ARP Media Factiva Search 2011

Jail for Trio frontman 3

Trio's Richard jailed for 2 years over stolen super 5

Andrews given nine-year ban, Richard facing time in the can 6

Burning questions remain over super theft 8

Words will not save Richard from jail time 11

How regulator missed chance in Trio debacle 13

Trio CEO accepts a 15-year ban from ASIC 15

'Raised concern' on hedge funds 17

Parliament to probe Trio Capital fraud claims 19

DIY funds need compensation too 20

Cold comfort for forgotten victims of Trio Capital fiasco 22

Move to compensate investors for bad financial advice 23

Investors deserve a softer landing than concrete 25

Couple of clowns duped in super scam muddy waters for true victims 27

Largest government payout of $55m for Trio super fraud 29

DIY super funds given cold shoulder in Trio payout 31

Super bailout excludes DIY investors 33

Ombudsman's name and shame list a bold step forward 35

No safety net for $400bn in DIY super 37

DIY super fund investors warned of no compensation from fraud 38

THE DISTILLERY: Murky waters 40

Self-managed super and the Trio trap 42

Transfers to Trio chiefs queried 44

Trio's $170m has vanished 45

Three pennies in the fountain of Trio Capital losses 46

Advisers' former staffers help Trio investigators 48

List of alleged Trio offences sent to ASIC 49

TypewriterFACTIVA SEARCH; "ARP GROWTH FUND"AUGUST 28, 2011

eliuTypewriterPublications after Oct 21, 2010

ASIC gets list of Trio suspicions 50

AUSTRALIAN NEWSPAPER HIGHLIGHTS - MAY 19, 2010 51

Trio debacle could cost $180m-plus 53

Trio administrator seeks answers in HK 54

Judge blasts Trio 'scam' 55

Crime probe on Trio directors 57

Corporate regulator investigates former directors at Trio Capital 58

No safety net for self-managed super 60

How investors in Trio backed the wrong horse 62

Trio funds trail lead to Germany 67

Trio funds told to wind up 68

ASIC refuses to release Trio details 69

Case being prepared for Trio government compensation 70

Trio Capital forged iron triangle of self-interest 72

ASIC must move quickly on Trio fund 74

Fraud fear in Trio fund's lost $45m 76

CRISIS CATCHES MYSTERY MEN OUT 78

Trio funds wound up as hunt for lost millions widens 81

Wind-up move on Trio funds 83

Mystery deepens over missing Trio funds 85

Trio directors surrender passports 87

Trio Capital holding $1.5m 'risky' asset 89

eliuHighlight

eliuHighlight

eliuHighlight

eliuHighlight

eliuHighlight

J a i l f o r T r i o f r o n t m a n

SE NewsHD Jail for Trio frontman BY By STUART WASHINGTON and MICHELE TYDDWC 429 wordsPD 13 August 2011SN Illawarra MercurySC ILMED FirstPG 3LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

Light sentence stirs investor ire THE frontman for Australia's largest superannuation theft has been sentenced to a minimum oftwo years and six months in jail.

TDAppearing drawn and unshaven in the NSW Supreme Court yesterday, Shawn Richard, 36, wassentenced for his role in the disappearance of $26.6 million from Albury fund manager TrioCapital. The decision has left solicitor Mark McDonald, who is representing about 100 Illawarra victims in acompensation case, surprised and disappointed. "I thought Richard would get more and I'm intrigued as to the length of that sentence. It seemslight for what he did but obviously there were a lot of issues that the judge has taken into accountwhich 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," hesaid. Robert Harley, from Wollongong, who lost about $40,000 invested in the scheme, said he thoughtthe sentence would be closer to 10 years for the suffering Richard had inflicted on so manypeople. "I've moved on but I've spoken to and read about people who lost everything and will neverrecover," he added. Richard, widely known by his Facebook nickname Shawny Cash, was sentenced on two counts ofdishonest conduct, including secretly receiving $1.3 million paid into offshore bank accounts inLiechtenstein and Curaao. Investors have lost a total of $180 million invested in Astarra Strategic and ARP Growth that werethen 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 aboutthe lower minimum immediately provoked ire from Trio investors. "I don't think the custodial sentence agrees with the extent of criminality," a Trio investor, BrianLarking, said outside the court. "Two years and six months compared with the millions he's sentoffshore 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 carefullyplanned, concealed and involved a "staggeringly large sum". "He was the central figure in Australia without whose participation these offences could not haveoccurred," the judge said. Justice Garling gave Richard a 25 per cent discount on his sentence for contrition, includingpleading guilty at the first available opportunity, and a further 12.5 per cent for undisclosedassistance in another matter.

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/OceaniaPage 3 of 89 2011 Factiva, Inc. All rights reserved.

PUB Fairfax Media Management Pty Limited AN Document ILM0000020110815e78d00013

Page 4 of 89 2011 Factiva, Inc. All rights reserved.

T r i o ' s R i c h a r d j a i l e d f o r 2 y e a r s o v e r s t o l e n s u p e r

SE BusinessHD Trio's Richard jailed for 2 years over stolen super BY Stuart WashingtonWC 382 wordsPD 13 August 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 3LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

COURTS A SMOOTH-TALKING Canadian patsy took the fall for Australia's largest superannuation theftyesterday, but the major beneficiary of the crime remains at large.

TDShawn Richard, known by his Facebook nickname Shawny Cash, was sentenced in the NSWSupreme 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 late2009. 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 $500,000and 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 largenumber of people a very large amount of pain. If he had mugged three of those people and tooktheir purses he would have probably got a longer sentence." Richard, 36, looked haggard and unshaven as Justice Peter Garling found he was "motivatedsimply by greed" when he directed $26.6 million into offshore funds, knowing the money wasbeing stolen. But Justice Garling's sentencing remarks show that a US citizen based in Hong Kong called JackFlader 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, hadbeen naive and gullible when he started working for Mr Flader. But he said benefits Richardreceived included secret payments of $1.3 million to personal bank accounts in Liechtenstein andCuracao and payments to his company of $5.3 million. "Mr Richard is guilty of serious crimes of a high order. They were carefully considered andplanned, they were concealed, they continued over a period of nearly four years and they led tosignificant financial losses," Justice Garling said. "Whilst he may not have been the ultimate controller, a role attributed to Mr Flader, he was thecentral figure in Australia, without whose participation these offences could not have occurred."

