ARP Media Factiva Search 2011

FACTIVA SEARCH; "ARP GROWTH FUND" AUGUST 28, 2011
Publications after Oct 21, 2010

Jail for Trio frontman Trio's Richard jailed for 2 years over stolen super 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 How regulator missed chance in Trio debacle Trio CEO accepts a 15-year ban from ASIC 'Raised concern' on hedge funds Parliament to probe Trio Capital fraud claims DIY funds need compensation too Cold comfort for forgotten victims of Trio Capital fiasco Move to compensate investors for bad financial advice Investors deserve a softer landing than concrete Couple of clowns duped in super scam muddy waters for true victims Largest government payout of $55m for Trio super fraud DIY super funds given cold shoulder in Trio payout Super bailout excludes DIY investors Ombudsman's name and shame list a bold step forward No safety net for $400bn in DIY super DIY super fund investors warned of no compensation from fraud THE DISTILLERY: Murky waters Self-managed super and the Trio trap Transfers to Trio chiefs queried Trio's $170m has vanished Three pennies in the fountain of Trio Capital losses Advisers' former staffers help Trio investigators List of alleged Trio offences sent to ASIC 3 5 6 8 11 13 15 17 19 20 22 23 25 27 29 31 33 35 37 38 40 42 44 45 46 48 49
ASIC gets list of Trio suspicions AUSTRALIAN NEWSPAPER HIGHLIGHTS - MAY 19, 2010 Trio debacle could cost $180m-plus Trio administrator seeks answers in HK Judge blasts Trio 'scam' Crime probe on Trio directors Corporate regulator investigates former directors at Trio Capital No safety net for self-managed super How investors in Trio backed the wrong horse Trio funds trail lead to Germany Trio funds told to wind up ASIC refuses to release Trio details Case being prepared for Trio government compensation Trio Capital forged iron triangle of self-interest ASIC must move quickly on Trio fund Fraud fear in Trio fund's lost $45m CRISIS CATCHES MYSTERY MEN OUT Trio funds wound up as hunt for lost millions widens Wind-up move on Trio funds Mystery deepens over missing Trio funds Trio directors surrender passports Trio Capital holding $1.5m 'risky' asset
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News Jail for Trio frontman By STUART WASHINGTON and MICHELE TYDD 429 words 13 August 2011 Illawarra Mercury ILM First 3 English 2011 Copyright John Fairfax Holdings Limited. Light sentence stirs investor ire THE frontman for Australia's largest superannuation theft has been sentenced to a minimum of two years and six months in jail.
TD Appearing drawn and unshaven in the NSW Supreme Court yesterday, Shawn Richard, 36, was sentenced for his role in the disappearance of $26.6 million from Albury fund manager Trio Capital. The decision has left solicitor Mark McDonald, who is representing about 100 Illawarra victims in a compensation case, surprised and disappointed. "I thought Richard would get more and I'm intrigued as to the length of that sentence. It seems light for what he did but obviously there were a lot of issues that the judge has taken into account which I would not be aware of. "But I'm pleased at least to see a sentencing outcome for one of the players in this matter," he said. Robert Harley, from Wollongong, who lost about $40,000 invested in the scheme, said he thought the sentence would be closer to 10 years for the suffering Richard had inflicted on so many people. "I've moved on but I've spoken to and read about people who lost everything and will never recover," he added. Richard, widely known by his Facebook nickname Shawny Cash, was sentenced on two counts of dishonest conduct, including secretly receiving $1.3 million paid into offshore bank accounts in Liechtenstein and Curaao. Investors have lost a total of $180 million invested in Astarra Strategic and ARP Growth that were then placed into offshore hedge funds controlled by Hong Kong businessman Jack Flader. Justice Peter Garling set a maximum period of three years and nine months. The decision about the lower minimum immediately provoked ire from Trio investors. "I don't think the custodial sentence agrees with the extent of criminality," a Trio investor, Brian Larking, said outside the court. "Two years and six months compared with the millions he's sent offshore under Jack Flader ... plus the fact he got that $1.3 million." Justice Garling said Richard was guilty of serious crimes of a high order that were carefully planned, concealed and involved a "staggeringly large sum". "He was the central figure in Australia without whose participation these offences could not have occurred," the judge said. Justice Garling gave Richard a 25 per cent discount on his sentence for contrition, including pleading guilty at the first available opportunity, and a further 12.5 per cent for undisclosed assistance in another matter. RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania Page 3 of 89 2011 Factiva, Inc. All rights reserved.
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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 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 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 8 of 89 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 responsibility Page 9 of 89 2011 Factiva, Inc. All rights reserved.
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 11 of 89 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 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 13 of 89 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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Finance Trio CEO accepts a 15-year ban from ASIC ANDREW MAIN 401 words 5 July 2011 The Australian AUSTLN 2 - All-round First 21 English Copyright 2011 News Ltd. All Rights Reserved REGULATION: Trio Capital chief executive Rex Phillpott -- a former assistant commissioner at the Australian Taxation Office -- has agreed to a 15-year ban from acting as a director or working in any role in the financial services industry. Mr Phillpott, from Albury in NSW, was appointed CEO of Trio Capital in October 2005, but it went into administration in December 2009.
TD The Australian Securities and Investments Commission also revealed yesterday that Natasha Beck, from Bronte in Sydney, who joined Trio Capital as a non-executive director in 2008, had accepted a two-year banning order, with an exemption for her personal company, Rumi Holdings, of which she is the sole director and sole shareholder. Both orders were enforceable undertakings, which usually signal the end of a formal investigation and remove the threat of stronger legal action. Albury-based Trio was the responsible entity for 25 managed investment funds, including Astarra Strategic. It reportedly had assets of $125 million in December 2009, but in April last year the NSW Supreme Court ordered that it be wound up. Much of the money appears to have been invested in Caribbean hedge funds and other unsuitable asset categories offshore, leaving thousands of superannuants significantly out of pocket. The liquidator of Trio Capital has reportedly been unable to recover most of the money invested in the fund. ASIC is understood to be very keen to talk to US-born lawyer Jack Flader, a resident of Hong Kong, about Astarra Strategic's investments, but so far he has shown no desire to visit Australia and he has not been charged with any offence here. In April, the federal government rescued 5358 members of APRA-regulated super funds with a $55m , 100c in the dollar package. However, the 365 holders of about $120m of Trio Capital funds in administration, such as Astarra and ARP Growth, have their own self-managed superannuation funds and have received no restitution so far. Their funds are not regulated by the Australian Prudential Regulation Authority, and as Financial Services Minister Bill Shorten has stated, they are responsible for their own choices. Canadian citizen Shawn Richard, the former investment director of Astarra Strategic, recently pleaded guilty in Sydney to two charges of dishonesty in relation to that role and he is facing a jail sentence when he comes up for sentence shortly. CO NS autaxo : Australian Taxation Office c411 : Management Moves | cslmc : Senior Level Management | c41 : Management Issues | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter austr : Australia | nswals : New South Wales | apacz : Asia Pacific | ausnz : Australia/Oceania
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Business 'Raised concern' on hedge funds STUART WASHINGTON 556 words 5 July 2011 The Age AGEE First Drop-in 1 English 2011 Copyright John Fairfax Holdings Limited. 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. Yesterday it was revealed that the Australian Prudential Regulation Authority raised concerns about the fund manager Trio Capital's valuation of its two hedge funds in August 2008.
