Just the link.
This post is the author’s reaction to the 11th update, which I cannot re-produce here, and is mainly written for fellow MPF investors who were also sent this update.
While the overall status of the Managed Performance Fund is indeed bleak, no doubt, the main source of any optimism about recovery action has been — for several months now — recovery through litigation. Prospects for recovery through selling off any land or for “normal business” stuff (which comprises the first half of the update) just hasn’t been on the table since the fund went into administration. Our money went “poof” on that moment, probably even before then. So let’s just accept that, if we haven’t already. Perhaps the one thing is that what money they are able to recover from the business side of things is paying for part of Korda Mentha’s costs.
What remains to be seen, however, is how well we’ll do in court. On that score, it seems — at least, this is my takeaway from it — is that it sounds like there is reason for some guarded optimism. Now, we’re probably wishing and hoping that Drake’s finances will allow some recovery, but that’s just not going to happen. The way I read it, is that have tracked down how and when Drake squirrelled away money, which means it’s gone, but it also means they have a strong criminal court case against him. Remember, the action of pushing money in the lead up to the failure is indication that this fraud was intentional, a vital and difficult aspect to prove in court. That they seem to have that should be reason for us to smile.
Where the money will be, though, is in discovering that this fund was clearly a scandal, that there were clearly multiple red flags, and everyone who was involved in the selling and confirming this fund are to blame. It’s those guys that have money from which can be recovered. They also have lots of lawyers, hence it will take years for this whole thing to play out.
There were other hints and suggestions that KM have convinced themselves of the extent of the fraudulent activity as well, which should also be indication, or at least, that I’m taking this as indication, that it might be “straightforward” to prove in court (or, at least as straightforward as this comes).
In other words, this author is choosing to believe the fact that KM isn’t saying “we’ve investigated things and we are unable to come to any definitive conclusions” to mean that there are still a lot of legs left in this saga.
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!
Australian Securities & Investment Commission (ASIC) is going after Peter Drake.
Can’t wait for the other shoe to drop.