NS gtheft : Burglary/Theft | gcat : Political/General News | gcrim : Crime/Courts RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document SMHH000020110812e78d0005i


A n d r e w s g i v e n n i n e - y e a r b a n , R i c h a r d f a c i n g t i m e i n t h e c a n

SE BusinessHD Andrews given nine-year ban, Richard facing time in the can BY Stuart WashingtonWC 379 wordsPD 12 August 2011SN The Sydney Morning HeraldSC SMHHED ThirdPG 6LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

FINANCE Then those pathetic putrid looters?

TDCame 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 fromAustralian investors. Yesterday David Andrews, 59, a former chairman of Trio, was banned from financial services andbeing a director for nine years, the longest suspension yet handed to three Trio directors whofailed to protect investors. Today the investment manager of Trio, Shawn Richard, is due to be sentenced to up to 10 yearsin jail. More than $180 million has been lost in two offshore hedge funds run by Trio, Astarra Strategicand ARP Growth. The Herald revealed last year that Mr Andrews was the author of what appeared to be a lightlyfictionalised 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 ina red light district - all elements of Australia's largest superannuation theft from the sleepy Alburyfund manager chaired by Mr Andrews. Mr Andrews's writings after the Trio collapse included the confessional poems Loser (quotedabove) and Fanfare for Failure. While silent on Mr Andrews's highly commended talent as a poet, the chairman of the AustralianSecurities 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 AstarraStrategic Fund and therefore it's inappropriate for him to be involved in the financial servicesindustry or act as director," Mr Medcraft said. Mr Andrews was an economist who worked for seven years with the Australian Anglican Church'sfunds 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 andchairman of the risk and compliance committee. An enforceable undertaking shows how during Mr Andrews's time at Trio millions of dollars weredirected into the Astarra Strategic hedge fund without conducting proper valuations.

RE austr : Australia | nswals : New South Wales | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited Page 6 of 89 2011 Factiva, Inc. All rights reserved.

AN Document SMHH000020110812e78c00004


B u r n i n g q u e s t i o n s r e m a i n o v e r s u p e r t h e f t

SE BusinessHD Burning questions remain over super theft BY Stuart WashingtonWC 1,467 wordsPD 28 July 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 7LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

TRIO CAPITAL FRAUD How did 'Shawny Cash' manage to conceal his crimes for so long, asks Stuart Washington.

TDAn air of exasperated disbelief radiated from the bench on Friday as Justice Peter Garlingconsidered 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 oldSupreme Court House. What was Trio Capital's investment committee doing? What about TrioCapital's board of directors? Implicit in Justice Garling's questions was the puzzle of how the mild looking man sitting beforehim, 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 twohedge 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 classneighbourhood 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 degreein finance from the same institution. Richard's lawyer, John Agius SC, argued last week that Richard had been naive andpsychologically vulnerable to the lure of the high-powered role in financial services offered by hisboss, Jack Flader. Richard was on an overseas trip looking for adventure, landing up in Taiwan, when he first metFlader 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 "thenoble 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-settinglifestyle, in which he crossed the globe to visit 80 destinations in three years as head of hisbusiness, Global Consultants and Services Ltd. Flader emerges in the statement of facts tendered before court on Friday as the mastermind ofthe whole scheme. Whether the source of the cash ever rested poorly with Flader as he sampled the "ocean of finewines" and enjoyed 10 hours of massages at the $1500-a-night Bulgari resort in 2007 has notbeen established.


He has not been available for interview. While offshore miscreants escape sanction, Richard was the man placed in jail on Friday awaitingsentence 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 seveninstances of dishonesty between November 2005 and September 2009. In short, the counts state he knew he was personally benefiting by placing investors' money infunds he was lying about. On Friday the Crown's case against Richard showed how he illegally enriched himself throughsecret payments of $1.3 million channelled through bank accounts in the tax havens ofLiechtenstein 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 inillegal payments. But the jig was nearly up. In September 2009, Bronte Capital fund manager and blogger JohnHempton informed the corporate regulator of concerns about what has become Australia's largestsuperannuation fraud. In December 2009, 10,000 investors in Trio Capital had more than $400 million frozen as theregulator put in place liquidators and trustees to piece together just what happened. In April this year, investors in superannuation funds regulated by the Australian PrudentialRegulation Authority were awarded $55 million in compensation because they had beensubjected to fraud. In court on Friday, Justice Garling's puzzlement extended to the exclusion of self-managedsuperannuation investors from any compensation for fraud in Trio Capital. It is a puzzlement shared by self-managed super investors themselves, who now find themselveslocked out of any meaningful compensation. In a recent submission to a federal parliamentary inquiry into Trio Capital, a 68-year-old SouthCoast man, Philip Keeffe, wrote after losing $70,000: "That the Commonwealth has failed tocreate 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 supposedattractiveness 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 anumber of other bodies that were asleep on duty here." The opaque nature of the offshore investment vehicles is amply demonstrated in the statement offacts before the court. One fund called the SBS Dynamic Opportunities Fund had a Liberian company as soleshareholder and director, an Anguillan company as investment manager, a Cayman Islands bankaccount and a Belize company as its administrator. But in a common thread with all four offshore funds that became destinations for Australianinvestors' 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 investmentvehicles 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


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 (thenknown as the Alpha Strategic Fund) to be placed in the Exploration Fund, which was one of theoffshore 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 wineryup 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 werepractically worthless. In what was a leitmotif for the scheme, Australian money invested in a fund controlled by Fladerwould be used as cash to pay another controlled company by Flader for practically worthlessshares. From the considerable profits from this transaction, $US818,000 ended up in a bank account inthe 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 fundrun by Flader, used to buy $US1.75 million in worthless shares from Flader, then Richard wassecretly paid $US818,000. As Richard endures a lengthy prison sentence - the two counts carry a maximum sentence of 10years 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, runby 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 adisgraceful track record who ran the Exploration Fund. Then there is Carl Meerveld, named in court documents as a director of the Exploration and SierraMulti-Strategy Funds, and Roman Lyniuk, named as the key investment professional of the PacificCapital 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 15years. 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 itsowners 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 gdtcsh : Money Laundering | gcat : Political/General News | gcrim : Crime/Courts | gfinc : FinancialCrime | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document SMHH000020110727e77s0005y


W o r d s w i l l n o t s a v e R i c h a r d f r o m j a i l t i m e

SE Business - Opinion & AnalysisHD Words will not save Richard from jail time BY STUART WASHINGTONWC 870 wordsPD 25 July 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 7LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

When Shawn Richard sought character references as he faced a lengthy jail sentence, there werea 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 fundmanager Trio Capital.

