempton, Ross Jones, the deputy chairman at the Australian Prudential Regulation Authority, should have a second look at a hedge fund called ARP Growth. Hempton famously blew the whistle with the regulators after examining the smooth returns of Astarra Strategic, a hedge fund that was run by Trio Capital. Investors in that fund lost $123 million. A total of 74 investors in a sister fund called ARP Growth lost $58 million, in many cases the elderly investors' life savings. At a federal parliamentary inquiry last week, Jones made the incredible statement that ARP Growth's losses were not due to fraud, but due to investment losses. Given what we now know about the masterminds behind Trio Capital and their criminal intent, the parliamentarians are in danger of being falsely reassured by Jones's statement. As this newspaper has established, there were two sets of accounts for ARP Growth. So at its most basic level, there has been a fraud committed of some sort. Further than that, the investments ARP Growth made through the British Virgin Islands have never been found and are shrouded in a mysterious swap agreement with Bear Stearns (now JPMorgan). Did the money ever go where it was supposed to? Certainly Brett Manwaring, the PPB liquidator who has investigated ARP Growth, was much more guarded about whether the losses could be investment losses. ARP Growth was a fraud - two sets of accounts show it was a fraud. And APRA should pull its collective finger out and look at ARP Growth again. CO IN NS yoinco : YouTube Inc. | goog : Google Inc. iint : Internet/Online Services | iport : Internet Portals gmovie : Movies | gcat : Political/General News | gent : Arts/Entertainment
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Business Regulator concedes it fiddled while Trio burned Stuart Washington 388 words 31 August 2011 The Sydney Morning Herald SMHH CTGDJC First 5 English 2011 Copyright John Fairfax Holdings Limited. INQUIRY THE superannuation regulator was grilled yesterday about failing to follow up its request for a valuation of a Trio Capital fund, a year before it was discovered the fund had been defrauded of $123 million.
TD Senior officers of the Australian Prudential Regulation Authority were called before a federal parliamentary inquiry in Sydney yesterday investigating the collapse of Trio Capital and a fraud in its fund, Astarra Strategic. Trio Capital collapsed in late 2009 after regulators were alerted by a whistleblower, John Hempton. Its investment manager, Shawn Richard, was jailed for two years and six months earlier this month. APRA officials portrayed a historical total of about $100 million in compensation paid for fraud from superannuation funds it regulates - including $55 million for Trio - as a "pretty good result" for the size of the superannuation sector. But the deputy chairman of APRA, Ross Jones, agreed with committee member Paul Fletcher that APRA had not addressed the root cause of the fraud in its interventions with Trio since 2005, but had mainly focused on corporate governance issues. Mr Jones blamed the failure to detect the fraud on the "gross incompetence" of later directors of T ri o Capital, who had inherited the structure of a fraud set up by promoters in earlier years. The chair of the corporations and financial services committee, Bernie Ripoll, said: "If it is gross incompetence ... then there is something wrong in the system that allows that gross incompetence to take place." The inquiry also heard calls for a last-resort fraud compensation scheme, after members of Trio fund ARP Growth found their $58 million invested through do-it-yourself super funds was ineligible for compensation after Trio's collapse. And the inquiry heard descriptions of the fraud from the liquidator, PPB, including Astarra Strategic investing in non-existent companies and continuing investigations into doubtful ARP Growth investments. The committee heard APRA had been involved with Trio as early as 2005 and had asked for a valuation of assets inside Astarra Strategic, but had never received the information it sought. In October 2008 Trio wrote to APRA saying it had no available valuations for two Trio funds later found to be at the heart of the fraud, Astarra Strategic and the Exploration Fund. NS RE c131 : Regulatory Bodies | c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Scoundrels, and how to avoid them STUART WASHINGTON 921 words 22 August 2011 The Sydney Morning Herald SMHH First 7 English 2011 Copyright John Fairfax Holdings Limited. Are people with criminal records allowed to own businesses in financial services? Answer A Are you joking? There's $1.3 trillion tied up in superannuation that's supposed to be for people's retirement. There's no way you would let anyone with even the whiff of criminality anywhere near it. You would have to be bananas to think that someone with ill will wouldn't use their ownership to control the destiny of a financial services licensee.
TD Answer B Ahem, well, yes, people with criminal records are in fact allowed to own a financial services business which has a licence and (sound of throat clearing) they can exert whatever control they wish to inside the company. The test for a financial services licence relies on the directors of the financial services business passing a test of good fame and character. The same test is not applied to the owner of the license; in fact there is little evidence ownership of the business is even considered. Answer Sadly, B is correct. How does a scoundrel financial planner find his or her way into the industry? Answer A There are no scoundrels in this industry - they are carefully weeded out by the holders of financial services licences. These licensees have far too much skin in the game to put their own licence at risk. The vetting means that people (or whole businesses) that become "authorised representatives" of the licensed business behave in a thorough and ethical manner. Answer B A scoundrel finds a financial planning group that doesn't pay too much attention to whom it is authorising. Some financial services businesses act as little more than licences-for-hire who are happy to clip the ticket, appointing practically anyone who knocks on the door as an authorised representative. These businesses are shoddy enough and happy enough to take a punt that the people (or whole businesses) they authorise are behaving appropriately. The scoundrels (or scoundrels running whole businesses) then carry on with practically no other checks. Answer Sadly, B is correct. W hat is the corporate regulator doing about the issue of licences-for-hire in the financial planning industry? Answer A A fair bit. The Australian Securities and Investments Commission is looking closely at the issue and checking just how some financial planning groups have managed to accumulate a whole range of odds-and-sods financial planners, without any real evidence the group is holding its authorised representatives to an appropriate professional standard. Answer B Not enough. ASIC has allowed a system to develop so that unsavoury planners can hop from one network to another, with seeming impunity for both planners and the holders of the licence. Answer Sadly, answer A and B are the correct answers. Is my super safe? Answer A Australia's superannuation system and the national savings they represent are the envy of the developed world, and are closely regulated by the Australian Prudential Regulation Page 8 of 159 2011 Factiva, Inc. All rights reserved.
Authority. Answer B There have been notable thefts that have shown weaknesses in the current superannuation system, including Trio Capital in 2009 (about $180 million missing) and Commercial Nominees in 2002 (about $25 million stolen). Answer C A weakness in the current system is a lack of control over conflicts of interest in superannuation, so the financial planner, the trustee and the fund manager can all be owned by the same person. It's not a good look at the best of times, but especially not a good look when that owner is also a criminal (see question one). Answer A, B and C are correct. I f I lose all my super because someone robs me of my life savings, do I get compensation? Answer A Of course. Answer B Yes, after more than a year, if you are in a super fund regulated by the Australian Prudential Regulation Authority, and the fund has taken a big knock. Answer C No, if you are in a self-managed super fund. Answer D No, if you are in a super fund regulated by the Australian Prudential Regulation Authority and the fund has not taken a big knock. Answer Sadly, answer A is not the correct answer. Answers B, C and D are the correct answers. H ow long do you go to jail for if you steal money as a financial services provider? Answer A Two years and six months for dishonestly helping to steal $26.6 million in super and making $1.3 million. Answer B Three years for insider trading and making $1.9 million. Answer C Two years for ripping off $4 million from your clients as a stockbroker. Answer A (Shawn Richard in Trio Capital), B (fund manager John Joseph Hartman) and C (stockbroker Robert Blanshard) are all correct. H ow do I make sure criminals keep their hands off my hard-earned super? Answer Be careful. Go to brand names you trust. Find a financial planner who listens to your needs. As a general principle if it looks too good to be true, it usually is. Look at the interest on a term deposit (currently about 5.5 per cent a year). If anything is promising greater than that, you are taking more risk. If anything is promising greater than 10 per cent a year, it is quite risky. If it is promising greater than 20 per cent, either do it with money you can afford to lose or forget about it. CO RE aupra : Australian Prudential Regulation Authority austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business - Opinion & Analysis Come and clear up this cornucopia of calumnies STUART WASHINGTON 973 words 15 August 2011 The Sydney Morning Herald SMHH First 7 English 2011 Copyright John Fairfax Holdings Limited. Bad luck, Jack W. Flader. What was that judge thinking on Friday when he all but called you an out-and-out thief? He said you were the mastermind of a superannuation fraud that has cost investors in the Albury fund manager Trio Capital up to $180 million.
TD I know, I know. It's so outrageous you haven't been given a chance to defend yourself. I just can't believe how those judges and lawyers and regulators are badmouthing you around the place. How did Justice Peter Garling put it in the NSW Supreme Court on Friday? He said: "I accept that ... Mr Flader was the architect and ultimate controller of the scheme." Then he put your former employee Shawn Richard in the slammer for 2 years. So I guess poor old Shawny Cash had a bit of bad luck after he put all that money into offshore hedge funds you controlled. But it's nothing compared to the indignities being committed against your good name. Last I heard from you I thought you were in Hong Kong. I'm surprised you haven't jumped on a plane and set these scurrilous rumours to rest. They schedule flights to Australia reasonably frequently these days, but I guess there must be some reason you haven't come down. It was bad enough when BusinessDay was having a go at you. What were you called? Something along the lines of "super thief"? It's pretty intolerable to see your name coming up associated with Australia's largest superannuation fraud. So bad luck, sir, bad luck. And it's not as if it's the first bit of bad luck you've had either, is it Jack? I'm figuring it must be just a run of bad luck that your name crops up in association with a whole host of separate scams. Bad luck, I say, that you were general counsel of Zetland Financial Group when it was owner of the British stockbroker Pacific Continental Securities. I'm sure you were as shocked as anyone that Pacific Continental turned out to be a shopfront for rogues selling worthless penny stocks before it collapsed in 2007. I'm sure you were acting appropriately as the US-trained lawyer that you undoubtedly are. I bet you were right in there, behind the scenes, working hard to change its ways. What was it that the Financial Services Authority called Pacific Continental Securities? Something about inappropriate selling between 2005 and 2007, and the chief executive acting without integrity. Page 10 of 159 2011 Factiva, Inc. All rights reserved.
And bad luck, too, that your name appears as a defendant in a mega court litigation about the Derivium scandal in the United States. You were named as a "RICO defendant" weren't you? You being a lawyer and all, you would well know that stands for the Racketeer Influenced Corrupt Organisation Act. They never took you to trial. So I suppose that's a bit of good luck. But in any case, it would have been nice for you to stand before 12 of your peers and clear your name of the slur. In any case the courts found last November that investors were ripped off to the tune of $US1 billion ($965 million), and promoters were paid $US100 million ($96.5 million). Again, I say: bad luck, sir, to have your name associated with such an outrage. And while I'm at it, I'm sorry about this newspaper's references to your 2005 trip to Pattaya for a "global meeting" of stockbrokers you organised. I'm pretty sure it was just bad luck that seven of the 25 who attended have had substantial run-ins with regulators. Many seemed proficient in the world of penny stock fraud, but I'm sure the presence of those rats in the ranks at Pattaya would have come as a shock to you. Mind you, it didn't sound like the conference was all hard work. What were the wines you recommended your guests bring with them to your house in Pattaya? Weren't they Chateau Talbot, Lynch Bages and Carruades De Lafite? When I last looked a bottle of the current vintage in these labels they cost $65, $170 and $413. Such a merry life you had. What was it you said about your time at the Bulgari resort in Bali and its $1500-a-night rooms? Wasn't it "10 hours of massages, excellent Italian and Indonesian food, an ocean of fine wines, great workouts and painful yoga". It's all now uprooted and unsettled by these importunate aspersions. Now you say you have sold your Global Consultants and Services Ltd business. At any rate your old website doesn't work any more. I guess it's another bit of bad luck how both those men you sold your business to were found guilty in the Derivium scandal. I also think it's a bit of bad luck, by the way, that a couple of your old business colleagues, James Campbell Sutherland and Jeffrey Revell-Reade, seem to still have financial services interests in Australia. But most of all I think it's bad luck you ever turned your attention to Australia. I'm very sorry about that, Jack. The investors in Trio Capital who have been forced on to pensions and have lost their homes are sorry about that, too. I think ASIC may have a few regrets as well. I tell you what. Why don't we meet up at Sydney Airport, just you, me and a few officers from the corporate regulator, and we can start addressing some of the bad luck that seems to follow you around? I mean, really, it's just not fair, is it? IN NS RE i835 : Legal Services | i831 : Financial Investments | ibcs : Business/Consumer Services | iinv : Investing/Securities nedc : Commentary/Opinion | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Trio's Richard jailed for 2 years over stolen super Stuart Washington 382 words 13 August 2011 The Sydney Morning Herald SMHH First 3 English 2011 Copyright John Fairfax Holdings Limited. COURTS A SMOOTH-TALKING Canadian patsy took the fall for Australia's largest superannuation theft yesterday, but the major beneficiary of the crime remains at large.
TD Shawn Richard, known by his Facebook nickname Shawny Cash, was sentenced in the NSW Supreme Court to a minimum of two-and-a-half years in jail yesterday. The sentence immediately attracted the ire of investors in Trio Capital, which collapsed in late 2009. Trio investors lost $180 million sent to offshore hedge funds through Astarra Strategic and ARP Growth. "We will be paying for many more years," Beth Roffe, a Wollongong investor who lost $500,000 and is living on the pension, said outside the court yesterday. John Hempton, a fund manager who first exposed the fraud, said: "This has caused a very large number of people a very large amount of pain. If he had mugged three of those people and took their purses he would have probably got a longer sentence." Richard, 36, looked haggard and unshaven as Justice Peter Garling found he was "motivated simply by greed" when he directed $26.6 million into offshore funds, knowing the money was being stolen. But Justice Garling's sentencing remarks show that a US citizen based in Hong Kong called Jack Flader was the real mastermind and major beneficiary. Mr Flader remains at large. Justice Garling sentenced Richard to a maximum sentence of three years and nine months. He said he was prepared to accept Richard, described as "ripe for the picking" by his lawyer, had been naive and gullible when he started working for Mr Flader. But he said benefits Richard received included secret payments of $1.3 million to personal bank accounts in Liechtenstein and Curacao and payments to his company of $5.3 million. "Mr Richard is guilty of serious crimes of a high order. They were carefully considered and planned, they were concealed, they continued over a period of nearly four years and they led to significant financial losses," Justice Garling said. "Whilst he may not have been the ultimate controller, a role attributed to Mr Flader, he was the central figure in Australia, without whose participation these offences could not have occurred." NS RE gtheft : Burglary/Theft | gcat : Political/General News | gcrim : Crime/Courts austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Andrews given nine-year ban, Richard facing time in the can Stuart Washington 379 words 12 August 2011 The Sydney Morning Herald SMHH Third 6 English 2011 Copyright John Fairfax Holdings Limited. FINANCE Then those pathetic putrid looters?
TD Came up behind me to bully, ambush and bash Callous bulls in a fragile china shop/Plundering nothing less than someone else's cash THE bard of Trio Capital has written his last stanza in the saga of the theft of $180 million from Australian investors. Yesterday David Andrews, 59, a former chairman of Trio, was banned from financial services and being a director for nine years, the longest suspension yet handed to three Trio directors who failed to protect investors. Today the investment manager of Trio, Shawn Richard, is due to be sentenced to up to 10 years in jail. More than $180 million has been lost in two offshore hedge funds run by Trio, Astarra Strategic and ARP Growth. The Herald revealed last year that Mr Andrews was the author of what appeared to be a lightly fictionalised account of the Trio imbroglio under his pen name, David Morisset. The excerpt featured a shady Hong Kong businessman, high-octane hedge funds and a murder in a red light district - all elements of Australia's largest superannuation theft from the sleepy Albury fund manager chaired by Mr Andrews. Mr Andrews's writings after the Trio collapse included the confessional poems Loser (quoted above) and Fanfare for Failure. While silent on Mr Andrews's highly commended talent as a poet, the chairman of the Australian Securities and Investments Commission, Greg Medcraft, gave him a scathing review. "We believe Mr Andrews failed in his duties as officer of the responsible entity of the Astarra Strategic Fund and therefore it's inappropriate for him to be involved in the financial services industry or act as director," Mr Medcraft said. Mr Andrews was an economist who worked for seven years with the Australian Anglican Church's funds management arm, Glebe Asset Management, before joining Trio in 2005. At Trio he chaired the board and also held roles as chairman of the investment committee and chairman of the risk and compliance committee. An enforceable undertaking shows how during Mr Andrews's time at Trio millions of dollars were directed into the Astarra Strategic hedge fund without conducting proper valuations. RE austr : Australia | nswals : New South Wales | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Andrews given nine-year ban, Richard facing time in the can Stuart Washington 378 words 12 August 2011 The Sydney Morning Herald SMHH First 3 English 2011 Copyright John Fairfax Holdings Limited. FINANCE Then those pathetic putrid looters/Came up behind me to bully, ambush and bash -
TD Callous bulls in a fragile china shop/Plundering nothing less than someone else's cash THE bard of Trio Capital has written his last stanza in the saga of the theft of $180 million from Australian investors. Yesterday David Andrews, 59, a former chairman of Trio, was banned from financial services and being a director for nine years, the longest suspension yet handed to three Trio directors who failed to protect investors. Today the investment manager of Trio, Shawn Richard, is due to be sentenced to up to 10 years in jail. More than $180 million has been lost in two offshore hedge funds run by Trio, Astarra Strategic and ARP Growth. The Herald revealed last year Mr Andrews was the author of what appeared to be a lightly fictionalised account of the Trio imbroglio under his pen name, David Morisset. The excerpt featured a shady Hong Kong businessman, high-octane hedge funds and a murder in a red light district - all elements of Australia's largest superannuation theft from the sleepy Albury fund manager chaired by Mr Andrews. Mr Andrews's writings after the Trio collapse included the confessional poems Loser (quoted above) and Fanfare for Failure. While silent on Mr Andrews's highly commended talent as a poet, the chair of the Australian Securities and Investments Commission, Greg Medcraft, gave him a scathing review. "We believe Mr Andrews failed in his duties as officer of the responsible entity of the Astarra Strategic Fund and therefore it's inappropriate for him to be involved in the financial services industry or act as director," Mr Medcraft said. Mr Andrews was an economist who worked for seven years with the Australian Anglican Church's funds management arm, Glebe Asset Management, before joining Trio in 2005. At Trio he chaired the board and also held roles as chairman of the investment committee and chairman of the risk and compliance committee. An enforceable undertaking shows how during Mr Andrews's time at Trio millions of dollars were directed into the Astarra Strategic hedge fund without conducting proper valuations. RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Burning questions remain over super theft Stuart Washington 1,467 words 28 July 2011 The Sydney Morning Herald SMHH First 7 English 2011 Copyright John Fairfax Holdings Limited. TRIO CAPITAL FRAUD How did 'Shawny Cash' manage to conceal his crimes for so long, asks Stuart Washington.
TD An air of exasperated disbelief radiated from the bench on Friday as Justice Peter Garling considered the fate of the man guilty of Australia's largest superannuation theft. Where were the auditors, Justice Garling asked under the lofty ceiling of courtroom one in the old Supreme Court House. What was Trio Capital's investment committee doing? What about Trio Capital's board of directors? Implicit in Justice Garling's questions was the puzzle of how the mild looking man sitting before him, 36-year-old Shawn Richard, could have been allowed to get away with so much for so long. As we now know, the Albury-based fund manager Trio Capital spirited away $180 million into two hedge funds, Astarra Strategic and ARP Growth, from 2005 and probably earlier. Richard's "success" is at odds with his inauspicious background. The man dubbed "Shawny Cash" only had a high school education from the modest middle class neighbourhood of the largely French-speaking Dieppe in New Brunswick, Canada. He dropped out of his local Moncton University, later lying in Australia he had a bachelor's degree in finance from the same institution. Richard's lawyer, John Agius SC, argued last week that Richard had been naive and psychologically vulnerable to the lure of the high-powered role in financial services offered by his boss, Jack Flader. Richard was on an overseas trip looking for adventure, landing up in Taiwan, when he first met Flader in the late 1990s. "He [Richard] was someone going nowhere in particular and going there at no speed," Agius said. Richard last year described his role in Taiwan as "office boy" - not the grandiose "vice-president" he labelled himself in his online investment manager's biography. Flader, a US lawyer based in Hong Kong, is a noted bon vivant who enjoys what he calls "the noble grape", particularly $250-odd bottles of Carruades de Lafite. It is of no comfort to Australian investors that they almost certainly funded Flader's jet-setting lifestyle, in which he crossed the globe to visit 80 destinations in three years as head of his business, Global Consultants and Services Ltd. Flader emerges in the statement of facts tendered before court on Friday as the mastermind of the whole scheme. Whether the source of the cash ever rested poorly with Flader as he sampled the "ocean of fine wines" and enjoyed 10 hours of massages at the $1500-a-night Bulgari resort in 2007 has not been established. Page 16 of 159 2011 Factiva, Inc. All rights reserved.
He has not been available for interview. While offshore miscreants escape sanction, Richard was the man placed in jail on Friday awaiting sentence on August 12. In court, he was described as the frontman and pivotal to the whole scheme. Richard has pleaded guilty to two counts of dishonest conduct. The charges relate to seven instances of dishonesty between November 2005 and September 2009. In short, the counts state he knew he was personally benefiting by placing investors' money in funds he was lying about. On Friday the Crown's case against Richard showed how he illegally enriched himself through secret payments of $1.3 million channelled through bank accounts in the tax havens of Liechtenstein and Curacao. In 2009 Richard blew at least $250,000 on personal expenses, including $67,000 on rent. In total, Richard's company, Astarra Asset Management (AAM), would receive $6.55 million in illegal payments. But the jig was nearly up. In September 2009, Bronte Capital fund manager and blogger John Hempton informed the corporate regulator of concerns about what has become Australia's largest superannuation fraud. In December 2009, 10,000 investors in Trio Capital had more than $400 million frozen as the regulator put in place liquidators and trustees to piece together just what happened. In April this year, investors in superannuation funds regulated by the Australian Prudential Regulation Authority were awarded $55 million in compensation because they had been subjected to fraud. In court on Friday, Justice Garling's puzzlement extended to the exclusion of self-managed superannuation investors from any compensation for fraud in Trio Capital. It is a puzzlement shared by self-managed super investors themselves, who now find themselves locked out of any meaningful compensation. In a recent submission to a federal parliamentary inquiry into Trio Capital, a 68-year-old South Coast man, Philip Keeffe, wrote after losing $70,000: "That the Commonwealth has failed to create a secure environment for these investors, as well as failing to compensate them for losses ... is simply shameful." Justice Garling's questions about the role of Trio Capital's gatekeepers extended to the supposed attractiveness of the offshore investments. "Excuse me, what is the fund you have put your money into?" Justice Garling said on Friday, adopting the voice of Trio's auditor. "Please prove the worth of those funds to me? That's what auditors are supposed to do, isn't it? "One can't avoid at least the observation and reflection when looking at this that there were a number of other bodies that were asleep on duty here." The opaque nature of the offshore investment vehicles is amply demonstrated in the statement of facts before the court. One fund called the SBS Dynamic Opportunities Fund had a Liberian company as sole shareholder and director, an Anguillan company as investment manager, a Cayman Islands bank account and a Belize company as its administrator. But in a common thread with all four offshore funds that became destinations for Australian investors' money, the fund was actually administered by the company Flader founded in 2006, GCSL. The round robin of Australian investors' funds that were placed in exotic offshore investment vehicles is documented at its simplest in the first case of dishonesty admitted by Shawn Richard. He was the investment manager for Trio Capital through his company AAM, with the Page 17 of 159 2011 Factiva, Inc. All rights reserved.
responsibility of placing investors' funds into the ultimate investment vehicles. In this role in November 2005 he arranged for $3 million invested in Astarra Strategic Fund (then known as the Alpha Strategic Fund) to be placed in the Exploration Fund, which was one of the offshore funds administered by GCSL and controlled by Flader. The money was then used to "buy" $US1.75 million in shares in Yarraman Winery, a small winery up a windy road in the Hunter Valley. The winery exists to this day, and is not implicated in the activities concerning its shares. However, its shares from its listing on the "over-the-counter" pink sheets market in the US were practically worthless. In what was a leitmotif for the scheme, Australian money invested in a fund controlled by Flader would be used as cash to pay another controlled company by Flader for practically worthless shares. From the considerable profits from this transaction, $US818,000 ended up in a bank account in the tiny Caribbean island of Curacao, to the benefit of Richard. In summary, $3 million in Australian money controlled by Richard was placed in an offshore fund run by Flader, used to buy $US1.75 million in worthless shares from Flader, then Richard was secretly paid $US818,000. As Richard endures a lengthy prison sentence - the two counts carry a maximum sentence of 10 years in total - he may have cause to think about his former mentor. Flader has purportedly sold his GCSL business to a boutique investment bank, Jeeves Group, run by a father and son found guilty in absentia of a major US investment fraud. Not coincidentally, Flader was named as being involved in the same fraud. The GCSL website is no longer operating. Others named in the court documents include Frank Richard Bell, the veteran British broker with a disgraceful track record who ran the Exploration Fund. Then there is Carl Meerveld, named in court documents as a director of the Exploration and Sierra Multi-Strategy Funds, and Roman Lyniuk, named as the key investment professional of the Pacific Capital Multi-Arbitrage Fund. Needless to say, no money has been recovered from these funds. In Australia, there have been more visible repercussions. Earlier this month Rex Phillpott, Trio's chief executive, was banned from financial services for 15 years. Natasha Beck, a Trio director, was banned from financial services for five years. A South Australian financial planner, Seagrims, has been forced to give up its licence and its owners have also been banned from financial services for three years. In the case of Trio's auditors, WHK, there has been no formal action to date. Action is likely to roll on for some time. And as for Richard he, alone, is going to jail. NS RE gdtcsh : Money Laundering | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business - Opinion & Analysis Words will not save Richard from jail time STUART WASHINGTON 870 words 25 July 2011 The Sydney Morning Herald SMHH First 7 English 2011 Copyright John Fairfax Holdings Limited. When Shawn Richard sought character references as he faced a lengthy jail sentence, there were a few people from his past he felt he could ask. Even the mention of Richard's name would be bad news to investors in the Albury-based fund manager Trio Capital.
TD Investors had more than $400 million in funds frozen in December 2009 when Australia's largest superannuation theft was first uncovered. So investors would not be among those likely to give the most glowing assessments of the Canadian-born investment manager. Richard, 36, faced a sentencing hearing on Friday for his part in the disappearance of $180 million from two investment funds managed by Trio Capital: Astarra Strategic and ARP Growth. The court heard how Richard, now remanded in custody, had received $1.3 million in personal payments for his part in the thefts. His company, Astarra Asset Management, had received further millions to keep sucking in investors' dollars. Instead of investors, Richard turned to some old mates, some professional contacts and some financial planners for some kind words. Including his dentist. Among those setting pen to paper were Peter Wood, Richard's old flatmate in Manly and the onetime Trio Capital marketing manager. Wood didn't reminisce about some rather wild-looking parties he and Richard enjoyed, but spoke to the qualities of Richard he had observed. Then there was a financial planner from the Wollongong financial planning business Dominion, Colin Warne, who was prepared to go on the record about Richard's strenuous help since the fraud had been uncovered. "I wish to confirm that Mr Richard has already assisted our clients, providing critical evidence which has assisted the process in recovering some investments," Warne wrote. This is the same Warne who was found by the NSW Supreme Court in 2004 to have breached the Corporations Act by operating an unregistered managed investment scheme. The failed investment scheme involved raising $4.6 million to buy the Queen Victoria Hospital in the Blue Mountains and turn it into a retirement home. The case resulted in Warne receiving a lifetime ban from managing an investment scheme. Sadly for investors in Trio Capital, the ban did not stop Warne from operating as a financial planner. So Warne met Richard through Trio Capital and promptly placed large amounts of investors' money into Astarra Strategic. Page 19 of 159 2011 Factiva, Inc. All rights reserved.
Another who put pen to paper for Richard was a second Wollongong financial planner, Ronald Caines. Caines was eloquent about the help Richard had given him. "He has shown honesty and integrity and his ongoing compassion and financial assistance during an extremely difficult time for our family will forever be appreciated," Caines wrote. Caines said Richard "continued to provide loan funds" and credited Richard with "standing by and helping your mates during difficult times". Stirring stuff. However, it is worth remembering some facts about the Trio Capital "loan funds" - more than $500,000 - that Richard forwarded s o generously to Caines. Back in 2008, the Australian Securities and Investments Commission grilled Richard about the loans to Caines under its section 19 powers to compulsorily interview people. ASIC went on to ban Caines from the financial planning industry for life, after he advised people to invest in Trio Capital without disclosing the loans. In March, the Administrative Appeals Tribunal overturned the life ban, and replaced it with a threeyear ban. Showing that the gods of financial services have a wry sense of humour, Caines can start work as a financial planner again on August 12 - the same day Richard is due to be sentenced to jail. Another referee sought out by Richard was Graham Kinder. Kinder made a brief appearance in the Trio saga last year when he became a director of financial planner Wright Global Investments, alongside Wood. ASIC has told the Supreme Court that Wright Global Investments was one of the vehicles that was owned and controlled by the supposed mastermind of the Trio Capital fraud, the Hong Kong businessman Jack Flader. (There is no evidence Flader controlled the company at the time of Wood's and Kinder's involvement.) Another referee was Ron Phipps-Ellis, an employee with auditing firm BCS whose character reference confirmed that the "company's employees had money invested in Astarra [Trio] and lost 10 per cent". Richard's defence bundle, tendered in court on Friday, showed the sad truths facing a man destined for jail time. It disclosed that Richard had sought a recent diagnosis from a neurologist. In a letter, his defence team articulated his symptoms as: "Double vision, headaches, muscle weakness, neck aches, numbness or tingling, most often on the face, poor co-ordination, sudden unco-ordinated movements and vertigo". The diagnosis was inconclusive. And an assessment by a forensic psychologist, W. John Taylor, spelled out the none-too-happy realities of the prison system that Richard faced. He wrote: "Because of threats that have been made against Mr Richard, it is likely that any custodial sentence given to him by the court will need to be served in protective custody. This is far more difficult and restrictive than serving a custodial sentence." IN NS i831 : Financial Investments | iinv : Investing/Securities gplan : Urban Planning/Development | nedc : Commentary/Opinion | ccat : Corporate/Industrial News | gcat : Political/General News | gpir : Politics/International Relations | gpol : Domestic Politics | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Trio front man 'Shawny Cash' heads to prison Stuart Washington 465 words 23 July 2011 The Sydney Morning Herald SMHH First 3 English 2011 Copyright John Fairfax Holdings Limited. FRAUD THE front man for Australia's largest superannuation heist, Shawn Richard, has spent his first night in prison.