TD As a result of its "prudential review" of the Albury-based fund manager, the superannuation regulator unsuccessfully sought further information about the valuation of the funds. In October 2008, APRA was told there were no "available valuations" of two offshore hedge funds registered in the obscure 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 Exploration Fund was run by a Philippines stockbroker with a long history of stock fraud, Frank Richard Bell. As the Trio saga unfolded, it became clear regulators had regular brushes with the fund. For example, in 2005 APRA forced Richard off the board of Trio Capital in 2005 because of conflict-ofinterest concerns arising from his roles as both owner and investment manager for the fund. In Page 17 of 89 2011 Factiva, Inc. All rights reserved.
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 yesterday. CO IN NS aupra : Australian Prudential Regulation Authority i81502 : Trusts/Funds/Financial Vehicles | i831 : Financial Investments | ihedge : Hedge Funds | ialtinv : Alternative Investments | iinv : Investing/Securities c171 : Share Capital | c17 : Funding/Capital | cactio : Corporate Actions | 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 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 Trio 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 20 of 89 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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Finance Move to compensate investors for bad financial advice Andrew Main 616 words 20 May 2011 The Australian AUSTLN 1 - All-round Country 19 English Copyright 2011 News Ltd. All Rights Reserved PRESSURE is likely to increase on the federal government to introduce a statutory compensation scheme for seriously affected private investors after a study found the social impact of major financial loss was sometimes ``catastrophic''. The study, by an independent market research company commissioned by the Australian Securities & Investments Commission, found that losses by some investors were so significant that ``their life will never be the same''. Some felt prolonged anger, uncertainty, worry and depression.
TD The study's findings came from an original sample of more than 9000 people who had invested in a range of financial products and who complained widely that when schemes failed, financial planners provided them with very little information and in many cases refused to take or return phone calls. They were also largely unaware of existing avenues for compensation. ASIC commissioned the study to better understand the personal consequences of investors not being fully compensated and to help inform submissions to the government review into whether a statutory compensation scheme should be introduced in Australia. Among key findings were that investors who suffered the most had invested all their money, had not diversified or went into debt as part of their investment strategy. Most investors' losses were associated with an underlying product that was either frozen or collapsed, and the impact of the monetary loss was immediate on investors who did not have a financial buffer. For others, the first six months from when they discovered their loss were critical. Last month, the government released a consultation paper written by Richard St John, a former general counsel at BHP and the man who ran the HIH royal commission in 2002, which canvassed the idea of a British-style levy on financial service providers to compensate retail investors significantly affected by bad financial advice, mismanagement or dishonesty. The parliamentary joint committee on corporations and financial services recommended in February 2009 that a report of the type provided by Mr St John should be commissioned. It focuses on bad financial advice and there has never been a blanket proposal to rescue people who have made bad investments, unadvised, on their own account. The new report, commissioned by ASIC's consumer advisory panel and carried out by Susan Bell Research of Sydney, notes that the government is already shouldering the burden of helping previously self-funded retirees because they are now receiving government pensions `ànd because of the physical and mental health problems suffered by investors who have no medical insurance''. Every single investor in the worst affected category, which Continued on Page 24 Continued from Page 19 usually involved losing their house, reported serious illness following the financial loss. Page 23 of 89 2011 Factiva, Inc. All rights reserved.
Any notion of compensation is complex because deferent types of investment are regulated in different ways. For example, different categories of superannuation are covered by different levels of compensation safety net. Some 70 self-managed super fund investors who lost about $50 million in a Trio/Astarra-related fund called ARP Growth have not been financially rescued in any way, while superannuants within conventional APRA-licensed superannuation schemes were almost fully compensated last year after a $55m fraud in Trio Capital, a related company. The worst-affected investors covered by the new study were in the following types of scheme: inner city unit developments, mortgage investment schemes, rural managed investment schemes such as forestry or horticulture, structured investment such as hedge funds and infrastructure funds, and investors who geared up against their home equity and took out margin loans to invest in assets which lost value. The survey ran in-depth interviews with a sample of 29 investors after an initial questionnaire. CO NS RE ausic : Australian Securities and Investments Commission gcat : Political/General News 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 25 of 89 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 27 of 89 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 Largest government payout of $55m for Trio super fraud STUART WASHINGTON 554 words 13 April 2011 The Age AGEE Second 1 English 2011 Copyright John Fairfax Holdings Limited. IN AUSTRALIA'S largest payout for superannuation fraud, the government yesterday awarded $55 million to investors who lost money in Albury fund manager Trio Capital. The compensation will return 100 in the dollar to more than 5000 investors, many of them retirees.
TD The move was portrayed by Assistant Treasurer Bill Shorten as vital to shore up confidence in the superannuation system. "The idea that we can eliminate all crooks and thieves and charlatans some people always try and take advantage of others," Mr Shorten 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 to 100 per cent from the previous level of 90 per cent when superannuation investors in Commercial Nominees were compensated for losses of $30 million in 2002. But yesterday's compensation measure is limited to 5385 investors in government-regulated superannuation funds, including more than 2500 in New South Wales. The distinction means do-it-yourself superannuation investors, among those who lost another $120 million in two Trio hedge funds, will not be compensated. These investors include John Telford, 62, a Wollongong man diagnosed as an incomplete quadriplegic who lost his disability payout of $600,000 in Trio. Mr Telford is among more than 100 clients of a collapsed Wollongong financial planner, Tarrants, who will not receive a cent because they were 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. About $170 million in Trio's reported losses were concentrated in two hedge funds, Astarra Strategic and ARP Growth. "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," Mr Shorten said. 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 there was no compensation available for non-superannuation investors who placed their money directly into troubled funds. He also said investors in DIY super funds were ineligible for compensation on the basis these Page 29 of 89 2011 Factiva, Inc. All rights reserved.
investors were taking responsibility for their own investments. 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 commissioned by the federal government about extending a fraud compensation scheme to all investors was due by June 30. Rosemary Walker, 73, welcomed the decision that will return money to her and 250 fellow lowpaid Tabcorp workers who had superannuation in Astarra Superannuation Plan. Ms Walker said the uncertainty had taken its toll on her colleagues' health. IN NS RE i831 : Financial Investments | iinv : Investing/Securities gcrim : Crime/Courts | gcat : Political/General News 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 31 of 89 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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Local Super bailout excludes DIY investors SIOBHAIN RYAN, ADDITIONAL REPORTING: GEOFFREY NEWMAN 759 words 13 April 2011 The Australian AUSTLN 1 - All-round Country 1 English Copyright 2011 News Ltd. All Rights Reserved THOUSANDS of superannuation fund members who were defrauded in the Trio Capital scandal will have their money returned in the biggest bailout in the industry's history. But, in announcing the $55 million rescue, the Gillard government excluded hundreds of do-ityourself superannuation fund holders in what will be a wake-up call to the more than 800,000 selfmanaged funds in the country.