TDInvestors had more than $400 million in funds frozen in December 2009 when Australia's largestsuperannuation theft was first uncovered. So investors would not be among those likely to give the most glowing assessments of theCanadian-born investment manager. Richard, 36, faced a sentencing hearing on Friday for his part in the disappearance of $180 millionfrom 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 personalpayments for his part in the thefts. His company, Astarra Asset Management, had received further millions to keep sucking ininvestors' dollars. Instead of investors, Richard turned to some old mates, some professional contacts and somefinancial 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 one-time Trio Capital marketing manager. Wood didn't reminisce about some rather wild-looking parties he and Richard enjoyed, but spoketo 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 thefraud had been uncovered. "I wish to confirm that Mr Richard has already assisted our clients, providing critical evidencewhich 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 theCorporations Act by operating an unregistered managed investment scheme. The failed investment scheme involved raising $4.6 million to buy the Queen Victoria Hospital inthe 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 financialplanner. So Warne met Richard through Trio Capital and promptly placed large amounts of investors'money into Astarra Strategic.


Another who put pen to paper for Richard was a second Wollongong financial planner, RonaldCaines. Caines was eloquent about the help Richard had given him. "He has shown honesty and integrity and his ongoing compassion and financial assistance duringan 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 andhelping your mates during difficult times". Stirring stuff. However, it is worth remembering somefacts about the Trio Capital "loan funds" - more than $500,000 - that Richard forwarded so generously to Caines. Back in 2008, the Australian Securities and Investments Commission grilled Richard about theloans 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 toinvest in Trio Capital without disclosing the loans. In March, the Administrative Appeals Tribunal overturned the life ban, and replaced it with a three-year ban. Showing that the gods of financial services have a wry sense of humour, Caines can start work asa 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 inthe 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 thatwas owned and controlled by the supposed mastermind of the Trio Capital fraud, the Hong Kongbusinessman Jack Flader. (There is no evidence Flader controlled the company at the time ofWood's and Kinder's involvement.) Another referee was Ron Phipps-Ellis, an employee with auditing firm BCS whose characterreference confirmed that the "company's employees had money invested in Astarra [Trio] and lost10 per cent". Richard's defence bundle, tendered in court on Friday, showed the sad truths facing a mandestined for jail time. It disclosed that Richard had sought a recent diagnosis from a neurologist. In a letter, his defenceteam articulated his symptoms as: "Double vision, headaches, muscle weakness, neck aches,numbness or tingling, most often on the face, poor co-ordination, sudden unco-ordinatedmovements and vertigo". The diagnosis was inconclusive. And an assessment by a forensic psychologist, W. John Taylor, spelled out the none-too-happyrealities of the prison system that Richard faced. He wrote: "Because of threats that have been made against Mr Richard, it is likely that anycustodial sentence given to him by the court will need to be served in protective custody. This isfar more difficult and restrictive than serving a custodial sentence."

IN i831 : Financial Investments | iinv : Investing/Securities NS gplan : Urban Planning/Development | nedc : Commentary/Opinion | ccat : Corporate/Industrial

News | gcat : Political/General News | gpir : Politics/International Relations | gpol : DomesticPolitics | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document SMHH000020110724e77p0001v


H o w r e g u l a t o r m i s s e d c h a n c e i n T r i o d e b a c l e

SE BusinessHD How regulator missed chance in Trio debacle BY Stuart WashingtonWC 655 wordsPD 5 July 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

INVESTMENT A TEAM of regulators raised concerns about fraudulent hedge funds more than a year before thewhistle was blown on the biggest superannuation theft in Australia's history.

TDYesterday it was revealed the Australian Prudential Regulation Authority raised concerns aboutthe 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 superannuationregulator 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 fundsregistered in the Caribbean tax havens, St Lucia and the British Virgin Islands. APRA took noaction against Trio Capital until after the scam was exposed in a letter by Bronte Capital bloggerJohn Hempton in September 2009. In April this year the federal government awarded superannuation investors $55 million incompensation 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 undertakingsmade by former directors of Trio with both APRA and the Australian Securities and InvestmentsCommission. The former chief executive of Trio Capital, Rex Phillpott, has been barred from a role in financialservices for 15 years. A former non-executive director of Trio, Natasha Beck, has been barred from a role insuperannuation for four years and financial services for two years. The actions against the directors of Trio Capital follow the charging of Trio's former investmentmanager, Shawn Richard, on two counts of dishonest conduct in relation to misappropriating $6.4million. The undertakings signed by the directors reveal ASIC's concerns that each director breachedseveral sections of the Corporations Act. The documents show Trio's board held concerns about its hedge fund investments as early as2006, including failures to honour requests for the return of investors' money and difficulties inobtaining accurate valuations. Mr Phillpott was revealed as being intimately involved in the investments into offshore hedgefunds, 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 andconcerns 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 along 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 Shawn Richard off the board of Trio Capital in 2005 becauseof conflict-of-interest concerns arising from his roles as both owner and investment manager forthe fund. In 2006 APRA had direct involvement with another Trio fund, ARP Growth, forcing it outside thesuperannuation entities it regulates. In 2008 ASIC interviewed Richard under its compulsory examination powers about a $500,000secret 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 ihedge : Hedge Funds | i831 : Financial Investments | i81502 : Trusts/Funds/Financial Vehicles |ialtinv : Alternative Investments | iinv : Investing/Securities

NS c131 : Regulatory Bodies | npag : Page-One Story | c13 : Regulation/Government Policy | ccat :

Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E IndustryNews Filter | reqris : Editor's Choice - Investing/Securities | redit : Selection of TopStories/Trends/Analysis | reqr : Editor's Choice - Industry Trends/Analysis

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document SMHH000020110704e77500047


T r i o C E O a c c e p t s a 1 5 - y e a r b a n f r o m A S I C

SE FinanceHD Trio CEO accepts a 15-year ban from ASIC BY ANDREW MAINWC 401 wordsPD 5 July 2011SN The AustralianSC AUSTLNED 2 - All-round FirstPG 21LA EnglishCY Copyright 2011 News Ltd. All Rights Reserved LP

REGULATION: Trio Capital chief executive Rex Phillpott -- a former assistant commissioner at theAustralian Taxation Office -- has agreed to a 15-year ban from acting as a director or working inany role in the financial services industry. Mr Phillpott, from Albury in NSW, was appointed CEO of Trio Capital in October 2005, but it wentinto administration in December 2009.