TD The long night with the Department of Corrective Services marks the final fall from grace for the former investment manager and playboy, who dishonestly received $1.3 million in investors' money. The fall of the man known as "Shawny Cash" was witnessed by his one-time business partner, Eugene Liu, and a former Trio director, David Andrews, as they sat in the public gallery in the NSW Supreme Court. Yesterday Richard, 36, was formally convicted of two counts of dishonest conduct for his role in the Trio Capital fraud, in which investors lost $180 million. Justice Peter Garling revoked Richard's bail and confirmed he would impose a prison sentence on the counts, which carry a maximum term of 10 years. Richard is due to be sentenced on August 12. Yesterday the court heard Richard had received $1.3 million in secret payments directed to offshore bank accounts in the exotic tax havens of Liechtenstein, in Europe, and Curacao, an island in the Caribbean Sea. Richard then splurged hundreds of thousands on his personal expenses. In one instance in 2009 Richard received $250,000 in Australian investors' money for his personal expenses, including $67,800 spent on rent. In another example, in 2005 Richard received $US800,000 in a bank account in Curacao. The payments were on top of his annual salary of $113,000. The Crown showed Richard's secret payments were raked off from Australians' investments into complicated offshore funds in a system likened by Justice Garling to a Ponzi scheme. Richard's representative, John Agius, SC, said Richard had been naive, vulnerable and greedy when he had teamed up with a US citizen based in Hong Kong, Jack Flader, who was referred to as a sophisticated fraudster. Mr Agius tendered a psychological report, arguing Richard had acted under the influence of Mr Flader and was not responsible for the scheme itself. But Anthony Payne, SC, acting for the Commonwealth Director of Public Prosecutions, said Richard's behaviour showed criminality of the most serious kind. Justice Garling questioned the absence of investment committees, directors and auditors in the case of Trio Capital. Justice Garling also said he did not understand the principle by which funds regulated by the Australian Prudential Regulation Authority could receive federal government compensation but self-managed superannuation funds could not. In the case of Trio, the former have received $55 million and the latter have received nothing. "So the principle is if you are bigger and regulated you get compensation ... if you are smaller and vulnerable you don't?" Justice Garling said to Mr Payne. Page 21 of 159 2011 Factiva, Inc. All rights reserved.
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Business - Opinion & Analysis A company is made in its owner's image STUART WASHINGTON 907 words 11 July 2011 The Sydney Morning Herald SMHH First 9 English 2011 Copyright John Fairfax Holdings Limited. One of my first jobs in journalism was to go to the art department and have a prominent frown-line spray painted out of the middle of Rupert Murdoch's forehead. As copy kids at News Ltd's Holt Street offices, one of our jobs was to take photographs to the art department for any necessary retouching.
TD At that time in the mid-'80s, photographs were really photographs, not bits and bytes whizzing around. And the art department really was an art department: people with brushes and pens. Well before Photoshop and the like, an important part of the artists' retouching armoury was a series of atomisers filled with various shades of grey paint. Of course, in those prehistoric times, photos for newspapers were only ever in black and white. The sprays were applied with skill and used to retouch photos and hide any imperfections. Beaches would suddenly become less visible behind the Mirror's ever-smiling but already fading page-three girls. Hands resting on shoulders, indeed whole people, would be whisked from the photographic record. In more creative moments, a space helmet would be workshopped on to Joh Bjelke-Petersen's head for a front-page splash on The Daily Mirror. The skills were particularly useful one evening when The Daily Telegraph published photos of two antique snuff bottles in the first edition, held up by an enthusiastic collector. The collector's enthusiasm did not extend to warnings that the fine carving on the snuff bottles featured somewhat out-of-proportion depictions of energetic couplings of a type not often seen in a daily newspaper. Blown up to four times life-size in the first edition, the depictions were rendered even more energetic and - if possible - even more out of proportion. The prospect of Sydney breakfasts widely interrupted by antique throbbing organs was avoided in the second edition through some deft retouching. Which brings me back to Rupert Murdoch's forehead, the art department and spray painting. It was an unwritten rule that photographs of Murdoch be subject to retouching. Specifically, a rather deep vertical crease at the centre of Murdoch's forehead had to be spray painted away. There was never any tangible direction from Murdoch that anyone could ever point to that ordered such artistic reimagings of News Ltd's chief executive. All I knew was that it was known, and known pretty widely, that only photographs sans crease should run. Then and now, I see this extension of an unseen hand through an organisation to its very lowest Page 23 of 159 2011 Factiva, Inc. All rights reserved.
levels - and believe me, I was at the lowest level at News Ltd - as a fascinating phenomenon. It showed me better than any management text I have ever read that the presence of the business's founder or chief executive could be felt to the very furthest reaches of an organisation. Founder-chief executives leave particularly strong impressions. For example, Kerry Packer's presence was extended in similarly surprising ways. In many ways, the reach of the founder or chief executive is perpetuated by choosing like-minded people to carry out their orders. Unsurprisingly, these like-minded people choose other like-minded people. And so on, so that the (retouched and therefore unblemished) image of the leader lives on throughout the organisation. The flip side of this intense personalisation of a business around its founder - with the Sun King continuing to preside over News Corp even as it became a global media giant - is the difficulty created by a scandal. When a scandal breaks, how do you disown the rogue elements when you are so closely associated with the whole structure? Indeed, as witnessed in the News of the World scandal, the rogue elements of the business have flourished under the supervisors Murdoch has chosen and feted - such as the former News of the World editor Rebekah Brooks - or the supervisors chosen by those supervisors. In business terms, the News of the World debacle represents a monumental failure of governance over many years. It also represents a monumental failure of ethics within a major business unit. The difficulty for Murdoch and his closest lieutenants is that for years they have impressed on everyone time and again about how much they are part of the fabric of the organisation as a whole. The fabric of News Corporation was found to have been badly flawed at the News of the World. Murdoch and his top lieutenants have a battle to explain to the market, after years of messaging to the contrary, that they are not part of that fabric and that they should not share in the blame. TRIO TROUBLE It was significant last week that the Australian Prudential Regulation Authority (APRA) outed itself as having crawled over Trio Capital more than a year before it collapsed. The disclosure in an enforceable undertaking stated that, in 2008, APRA raised significant questions about the valuation methodology of two hedge funds run by Trio Capital. Trio Capital collapsed in late 2009, with losses from the two hedge funds of about $185 million. Guess what? There was no valuation methodology, because one fund was a fraud and the other is likely to be proved to be the same. The actions - or lack thereof - by the regulators should be examined when the parliamentary inquir y kicks off its examinations into Trio Capital. CO IN NS RE newsc : News Corporation | newsli : News Limited i475 : Printing/Publishing | i4751 : Newspaper Publishing | imed : Media | ipubl : Publishing nedc : Commentary/Opinion | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Planners banned over Trio fiasco Stuart Washington 282 words 6 July 2011 The Sydney Morning Herald SMHH First 4 English 2011 Copyright John Fairfax Holdings Limited. INVESTMENTS FINANCIAL planners who directed $105 million into the doomed Trio Capital funds management business were banned from providing financial services for three years yesterday after the corporate regulator carpeted their behaviour.
TD The Australian Securities and Investments Commission found Peter and Anne-Marie Seagrim, the owners of the Port Augusta planner Seagrims, had failed to properly disclose to clients they stood to personally gain from directing business Trio's way. It also suspended the licence of the financial planner until November this year. ASIC said that between September 2008 and October 2009, a total of 972 clients with $105 million in investments were directed into Trio Capital funds by Seagrims. Regulators froze $426 million invested in Trio Capital in December 2009. It was later found more than $100 million invested in a Trio Capital fund, Astarra Strategic, had been stolen. The regulator found Seagrims had failed to ensure its advisers met legal requirements to check whether there was a reasonable basis for advising investors to switch into Trio Capital funds. The regulator found statements of advice given to clients by both Mr and Mrs Seagrim failed to disclose an "equity return agreement" between Seagrims and the Trio Capital funds management business. It also found both Mr and Mrs Seagrim failed to disclose advertising paid for by Trio Capital. Yesterday's bans followed enforceable undertakings for two Trio Capital directors announced on Monday and the guilty plea of Trio Capital's investment manager, Shawn Richard. Seagrims is a member of the Association of Independently Owned Financial Planners, a fierce critic of aspects of the federal government's reforms to financial planning. RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business How regulator missed chance in Trio debacle Stuart Washington 655 words 5 July 2011 The Sydney Morning Herald SMHH First 1 English 2011 Copyright John Fairfax Holdings Limited. INVESTMENT A TEAM of regulators raised concerns about fraudulent hedge funds more than a year before the whistle was blown on the biggest superannuation theft in Australia's history.
TD Yesterday it was revealed the Australian Prudential Regulation Authority raised concerns about the fund manager Trio Capital's valuation of its two hedge funds in August 2008. As a result of its "prudential review" of the Albury-based fund manager, the superannuation regulator even unsuccessfully sought further information about the valuation of the funds. In October 2008 APRA was told there was no "available valuations" of two offshore hedge funds registered in the Caribbean tax havens, St Lucia and the British Virgin Islands. APRA took no action against Trio Capital until after the scam was exposed in a letter by Bronte Capital blogger John Hempton in September 2009. In April this year the federal government awarded superannuation investors $55 million in compensation for their part in a theft totalling $125 million. A further $60 million in investors' money is missing, presumed stolen. The revelation of APRA's 2008 review of Trio Capital was contained in enforceable undertakings made by former directors of Trio with both APRA and the Australian Securities and Investments Commission. The former chief executive of Trio Capital, Rex Phillpott, has been barred from a role in financial services for 15 years. A former non-executive director of Trio, Natasha Beck, has been barred from a role in superannuation for four years and financial services for two years. The actions against the directors of Trio Capital follow the charging of Trio's former investment manager, Shawn Richard, on two counts of dishonest conduct in relation to misappropriating $6.4 million. The undertakings signed by the directors reveal ASIC's concerns that each director breached several sections of the Corporations Act. The documents show Trio's board held concerns about its hedge fund investments as early as 2006, including failures to honour requests for the return of investors' money and difficulties in obtaining accurate valuations. Mr Phillpott was revealed as being intimately involved in the investments into offshore hedge funds, without being aware of the valuation methods used to value the funds. Mr Phillpott was also instrumental in the 2009 transfer of $50 million in one of Trio's hedge funds, the Exploration Fund, into its successor hedge fund, Astarra Strategic. He did this "notwithstanding that he was aware of liquidity problems with the Exploration Fund and concerns about the lack of information being provided by the Exploration Fund". BusinessDay has previously revealed that the fund was run by a Philippines stockbroker with a long history of stock fraud, Frank Richard Bell. Page 26 of 159 2011 Factiva, Inc. All rights reserved.
As the Trio saga unfolded, it became clear regulators had regular brushes with the fund. For example, in 2005 APRA forced Shawn Richard off the board of Trio Capital in 2005 because of conflict-of-interest concerns arising from his roles as both owner and investment manager for the fund. In 2006 APRA had direct involvement with another Trio fund, ARP Growth, forcing it outside the superannuation entities it regulates. In 2008 ASIC interviewed Richard under its compulsory examination powers about a $500,000 secret payment from Trio and Trio-related companies to a financial planner. APRA would make no comment on its investigations yesterday. ROAD TO COLLAPSE 2003 Trio Capital set up by Shawn Richard, pictured. 2006 Trio board documents concerns about valuations inside hedge fund. August 2008 APRA raises concerns about valuations of two hedge funds. October 2008 APRA told by Trio there were no "available valuations". September 2009 Bronte Capital blogger John Hempton writes to ASIC. October 2009 APRA and ASIC launch investigations into Trio. December 2009 All Trio funds frozen by the regulators. December 2010 Shawn Richard pleads guilty to dishonest conduct. July 2011 Directors Rex Phillpott and Natasha Beck receive bans from financial services. IN NS ihedge : Hedge Funds | i831 : Financial Investments | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments | iinv : Investing/Securities c131 : Regulatory Bodies | npag : Page-One Story | c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter | reqris : Editor's Choice - Investing/Securities | redit : Selection of Top Stories/Trends/Analysis | reqr : Editor's Choice - Industry Trends/Analysis austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Parliament to probe Trio Capital fraud claims Stuart Washington 314 words 2 July 2011 The Sydney Morning Herald SMHH First 4 English 2011 Copyright John Fairfax Holdings Limited. FUNDS THE loss of about $180 million invested in Trio Capital and the lack of compensation for selfmanaged superannuation investors will be investigated by a federal parliamentary inquiry.
TD The inquiry into the Albury fund manager will examine losses from two Trio funds, Astarra Strategic and ARP Growth, with terms of reference that include inquiring into the implications of international fraud. The chairman of the federal parliament's joint committee on corporations and financial services, Bernie Ripoll, said the inquiry would examine systemic issues arising from the collapse. "The collapse of Trio is quite significant and it's got some unique parts to it which I think need a separate inquiry; particularly, we mention the self-managed super funds and international fraud," Mr Ripoll said. More than 10,000 investors had $426 million in funds frozen after the Australian Securities and Investments Commission was first alerted to a fraud affecting Astarra Strategic in 2009. It later emerged that $125 million invested in Astarra Strategic had disappeared through a British Virgin Islands company into a network of offshore funds controlled by a Hong Kong businessman, Jack Flader. A further $60 million was invested through ARP Growth, with no money yet recovered. Earlier this year, investors in Astarra Strategic through superannuation funds regulated by the Australian Prudential Regulation Authority received $55 million in compensation for fraud under part 23 of the Superannuation Industry (Supervision) Act. However, self-managed superannuation investors in Astarra Strategic were not eligible for any compensation. The inquiry will examine issues related to the collapse, including the lack of any compensation for investors in self-managed superannuation, where the investment products or advice had failed and the role of research houses who examined the products. Submissions are due by August 19 and the committee will report by November 24. NS RE gfraud : Fraud | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business DIY funds need compensation too STUART WASHINGTON 895 words 6 June 2011 The Sydney Morning Herald SMHH First 9 English 2011 Copyright John Fairfax Holdings Limited. Australia has a compensation system for investors that leaves many of them out in the cold when the worst happens. The situation may be about to change, which should be welcome news for self-managed super fund investors. Do-it-yourself super investors now account for about a third of Australia's superannuation investments, with more than $400 billion invested. Those DIY super investors should be well aware of the worst case they face after the federal government's compensation for fraud within Tri o Capital.
TD Investors in Trio Capital through super funds regulated by the Australian Prudential Regulation Authority received $55 million in compensation - or 100 in the dollar. Investors through DIY super funds received nothing. The federal government will shortly receive a final report from Richard St John, who has been asked to consider the need for a broader compensation scheme, and examine the costs and benefits. In all likelihood, St John's report will recommend a broadly-based compensation fund for all retail investors. Such a recommendation will mark an historic step from an investor compensation regime largely reliant on professional indemnity insurance to one of a fund supported by industry contributions. There will be a certain level of harrumphing about the moral hazard such a fund would create. The term "moral hazard" is used to describe a situation in which the introduction of a catch-all safety net becomes an excuse for lax behaviour by either investors or financial services providers. Such arguments have merit. No one (except the recipient) wants a compensation fund that rewards investors for stupidity and greed. However, as is the way of things, "moral hazard" arguments are likely to be advanced most loudly by those who face the highest bill from introducing such a compensation fund. And with the Financial Ombudsman Service putting before St John a proposal for a broadly-based compensation fund, the costs are not small. The FOS estimates costs would be capped at 1 per cent of revenues for participants across the financial services industry. Indeed, the harrumphing has started already. In the Stockbrokers Association's submission to St John, it recommends he take into account the broking industry's "excellent record in relation to client complaints and award recovery". "To do otherwise would be to introduce the risk of moral hazard, and will encourage less ethical operators, putting consumers at risk," it says. Leaving aside the intricacies of introducing such a compensation fund - and there are many - it i s worth emphasising the real need for change spelt out in the submissions. The FOS puts it in simple terms: there are many occasions when investors are left without anywhere to turn to, despite considerable wrongdoing. The FOS and the Australian Securities and Investments Commission say professional indemnity insurance, taken out by financial services providers to ensure they can meet compensation claims, does not serve its purpose. "Over an extended period, [the] FOS has witnessed examples of retail consumers who receive Page 29 of 159 2011 Factiva, Inc. All rights reserved.
[compensation] awards in their favour which have subsequently not been paid because of the disappearance or insolvency of a licensee [and] fraud," the FOS says. "Losses have occurred when consumers have been induced to invest in financial instruments which they don't understand and where the advice has been inappropriate for their needs." The consequences of the present situation are spelt out by the Association of ARP Unit Holders, a sub-set of Trio Capital investors, in a submission to St John. These investors have found themselves outside any meaningful compensation mechanism from either their authorised representative (PST Management) or the financial services licensee (Wright Global Investments). "Professional indemnity insurance as a means to compensate complainants has failed the case of ARP Growth Fund members," the submission states. "For example, PST Management Pty Ltd [holds] professional indemnity cover of $5 million, which is less than 10 per cent of the assets 'lost'. Wright Global Investments Pty Ltd holds a similar amount of professional indemnity cover. "Putting aside the difficulty and legal expense of recovering under such a policy, the quantum available means that no substantive level of compensation for loss is possible, even if a legal action is successful. "This situation is made more difficult by the tendency of groups caught up in these situations to go into liquidation, as has now happened not only with Trio Capital but also PST Management and Wright Global." The submission further spells out the ridiculousness of relying on professional indemnity insurance when all the main players fall over and the insurance contracts are cancelled. "In the case of ARP Growth Fund unit holders, great uncertainty as to what exactly was happening with unit holder funds existed for many months and was not clarified until well after the professional indemnity cover was no longer in place," the submission says. "There was no opportunity to even lodge claims at this point, should a unit holder have wished to do so." The predominantly elderly investors in ARP Growth have lost their superannuation savings and have no recourse to any meaningful compensation. The existing system has comprehensively failed them. Such a situation should not be allowed to happen again. Historic steps likely to be contained in St John's report should be embraced by the federal government, no matter how much harrumphing comes from the financial services industry. RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business Cold comfort for forgotten victims of Trio Capital fiasco Stuart Washington 318 words 1 June 2011 The Sydney Morning Herald SMHH First 8 English 2011 Copyright John Fairfax Holdings Limited. SUPERANNUATION THEY are generally broke, one in five have had to sell their homes as a result of their losses, and almost two-thirds are older than 65. And yet they fight on.
TD Yesterday more than 40 unitholders of ARP Growth, a practically forgotten fund in the Trio Capital collapse, met at the Norths Leagues Club. They have weathered many knocks since early last year, when it became clear their $54 million in investments may have vanished into a complicated overseas structure. The investors were still coming to grips with the cruellest cut: their self-managed super fund investments are not eligible for any compensation, even if fraud is proven. Some Trio Capital superannuation investors are eligible for a shareof $55 million in compensation announced last month, because they were regulated by the Australian Prudential Regulation Authority. The meeting heard it was no good taking action against Paul Gresham, the man who put investors into the fund in the first place. Mr Gresham's business, PST Management, is bust. There are still no clear answers about what happened to their money. Ron Thornton, president of the association formed by embattled investors, told of how the Australian Securities and Investments Commission was not even investigating the matter until it was prodded late last year. Nor was the liquidator, PPB, of a mind to take action because there were no assets to liquidate to pay for an investigation. "The thing was going to die on the vine," he said. "Nothing was going to happen." The association hopes it will find out the truth about a JPMorgan swap, at present being liquidated in the British Virgin Islands. The complicated financial product, initially signed with Bear Stearns, was the chief asset of sub funds dubbed Pythagoras and Archimedes. What lies behind these funds is a mystery. PUB Fairfax Media Management Pty Limited AN Document SMHH000020110531e7610003z
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Business Super industry shouldn't fool itself: Trio Capital could happen again STUART WASHINGTON 486 words 27 May 2011 The Sydney Morning Herald SMHH First 4 English 2011 Copyright John Fairfax Holdings Limited. COMMENT In Michael Lewis's excellent book The Big Short, there is a Brooklyn-born fund manager with a colourful turn of phrase called Vinny. In the book Vinny is quoted as saying words to the effect: "every time I hear people talking about Chinese walls, I think to myself: you're a f---ing liar."
TD I use this example to represent the breach of trust that occurred between fund managers and investment banks in the global financial crisis. What I fear for the broader superannuation industry is if there were ever to be a similar broadbased breach of trust between superannuation investors and the super system we place so much faith in. The stories that I wrote about Trio Capital were an example of how such a breach of trust occurs. With all the present protections in place - administrators, custodians, trustees, responsible entities, investment managers and auditors - people with criminal intent were able to steal $125 million, about half of it superannuation money. Through dogged investigation, the Herald revealed the full extent of a criminal fraud that stretched around the globe, from the British Virgin Islands to Hong Kong and back to Albury. I also became unwittingly familiar with a lawyer based in Hong Kong, Jack W. Flader, who distinguishes himself with the fact Trio Capital is now the third major international scam he has been involved in. With his taste for $200 bottles of wine and an international jet-setting lifestyle, he, at least, appeared to enjoy his experience with Trio Capital. The Herald also fought in the courts - at a cost of tens of thousands of dollars - to make sur e liquidators' hearings were kept public, so people could understand the extent of the issue. Returning to the supposed gatekeepers of Trio Capital, they were exposed as being, to use Vinny's turn of phrase, f---ing liars. The breach of trust for those investors was profound. The challenge as I see it for the broader superannuation industry is to keep situations like Trio Capital at the fringe. The problem as I see it is that the financial services industry seems almost constitutionally incapable of weaning itself off the kinds of commissions and secret payments that were an integral part of the Trio Capital story. Government reforms notwithstanding, there seems to be some among the industry who appear hellbent on creating and fostering the situations in which Trio Capital flourished. The superannuation system is a great, shining victory for Australia. People in this room have to fight to keep it that way. BusinessDay's Stuart Washington yesterday won the $5000 Australian Council of Superannuation Investors media award for his coverage of the collapse of the Albury fund manager Trio Capital, in which investors lost $125 million. He gave this acceptance speech at the award ceremony. Page 32 of 159 2011 Factiva, Inc. All rights reserved.
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Business - Opinion & Analysis Opportunity still knocks - be sure to read the fine print STUART WASHINGTON 920 words 23 May 2011 The Sydney Morning Herald SMHH First 9 English 2011 Copyright John Fairfax Holdings Limited. When you have made a superannuation investment, I bet you haven't paid too much attention to the word "trustee" in the marketing material. Don't worry. You're hardly alone. But, rather belatedly, it now stands clear that the owner of the word "trustee" can be the difference between your investment being a success and a horrible failure.
TD It's with some force the broader superannuation and investment industry is digesting the fact that trustees are gatekeepers, with real responsibilities and real duties. The word "real" here should be interpreted as meaning cold, hard cash payable to investors. Sure, there has been a lot of lip service about the importance of trustees and governance and blah, blah, blah. But a trustee being brought to book for the dud investment it happily sat by and watched investors flock into? Such an event has been practically unheard of - until now. The fact of trustees' liability has been brought to the fore with the $29 million settlement achieved on Friday by the law firm Slater & Gordon for investors in Fincorp, which collapsed in March 2007. Slater & Gordon argued that Fincorp's trustee, Sandhurst, had stuffed up. Or, to put it more elegantly, the class action lawyers argued Sandhurst needed to "exercise reasonable diligence" to make sure investments of Fincorp would be sufficient to repay Fincorp note holders. Sandhurst doesn't agree, but it's still coughing up the cash. The unusual nature of the gatekeeper argument is highlighted by the Sandhurst case being one of the few times trustees have been held to account for the failure of the underlying fund. The role of trustee has long been one of those mysterious functions that are paid for by "crumbs" from your investment. The trustee doesn't manage the money. That's done by fund managers. Nor does the trustee swear to the money being put where it is supposed to be put. That's done by the custodian. Nor does the trustee run the investment on a day-to-day basis. That's done by the administrator. (I know what you're thinking, and you are right: that's a lot of "crumbs" falling off your investment.) So what does the trustee do? Well, the trustee is responsible for the governance of the superannuation fund. The trustee's close relative, the responsible entity, has the same role over in managed funds. But what is a trustee's main skill? As Fincorp's investors have found, the main skill is to be big enough to stick around and cop a $29 million bill - then pay it. Fortunately for the Fincorp investors, who stand to receive between 6 and 75, Sandhurst is owned by Bendigo Bank. And while Bendigo Bank won't be pleased, it's big enough to cop the bill. But what of our other trustees and responsible entities? Under current settings, there is only need for $5 million in capital, an insurance policy, and away you go. Of course, this was found to be nowhere near enough when Trio Capital - acting as a trustee and responsible entity - managed to ship $125 million offshore without blinking. All that money was lost, and as soon as the going got rough, the responsible entities went into liquidation and the trustees had to be taken over. Page 34 of 159 2011 Factiva, Inc. All rights reserved.
Therefore Trio's inability to stick around has cost the industry more generally. The $55 million in government compensation will be coming to bite the superannuation industry in the form of an industry levy. Now excuse me while I express some surprise that Trio's doomed business model, advanced by the Association of Independently Owned Financial Planners, is being rolled out again by exactly the same industry organisation. The association's members were over-represented in the Trio Capital collapse, helped along in the case of Tarrants in Wollongong by a $840,000 marketing payment. But those minor irritations are not about to stop the indefatigable head of the association, Peter JohnstonIn a recent letter to his members Johnston ranges widely. First, he offers some free advice about how to avoid some of the effects of the federal government's move to strip financial planners of commissions. Johnston helpfully highlights the July 1, 2012, start date for the reforms, noting "a 14-month window of opportunity". He says financial planning businesses will be divided into clients who sign up "pre" and "post" the start date of the reforms, "with the pre clients representing the most valuable asset to sell and/or manage". Now, skipping over the association's blatant attempt to game the federal government's move to ban commissions, Johnston's message becomes even more chilling. He has a new investment platform offered through Asgard, and no problems there. It's owned by St George. However, the Asgard model gives association members the opportunity "where the custodial, administration and trustee/RE role is either outsourced or performed in-house". Wow. Good work, Peter. Your guys did such a good job in finding a trustee with Trio Capital. I can't wait to see who you come up with this time. For the investor who is actually hoping to see their money at some stage in the future, however, it is worth remembering the following: read the fine print to find out whether the trustee has deep pockets. It could cost you dearly if it doesn't. IN NS RE i835 : Legal Services | ibnk : Banking/Credit | ibcs : Business/Consumer Services nedc : Commentary/Opinion | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business - Opinion & Analysis Investors deserve a softer landing than concrete STUART WASHINGTON 608 words 25 April 2011 The Sydney Morning Herald SMHH First 5 English 2011 Copyright John Fairfax Holdings Limited. Investors who use misbehaving financial planners have a compensation safety net that is more like landing on concrete. As a case in point, some investors have put their case to the Financial Ombudsman Service and been found to have been wronged. But then nothing. No compensation because their financial planners have become insolvent.
TD If you think of a safety net, these people have bounced right off and landed on the concrete. The situation arises because the present system relies on financial planners taking out insurance to cover them if they are subject to compensation claims. But at its worst the system leaves investors fighting an insurance company as they seek compensation for wrongdoing by their financial planner. Sometimes a planner simply does not have the financial capacity to meet the claims that are being made, and the insurance does not provide a backup. For example, a planner's insurance generally does not cover fraud. Also, a planner's insurance scheme does not cover amounts above $20 million. Nor does it offer very effective cover when a financial planner becomes insolvent. If a financial planner goes bust, they generally have to notify their insurers. Often an insurer, on hearing this news, will cancel the planner's policy within 30 days. Of course, if there is no insurance policy it is pretty hard for the liquidator to lodge a claim against that insurance. And an insolvent financial planner, by definition, does not have much money to throw around. About 70 investors with about $50 million invested in a fund called ARP Growth know these facts only too well. These investors have no realistic recourse to compensation because the fund is insolvent, as are the advisers. The problem is broader. Among 78 ombudsman claims where planners were insolvent, a total of $4.6 million in compensation was awarded but only $2.7 million was paid. These failings have been aired in a consultation paper on the issue of whether there should be a formal statutory compensation fund for retail investors by Richard St John. As St John notes in his paper, handed to the Assistant Treasurer, Bill Shorten, last week: "ASIC is also of the view that there are inherent limitations on the effectiveness of professional indemnity insurance as a compensation mechanism for retail investors who suffer loss." With St John's report, investors stand at a crossroads for this manifestly malfunctioning compensation system. There is a real opportunity for the federal government to put in place a system that avoids investors running the gamut of taking on an insurance company. It would also offer a neat patch for the problems facing self-managed super fund investors, who have $400 billion of investments at stake but no workable compensation system. This problem Page 36 of 159 2011 Factiva, Inc. All rights reserved.
was exposed when mainstream fund investors received government compensation of $55 million for the fraud in Trio Capital, but self-managed super fund investors, including the ARP Growth investors, received nothing. The seeds of an effective system are contained in St John's paper, detailing a report made by the forerunner to the Companies and Markets Advisory Committee 10 years ago. It recommended a statutory compensation fund that was operated by an independent organisation, covered mum-and-dad clients, and was funded by an industry levy. The alternative, adopted by the Coalition government in December 2003 and finally put in place in 2008, was to rely on planners taking out insurance. It hasn't worked. Now there is a fresh opportunity for a safety net that performs better than landing on concrete. CO NS ombud : Financial Ombudsman Service gplan : Urban Planning/Development | nedc : Commentary/Opinion | gcat : Political/General News | gpir : Politics/International Relations | gpol : Domestic Politics | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
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Business - Opinion & Analysis Couple of clowns duped in super scam muddy waters for true victims STUART WASHINGTON 759 words 16 April 2011 The Sydney Morning Herald SMHH First 6 English 2011 Copyright John Fairfax Holdings Limited. The clowns came out to play when the federal government shelled out $55 million in compensation for certain investors in Trio Capital. The clowns include the former Wollongong financial planner Ross Tarrant, on the front page of a rival newspaper this week moaning about how DIY super investors should be paid compensation.