TD Assistant Treasurer Bill Shorten yesterday revealed 285 people who ploughed money into the now defunct Trio Capital via DIY super, along with 405 who invested directly, would have no recourse to the government lifeline. Compensation will be limited to 5358 contributors to mainstream superannuation funds regulated by the industry watchdog, the Australian Prudential Regulation Authority. They will receive back all of the money that was invested in the Albury-based funds manager, formerly known as Astarra. To explain the exclusions, Mr Shorten said self-managed superannuation fund members had ``the benefit of direct control over where their money was invested, while the members of other funds do not''. `Ìf people wish not to operate under those SMSF regulations, they're free to become members of the APRA funds,'' Mr Shorten said. Ross Tarrant, managing director of Tarrant Financial Consultants, who lost $500,000 in family savings as well as $20m of his clients' money in Trio Capital investments, blasted the government decision to deny compensation to those who invested through an SMSF. `ÀSIC and APRA licensed and regulated these public offer funds and are now, while acknowledging the fraud and compensating some superannuants, leaving the SMSFs out in the cold,'' he said. ``This was an opportunity for the government to recognise its shortcomings in this area and compensate ordinary Australians for events well beyond our shores and controls while restoring confidence to the superannuation industry and investors generally. `Ùnfortunately, the letter of the law has prevailed and some will receive compensation and others won't.'' For Mr Tarrant, the Trio scandal, in which money was channelled offshore to a hedge fund in the Caribbean, has been a double hit. Apart from losing his own money through an SMSF and a direct invest, his firm was forced into liquidation, largely due to its loss of reputation over the Trio Continued on Page 4 Continued from Page 1 Capital collapse. He has joined a planned class action against insurers for Trio Capital and its directors as well as the research houses that gave the fund manager glowing reports. The exclusion of self-managed fundholders from the compensation provisions of part 23 of the Superannuation Industry (Supervision) Act was last reviewed by the Howard government in 2003 and retained by Labor when it took office. Page 33 of 89 2011 Factiva, Inc. All rights reserved.
Yesterday's ruling represents the biggest application of the controversial exclusion, but it comes at a time of exponential growth in the SMSF sector. DIY super funds now hold almost one-third of Australia's retirement savings -- just under $400 billion of the $1.23 trillion total. Australia's 800,000-plus SMSFs, which have average assets of $836,000, represent the fastestgrowing segment of the superannuation market, growing 14 per cent in the 2009-10 financial year. The Trio bailout will top the $49m paid out in all previous compensation bailouts between 2001 and 2009. It will be funded via an industry levy of about 2c per $100 on people with super accounts in APRAregulated funds. The Gillard government has commissioned an independent review of the pros and cons of a statutory compensation scheme for the financial services sector, with a report due by June 30. Until then, the courts and the Financial Services Ombudsman are the two avenues left to investors outside the compensation scheme. Ron Willemsen, principal at law firm Macpherson & Kelley, which is leading the class action, said many more of his 190 claimants would be left empty-handed by the government decision. Many SMSF members are near the end of their working lives, with 33.7 per cent in the 55-64 age group, leaving them particularly vulnerable to capital losses. Jeremy Cooper, author of the government's review of super, said those who managed their own superannuation had to accept they were taking on more risk than those who handed the task to a fund monitored by the APRA. Despite yesterday's bailout, the government had no comment on how it would deal with a further $59m said to be missing from another Trio Capital fund, the ARP Growth Fund. NS RE gcat : Political/General News 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 35 of 89 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 No safety net for $400bn in DIY super By STUART WASHINGTON 352 words 14 February 2011 The Age AGEE First 1 English 2011 Copyright John Fairfax Holdings Limited. 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. 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 appreciating the risks.
TD Investors in work-based super schemes covering the majority of Australians are eligible for compensation in the case of fraud, at the discretion of assistant treasurer Bill Shorten. 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, managing director of super fund ratings firm SuperRatings, said DIY super had been sold by financial advisers and accountants, leading to the rapid growth. But he said many investors would not have been told of the lack of compensation when it came to fraud. Mr Bresnahan 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," Mr Bresnahan said. Yet the federal government has no plans 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 reasoning for excluding DIY funds from compensation is that DIY trustees 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 offshore 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. NS RE gdiy : DIY | gcat : Political/General News | ghimp : Home Improvements | glife : Living/Lifestyle | greest : Real Estate/Property News 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 38 of 89 2011 Factiva, Inc. All rights reserved.
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THE DISTILLERY: Murky waters Glenn Dyer 1,441 words 17 January 2011 Business Spectator NBSPEC English 2011 Business Spectator Pty Ltd. All rights reserved. As the commentariat counts the costs of the Queensland floods, the more daring jotters ask whether it is governments or individuals who should cover uninsured losses.
TD Australians pride themselves on being able to react to disasters with energy and charity, as we have seen with the spate of floods in the past few months in Queensland, NSW and Victoria. But that's not the whole story. For decades we have constantly avoided the big issue of how to set up a system that will handle the costs of disasters. We've had plenty of chances to fix the problem, but failed to grab them. The issues are difficult, but they emerge in the aftermath of every disaster, whether it was the 1974 floods in Brisbane, the Victorian bushfires in 2009, the Newcastle earthquake in 1989, the collapse of HIH a decade ago and Cyclone Tracy in Darwin in 1974. Who will be responsible for uninsured losses? Will the government have to step in and pay? Why should this happen because it penalises the prudent who insure and rewards the lazy, and the imprudent who don't? Worse it raises a sense of entitlement and creates a high level of moral hazard in the community that the government will always step in and meet the cost. This morning some of the issues are canvassed by some of our jotters, but The Australian carries a very timely contributed column which should be required reading for all those involved in the aftermath of the floods. "In the coming weeks and months, Australia will have to decide what catastrophe management and financing solutions would best be aligned with its social, economic and political priorities. Ideally, the answer will provide signals as to the level of exposure people face and increase personal responsibility towards mitigating those risks." All those in the media, politics and insurance should be asking, how we can establish a mechanism to handle the cost (human and financial) of future disasters. Fairfax's Phillip Wen wondered about the true cost of the Queensland floods: "It hasn't taken long for economists to begin counting the cost of the all-consuming, once-in-a-generation Queensland floods. By now, you would have heard the good (economic) news: despite extensive damage to roads and infrastructure, a $50 billion coal industry crippled, and 75 per cent of the state declared a disaster zone, the hit to Australia's gross domestic product is expected to be modest. The most pessimistic of economists think the floods will shave three-quarters of a percentage point off gross domestic product this year. More believe the impact will be less, about 0.3 percentage points." Wen also points out there is a human cost that can't be measured. And fellow Fairfax writer, Ian McIlwraith says: "Work last week by a Deutsche Bank analyst, Paul van Meurs, and his team tried to put some of the more hysterical economic damage predictions into perspective coming to the conclusion that the impact on listed companies should not be significant if things normalise in weeks rather than months. Interestingly, the larger effect on retailers is expected to be not so much their closed shops and stock damage (most of which they will be insured against), but the fact that many of the rest of us show empathy for the victims by not spending on ourselves instead, hopefully, donating some of that cash." The Australian Financial Review says: "Federal and state leaders have foreshadowed major reforms to the insurance industry to ensure policies properly cover flood damage as the Queensland clean-up continues and the flood threat in Victoria worsens." But the paper also reports that insurers will not be generous: "The insurance sector has pushed back against calls for it to be more generous in paying out its policyholders than is required by the fine print of their contracts, leaving as many as half the people with insurance affected by the Queensland floods not being able to make a claim." But the AFR reports that re-insurers (the insurance industry's insurers) are showing a good turn of balance sheet speed to boost the cost of providing local insurers with coverage "The worlds largest reinsurer has said it will push through price increases on reinsurance policies sought by local insurance companies in response to the severe flooding in Queensland and more frequent natural catastrophes in Australia." The move is understandable given the spate of big storms, floods and fire claims since 2007. The paper's Chanticleer columnist wrote on the weekend: "Insurance claims from Queenslands catastrophic floods have topped $365 million and will rise significantly when Brisbane, Toowoomba and the mines start to roll in." The Australian also reported: "The trauma for flood victims is being compounded by some insurance companies insisting home owners delay cleaning up until after inspections. As Page 40 of 89 2011 Factiva, Inc. All rights reserved.