TDThe Australian Securities and Investments Commission also revealed yesterday that NatashaBeck, from Bronte in Sydney, who joined Trio Capital as a non-executive director in 2008, hadaccepted 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 investigationand remove the threat of stronger legal action. Albury-based Trio was the responsible entity for 25 managed investment funds, including AstarraStrategic. It reportedly had assets of $125 million in December 2009, but in April last year the NSWSupreme Court ordered that it be wound up. Much of the money appears to have been invested inCaribbean hedge funds and other unsuitable asset categories offshore, leaving thousands ofsuperannuants significantly out of pocket. The liquidator of Trio Capital has reportedly beenunable 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 HongKong, about Astarra Strategic's investments, but so far he has shown no desire to visit Australiaand 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 Astarraand ARP Growth, have their own self-managed superannuation funds and have received norestitution so far. Their funds are not regulated by the Australian Prudential Regulation Authority, and as FinancialServices Minister Bill Shorten has stated, they are responsible for their own choices. Canadian citizen Shawn Richard, the former investment director of Astarra Strategic, recentlypleaded guilty in Sydney to two charges of dishonesty in relation to that role and he is facing a jailsentence when he comes up for sentence shortly.

CO autaxo : Australian Taxation Office NS c411 : Management Moves | cslmc : Senior Level Management | c41 : Management Issues | ccat :

Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&EExecutive News Filter | nfcpin : FC&E Industry News Filter

RE austr : Australia | nswals : New South Wales | apacz : Asia Pacific | ausnz : Australia/Oceania PUB News Ltd. Page 15 of 89 2011 Factiva, Inc. All rights reserved.

AN Document AUSTLN0020110704e7750008k


' R a i s e d c o n c e r n ' o n h e d g e f u n d s

SE BusinessHD 'Raised concern' on hedge funds BY STUART WASHINGTONWC 556 wordsPD 5 July 2011SN The AgeSC AGEEED First Drop-inPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

A TEAM of regulators raised concerns about fraudulent hedge funds more than a year before thewhistle was blown on the biggest superannuation theft in Australia's history. Yesterday it was revealed that the Australian Prudential Regulation Authority raised concernsabout the fund manager Trio Capital's valuation of its two hedge funds in August 2008.

TDAs a result of its "prudential review" of the Albury-based fund manager, the superannuationregulator 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 fundsregistered 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 BronteCapital blogger John Hempton in September 2009. In April this year, the federal government awarded superannuation investors $55 million incompensation 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 undertakingsmade by former directors of Trio with both APRA and the Australian Securities and InvestmentsCommission. The former chief executive of Trio Capital, Rex Phillpott, has been barred from a role in financialservices for 15 years. A former non-executive director of Trio, Natasha Beck, has been barred from a role insuperannuation for four years and financial services for two years. The actions against the directors of Trio Capital follow the charging of Trio's former investmentmanager, Shawn Richard, on two counts of dishonest conduct in relation to misappropriating $6.4million. The undertakings signed by the directors reveal ASIC's concerns that each directorbreached several sections of the Corporations Act. The documents show Trio's board held concerns about its hedge fund investments as early as2006, including failures to honour requests for the return of investors' money and difficulties inobtaining accurate valuations. Mr Phillpott was revealed as being intimately involved in the investments into offshore hedgefunds, without being aware of the valuation methods used to value the funds. Mr Phillpott was alsoinstrumental 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 ofliquidity problems with the Exploration Fund and concerns about the lack of information beingprovided by the Exploration Fund". BusinessDay has previously revealed that the Exploration Fund was run by a Philippinesstockbroker 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. Forexample, in 2005 APRA forced 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 thesuperannuation entities it regulates. In 2008 ASIC interviewed Richard under its compulsory examination powers about a $500,000secret payment from Trio and Trio-related companies to a financial planner. APRA would make no comment yesterday.

CO aupra : Australian Prudential Regulation Authority IN i81502 : Trusts/Funds/Financial Vehicles | i831 : Financial Investments | ihedge : Hedge Funds |

ialtinv : Alternative Investments | iinv : Investing/Securities NS c171 : Share Capital | c17 : Funding/Capital | cactio : Corporate Actions | ccat :

Corporate/Industrial News | ncat : Content Types | nfact : Factiva Filters | nfcpin : FC&E IndustryNews Filter

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document AGEE000020110704e77500031


P a r l i a m e n t t o p r o b e T r i o C a p i t a l f r a u d c l a i m s

SE BusinessHD Parliament to probe Trio Capital fraud claims BY Stuart WashingtonWC 314 wordsPD 2 July 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 4LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

FUNDS THE loss of about $180 million invested in Trio Capital and the lack of compensation for self-managed superannuation investors will be investigated by a federal parliamentary inquiry.

TDThe inquiry into the Albury fund manager will examine losses from two Trio funds, AstarraStrategic and ARP Growth, with terms of reference that include inquiring into the implications ofinternational 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 aseparate 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 andInvestments Commission was first alerted to a fraud affecting Astarra Strategic in 2009. It lateremerged that $125 million invested in Astarra Strategic had disappeared through a British VirginIslands company into a network of offshore funds controlled by a Hong Kong businessman, JackFlader. 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 theAustralian Prudential Regulation Authority received $55 million in compensation for fraud underpart 23 of the Superannuation Industry (Supervision) Act. However, self-managed superannuation investors in Astarra Strategic were not eligible for anycompensation. The inquiry will examine issues related to the collapse, including the lack of any compensation forinvestors in self-managed superannuation, where the investment products or advice had failedand the role of research houses who examined the products. Submissions are due by August 19 and the committee will report by November 24.

NS gfraud : Fraud | gcat : Political/General News | gcrim : Crime/Courts | gfinc : Financial Crime | ncat: Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive News Filter

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document SMHH000020110701e7720005u


D I Y f u n d s n e e d c o m p e n s a t i o n t o o

SE BusinessHD DIY funds need compensation too BY STUART WASHINGTONWC 895 wordsPD 6 June 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 9LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

Australia has a compensation system for investors that leaves many of them out in the cold whenthe worst happens. The situation may be about to change, which should be welcome news forself-managed super fund investors. Do-it-yourself super investors now account for about a third of Australia's superannuationinvestments, with more than $400 billion invested. Those DIY super investors should be wellaware of the worst case they face after the federal government's compensation for fraud withinTrio Capital.