TD And that bloke Peter Johnston, the head of the Association of Independently Owned Financial Planners, was out there whingeing about the same thing. Really, who are these jokers? How anyone could quote them with a straight face is beyond me. They have zero credibility on the issue of Trio Capital. The fact they are presenting themselves as part of the solution is staggering; they were part of the problem. Worse, they are muddying the waters for DIY super investors who have what appear to be genuine claims for compensation. A quick recap: Trio Capital, a fund manager in Albury, was seized by regulators in December 2009. It has now been revealed to have been operating a big fraud in two particular hedge funds it managed: Astarra Strategic and ARP Growth. On Wednesday the Assistant Treasurer, Bill Shorten, said government compensation would cover 5000 members of super funds overseen by the Australian Prudential Regulation Authority with money in Astarra Strategic. All up, they will be paid $55 million. But 295 self-managed super fund investors in Astarra Strategic and 70 investors in ARP Growth were essentially told to nick off. Collectively, along with some direct investors who are not being compensated, these investors lost up to $120 million. Now, this should be a big warning bell for the self-managed super investors that account for $420 billion in Australia's booming $1.3 trillion superannuation industry. It's a bell these pages have been ringing for a while. As we wrote here last April, people being ushered into DIY super should receive documents with large red letters on the front reading: "You could lose the lot." My position is not a Ross Tarrant-style pitch for broad-based compensation for DIY super fund investors. For example, I wouldn't include him in any compensation scheme. Additionally, there are good reasons for the government's current position to let people in DIY super look after themselves. The current setting, as played out in Trio Capital, is that government compensation looks after mainstream investors in funds regulated by the Australian Prudential Regulation Authority. I am alive to arguments of moral hazard that a broad-based compensation scheme for DIY super could create. I am also alive to the ridiculous situation of bailing out a DIY super husband in a case against a DIY super wife. The reason I am sympathetic to the Astarra Strategic and ARP Growth DIY super investors is they found themselves in a managed investment scheme where a fraud was perpetrated. They entered those schemes on the advice of a trusted adviser. That trusted adviser failed them, often with a flurry of associated fees. So, when Shorten considers the merits of broadly based compensation for investors, I believe there are grounds for a limited compensation scheme for DIY super investors. Page 38 of 159 2011 Factiva, Inc. All rights reserved.
At the same time, many problems will be addressed by forthcoming financial advice reforms that remove conflicted remuneration received by planners. That brings me neatly back to Ross Tarrant. His business, Tarrants, received $840,000 from Trio Capital in commissions termed a "marketing allowance". That same "marketing allowance" was paid as about 200 Tarrants clients set up DIY super funds that invested $20 million in Astarra Strategic. And Tarrant reckons he deserves compensation? It is beyond audacious. Then there's Peter Johnston. Johnston's members in the association, including Tarrants, Dominion and Seagrims, were wildly overrepresented in the fallout of Trio Capital. Johnston is the clown who squired around Shawn Richard - also known as Shawny Cash - proclaiming his innocence early last year. Shawny ended up being the front man for the Hong Kong mastermind of the scam, and now faces a lengthy jail term. I am uncomfortable about the large number of association members who found themselves investing money in the Trio Capital scam. I am uncomfortable about the credulousness of the association's leader. Shorten's reforms promise to make it more difficult for Trio Capital to happen again, and keep some of the clowns at bay. But there should also be consideration of compensation for DIY super investors sucked in by the clowns. CO IN NS aupra : Australian Prudential Regulation Authority i831 : Financial Investments | iinv : Investing/Securities gdiy : DIY | nedc : Commentary/Opinion | ccat : Corporate/Industrial News | gcat : Political/General News | ghimp : Home Improvements | glife : Living/Lifestyle | greest : Real Estate/Property | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
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Business DIY super funds given cold shoulder in Trio payout Stuart Washington 537 words 13 April 2011 The Sydney Morning Herald SMHH First 8 English 2011 Copyright John Fairfax Holdings Limited. SUPERANNUATION THE stark difference between regulated super funds and self-managed super funds in the case of fraud was made clear yesterday when the first set received $55 million in government compensation.
TD The second set, suffering losses of about $120 million, will receive nothing. The Assistant Treasurer, Bill Shorten, signalled a forthcoming review of a compensation scheme for all investors yesterday, which is due by June 30. Yesterday's outcome highlights wildly different compensation regimes for people caught up in the imbroglio of Trio Capital, an out-of-control Albury fund manager that allowed two hedge funds to rip off investors. In September 2009 the whistle was first blown on Trio Capital when the Bronte Capital blogger John Hempton contacted authorities with suspicions prompted by magically even returns in a Trio hedge fund called Astarra Strategic. By December both the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority had stepped in and the massive untangling job began. What eventually emerged was a tale of global fraud involving a bunch of international penny stock scammers. Using elaborate corporate structures in exotic Caribbean tax havens, Astarra Strategic spirited away about $125 million, with ASIC eventually finding a lawyer based in Hong Kong, Jack Flader, playing an instrumental role. As the digging continued, 70 investors in a second Trio hedge fund, ARP Growth, were found to have suffered losses of more than $50 million. Mr Flader's local henchman, Shawn Richard, faces sentencing on May 13 after pleading to two counts of dishonest conduct. The effect on investors has been devastating. First, whether it was good money or bad, regulators locked up all money - more than $400 million - that was locked inside Trio Capital. It was only gradually that funds were awarded to new managers and investors could start retrieving some money as ACT Super, for super fund investors, and the liquidator PPB, for regular investors, unpicked the mess. ACT Super made the application for compensation for super fund investors to Mr Shorten last October. The compensation is available under part 23 of the Superannuation Industry (Supervision) Act, but only to those who invested in Trio through APRA-regulated funds. It leaves superannuation investors who had been tipped into Trio through DIY funds, including all the investors in ARP Growth, without a cent. The theory is that trustees of DIY super funds should be skilled enough to look after themselves. Mark McDonald of the lawyers Maguire & McInerney said 100 clients who went through the financial planning firm Tarrants were all in DIY funds that then invested in Astarra Strategic. Page 40 of 159 2011 Factiva, Inc. All rights reserved.
"I think it's incredibly exciting for the poor people who have suffered such a huge amount of loss through no fault of their own," he said. "The problem is, only some of them are getting sorted out." It is a view that resonates with John Telford, 62, a Wollongong pensioner who was a client of Tarrants and lost a $600,000 disability payout. "I'm one of those out in the cold because of the way the financial planner invested my money, that I wasn't savvy to," he said. IN NS RE i835 : Legal Services | ibcs : Business/Consumer Services gdiy : DIY | gcat : Political/General News | ghimp : Home Improvements | glife : Living/Lifestyle | greest : Real Estate/Property austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
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News and Features Fraud victims get $55m back, but some left empty-handed Stuart Washington 543 words 13 April 2011 The Sydney Morning Herald SMHH First 1 English 2011 Copyright John Fairfax Holdings Limited. AUSTRALIA'S largest payout for superannuation fraud was announced by the federal government yesterday, with $55 million set aside for investors who lost money in the Albury fund manager Trio Capital. The compensation will return 100 cents in the dollar to more than 5000 investors, many of them retirees who lost life savings.
TD The move was portrayed by the assistant treasurer, Bill Shorten, as vital to bolster confidence in the superannuation system. There would always be "crooks and thieves and charlatans", he said. "What we do know is the regulators seem to be catching some of the people who have done it; and we will compensate victims who are victims through no fault of their own." The compensation marks the end of a tortuous path for some Trio investors after regulators took over Trio Capital in December 2009 and froze more than $400 million in investments. It lifts the payout from 90 per cent when superannuation investors in Commercial Nominees were compensated for losses of $30 million in 2002. But yesterday's measure is limited to 5385 investors in government-regulated superannuation funds, including more than 2500 in NSW. The distinction means that do-it-yourself superannuation investors, among those who lost another $120 million in two Trio hedge funds, will not be paid. These investors include John Telford, 62, a Wollongong man diagnosed as an incomplete quadriplegic who lost his disability payout of $600,000. Mr Telford is among more than 100 clients of a collapsed Wollongong financial planner, Tarrants, who will not receive a cent because they invested in DIY super funds. "It's a hit below the belt considering that nobody pointed out that there was such a thing as two super funds: one with a guarantee and one with nothing," Mr Telford said yesterday. Rosemary Walker, 73, and 250 other low-paid Tabcorp workers who had savings tiedup in the Astarra Superannuation Plan will now get their money back. Ms Walker said the uncertainty had taken its toll on her colleagues' health. "It's been a very arduous, traumatic and highly stressful time." About $170 million in Trio's losses were in two hedge funds, Astarra Strategic and ARP Growth. Mr Shorten said: "Money was directed into hedge funds in the Caribbean; there is little evidence investments were made or, if they were, if they have any value." The former investment manager for Trio Capital, Shawn Richard, has pleaded guilty to two counts of dishonest conduct in relation to Astarra Strategic and faces sentencing on May 13. Mr Shorten said no compensation was available for non-superannuation investors who placed their money directly into troubled funds. He also said investors in DIY super fundswere ineligible for compensation because they were taking responsibility for their own investments. Page 42 of 159 2011 Factiva, Inc. All rights reserved.
Asked whether DIY super investors, who account for a third of the $1.3 trillion in Australian superannuation savings, were aware of their lack of a safety net, Mr Shorten said: "I would say they are going to become a lot more aware." He said a report on extending a fraud compensation scheme to all investors was due by June 30. BusinessDay Page 8 IN NS i831 : Financial Investments | iinv : Investing/Securities gfraud : Fraud | npag : Page-One Story | ccat : Corporate/Industrial News | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
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Business - Opinion & Analysis Ombudsman's name and shame list a bold step forward STUART WASHINGTON 905 words 7 March 2011 The Sydney Morning Herald SMHH First 9 English 2011 Copyright John Fairfax Holdings Limited. Hooray for the name-and-shame list released by the Financial Ombudsman Service! Please forgive the exclamation mark; I don't get to be jubilant very often in this column. It's usually written with a harried frown as I spell out some abuse visited upon investors.
TD Like those poor investors now waiting for an outcome from the mega-litigation surrounding the $3 billion collapse of Storm Financial. Or those other poor people who had the misfortune to have the Albury-based fund manager Trio Capital visited on them. Now where was I? That's right, I was jubilant. Easy to get sidetracked sometimes. My reason for jubilation (as I have said, an uncommon term for this column; I am using it in the dictionary sense of "a feeling of great happiness") is the FOS's first attempt at a name-and-shame list ranking complaints made against financial services companies. I would argue this is good for the industry, good for consumers and even good for companies who are unwittingly caught out in the glare of the new level of disclosure. For the first time, FOS has attempted to publicly rank the complaints it has received about individual institutions over the six months to June 30 last year. Following the dictum of sunshine being the best disinfectant, the lists give the industry and the hardy consumer a snapshot of who is being most complained about. I say hardy consumer because the FOS lists are definitely a work in progress. First, you are drowning in data. There are 20 different industry categories and within each category companies are ranked on up to nine criteria. Also, on an initial scan some aspects are downright confusing. For example, there is a valiant attempt made to rank each company on a complaints-for-every-100,000-customers basis. Big banks like this approach because it puts into perspective large numbers of complaints that large shops receive and ranks them on a like-for-like basis with smaller numbers of complaints that small shops receive. The system unfortunately breaks down when some of the companies that are the subject of complaints do not disclose their market size to FOS, rendering like-for-like comparisons impossible. The lists then resort to disclosing the actual number of complaints these recalcitrant companies receive, while ranking the other companies on a complaints for every 100,000 customers basis. Apples and oranges, anyone? The lists also have the potential to raise more questions than answers. For example, I have no great insight into why the small Adelaide firm Mark Power Financial scores the highest complaints ranking in the derivatives and broking category on a complaints for every 100,000 customers basis, at almost 10 times the median ranking. Nor do I know the reasons why QBE ranks second highest for complaints in sickness and accident insurance when it is near or under the median ranking in most other categories. Then I see that Hollard Insurance Company is first in the rankings of complaints for home Page 44 of 159 2011 Factiva, Inc. All rights reserved.
contents insurance and second in home building insurance and I start to wonder why. It is the question of "why?" provoked by these rankings that is good for everyone with an interest in financial services. After all, the aim of an external disputes resolution provider like FOS is to have no work: it wants disputes with customers to be solved internally. If firms ask themselves why they are appearing on this list, or they are regularly asked the same question by consumers, media and regulators, there is a strong impetus for better systems to address customer complaints. That is good for the industry, good for consumers and even good for the outed companies. So bravo again to FOS for a bold step in the right direction. Footnote one: The one result in the FOS rankings I don't ask myself "why" about is RHG, the successor to RAMS Home Loans, being the highest ranked for complaints in housing finance. As this paper has reported previously, ever since borrowers got stuck with RHG after RAMS collapsed they have been charged one of the highest variable rates in the market. Then RHG charges large fees to leave its embrace. Failures in dispute resolution are just another black mark. I would complain too. Footnote two: On the subject of Trio Capital, the Assistant Treasurer, Bill Shorten, is still considering the Trio trustee's application for compensation for super investors dudded in Trio. The compensation is available, at Shorten's discretion, under fraud provisions of the Superannuation Industry (Supervision) Act, with a potential payout of 90 in the dollar. Of course, Trio has turned out to be an impressively large fraud, with $120 million missing from a fund called Astarra Strategic and another $59 million or so missing from a fund called ARP Growth. The application for super investors in Astarra Strategic was made to Shorten months ago. When I inquired of his office in October an answer was expected in the delightfully imprecise "coming weeks". On Friday the expectation of an answer, after Shorten's office had flicked it to the Australian Prudential Regulation Authority, was within four to six weeks. How long does it take the government to call a spade a spade? Or, in this case, a fraud a fraud? CO NS RE ombud : Financial Ombudsman Service nedc : Commentary/Opinion | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand
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Business DIY super fund investors warned of no compensation from fraud Stuart Washington 429 words 14 February 2011 The Sydney Morning Herald SMHH First 5 English 2011 Copyright John Fairfax Holdings Limited. PROPERTY- SUPERANNUATION MORE than $400 billion invested in "do-it-yourself" superannuation funds, representing a third of Australian super, has no compensation safety net in case of fraud, industry experts have warned.
TD The chief executive of the Association of Super Funds of Australia, Pauline Vamos, said many investors put money into self-managed super funds without fully appreciatingthe risks. Investors in work-based super schemes covering most Australians are eligible for compensation inthe case of fraud, at the discretion of the Assistant Treasurer, BillShorten. But there is no such compensation safety net for investors in the rapidly-growing DIY super sector. "The risks are you don't have a lot of those safety nets, and you have to understand that," Ms Vamos said. Jeff Bresnahan, the managing director of the super fund ratings firm SuperRatings, said DIY super had been sold by financial advisers and accountants, leading to its rapid growth, but many investors would not have been told of the lack of compensation when it comes to fraud. He said the size of the DIY super pool would lead to more problems, including questionable investments and catastrophic losses. "It's just going to attract more and more fraudulent activity," he said. Yet there are no plans by the federal government to extend the safety net available to mainstream super funds to include DIY funds. Under the Superannuation Industry (Supervision) Act, a trustee of a mainstream super fund regulated by the Australian Prudential Regulation Authority can apply for compensation if losses are due to fraud. The reason for excluding DIY funds from compensation is that DIY trustees, generally family members, take responsibility for their investment decisions and should not be bailed out by the government. The lack of compensation is being challenged by 70 DIY super investors who lost $50 million in overseas assets that were placed through a Trio Capital fund called ARP Growth Fund. Trio Capital has subsequently been accused of fraud in the case of two of its funds, ARP Growth and Astarra Strategic. Roy Larkin, 67, a retired furniture maker now living on the central coast, lost $700,000 in ARP Growth. He says he is in a better position than many. "Many of the people in this thing are selling their homes," he said. Mr Larkin had been hoping to do things in his retirement for his four grandchildren, such as helping them buy their first cars. Now he is on the pension, and ineligible for compensation. Page 46 of 159 2011 Factiva, Inc. All rights reserved.
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Business Astarra frontman pleads guilty Stuart Washington 347 words 5 February 2011 The Sydney Morning Herald SMHH First 4 English 2011 Copyright John Fairfax Holdings Limited. COURTS SO IT HAS come to this for Shawn Richard, the French Canadian from humble origins who dishonestly aided the disappearance of $120 million in Australians' investments.
TD Yesterday men facing charges of manslaughter and murder were brought upstairs from the cells under the NSW Supreme Court as Richard stood at the back of the courtroom awaiting his appearance. After working in high finance as an investment manager of the hedge fund Astarra Strategic, Richard, known by his Facebook friends as Shawny Cash, has hit the big time. But not in the way he or his proud mother, Helene, would have perhaps once imagined. Dressed in a neat blue suit, Richard yesterday pleaded guilty for his role in siphoning cash from the hedge fund to offshore funds in exotic Caribbean locations. No money has been found, despite extensive investigations. Richard stood before the court saying "guilty" when asked by Justice Megan Latham to plead to two counts of dishonest conduct while providing financial services between 2005 and 2009. He will be sentenced on May 13, with each count attracting a maximum of five years' jail. Earlier, as Richard waited in the court complex, a disgruntled financial planner, Kym Marriott, gave him a serve. "You were in it from the start. You're a bloody crook," Mr Marriott told Richard. Richard responded politely: "It wasn't my intention." His guilty pleas tell a different story, admitting to dishonest conduct that has played a part in a theft that has left hundreds of elderly investors without life savings. Richard was the frontman foran extensive offshore operation, helping to cement close relationships with financial planners including Tarrants in Wollongong for the placement of investors' money. The balloon went up for Richard when the Australian Securities and Investments Commission froze $426 million managed by the Albury-based fund manager Trio Capital in December 2009. Now Richard, on bail, is declaring himself bankrupt and puts his title as "unemployed" at the Manly flat he shares with a former Trio employee, Peter Wood. IN NS ihedge : Hedge Funds | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments | iinv : Investing/Securities gfraud : Fraud | c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter 2011 Factiva, Inc. All rights reserved.
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Business - Opinion & Analysis Self-managed super and the Trio trap STUART WASHINGTON 929 words 17 January 2011 The Sydney Morning Herald SMHH First 5 English 2011 Copyright John Fairfax Holdings Limited. If I were to tell you one third of Australia's superannuation savings is at risk I could be accused of being alarmist. Well, here goes: one third of Australia's superannuation savings is at risk. And I think there is good reason to be alarmed, because no one - regulators, the industry, government and certainly not the investors - seems to have a full understanding of the extent of risk involved.
TD I'm writing about the self-managed super sector, and the thriving industry of advisers and accountants who have profited from the rapid growth in what is now the destination of $408 billion of Australia's superannuation money. That's right. A third of Australia's superannuation money is now in self-managed super. In my view these funds are prey to risks that do not face regular work-based or retail superannuation schemes, for reasons I shall spell out. The loud grumbling you can hear at this point of the column is coming from disgruntled advisers and self-managed super investors. If you could magnify the grumblers, they would be rightly pointing out that the recent Cooper super review found no widespread issues threatening selfmanaged super. Sadly, however, I have witnessed a situation in which all the supposed protections surrounding self-managed super have come to nought. The collapse of those protections has left about 70 investors without any realistic chance of recompense for losses that could be anywhere up to $80 million. These predominantly elderly investors have - to use a phrase we often employ without thinking about its real meaning - lost thei r life savings. The losses they experienced by investing in a little-known fund called ARP Growth expose weaknesses of the self-managed super system that have been given little attention. ARP Growth is one of the investments within the Albury fund manager Trio Capital that was frozen by regulators early last year. Much of the attention on Trio Capital has focused on superannuation savings filched overseas through a hedge fund called Astarra Strategic. Trio's handsome front man, Shawn Richard, faces sentencing on dishonest conduct charges. But the real tragedy within Trio may lie with ARP Growth. ARP Growth is not just a story of bad investment; it's a story of fraud. I assert this so boldly because I have seen two sets of accounts that give very different pictures of the fund. On one set of accounts the investments into hedge funds through a complicated structure in the British Virgin Islands appeared to be going swimmingly. On another set the investments were dwindling to the point they ceased to exist in any meaningful way. Now where the fraud lies is not for me to say. Exactly who was cooking the books to create this elaborate fiction is unclear. Given the pedigree of Trio there is a real question whether the accounts showing dwindling Page 50 of 159 2011 Factiva, Inc. All rights reserved.
assets are not themselves a fiction - that there is a third set of accounts and the money has ended up somewhere else entirely. Suffice to say there hasn't been any money coming back. And there isn't likely to be either. Now if the retirees who were invested in ARP Growth had invested in a superannuation fund regulated by the Australian Prudential Regulatory Authority, they would be likely to receive government compensation that historically amounts to about 90 in the dollar. This is the compensation that other Trio superannuation investors are hoping for after receiving the nod from the Assistant Treasurer, Bill Shorten. These Trio investors placed money into Astarra Strategic through regulated superannuation funds. In the case of fraud - and at the discretion of the minister - investors in regulated scheme s are eligible for compensation for fraud under part 23 of the Superannuation Industry (Supervision) Act. There is no such magic wand for the ARP Growth investors. The fund has no money. The fund's liquidator, PPB, is not being paid from the fund and - with little realistic chance of recoveries - its interest in the issue is waning. The government has no obligation to compensate, so don't imagine Shorten riding in on a white charger. The corporate regulator may nail a few local miscreants for the fraud, but that does not bring the money back. And the various professional indemnity insurances do not amount to anything much when the total sought is $80 million or so. Is this an argument that self-managed super should automatically have some type of government safety net? Not at all. People should be free to make bad investments and suffer the consequences. Even in the case of fraud, there are good reasons the safety net for regulated superannuation investors should not be extended. A problem with self-managed super is that the trustees of self-managed super funds are often members of the same family. You would be shocked to learn that some family members accuse other family members of fraud. The government should not be forced into the ludicrous situation of offering compensation for a husband-and-wife bust-up. But when self-managed super investors place all their money into what is, for all intents and purposes, a superannuation fund, there is a blind spot in the current system. Investors can be ripped off and left with nothing. The investors in ARP Growth know this only too well. How many others pushing money into the self-managed third of the Australian super industry have to find this out before changes are made? IN NS i8150214 : Private Pension Funds | i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities | ipension : Pension Funds ncat : Content Types | nfact : Factiva Filters | c1521 : Analyst Comment/Recommendation | c15 : Performance | c152 : Earnings Projections | ccat : Corporate/Industrial News | nfce : FC&E Exclusion Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Trio Capital manager faces jail after guilty plea Stuart Washington 409 words 8 December 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. SUPERANNUATION A MAN who raked off $6.4 million in cash in Australia's largest superannuation fraud faces up to 10 years' jail after he pleaded guilty to two charges of dishonest conduct yesterday.
TD Shawn Richard, 35, who was the investment manager of Trio Capital, faces an additional life ban from the financial services industry for his part in a fraud that led to more than $100 million being siphoned overseas. The guilty plea by Richard in Downing Centre Local Court marks the first scalp for the Australian Securities and Investments Commission since it froze $426 million in the Albury-based Trio in January. Richard, who was known to his Facebook friends as Shawny Cash, was a central figure in a debacle that has led to more than 10,000 investors facing massive uncertainty about their $300 million in superannuation investments. The guilty plea also marks ASIC's first formal recognition of the fraud perpetrated on Trio Capital investors by documenting the worthlessness of the overseas investments Richard placed through a hedge fund called Astarra Strategic. More than $100 million placed into Astarra Strategic has never been recovered. Richard pleaded guilty to a charge that he dishonestly received undisclosed payments in his role as the investment manager of Astarra Strategic. ASIC alleged Richard and his company received $6.4 million. He also pleaded guilty to making misleading statements about the value of the investments in Astarra Strategic, with the effect of encouraging further investments. Both offences carry jail terms of up to five years, and fines of $220,000, or both. Richard will be sentenced next year. He admitted a third charge of making false statements in relation to financial products. A separate enforceable undertaking with ASIC that bans Richard from any role in financial services detailed his role in sending money through Astarra Strategic to overseas companies controlled by a Hong Kong businessman, Jack Flader. ASIC outlined how investors' money was placed into five Flader-controlled overseas funds. The money was then swappedfor virtually worthless US shares Mr Flader owned. Much of the "profits" were then returned to Mr Flader's Australian businesses as "loans". "Richard knew, from at least April 10, 2007, that the statements he made about the value of the Flader controlled funds that were included in valuation statements to Trio, were materially misleading," ASIC said in its enforceable undertaking. NS RE npag : Page-One Story | ncat : Content Types | gfinc : Financial Crime | gcat : Political/General News | gcrim : Crime/Courts austr : Australia | ausnz : Australia and New Zealand
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Business Let's hope this time there is a difference STUART WASHINGTON 941 words 20 September 2010 The Sydney Morning Herald SMHH First 9 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS If you took a leap of faith, you might think the corporate watchdog was doing something dramatic about a risky financial product called contracts for difference.
TD The leap is necessary because the track record of the Australian Securities and Investments Commission is hardly that of the hard-charging defender of retail investors. Remember we are talking about a mob that has had nothing meaningful to say to comfort 3000 investors who lost the lot when Storm Financial collapsed more than 20 months ago. Not one thing. And more than a year ago it first emerged that the Albury fund Trio Capital had been the scene of a crime, with about $200 million spirited offshore. So far not a charge has been laid. Not one. So, on those matters alone, it is necessary to take the following argument with the obligatory grain of salt. First, a bit about contracts for difference. They have been peddled to "investors" with an emphasis on the promise of big gains from small amounts of money. The big gains come about because of leverage, which has the effect of good old-fashioned debt. Indeed, when you put $5000 in, you can have the effect of $100,000 working for you in the market. The gains come when, say, the value of your position in the market increases from $100,000 to $110,000. Guess what? You just tripled your initial investment (your $5000 plus the extra $10,000) with a 10 per cent move in the market position. This is the good side of leverage. But look what happens when your market position moves against you by 10 per cent. Your $100,000 goes down to $90,000. Not a big deal, you might be inclined to think. But look at what has happened to your $5000 when the market position retreated by $10,000. You have not only lost the lot - your $5000 is the first bit to go - but you are actually on the hook for another $5000. The above maths are a relatively simple way of thinking about how risky contracts for difference can be. And having spoken to people who have incurred debts of more than $100,000 to their contracts-for-difference providers, the risks are very real. The even easier way to think about the products is that they look more like gambling than an investment. Now, to be fair, the regulator has jumped on contracts-for-difference providers in a reasonably meaningful way. Page 54 of 159 2011 Factiva, Inc. All rights reserved.
ASIC has been slowly ratcheting up the pressure on the product providers of these derivatives, using what is seen as the current panacea for retail investors: more and more disclosure. Informed investors, so the argument goes, will be able to make the correct decision about the level of risk they wish to enter into. In July the regulator asked the product providers to disclose fully the levels of "counterparty risk" investors are signing up for when they deal with the product providers. It is in these moves towards greater disclosure that you might be inclined to see a grander scheme by the corporate regulator. Take, for example, a simple disclosure about counterparty risk. The bald fact is there is no simple disclosure about counterparty risk. "Counterparty risk" is a rarefied financial term that has come into vogue during the financial crisis. At its simplest, the term means your risk of the company you are dealing with failing to honour the terms of the original agreement. In the financial world, counterparty risk suddenly became much more important when banks started failing. ASIC demanding contracts-for-difference providers to in effect disclose to investors their risk of dealing with the firm is a bit of a laugh. What we have seen in the crisis is that many financial services firms don't even know their own counterparty risks, let alone explain them to investors. Opes Prime didn't know, Chimaera didn't know, Lift Capital didn't know, Chartwell didn't know and Sonray didn't know. If they did know, they probably wouldn't have collapsed quite so spectacularly. How a contracts-for-difference provider meaningfully explains the risks its customers face in dealing with it becomes a set-up-to-fail conundrum. If the providers fail to effectively disclose those risks, they fall outside the "disclose, disclose, disclose" methodology that is supposed to protect investors. In effect, on an extremely positive view, ASIC is exhausting all its options before taking real action about contracts-for-difference providers. There is an argument ASIC has shown a precedent in action against a risky investment class. When risky property debentures such as Westpoint, Fincorp and Bridgecorp were burning retail investors, ASIC ratcheted up disclosure requirements to a point where hopefully even the most naive investor can assess that they are extremely risky. The campaign has included the need for debenture sellers to provide benchmark levels of disclosure, or explain why they are not meeting those benchmarks. It also clamped down on misleading advertisements for the sector. The market for debentures has shrunk dramatically. Last year the ASIC chairman, Tony D'Aloisio, flirted with the idea that some investment products were too risky for small retail investors, with the risks incapable of being accurately disclosed. If you were inclined to take a positive view of the regulator's actions on contracts for difference, it could be seen to be building exactly this case. It is a leap of faith that is not warranted on ASIC's track record. But here's hoping. IN NS RE iinv : Investing/Securities ccat : Corporate/Industrial News | nanl : Analysis | nedc : Commentary/Opinion | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Investors deserve comfort of savings made for rainy days STUART WASHINGTON 858 words 13 September 2010 The Sydney Morning Herald SMHH First 9 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS A murmur is running through the broader funds management industry: you mean we need to put up some of our own money to look after other people's money?
TD Strange as it may sound, you can go into business as a responsible entity of a fund with $50,000 and take in an unlimited amount of investors' money. That's right, for what passes as a deposit on a Sydney house these days, you can set up your shingle and offer your services as a fund manager taking in hundreds of millions. On the superannuation side of the fence, there is a prudential framework. That is a fancy way of saying the Australian Prudential Regulation Authority (APRA) has a set of guidelines about the amount of money superannuation funds need to keep to one side. APRA has been pretty active on this front, republishing a set of guidelines last month that outline what levels of capital superannuation funds have to set aside to address a range of issues: A buffer against risk; A commitment by the trustee to its superannuation business; and An incentive to manage the fund well. However, on the managed investment scheme side, which is regulated by the Australian Securities and Investments Commission (ASIC), there is no such prudential regulation. Therefore, there is no stated regulatory need to set aside extra money to address the above points when you operate a managed investment scheme, except for the $50,000. (As a financial services licensee you do have some responsibilities; for example, you must maintain your fund's solvency, which is no small thing.) Most large-fund managers can meet the APRA-style operating capital requirements quite easily. But it doesn't mean everyone can. The low level of funding for responsible entities of managed investment schemes has caused some disquiet among those familiar with the industry. The chairman of the Business Council of Australia, Graham Bradley, a former chief executive of Perpetual when it was a trustee business, has wondered whether the system provides enough reserves. It's a no-brainer for the broader managed funds industry to move to the same kind of capital requirements expected of superannuation funds. And fund managers will no doubt have picked up that this is exactly the line of thinking being pursued by regulators. I will gladly take calls from fund managers who want to tell me that implementing operating or risk Page 57 of 159 2011 Factiva, Inc. All rights reserved.
requirements may impose an onerous burden on them. But I will give fair warning that the response is likely to be: "You must be bloody joking." After what we have seen with frozen funds, illiquidity and trapped investors, there is no argument against having managed funds set aside adequate amounts of money for operating risk. If this knocks some participants out of the industry, that is a good thing not a bad thing. --STAYING with fund managers, there are likely to be some much-needed ructions among superannuation funds as well. This is quite apart from the package of reforms that are now likely to go through under the MySuper banner. When APRA released four guides for superannuation funds in early August, the news was in the one it didn't release: guidelines on conflicts of interest. APRA has flagged that it will take into account the Cooper review's views on conflicts of interest when it finally releases the new guidelines. Cooper's views on conflicts of interest are much tougher than existing standards, which seem to allow a multiplicity of conflicts to exist with little real attempt to manage them. The classic example is that the trustee, the fund administrator and the investment manager of a superannuation fund can all be owned by the same person. These pages have already complained long and loudly about how this ownership structure occurred with the Albury fund manager Trio Capital, allowing at least $123 million to be siphoned offshore. But the ownership structure occurs everywhere in the funds management game, posing similar risks inside large organisations and raising real questions about whether gatekeepers are doing their jobs. (I'll tell the story about the trustee who is co-located with the administrator down in Melbourne another day, except for this snippet: the trustee executed an Australia-wide search for an administrator and found the administration business it was leasing its premises from.) Bradley was alive to conflict-of-interest problems, warning in a private briefing in March that "the responsible entity is a creature of its promoter". The Cooper review stance is conveyed in its recommendation: "APRA should develop a prudential standard that sets out particular examples of conflicts of interest and conflicts of duty to illustrate behaviour that would not be allowed in relation to all APRA-regulated funds so as to ensure that trustee-directors and trustees observe their duty of loyalty to members." Again, I'm prepared to take any calls about the heavy hand of government intervention. But given what happened in Trio Capital, tougher standards on conflicts can't come soon enough. NS RE gpersf : Personal Finance | gcat : Political/General News austr : Australia | ausnz : Australia and New Zealand
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Business Three pennies in the fountain of Trio Capital losses STUART WASHINGTON 867 words 23 August 2010 The Sydney Morning Herald SMHH First 9 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS A virtually unknown Melbourne funds administration business called Super Managers Australia, or SMA, keeps reappearing like a bad penny in relation to Trio Capital.