Queensland Premier Anna Bligh called for a review of insurance protection against flood, it emerged that many devastated residents had only now discovered they were not covered for the disaster or would have to wait for an inspection before cleaning up their homes. So far, Queensland flood victims have lodged claims worth more than $365 million but the figure will escalate when those from Toowoomba, Ipswich and Brisbane come in." No names of the naughty insurers were given, but the paper said they were "small". All the media reports and comments are predictable this morning, with the exception of The Australian's column. On a national note, The Australian's David Uren looks at the economy and wonders: "Is Australia's economy bursting at the seams, as labour force figures suggest, with unemployment down to levels that threaten inflation? Or does it, as key business surveys show, belong in the economic basket alongside Greece, Ireland and Spain? It is not unusual for different pieces of economic data to deliver conflicting signals about the outlook, but the divergence at present is extreme. Some economists are expecting growth at an annual rate of about 4 per cent in the December quarter and others think it will be barely above zero. Westpac and Macquarie Group have canvassed the possibility of a negative March quarter. The economy could either be booming or hovering close to recession." Well, it is the economy and never runs smoothly or according to the demands of economists, the media, or politicians, does it? Superannuation is a constant focus of Fairfax's Stuart Washington. This morning he goes dramatic: "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." Judging by the level of scandal in Trio, this isn't surprising. On Saturday, The Australian's John Durie said: "Tony D'Aloisio is showing that the securities regulator is different from the competition watchdog when it comes to the law. DAloisios decision to appeal the court loss the Australian Securities and Investments Commission suffered over James Hardie, while surprising, is a welcome change from the attitude of his comrades at the Australian Competition and Consumer Commission. The ACCC would prefer the back rooms of Parliament House to lobby ministers over settling the law." Yes, it might be so, but ASIC still has the stumbles and fumbles when it comes to high profile legal cases against alleged wrongdoers. The AFR pointed out that 2011 will be a challenging year for ASIC. "The Australian Securities and Investments Commission begins 2011 with a strong headwind. Its been chastened by the loss of four high-profile court cases and has been given more responsibilities." And The Australian's Tim Boreham wrote on the weekend: "Get set for a cracker. That's the (almost) unanimous verdict of The Australian's expert panel. The 10-member panel expects the local sharemarket and US equities to race ahead in 2011. On average, the panel tips the All Ordinaries index to end the year at 5301 points, a 13 per cent improvement but still a country mile off the all-time Himalayan high of 6853 points scaled on November 1, 2007." The Australian market fell 2.6 per cent in 2010, despite some bullish forecasts a year ago and a tremendous first quarter. http://www.businessspectator.com.au NS RE c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | queensl : Queensland | brisbn : Brisbane | ausnz : Australia and New Zealand
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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 assets Page 42 of 89 2011 Factiva, Inc. All rights reserved.
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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Financial Services Transfers to Trio chiefs queried Duncan Hughes 95 words 1 December 2010 Australian Financial Review (Abstracts) AFNR 50 English Copyright 2010 Media Monitors Australia Pty Ltd. All Rights Reserved Liquidator Peter Ngan, of Ngan & Company, says there was "no reasonable basis" for the nearly $500,000 transferred to former senior executives of Wright Global Investments, a leaked copy of a report to creditors reveals. WGI recommended the funds of investment group Trio Capital, which collapsed in 2009. About $120 million invested in Trio's Astarra Strategic Fund and more than $50 million in ARP Growth Fund remain missing. The Australian Securities and Investment Commission is investigating WGI director, Shawn Richard, about the lost funds.
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Financial Services Trio's $170m has vanished Duncan Hughes 158 words 17 November 2010 Australian Financial Review (Abstracts) AFNR 62 English Copyright 2010 Media Monitors Australia Pty Ltd. All Rights Reserved PPB partner Neil Singleton, the administrator of collapsed fund manager Trio Capital, has confirmed that around $120 million in funds invested in Trio's Astarra Strategic Fund, and $50 million in its ARP Growth Fund have not been located, in what is thought to be the largest loss of Australian superannuation investments. The Australian Securities and Investments Commission and the Australian Prudential Regulatory Authority closed the funds and appointed administrators 12 months ago. Although investigations have found links to overseas hedge funds including Exploration, the defunct Atlantis Capital Management, SBS Dynamic Opportunities Fund, Pacific Capital Markets Preservation of Capital Plus and Tailwind Investment Fund, only minor amounts have been recovered. Mr Singleton has said there is little value in continuing search for the funds, and will instead focus on seeking compensation from third parties involved in the loss of the funds .
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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 46 of 89 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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Financial Services Advisers' former staffers help Trio investigators Duncan Hughes 309 words 30 June 2010 Australian Financial Review (Abstracts) AFNR 51 English Copyright 2010 Media Monitors Australia Pty Ltd. All Rights Reserved The Australian Securities and Investments Commission has used former employees of a financial adviser to help with its surveillance of the company as part of its long-running investigation into collapsed fund manager Trio Capital. According to leaked documents, correspondence between an officer in the securities regulators financial advisers stakeholder team and the former employees talks about their role in the investigation. The investigation began about eight months ago after ASIC and the Prudential Regulation Authority closed down Trio. ASIC confirmed that investigations are continuing into advisers linked to the failed fund manager and that two may face disciplinary action. Separate investigations have been started by industry groups such as the Financial Planning Association. During the financial crisis of late 2007, Trios Astarra fund continued to deliver positive returns when other funds were losing heavily.
TD Industry gatekeepers such as Van Eyk Research and Aegis Equity Research recommended the fund. Financial advisers who recommended Trio Capital products are the latest targets of the investigation. This has broadened to involve European, Asian, United States and British Virgin Islands financial centres. The two advisers under investigation recommended Trios flagship Astarra Strategic Funds, a hedge fund of funds, which used offshore fund centres and complex funds to invest around $123 million. Administrators PPB have not recovered any Astarra assets from the Virgin Islands companies and some $41 million invested through ARP Growth Fund. Former Astarra fund managers Shawn Richard and Eugene Liu will give evidence in public examinations next month over their management roles. Sydney-based Mr Richard has repeatedly advised administrators and regulators he has information over where about $75 million invested in the Exploration Fund is located. It is one of the five funds used by Astarra. RF CO IN NS Financial Planning Association, van Eyk, Virgin, Australian Securities and Investments Commission ausic : Australian Securities and Investments Commission iinv : Investing/Securities | i83108 : Investment Advice | i831 : Financial Investments nabst : Abstract | c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter | c16 : Bankruptcy | cactio : Corporate Actions 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 ASIC gets list of Trio suspicions By STUART WASHINGTON 254 words 23 June 2010 The Age AGEE First 9 English 2010 Copyright John Fairfax Holdings Limited. A LIST of suspected offences by Trio Capital's officers was sent to the Australian Securities and Investments Commission yesterday as the crippled fund manager was pushed into liquidation. Investigations into the Albury-based fund manager Trio Capital are yet to establish the existence of more than $180 million in assets, with Supreme Court judge George Palmer saying it had all the signs of a fraudulent scam.