TDInvestors in Trio Capital through super funds regulated by the Australian Prudential RegulationAuthority received $55 million in compensation - or 100 in the dollar. Investors through DIY superfunds received nothing. The federal government will shortly receive a final report from Richard St John, who has beenasked to consider the need for a broader compensation scheme, and examine the costs andbenefits. In all likelihood, St John's report will recommend a broadly-based compensation fund for all retailinvestors. Such a recommendation will mark an historic step from an investor compensationregime largely reliant on professional indemnity insurance to one of a fund supported by industrycontributions. There will be a certain level of harrumphing about the moral hazard such a fund would create. Theterm "moral hazard" is used to describe a situation in which the introduction of a catch-all safetynet 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 thatrewards investors for stupidity and greed. However, as is the way of things, "moral hazard" arguments are likely to be advanced most loudlyby 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-basedcompensation fund, the costs are not small. The FOS estimates costs would be capped at 1 percent of revenues for participants across the financial services industry. Indeed, the harrumphing has started already. In the Stockbrokers Association's submission to StJohn, it recommends he take into account the broking industry's "excellent record in relation toclient complaints and award recovery". "To do otherwise would be to introduce the risk of moral hazard, and will encourage less ethicaloperators, putting consumers at risk," it says. Leaving aside the intricacies of introducing such a compensation fund - and there are many - it is 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 withoutanywhere to turn to, despite considerable wrongdoing. The FOS and the Australian Securities andInvestments Commission say professional indemnity insurance, taken out by financial servicesproviders 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


[compensation] awards in their favour which have subsequently not been paid because of thedisappearance or insolvency of a licensee [and] fraud," the FOS says. "Losses have occurred when consumers have been induced to invest in financial instrumentswhich 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, asub-set of Trio Capital investors, in a submission to St John. These investors have foundthemselves outside any meaningful compensation mechanism from either their authorisedrepresentative (PST Management) or the financial services licensee (Wright Global Investments). "Professional indemnity insurance as a means to compensate complainants has failed the case ofARP 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 quantumavailable means that no substantive level of compensation for loss is possible, even if a legalaction is successful. "This situation is made more difficult by the tendency of groups caught up in these situations to gointo liquidation, as has now happened not only with Trio Capital but also PST Management andWright Global." The submission further spells out the ridiculousness of relying on professional indemnityinsurance 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 washappening with unit holder funds existed for many months and was not clarified until well after theprofessional indemnity cover was no longer in place," the submission says. "There was noopportunity 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 andhave no recourse to any meaningful compensation. The existing system has comprehensivelyfailed 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 federalgovernment, no matter how much harrumphing comes from the financial services industry.

RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB Fairfax Media Management Pty Limited AN Document SMHH000020110605e7660001p


C o l d c o m f o r t f o r f o r g o t t e n v i c t i m s o f T r i o C a p i t a l f i a s c o

SE BusinessHD Cold comfort for forgotten victims of Trio Capital fiasco BY Stuart WashingtonWC 318 wordsPD 1 June 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 8LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

SUPERANNUATION THEY are generally broke, one in five have had to sell their homes as a result of their losses, andalmost two-thirds are older than 65. And yet they fight on.

TDYesterday more than 40 unitholders of ARP Growth, a practically forgotten fund in the TrioCapital collapse, met at the Norths Leagues Club. They have weathered many knocks since earlylast year, when it became clear their $54 million in investments may have vanished into acomplicated overseas structure. The investors were still coming to grips with the cruellest cut: their self-managed super fundinvestments are not eligible for any compensation, even if fraud is proven. Some Trio Capital superannuation investors are eligible for a shareof $55 million in compensationannounced last month, because they were regulated by the Australian Prudential RegulationAuthority. The meeting heard it was no good taking action against Paul Gresham, the man who put investorsinto 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 ofthe association formed by embattled investors, told of how the Australian Securities andInvestments 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 topay for an investigation. "The thing was going to die on the vine," he said. "Nothing was going tohappen." The association hopes it will find out the truth about a JPMorgan swap, at present being liquidatedin 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 thesefunds is a mystery.

PUB Fairfax Media Management Pty Limited AN Document SMHH000020110531e7610003z


M o v e t o c o m p e n s a t e i n v e s t o r s f o r b a d f i n a n c i a l a d v i c e

SE FinanceHD Move to compensate investors for bad financial advice BY Andrew MainWC 616 wordsPD 20 May 2011SN The AustralianSC AUSTLNED 1 - All-round CountryPG 19LA EnglishCY Copyright 2011 News Ltd. All Rights Reserved LP

PRESSURE is likely to increase on the federal government to introduce a statutory compensationscheme for seriously affected private investors after a study found the social impact of majorfinancial loss was sometimes ``catastrophic''. The study, by an independent market research company commissioned by the AustralianSecurities & Investments Commission, found that losses by some investors were so significantthat ``their life will never be the same''. Some felt prolonged anger, uncertainty, worry anddepression.

TDThe study's findings came from an original sample of more than 9000 people who had invested ina range of financial products and who complained widely that when schemes failed, financialplanners provided them with very little information and in many cases refused to take or returnphone calls. They were also largely unaware of existing avenues for compensation. ASIC commissioned the study to better understand the personal consequences of investors notbeing fully compensated and to help inform submissions to the government review into whether astatutory compensation scheme should be introduced in Australia. Among key findings were that investors who suffered the most had invested all their money, hadnot diversified or went into debt as part of their investment strategy. Most investors' losses were associated with an underlying product that was either frozen orcollapsed, and the impact of the monetary loss was immediate on investors who did not have afinancial 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 formergeneral counsel at BHP and the man who ran the HIH royal commission in 2002, whichcanvassed the idea of a British-style levy on financial service providers to compensate retailinvestors significantly affected by bad financial advice, mismanagement or dishonesty. The parliamentary joint committee on corporations and financial services recommended inFebruary 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 peoplewho have made bad investments, unadvised, on their own account. The new report, commissioned by ASIC's consumer advisory panel and carried out by Susan BellResearch of Sydney, notes that the government is already shouldering the burden of helpingpreviously self-funded retirees because they are now receiving government pensions ``andbecause of the physical and mental health problems suffered by investors who have no medicalinsurance''. 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.