TD And the appearances of SMA speak, in my view, to enduring links between three colourful figures in the world of penny stock scams, Jeff, Jim and Jack. The Albury fund manager Trio Capital is shaping up as the worst case of superannuation theft in Australian history, after $180 million in investors' money disappeared offshore. To borrow a stanza from Trio's last remaining director, David Andrews: "Then those pathetic putrid looters/ Came up behind me to bully, ambush and bash -/ Callous bulls in a fragile china shop/ Plundering nothing less than someone else's cash." First among the penny stock trio is Jeff, the dashing Jeffrey Revell-Reade, once believed to reside in Austria. BusinessDay later found him staying in the swish Sydney suburb of Darling Point getting around in a Mini Cooper S. Revell-Reade was the owner of the forerunner to SMA, the patriotically titled Oz Group, which administers $540 million in Australian superannuation money. Revell-Reade cuts quite a swath in London press reports, which name him as the controlling figure identified by the British Financial Services Authority in a report into Pacific Continental Securities. Pacific Continental was the rogue British broker that recklessly misled customers between 2005 and 2007, flogging them penny stocks that turned out to be worthless. Revell-Reade is facing a court action by the British Serious Organised Crime Agency seeking orders to freeze 3 million ($5.2 million) from the sale of his house in Wimbledon, South London, under proceeds-of-crime laws. After BusinessDay reported on Revell-Reade's ownership of Oz Group, he sold his business to the managing director, Nigel Westoby - and more on that transaction later. Then there is Jim, the Scottish accountant James Campbell Sutherland, whose former business Zetland Financial was listed as the owner of Pacific Continental. Sutherland, based in Hong Kong, is the owner of a foreign exchange trader in Australia called Go Markets. Two Go Markets directors remain directors of an SMA-owned fund promoter called Endeavour Securities. Sutherland's name appears in early organisational charts of ARP Growth, a Trio Capital fund also invested offshore with $59 million now missing. Finally there is Jack. Jack Flader has come into focus in Trio Capital as the man who ended up with every dollar sent to a Trio fund called Astarra Strategic in his pockets. Page 59 of 159 2011 Factiva, Inc. All rights reserved.
A NSW Supreme Court hearing was told Flader was the ultimate owner of Trio Capital. Before that, the Brooklyn-born Flader was a business partner with Sutherland in Zetland Financial, before falling out and setting up his own business around 2006. Flader was also heavily involved in Pacific Continental. Flader and Sutherland have been named as defendants in a huge US court case about a stock lending scam that raised $US1 billion ($1.1 billion) and dudded the Internal Revenue Service of $US234 million. Now, on previous form, when Jeff, Jim and Jack do business, it seems to be a reasonably safe bet you should watch where your money goes. So imagine the surprise when the successor to Jeff's business, SMA, appeared at Trio Capital's deathbed to successfully bid for the administration business of four Trio Capital superannuation funds. Double that surprise when Jack's existing financial planning business, Wright Global Investments, appointed a director called Graham Kinder in June. Kinder was at that time a director of the misleadingly named Industry Superannuation Australia (it is not an industry superannuation fund), which has a website registered by a Trio Capital subsidiary. And who administers Industry Superannuation Australia? Jeff's old business, SMA. I am in no way suggesting any nonsense on the part of Kinder, but his surprise appearance illustrates ties between companies linked to Jack (Wright Global) and Jeff (SMA). I'm told by Nigel Westoby he is indisputably the new owner of the SMA business he bought from Jeff. Westoby says he was never a bankrupt but had a 1996 dispute with the Australian Taxation Office, which is why there is a record of a two-month arrangement on the Insolvency and Trustee Service of Australia's register. The liquidation in 2000 of a Melbourne metal fabrication business he was a director of, Chipstar International, was due to an irreparable breakdown of relations within the company. And his previous experience in financial services, before meeting up with Jeff in about 2007, was as secretary of the small Bentmore Credit Union in rural Victoria in the 1980s. He didn't have any involvement in lending. On the face of it, Westoby's less-than-stellar track record has little to suggest why his business is close to Jim's business and continues to bump into Jack's old businesses. Except, that is, his previous relationship with Jeff. It puzzles me how Jeff, Jack and Jim got Australian financial services licences in the first place. And it worries me that their current and former business interests appear to have links that endure. NS RE gdtcsh : Money Laundering | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | victor : Victoria | ausnz : Australia and New Zealand
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Business Super thief caught up in US fraud Stuart Washington 456 words 11 August 2010 The Sydney Morning Herald SMHH First 4 English 2010 Copyright John Fairfax Holdings Limited. FUND MANGER THE suspected super thief behind Australia's largest superannuation rip-off has been embroiled in a US court case alleging he profited handsomely from a $US234 million fraud against the US taxpayer.
TD In Australia, the businessman and lawyer Jack Flader has faced scrutiny amid mounting evidence that $123 million invested through fund manager Trio Capital has been stolen. In July, Trio's investment manager, Shawn Richard, gave evidence in the NSW Supreme Court that every dollar sent overseas ended up in Mr Flader's pockets. Now BusinessDay can reveal Mr Flader and his former Hong Kong business partner, James Campbell Sutherland, were defendants within a jumbo civil litigation tried under the US Racketeer Influenced and Corrupt Organisation Act. Both Mr Flader and Mr Sutherland own Australian financial services companies. Last November a US investor successfully proved a "90 per cent stock loan" program that took in more than $US1 billion had been a Ponzi scheme that ripped off investors and paid $US100 million to its promoters. In a case within the jumbo litigation brought by an investor, Mr Flader and Mr Sutherland were named among the "RICO defendants" in an action that never went to trial. "Flader, Sutherland and [their company] Zetland received substantial proceeds from the 90 per cent Stock Loan program in compensation for their services," the complaint stated. The South Carolina District Court awarded the investor a $US483 million payout in the lead case among 11 cases within the jumbo litigation. Mr Flader and Mr Sutherland were not defendants in the lead case. In a separate case launched by the US Government in 2007, the California Northern District Court found the same scheme had helped investors avoid $US234 million in tax. The scheme involved a former Citibank employee, Charles Cathcart, who offered a product known as the "90 per cent loan" through a company called Derivium. In the tax fraud case, the US Government's uncontested complaint stated a Hong Kong company, Optech, started lending under the scheme in 2002 and "eventually became the sole purported lender for the '90 per cent loan' transactions". In the investor's case, Mr Flader and Mr Sutherland were named as Optech directors between 2002 and 2005. The tax fraud case proved the scheme falsely told customers they could obtain a loan for 90 per cent of the current value of their shares without triggering any capital gains tax obligations. The investors' case successfully argued investors were ripped off because their pledged shares were never held as collateral for the loans but sold immediately, with 90 per cent returned to the investor and 10 per cent paid to the scheme promoters. NS gtheft : Burglary/Theft | gcat : Political/General News | gcrim : Crime/Courts
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Business How to grow rich stealing super cash STUART WASHINGTON 862 words 2 August 2010 The Sydney Morning Herald SMHH First 9 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS I propose a new push to educate industrious individuals looking at money-making opportunities in the $1.3 trillion Australian superannuation industry. I'm writing, of course, about organised criminals.
TD Given the rich range of opportunities available to rip-off superannuation money, I think it only fair the Australian Securities and Investments Commission provide a level playing field for the ne'erdo-wells by fully disclosing the loopholes. Through a program of financial education, the commission can give these individuals what they want and indeed deserve from the current settings - a free ride with your superannuation cash. As a handy guide for the commission, I propose any education program cover the following areas: FINANCIAL SERVICES LICENCES Criminal background? Dodgy past? Ownership of a financial services licensee is no problem. How so? The commission does not apply a good-fame-and-character test to the owner of a company granted a financial services licence, but applies it to the directors. BusinessDay exposed just such a situation this year when it reported on Jeffrey Revell-Reade who owned OzGroup, involved in managing super worth $600 million. Revell-Reade had been repeatedly named in relation to international penny stock scams. All a person with a dubious past need do is own a company, appoint relatively clean-skin directors with some financial experience, and away you go - a financial services licence to play with. Incidentally, even if the owner directly controls the financial services licensee, the commission doesn't say boo publicly. For example, companies controlled by a Hong Kong businessman Jack Flader, a central figure in the disappearance of $123 million in Trio Capital money, appointed two new directors to his financial planning business in June. The commission said this was not a problem. PRODUCT DISCLOSURE STATEMENTS If you are of a certain inclination you definitely do not want to tell investors exactly what you plan to do with their money. Fortunately, the commission has, in my view, a track record of letting through misleading material that can be used to garner funds. In the case of Trio Capital, the product disclosure statements for Astarra Strategic were revealed to be meaningless to the point of laughable. In evidence to a liquidator's examination, the 24 years of investment experience referred to in Astarra Strategic's disclosure statement consisted of Shawn Richard, who described his qualifications as an office boy, and his less talented companion, Eugene Liu. And away you go, harvesting $123 million in investments sent to an overseas company without Page 63 of 159 2011 Factiva, Inc. All rights reserved.
another word. Astarra is not an isolated case. I am aware of another product disclosure statement out there that does not name the investment manager. Where is the money going? Who is placing it? The investor doesn't know. Neither does the commission. Pretty handy, hey? CONFLICTS OF INTEREST Fortunately for the criminally-minded, there are few legal obligations that effectively pick up conflicts of interest for those running superannuation funds. Those patient enough can winkle their way into controlling all three elements within a superannuation fund: the administrator, the trustee and the investment manager. In Trio Capital, all three became owned by the same enterprise, so the cash could be directed offshore without question. Interestingly, large investment managers, such as AMP and Westpac, use exactly the same system. Current practice means Bear Stearns could have set up in Australia in 2007 the You Beaut All You Can Eat CDO Superannuation Fund. So this isn't just an education program for criminals; big corporations that act irresponsibly can get a leg up with this particular loophole. FINANCIAL PLANNERS Of course, your criminal enterprise needs a distribution network. And who better than a group of salespeople handsomely rewarded for selling your product? Current settings allow all kinds of secret commissions to financial planning networks. With Trio Capital, an $840,000 secret commission was paid by the investment manager to the Wollongong financial planner Tarrants that it happily called a "marketing allowance". These kinds of payments are due to be banned under the Bowen reforms. Fortunately for crims, there are still opportunities to use financial planners for their own ends. This rests in the ease with which planners and entire businesses can become "authorised representatives" of a financial services licensee. The commission has no say about these "authorised representatives". It does not check their credentials in any way. Instead it relies on financial services licensees to check the competence and integrity of their authorised reps. Ahem. See point one. BREAK THE LAW Put a bit of spit and polish on the curriculum vitae. Even tell a few lies in your Australian Financial Services Licence application; the commission doesn't appear to look too hard. And there you have it. Put in place the above steps and grab the money. There is a lot of superannuation money. It has attracted a lot of interest of the wrong sort. By rights the commission should be acting to fix these problems. But until that time, the crims are free to use all the pointers outlined above. In fact, they already have. NS RE nedc : Commentary/Opinion | gcrim : Crime/Courts | gcat : Political/General News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | ausnz : Australia and New Zealand 2011 Factiva, Inc. All rights reserved.
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Business Trio identity still controls financial planner Stuart Washington 423 words 28 July 2010 The Sydney Morning Herald SMHH First 4 English 2010 Copyright John Fairfax Holdings Limited. MISSING FUNDS THE Australian financial planning business of a Hong Kong businessman, Jack Flader, is alive and kicking despite his central role in the disappearance of $123 million from Trio Capital.
TD Mr Flader has been named in the Federal Court as owner and controller of Wright Global Investments, which has a licence from the Australian Securities and Investments Commission to act as a financial planner . The business is run from a William Street office in Sydney and licenses about 60 planners as authorised representatives in cities including Sydney, Melbourne and Perth. ASIC has raised no public concerns about Mr Flader's ownership, amid mounting evidence suggesting the Albury-based Trio Capital represents Australia's largest theft of superannuation money. In a liquidator's examination Mr Flader was named by his former employee, Shawn Richard, as the controller of offshore investment vehicles that received $123 million in Trio money through Astarra Strategic, which was managed by Mr Richard. No money sent overseas has been recovered, and there is evidence of illegal kickbacks to Mr Richard's company and secret commissions to financial planners. Mr Flader appears to have recently reinforced his control over Wright Global. A Hong Kong company said to be controlled by Mr Flader, Astral Investments, which is the sole shareholder of Wright Global, appointed two new directors on June 22, Peter Wood and Graham Kinder. When it was put to Mr Wood that Wright Global was owned and controlled by Mr Flader, he replied: "It bloody well better not be." Mr Wood said the business was a financial planning outfit, and added: "There's a few warts on it, we're just trying to clean it up." Mr Wood is a former employee of Trio's investment manager and a close friend of his former boss, Mr Richard. They share an address in Manly. Mr Flader's apparent manoeuvres come amid ructions facing financial planners linked to Trio Capital, including the entry into liquidation on Monday of the financial planning arm of the Wollongong firm Tarrants. Tarrants received a $840,000 secret commission from Trio's investment manager, although Ross Tarrant has defended the payment as a marketing allowance that allowed his business to survive the financial crisis. ASIC has made no public statement about its investigations into Trio Capital since December. Under the current system a licensee can authorise representatives without ASIC approval. The licensed company is responsible for ensuring the competence and integrity of its representatives. IN i831 : Financial Investments | iinv : Investing/Securities
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Business Murder and threats make for reluctant testimony Stuart Washington 424 words 27 July 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. TRIO CAPITAL AS HE sought to avoid public questioning, the investment manager for Trio Capital, Shawn Richard, outlined a litany of murder, attempted murder and threats relayed by three people.
TD Evidence in open court also gave rise to the suggestion Jack Flader, Mr Richard's Hong Kong business partner, was one of those he named as making threats against him. The court heard of a murder, the attempted murder of a man and his family, and a blackmail attempt against Mr Richard in an affidavit he used to argue against appearing at a liquidator's public examination. Mr Richard says he knew of "police matters", including a current investigation into a "real and continuing serious risk" to a woman who is named in the affidavit. Mr Richard was eventually forced earlier this month to give evidence to the examination in public, detailing his relationship with Mr Flader as he explained the disappearance of $123 million invested by the Trio Capital, of Albury, through the Astarra Strategic fund. Last week the NSW Supreme Court granted access to Mr Richard's confidential affidavit after an application by John Fairfax Publications, publisher of the Herald, and Nationwide News. Yesterday Mr Richard won leave in the Court of Appeal to appeal against the earlier judgment. He sought to keep the affidavit confidential because he fears for his safety if the contents are published in full. Mr Richard's representative, Simon White, said the affidavit showed several people had the "motive and capacity to carry out serious threats". In further details of the affidavit aired in court yesterday, Mr Richard cites a murder. BusinessDay has previously reported on the murder of his former business partner, Matthew Littauer, stabbed to death in his office in Tokyo in December 2004. The affidavit reveals the attempted murder of a man and his family, and a blackmail attempt against Mr Richard based on unfavourable aspects of his past. Mr Richard also says that shortly before the public examination he received threats in two handwritten notes. They had been destroyed. Sandy Dawson, for Fairfax, said Mr Richard gave evidence at the public examination that he was a puppet of "certain people", including Mr Flader, and was satisfied by their explanations about why money was moving overseas. In the affidavit, however, "he says he has fears of his personal safety from some of those people". Mr Dawson said the public was entitled to know why Mr Richard was telling inconsistent stories. NS RE gmurd : Murder/Manslaughter | gcat : Political/General News | gcrim : Crime/Courts nswals : New South Wales | ausnz : Australia and New Zealand | austr : Australia
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Business Revealed: Trio's links with Michael McGurk Stuart Washington 564 words 24 July 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. COLLAPSES FIGURES closely associated with Trio Capital had direct links to the Michael McGurk saga, including the notorious incident when goons armed with sledgehammers attacked a car driven by Maurice Terreiro.
TD In one of several links, the yellow Mazda 626 was owned by Zoe Viellaris, a former marketing employee of the forerunner of Trio Capital, and the partner of Mr Terreiro. Mr McGurk was murdered in the driveway of his Cremorne home on September 3 last year after acting as a loan shark and standover man. Mr Terreiro, 45, is a two-times bankrupt who had built up close links to Trio Capital figures through his financial planning business interests, although by early last year his business fortunes had waned. The Herald has previously reported Mr McGurk was pursuing Mr Terreiro for alleged debts of $500,000. Men armed with sledgehammers acting on Mr McGurk's behalf attacked the car last June as Mr Terreiro drove across a Redfern park to escape. Mr McGurk's murder remains an open investigation. Trio Capital is the Albury fund manager at the centre of what evidence from a public examination last week suggested was the largest theft of superannuation money in Australian history. Prior to his bankruptcy Mr Terreiro had a majority interest in a company called Solutions Wealth Strategies, which had several close links to Trio Capital figures. In the first link Solutions Wealth Strategies, when Mr Terreiro was a director, authorised Shawn Richard to act as a representative between 2006 and 2008. In the same period Mr Richard was the investment manager of Astarra Strategic, a Trio Capital fund now suspected of channelling $123 million in investors' money offshore. Ms Viellaris said yesterday Mr Richard was one of up to 50 financial planners authorised by Solutions Wealth Strategies over several years. "I think that the previous director [Mr Terreiro] had a business relationship with Shawn," she said. In a second link between Mr Terreiro's business interests and Trio Capital figures, Mr Richard gave evidence he had personally made loans of about $500,000 to another Solutions Wealth Strategies representative, Ronald Jeffery Caines. Mr Caines, a representative between 2005 and 2008, was banned by ASIC for life in 2008 for receiving separate undisclosed payments from an unnamed Trio Capital director. In a third link between Mr Terreiro's business interests and Trio Capital figures, a one-time friend and former business partner of Mr Terreiro, Mark Schroeder, was the chief executive of the forerunner of Trio Capital in 2005. Mr Schroeder's relation with the Trio Capital businesses continued until earlier this year, when he was a director of the Trio-related Wright Global Investments. Mr Richard, 35, gave evidence last week he was a "mere puppet" of a Hong Kong businessman, Jack Flader, who owned Trio and several related companies, including Wright Global Page 70 of 159 2011 Factiva, Inc. All rights reserved.
Investments. Mr Schroeder and Mr Terreiro were involved in an unsuccessful push to market a financial product called Keys to other financial planners through a second financial planning business where they both served as directors, Financial Wealth. It has been reported debts in relation to Mr Terreiro's financial planning businesses were the subject of a $150,000 covering loan with an exorbitant interest rate from Mr McGurk. Mr Terreiro filed for bankruptcy in March last year. NS RE gcat : Political/General News austr : Australia | ausnz : Australia and New Zealand
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Business Cowboys watched as millions disappeared STUART WASHINGTON 904 words 19 July 2010 The Sydney Morning Herald SMHH First 9 English 2010 Copyright John Fairfax Holdings Limited. An article in BusinessDay on Monday, "Cowboys watched as millions disappeared", incorrectly referred to a loan to RI Group. The payment was an investment.
LP OPINION & ANALYSIS Just how did a posse of cowboys penetrate weaknesses in regulations to allow what mounting evidence suggests is the largest theft of superannuation money in Australian history? TD Hearings on the Albury fund manager Trio Capital last week showed just how Australian investors were seduced into placing $123 million into one of its offshore funds, Astarra Strategic. All the investment money sent overseas is now missing. Understanding how this occurred should be the final word on just how perniciously commissions and secret payments can create the perception, if not the reality, of influencing financial planners. The hearings also showed Trio Capital was subject to numerous interventions by Australia's two corporate cops, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. The NSW Supreme Court heard last week that the authority intervened in effect to kick the fund manager Shawn Richard off what became the Trio Capital board in 2005, and was again showing interest in a $60 million transfer of Trio funds into Astarra Strategic last year. In 2008 ASIC interviewed Richard under its compulsory examination powers about a $500,000 secret payment from Trio and Trio-related companies that was regarded so seriously the financial planner who received the loan was banned for life in August 2008. But none of these interventions led to further scrutiny of the essential problem, uncovered in its full horror in the public hearings mounted by the liquidator, PPB, last week. The court heard that all the money sent overseas ended up in the pockets of the mysterious Hong Kong lawyer Jack W. Flader. He is the ultimate owner of the Trio Capital funds management business and, while Richard is shown as having ownership, is said to be the ultimate owner of Astarra Asset Management, which was Astarra Strategic's investment manager. As the directors of the investment manager, Richard and his business partner, Eugene Liu, allegedly issued meaningless Astarra Strategic product disclosure statements which made claims that simply could not be supported. Page 72 of 159 2011 Factiva, Inc. All rights reserved.
It then marketed its product through financial planning groups rewarded with secret loans and secret payments. How big were those rewards? Very, very big, it seems. The court heard that there was what was described as a $840,000 secret commission to a Wollongong financial planner, Tarrants; a $2 million loan to a now-failed Melbourne financial planner, Professional Alliance; a smaller loan to a Port Augusta planner, Seagrims; and a $2 million loan to a private equity mob called RI Group, to obtain a controlling stake in financial planners that would direct even more money Astarra Strategic's way. Richard denied these payments came directly from investors, while Tarrants is arguing its payments were "volume rebates" that were generally accepted in the industry. (Such payments would be banned under the Bowen financial planning reforms announced this year, and good riddance too). Evidence in the hearings indicated that when financial planners funnelled their investors' money into Astarra Strategic, the process was both complex and extremely simple. At its simplest, it became Flader's money. The complex version is that Astarra Strategic sent the funds to a British Virgin Islands company headed by Marc Boudreau, an old mate of Richard's with no qualifications to handle the funds. This company, called EMA International, was controlled by Flader. EMA International placed the money into numerous funds with fancy names domiciled in exotic Caribbean tax havens. These funds were also controlled by Flader. The really sweet deal was that Flader then swapped assets he owned for the money placed into the funds. Robert Newlinds, SC, acting for the liquidator, picked up on this theme when he asked Richard: "Let me guess: it was Mr Flader that valued the assets?" Richard said: "It was either him or someone in his control." The compounding conflicts of interest in this series of transactions beggars belief, and you can bet these conflicts were not detailed in the product disclosure statements. The hearings took perhaps their only comical turn when Richard said: "The way Jack explained it to me was there was no specific conflict." How Richard and Liu and the coterie of offshore figures associated with Flader came to control Australian superannuation money does the regulators no credit. How the pair issued fantastical product disclosure statements that provided little or no detail about what was going on with investors' money is another black mark for ASIC. Richard lied about having a bachelor of finance and said he was better described in his Taiwan days as an office boy rather than the grandiose "senior portfolio manager" in his applications to become an Australian financial services licensee. Liu has no tertiary qualification. Richard is personable and engaging. He was sharp and clear when he gave his evidence over the four days he appeared in the witness box. He no doubt used similar skills to persuade the regulators that he was good at his game. The whistle was blown on Trio Capital last September. More than $400 million in Trio Capital funds have been frozen since October. How long do we have to wait before the regulators take action to find out the full truth about what Page 73 of 159 2011 Factiva, Inc. All rights reserved.
Capital's game really was? IN NS i831 : Financial Investments | iinv : Investing/Securities gplan : Urban Planning/Development | ncrx : Corrected Items | ccat : Corporate/Industrial News | gcat : Political/General News | gpir : Politics/International Relations | gpol : Domestic Politics | ncat : Content Types austr : Australia | ausnz : Australia and New Zealand
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Business How Trio scandal slipped under ASIC's radar EXAMINATION Stuart Washington 451 words 17 July 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. A DIRECTOR of Trio Capital and related companies were involved in a secret loan to a Wollongong financial planner that got the planner booted out for life in 2008. But while the corporate regulator grilled the fund manager Shawn Richard that year about his involvement in the loan, it failed to detect what mounting evidence now suggests is the largest superannuation theft in Australian history.
TD Mr Richard said yesterday he did not hear from the Australian Securities and Investments Commission about the loan again until fears about the fund he managed, Astarra Strategic, were raised by a whistleblower last September. The interview adds to several occasions that regulators addressed issues within the Albury fund manager Trio Capital dating back to 2005, but manifestly failed to stop Astarra Strategic's $123 million disappearing offshore. Mr Richard faced the fourth and final day of a liquidator's public examination in the NSW Supreme Court yesterday. Mr Richard, 35, nicknamed by Facebook friends "Shawny Cash", was asked about a series of payments to financial planning groups to help Astarra Strategic secure more investment funds. The payments included a $500,000 loan from an unknown Trio Capital director and related Trio companies to the Wollongong financial planner Ronald Jeffrey Caines, which Mr Caines then failed to disclose to investors in Trio Capital products. The failure resulted in Mr Caines being banned by ASIC from the financial planning industry for life. There was also a $2 million investment in a private equity group called RI Group, which Mr Richard said was supposed to help purchase interests in financial planners that would direct funds to Trio Capital. Yesterday's disclosures were on top of what Robert Newlinds, SC, acting for the liquidator, PPB, described as a $840,000 secret commission paid to a Wollongong financial planner, Tarrants, and a $2 million loan to a Melbourne planner, Professional Alliance. Also yesterday, Mr Richard's fellow investment manager, Eugene Liu, said he was not sure if the business they operated as investment manager had a compliance plan. He also said that he did nothing more than accept at face value what a Hong Kong lawyer, Jack Flader, had told him about the values of assets Australian investors were buying in offshore funds controlled by Mr Flader. The court has heard that Mr Liu was responsible for risk management and valuations within the funds. Mr Richard said yesterday that Trio Capital's Albury managing director, Rex Philpott, had been aware of the investment strategy employed by Mr Flader. That strategy involved Mr Flader swapping Australian investors' money for assets which he had valued himself. IN i831 : Financial Investments | iinv : Investing/Securities 2011 Factiva, Inc. All rights reserved.
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News and Features Pair plays it cool as court hunts for $400m Stuart Washington 427 words 16 July 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. THE fund manager Shawn Richard has been living a highly social life in Manly amid mounting evidence he is a central figure in the largest theft of superannuation money in Australian history. Facebook photographs of Mr Richard show him dressed as a hippie at an event dubbed "Taronga Zoo goes Woodstock" earlier this year and enjoying a "party on the green" in April.
TD Friends have tagged photographs of Mr Richard with the nickname "Shawny Cash". Mr Richard's partying and guitar-playing antics with a former Trio Capital colleague, Peter Wood, contrast with the fate of Trio investors. More than $400 million invested in the Albury fund manager was frozen last October after fears were raised about a hedge fund managed by Mr Richard called Astarra Strategic. The appearance of a carefree Mr Richard also contrasts with his argument earlier this week that he feared for his physical safety as he attempted to avoid a liquidator's public examination about Capital's collapse. For the past three days Mr Richard has given evidence at a NSW Supreme Court examination as the liquidator PPB tries to find $123 million invested in obscure Caribbean tax havens through Astarra Strategic. Not a cent invested by Trio Capital into Astarra Strategic has been returned to Australian investors. In his appearance before the public examination Mr Richard has agreed he regularly received illegal secret commissions from his Jack Flader, a Hong Kong lawyer. He has also been unable to explain $265,000 shown as personal withdrawals from his company account in four months during 2008. And he has detailed several million dollars he has received in a secret Liechtenstein bank account. Mr Richard has described a corporate structure in which Mr Flader owned all Trio Capital businesses that channelled money through Astarra Strategic to a British Virgin Islands company, which Mr Flader also controlled. The British Virgin Islands company then placed the money into offshore funds, also controlled by Mr Flader. Yesterday Mr Richard said when the Australian money was received by these funds Mr Flader would swap assets to the same value and pay himself the Australian money. Robert Newlinds, SC, acting for PPB, said: "Let me guess, it was Mr Flader that valued the assets?" Mr Richard replied: "It was either him or someone in his control." Mr Richard has denied contentions that he knew he was acting illegally. No charges have been laid against Mr Richard. Inside BusinessDay, Page 2 NS gtheft : Burglary/Theft | gcat : Political/General News | gcrim : Crime/Courts 2011 Factiva, Inc. All rights reserved.
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Business 'Marketing allowance' paid to planner Stuart Washington 431 words 16 July 2010 The Sydney Morning Herald SMHH First 2 English 2010 Copyright John Fairfax Holdings Limited. INVESTIGATION A FINANCIAL planner received more than $840,000 in secret commissions last year as an incentive to invest money into Astarra Strategic, a public examination heard yesterday.
TD Secret commissions paid by product manufacturers to financial planners are illegal. Liquidators are trying to establish how $123 million in money invested by the fund manager Trio Capital of Albury disappeared after being sent offshore by Astarra Strategic. The investment manager for Astarra Strategic, Shawn Richard, told the NSW Supreme Court examination yesterday the payments to the the financial planne Tarrants, of Wollongong, were a "marketing allowance". Mr Richard did not contest that the payments were kept secret from investors who were introduced to the Astarra Strategic hedge fund by Tarrants. Robert Newlinds, SC, acting for the liquidator PPB, said: "It could be defined as a kickback, couldn't it?" Mr Richard replied: "It was defined to me as a marketing allowance." Mr Newlinds said Mr Richard should not "beat around the bush. These were secret commissions, weren't they?" Mr Richard replied that the broader funds management group, Trio Capital, knew about the payments and it was up to financial planners to disclose them to investors. He said Tarrants had asked for the marketing allowance because it was "something they received in the past and something that they asked for". Mr Richard said he was not responsible for Astarra Strategic product disclosure statements that did not make disclosures about money being paid from his company Astarra Asset Management to financial planners. He also agreed Astarra Asset Management had made loans to two other financial planners, $1 million to Professional Alliance of Melbourne and a much smaller sum to the Seagrims of Port Augusta . Mr Richard agreed it was easier to gain investments for Astarra Strategic from financial planners who were receiving the "marketing allowance" payments. Yesterday Mr Richard also described in detail how his Hong Kong boss, Jack Flader, in effect paid himself Australian investors' money from the overseas funds he controlled. Mr Richard said Mr Flader controlled the funds, and swapped the money for assets he either valued himself or caused to be valued by people he controlled. The funds included the SBS Dynamic Opportunities Fund and the Exploration Fund, domiciled in the tax enclave of St Lucia. No assets have been found by liquidators. Mr Newlinds asked Mr Richard whether Mr Flader was "hopelessly compromised" by conflicts of interest. "The way Jack explained it to me was there was no specific conflict," Mr Richard said. The examination continues. IN i831 : Financial Investments | iinv : Investing/Securities
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Business Kickbacks kept coming as Trio manager sent investors' funds offshore Stuart Washington 467 words 15 July 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. EXAMINATION AN INVESTMENT manager was shown making personal withdrawals totalling $265,000 over four months in 2008 from a company account, but yesterday could not explain what the money had been used for.
