First of all, caveats. I am no by no means an expert in any of the things that I’m talking about below. It’s well outside of the scope of my regular day job. Up until this happened discussing business and economics was just not something I was interested in. I am almost certainly wrong about something below, but at least it’s something for investors to think about. So, with that in mind, here goes:
- Legal case against Drake. There likely will be a case taken against the founding director. I seriously doubt there be any monies recoverable from this action, however, as he’ll probably just declare personal bankruptcy.
- FTI and KM are gonna be hating each other. Both FTI and Korda Mentha (KM), have an obligation to pursue actions against LM, in order to recover money, so they have to co-operate. Note, however, that FTI has control of one fund and KM has control of the other, and KM took control of something that FTI used to have control over. That means that KM and FTI have to work together to get at LM, but it’s in KM’s interest to screw around with FTI. When you see KM going after the “previous administrator” you know that’s what’s happening. The FTI meanwhile are scraping to remain legitimate, after suffering a humiliating loss in court. A very confusing state of affairs.
- Class Action against advisor groups (IFAs). The MPF fund was not registered with ASIC yet it was being sold to overseas investors. This fact is very likely to attract a lot of attention to class action groups based in Australia. Or, at least I should hope so.
- Beginning of court case against the auditors and insurance companies. There is a lot of potential money to be had if a case can be won against the auditors and insurance companies, because they are flush with cash. However, they are also flush with lawyers, which means we can expect delay after delay on this front. If this is going to go anywhere, it probably won’t be very much down the road; I’m thinking 2016 before anything really takes flight on this front.
- Infighting from within the ACI. The ACI are a group of advisors that have banded together in order to try and recover money from LM. They are seeking funding from the investors in order to fund court case(s) and try and win some money back from them, I assume, given that there is no money in LM itself, but maybe from the auditors. This also goes along with their story line about how they could not have known the fund was structured in the way that it was. The reason I think that there will be in-fighting is partly because I hope there is as much pain for them as possible.* But the other reason is that they’ll have to decide which court case to actually take to court in the first case, which will probably lead to disagreement. It’s important, and probably worth fighting over, because they probably only have enough funding for one case, and winning that one is important, as investors probably aren’t going to fund further actions unless they can see tangible results.
So, that for me, is what I’m looking at for 2014. Feel free to contribute in the comments.
* I simply don’t accept the reasoning that they engaged in sufficient due diligence. How hard could it have been to check to see whether or not they were registered with ASIC? Plus, how rich is it that they are asking investors to trust them with more money? They’ll pay us back, they say!
We were advised to invest and triggered the investment 4th March 2013, via a Skndia platform, by 8th March the Hedging facility had closed, maybe there’s hope via the quarantine fund! Financial Advisor Skandia Due Dilligence Low Risk Investment!!!! As a businessman, I would have been sacked if I had recommended this investment. The only way any of the funds could continue was from new money, pyramid selling. To achieve 3-4% above bank rate of say 4% after commission of >4% and management fees of 5% and expenses and loan interest, means they needed >17% plus expenses. If I sold 60% of products (Maddison Loan) to 1 customer. Had inter company loans (MPF from LMIM paying 15% also paying bank 17%). My auditor would be seeing red and demand an explanation. Reg Williams the auditor is still getting endorsed on Linkedin for Financial Audits, Risk Analysis and Forensic Accounting. The accounts for 2012 are still on the website take a look its all there. Perhaps all 400+ investor victims should join linkedin and ask him to justify “Going Concern”
I thought I would give my five pence on my situation and how I see it.
I will first say that I lost 20k and had worked in the industry some years ago.
I invested a 200k inheritance across a number of different funds with an offshore advisor who I will not name as he was a close friend.
I also had the opportunity to meet one of the representatives from LM by chance before I deciding to make my investment.
This fund was clearly being marketed to retail offshore investors for whatever reason.
I guess I could say that I investigated the fund better than the average investor and from the outside all looked well. I received a huge amount of promotional material and there news paper clippings and the like. The Madission project received a state government recommendation and there were a number of celebrities that had got involved. So I’m not sure what went so terribly wrong.
I do blame Peter Drake but then I’m not sure whether it collapsed as he was a reckless manager or he committed some fraud. With ASIC yet to press charges I’m guessing it is the later.
I certainly don’t blame my advisor as I received the same material as him. In fact he advised me to split my 200k over ten different funds. He was also not commission driven as there were other investments paying higher commissions. He actually took a commission cut so I got a higher return rate.
I left the FA industry as we attempted to go fee for service but many clients just would not accept this. People who have their life savings in one fund is the result of people wanting a commission based service. People who have their life savings in one fund certainly do have a beef with their advisor those that have a small fraction should put this down to how a diversified portfolio works. Risk is spread over a number of assets, portfolio management 101….
The big question I have is if these companies and funds were audited how did this slip through….. I do think the auditors have a few questions to answer. How could the Qld state government give it a recommendation and then two weeks later it collapses.
Looking at the topics above Peter Drake is broke so good money could be thrown to chase nothing.
No one will be interested in a class action agains advisors as again this will cost more than what could be recovered. Many advisors will simply move to a different area and some countries have weak or costly legal systems. Maybe some hope in Singapore and Hong Kong.
Court case against auditors is a possibility but will be hugely costly and it will need to be proved that they were negligent.
The ACI is a load of crap. The group would be well aware by now that there is little available. To me it simply looks like a group of advisors who may have given clients bad advice and as such are attempting to deflect blame.
My 5 pence