TD Administrators are required to send ASIC details if Trio Capital officers are suspected of breaching the Corporations Act or if officers "may have been guilty of negligence, default, breach of duty or breach of trust". An hour-long meeting attended by six creditors yesterday formally placed the fund manager into liquidation. The report to ASIC covers possible breaches of the Corporations Act revealed in PPB's investigations into Trio Capital since it was appointed administrator in late December. PPB has been unsuccessful in locating $123 million invested through British Virgin Islands companies in a Trio hedge fund called Astarra Strategic and another $51 million invested offshore through ARP Growth. In a report in April, PPB revealed ASIC was investigating Trio officers for possible criminal penalties in relation to whether they were reckless or intentionally dishonest. Public examinations of Trio Capital's former investment managers, Shawn Richard and Eugene Liu, are scheduled for July 13. Mr Richard is due to meet administrators before the examination to help explain where the Astarra Strategic assets are. CO IN NS ausic : Australian Securities and Investments Commission i831 : Financial Investments | iinv : Investing/Securities gcrim : Crime/Courts | c13 : Regulation/Government Policy | ccat : Corporate/Industrial News | gcat : Political/General News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E Industry News Filter austr : Australia | ausnz : Australia and New Zealand
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AUSTRALIAN NEWSPAPER HIGHLIGHTS - MAY 19, 2010 504 words 19 May 2010 Asia Pulse APULSE English (c) 2010 Asia Pulse Pty Limited SYDNEY, May 19 Asia Pulse - Highlights of today's newspapers: AUSTRALIAN FINANCIAL REVIEW: - BHP chief Marius Kloppers has warned that dividend payments to 540,000 shareholders could be hit by the proposed tax on resource company profits.
TD - Rumours of Telstra's imminent demise have been much exaggerated. We have no plans to die, says David Thodey, who marks one year in the loneliest job in the ASX 200 today. - Australia's housing market is not facing a debt-fuelled bubble, according to a senior Reserve Bank of Australia official. - Large numbers of people may be missing out on government co-contribution payments to their retirement savings because a quarter of large superannuation funds fail to lodge member statements with the Australian Taxation Office, an audit has warned. - AXA APH is helping National Australia Bank seek clearance for its takeover offer from the competition regulator and is talking to the bank about possible asset sales to get the controversial deal over the line. THE AUSTRALIAN: - Telstra boss David Thodey has reaffirmed earnings guidance in the face of a slew of analysts' downgrades. - There is a risk that miners will move to lower-cost countries to avoid the Rudd government's proposed resource super-profits tax. - The major banks benefited from the RBA's quick cuts to rates. - Macarthur Coal's largest shareholder, China's Citic Group, has put the brakes on US giant Peab ody Energy's $3.8 billion bid for the miner. - Both bidder and target in NAB's $14 billion offer for Axa Asia Pacific Holdings have lobbied the ACCC to approve the deal. - Optus has warned the competition regulator that broadband prices will rise and competition will wither unless it rejects Telstra's proposed changes to the telecommunications wholesale access regime. SYDNEY MORNING HERALD: - Optus has warned the competition regulator that broadband prices will rise and competition will wither unless it rejects Telstra's proposed changes to the telecommunications wholesale access regime. - Average weekly rents in Sydney have increased to $400 a week, an increase of $10 since last year. - Australia's competition tribunal has rejected Telstra's attempt to increase the cost for its retail rivals to access its copper fixed-line network. - 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. CANBERRA TIMES: - Housing affordability is at record lows in the ACT, according to the latest Housing Industry Association Commonwealth Bank housing affordability index. Page 51 of 89 2011 Factiva, Inc. All rights reserved.
- Treasury Secretary Ken Henry says mining will not be harmed in the long-term by the new resources super profits tax. - Baby boomers have been dubbed "generation risk" by a study that found 2.6 million Australians aged over 55 are at high risk of heart attack or stroke in the next five years. - Takeover target Macarthur Coal has rejected a reduced offer from Peabody Energy that cut its value by $254 million. ASIA PULSE bl CO IN NS nmlaus : AXA Asia Pacific Holdings Limited | pbdy : Peabody Energy Corp | lehbro : Lehman Brothers Holdings Inc | midi : AXA SA i1 : Energy | i111 : Coal Mining | i82 : Insurance | i82002 : Life Insurance | imet : Metals/Mining c22 : New Products/Services | gcat : Political/General News | nsum : News Digest | ccat : Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfce : FC&E Exclusion Filter | nfcpin : FC&E Industry News Filter | niwe : IWE Filter austr : Australia | ausnz : Australia and New Zealand all | aus | hlt
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Business Trio debacle could cost $180m-plus By STUART WASHINGTON 297 words 19 May 2010 The Age AGEE First 4 English 2010 Copyright John Fairfax Holdings Limited. NEWS LOSSES from Albury-based 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.
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 previously has revealed two sets of accounts for PPARP, raising fears of fraud in A R P 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 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. 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. Yesterday's meeting follows NSW Supreme Court judge George Palmer's order to wind up five Trio Capital 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. 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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General News Trio administrator seeks answers in HK Duncan Hughes 169 words 17 April 2010 Australian Financial Review (Abstracts) AFNR 15 English Copyright 2010 Media Monitors Australia Pty Ltd. All Rights Reserved Australias PPB says the value of collapsed fund manager Trio Capitals missing funds has increased to over $190 million, with about $123 million held in overseas hedge fund investments handled by Trios flagship Astarra Strategic Fund. Investigations are focusing on a transaction undertaken by Global Consultants and Services Limited, where Astarra instructed EMA International to buy units in a fund. Former fund manager Shawn Richard believes GCSLs chief executive, Jack Flader has information about the missing assets whereabouts. Attempts to locate $51 million in ARP Growth Fund are also underway, as well as investments of $17 million made by Astarra Wholesale Portfolio Service in Ualan Property Group and Millhouse Private Equity Trusts. Australian Securities Investments Commission and the Australian Prudential Regulation Authority continue their investigations.
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Australian Prudential Regulation Authority, PPB, Trio Capital, Astarra Strategic Fund, Global Consultants and Services Limited, EMA International, Jack Flader, Astarra Wholesale Portfolio Service, Ualan Property Group, Millhouse Private Equity Trusts aupra : Australian Prudential Regulation Authority i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities c181 : Acquisitions/Mergers/Takeovers | nabst : Abstract | c18 : Ownership Changes | 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 Judge blasts Trio 'scam' By STUART WASHINGTON 404 words 17 April 2010 The Age AGEE First 3 English 2010 Copyright John Fairfax Holdings Limited. INVESTORS with $123 million invested in an overseas fund managed by Trio Capital have almost certainly been victims of a "fraudulent scam", a NSW Supreme Court judge ruled yesterday. Justice George Palmer detailed "vices" in Trio's business as he ruled it in the public interest to wind up five schemes managed by Trio, including a controversial fund of hedge funds called Astarra Strategic.