TD Shawn Richard also agreed yesterday his business had received regular illegal secret commissions or kickbacks from his offshore boss, the Hong Kong lawyer Jack Flader. Mr Richard, 35, is the first witness in a liquidators' public examination attempting to find the whereabouts of $123 million missing from an offshore Trio Capital fund called Astarra Strategic. Mr Richard said he could not explain the seven withdrawals of between $20,000 and $50,000 his company accounts showed him making between March and June in 2008. Mr Richard also revealed he had stood down as a director of Trio Capital in November 2005 as a result of an Australian Prudential Regulation Authority review of the fund manager - with no further action taken. Mr Richard, who was responsible for placing Trio Capital investors' money into Astarra Strategic, also detailed a system in which every dollar sent offshore ended up as cash with Mr Flader. In reference to one portion of investors' money, Robert Newlinds, SC, acting for the liquidators PPB, said: "The $300,000 cold hard cash that was leaving Australia, by a very quick round-robin system, found its way into Mr Flader's pocket?" Mr Richard replied: "Privilege, yes." He said he noticed, in late 2007 or early 2008, a relationship between money being sent offshore by Australian investors and money being paid by Mr Flader to his Australian business, Astarra Asset Management. Mr Newlinds asked: "What you suspected was that perhaps those moneys that were supposedly being invested were not being invested, because you seemed to be getting a great slab of them coming back?" Mr Richard replied: "Privilege, I did not ever think that." Mr Richard was asked about six investments in Astarra Strategic of up to $1.5 million in 2007 and 2008, which were forwarded to a British Virgin Islands company, EMA International. Each time, within 10 days, Mr Richard's business had received payments from Mr Flader's Hong Kong company of up to $150,000. Mr Richard said Mr Flader controlled Astarra Strategic, EMA International and the funds that were the ultimate destination of the Australian money. He said had been completely satisfied with Mr Flader's explanation of how he was obtaining the Australian money from the funds. "You knew what you and Mr Flader were cooking up together was illegal, didn't you?" Mr Newlinds said. Page 81 of 159 2011 Factiva, Inc. All rights reserved.
Mr Richard replied: "Privilege. Jack was very good at convincing me that it wasn't illegal." The examination in the NSW Supreme Court continues. IN NS RE iinv : Investing/Securities c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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News and Features Funds manager admits lying Stuart Washington 377 words 14 July 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. HE WAS the clean-cut fund manager who, on paper, was perfectly qualified to take control of $123 million in superannuation investments. Now Shawn Richard's elaborate fiction has come crashing down. His financial qualifications are exposed as lies and he has admitted to a secret Liechtenstein bank account in which he received several million dollars.
TD The Canadian-born Mr Richard, 35, is the first witness called in public examinations held in the NSW Supreme Court by the liquidator of the Albury-based fund manager Trio Capital. The collapse has affected 10,000 superannuation investors, who have had $400 million in investments frozen since October when regulators first acted. Not one cent has been recovered of the Trio money invested in the exotic offshore investment vehicle Astarra Strategic, which Mr Richard was paid $170,000 to manage. This was on top of commissions paid to him from a Hong Kong businessman, Jack Flader. It was a lot of money for a role that, on Mr Richard's account, was to act on the orders of two men, first Matthew Littauer until he was murdered in Tokyo in 2004, then Mr Flader. Yes, Mr Richard agreed, he acted as a puppet of the two men. Yes, he said, he had lied to regulators because the men had told him to. The demolition yesterday of Mr Richard's reputation as a highly fancied fund manager continued into the fine detail. No, Mr Richard told Robert Newlinds, SC, acting for the liquidator PPB, he does not have a bachelor of finance from the University of Moncton in Canada. Yes, he had used that credential when applying for financial services licences in Australia. No, Mr Richard said, he should not have been described as a senior portfolio manager when he worked in Taiwan between 1996 and 2000 with a stockbroker called Pacific Continental Securities. Yes, he said, his duties and roles could be described as those of an office boy. Until recently Mr Richard had been publicly assuring investors he was aware of the location of some of the Astarra Strategic money and he was working to recover it. Mr Richard's examination continues today. BusinessDay Page 1 IN NS iinv : Investing/Securities | i81502 : Trusts/Funds/Financial Vehicles npag : Page-One Story | ccat : Corporate/Industrial News | ncat : Content Types | c12 : Corporate Crime/Legal/Judicial | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand 2011 Factiva, Inc. All rights reserved.
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Business I am only a puppet, says Trio director Stuart Washington 456 words 14 July 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. EXAMINATION THE former investment manager who took legal responsibility for placing $123 million missing from the Astarra Strategic Fund said he was only a puppet of his overseas bosses.
TD On the first day of a liquidators' examination into the collapse of the Albury-based fund manager T ri o Capital, Shawn Richard said he had misled regulators and investors in documents that stated he was responsible for placing money. Instead, he told the examination in the NSW Supreme Court, ultimate responsibility for decisions about investments in Astarra Strategic rested with Matthew Littauer, until his murder in Tokyo in 2004, and thereafter with the Hong Kong-based Jack Flader. The disappearance of the money Trio placed into Astarra Strategic has been the subject of a global hunt by the liquidator PPB. Regulators froze more than $400 million in investments in Trio Capital in October. Robert Newlinds, SC, acting for PPB, asked: "You are trying to suggest you are nothing more than a mere puppet of Mr Flader?" Mr Richard replied: "Privilege. Yes." Mr Richard, 35, said he had lied about his former experience, including a claimed bachelor of finance from the University of Moncton in Canada, on the direction of Mr Littauer and Mr Flader. Asked why he had lied, Mr Richard said because they had told him to, and had he not done so he would have lost his job. Mr Richard's lies included describing himself in applications for financial service licences as "senior portfolio manager" for Pacific Continental Securities in Taiwan, when he agreed the accurate description was "office boy". Mr Richard said he was a puppet despite agreeing he and a fellow director, Eugene Liu, appeared in product disclosure statements as investment managers of Astarra Strategic. Mr Richard also agreed he was involved in drawing up a contractual arrangement with a British Virgin Islands company, EMA International, which became the recipient of the Astarra Strategic money. EMA International had one director, Marc Boudreau, whom Mr Richard described as "simply a mate I grew up with who resides in Canada". Asked what skills and abilities Mr Boudreau had to direct money placed into EMA International, Mr Richard said: "He had none." The public examination, in which Mr Richard used the word "privilege" so his answers may not be used in court proceedings, continues. SHAWN RICHARD Official description: Bachelor of finance, University of Moncton, Canada. Revised description: No degree qualifications. Page 85 of 159 2011 Factiva, Inc. All rights reserved.
1996-2000 Official description: Senior portfolio manager with Pacific Continental Securities in Taiwan. Revised description: Office boy. 2004-10 Official description: Investment manager for what became $123 million placed in Astarra Strategic as a director of Astarra Asset Management. Revised description: Puppet. IN NS i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities npag : Page-One Story | ncat : Content Types | c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Trio Capital principal tries to stop public examination Stuart Washington 470 words 13 July 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. FUND MANAGER A CENTRAL figure in the saga of Trio Capital, Shawn Richard, has reported threats to his safety and "work-associated stress" in an unsuccessful bid to stop a liquidator publicly examining his role in the fund manager's collapse.
TD The Canadian-born Mr Richard, 35, has previously expressed his willingness to help the liquidator, PPB, discover the whereabouts of $123 million missing from a Trio hedge fund called Astarra Strategic. More than $400 million in investments in the Albury-based Trio Capital, affecting 10,000 superannuation investors, were frozen last October after regulators were first alerted to fears about Astarra Strategic. Yesterday Mr Richard argued in the NSW Supreme Court his appearance before a public examination by the liquidator, which is due to start today, should be conducted in private. Simon White, acting for Mr Richard, told the court there was "clear evidence that my client's physical safety is at risk and he has a medical condition", giving the court a confidential affidavit to support Mr Richard's argument. The move to close the hearings to the public was contested by John Fairfax Publications, publisher of this newspaper. Robert Newlinds, SC, acting for PPB, said threats detailed by Mr Richard came from people who could be regarded as "co-conspirators" - a former employee of one of the Trio companies, and former Trio investors. Mr Newlinds questioned the reality of the threats, saying of investors: "Of course they would be upset. They lost their life savings. They might say those sorts of things." He also said the claim about the medical condition appeared "hopeless", consisting of a report on Mr Richard's blood pressure and "work-associated stress". Sandy Dawson, acting for John Fairfax Publications, also raised questions about how details of two written threats detailed by Mr Richard had been destroyed. Mr Newlinds said it was possible that Trio Capital was a case of serious criminal fraud and emphasised Mr Richard's central role in its operations. "There is certainly a theory in the community that what has gone on has been wholesale fraud," Mr Newlinds said. He said Mr Richard appeared to be the ultimate owner of Trio Capital through a company called Belladonna, registered in St Vincent in the Caribbean. The court heard that Mr Richard had been a former director of Trio companies and a current director of its investment manager, Astarra Asset Management, which was responsible for placing money into Astarra Strategic. Justice Reg Barrett denied Mr Richards bid to close the hearings to the public, agreeing his evidence held little weight. He agreed to an application by PPB to hear certain evidence from Mr Richard, relating to Page 87 of 159 2011 Factiva, Inc. All rights reserved.
confidential documents obtained from Hong Kong regulators, in private. IN NS RE i831 : Financial Investments | iinv : Investing/Securities npag : Page-One Story | ncat : Content Types | c16 : Bankruptcy | cactio : Corporate Actions | ccat : Corporate/Industrial News | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Trio Capital - a long, slow car crash STUART WASHINGTON 959 words 12 July 2010 The Sydney Morning Herald SMHH First 9 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS Sometimes bad things happen in front of you, and you see it. It's a bag-snatch, there's a yell, someone's fallen over, and someone else is running off into the distance.
TD Sometimes bad things happen in front of you, and you don't see it. It happens over a long time, silently, like rust. When you finally see it, you realise it's been bad for years. It is a fair bet that investors in the fund manager Trio Capital, based in Albury, will be found to belong in the second category. This week the administrators start a public examination that asks just how an estimated $123 million in Trio money found its way offshore in a hedge fund called Astarra Strategic. To date, not one cent of money placed offshore has been returned. We now know the bulk of the money in Astarra Strategic was channelled through a British Virgin Islands company into underlying investments that are at best dubious and at worst fictional. We also know some of the main players to be examined this week have had a long, unhealthy track record with so-called "boiler-rooms", unlicensed cold-callers who flog dodgy stocks to often elderly investors. Those with the unhealthy links include Shawn Richard, the plausible Canadian-born frontman who established what became known as Trio Capital from 2003. BusinessDay has previously revealed Richard was named in 2001 by regulators as an associate of an unlicensed stockbroker operating out of Manila. Before that he worked with a dodgy broker called Pacific Continental. The ties that bind Richard to this world are worth examining. BusinessDay has also previously reported that Richard was slated to attend a conference in Pattaya in 2005, where three of the men named alongside him in the scam in 2001 were on the list of attendees. Another four at the same conference have figured in the elaborate network of offshore companies that have taken care of Astarra Strategic money. One of those is Frank Richard Bell, a British stockbroker with a lengthy record of fines by the US self-regulatory body, who is looking after $75 million of Astarra Strategic money placed into the Exploration Fund. Incidentally, Bell won't be helping out with the inquiry. He is in Cebu in the Philippines. The sheer wonder of it all is that the bad thing happened in front of so many people for so long, without even a murmur of suspicion until regulators were tipped off by Bronte Capital's fund manager, John Hempton. The checks and balances in a system that is supposed to protect people's investments from wrong-doing appear to have failed every step of the way. Take, as one example, the compliance plan auditor, KPMG. On September 28 last year, just three weeks before regulators froze all of Trio's managed investment schemes, KPMG signed an audit Page 89 of 159 2011 Factiva, Inc. All rights reserved.
of Trio Capital's compliance plan for Astarra Strategic. KPMG stated Trio had "complied with the compliance plans for each of the schemes". Given what was going on inside Astarra Strategic, this is pretty ordinary. But there are reasons for even more scrutiny of just how effective KPMG's compliance plan audits were. On June 30 last year, Astarra Strategic's investments grew by $47 million, apparently tipped in by related-party Trio funds. It now appears this was not fresh cash. It was money that was being leeched offshore from other funds that were put together into the Astarra Strategic bucket. But leaving aside whether fresh cash was involved, it was a major related party transaction that appeared in the audited accounts of Astarra Strategic. Under the Trio compliance plan, related party dealings are supposed to comply with the law and not prejudice the interests of other unit holders. The managing director of Trio is supposed to monitor these non-standard transactions and ensure compliance. Did KPMG check these points in its compliance plan audit, shortly after $47 million was shuffled from one hand to the other inside Trio Capital? I don't know. But suffice to say it was not KPMG that blew the whistle on Trio Capital. Nor was it the custodian, the National Australia Bank subsidiary, National Australia Trustees, charged with ensuring each dollar invested in Astarra Strategic arrived where it was supposed to arrive. Nor was it any of the financial planners, who were gaily recommending their clients' money be tipped into Trio Capital. In the case of the financial planner Seagrims, in Port Augusta, about $100 million was switched to Trio in very short order. How Astarra Strategic became such a problem is pretty simple. There are three entities within a managed investment scheme (or a superannuation fund): a responsible entity (or trustee), an administrator and an investment manager. In Trio Capital's case, over the years they all became owned by the same people. And the investments in Astarra Strategic grew and grew. So while there is a host of gatekeepers that failed, Trio failed at the first hurdle, by not having some independence between the different elements of the structure. (Not that Trio Capital is an isolated case with this structure. The big shops - AMP, for example - sometimes act as all three. Perhaps a warning for us all.) The end result was that Trio Capital was a bad thing. A scheduled four days of hearings into Trio Capital start tomorrow. There will be pleas of ignorance from people intimately involved in Trio that they had no idea what was going on. The bad thing happened in front of them, and they will say they didn't see it. For a long time. NS RE gtacc : Transport Accidents | gcat : Political/General News | gdis : Disasters/Accidents | gmmdis : Accidents/Man-made Disasters | grisk : Risk News austr : Australia | ausnz : Australia and New Zealand
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Business List of alleged Trio offences sent to ASIC Stuart Washington 193 words 23 June 2010 The Sydney Morning Herald SMHH First 4 English 2010 Copyright John Fairfax Holdings Limited. LIQUIDATION A LIST of suspected offences by Trio Capital's officers was sent to the Australian Securities and Investments Commission yesterday as the Albury-based fund manager was pushed into liquidation.
TD Investigations into Trio Capital have not established the existence of more than $180 million in assets, with the Supreme Court judge George Palmer saying it had all the signs of a scam. Administrators are required to send ASIC details if officers of Trio Capital were suspected of breaching the Corporations Act or if officers "may have been guilty of negligence, default, breach of duty or breach of trust". The hour-long meeting attended by six creditors to Trio Capital formally placed the fund manager into liquidation yesterday. The report to ASIC covers possible breaches of the Corporations Act revealed in PPB's investigations into Trio Capital since it was appointed as administrator in late December. PPB has been unsuccessful in locating $123 million invested through the British Virgin Islands companies in a Trio hedge fund called Astarra Strategic and another $51 million invested overseas through ARP Growth. IN NS i831 : Financial Investments | iinv : Investing/Securities c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter | c12 : Corporate Crime/Legal/Judicial | nfcpex : FC&E Executive News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Lack of independent trustees could hurt investors, critic warns Stuart Washington 312 words 24 May 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENT THE absence of independent trustees in Australia's managed investment schemes may have increased investor losses in recent collapses such as Great Southern, a long-time critic of the dismantling of the trustee system has warned.
TD Graham Bradley, a former chief executive of Perpetual when it was the largest trustee business in Australia and the present president of the Business Council of Australia, aired his private views in a closed briefing in Sydney to mark the 10th anniversary of reforms to managed investment schemes. The structure of managed investment schemes has been brought into focus after collapses such as Great Southern and Timbercorp, and suspected fraud in the case of Trio Capital. Reforms passed in 2000 removed the role of independent trustee from managed investment schemes and replaced it with a "responsible entity". In Mr Bradley's speech in March, obtained by the Herald, he outlined the requirements for a responsible entity, including the need for a separate compliance committee, an Australian Financial Services Licence and a compliance auditor. But he argued the changes had failed to address the need for genuinely independent oversight and had not established an entity investors could rely on for restitution if things went awry. "The responsible entity is a creature of its promoter," Mr Bradley said on the question of independence. "The promoter appoints the directors." Noting the move to independent oversight in superannuation trusts regulated by the Australian Prudential Regulation Authority, he said of investment schemes: "I have no doubt that one day the same call will go up: where were the independent trustees?" He said a responsible entity needed to have $5 million in capital, regardless of its size, or a custodian that had at least $5 million in net tangible assets, and maintain adequate insurance cover. IN NS RE iinv : Investing/Securities c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand | nswals : New South Wales
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Business ARP Growth liquidator finds assets are worthless Stuart Washington 362 words 19 May 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. TRIO CAPITAL LOSSES from Albury fund manager Trio Capital are likely to exceed $180 million after investors in its ARP Growth fund formally received a no-cents-in-the-dollar valuation on their investments yesterday.
TD Administrator Neil Singleton of liquidators PPB delivered the news to about 40 elderly investors in a meeting in Sydney yesterday. Mr Singleton revealed PPB had been unable to value ARP Growth's main asset, a British Virgin Islands company called PPARP with investments of about $53 million. The nil valuation of PPARP adds to the disappearance of $123 million invested by Trio Capital through another of its funds, Astarra Strategic, bringing likely losses from Trio Capital to more than $180 million. BusinessDay has previously revealed two sets of accounts for PPARP, raising fears of fraud in ARP Growth. Yesterday's report to unit holders revealed ARP Growth held other worthless assets including a $2 million property loan, a $1.5 million loan to Trio Capital's former investment manager and a $1 million loan to Secare Health Centre and the Advanced Medical Institute founder Jack Vaisman. The administrators are awaiting the appointment of a liquidator in British Virgin Islands, PricewaterhouseCoopers, to attempt to recover some value from the PPARP investment. The investment is held through a complicated structure, including using a Hong Kong company, Empyreal, as funds manager. A unit holder, Mr Terry Gammell, said the delay in finding any value in PPARP meant the corporate regulator, the Australian Securities and Investments Commission, should examine the disappearance of the money. "PPB should be getting on to ASIC on our behalf," Mr Gammell said . Yesterday's meeting follows NSW Supreme Court judge George Palmer's order to wind up five Tri o Ca pit al funds, including ARP Growth and Astarra Strategic. He found Astarra Strategic had signs of a "fraudulent scam" and he found there were "inherent vices" in Trio Capital's business model. Most ARP Growth investors had established self-managed super funds, meaning they are not eligible for federal government compensation for fraud available to investors in mainstream retail super funds. Comment Page 8 IN NS RE i831 : Financial Investments | iinv : Investing/Securities c151 : Earnings | c15 : Performance | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business ASIC probity inquiry puts Trio adviser in spotlight Stuart Washington 339 words 11 May 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENTS AN INVESTMENT manager who advised Trio Capital, Shawn Richard, and the Hong Kongbased business he dealt through are being investigated on suspicion of dishonest conduct by the Australian corporate regulator.
TD About 10,000 superannuation investors have been affected after the Australian Securities and Investments Commission seized control of the Albury-based fund manager and $426 million in investments in December. Justice George Palmer ruled last month there were strong reasons to believe about $123 million T ri o invested through a hedge fund called Astarra Strategic had been fraudulently invested. The nature of the corporate regulator's investigation into Mr Richard and Global Consultants and Services Ltd was revealed for the first time in a NSW Supreme Court hearing yesterday. GCSL, its chief executive, Jack Flader, and a staff member, Marty Cohen, tried to stop Trio's administrators, PPB, from obtaining documents ASIC had received from its Hong Kong counterpart, the Securities and Futures Commission. GCSL's counsel, Ian Lloyd, QC, said the SFC had issued a notice to produce to GCSL dated December 1 last year. In the document the SFC said it was acting at the request of ASIC, which was investigating suspicion of dishonest conduct by Mr Richard, GCSL and a British Virgin Islands company used to place the investments, EMA. Mr Lloyd said that ASIC should not make public the documents received from SFC because they were provided under SFC's secrecy provisions. He also said the documents should not be made public because they were covered by public interest immunity. Guy Parker, SC, representing PPB, said the documents could be subpoenaed from ASIC, and public interest immunity only applied to matters of state. ASIC did not resist the release of documents to PPB. Justice Julie Ward reserved her decision. Earlier, Justice Palmer withdrew from the case after an application by Mr Lloyd that there could be a reasonable apprehension of bias about Justice Palmer's Trio judgment last month. IN NS RE i814 : Banking | ibnk : Banking/Credit c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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News and Features - News Review You wouldn't read about it Stuart Washington 1,323 words 24 April 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. The collapse of Trio Capital was barely believable. Now it has taken a novel twist, writes Stuart Washington. A high-octane investment fund established in Hong Kong. A murder in a red light district. A cast of characters of dubious merit. And what looks to be a tale of skullduggery involving a heist of Australian superannuation money. Fact or fiction?
TD In one of the strangest twists to date in the case of the Albury fund manager Trio Capital and its literary mirror, Triadica Securities, all of the above elements appear to be both fact and fiction. The facts about Trio Capital are scarcely believable. Investors look like they have been defrauded of at least $123 million, according to a recent court judgment. The fiction about Triadica Securities, which might be based on Trio Capital, is also astonishing, largely due to its source. The account has been penned under a nom de plume of David Andrews, a director of Trio. In the annals of corporate intrigue, it would be unusual for those whose job it is to look after investors' money to pen thinly disguised details of what might have happened well ahead of the almost inevitable courtroom brawl. Unfortunately for 10,000 superannuation investors, the likely heist of their $123 million placed through Trio Capital into offshore hedge funds is all too real. On the most optimistic take, Trio Capital's directors were unwitting dupes as large amounts were channelled to miscreants offshore. The probability of outright theft was highlighted in a judgment this month in the NSW Supreme Court by Justice George Palmer, who labelled Trio Capital's investments in its offshore hedge fund, Astarra Strategic, as having every sign of a "fraudulent scam". If the money has been stolen, it is biggest theft of superannuation in Australia. Only Alan Bond's thefts during his time at Bond Corporation would trump it. The real-life impact of these losses is severe. The Herald reported this week that 250 low-paid racecourse workers had invested in a Trio Capital-managed superannuation fund exposed to the losses, putting their life savings at risk. So much for the hard facts, which have been unfolding since financial regulators stepped in last October. In his working life, David Andrews, 57, was regarded as a talented economist and company director, joining Trio Capital in 2006 after an unblemished seven years at a fund manager operated by the Anglican Church, Glebe Asset Management. Rodney Dredge, who chaired that fund and was a director with Andrews, said: "David was your classic economist, and from what I gathered he was a pretty good economist." Few of Andrews's former colleagues know about his alter ego, David Morisset, a blogger and novelist and his "plan to spend the rest of my life writing fiction and the occasional poem". Andrews the novelist quotes Rumi, and both Heathcliff and Cathy from Emily Bronte's Wuthering Heights as he publishes snippets of novels inspired by his varied career. Page 97 of 159 2011 Factiva, Inc. All rights reserved.
Dredge is astonished at the writing hopes of Andrews. "I can't imagine him doing it, or having the skills to do it. He's an economist. I love them dearly, but they are as boring as batshit." Andrews is, however, no slouch. He was commended for his poem Persian Princess in the National Literary Awards in March. A novel excerpt titled Crown Jewels is from "a draft of David Morisset's novel set in Iran in the late 1970s", presumably drawing on Andrews's time as a diplomat in the Middle East. Another novel excerpt titled Barrington Avenue appears as "early drafts of David Morisset's novel about life in Sydney's western districts at the time of the Vietnam War", again presumably drawing on his experiences. But it is the excerpt of Lockhart Road posted in March that will be of most interest to Trio Capital investors. On his blog it is described as "an excerpt from the opening pages of David Morisset's early drafts of a crime fiction novel set against the background of Australia's trillion-dollar superannuation industry". The snippet offers what might be an account of the genesis of Trio Capital, including the opening line: Michael Macasero had apparently found out the hard way that the noise and traffic on Wanchai's Lockhart Road in the early morning hours was ample cover for casually committing murder in a rubbish-strewn alley. In the fictional account, Michael Macasero is a Filipino-American attracted to Hong Kong to manage a hedge fund. The novel excerpt opens with Macasero's body found in Hong Kong's red light district, murdered in his mid 30s. In real life, Matthew Nguyen Littauer was a Vietnamese American who was working to establish T ri o C a pi ta l and appeared on the board of its Australian owner in 2003. He was stabbed to death in the Tokyo red light district of Roppongi, aged 34. The Herald has established that Littauer was a central figure in a network of unlicensed stockbrokers that left a trail of burnt investors from the brokers' operations across Asia. A chatroom epitaph from someone who knew him well stated: "Matthew was a penny-stock fraudster who tricked 'clients', partners and employees and many times dealt with mafia types. This is not surprising at all." Still in his 30s when he was killed, he had set up supposedly sophisticated vehicles in various tax shelters to provide services for his clients in Hong Kong and was expanding into Australia. Investigations into Trio Capital reveal Astarra Strategic was at the pinnacle of supposedly sophisticated vehicles in various tax shelters, and had tapped a willing audience through Trio Capital. Indeed, companies involved in the Astarra Strategic investments have been registered in such farflung Caribbean enclaves as Belize, Anguilla, Nevis and St Lucia. Palmer used the proliferation of tax shelters as a basis for his decision to wind up Astarra Strategic and four other funds. His young English colleague, Joel Rogers, had an Australian mother and he had already set up a small Sydney office. Rogers was ready to move there permanently as soon as Macasero made the call. Perhaps the most intriguing question is whether any other characters are based upon real-life identities. There is Rodney Hawker, a rumpled 50-something Briton with a questionable banking track record and interesting sex life. Then there is Rogers, something of an apprentice to Macasero. The head of Trio Capital's investment manager, responsible for placing the investments made by Trio Capital, was a clean-cut Canadian called Shawn Richard, who moved to Australia to establish the business. Richard has said he met Littauer in a bar in 1996, when he was about 21. It has been established that Richard worked with Littauer in Taiwan in the early 2000s, before Littauer funded Richard in the purchase of what became Trio Capital in 2003. Page 98 of 159 2011 Factiva, Inc. All rights reserved.
Is Macasero a fictional proxy for Littauer? Is Rogers a fictional proxy for Richard? These are valid questions, but Andrews is not talking about his literary creation. Another question is what Andrews, a director of a company looking after investors' funds, is doing publishing a fictional version of a heist with all too many links to the real world. Amanda Ferguson, a psychologist and author who specialises in the effect of organisational structures on people at work, says such a fictional work by a person under stress could be seen as a cathartic attempt to deal with the events that had occurred. "It's a form of trying to process what has happened," she says. But she also cautions taking risks through the appearance of a published work, without considering the effects on others, could demonstrate blindness to its effects or even delusion. The Australian Securities and Investments Commission is scrutinising criminal action against directors of Trio Capital and associated companies. NS nedc : Commentary/Opinion | gmurd : Murder/Manslaughter | gcat : Political/General News | gcrim : Crime/Courts | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | hkong : Hong Kong | asiaz : Asian Countries/Regions | ausnz : Australia and New Zealand | china : China | chinaz : Greater China | devgcoz : Emerging Market Countries/Regions | dvpcoz : Developing Economies | easiaz : Eastern Asian Countries/Regions
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News and Features Racecourse workers lose savings in super fraud Stuart Washington 509 words 19 April 2010 The Sydney Morning Herald SMHH First 2 English 2010 Copyright John Fairfax Holdings Limited. LIFE SAVINGS of 250 low-paid racecourse workers have been caught up in a $123 million fraud case that could become the biggest superannuation theft in Australian history. Tabcorp's NSW casual racecourse wagering staff say they have not been told how much money they have lost after their Astarra Superannuation Fund was frozen by financial regulators last October.
TD A staff member for 33 years, Rosemary Walker, 72, who works at Randwick Racecourse, questioned how Tabcorp could have approved Astarra as a suitable destination for her super. "I'm puzzled as to why we started off in a reputable fund when we were with [former employer] AWA and ultimately we finished up in Astarra," she said. The staff put a human face on losses faced by 10,000 superannuation investors after their investments were placed with Albury-based fund manager Trio Capital. Trio Capital managed more than $400 million in investments including the Astarra Superannuation Fund before regulators removed the previous managers. On Friday a NSW Supreme Court justice, George Palmer, ruled that a separate offshore hedge fund managed by Trio Capital had all the signs of a "fraudulent scam" as he detailed "inherent vices" in Trio Capital's business model. The hedge fund called Astarra Strategic channelled $123 million in investments through the British Virgin Islands using companies based in obscure Caribbean tax havens including Belize, Nevis, St Lucia and Anguilla. In a finding ordering Astarra Strategic be wound up in the public interest, Justice Palmer wrote: "If one wants to conduct financial operations dishonestly or illegally - then it is to these jurisdictions that one goes to incorporate puppet companies with puppet directors in order to operate fraudulent schemes and to move money around the world in secrecy." Regulators have been unable to find any money. No charges have been laid. Astarra Superannuation Fund is not the corporate superannuation fund used by Tabcorp staff. Tabcorp's contributions to Astarra Superannuation are a legacy of the original fund the on-course staff were switched to when NSW TAB bought their previous employer AWA in 2000. Ms Walker has $21,000 at risk and the life savings of other staff members are under threat. 'We don't know if we're ever going to get our money," she said. A Tabcorp spokesman, Bruce Tobin, said the company had written to all affected employees and was working with the union. In his ruling, Justice Palmer said Astarra Strategic's use of tax havens should have sounded deafening warning bells "that there was a very high prospect that the funds would simply disappear into the ether - as has almost certainly happened in this case". But he said the use of the tax havens had not been disclosed in Trio Capital's statements to investors. Page 100 of 159 2011 Factiva, Inc. All rights reserved.
