Life is unfair, fundamentally

We lost half of our life’s savings in an instant. There were a few days there where I read the email and my brain knew the implications of what it was saying, and mental torment followed as I prepared to tell my dear wife, emotional struggle of having to deal with the singular notion of “What did I do to deserve this?”

It actually wasn’t an instant, though, and the people who sold me the LM Managed Performance Fund (MPF) should have seen through it all. The company LM already had a frozen fund when we bought it — and didn’t disclose it. The company LM was supposedly under the jurisdiction of the Australian regulation system, but the fund wasn’t. How about that? Also not disclosed.

I’m going public because I want it to be known that purchasing funds from the number of internationally-based companies out there who are competing for investments from international school teachers justifies more than just passing reconsideration. Don’t assume that there is some law operating over these transactions; don’t assume there is legal recourse that puts pressure on those companies if something goes awry.

Before this investment, we had only invested into timed deposits in banks. We were careful about being clear that we were conservative investors who didn’t want the hassle of wondering how our cash was doing. We didn’t expect — nor was it advertised — that this investment would make big returns. We had enough cash to be like “We ought to be investing wisely”, and a lot of the cash was in the form of end-of-year bonuses and accumulated cash you have when you leave and pack up for your next assignment.

Altogether, we put in more than a year of both our salaries’ worth, for a three-year deal with a return of around 7%.

I thought LM was a property development, it wasn’t. I thought that the directors of LM would be under a microscope in how it was managed. It certainly was not. I was specifically told that in the scale of things it was a low-risk fund and the returns were modest.

In fact what was happening was that the Australian-based LM were giving handsome up-front commissions to those overseas businesses selling the fund to regular people like us. In fact the LM business was giving loans to other property developers as second mortgages. When not making dubious loans, the directors of LM were helping themselves, tax free. The structure of the company — and its interrelationships with associated companies — is so convoluted that I’m not even going to bother trying to explain it. In fact most of the business was predicated on the promises of impossible growth and further investment monies. If that doesn’t sound like a Ponzi scheme, you don’t know what one is.

After the collapse of the fund, LM-appointed administrators went in and “investigated” and helped themselves to the fund, too, in the form of fees. Then they got ridiculed in court, lost control of the fund completely, and the new administrators are now gearing up for costly legal battles against the first administrators. Meanwhile, the latter continue to document the clear evidence indicating criminal malfeasance, proving that the fund was overvalued and nothing but hot air, and that people on the ground knew it all along.

They go under the name of independent financial advisors, and they sold me this fund, this fund without legal providence whatsoever. They now claim there was no way for them to know how bad it was, well then, I state, so you admit your due diligence resulted in you losing all of my money, how about a payout? Make no mistake, though, the real evil here is Peter Drake, a con artist who is able to lose  the money of thousands, unscathed and pocketing large slices all the while … and move on to the next venture. Meanwhile, there does seem to be a whole industry here chugging along with little operable oversight.

These advisors are trying to salvage the situation by petitioning the Australian government… but the possibility of the government helping out a bunch of overseas investors in some private exchanges … well, that alone says a lot. Desperation speaks volumes.

Yuri and I have been committed teachers for nearly 10 years, not expecting massive financial reward except the knowledge of a job well done and just a bit of security. We were hoping to be able to afford a year off someday.

I have heard that even at my own school there is more than just us. This is our situation, and probably for a lot of others like us.

And, in case you are wondering, we really are okay. The tone here is probably quite a bit more intense than my actual perspective on this now. But the tone here warrants the warning, which is why I thus wrote:

Please do be so warned.

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  1. It took considerable courage to write this post. I am proud of you.

    When people realize it’s not only the careless or greedy who can be taken by folks with no scruples, they are better able to invest.

    This was a public service posting.

  2. follow invester

     /  September 21, 2013

    I am not married and have worked
    as a nurse for 30 years and a
    trusted couple got me invested
    in LM.
    I new in Feb 2011 that there was a problem because LM would not
    redeem my funds and no time frame
    I lost $200,000 and I won’t retire

  3. Billy Bloggs

     /  September 25, 2013

    Mr Morris, you are not alone. Thank you for this blog. I have been trying to ignore news on LM, as it’s always been bad, never a shadow of light at the end of the dark tunnel we’ve all been taken down, not just this year but in the years leading up it this eventuality.

    My story:-
    It’s ironic that my investment in the LM MPF would cause my wife and I to be audited due to my undeclared gains on the funds I had invested (only ever paper gains mind you). 10% was being withdrawn by the Australian government, which raised a red flag with the local tax authorities.

    I had a feeling I should have been declaring my investments abroad but was told not to worry about it, “it’s large companies that the tax authorities chase” I was constantly told. Besides it was rather complicated to do in a country in which you don’t speak the language.

    I was hit with a huge tax bill due to the penalties and unpaid taxes, so I decided to redeem all LM investments in 2011. Unfortunately I couldn’t yet I continued to pay taxes on them…now I hope I can at least claim my taxes back!

    Working long hours, almost always 12 hour days, sometimes more in order to achieve an early retirement no longer seems to be a reality I can afford myself.

    I gave up spending time with my children in order to better provide for them financially. As my wife chose to be a stay at home mum, I felt I needed to work the extra hours and invest wisely.

    You read these stories about people loosing their life-time savings and think, wow, poor bloke.
    Then think, he should have seen it coming or why was he so foolish to put all his savings into one investment?

    While this is a major setback, it’s not life debilitating. Surprisingly I haven’t suffered nearly as badly mentally as I thought I would…perhaps it’s yet to fully sink in.

    It does depress me to think about this, so I don’t. I like to get out into the fresh air and feel grateful for what surrounds me. I’m hopeful this loss will change me to be a better person. Money doesn’t buy you happiness, it’s just a materialistic thing…our lives are controlled by money and it’s not right…I’d love to experience a nomadic lifestyle – I was hoping to do so on my own terms and for a period of time I’d determine, rather than it being a necessity…but perhaps that’s the hand that’s been given to me so I just have to accept it.

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