TD And the judge 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," Justice Palmer wrote. More than $400 million of Albury-based Trio investors' money has been frozen since October after fears were raised that the $123 million invested in Astarra was 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 recent product statements did not disclose 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 Exploration, Tailwind, SBS Dynamic Opportunities, Pacific Capital Markets and Atlantis Capital Markets but administrators have been unable to find any assets. "The administrators' investigations strongly suggest that EMA's 'investment' in the underlying funds is a fraudulent scam," Justice Palmer wrote. He wrote that 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". He said 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, after concluding "there are strong reasons to believe that a substantial part of the funds of [Astarra] were invested fraudulently and have been lost". Yesterday's judgment 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 Crime probe on Trio directors By STUART WASHINGTON 245 words 13 April 2010 The Age AGEE First 3 English 2010 Copyright John Fairfax Holdings Limited. TRIO Capital's directors are being investigated for suspected criminal offences amid new allegations they may have acted improperly. 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.
TD Under the act, it is an offence to fail to attend the examination or make details of the examination public. Details 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. Administrator PPB was appointed in December after fears were raised about $123 million invested in a hedge fund managed by the Albury-based Trio Capital called Astarra Strategic. A worldwide 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 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. 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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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 60 of 89 2011 Factiva, Inc. All rights reserved.
ACT Super, the recently appointed trustee of super funds offered through Albury fund manager Trio 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 How investors in Trio backed the wrong horse Stuart Washington. 1,955 words 27 March 2010 The Age AGEE First 1 English 2010 Copyright John Fairfax Holdings Limited. A super fund's links with questionable operators bodes ill for punters, writes Stuart Washington. A LITTLE-KNOWN fund manager from Albury has come to represent the worst nightmare for some Australian superannuation investors.
TD The savings of at least 10,000 superannuation investors have been frozen since last October 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 investors and the regulators tasked with guarding the sanctity of Australia's superannuation industry cause for grave concern. 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 self-regulation body, securities regulators' warnings and a guest list to an exclusive conference in the Thai beach resort of Pattaya, BusinessDay 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 that regulators are any further ahead. Astarra investment manager Shawn Richard could have been excused a little nostalgia as he scanned down the guest list for the "global meeting" of stockbrokers planned for the Thai beach resort of Pattaya in 2005. Richard, now 35, and his Hong Kong business partner for the past 11 years, Jack Flader, 47, have come into sharp focus in Australia as leading figures in Astarra Strategic. Richard 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. BusinessDay 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. BusinessDay can also reveal for the first time that Richard was named in 2001 by securities regulators as an associate of an unlicensed stockbroker in what is known as a boiler-room scam. In ties that appear to bind, several figures from the 2005 conference are now playing central roles in the Astarra Strategic drama. Among the men contemplating the dinners and bar tours provided as part of the Pattaya Page 62 of 89 2011 Factiva, Inc. All rights reserved.
conference the daily schedule was "subject to change based on the health of delegates" nine 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 Millennium Financial operating in the Philippines in 2001. The warning was subsequently removed from the Securities Commission website. The Securities Commission could not provide a reason for its removal. BusinessDay 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, Trio 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 is 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 redlight 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, 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. The high life would no doubt continue at the conference's two "Gregory S. Rullo Bar Tours". Page 63 of 89 2011 Factiva, Inc. All rights reserved.
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 name more than 80 destinations including 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 a night he wrote on his web site of "10 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. 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. Tony Hetherington has a full-time role as a journalist exposing boiler-room scams in a column called Readers' Champion for Britain's Sunday Mail. In a part-time role he sits on a consumer advisory panel for Britain's Financial Services Authority (FSA), which acts as an oversight body of its enforcement measures. Hetherington claims credit for prompting the Financial Services Authority'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 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," he 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. The history of Astarra Strategic is yet to be written. But there are clear signs that Australia's trillion-dollar superannuation industry has attracted some less-than-desirable elements through a plausible onshore base. Page 64 of 89 2011 Factiva, Inc. All rights reserved.
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. The story until now 2003 Shawn Richard and Eugene Liu buy the fund management business of Tolhurst Capital, funded by Jack Flader. It is eventually known as Trio Capital, based in Albury. 2009 Trio claims to have more than $1 billion in investments after giving big commission-based incentives to a group of financial planners to invest in the funds. September 2009 Bronte Capital blogger and fund manager John Hempton writes a letter to the Australian Securities and Investments Commission detailing fears about a Trio Capital fund called Astarra Strategic. He says the even returns suggest it may be a pyramid investment known as a Ponzi scheme. October 2009 ASIC imposes conditions on Trio Capital, freezing its ability to take any new money. December 2009 Regulators take over Trio Capital, amid fears about the valuations of $426 million in Page 65 of 89 2011 Factiva, Inc. All rights reserved.
assets, including $125 million invested through Astarra Strategic. December 2009 Administrators PPB say they do not know where $125 million invested in Astarra Strategic has ended up. February 2010 BusinessDay reveals two sets of accounts in another Trio fund, ARP Growth, raising fears of fraud affecting a further $58 million invested through Trio. March 2010 Mr Richard defends his track record as investment manager with Astarra Strategic, saying: I can sit here and tell you I have performed my role as an investment manager. March 2010 Five Trio funds are placed into liquidation because they are illiquid and probably insolvent. March 2010 The New South Wales Supreme Court hears Mr Flader has faced two compulsory examinations at ASICs request. IN NS iinv : Investing/Securities | ihedge : Hedge Funds | i8150214 : Private Pension Funds | i81502 : Trusts/Funds/Financial Vehicles | ialtinv : Alternative Investments c11 : Plans/Strategy | 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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Financial Services Trio funds trail lead to Germany Duncan Hughes 184 words 22 March 2010 Australian Financial Review (Abstracts) AFNR 43 English Copyright 2010 Media Monitors Australia Pty Ltd. All Rights Reserved Former managers of Trio Capitals flagship Astarra Strategic Fund, Shawn Richard and Eugene Liu, will be cross-examined in court tomorrow about the location of $170 million missing assets ($120 million from Astarra Strategic and $50 million in the ARP Growth Fund, including the German assets). The search is expected to be extended to a German biochemical company. Administrator PPB applied for a NSW Supreme Court ruling to wind up five of the funds. The Australian Securities and Investments Commission has also joint forces with the Australian Prudential Regulation Authority to support regulators in the US, Hong Kong and the Caribbean. Other than identifying the assets, administrators and regulators also want to talk to Astarra Strategics administrator, Hong Kong-based Jack Flader, and fund manager Frank Richard Bell.