Superannuation losses from Astarra Strategic would represent the largest superannuation fraud or theft since current superannuation laws were enacted in 1993. $1.5 billion bonanza reaped by financial advisers BusinessDay, Page 1 CO IN NS tabcor : TABCORP Holdings Ltd i97912 : Gambling Industries | ilea : Leisure/Arts gfraud : Fraud | c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | nswals : New South Wales | ausnz : Australia and New Zealand
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Business Judge says Trio fraud Stuart Washington 396 words 17 April 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. COURTS INVESTORS with $123 million in an offshore fund managed by Trio Capital have almost certainly been victims of a "fraudulent scam", a NSW Supreme Court judge ruled yesterday.
TD Justice George Palmer detailed "vices" in Trio's business and ruled it was in the public interest to wind up five schemes that it managed, including the controversial fund Astarra Strategic. He was scathing about Astarra's use of tax havens in the British Virgin Islands, Anguilla, St Lucia, the Cayman Islands, Belize, the Cook Islands and Nevis. "If one wants to conduct financial operations dishonestly or illegally, then it is to these jurisdictions that one goes to incorporate puppet companies with puppet directors in order to operate fraudulent schemes and to move money around the world in secrecy," he wrote. More than $400 million invested in Trio has been frozen since October, when fears were raised that the $123 million invested in Astarra was the subject of a Ponzi scheme. Justice Palmer blasted Trio Capital's disclosure about the Astarra Strategic Fund as "nothing more than gibberish" and the structure of the fund as "inherently improvident". Justice Palmer said Astarra's product statements did not disclose that it relied on a contract called a deferred purchase agreement with a company called EMA International, with a post office box address in the British Virgin Islands. EMA is supposed to have invested in five underlying funds - the Exploration, Tailwind, SBS Dynamic Opportunities, Pacific Capital Markets and Atlantis Capital Markets funds - but administrators have been unable to find any any assets. "The administrators' investigations strongly suggest that EMA's 'investment' in the underlying funds is a fraudulent scam," Justice Palmer wrote. He wrote Trio's disclosures about Astarra meant "no more or less than that the fund can be invested in anything at all, no matter how foolish and risky". The fund structure was "an invitation to dishonesty by its promoters". Justice Palmer said it was in the public interest that the funds be wound up, concluding that "there are strong reasons to believe that a substantial part of the funds of [Astarra] were invested fraudulently and have been lost". The judgement yesterday formalises Justice Palmer's earlier order to wind up Astarra Strategic, Asttar Wholesale Portfolio Service, Asttar Portfolio Service, Astarra Overseas Equities Pool and ARP Growth. NS RE gcrim : Crime/Courts | gcat : Political/General News austr : Australia | ausnz : Australia and New Zealand
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Business Corporate regulator investigates former directors at Trio Capital Stuart Washington 389 words 13 April 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENT TRIO CAPITAL'S directors are being investigated for suspected criminal offences amid new allegations they may have acted improperly.
TD Former Trio directors have been questioned by the Australian Securities and Investments Commission in private examinations under the oppressive provisions of section 19 of the ASIC Act. Under the act, it is an offence not to attend the examination or to make details of the examination public. Elements of ASIC's investigation have been revealed in a report to Trio Capital's creditors, which also shows the administrator of Trio estimates up to $195 million in invested funds may be missing. The administrator, PPB, was appointed in December after fears were raised about $123 million invested in a hedge fund called Astarra Strategic and managed by the Albury-based Trio Capital. A global search is yet to establish the whereabouts of the assets. In its report, PPB says it has also been unable to establish the existence or value of $51 million invested in ARP Growth and $17 million invested in Ualan Property Trust and Millhouse Private Equity Trusts. BusinessDay has previously revealed the existence of two sets of accounts in ARP Growth, raising the possibility of fraud. PPB's report says ASIC is investigating Trio Capital for suspected breaches of the Corporations Act under a provision that imposes criminal penalties for directors that are reckless or intentionally dishonest and do not act in good faith. It also notes the Australian Prudential Regulation Authority had found Trio Capital in breach of sections of the Superannuation Industry (Supervision) Act. For the first time, PPB said its investigation showed some officers of Trio may not have acted with adequate care and diligence, nor acted for a proper purpose, which may be civil offences under the Corporations Act. The creditors' report shows that 36 creditors owed $1.2 million by Trio Capital are unlikely to receive any money unless there is successful action against company directors. It also reveals different outcomes among the 28 investment schemes for which Trio Capital acted as a responsible entity. Eleven funds have minimal exposure to the "problematic" assets. Another five are illiquid and being wound up, seven are dormant, and five are in the process of ending their relationship with Trio. CO IN NS ausic : Australian Securities and Investments Commission ihedge : Hedge Funds | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments | iinv : Investing/Securities c12 : Corporate Crime/Legal/Judicial | c41 : Management Issues | ccat : Corporate/Industrial 2011 Factiva, Inc. All rights reserved.
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Business No safety net for self-managed super STUART WASHINGTON 783 words 10 April 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. Opinion & Analysis More than 770,000 Australians with $380 billion in savings are ineligible for compensation in the worst case of a theft or fraud occurring in their superannuation funds.
TD In effect, a self-managed super fund member can see his or her retirement savings wiped out by theft. Investors in all other forms of super, experiencing exactly the same theft, can expect compensation from the federal government of about 90 in the dollar. Self-managed super has been the superannuation growth story of the past decade, growing at 20 per cent a year for the past five years and now the single-largest home for Australians' super savings. It covers about 32.1 per cent of the $1230 billion in Australian super investments. Self-managed super's rapid rise means about a third of Australia's super savings are excluded from a formal government compensation mechanism in the case of fraud or theft. Whether the exclusion should stand is being examined in the Cooper inquiry's review of superannuation. But recent events have exposed the gulf between compensation avenues for different classes of superannuation investors. Investors in funds regulated by the Australian Prudential Regulation Authority are covered by part 23 of the Superannuation Industry (Supervision) Act. Part 23 offers compensation for all forms of super, barring self-managed super, including the other two major homes for Australians' superannuation savings, industry funds and retail funds. A trustee of a super fund can apply for compensation if it is satisfied there has been "fraudulent conduct or theft". Reasons for self-managed super fund members being excluded from formal compensation lie with the apparently well-off nature of many self-managed super fund members. Such fund members represent about 7 per cent of overall super membership but control 32.1 per cent of all superannuation investments. The average size of a self-managed super fund is $860,000, although about a quarter have $200,000 or less invested. The average wage for self-managed super investors aged between 35 and 60 is about $106,000. Self-managed funds are limited to four members who all act as trustees of the fund. About 40 per cent of members are self-employed or derive their income from a business or partnership. One appeal of self-managed super is that it allows investors to control their own retirement savings, and gives them greater flexibility in where their money is invested. Investors can choose to invest directly in, say, property or shares, which is difficult to achieve in other forms of super. The apparently sophisticated nature of self-managed super members has led to a view from policymakers that they are big enough to look after themselves. Regulators are wary of creating a moral hazard, in which self-managed super fund members make reckless decisions under the influence of a compensation mechanism. The good news from the Cooper inquiry to date is there is no widespread signs of fraud or theft in self-managed superannuation accounts and overall the system is seen as being in good shape. The bad news is that compensation for super members is not just speculation. Page 106 of 159 2011 Factiva, Inc. All rights reserved.
ACT Super, the recently appointed trustee of super funds offered through Albury fund manager Tr io Capital, is preparing an application for compensation under part 23 of the Superannuation Industry (Supervision) Act. It follows the disappearance of $123 million in a hedge fund managed by Trio called Astarra Strategic. The path to a successful part 23 application is far from clear, and relies on the approval of the Minister for Superannuation, Chris Bowen. But the upshot is that if there has been a fraud or theft related to Astarra, super investors in the fund stand to receive about 90 in the dollar under the Superannuation Industry (Supervision) Act. But 50 members of another Trio Capital fund, ARP Growth, face another outcome. Their selfmanaged super totalling $58.5 million has also been invested into a British Virgin Islands vehicle. BusinessDay has revealed two sets of accounts for this vehicle, raising a strong possibility of fraud. The predominantly elderly self-managed super investors in ARP Growth are facing the loss of their retirement savings, without any safety net. It is a matter for Cooper to weigh the pros and cons of compensation for self-managed super investors. But service providers who have cropped up to establish self-managed super funds at a clip of about 3000 a month should consider putting a warning in large red letters on the front of their shiny self-managed super proposals. The warning should read: "You could lose the lot." IN NS RE i8150214 : Private Pension Funds | i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities gcat : Political/General News | cexpro : Existing Products/Services | gfinc : Financial Crime | nanl : Analysis | ccat : Corporate/Industrial News | gcrim : Crime/Courts | ncat : Content Types austr : Australia | ausnz : Australia and New Zealand
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Business Fictional resemblance to a heist Stuart Washington 378 words 8 April 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. SUPERANNUATION Michael Macasero had apparently found out the hard way that the noise and traffic on Wanchai's Lockhart Road in the early morning hours was ample cover for discretely [sic] committing murder in a rubbish-strewn alley.
TD Excerpt from Lockhart Road by David Morisset BILLED as a "crime fiction novel set against the background of Australia's trillion-dollar superannuation industry", the self-published author David Morisset sets up a racy story. An excerpt of the planned novel on Morisset's blog opens with a thirtysomething Filipino-American called Michael Macasero found dead in the red light district of Hong Kong after establishing a hedge fund called Triadica. The Australian Securities and Investment Commission's interest in a fictional account of a superannuation heist may be heightened, given Morisset's alter ego is David Andrews, a former director of Trio Capital. Real-life regulators are now investigating the disappearance of $123 million that was invested in the exotic hedge fund Astarra Strategic through Trio Capital. Andrews's fragment of a novel posted on March 17 details "investment regulators puzzled by apparent irregularities in a Sydney-based superannuation fund". Indeed similarities between Andrews's fictional account and the genesis of Trio Capital are striking. Matthew Nguyen Littauer, a 34-year-old Vietnamese-American, was found dead in Tokyo's red light district in 2004 after helping establish the nascent Trio Capital funds management business in Australia. In the novel excerpt Macasero "had set up supposedly sophisticated vehicles in various tax shelters to provide services for his clients in Hong Kong and was expanding into Australia". In real life, Littauer appears to have been a central figure in establishing a network of offshore hedge funds in tax havens that eventually received $123 million in investments through Trio. Regulators are yet to find the money. Andrews's use of Morisset as a pen name is established by their likeness in website photographs and similar online career biographies, including a stint as a diplomat in the Middle East. Andrews is an economist and has previously worked as head of the Anglican Church's investment arm, Glebe Asset Management. Calls to his western Sydney business were not being answered yesterday. NS nrvw : Review | gbook : Books | gcat : Political/General News | gent : Arts/Entertainment | ncat : Page 108 of 159 2011 Factiva, Inc. All rights reserved.
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Business Astarra funds custodian got around legal barrier Stuart Washington 358 words 6 April 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENT A HONG KONG business central to investigations into the disappearance of $123 million in Australian investments has previously accepted a client who could not pass a regulator's "fit and proper person" test.
TD Global Consultants and Services has also published a description of how it used structuring to sidestep regulatory requirements for disclosure of an owner's interest in an investment fund. Entities of GCSL, run by its chief executive, Jack Flader, have been named as custodian of three of five offshore hedge funds in which the bulk of the money from the ill-fated Australian fund Astarra Strategic was eventually placed. Regulators took over Astarra Strategic and its fund manager, Trio Capital, in December after fears were raised Astarra was a Ponzi scheme. Regulators are still searching for the whereabouts of $123 million invested in Astarra Strategic. GCSL was established in Hong Kong in 2006, opening offices in Belize, Anguilla, Singapore, Cook Islands, Samoa and Shanghai. It states its business is "legitimate offshore asset protection planning", setting up company, trust and fund structures for investors. The head of GCSL's Anguilla office, Carlyle Rogers, described in a 2007 GCSL newsletter how one of his clients could not meet the Anguilla regulator's "fit and proper person" test. GCSL went on to give a family member control of shares in a company, using a trust over the shares to vest beneficial ownership in the client's hands. Mr Rogers also described how it took on a client seeking ownership and control of a fund structure without his name showing his role on any public documents, although Anguilla's regulations require full disclosure. He told how the client's identity had been masked by a company while meeting the letter of the law. Mr Flader has been compulsorily examined twice by the Hong Kong Securities and Futures Commission, with a legal requirement to keep details of the investigation secret. He has told the Herald: "GCSL has complied with every requirement of it made by the Hong Kong SFC in relation to the ASIC investigation." IN NS RE ihedge : Hedge Funds | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments | iinv : Investing/Securities c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Out of the shadows Stuart Washington 2,117 words 27 March 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. HERALD EXCLUSIVE Millions of dollars in Australians' superannuation savings have vanished into exotic tax havens. Stuart Washington investigates the sharp characters behind a seemingly sleepy fund management operation from Albury.
TD Since last October, the savings of at least 10,000 superannuation investors have been frozen as regulators pick through $426 million invested in Trio Capital. At least $123 million is missing in what has been seen as an exotic investment in a fund of hedge funds offered by Trio called Astarra Strategic. Administrators hold little hope for meaningful recoveries, and in fact hold fears for $58 million invested in another Trio fund. The truth behind Astarra Strategic and Trio is likely to give both investors and the regulators tasked with guarding the sanctity of Australia's superannuation industry cause for grave concerns. Trio and its role in the superannuation industry became hostage to elements with long-lasting ties to questionable stock operators. Through interviews, the database of the US broking industry's self-regulation body, securities regulators' warnings and a guest list to an exclusive conference in the Thai beach resort of Pattaya, Weekend Business has pieced together close ties between key figures in Astarra Strategic and people with a history in the shadowy world of unlicensed stockbroking. The discomforting thing for Australian investors remains: they are seeing superannuation money, put into a regulated fund, now missing for six months and little sign regulators are any further ahead. Shawn Richard could have been excused a little nostalgia as he scanned down the guest list for the "global meeting" of stockbrokers planned for Pattaya in 2005. After all, he knew some of the names among the 25 intimately. He had worked with at least three of them when they got into that fix in Manila back in 2001. Indeed back in 2005, at least five of the 25 men at the meeting already had a history of run-ins with securities regulators. The Herald can reveal today Richard's long-standing relationships with a cadre of stockbrokers and hangers-on associated with unlicensed stockbroking firms in the south of Spain, Manila, Taiwan and Hong Kong. The Herald can also reveal for the first time Richard was named in 2001 by securities regulators as an associate of an unlicensed stockbroker in what is known as a boiler room scam. Richard, now 35, and his Hong Kong business partner for the past 11 years, Jack Flader, 47, have come into sharp focus in Australia in a continuing hunt for $123 million in missing money invested in a fund of hedge funds called Astarra Strategic. In ties that appear to bind, several figures from the 2005 conference are now playing central roles in the Astarra drama. Page 111 of 159 2011 Factiva, Inc. All rights reserved.
Among the men contemplating the dinners and bar tours provided as part of the Pattaya conference - the daily schedule was "subject to change based on the health of delegates" - nin e were or would be associated with brokers censured by regulators. Seven of the men have either been personally named by securities regulators or have been the subject of damning findings from industry self-regulation bodies. And a further four seem to have been associated with the shadowy hinterland of reputable law, accounting and broking firms that regularly grease the wheels of a disreputable industry. A boiler room is slang for the unlicensed broking firms that slip from country to country, changing their names as they sell virtually worthless penny stocks by cold-calling investors. The boiler room term arises from persuasive young "stockbrokers" hunched over the phones and persuading people to part with their hard-earned. Richard appears to have played a part in this "industry". He was named in 2001 by the New Zealand Securities Commission as being an associate of the unlicensed broker Millenium Financial operating in the Philippines in 2001. The warning was subsequently removed from the NZ Securities Commission website. The Securities Commission could not provide a reason for its removal. Weekend Business unsuccessfully sought comment about the warning and the conference in Pattaya from Richard through his lawyer. Fast forward to 2010 and Richard is in hot water again. Astarra Strategic and its fund manager, Tr io Capital, were taken over by regulators in December after Astarra Strategic was labelled a Ponzi scheme by a whistleblower, John Hempton. Richard was the investment manager for the broader funds management business of Trio Capital. His partner, the New Jersey-born, Brooklyn-raised Flader, appears to have been the owner of both Trio Capital and Richard's business. Regulators hunting for the $123 million are being taken on a merry chase by companies registered in obscure Caribbean enclaves including St Lucia, Anguilla, Nevis and Belize. What has been less well understood has been the background of many of the people who are part of Richard's long-established business network. The anonymous provider of an email about the 2005 conference remarked: "The attendees reads like a laundry list of who's who for boiler room enterprises." And Richard, who appears fifth on a list apparently drawn up with some form of seniority ranking, already knew many personally. Greg Rullo, Gary Artzt and Jon Lopresti were all coming to the conference. They had been named by regulators alongside Richard when they got into the fix in Manila with Millenium Financial. Then Richard had gone on to work at Pacific Continental Securities in the early 2000s with Rullo in Taiwan alongside Richard's good friend, Matthew Littauer. Littauer wouldn't be making it to Pattaya - he was stabbed to death in his office in the Tokyo red light district of Roppongi in the previous year. A former colleague of Littauer's has said Littauer was a central figure in unlicensed broking operations. On a happier note, the noted bon vivant Flader was playing host at his Pattaya home, alongside his Hong Kong offsider, the Scottish-born accountant James Campbell Sutherland. Flader's email about the conference contained an exhortation for what he refers to as the Noble Grape, suggesting to the guest list his favourite labels of reasonable cost included Chateau Talbot (1990, 1985 and 1989), Lynch Bages or Carruades De Lafite. As a reflection on the lifestyle Flader enjoys, a current vintage of Carruades De Lafite will set you back about $246. Page 112 of 159 2011 Factiva, Inc. All rights reserved.
The high life would no doubt continue at the conference's two "Gregory S. Rullo Bar Tours". Indeed, the high life continued for Flader after July 2006, when he established Global Consultants and Services Ltd (GCSL) in Hong Kong, which has emerged as playing a central role in channelling Australian money from the Astarra Strategic Funds. On paper, the business describes itself as "legitimate offshore asset protection planning", forming legal structures in offshore locations. It has opened offices in Belize, Anguilla, Singapore, Cook Islands, Samoa and Shanghai. In a dizzying whirlwind of offshore junkets in the past 3 years, Flader is able to tick off more than 80 destinations including to his offshore offices, the Eastern European cities of Tallin (twice), Riga and Prague (three times), Central America and Asia. Over the same period he has managed to squeeze in some rest and relaxation. At Bulgari's Bali resort - which publishes prices of about $US1400 ($1537) a night - he wrote on his website of "1 0 hours of massages, excellent Italian and Indonesian food, an ocean of fine wines, great workouts and painful yoga". Then there were his two visits for a charity to Hugh Hefner's Playboy Mansion in Los Angeles. "Jack & Friends attended and were both proud and privileged to have some fun while helping out some good causes," he wrote. Whether his travels have been curtailed after recent compulsory examinations about Astarra Strategic by Hong Kong's Securities and Futures Commission, with no right to silence, is unclear. At any rate Flader's jaunty website updates of his travels came to an end in October last year. Not even his customary Christmas trip to Miami to visit his mother rated a mention. HOW some of the men enjoying this particular conference came to be managing Australian superannuation money is something of a mystery. While Richard was obviously familiar with Frank Richard Bell through the Pattaya conference, Bell's name and his Exploration Fund have never been disclosed to Australian investors in Astarra Strategic. This is somewhat surprising, given Richard has said he has been investing money in Bell's fund for at least four years. The fund is now supposed to hold about $75 million of investors' money. Bell has a long and unfortunate stockbroking track record (see graphic). He was last the subject of press reporting when he was involved in a tragic car accident that killed two Filipino teenagers in February on his return to his home at the Philippine city of Cebu. Contacted by Weekend Business, Bell said: "I'm in the middle of a personal thing at the moment so I can't talk to you, at any rate." Administrators have found no sign of money invested in the Exploration Fund. But the links to boiler room scams seem pervasive. Weekend Business has revealed that some Exploration Fund money is invested in an illiquid over-the-counter bulletin board stock called Advanced Medical Institute (AMI). It is perhaps little surprise AMI has been regularly named in chatrooms as stock being sold by boiler room operators. Other attendees at the 2005 conference have subsequently had important roles in managing the missing Astarra Strategic money. Carl Meerveld, ninth on the list of attendees, is supposed to be managing Astarra Strategic money placed into the SBS Dynamic Opportunities Fund and Pacific Capital Markets. And Marty Cohen, eighth on the list, was revealed in court last week as the former operations manager of Flader's company, GCSL. Neither Meerveld nor Cohen has been the subject of any adverse regulatory findings. Page 113 of 159 2011 Factiva, Inc. All rights reserved.
GCSL's central role in husbanding the missing $123 million includes being the custodian of three of the funds where the money was placed. It also appears to have operated the company that placed the $123 million, a British Virgin Islands company called EMA International. TONY HETHERINGTON has a full-time role as a journalist exposing boiler room scams in a column called Readers' Champion for Britain's Mail on Sunday. In a part-time role he sits on a consumer advisory panel for Britain's Financial Services Authority, which acts as an oversight body of its enforcement measures. Hetherington claims credit for prompting the FSA's investigation into a British broker, Pacific Continental Securities, after stuffing more than 100 complaints into a sports bag and presenting it to FSA headquarters. The broker, which eventually collapsed in 2007, was found to have either deliberately or recklessly misled its customers as it used improper selling techniques, and would have been fined 2 million ($3.3 million) if it had survived. In short, it was a boiler room. No fewer than six attendees of the 2005 conference in Pattaya have worked with various offshoots of Pacific Continental Securities, including Richard in Taiwan. "Speaking in principle, the way that people who work in [fraudulent] investment companies move from country to country, confuses jurisdictions [and] confuses regulators," Hetherington said. "The classic stock scam boiler rooms change their name, move on somewhere else." What was different in the case of Pacific Continental Securities in Britain was its bold move to set up in the city of London. Hetherington experienced the consequences of this newfound respectability when Pacific Continental Securities mounted an unsuccessful Press Complaints Commission challenge against Hetherington's reporting. "It fought and it fought very hard and it hired very expensive lawyers to come after me," Hetherington says. He adds: "The only message I drew from their willingness to fight was that they were very keen to stay in business - the subtext there was they were making a lot of money." The history of Astarra Strategic is yet to be written. But there are clear signs Australia's trilliondollar superannuation industry has attracted some less-than-desirable elements through a plausible onshore base. Hempton has written in a submission to the Cooper review, which is examining the regulatory settings surrounding the Australian superannuation industry: "Superannuation however risks very large and long-lasting Ponzis because withdrawal is legally restricted." The Mail on Sunday's Hetherington asks whether Australia's defences around its superannuation industry were high enough to defend Australia from Astarra Strategic-style problems. "I'm surprised to see some familiar names that have cropped up in Astarrra Strategic that I'm virtually certain would never get a licence or ability to operate from the Financial Services Authority of Britain," he says. IN NS i8150214 : Private Pension Funds | i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities npag : Page-One Story | ncat : Content Types | c13 : Regulation/Government Policy | gfinc : Financial Crime | ccat : Corporate/Industrial News | gcat : Political/General News | gcrim : Crime/Courts | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | uk : United Kingdom | ausnz : Australia and New Zealand | eecz : European Union Countries | eurz : European Countries/Regions | weurz : Western European Countries/Regions
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Business Astarra hunt shifts to HK Stuart Washington 432 words 22 March 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. INVESTIGATION A CENTRAL figure in a global hunt for $123 million in missing cash has been compulsorily examined twice by the Hong Kong securities regulator at the request of the Australian Securities and Investments Commission.
TD Examinations of Jack Flader, the chief executive of Global Consultants and Services Ltd, came to light as he sought to block access to ASIC documents about the hunt for $123 million missing from the Astarra Strategic Fund. The whereabouts of money in the investment scheme has been the focus of investigators since September, when a fund manager and blogger, John Hempton, raised fears the fund might be a Ponzi scheme. Mr Flader and another GSCL employee examined in Hong Kong, Marty Cohen, are challenging a subpoena for access to ASIC documents issued by the fund's new administrator, the insolvency firm PPB. Regulators appointed PPB in December amid their concerns about the handling of $426 million in investments by the former manager Trio Capital. Astarra Strategic and four other former Trio funds were placed into liquidation on Friday. Mr Flader's company GCSL acted as the administrator of a British Virgin Islands company, EMA International, which was responsible for placing Astarra's investments into five offshore funds. A company linked to GCSL is also believed to have provided services to three of these offshore funds: The Exploration Fund, the SBS Dynamic Opportunities Fund and the Pacific Capital Markets Fund. Mr Flader is arguing that secrecy provisions attached to the Hong Kong investigation mean ASIC documents sourced from the examinations should not be passed to PPB. Mr Flader's barrister, Ian Lloyd QC, said he and perhaps the court were bound by secrecy provisions imposed by the Hong Kong's Securities and Futures Commission. The court was told in an affidavit that Mr Flader "attended two compulsory and very lengthy interviews of the SFC ... where he was required in law to answer all questions; there is no right of silence in these interviews." The affidavit says that the secrecy provisions of a SFC investigation mean it is a criminal offence to reveal any information aboutthe investigation. Justice George Palmer asked: "Am I bound by the Hong Kong Act?" Mr Lloyd replied: "It depends if your honour would like a holiday in Hong Kong in the future." Mr Flader's challenge of the subpoena will be heard in May. Documents made public on Friday also showed that cash in Astarra Strategic was distributed to companies in exotic tax havens, prompting a warning to investors from Justice Palmer. NS RE npag : Page-One Story | ncat : Content Types | gcrim : Crime/Courts | gcat : Political/General News
hkong : Hong Kong | asiaz : Asian Countries/Regions | china : China | chinaz : Greater China | devgcoz : Emerging Market Countries/Regions | dvpcoz : Developing Economies | easiaz : Page 116 of 159 2011 Factiva, Inc. All rights reserved.
Eastern Asian Countries/Regions PUB Fairfax Digital Australia & New Zealand Limited AN Document SMHH000020100321e63m0001e
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Business Astarra to be wound up COURTS Stuart Washington 431 words 20 March 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. A NSW Supreme Court judge has ordered the winding up of Astarra Strategic Fund and four other Trio Capital funds, criticising their former managers and the use of offshore tax havens. Justice George Palmer accepted an application by the administrator PPB to wind up Astarra Strategic, ARP Growth, Astarra Overseas Equities Pool, Astarr Wholesale Portfolio Services and Astarr Portfolio Services.
TD In other developments, Global Consultants and Services Ltd (GCSL), its chief executive, Jack Flader, and its former operations manager Marty Cohen, sought this week to block a subpoena by PPB to view documents held by the Australian Securities and Investments Commission. Astarra Strategic Fund has been the subject of investigations after it emerged $123 million had been invested through tax havens, with the Hong Kong-based GCSL acting as custodian. Justice Palmer said he would publish reasons for his orders to wind up the funds, to warn the public of "the danger of investing in schemes which are not utterly transparent and utterly transparently managed by reputable and reliable responsible entities". BusinessDay has reported fraud fears over $58.6 million invested in ARP Growth after revealing two sets of accounts for the fund's major investment. AOEP has about $9 million in reported assets and APS has about $4.1 million, almost all of which is invested in AWPS, which has about $63.4 million in reported assets. PPB submitted to the court that the funds were illiquid and that it was difficult to recover the reported values. Justice Palmer has ordered the funds be wound up after finding some funds were apparently insolvent, that there were cross investments between the funds and because of the insolvency of as the responsible entity for the funds. "I'm disturbed to read In the summary of facts that so much of the funds have been channeled through entities registered in the British Virgin Islands, Cayman Islands, St Lucia, Belize; all hallmarks of an endeavour to avoid scrutiny in the plain light of day," he said. He also appeared to criticise regulatory action on the funds: "That [warning] really has to be emphasised by the courts if no one else is going to do it." Yesterday, BusinessDay incorrectly reported that ASIC sought to block PPB's access to documents. Instead, Mr Flader and Mr Cohen are arguing it is not in the public interest to allow PPB to access evidence that the men provided to Hong Kong regulators, which was passed on to ASIC, because it could undermine investigations. CO NS RE ausic : Australian Securities and Investments Commission gcrim : Crime/Courts | gcat : Political/General News austr : Australia | ausnz : Australia and New Zealand
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Business ASIC refuses to release Trio details Stuart Washington 293 words 19 March 2010 The Sydney Morning Herald SMHH First 4 English 2010 Copyright John Fairfax Holdings Limited. MISSING MILLIONS THE Australian Securities and Investments Commission is resisting a subpoena for documents supposedly central to establishing the whereabouts of $123 million in missing Trio Capital funds.
TD The refusal to hand over documents subpoenaed by Trio Capital's administrators, PPB, has resulted in PPB's public examination of Trio's investment managers, Shawn Richard and Eugene Liu, being postponed from next week until mid-July. "In the circumstances, we have delayed the examinations until we are able to access this further information," the administrator, Neil Singleton, said yesterday. PPB had subpoenaed documents from ASIC in the hope it would help establish the whereabouts and value of $125 million in assets invested through Astarra Strategic Fund. PPB has previously stated that it has been unable to establish the existence of $123 million in assets invested in the fund and channelled through the British Virgin Islands. Mr Richard has claimed he has documents that prove the existence of the assets, but he provided copies only to ASIC. In the NSW Supreme Court on Wednesday ASIC refused to release the documents to PPB. An ASIC spokeswoman was unable to comment about the reasons for the refusal. In an unrelated development, PPB has said it is hopeful of announcing a replacement responsible entity for several Trio Capital funds within seven days. The switch gives investors in more liquid funds, including the Astarra balanced, conservative and growth funds, the hope of recouping some investments, less the money in impaired assets. Any move to replace Trio as the responsible entity would require a public meeting with 28 days' notice. Trio Capital funds with major impairments, including ARP Growth and Astarra Strategic, are being wound up. CO IN NS RE ausic : Australian Securities and Investments Commission i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Case being prepared for Trio government compensation Stuart Washington 380 words 8 March 2010 The Sydney Morning Herald SMHH First 2 English 2010 Copyright John Fairfax Holdings Limited. INVESTIGATION THE trustee for superannuation funds operated by Trio Capital has started collecting evidence of possible fraud, in a step towards a compensation claim for investor losses from the federal government.