Any notion of compensation is complex because deferent types of investment are regulated indifferent ways. For example, different categories of superannuation are covered by different levelsof compensation safety net. Some 70 self-managed super fund investors who lost about $50 million in a Trio/Astarra-relatedfund called ARP Growth have not been financially rescued in any way, while superannuantswithin conventional APRA-licensed superannuation schemes were almost fully compensated lastyear 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 schemessuch as forestry or horticulture, structured investment such as hedge funds and infrastructurefunds, and investors who geared up against their home equity and took out margin loans to investin assets which lost value. The survey ran in-depth interviews with a sample of 29 investors after an initial questionnaire.

CO ausic : Australian Securities and Investments Commission NS gcat : Political/General News RE austr : Australia | apacz : Asia Pacific | ausnz : Australia/Oceania PUB News Ltd. AN Document AUSTLN0020110519e75k0005f


I n v e s t o r s d e s e r v e a s o f t e r l a n d i n g t h a n c o n c r e t e

SE Business - Opinion & AnalysisHD Investors deserve a softer landing than concrete BY STUART WASHINGTONWC 608 wordsPD 25 April 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 5LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

Investors who use misbehaving financial planners have a compensation safety net that is morelike landing on concrete. As a case in point, some investors have put their case to the FinancialOmbudsman Service and been found to have been wronged. But then nothing. No compensation because their financial planners have become insolvent.

TDIf 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 insuranceto cover them if they are subject to compensation claims. But at its worst the system leaves investors fighting an insurance company as they seekcompensation for wrongdoing by their financial planner. Sometimes a planner simply does not have the financial capacity to meet the claims that arebeing 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 offervery effective cover when a financial planner becomes insolvent. If a financial planner goes bust, they generally have to notify their insurers. Often an insurer, onhearing 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 againstthat insurance. And an insolvent financial planner, by definition, does not have much money tothrow around. About 70 investors with about $50 million invested in a fund called ARP Growth know these factsonly too well. These investors have no realistic recourse to compensation because the fund isinsolvent, 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 aformal 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 isalso of the view that there are inherent limitations on the effectiveness of professional indemnityinsurance as a compensation mechanism for retail investors who suffer loss." With St John's report, investors stand at a crossroads for this manifestly malfunctioningcompensation system. There is a real opportunity for the federal government to put in place a system that avoidsinvestors 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, whohave $400 billion of investments at stake but no workable compensation system. This problem


was exposed when mainstream fund investors received government compensation of $55 millionfor the fraud in Trio Capital, but self-managed super fund investors, including the ARP Growthinvestors, received nothing. The seeds of an effective system are contained in St John's paper, detailing a report made by theforerunner to the Companies and Markets Advisory Committee 10 years ago. It recommended a statutory compensation fund that was operated by an independentorganisation, 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 in2008, 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 landingon concrete.

CO ombud : Financial Ombudsman Service 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

RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB Fairfax Media Management Pty Limited AN Document SMHH000020110424e74p0001j


C o u p l e o f c l o w n s d u p e d i n s u p e r s c a m m u d d y w a t e r s f o r t r u e v i c t i m s

SE Business - Opinion & AnalysisHD Couple of clowns duped in super scam muddy waters for true victims BY STUART WASHINGTONWC 759 wordsPD 16 April 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 6LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

The clowns came out to play when the federal government shelled out $55 million incompensation for certain investors in Trio Capital. The clowns include the former Wollongong financial planner Ross Tarrant, on the front page of arival newspaper this week moaning about how DIY super investors should be paid compensation.

TDAnd that bloke Peter Johnston, the head of the Association of Independently Owned FinancialPlanners, 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 aspart of the solution is staggering; they were part of the problem. Worse, they are muddying thewaters 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 December2009. It has now been revealed to have been operating a big fraud in two particular hedge funds itmanaged: Astarra Strategic and ARP Growth. On Wednesday the Assistant Treasurer, Bill Shorten, said government compensation would cover5000 members of super funds overseen by the Australian Prudential Regulation Authority withmoney 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 Growthwere essentially told to nick off. Collectively, along with some direct investors who are not beingcompensated, these investors lost up to $120 million. Now, this should be a big warning bell for the self-managed super investors that account for $420billion 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 beingushered into DIY super should receive documents with large red letters on the front reading: "Youcould lose the lot." My position is not a Ross Tarrant-style pitch for broad-based compensation for DIY super fundinvestors. 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 DIYsuper look after themselves. The current setting, as played out in Trio Capital, is that governmentcompensation looks after mainstream investors in funds regulated by the Australian PrudentialRegulation Authority. I am alive to arguments of moral hazard that a broad-based compensation scheme for DIY supercould create. I am also alive to the ridiculous situation of bailing out a DIY super husband in acase against a DIY super wife. The reason I am sympathetic to the Astarra Strategic and ARP Growth DIY super investors isthey found themselves in a managed investment scheme where a fraud was perpetrated. Theyentered those schemes on the advice of a trusted adviser. That trusted adviser failed them, oftenwith a flurry of associated fees. So, when Shorten considers the merits of broadly based compensation for investors, I believethere are grounds for a limited compensation scheme for DIY super investors.


At the same time, many problems will be addressed by forthcoming financial advice reforms thatremove conflicted remuneration received by planners. That brings me neatly back to Ross Tarrant. His business, Tarrants, received $840,000 from TrioCapital in commissions termed a "marketing allowance". That same "marketing allowance" waspaid as about 200 Tarrants clients set up DIY super funds that invested $20 million in AstarraStrategic. 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 HongKong mastermind of the scam, and now faces a lengthy jail term. I am uncomfortable about the large number of association members who found themselvesinvesting money in the Trio Capital scam. I am uncomfortable about the credulousness of theassociation's leader. Shorten's reforms promise to make it more difficult for Trio Capital to happen again, and keepsome of the clowns at bay. But there should also be consideration of compensation for DIY superinvestors sucked in by the clowns.