TD To act as trustee of four superannuation funds and one pooled super trust, Trio held an APRA licence; it also held an Australian Financial Services Licence that allowed it to operate 25 managed investment schemes. RF IN NS Australian Prudential Regulation Authority, Australian Securities and Investments Commission i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities nabst : Abstract | ncat : Content Types | c41 : Management Issues | c12 : Corporate Crime/Legal/Judicial | ccat : Corporate/Industrial News | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter | nfcpin : FC&E Industry News Filter nswals : New South Wales | ausnz : Australia and New Zealand | austr : Australia
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Business Trio funds told to wind up By STUART WASHINGTON 430 words 20 March 2010 The Age AGEE First 3 English 2010 Copyright John Fairfax Holdings Limited. A NEW South Wales Supreme Court judge ordered the winding up of the Astarra Strategic Fund and four other Trio Capital funds yesterday, criticising the funds' former managers and their use of offshore tax havens. Judge George Palmer approved administrator PPB's application to wind up Astarra Strategic, AR P Growth, Astarra Overseas Equities Pool (AOEP), Astarr Wholesale Portfolio Services (AWPS) and Astarr Portfolio Services (APS).
TD In other developments, Global Consultants and Services Ltd (GCSL), its chief executive, Jack Flader, and former operations manager Marty Cohen this week sought to block a subpoena by PPB for documents from the Australian Securities and Investments Commission. Astarra Strategic Fund has been investigated after it emerged $123 million has been invested through tax havens, with Hong Kong-based GCSL acting as a custodian. Justice Palmer said he would publish reasons for yesterday's orders, "bringing to the attention of the investing public the danger of investing in schemes which are not utterly transparent and utterly transparently managed by reputable and reliable responsible entities". BusinessDay has previously reported fraud fears surrounding $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. APS has about $4.1 million in reported assets, almost all invested in AWPS, which has about $63.4 million in reported assets. PPB submitted to the court that the funds are illiquid, with difficulties recovering the reported values. Justice Palmer has ordered the funds be wound up after finding some funds were apparently insolvent, cross investments between the funds and the insolvency of Trio Capital as responsible entity for the funds. "I'm disturbed to read in the summary of facts that so much of the funds have been channelled 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," Justice Palmer said. He also appeared to criticise regulatory action on the funds to date, saying: "That [warning] really has to be emphasised by the courts if no one else is going to do it." Yesterday BusinessDay wrongly reported ASIC sought to block PPB's access to documents. Instead, Mr Flader and Mr Cohen are arguing it is in the public interest not to give PPB evidence they have provided to Hong Kong regulators, then passed to ASIC, as it could undermine investigations. A hearing has been set for GCSL to contest PPB's subpoena. NS RE 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
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Business - Opinion & Analysis Trio Capital forged iron triangle of self-interest STUART WASHINGTON 750 words 17 February 2010 The Age AGEE First 13 English 2010 Copyright John Fairfax Holdings Limited. And, note well, its cosy relationships with Seagrims and Wright Global Investments broke no existing rules. JEREMY Cooper can draw some sharp lessons 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 have 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 promotions 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 Index but with lower risk than a government bond index. Such representations were simply not credible and should not have been distributed by any licensed financial planner. Starting from basics, how did a little-known Albury-based fund manager such as Trio come to hold an estimated $426 million in investments? Well, the number of investments grew over Trio's 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 effectively became 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, received 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 Seagrimsbadged funds paid total annual fees of up to 2.65 per cent, high when compared with 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 Seagrims-badged investment funds; 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 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. Page 72 of 89 2011 Factiva, Inc. All rights reserved.
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 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 overrepresented 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. 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 that recommended $118 million be placed into mysterious British Virgin Islands funds, which are yet to be recovered. This iron triangle flourished under existing regulations. Take note, Mr Cooper: it was pensioners who invested their savings in Australian superannuation products whose interests were not served. NS 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 | 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.
No!
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 A R P G ro w th 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 Page 74 of 89 2011 Factiva, Inc. All rights reserved.
Growth's 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 76 of 89 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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CRISIS CATCHES MYSTERY MEN OUT 1,089 words 14 February 2010 Sunday Star-Times SUNSTT 12 English 2010 Fairfax New Zealand Limited. All Rights Reserved. Australian regulators are tracing millions in pension savings held by Trio Capital. --------------------
TD 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. The connection is an investment firm in the country town of Albury, New South Wales, now centre of an investigation by Australian regulators concerned about the whereabouts of millions of dollars in pension savings. Albury was the home of Trio Capital, trustee to four pension schemes with about 10,000 members and responsible entity for several managed investment schemes. Total funds under management, $A426 million. Trio, previously named Astarra Capital, had a close relationship with an outfit called Absolute Alpha, manager of a hedge fund called Astarra Strategic. 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. In a warning sign made famous by Wall St swindler Bernie Madoff, Trio claimed positive returns in almost every month of 2008 and 2009 - a period otherwise known as the global financial meltdown - as everyone else watched their portfolio values collapse. Authorities were alerted to Trio in September in a letter from John Hempton, a fund manager who runs a blog on the website of his firm Bronte Capital, drawing their attention to the improbably smooth returns achieved by Astarra Strategic. Other red flags have since become apparent. Absolute Alpha had links with one of Britain's biggest stockbroking scandals, Pacific Continental Securities UK, with estimated losses of up to [PndStlg]300 million. Sole directors of Absolute Alpha/ Astarra Asset Management since it was established in April 2005, are a Canadian, Shawn Richard, 34, and New Jersey-born Eugene Liu, 33. 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 [PndStlg]300m from dodgy stocks the broker had flogged. The business was castigated by the Financial Services 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, Page 78 of 89 2011 Factiva, Inc. All rights reserved.
Silver Fortune Plaza, 1 Wellington St, 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. 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." Fast forward to October last year and the Australian Securities & Investments Commission, after a swift investigation, suddenly banned Trio from raising any more money in the Astarra pension and investment schemes, following up in December by stripping its financial services licence and placing it under external administration. The Australian Prudential Regulatory Authority meanwhile removed it as trustee of the pension funds and froze assets. The problem now is that considerable sums remain unaccounted for. For example, $A52m in the ARP Growth Fund, managed by Trio, appears to be 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, at this point, establish the value [for the investment]," administrator Neil Singleton of PPB said. 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. York said the investment by Professional Pensions 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. Continuing uncertainty about ARP Growth follows difficulty by administrators and regulators in tracing $A123m invested through another Trio Capital managed fund, Astarra Strategic. A statement from the administrators last month noted: "We understand that the Astarra Strategic Funds investments comprise offshore hedge funds. There is limited visibility at this stage as to the existence of these assets and, if they do exist, whether the assets can be realised within a reasonable timeframe." According to one report, the fund had poured almost every cent it had into a mysterious British Virgin Islands company called EMA International which, in turn, apparently was investing in overseas hedge funds. But the investments were made via what is known as "deferred purchase agreements", which in layman's terms means nothing was actually purchased, and if it ever was, it's impossible to value. As investigations continue, Richard and Liu have handed their passports to their solicitors on ASIC orders and are prevented from leaving Australia until February 22. _ SMH, Age, Sunday Star-Times IN NS RE i83107 : Portfolio/Fund/Asset Management | i831 : Financial Investments | iinv : Investing/Securities ccat : Corporate/Industrial News uk : United Kingdom | 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 | eecz : European Union Countries | eurz : European Countries/Regions | weurz : Western European Countries/Regions
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Business Trio funds wound up as hunt for lost millions widens Colin Kruger 479 words 11 February 2010 The Sydney Morning Herald SMHH First 3 English 2010 Copyright John Fairfax Holdings Limited. Trio Capital The administrators of Trio Capital will not be winding up MillhouseIAG Private Equity Fund or the Marq Capital Diversified Direct Property Fund, as reported yesterday. The unitholders of the funds have resolved to replace Trio as responsible entity prior to the administrator's appointment.