TD Any claims for compensation for two Trio Capital funds, with $125 million invested in Astarra Strategic and $55 million invested in ARP Growth, would be the largest claims made under a federal scheme for superannuation compensation. Until 2007 the government paid $44 million in compensation in 802 claims since 1993. Under section 23 of the Superannuation Industry (Supervision) Act 1993, a trustee can apply for compensation if it is satisfied there has been fraudulent conduct or theft. The Minister for Superannuation, Chris Bowen, would rule on any request, after asking for advice from the Australian Prudential Regulatory Authority. Under the legislation, any payments are capped at 90c in the dollar. Compensation under section 23 covers investors in superannuation funds, but not investors in managed investment schemes. BusinessDay has been told by two sources that Mike Hill, the employee of the accounting firm McGrathNicol appointed as trustee to Trio Capitals superannuation funds, has discussed preparations for a section 23 application during regular meetings with APRA about Trio Capital. Mr Hill, as a director of ACT Super Management, was appointed by APRA as trustee of the Trio Capital funds in December after concerns were raised that Astarra Strategic was a Ponzi scheme. BusinessDay has since revealed extensive links between the fund manager controlling $75 million in investments, Frank Richard Bell, and so-called boiler-room scams. A boiler-room scam is when unlicensed brokers sell nearly worthless over-the-counter stocks by cold-calling unsuspecting investors. In another Trio Capital fund invested through the British Virgin Islands, ARP Growth, BusinessDay has revealed there are two setsof accounts, raising the possibility of fraud. Mr Hill was unavailable for comment on Friday. Difficulties in claiming compensation include uncertainties about where the money in Astarra Strategic has been invested. The former investment manager Shawn Richard has refused to co-operate fully with administrators in the hunt for the cash, but says there was no fraud in placing the money. Inquiries by the Australian Securities and Investments Commission are continuing. NS gfraud : Fraud | greg : Regional Politics | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | gpir : Politics/International Relations | gpol : Domestic Politics | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter nswals : New South Wales | ausnz : Australia and New Zealand | austr : Australia 2011 Factiva, Inc. All rights reserved.
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PUB Fairfax Digital Australia & New Zealand Limited AN Document SMHH000020100307e63800018
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Business Astarra asset trail leads to Caribbean FINANCE Stuart Washington 385 words 6 March 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. THE global hunt for Astarra Strategic's assets could take a surprising turn: some cash may have found its way into a loss-making winery in the backroads of the Hunter Valley. Investigators have been searching for $125 million in Astarra Strategic since last October, when regulators froze all funds in Trio Capital.
TD It has emerged that Astarra Strategic's money was invested in the Exploration Fund, which is registered in the Caribbean tax haven of St Lucia and managed by Frank Richard Bell. Mr Bell was named by Hong Kong regulators in last July for selling an unlicensed investment fund called the Strategic Opportunity Fund to Hungarian investors. He has also been associated with a broking house reported by regulators as a boiler room, in which unlicensed brokers cold-call unwary investors to sell them infrequently traded and often worthless stocks. Astarra Strategic has placed about $75 million into Mr Bell's Exploration Fund. The former names of the Exploration Fund are the Huntleigh Investment Fund and the Strategic Opportunity Fund. The Huntleigh Investment Fund has appeared on the share register of two over-the-counter stocks registered with the US Securities and Exchange Commission: Yarraman Winery and Advanced Medical Institute. The shareholding in AMI, the controversial erectile dysfunction company founded by its chief executive, Jack Vaisman, appears to have been sold. But BusinessDay has confirmed with the chief executive of Yarraman Winery, Ian Long, that his Upper Hunter winery is still owned by the US over-the-counter company and Huntleigh remains on the share register. In its most recent annual report Huntleigh has 3.5 million shares, worth about $US1.7 million on paper at the current share price of 50c. The shares were bought in 2006. Yarraman, which reported a loss of $958,000 for the nine months to March 31 last year, was involved in an unsuccessful takeover bid for Evans & Tate in 2007. On Thursday the investment manager of Astarra Strategic, Shawn Richard, produced a letter from the Los Angeles accounting firm Lichter, Yu and Associates to support the existence of investments made by Astarra Strategic. Mr Lichter is the company secretary of Yarraman Winery and his firm has previously been auditor to AMI. IN NS RE i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter namz : North American Countries/Regions | usa : United States
PUB Fairfax Digital Australia & New Zealand Limited AN Document SMHH000020100305e63600038 2011 Factiva, Inc. All rights reserved.
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Business Astarra fund millions sent to dodgy dealer Stuart Washington and John Garnaut 850 words 2 March 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. SUPERANNUATION THE bulk of $125 million in Australian money invested in five offshore hedge funds has been sent to a known spiv, in what could become the largest case about missing cash in Australian history.
TD Frank Richard Bell, a British broker with a history of dubious deals, has been named as the manager of an offshore fund that received $75 million invested in Astarra Strategic. Money sent to Mr Bell's Exploration Fund provides the latest twist in an international hunt for more than $120 million invested in Astarra Strategic. And those close to the investigation admit it is likely no funds will be recovered. The hunt was launched last October when fears were first raised that Astarra Strategic may have been a Ponzi scheme. The money in Astarra Strategic was invested through the Albury fund manager Trio Capital, in an international transfer of funds that reveals weaknesses in Australia's superannuation regulation. The colourful record of Mr Bell's appearances before the US broking industry's independent regulatory body raises the likelihood investors may have been fleeced, despite continuing uncertainty about where the funds have ended up. The fund's appointed administrator, PPB, issued a letter last week that telegraphs the likely fate of the $125 million, which is mostly held in a complicated contractual relationship known as a "deferred purchase agreement". The administrator wrote succinctly: "The value of the deferred purchase agreements is uncertain." The administrator, Neil Singleton, said the funds had been placed into five hedge funds: Exploration, Tailwind, SBS Dynamic Opportunities, Pacific Capital Markets Cayman and Atlantis Markets Cayman. Mr Bell operates the Exploration Fund, which administrators say is the destination for most of Astarra's $125 million in investments. To date PPB has only found rats and mice from Astarra Strategic's investments: $US100,000 out of a bank account in Hong Kong and evidence about $1.2 million may sit in Tailwind. Then there is $1.4 million in a bank account of the custodian, National Australia Trustee, and $550,000 in application money submitted by investors. Astarra Strategic was supposed to have entered a contract with a British Virgin Islands company, EMA International, which then invested the money in five hedge funds. The placement of the money was supposed to have been checked by a Hong Kong company, Global Consultants and Services Ltd (GCSL), in its formal role as company secretary of EMA and as custodian for four of the hedge funds. The chief executive of GCSL, Jack Flader, is a subject of investigators' inquiries because of his company's central role in placing Astarra Strategic's money in the offshore hedge funds. When BusinessDay met Mr Flader in Hong Kong recently, it encountered a middle-aged man who looked very stressed. Page 123 of 159 2011 Factiva, Inc. All rights reserved.
BusinessDay sought an explanation for the missing money, but was politely refused. "I can't talk about this. It's a shame, I would love to talk about this ... there is probably another side to the story but I can't talk about it," he said. The former investment manager of Astarra Strategic, Shawn Richard, has said he is confident the money still exists, and he has documentary evidence to support this assertion. But he said Mr Flader, his former business partner, is no longer returning his calls. BusinessDay is making no suggestions of involvement in money becoming missing by Mr Richard or his offsider, Eugene Liu, who acted as investment managers for the fund. Nor is there any suggestion of such involvement by Trio Capital. Problems in the recovery of any money are illustrated by an examination of Mr Bell's broking record. He has an extensive record of being fined by the US broking industry's self-regulation body, originally known as the National Association of Securities Dealers but now called the Financial Industry Regulatory Authority (FINRA). Mr Bell was suspended in 2008 after failing to pay two arbitration payouts awarded against him. In a 2008 ruling, New World Financial and several staff, including Mr Bell, were ordered to pay $378,000 for breaches of fiduciary duties and securities laws. In a 2004 ruling, Mr Bell, acting for World Financial Capital Markets, and Pacific Continental Securities, were ordered to pay $US67,000. And in a separate finding in November 2003, he was ordered to pay $US40,000 and barred for eight months for World Financial issuing research reports that exaggerated company performances in return for issues of their shares. His previous employment history includes a stint as compliance officer with Pacific Continental Securities, which appears to be a common former employer among those close to Astarra Strategic. Mr Richard and Mr Liu were both employed by Pacific Continental Securities. Mr Flader was previously general counsel for its Hong Kong owner, Zetland Financial Group. Pacific Continental Securities UK failed in 2007 after operating as a boiler room, selling nearly worthless US shares to unsuspecting investors. Mr Bell also worked for broker New World Financial, which has been the subject of regulators' warnings. IN NS RE ihedge : Hedge Funds | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments | iinv : Investing/Securities npag : Page-One Story | ncat : Content Types | c17 : Funding/Capital | ccat : Corporate/Industrial News | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter hkong : Hong Kong | austr : Australia | asiaz : Asian Countries/Regions | ausnz : Australia and New Zealand | china : China | chinaz : Greater China | devgcoz : Emerging Market Countries/Regions | dvpcoz : Developing Economies | easiaz : Eastern Asian Countries/Regions
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Business Pensioners caught in freeze of Trio funds Stuart Washington 475 words 18 February 2010 The Sydney Morning Herald SMHH First 2 English 2010 Copyright John Fairfax Holdings Limited. FINANCE A CENTRAL Coast retiree faces the forced sale of her modest fibro house after regulators froze $426 million in superannuation and investments in Albury-based fund manager Trio Capital.
TD Jude Nicholson, 65, said she would have to borrow money for food if her monthly pension payment of $630 remained frozen, after regulators took over the management of the Trio Capital funds in December. Ms Nicholson is surviving in Tumbi Umbi on a part-pension payment from Centrelink, which cannot be increased because of uncertainty about the state of her investments. "Each time my pension comes in I pay the bills; this fortnight there's not going to be anything left," Ms Nicholson said. Her fate is shared by many among the 10,000 who invested in Trio Capital's superannuation products, which are now largely frozen. Their plight will be clearer after a hearing tomorrow in which the NSW Supreme Court has been asked to approve payments from some of the frozen funds. The Australian Securities and Investments Commission froze Trio Capital's funds in October after a whistleblower, John Hempton, tipped off regulators about unlikely returns from Trio's Astarra Strategic Fund. In recent developments, the Herald has learnt that about $75 million that was placed in the $118 million fund has been invested in small, poorly performing offshore companies that offer almost no chance of a return to investors. Ms Nicholson has been unable to discover the full impact on her life savings of about $172,000 she invested in Trio Capital on the advice of a Wollongong-based financial planner, Colin Warne. In making her investment, Mr Warne, who is a director of financial planner Dominion WFS, gave Ms Nicholson documentation showing an unrealistic investment performance of the Astarra Strategic Fund. The fund Ms Nicholson invested in charges about 3 per cent annually, high when compared to the average of 2 per cent in for-profit retail superannuation products. Non-profit superannuation products have average annual charges of just above 1 per cent. Mr Warne was named in an ASIC press release in 2004 after $4.6 million was raised from his clients, mainly retirees from Wollongong, for an unregistered managed investment scheme. The courts made no findings against Mr Warne, who could not be contacted for this story. Garry Weaven, the chairman of Industry Funds Management and an advocate of non-profit superannuation, said the incentives for financial planners in recommending investments such as T r i o needed to be examined. "For too long accountants and financial planners have been able to hold themselves out as Page 125 of 159 2011 Factiva, Inc. All rights reserved.
professional advisers while actually acting in their own interests," he said. "The system of paying commissions to advise people to take your product pervades all levels of the retail [for-profit] industry." CO IN NS ausic : Australian Securities and Investments Commission i831 : Financial Investments | iinv : Investing/Securities | i8150214 : Private Pension Funds | i81502 : Trusts/Funds/Financial Vehicles c16 : Bankruptcy | cexpro : Existing Products/Services | cactio : Corporate Actions | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Trio's failure could ensure Cooper's success in review of conflicted super industry STUART WASHINGTON 768 words 17 February 2010 The Sydney Morning Herald SMHH First 8 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS There are sharp lessons Jeremy Cooper can draw from the Trio Capital imbroglio in his review of Australia's superannuation industry.
TD Make no mistake, Trio's mismanagement of investments shows system failure of a magnitude Cooper cannot afford to ignore. Put bluntly, the superannuation savings of several thousand Australians has been exposed to the mysterious disappearance of $118 million in Trio's Astarra Strategic Fund and what may be fraud, evidenced by two sets of accounts, in Trio's ARP Growth Fund. How this could happen in a closely regulated system should send a shiver down the spines of Australians depending on superannuation for their retirement. More particularly, it should concern those Australians relying on financial planners to provide them with advice. What Trio has come to demonstrate, yet again, is self-interested financial planners recommending products investors should never have gone near. BusinessDay has seen promotional material provided to investors by the Wollongong-based financial planner Dominion Group showing Astarra Strategic Fund having higher returns than the US-based S&P 500 stockmarket index but lower risk than a government bond index. Too good to be true? Such representations were simply not credible and should not have been distributed by any licensed financial planner. Starting from the basics, it is worth thinking about how a little-known Albury-based fund manager such as Trio came to hold an estimated $426 million in investments. Well, the number of investments grew in the last 18 months through about $100 million sourced from a Port Augusta-based financial planner, Seagrims. A fund manager establishing this kind of relationship with a financial planner is what is known as "distribution": harvesting the bucks from investors. Seagrims and Trio came to what was effectively a joint venture in which Trio provided the funds and Seagrims labelled them. The usual payments financial planners receive from recommending investments are known as trailing commissions, paid annually. But the financial benefits for Seagrims went beyond its trailing commission of up to 1.1 per cent in invested funds annually. (Investors in the Seagrims-badged funds paid total annual fees of up to 2.65 per cent, high when compared to Rice Warner's most recent figure of 2 per cent for the average retail fund.) Those additional financial benefits were twofold: Seagrims discloses in its financial services guide that it received 50 per cent of the money Trio was paid to manage the Seagrim-badged investment funds. Page 127 of 159 2011 Factiva, Inc. All rights reserved.
Seagrims also discloses it could receive 50 per cent of the equity from the business of running the Seagrims-labelled funds. So the path looks something like this: a financial planner, Seagrims, is financially rewarded for investing funds in Trio, in three different ways. And, with almost unseemly haste, a large proportion of investors' money suddenly appears inside Trio. The Trio-Seagrims relationship also shows how merely turning off commissions may not remove all incentives for financial planners to recommend certain investments. Is there anything that stops a financial planner engaging in commercial relationships with investments they recommend? No. Under existing Australian laws, if the commercial relationships are openly disclosed to investors in a financial services guide and a product disclosure statement, then almost anything, including common ownership of a planner and a fund, is OK. Other planners that are over-represented in Trio funds seem to be fellow members alongside Seagrims in the Association of Independently Owned Financial Planners. And the above average trailing commissions Trio offered are likely to have been attractive to some of those planners. One of these "independent" members is the fully licensed financial planner Wright Global Investments. BusinessDay has discovered Wright Global Investments is owned by the same mysterious Hong Kong figures that own Trio Capital and Trio Capital's investment manager, Astarra Asset Management. In this case, Trio Capital's logo of a triangle is appropriate. Trio Capital was part of an iron triangle of self-interest: a planner whose owners had an incentive to recommend the funds that it also owned. The funds had a commercial incentive to use the investment manager owned by the same people. And it was the investment manager who recommended $118 million be placed into mysterious British Virgin Islands funds; it is yet to be recovered. This was an iron triangle of self-interest that flourished under existing regulations. Take note, Mr Cooper. And remember it was pensioners who invested their savings in Australian superannuation products whose interests were not looked after. NS RE gplan : Urban Planning/Development | gcat : Political/General News | gpir : Politics/International Relations | gpol : Domestic Politics austr : Australia | ausnz : Australia and New Zealand
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Business ASIC must move quickly on Trio fund Stuart Washington 689 words 16 February 2010 The Sydney Morning Herald SMHH First 6 English 2010 Copyright John Fairfax Holdings Limited. OPINION & ANALYSIS When there are two sets of accounts with widely varying outcomes it is hard to avoid an ugly possibility: some form of fraud has been afoot. This is the proposition investigators of Trio Capital are now examining when it comes to one fund managed by Trio, the ARP Growth fund.
TD Trio Capital is the Albury-based fund manager that shot to unwanted prominence when its control over a series of managed investment schemes and superannuation trusts was seized by regulators in December. A total of $426 million in investments is frozen as administrators and investigators pick through accounts to piece together where the money has ended up. Regulators acted on a tip-off from a Bronte Capital fund manager, John Hempton, that one of its managed funds, Astarra Strategic Fund, was posting extremely unlikely returns. To date attention has focused on the missing $118 million placed through Astarra Strategic Fund, which was supposed to be invested through the British Virgin Islands. BusinessDay has reported extensively on the links between Astarra Strategic Fund's former managers Shawn Richard and Eugene Liu and their former employer Pacific Continental Securities. Pacific Continental Securities (UK) was a disreputable broker that sold nearly worthless penny stocks to unsuspecting investors, falling into administration in 2007 before the Financial Services Authority could fine it 2 million. But the ARP Growth Fund is a completely separate fund, with its own substantial problems. Those problems are clearly shown by two separate sets of accounts for its main investment, also made through the British Virgin Islands, in a fund called Professional Pensions ARP. One set of accounts provided to ARP Growth investors was a meticulous list of about 15 exotic hedge funds that make up the underlying investments of $50 million placed into the fund back in 2005 or so. Accounts in Australian dollars show a remarkable story. Through the most volatile period in global markets in decades, the investment dipped about 10 per cent in the three months after December 2007 then slowly clawed back those losses. Even more extraordinarily, these steady returns occurred over a period of wild yo-yoing in the value of the Australian dollar versus the US dollar. In short, the returns are extremely unlikely. The additional problem is that a closer examination of the funds reveals significant credibility problems. Investments were reported last August for hedge-fund managers, such as Centrix and Cornell Capital, that did not exist at the time of the report. Public information shows Eden Rock Finance Fund more than halved in value since December 2007. But in the accounts supplied to ARP Growth investors it only fell 4 per cent in the first period. And other funds including the Denholm Hall Russia Arbitrage Fund and the Fairfield Ludgate Hill Asian Arbitrage fund are equally exotic and unlikely to have fared fantastically in volatile times. So one set of accounts looks difficult to rely on. On the other hand, BusinessDay has received documents titled Fortis Prime Fund Solutions (Asia) that are supposed to represent the true state of affairs of the British Virgin Islands fund. They show that in December 2007 there was only $36.4 million in capital left in the fund. By May 2008 there was only $26.5 million left. This is a far cry from the $50 million in hedge-fund investments gamely hanging in there in the list of hedge-fund accounts received by ARP Growth's Page 129 of 159 2011 Factiva, Inc. All rights reserved.
Australian investors. BusinessDay has been told by the investment manager that only $7 million is left now. Somewhere between the two sets of accounts there is the possibility of fraud. Regulators have some finely balanced considerations when they pursue these issues, not least the fate of the money invested through the British Virgin Islands. In June 2008, in accounts audited by the listed auditor WHK, ARP Growth showed assets held through PPARP of $61 million. On the face of it, investors have been lied to in statutory accounts. The Australian Securities and Investments Commission should not hold back on the perpetrators. NS gfraud : Fraud | nanl : Analysis | nedc : Commentary/Opinion | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Fraud fear in Trio fund's lost $45m Stuart Washington 507 words 16 February 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. FINANCE TWO sets of accounts have emerged for $50 million invested in a fund managed by Trio Capital, raising the possibility of outright fraud.
TD Investors in the Australian fund, ARP Growth, have been told the fund's main investment - a series of exotic hedge funds owned through a British Virgin Islands fund - was valued at $52.5 million last August. But Philip York, a director of Empyreal Holdings and the investment manager of the offshore fund called Professional Pensions ARP, said the value of investments were now worth about $7 million . Mr York said there was a "discrepancy" between accounts issued from investments in the British Virgin Islands and what has been reported to Australian investors. "I can confirm there are serious discrepancies," he said. "It does not agree with what we have got and what we have reported to other [international] investors." Australian investors have received reports showing the fund swinging between $54.7 million in December 2007 and $52.5 million last August. But BusinessDay has obtained statements that appear to be from Fortis Prime Fund Solutions (Asia), the offshore fund's administrator. These statements show assets in the fund plummeting from $36.4 million in December 2007 to $26.5 million in May 2008. ARP Growth's audited annual report put a value of $61 million on the same assets in June 2008 a clear mismatch with the Fortis documents. "Fortis provided those figures ... those figures agree with my figures but they are different to what has been reported to ASIC," Mr York said. Paul Gresham, an investor in the ARP Growth fund and its investment manager up until June 2007, said of investment losses in the fund: "It's news to me." He said the documents he had seen updating investors had come from the offshore fund. "I was under the impression that it was information that came from Empyreal," Mr Gresham said. Mr York said the information received by Australian investors had not been provided by Empyreal. "This issue is not an issue of Empyreal's, it is not an issue of PPARP's," Mr York said. If the Fortis documents prove to be correct, Australian investors in ARP Growth have been supplied incorrect information about the performance of their funds since at least December 2007. Documents provided to Australian investors have included reports on holdings in hedge funds. But at least some of those hedge funds appear to have closed or gone out of business - while still reporting stable capital positions to ARP Growth investors. Regulators took control of Trio Capital's funds last December, seizing control of almost $426 million invested through the funds including $118 million invested through the British Virgin Islands in the Astarra Strategic Fund. The whereabouts of the $118 million has not yet been established. Page 131 of 159 2011 Factiva, Inc. All rights reserved.
Administrators from PPB are continuing to examine the accounts of the Trio Capital funds, which have been frozen for almost all redemptions since October last year. IN NS i81502 : Trusts/Funds/Financial Vehicles | ihedge : Hedge Funds | ialtinv : Alternative Investments | iinv : Investing/Securities npag : Page-One Story | gcat : Political/General News | ncat : Content Types | c12 : Corporate Crime/Legal/Judicial | gfraud : Fraud | ccat : Corporate/Industrial News | gcrim : Crime/Courts | gfinc : Financial Crime | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Mystery deepens over missing Trio funds Stuart Washington 451 words 9 February 2010 The Sydney Morning Herald SMHH First 4 English 2010 Copyright John Fairfax Holdings Limited. FINANCE ADMINISTRATORS have so far been unable to satisfy themselves about the value of another $52 million invested in a Trio Capital-managed fund.
TD The ARP Growth Fund has as its major investment $52 million invested through the British Virgin Islands in a fund of hedge funds. The investment vehicle, Professional Pensions ARP Ltd, also based in the islands, uses a Hong Kong company, Empyreal Holdings, as its investment manager . "We have not been able to, atthis point, establish the value," a PPB partner, Neil Singleton, said yesterday. PPB was appointed administrator of the ARP Growth Fund after regulators swooped on Trio Capital on December 17 and removed it as the responsible entity or trustee from $426 million in investments. Continuing uncertainty about ARP Growth follows difficulty by administrators and regulators in tracing $118 million invested through another Trio Capital managed fund, Astarra Strategic. Establishing the existence of ARP Growth's major asset has been slow because of negotiations on a confidentiality agreement requested by the British Virgin Islands-based Professional Pensions on January 20. Another PPB partner, Mark Robinson, said documents had been delivered later to show that the investments and the documents were being examined. Even once assets have been established, valuing investments in hedge funds ranging from the Denholm Hall Russia Arbitrage Fund Class A, the Alpstar Secured Bank Loan Fund and the Fairfield Ludgate Hill Asian Arbitrage Fund remains extremely difficult. Professional Pensions has asked the British Virgin Islands for approval to wind up the fund, raising the prospect of hard-to-sell hedge fund assets being sold at discount. Philip York, a director of Empyreal Holdings, said he had answered all the administrators' questions and provided details of transfers of moneys by a custodian, Fortis. Mr York said the investment by Professional Pensions, which about 70 people rely on for their superannuation savings, was an agreement known as a "total return swap" entered into with Bear Stearns in 2005. He said the money, which was invested in a series of hedge funds, was now held by JPMorgan due to JPMorgan's takeover of Bear Stearns. Under the total return swap the investors benefit from a "synthetic" exposure to a basket of hedge funds, while JPMorgan holds the assets. Mr York said he had provided evidence of Empyreal's contractual relationship with JPMorgan to ASIC. "We have provided ASIC with information supporting the existence of those assets. We have provided PPB [with] all the documents we have in relation to the valuations and shareholdings." A former investment manager of ARP Growth Fund, Paul Gresham, said: "I have seen the swap agreements; so has ASIC." IN NS i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities
c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter Page 133 of 159 2011 Factiva, Inc. All rights reserved.
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Business Majority of Trio's assets 'accounted for' Stuart Washington 391 words 5 February 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENT A FINANCIAL planner that contributed more than $100 million to the now-frozen fund manager Tri o Ca pit al has reported about 90 per cent of its clients' investments are held by brand-name managers.
TD In a letter to clients this week, the head of the Port Augusta-based Seagrims Accountants and Financial Planners, Peter Seagrim, said Trio's administrator, PPB, had accounted for about 90 per cent of his clients' assets. He said the assets were held by the National Australia Bank as custodian on behalf of investors in funds managed by brand-name fund managers including BT, Vanguard, Fidelity and Ausbil. He said the outstanding uncertainty related to Astarra Strategic Fund, which has $118 million in assets invested through the British Virgin Islands, was yet to be satisfactorily accounted for by administrators or regulators. "The Astarra Strategic Fund's audit process is yet to be finalised as most of the investment managers within this fund are domiciled overseas and are creating some difficulty," Mr Seagrim wrote. One of Trio's administrators, Neil Singleton, said yesterday $320 million in Trio assets were held through National Australia Bank as custodian. Regulators put the total of Trio investments at $426 million. Mr Singleton said because of many cross-investments between Trio funds, any fund holding Astarra Strategic was facing the prospect of impairments. Seagrims started directing investments to the Trio Capital funds about 16 months ago. Seagrims' funds make up a sub-set of a broad range of managed investment schemes and superannuation schemes run by Trio Capital. Funds remain frozen after regulators swooped on the funds management business in December, in effect pushing Trio into administration and appointing a new trustee to its superannuation funds. Mr Seagrim also detailed attempts to unfreeze its Trio funds, including the possibility of replacing as the fund's responsible entity by a vote of members under the Corporations Act. "If we are successful, we should be in a position to just allow the 'freeze' to exist on the Astarra Strategic Fund," he wrote. Mr Seagrim's financial planning firm belongs to the Association of Independently Owned Financial Planners. Its chief executive, Peter Johnston, has previously claimed a Hong Kong private investigator had established the whereabouts of Astarra Strategic's $118 million. CO IN NS ncbnk : National Australia Bank Ltd i814 : Banking | i81402 : Commercial Banking | ibnk : Banking/Credit c151 : Earnings | c15 : Performance | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter 2011 Factiva, Inc. All rights reserved.
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Business Murder, intrigue and missing millions Stuart Washington 1,062 words 11 January 2010 The Sydney Morning Herald SMHH First 17 English 2010 Copyright John Fairfax Holdings Limited. Trio Capital has mixed with a starry cast of companies, writes Stuart Washington. It reads like an airport spy novel: an unsolved murder in a Tokyo red-light district, exotic tax havens around the world, and thousands of defrauded investors in Britain.
TD Add to that some $118 million tipped in to Astarra Strategic Fund by Australian investors which, almost three months after authorities blew the whistle, is still not properly accounted for. The investigation by regulators is understood to include every possibility - from the $118 million being "misplaced" to misappropriation. Unfortunately for investors in Trio Capital, the Albury funds manager did not read the first part of the book when it began its relationship with Astarra Strategic, a hedge fund managed by Absolute Alpha. Absolute Alpha and its associated cast of characters have links with one of Britain's biggest stockbroking scandals, Pacific Continental Securities UK, with estimated losses of up to 300 million ($520 million). One of the characters, Matthew Littauer, can be seen with his fingerprints on stockbroking cheats and swindles dating back to the internet boom of the late 1990s. Many of the same characters, through companies registered in Belize and the Federation of St Christopher and Nevis, appear to be outright owners of companies that came to control $426 million in Australian investors' money, including $300 million in superannuation money. By August last year, Absolute Alpha had rebadged itself Astarra Asset Management and had been appointed as investment manager to all of Trio's big funds, responsible for investing money on behalf of Trio. Authorities were alerted in September in a letter from the Bronte Capital blogger, John Hempton, about the improbably smooth returns achieved by Astarra Strategic, which advertised itself as an investor in hedge funds. Administrators appointed to all of Trio's managed investment schemes before Christmas are still trying to establish the existence of Astarra Strategic's $118 million that was invested through a company in the British Virgin Islands. A Canadian, Shawn Richard, 34, and New Jersey-born Eugene Liu, 33, have been the sole directors of Astarra Asset Management and its predecessor, Absolute Alpha, since it was established in April 2005. They are clean-cut and plausible - and Richard has been a confident media performer. But the extent of their links to the disgraced British broker Pacific Continental Securities has not been fully understood. Until recently, Liu's online biography showed he worked for PCS. Richard's showed he worked with the firm in Taiwan from 1996 to 2000; but in October 2007 he dropped all online mention of it . Well he might: in June that year, PCS UK collapsed with estimated investor losses of 300 million from dodgy stocks the broker had flogged. The business was castigated by the Financial Services Page 137 of 159 2011 Factiva, Inc. All rights reserved.