CO aupra : Australian Prudential Regulation Authority IN i831 : Financial Investments | iinv : Investing/Securities NS gdiy : DIY | nedc : Commentary/Opinion | ccat : Corporate/Industrial News | gcat :

Political/General News | ghimp : Home Improvements | glife : Living/Lifestyle | greest : RealEstate/Property | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E Executive NewsFilter

RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB Fairfax Media Management Pty Limited AN Document SMHH000020110415e74g0006j


L a r g e s t g o v e r n m e n t p a y o u t o f $ 5 5 m f o r T r i o s u p e r f r a u d

SE BusinessHD Largest government payout of $55m for Trio super fraud BY STUART WASHINGTONWC 554 wordsPD 13 April 2011SN The AgeSC AGEEED SecondPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

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 themretirees.

TDThe move was portrayed by Assistant Treasurer Bill Shorten as vital to shore up confidence in thesuperannuation system. "The idea that we can eliminate all crooks and thieves and charlatans some people always tryand take advantage of others," Mr Shorten said. "What we do know is the regulators seem to becatching some of the people who have done it; and we will compensate victims who are victimsthrough no fault of their own." The compensation marks the end of a tortuous path for some Trio investors after regulators tookover 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 superannuationinvestors in Commercial Nominees were compensated for losses of $30 million in 2002. But yesterday's compensation measure is limited to 5385 investors in government-regulatedsuperannuation 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 incompletequadriplegic 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 twosuper 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, AstarraStrategic and ARP Growth. "Money was directed into hedge funds in the Caribbean; there is little evidence investments weremade 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 countsof 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 whoplaced their money directly into troubled funds. He also said investors in DIY super funds were ineligible for compensation on the basis these


investors were taking responsibility for their own investments. Asked whether DIY super investors, who account for a third of the $1.3 trillion in Australiansuperannuation savings were aware of their lack of a safety net, Mr Shorten said: "I would saythey are going to become a lot more aware." He said a report commissioned by the federal government about extending a fraud compensationscheme to all investors was due by June 30. Rosemary Walker, 73, welcomed the decision that will return money to her and 250 fellow low-paid Tabcorp workers who had superannuation in Astarra Superannuation Plan. Ms Walker said the uncertainty had taken its toll on her colleagues' health.

IN i831 : Financial Investments | iinv : Investing/Securities NS gcrim : Crime/Courts | gcat : Political/General News RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB Fairfax Media Management Pty Limited AN Document AGEE000020110413e74d00003


D I Y s u p e r f u n d s g i v e n c o l d s h o u l d e r i n T r i o p a y o u t

SE BusinessHD DIY super funds given cold shoulder in Trio payout BY Stuart WashingtonWC 537 wordsPD 13 April 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 8LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

SUPERANNUATION THE stark difference between regulated super funds and self-managed super funds in the case offraud was made clear yesterday when the first set received $55 million in governmentcompensation.

TDThe second set, suffering losses of about $120 million, will receive nothing. The Assistant Treasurer, Bill Shorten, signalled a forthcoming review of a compensation schemefor all investors yesterday, which is due by June 30. Yesterday's outcome highlights wildly different compensation regimes for people caught up in theimbroglio of Trio Capital, an out-of-control Albury fund manager that allowed two hedge funds torip off investors. In September 2009 the whistle was first blown on Trio Capital when the Bronte Capital bloggerJohn Hempton contacted authorities with suspicions prompted by magically even returns in a Triohedge fund called Astarra Strategic. By December both the Australian Securities and Investments Commission and the AustralianPrudential 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 stockscammers. Using elaborate corporate structures in exotic Caribbean tax havens, Astarra Strategic spiritedaway 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 tohave suffered losses of more than $50 million. Mr Flader's local henchman, Shawn Richard, faces sentencing on May 13 after pleading to twocounts of dishonest conduct. The effect on investors has been devastating. First, whether it was good money or bad, regulatorslocked 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 startretrieving some money as ACT Super, for super fund investors, and the liquidator PPB, for regularinvestors, unpicked the mess. ACT Super made the application for compensation for super fund investors to Mr Shorten lastOctober. 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 allthe investors in ARP Growth, without a cent. The theory is that trustees of DIY super fundsshould be skilled enough to look after themselves. Mark McDonald of the lawyers Maguire & McInerney said 100 clients who went through thefinancial planning firm Tarrants were all in DIY funds that then invested in Astarra Strategic.


"I think it's incredibly exciting for the poor people who have suffered such a huge amount of lossthrough 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 ofTarrants 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, thatI wasn't savvy to," he said.

IN i835 : Legal Services | ibcs : Business/Consumer Services NS gdiy : DIY | gcat : Political/General News | ghimp : Home Improvements | glife : Living/Lifestyle |

greest : Real Estate/Property RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB Fairfax Media Management Pty Limited AN Document SMHH000020110412e74d0004i


S u p e r b a i l o u t e x c l u d e s D I Y i n v e s t o r s

SE LocalHD Super bailout excludes DIY investors BY SIOBHAIN RYAN, ADDITIONAL REPORTING: GEOFFREY NEWMANWC 759 wordsPD 13 April 2011SN The AustralianSC AUSTLNED 1 - All-round CountryPG 1LA EnglishCY Copyright 2011 News Ltd. All Rights Reserved LP

THOUSANDS of superannuation fund members who were defrauded in the Trio Capital scandalwill 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-it-yourself superannuation fund holders in what will be a wake-up call to the more than 800,000 self-managed funds in the country.

TDAssistant Treasurer Bill Shorten yesterday revealed 285 people who ploughed money into thenow defunct Trio Capital via DIY super, along with 405 who invested directly, would have norecourse to the government lifeline. Compensation will be limited to 5358 contributors to mainstream superannuation funds regulatedby the industry watchdog, the Australian Prudential Regulation Authority. They will receive back allof 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 ``thebenefit of direct control over where their money was invested, while the members of other fundsdo not''. `Ìf people wish not to operate under those SMSF regulations, they're free to become members ofthe APRA funds,'' Mr Shorten said. Ross Tarrant, managing director of Tarrant Financial Consultants, who lost $500,000 in familysavings as well as $20m of his clients' money in Trio Capital investments, blasted the governmentdecision to deny compensation to those who invested through an SMSF. `ÀSIC and APRA licensed and regulated these public offer funds and are now, whileacknowledging the fraud and compensating some superannuants, leaving the SMSFs out in thecold,'' he said. ``This was an opportunity for the government to recognise its shortcomings in this area andcompensate ordinary Australians for events well beyond our shores and controls while restoringconfidence to the superannuation industry and investors generally. `Ùnfortunately, the letter of the law has prevailed and some will receive compensation and otherswon't.'' For Mr Tarrant, the Trio scandal, in which money was channelled offshore to a hedge fund in theCaribbean, has been a double hit. Apart from losing his own money through an SMSF and a directinvest, 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 itsdirectors 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 theSuperannuation Industry (Supervision) Act was last reviewed by the Howard government in 2003and retained by Labor when it took office.