LP INVESTMENT TRIO CAPITAL'S administrators will wind up eight of the failed investment company's funds, including the Astarra Strategic Fund, as they prepare to question the Astarra principals Shawn Richard and Eugene Liu on the complex trail of companies into which at least $120 million worth of funds have disappeared. TD In a report to unitholders this week, Nicholas Martin of PPB reported that, on top of the troubled ASF, there were seven additional managed investment schemes "with substantial assets which are unlikely to be realised in the short-term and are therefore proposed to be wound up". These schemes are; Asttar Portfolio Services, Astarra Overseas Equities Pool, Asttar Wholesale Portfolio Service, ARP Growth Fund, Regional Land Property Fund, Millhouse IAG Private Equity Fund, and Marq Capital Diversified Direct Property Fund. No estimate was given of how much money is tied up in these investment schemes but two schemes have more than $42 million invested with ASF, which has been unable to account for the $120 million it invested through Caribbean tax havens. Mr Martin said that despite claims to the contrary neither the administrators nor any other party had "been able to establish the existence or value of the foreign assets of ASF". Exposure to ASF may not be the only problem. Unitholders in the ARP Growth Fund were told last August that the fund held $52.5 million. BusinessDay has learnt that the fund holds assets worth $7 million. The administrators said the assets in the remaining schemes were "substantially accounted for", although a number of them do have exposure to the schemes being wound up. The administrators are taking the first steps to returning the healthier schemes to normal operation and are seeking a replacement responsible entity for them. Mr Martin said they would also apply to the courts this week to allow "limited redemptions" from those schemes with exposure to the investments being wound up. In a sign that paperwork problems extended beyond the Trio/Astarra empire, the administrators are also conducting a review of assets held by Trio's custodian on behalf of the schemes to provide confidence they have been properly accounted for by Trio. "The custodian did not maintain records which enable us to readily identify the individual scheme property," Mr Martin said. Meanwhile, the hunt for information over ASF's missing funds continues. The administrators have issued formal demands "on all parties involved in the management of the assets of the scheme for Page 81 of 89 2011 Factiva, Inc. All rights reserved.
information concerning the foreign assets". IN NS i81502 : Trusts/Funds/Financial Vehicles | iinv : Investing/Securities ncrx : Corrected Items | ncat : Content Types | c181 : Acquisitions/Mergers/Takeovers | c18 : Ownership Changes | 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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Finance Wind-up move on Trio funds Anthony Klan 443 words 11 February 2010 The Australian AUSTLN 2 - All-round First 21 English Copyright 2010 News Ltd. All Rights Reserved SIX managed investment and superannuation funds formerly controlled by the failed investment group Trio Capital, holding $260 million, are set to be wound up. The funds, including the Astarra Strategic Fund which invested $118m in a secretive British Virgin Islands company, will cease operating following action by Trio administrator PPB.
TD PPB said the funds would be wound up because the administrator could ``confirm the existence'' of the BVI investments held by Astarra Strategic Fund and the ARP Growth Fund, which had much of its $59m invested in the secretive tax haven. The other four funds -- Asttar Portfolio Services, Astarra Overseas Equities Pool, Asttar Wholesale Portfolio Service and the Regional Land Property Fund -- would be wound up because of their exposure to the two funds which had invested in BVI companies, said PPB administrator Neil Singleton. ``There are a number of schemes with substantial assets which are unlikely to be realised in the short term and are therefore proposed to be wound up,'' Mr Singleton said. In mid-September corporate regulator the Australian Securities & Investments Commission removed Trio Capital -- based in the regional NSW border town of Albury -- as the manager o r trustee of $426m in funds. The men then controlling the fund, Canadian Shawn Richard and New Jersey-born Eugene Liu, subsequently surrendered their passports ``without admission'' under a deal with ASIC. PPB said it would hold a public examination of Mr Shaw and Mr Liu late next month. Mr Singleton said that although based in Albury, Trio Capital raised funds by using nationwide financial planning networks. He said the group had used its Albury premises primarily for ``back office'' functions. PPB yesterday rejected reported claims from the Association of Independently Owned Financial Planners, a financial planning network, that it had largely succeeded in finding the missing funds. ``Contrary to recent media reports, we, or any other party, have not been able to establish the existence or value of the foreign assets of ASF,'' PPB said in a report to creditors. The financial planning network had reportedly claimed to have hired a Hong Kong-based private investigator to track down the missing funds, which it said had initially been invested with BVIbased company EMA International and ended up with five Hong Kong-based hedge funds. Mr Singleton said investors in two managed funds formerly controlled by Trio Capital -- Millhouse IAG Private Equity Fund and MARQ Capital Diversified Direct Property Fund -- had voted to replace Trio as manager before it collapsed. `Ìn relation to the remaining schemes it would appear the assets are substantially accounted for,'' PPB said. RF AUS-20100211-2-021-758332 2011 Factiva, Inc. All rights reserved.
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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
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Business Trio directors surrender passports Colin Kruger 404 words 16 January 2010 The Sydney Morning Herald SMHH First 1 English 2010 Copyright John Fairfax Holdings Limited. FINANCE TWO executives caught up in the investigations surrounding Trio Capital have handed in their passports.
TD And the administrators, PPB, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority are trying to unravel the fate of $426 million of funds under management. ASIC confirmed yesterday evening that orders were made "by consent" for Shawn Richard and Eugene Liu - directors of Trio's ultimate owner - to hand in their passports to their solicitors "withou t admission". They may not leave the country until February 22. This week PPB confirmed it was not yet able to establish the financial positions of the investment schemes, although details of the "liquid" schemes were expected within weeks. Questions remain about all Trio's funds under management, most of them being superannuation funds managed on behalf of 10,000 clients. The administrative team visited the company's headquarters in Albury this week but the real action centres on a Caribbean tax haven, the British Virgin Islands, where the money trail appears to have gone cold. The administrators' report referred to the problem obliquely, saying one reason for the lack of detail was the "complexities associated with the underlying assets, including a significant portion of them being located in jurisdictions outside Australia" and cross investments among the 28 schemes. The fault lines all cross at one hedge fund, the Astarra Strategic Fund, which claims to have invested all its $118 million in funds with EMA International, based in the British Virgin Islands. ASIC began its inquiry more than three months ago but no one has been able to offer any clue on the fate of this money or shed light on who controls EMA. The entity which set up the investment, Astarra Asset Management, is in liquidation. Mr Richard and Mr Liu were directors of this company and of Trio's parent company. The administrators have put in a contingent claim against Astarra Asset Management for $120 million, offering the strongest hint that the funds will not be returning from their Caribbean address. In a sign there may be further trouble, it appears the Astarra Strategic Fund was not the only Trio venture doing business with hedge funds domiciled in the British Virgin Islands. According to a document provided to BusinessDay, a Trio fund, ARP Growth, was also investing via the tax haven through Professional Pensions Arp Ltd. IN NS 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 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 Trio 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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