Authority, which found it had acted without integrity between 2005 and 2007. Accesspoint, AccuPoll and eSat were among 40 high-risk, "over-the-counter" shares that could not be sold to US investors but were marketed by PCS to unwary investors in Britain, often using high-pressure selling tactics. Richard and Liu have more than a passing employment record with PCS UK and its offshore owners. Company filings show multiple links exist to this day. In one link, Astarra Asset Management is wholly-owned by a Hong Kong company called Century Investments Holdings. No such company exists on the Hong Kong companies register, but it gives its address as Level 13 Silver Fortune Plaza, 1 Wellington Street, Central Hong Kong. Until late 2008 the address was also used by Zetland Financial Group, a company that was reported in the British press as the ultimate owner of PCS. James Sutherland is named as Zetland's owner. The emblem of Zetland Financial Group, a British Virgin Islands company, is now being used by Zetland Fiduciary Group, a company registered in Belize, Central America, in June 2008. The website of Zetland Fiduciary Group describes it as "working with a select group of individuals and corporations to achieve their objectives in a cost-effective, private and conservative manner". Since 2003 Richard, and later Liu, have served as directors of Wright Global Asset Management, which has a formal business relationship with Astarra Asset Management. In 2004, Wright Global also had as a director a Vietnamese-American, Matthew Nguyen Littauer. A 1998 Securities and Exchange Commission document shows Littauer was president of PCS. In December 2004, Littauer, 34, was stabbed to death in the Tokyo red-light district of Roppongi. Police were reported to have been unable to solve the case. An anonymous July 2005 posting on a Japanese expat chat site about his death said: "Matthew was a penny stock fraudster who tricked 'clients', partners and employees and many times dealt with mafia types. This is not surprising at all." Until August 2005 a Hong Kong resident, Jack W. Flader, also served as a director of Wright Global. Until at least December 2005, Flader was managing director and general counsel of Zetland. His personal address given in Wright Global's company filing is the same address as that of Zetland until late 2008. Wright Global is owned 100 per cent by a company called Bella Donna Ltd. No such company exists in Australian or Hong Kong company registers, but Flader appears as the authorised signatory of Belladonna in a 2001 stock purchase agreement with the US company Accesspoint Corporation (one of companies flogged by PCS UK). Another company that had Liu, Richard and Littauer as directors, Wright Global Investments, has as its ultimate owner a Hong Kong company, Astral Investments, and its sole director is a company, GCSL Ltd, or Global Consultants and Services Ltd. Global Consultants and Services Ltd says on its website it "was established in Hong Kong in 2006 by a group of like-minded fiduciary services professionals who possess a wealth of experience in servicing the simplest to the most complex needs of our global clientele". A director of the GCSL Group of Companies Ltd, registered in the Federation of St Christopher and Nevis, is Jack W. Flader. Boiler-room operators and PCS have previously used threats of legal action to silence critics. The Herald has been threatened by Richard on the grounds of defamation since following the story in October last year. The hunt for the money goes on. NS RE gmurd : Murder/Manslaughter | gcat : Political/General News | gcrim : Crime/Courts uk : United Kingdom | hkong : Hong Kong | austr : Australia | asiaz : Asian Countries/Regions | ausnz : Australia and New Zealand | china : China | chinaz : Greater China | devgcoz : Emerging Market Countries/Regions | dvpcoz : Developing Economies | easiaz : Eastern Asian Countries/Regions | eecz : European Union Countries | eurz : European Countries/Regions | weurz : Western European Countries/Regions 2011 Factiva, Inc. All rights reserved.
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Business Astarra shares Hong Kong link to broking scandal Stuart Washington 459 words 5 January 2010 The Sydney Morning Herald SMHH First 19 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENTS A COMPANY under investigation over the whereabouts of $118 million in funds channelled through the British Virgin Islands shared a Hong Kong address with a firm linked to one of Britain's biggest stockbroking scandals.
TD The address given for Astarra Asset Management's Hong Kong-based owner, Century Investments Holdings, matches the address given by Zetland Financial Services Group until late 2008. Zetland and its chief executive, James Sutherland, were named in the British press as the Hong Kong-based owners of Pacific Continental Securities, a British broker that used high-pressure, "boiler room" tactics to sell risky and sometimes worthless US shares to British investors. BusinessDay has reported that two Astarra Asset Management directors, Shawn Richard, 34, and Eugene Liu, 33, had previously worked at Pacific Continental Securities, which has been identified as a seller of risky shares in the US and Britain since the late 1990s. BusinessDay has no evidence Zetland controls Century Investments. The address used by Zetland, Level 13 or 13/F Silver Fortune Plaza at 1 Wellington Street, is also shared by a number of other businesses, suggesting it may be a serviced office. Calls to Mr Sutherland and Astarra Asset Management's administrator, Ian Purchas, were not returned yesterday. Astarra Asset Management was investment manager for $426 million in funds of the fund manager Trio Capital of Albury, including its flagship fund Astarra Strategic, which had $118 million invested in international hedge funds. Authorities froze the funds in mid-October and took effective control shortly before Christmas. On another front, the Bronte Capital blogger John Hempton, who blew the whistle on concerns related to Astarra Strategic, said he first looked at Astarra because of its purported links to a US hedge fund, Paradigm Global. Paradigm Global, an investor in funds of hedge funds, is owned by Hunter Biden, the son of the US Vice-President, Joe Biden, and James Biden, the Vice-President's brother. The link to Astarra was made through the appearance of Charles Provini's biography on an Astarra website, saying he was chief executive of Paradigm Global and Astarra's US asset consultant. Mr Provini was not chief executive of Paradigm at the time the online biography appeared. The British arm of Pacific Continental Securities collapsed in June 2007, with potential compensation claims against it of 300 million ($530 million). The Financial Services Authority later censured the broker for recklessly or deliberately misleading its customers and allowing its advisers to use inappropriate selling tactics between 2005 and 2007. Last January its chief executive, Steven Griggs, was fined 80,000 and its finance director, Charles Weston, 95,000. They were described as "without integrity". IN i831 : Financial Investments | iinv : Investing/Securities Page 140 of 159 2011 Factiva, Inc. All rights reserved.
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Business Trio Capital holding $1.5m 'risky' asset Stuart Washington 319 words 4 January 2010 The Sydney Morning Herald SMHH First 19 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENTS A $1.5 MILLION debenture owed by Astarra Asset Management is listed in the books of one of Tri o Capital's managed funds as an asset.
TD But the investors in ARP Growth Fund should not hold high hopes for its prospects: Astarra Asset Management was placed into administration shortly before Christmas. And the only security on offer for its investment is "the shares owned by [Astarra Asset Management] in SpecOpsLab, a listed Nasdaq entity to the total value of $1,500,000". SpecOpsLab, which used to promise a technology called David that would allow Windows applications to work under the Linux operating system, is defunct. The appearance of a risky debenture within ARP raises further questions about the quality of assets that have been placed into Trio's funds. The whereabouts of $118 million in investments through Astarra Strategic Fund, which was managed by Astarra Asset Management, has led to $426 million in funds being frozen. The administrator of the fund is now seeking to establish the existence of those assets, while also determining the extent of assets held in all funds. Astarra Asset Management's two directors, Shawn Richard, 34, and Eugene Liu, 33, were appointed as investment managers to the whole of Trio's funds management business in the middle of last year. Last February Astarra Asset Management took over responsibility for paying the $1.5 million debenture from a company called Silverhall Holdings, a company associated with Trio's former investment managers, Michael Anderson and Cameron Anderson. The debenture was first established in 2006 with a maturity of two years, although this was extended in 2008 for another four years, or a maturity of April 2012. The ARP Growth Fund also invested alongside other Trio funds in Astarra Strategic Fund, increasing its exposure from nothing to $4.3 million last year. IN NS RE i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities c17 : Funding/Capital | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Trio problems are a failure on the part of its gatekeepers STUART WASHINGTON 1,097 words 2 January 2010 The Sydney Morning Herald SMHH First 5 English 2010 Copyright John Fairfax Holdings Limited. As the time lengthens between regulators freezing Trio Capital's funds and an "I found it" moment for its $118 million apparently invested in international hedge funds, it is reasonable to assess what safeguards exist for investors. Fund managers have a series of "gatekeepers" who are there to make sure they are doing what they say they are doing with their invested funds.
TD But in the case of Trio, there is reason to question whether those gatekeepers have failed in their roles. Regulators froze Trio's superannuation and managed investment schemes in mid-October because the funds were apparently not able to answer relatively simple questions about what they were invested in. Or, as the Australian Prudential Regulation Authority noted when it seized control of the superannuation funds before Christmas: "APRA has concerns about the valuation of assets in the superannuation entities, including the Astarra Strategic Fund, a managed investment scheme for which Trio is the responsible entity." Astarra Strategic Fund was set up to invest in hedge funds through a British Virgin Islands company, EMA International. The fund eventually came to house $118 million in assets, most of which have been invested through EMA International. The investment manager for Astarra Strategic Fund was Astarra Asset Management, which had as its sole directors Shawn Richard, 34, and Eugene Liu, 33. It is now in administration. Since at least August, Astarra Asset Management had been given the role of investment manager for all of Trio Capital's investments. Under the system currently in place, there are a series of responsibilities for gatekeepers. First and foremost, Trio Capital is - as the very title suggests - "the responsible entity". It appoints a n investment manager but it is responsible for supervising the investment manager's work. To assist it in assessing the work performed by its investment managers, a responsible entity has legal obligations to employ a series of third-party gatekeepers, such as the auditor. Astarra Strategic Fund's most recent annual report shows WHK, a listed accounting business, was paid $16,520 to audit the scheme's books. Apart from the now-demonstrated opacity of the relationship with EMA International, there is another striking thing about the audited accounts. The fund grew by a staggering $75 million over the year. But $47 million of that was tipped in on June 30, apparently stripped from related-party funds. There is only one mention of this transaction in the whole annual report, and no mention of it under the section in the annual report devoted to related-party transactions. This transaction had the effect of almost doubling the size of the fund. Yet the auditor was still able to sign its letter saying the accounts gave a true and fair view of the scheme's financial position as at June 30, 2009. Where did the $47 million come from? Who moved it? Why the rush on June 30? Which brings us to another gatekeeper. KPMG was paid to perform another gatekeeping role for as its responsible entity, an audit of the compliance plan for 24 schemes to test whether Trio was Page 143 of 159 2011 Factiva, Inc. All rights reserved.
doing what it said it was doing. Each scheme has a compliance plan based on what the fund can and cannot do with its investments. On September 28 - less than three weeks before regulators froze all of Trio's management investment schemes - KPMG signed an audit of the compliance plans stating Trio had "complied with the compliance plans for each of the schemes". The external auditor is responsible for examining the plan, carrying out an audit of compliance with the plan and submitting a report to the responsible entity. Among a long list of "desired outcomes" within Astarra's compliance plans is that any related party dealings comply with the act and do not prejudice the interests of other unit holders. The method of monitoring this in the plan was the managing director's responsibility for approving all non-standard transactions and ensuring compliance. It remains unclear whether KPMG's audit asked questions of Trio. But a large June 30 movement of $47 million into one Trio fund investing offshore affecting several other Trio funds was not something that was noted in particular. KPMG signed off on all the affected funds' compliance plans. Another desired outcome in the compliance plan was the responsible entity's obligation to appoint a suitably qualified custodian. KPMG's audit does not seem to have picked up a degree of confusion about who was ultimately responsible as custodian for the cash invested in Astarra Strategic Fund. And that brings us to the final gatekeeper, the custodian. In the Trio saga, there have been few who deserve less glory than National Australia Trustees, which is listed as custodian to Astarra Strategic Fund in its most recent product disclosure statement. The custodian is the party that is responsible for checking that money has been placed where it is supposed to be placed. When the Herald was following this story last year, asking questions about Astarra Strategic Fund's assets, the National Australia Trustee provided it with a statement that put to rest concerns. NAT confirmed to BusinessDay it was custodian and vouched for the existence of the assets. But it later turned out NAT had simply passed on information that had been provided to them by T ri o or Astarra. Hardly a textbook case of being an independent gatekeeper. And the whereabouts and the position of Standard Chartered, which is supposed to be the custodian of funds invested through Hong Kong in EMA International? It neither confirms nor denies its role. What can investors learn from all this? In the case of the Trio funds, investors with their superannuation money tied up are right to be nervous about the fate of money invested in Astarra Strategic Fund. Trio Capital is yet to furnish answers about the existence of the $118 million that have given any assurances to the scheme's administrators, PPB. If the money is not found, it will be a failure of Trio. But it will also be a failure of its gatekeepers. Hopefully the problem is ringfenced to the Astarra Strategic Fund. But if the gatekeepers failed in one instance, how many more instances of failure are there within Trio? Or indeed, in the broader funds management industry? In a column earlier this week I incorrectly stated Sydney Airport had been sold into Macquarie Airports. Macquarie Airports invested in the airport directly alongside other Macquarie-managed funds. IN NS i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities c12 : Corporate Crime/Legal/Judicial | nedi : Editorial | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand 2011 Factiva, Inc. All rights reserved.
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News and Features Blogger who blew the whistle Stuart Washington 528 words 2 January 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. WHEN John Hempton started a blog as he recovered from pneumonia, he did not expect to send shockwaves through the finance industry. But that is exactly what the 42-year-old fund manager did through his Bronte Capital blog. His expose of an unrelated US hedge fund would eventually lead to $426 million in investments being frozen and authorities seizing control of the Albury fund manager Trio Capital shortly before Christmas.
TD Investigators are focused on the fate of $118 million in Trio's Astarra Strategic Fund, which is supposed to be invested in international hedge funds through a British Virgin Islands company. After receiving information through his blog, Mr Hempton blew the whistle on Trio in a letter to the chairman of the Australian Securities and Investments Commission, Tony D'Aloisio, on September 16. "You should take this seriously," he wrote at a time when Trio was spruiking nearly $1 billion in investments. Mr Hempton was first told about Trio Capital and its link to a US hedge fund after his blog posts exposing US hedge funds were publicised in the Herald. His anonymous letter to ASIC was sent through a former employer, the Treasury secretary Ken Henry, with Mr Henry's consent. Like (spurned) whistleblowers in the Bernie Madoff fraud in the US, Mr Hempton focused on the improbability of smooth investment returns recorded by the Astarra Strategic Fund. "I thought the returns were not consistent with any known hedge fund index or grouping of hedge funds that I knew of," Mr Hempton said this week. In the letter, Mr Hempton wrote: "These are the sort of results that have had a bad reputation since the exposure of Bernie Madoff." He also criticised Trio for recently awarding responsibility for its entire portfolio to the investment managers of the Astarra Strategic Fund, Astarra Asset Management. The regulator acted promptly. By mid-October all Trio funds had been frozen. And on December 17, Trio Capital was removed as manager from all its investment roles. No charges have been laid and ASIC investigations are continuing. "The simple test for ASIC was if they [Trio] could actually prove the existence of the assets, then ASIC could ignore my letter," Mr Hempton said. "For a reputable fund, it should not take more than 20 minutes to prove the existence of the assets." Mr Hempton, who has since become the chief investment officer of his part-owned funds management business, also called Bronte Capital, says he is a "creature of the globalised world". The finance specialist has predicted the collapse of Latvia's banking system in the racily titled blog post "Hookers that cost too much, flash German cars and insolvent banks". And he said his approach in his blog and his investment philosophy was simple. "I find something interesting: you pull on the piece of string and mostly you find a piece of string. Page 146 of 159 2011 Factiva, Inc. All rights reserved.
But sometimes you find something attached," he said. "[There was] nothing that led to the uncovering of Astarra you could not find on the internet. This was not hard, I just did the work." CO IN NS ausic : Australian Securities and Investments Commission i831 : Financial Investments | iinv : Investing/Securities npag : Page-One Story | ncat : Content Types | cmisco : Gross Misconduct/Malpractice | c42 : Labor/Personnel Issues | ccat : Corporate/Industrial News | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Trio: from the boiler room into the fire Stuart Washington 588 words 2 January 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. INVESTMENTS INVESTMENT managers appointed to oversee $400 million in Trio Capital funds had previously worked at Pacific Continental Securities, a "boiler room" stockbroker censured in the US and Britain for pressuring investors to buy dodgy stocks.
TD The allegation was contained in a letter sent to the Australian Securities and Investments Commission chairman, Tony D'Aloisio, that blew the whistle on Trio Capital's Astarra Strategic Fund. Within a month of receiving the letter, ASIC had frozen Trio's 24 managed investment schemes. Shortly afterwards the Australian Prudential Regulation Authority had frozen Trio's five superannuation funds. Astarra Strategic Fund is under scrutiny over the whereabouts of $118 million supposedly invested in international hedge funds througha company in the BritishVirgin Islands called EMA International. This week the Herald revealed that about $47 million had been tipped into the fund on June 30 by managers acting for Trio Capital. Shortly before Christmas regulators in effect seized control of all Trio's investments, revoking its licence to operate managed investment schemes and placing a trustee over its superannuation funds. The whistleblower letter was sent by the chief investment officer of the fund manager Bronte Capital, John Hempton, who was alerted to Trio's flagship investment fund, Astarra Strategic Fund, after he had blogged about US hedge funds. In his letter to ASIC, Mr Hempton focused on the smooth returns achieved by Astarra Strategic Fund over the past five years, similar to how whistleblowers focused on the returns of Bernard Madoff's fund. "It reported a few negative months (typically about -1 to -2 per cent) during the height of the crisis - but it has never reported anything that looks like a bad result," Mr Hempton wrote. "These are the sort of results that have had a bad reputation since the exposure of Bernie Madoff." Mr Hempton said this week: "The point is, all ASIC needed to do to dismiss my letter was to check whether the assets were there. That is the one thing that has not yet been able to be done." Mr Hempton also focused on the career histories of the investment managers of Astarra Strategic Fund - Shawn Richard, 34, and Eugene Liu, 33 - and voiced his alarm that Trio had appointed the men as investment managers to all of its funds. He said both men had worked previously with Pacific Continental Securities. Pacific Continental Securities has been associated with "boiler room" or pressure tactics since the late 1990s, as it sold microcap companies to investors. It has been mentioned in academic papers examining the sale of practically worthless US companies to offshore investors. Its British arm, established in 2001, collapsed in June 2007, and last year its chief executive was banned and fined 80,000 ($145,000). Page 148 of 159 2011 Factiva, Inc. All rights reserved.
The Times described its tactics last year, saying "the company was notorious for its cold-calling of inexperienced investors and for using high-pressure techniques to sell them shares of companies listed on AIM [the Alternative Investment Market] and high-risk shares listed on America's overthe-counter market". Mr Liu refers to his time with Pacific Continental Securities in the US, and World Financial Capital Markets in the US and Asia, in his biography on Astarra Asset Management's website. Earlier online versions of Mr Richard's biography say he held the position of general manager for Pacific Continental Securities' Taiwan branch from 1996 to accepting the vice-presidency in 2000. Comment Page 5 CO IN NS aupra : Australian Prudential Regulation Authority | ausic : Australian Securities and Investments Commission i831 : Financial Investments | iinv : Investing/Securities cmgent : Management Entering | cmmm : Middle Management Moves | npag : Page-One Story | c41 : Management Issues | c411 : Management Moves | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | bvi : British Virgin Islands | usa : United States | ausnz : Australia and New Zealand | caribz : Caribbean Countries/Regions | namz : North American Countries/Regions
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Business Mystery deepens over Trio's missing $118m Stuart Washington 369 words 30 December 2009 The Sydney Morning Herald SMHH First 15 English 2009 Copyright John Fairfax Holdings Limited. FINANCE On June 30, managers acting for Trio Capital poured $47 million of their investments into a fund that is now being investigated for the whereabouts of $118 million in hedge fund investments.
TD Administrators called in before Christmas to oversee Trio Capital say they are unable to determine what assets have been bought with $118 million invested through the Astarra Strategic Fund. Inquiries have focused on a company registered in the British Virgin Islands, EMA International, which has provided statements but no proof of investments in hedge funds. The annual report of Astarra Strategic Fund, one of 24 Trio Capital managed investment schemes now under administration, reveals that on June 30 its assets were topped up with a $47 million transfer of assets. The bulk of those assets apparently came from nine related Trio Capital funds that are investors in Astarra Strategic Fund, including Astarra Conservative Fund and Astarra Balanced Fund. Investments in Astarra Strategic Fund grew from a reported $43 million on June 30 last year to $118 million, taking into account $24 million in net cash received for new units and the $47 million in transferred assets. Trio is the responsible entity for its managed investment schemes but it had handed responsibility as investment manager for many of its funds to Astarra Asset Management. On December 22, Astarra Asset Management was placed into voluntary administration at the request of creditors. Its sole directors are Shawn Richard, 34, and Eugene Liu, 33. The annual report noted a "counter party risk" in what it termed an "exposure agreement" with EMA International. "The risk includes the possibility of EMA failing to perform its duties under the deferred purchase agreement," it said. "The responsible entity [Trio] monitors this risk via its appointed investment manager [Astarra Asset Management] who monitors EMA, ensuring EMA does not enter into other transactions or business outside the deferred purchase agreement." On December 17, regulators put Trio Capital's five main superannuation funds in the hands of a trustee and withdrew its licence for its managed investment schemes. A creditors' meeting yesterday heard the administrator, PPB, was continuing its investigation of the assets. IN NS i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities gfraud : Fraud | c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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Business Details sketchy on Trio's $118m Stuart Washington 375 words 29 December 2009 The Sydney Morning Herald SMHH First 19 English 2009 Copyright John Fairfax Holdings Limited. FINANCE TRIO CAPITAL has been unable to give administrators detailed information about almost $118 million that its managed investment scheme placed through a British Virgin Islands company.
TD The Albury-based company's Astarra Strategic Fund made its investments through Astarra Asset Management Pty Ltd as investment manager and then through EMA International, which is registered in the British Virgin Islands. "The majority of the assets were repatriated ultimately to overseas hedge funds," Neil Singleton, an executive with the administrator PPB, said last week. "From the information I have seen it's quite devoid of any detail of the investments. "What I have seen is a letter from EMA International, which I'm advised was a monthly letter that 'confirms the value of your holdings'. There is no visibility around the underlying assets." Mr Singleton said the lack of information about EMA's assets did not automatically suggest there were no assets at all. Creditors are to meet tomorrow. Trio's directors appointed PPB after regulators effectively froze its business on two fronts. The Australian Prudential Regulation Authority appointed a trustee to manage the $300 million the company holds in its super funds and stopped it receiving further cash inflows. The Australian Securities and Investments Commission revoked Trio's licence to operate its 24 managed investment schemes. PPB's preliminary investigations included an interview with the Trio Capital chief executive, Rex Philpott. Figures supplied by Trio indicate that more than $233 million in net investors' money is sitting within the managed investment schemes, more than $100 million in excess of ASIC's initial estimates of $126 million. PPB's investigations have also revealed a high level of inter-related investments between the managed investment schemes. When adding all inter-related investments between the schemes, in which one Trio fund invests in another, leading to double counting of assets, investments in the schemes stood at $713 million in September. Astarra Asset Management played the role of investment manager to Astarra Strategic Fund. ASIC documents show its directors are Sydney men Shawn Richard, 34, and Eugene Liu, 33. The company is wholly owned by Century Investments Holdings in Hong Kong. swashington@smh.com.au IN ihedge : Hedge Funds | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments | iinv : Investing/Securities 2011 Factiva, Inc. All rights reserved.
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Business Trustees track Trio Capital's offshore vehicle Stuart Washington 389 words 19 December 2009 The Sydney Morning Herald SMHH First 3 English 2009 Copyright John Fairfax Holdings Limited. INVESTMENT MORE than 10,000 superannuation investors with $300 million placed through Trio Capital have been told more than 20 per cent of their assets went into a fund that invested chiefly in a mysterious British Virgin Islands special purpose vehicle.
TD Regulators moved on Trio Capital in Albury on Thursday, replacing the previous trustees on its superannuation funds and revoking its licences to operate 24 managed investment schemes, among them its main vehicle, Astarra Strategic Funds. Following the appointment of the new trustee, the directors of Trio Capital placed the firm into administration, making the forensic accounting group PPB responsible for investigating the managed investment schemes. In a "significant event" notice posted on Trio Capital's website, the new trustee, Mike Hill, from ACT Super Management, said up to $70 million of Trio's total superannuation assets of $300 million had been invested in ASF. "However, members should be aware that this figure may be revised following the work of Trio's administrators," Mr Hill said. The Herald has previously reported that ASF invested almost all of its $118 million in funds through EMA International Ltd, a special purpose vehicle in the British Virgin Islands. The valuation of Trio's superannuation funds' assets was central to the regulator's concerns when it appointed a subsidiary of the accounting firm McGrathNicol as trustee. It cited as a reason for its move "Trio not being able to satisfy APRA's concerns regarding the valuation of superannuation assets". The former investment managers of ASF are Shawn Richard and Eugene Liu. Earlier regulatory action included stop orders on superannuation funds receiving further contributions and bans on managed investment schemes issuing further product disclosure statements. Previous inquiries by the Herald drew confusing responses from the fund's custodian, National Australia Bank's National Australia Trustees. Neither National Australia Trustees nor Trio could confirm whether the funds ultimately sent to the British Virgin Islands were invested properly in line with the product disclosure statement. National Australia Trustees was custodian of all the Astarra managed investment schemes. But ASF also said it used Standard Chartered in Hong Kong as custodian for EMA, even though that was not in the product disclosure statement. Standard Chartered declined to confirm its role, claiming client confidentiality. IN NS i8150214 : Private Pension Funds | i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities
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Business APRA moves on super fund Trio Capital's $426m Stuart Washington 411 words 18 December 2009 The Sydney Morning Herald SMHH First 2 English 2009 Copyright John Fairfax Holdings Limited. INVESTMENTS THE fate of $426 million in investments, including $300 million in superannuation, has been thrown into doubt after regulators effectively took over fund manager Trio Capital's funds and placed it into administration.
TD Regulators have removed the managers of Trio Capital investments covering assets of more than $426 million, accusing them of numerous breaches of licence conditions. The Australian Prudential Regulation Authority moved on Trio, citing concerns the fund manager had been unable to satisfy it about the value of its superannuation assets. Investors are being advised to check Trio Capital's website for a "significant event" announcement, although no such announcement existed early last night. Trio, which was formerly known as Astarra, manages four main superannuation funds with assets of $300 million and more than 10,000 investors. The funds are called Astarra Superannuation Plan, Astarra Personal Pension Plan, My Retirement Plan and the Employers Federation of NSW Superannuation Plan. Trio Capital covers a total of $426 million through the superannuation funds and other managed investment schemes, with a further 726 non-superann-uation investors. APRA said a trustee had been appointed to provide a report "setting out among other things a plan of its proposed course of action in respect of the ongoing and future management of the superannuation entities". In a related move, the Australian Securities and Investments Commission has suspended Trio Capital's licences to operate its managed investment schemes. APRA has appointed a subsidiary of the accounting firm McGrathNicol as trustee after removing T ri o as managers of the superannuation funds. The business of Trio Capital has also been placed into administration, with the appointment of PPB to sort out the affairs of the group. The trustee's role is to protect the interests of the superannuation investors. The administrator's role is to protect the interests of investments in managed investment schemes. Trio operated 24 managed investment schemes, including $118 million in assets in its main managed investment scheme, the Astarra Strategic Fund, which housed significant investments from Trio's superannuation funds. ASIC started investigating Astarra on October 2. It placed stop orders on three of Astarra's main funds on October 21, preventing them from taking in new money. APRA also froze the assets of the four main funds on the same day. No redemptions have been allowed from the funds except, on a limited basis, pension payments. IN i831 : Financial Investments | iinv : Investing/Securities 2011 Factiva, Inc. All rights reserved.
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Business - Trading Room Warrants close, holders lose all Stuart Washington xchange@smh.com.au 945 words 17 August 2007 The Sydney Morning Herald SMHH First 22 English 2007 Copyright John Fairfax Holdings Limited. XCHANGE INVESTORS in highly leveraged warrant products are facing the loss of 100 per cent of their investments, investment banks said yesterday.
TD Because of the sharp movement in the index and share prices over the past two days, investment banks were out in droves, announcing warrants had reached barrier limits, with the net effect that anyone holding open positions would lose all their capital. Warrants, listed on the ASX, are sold as highly leveraged and liquid positions, with the investment banks providing buy-and-sell quotes in line with the underlying stock or index. Unless, of course, those underlying shares go into free fall and trigger what must be some form of stop loss on the bank's part - and an entire loss on the investor's part. The warrants are known as one-touch: once the warrant series reaches a certain price point they are terminated. Citibank announced that warrants issued over shares in Commonwealth Bank, BHP, ANZ Westpac and QBE had been terminated, with no returns made to investors. UBS announced warrants over RIO, National Australia Bank, Woodside and Commonwealth had been knocked out, with no payment made. Macquarie Bank announced that two series of index warrants, XJOXML and XJOXMK, breached what are known as barrier triggers because the underlying index touched 5625, or the barrier level. A spokeswoman said the announcement was formal only, and there were no open positions in the warrants. Macquarie Bank, on its website, says: "The significant additional risk is that if the barrier level is triggered and the turbo warrant is terminated, the investor will not be able to sell the turbo warrant and will not be entitled to any payment. The investor will therefore need to monitor carefully the relevant market price of the underlying share or index." WhackBank Investment banks were whacked again by the market yesterday, reflecting deep and unassuaged concern about exposures to the subprime mortgage meltdown and its knock-on effect in the broader debt markets. Macquarie Bank closed down another $2.68, or 4 per cent, at $64, Allco Finance Group fell 55c to $7.14 and Babcock & Brown fell $1.49 to $19.51. Both Allco Finance Group and Babcock & Brown Power put out "don't panic" statements to the stock exchange yesterday. Allco again said its exposure to the US subprime market was minimal (it said the same thing on August 2, and nobody listened then either). Babcock & Brown Power outlined the funding arrangements it had entered into to fund its purchase of Alinta. Page 157 of 159 2011 Factiva, Inc. All rights reserved.
The trio of big investment banks seem to be under siege from three disparate directions. One, there is obviously an increasingly denied view that there are subprime exposures in the investment banks. The second, more credible, fear - but again it seems to be largely confined to the fringes - is tha t the banks have dabbled in complex collateralised debt obligations, which have had their values cut by up to 80 per cent in the ensuing market meltdown. The third, and probably most credible, fear is that an era of cheap debt is coming to an end, with a big question mark about how financially engineered structures surrounding highly geared infrastructure projects will last in an era when risk has been repriced. In the meantime, we expect plenty more reassuring announcements. Time will tell whether or not investors have acted irrationally about investment banks, but investors certainly have not tarred the big banks with the same brush, which survived yesterday's tumble relatively unscathed. K2 assault put off The K2 Asset Management co-founders Campbell Neal and Mark Newman were just weeks away from catapulting their combined net wealth to almost $300 million. But it has all been put on ice, thanks to the market slump. It is only three weeks since they lodged a prospectus to float 8 per cent of the $340 million business at $1.60 a share. Luckily clause 2.1 of the prospectus says they can withdraw the offer at any time before the offer expires. "This is not a decision we have taken lightly, but we feel that launching the offer during the midst of serious market correction would be poor timing for investors," they said in a statement. "I am happy to report that the float would have closed oversubscribed," said Mr Neal, the chairman of K2. The asset manager would reconsider listing later "when the timing was right", he said. Not to worry, Mr Neal still has his $574,500 salary and Mr Newman has $539,500. You was warned RAMS home-loan borrowers can happily solace themselves with these gems from the prospectus: "Over the last five years the business model of RAMS has been refined to continue to drive sustainable long-term growth." Whether investors in the float can be cheered by the words of the chairman, John Kinghorn, less than three weeks after its July 31 listing and seeing two-thirds of their cash go up in smoke, seems extremely doubtful. It might have paid more to read this under the headline "A major liquidity event in the capital markets": "In the event of a major liquidity disruption in the capital markets, it may be necessary or appropriate for RAMS to replace some or allof its short-term fundingwith longer term funding, most likely via the issue of RMBS. Depending on the liquidity event, the cost of term funds may be higher than the present cost of RAMS short-term funding." In other words, our business model could be stuffed by a credit crisis. NS RE m11 : Equity Markets | mcat : Commodity/Financial Market News | ncat : Content Types | nfact : Factiva Filters | nfce : FC&E Exclusion Filter austr : Australia | ausnz : Australia and New Zealand
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2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

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2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.

2011 Factiva, Inc. All rights reserved.