Yesterday's ruling represents the biggest application of the controversial exclusion, but it comes ata time of exponential growth in the SMSF sector. DIY super funds now hold almost one-third ofAustralia'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 fastest-growing 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 2001and 2009. It will be funded via an industry levy of about 2c per $100 on people with super accounts in APRA-regulated funds. The Gillard government has commissioned an independent review of the pros and cons of astatutory 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 toinvestors 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 leftempty-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 agegroup, leaving them particularly vulnerable to capital losses. Jeremy Cooper, author of the government's review of super, said those who managed their ownsuperannuation had to accept they were taking on more risk than those who handed the task to afund 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 gcat : Political/General News RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB News Ltd. AN Document AUSTLN0020110412e74d0000q


O m b u d s m a n ' s n a m e a n d s h a m e l i s t a b o l d s t e p f o r w a r d

SE Business - Opinion & AnalysisHD Ombudsman's name and shame list a bold step forward BY STUART WASHINGTONWC 905 wordsPD 7 March 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 9LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

Hooray for the name-and-shame list released by the Financial Ombudsman Service! Pleaseforgive 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.

TDLike those poor investors now waiting for an outcome from the mega-litigation surrounding the $3billion collapse of Storm Financial. Or those other poor people who had the misfortune to have theAlbury-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 forjubilation (as I have said, an uncommon term for this column; I am using it in the dictionary senseof "a feeling of great happiness") is the FOS's first attempt at a name-and-shame list rankingcomplaints made against financial services companies. I would argue this is good for the industry, good for consumers and even good for companies whoare 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 aboutindividual 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 thehardy consumer a snapshot of who is being most complained about. I say hardy consumerbecause the FOS lists are definitely a work in progress. First, you are drowning in data. There are 20 different industry categories and within eachcategory companies are ranked on up to nine criteria. Also, on an initial scan some aspects aredownright confusing. For example, there is a valiant attempt made to rank each company on acomplaints-for-every-100,000-customers basis. Big banks like this approach because it puts into perspective large numbers of complaints thatlarge shops receive and ranks them on a like-for-like basis with smaller numbers of complaintsthat small shops receive. The system unfortunately breaks down when some of the companies that are the subject ofcomplaints do not disclose their market size to FOS, rendering like-for-like comparisonsimpossible. The lists then resort to disclosing the actual number of complaints these recalcitrant companiesreceive, 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 scoresthe highest complaints ranking in the derivatives and broking category on a complaints for every100,000 customers basis, at almost 10 times the median ranking. Nor do I know the reasons why QBE ranks second highest for complaints in sickness andaccident 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


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 interestin financial services. After all, the aim of an external disputes resolution provider like FOS is tohave 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 samequestion by consumers, media and regulators, there is a strong impetus for better systems toaddress 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, thesuccessor 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 RAMScollapsed they have been charged one of the highest variable rates in the market. Then RHGcharges 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 stillconsidering 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 theSuperannuation 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 afund 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 AustralianPrudential 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 ombud : Financial Ombudsman Service NS nedc : Commentary/Opinion | ncat : Content Types | nfact : Factiva Filters | nfcpex : FC&E

Executive News Filter RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB Fairfax Media Management Pty Limited AN Document SMHH000020110306e7370001r


N o s a f e t y n e t f o r $ 4 0 0 b n i n D I Y s u p e r

SE BusinessHD No safety net for $400bn in DIY super BY By STUART WASHINGTONWC 352 wordsPD 14 February 2011SN The AgeSC AGEEED FirstPG 1LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

MORE than $400 billion invested in "do-it-yourself" superannuation funds, representing a third ofAustralian 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 manyinvestors put money into self-managed super funds without fully appreciating the risks.

TDInvestors in work-based super schemes covering the majority of Australians are eligible forcompensation 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," MsVamos said. Jeff Bresnahan, managing director of super fund ratings firm SuperRatings, said DIY super hadbeen 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 tofraud. Mr Bresnahan said the size of the DIY super pool would lead to more problems, includingquestionable 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 superfunds to include DIY funds. Under the Superannuation Industry (Supervision) Act, a trustee of a mainstream super fundregulated by the Australian Prudential Regulation Authority can apply for compensation if lossesare due to fraud. The reasoning for excluding DIY funds from compensation is that DIY trusteestake 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 inoffshore 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 Growthand Astarra Strategic.

NS gdiy : DIY | gcat : Political/General News | ghimp : Home Improvements | glife : Living/Lifestyle |greest : Real Estate/Property News

RE austr : Australia | apacz : Asia Pacific Countries/Regions | ausnz : Australia and New Zealand PUB Fairfax Media Management Pty Limited AN Document AGEE000020110213e72e0002c


D I Y s u p e r f u n d i n v e s t o r s w a r n e d o f n o c o m p e n s a t i o n f r o m f r a u d

SE BusinessHD DIY super fund investors warned of no compensation from fraud BY Stuart WashingtonWC 429 wordsPD 14 February 2011SN The Sydney Morning HeraldSC SMHHED FirstPG 5LA EnglishCY 2011 Copyright John Fairfax Holdings Limited. LP

PROPERTY- SUPERANNUATION MORE than $400 billion invested in "do-it-yourself" superannuation funds, representing a third ofAustralian super, has no compensation safety net in case of fraud, industry experts have warned.

TDThe chief executive of the Association of Super Funds of Australia, Pauline Vamos, said manyinvestors put money into self-managed super funds without fully appreciatingthe risks. Investors in work-based super schemes covering most Australians are eligible for compensationinthe 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 supersector. "The risks are you don't have a lot of those safety nets, and you have to understand that," MsVamos said. Jeff Bresnahan, the managing director of the super fund ratings firm SuperRatings, said DIY superhad been sold by financial advisers and accountants, leading to its rapid growth, but manyinvestors 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 questionableinvestments and catastrophic losses. "It's just going to attract more and more fraudulent activity," he said. Yet there are no plans by the federal

ARP Media Factiva Search 2011

Documents

Transcript of ARP Media Factiva Search 2011