Reporter : Ted Baxter

Content : ASIC & CBA compensation, Storm Financial settlement, ASIC gagging, Emmanuel Cassimatis, ASIC Hugh Copley

Wednesday 25^th September 2012

The Plain Truths insider at ASIC, known as ‘Matador’, has provided quite valuable information to us over the last 12 months.  In recent communications Matador cited in internal high level memo which outlined the tactics ASIC expected to use in its cases against the banks and Cassimatis’.

Matador was unable to obtain copy and only had a brief time to read part of the lengthy memo however was able to pass on some pertinent points.

The main thrust of what Matador read appeared to be an instruction to the ASIC legal team to “stay away” from Emmanuel Cassimatis as a witness and under no circumstances were either Emmanuel or Julie Cassimatis to be subpoenaed for ASIC’s case against the banks .

The reason given for this ASIC directive was to prevent Cassimatis from offering evidence which contradicted what ASIC called its ‘relationship based evidence’ in the case against the banks.  Furthermore whilst ASIC funded Storms liquidators (Worrells) to the tune of half a million dollars to build a case against Storm and the Cassimatis’, a further directive was made by the highest levels within ASIC to under no circumstances offer any further funding to Worrells which may enable them to fulfil their duty as liquidators of Storm Financial by representing the best interests of Storm in court.  This directive to withhold funding along with the ‘behind closed doors’ encouragement by ASIC to not have Storm represented in court has had the desired outcome for ASIC where…

STORM AS A DEFENDANT IN THE CASE LAUNCHED BY ASIC HAS NO LEGAL REPRESENTATION WHATSOEVER.

What democratic society would allow a defendant to be tried, whether guilty or not, without any representation whilst being completely denied any right of reply or response whatsoever?

This tactic is consistent and identical to the tactic used by ASIC from the beginning.  That is, ASIC is [mis]using its power to protect the CBA and cover it own wrongful activities by using all means at its disposal to prevent any communication from emerging from the Storm camp thus ensuring that only the ASIC case is heard.

One should never condone wrongdoing but it happens.  When it does we call the police.  But to have the police help the burglar carry your stuff out to his car is a wrong too far…

In 2008, following discussions with the Commonwealth Bank,  AISC launched an investigation into Storm and extracted an undertaking from directors Emmanuel and Julie Cassimatis (click here for related article) which had the effect of gagging any communication with Storm clients.   This prevented Storm clients from being able to obtain advice from Storm advisors at the time they needed it most.  In other words ‘ASIC exceeded its authority’ because it did not regulate or police margin loans and thus stuffed up big time.

From that point on ASIC was forced to either come clean or cover its tracks.  ASIC chose to cover its tracks and the method ASIC has consistently used has been to ‘gag all things Storm’.  By ASIC frenetically attempting to cover their tracks, using the tactics they have been employing to date, ASIC have exposed to the general public that they do in fact have something to hide . One of many examples of the attempt to suppress information has been AISCs keystone cops approach to ‘due process’ or rather, the lack of attention to it as previously mentioned (i.e. no defendant representation or information from defendants).  This approach by ASIC is ultimately doomed and will only waste time and money due to the inevitable appeals that will occur from chasing the wrong people.

The Plain Truth has proof that many Storm people, including Cassimatis, have attempted to meet with ASIC to provide the necessary evidence but have been denied even the right to talk to someone in ASIC face to face. The further the saga continues, the deeper they dig their own hole and the closer they expose themselves to a negative verdict by the court of public opinion.

The Editor

The Plain Truth,

PO Box 2783

New Farm  QLD  4005

Content : ASIC & CBA compensation, Storm Financial settlement, ASIC gagging, Emmanuel Cassimatis, ASIC Hugh Copley

Reporter : Ted Baxter

Content : ASIC & CBA compensation, ASIC compensation model, Storm Financial settlement, CBA UMIS.

Tuesday 18^th September 2012

The inevitability that ASIC would protect the CBA at all costs finally came to fruition on Friday 14^th September 2012 with the creation of the ‘ASIC and CBA Storm Financial Settlement’ and the ‘ASIC Compensation Model’.  The CBA, because it has the money, was able to buy its way out of prosecution whilst at the same time admitting ‘no liability whatsoever’ or ‘any wrongdoing’ towards Storm clients.

“By settling the ASIC UMIS Proceeding brought against it by ASIC, CBA admits no liability in relation to ASIC’s allegations and the terms of the agreement reached between ASIC and CBA reflect this.” – extract 3.2 from ASIC and CBA Storm Financial Settlement

So, CBA is off the hook for the UMIS…which in the opinion of The Plain Truth did not exist anyway.

However the most astonishing and diabolical component of this whole shame (the ASIC settlement and compensation model) is the CBA obtaining from ASIC, TOTAL IMMUNITY from ALL and ANY Storm related prosecutions, including all margin loan dealings, illegal sell-downs and unauthorised closing of funds.

“The settlement reached between ASIC and CBA means that ASIC will not bring any action against CBA along the lines of the action ASIC has brought on behalf of Mr and Mrs Doyle in the Doyle Proceeding. ASIC will not be taking any other action against CBA.”  – extract 5.1 from ASIC and CBA Storm Financial Settlement.

So much for Sir Ralph’s famous mia culpa – “Our customers can be assured that where we have done wrong, we will put it right.”  The fact is that Sir Ralph, Dame Ina Narev nor their kingdom of CBA have parted with $1 for any wrongdoing.  All settlement deeds, and we mean ALL, have absolved the Commonwealth Bank of ANY wrongdoing with respect to Storm.

The extent of CBA’s power and influence, especially over ASIC, appears to be overwhelming.  One can only imagine the dirt that the CBA has on ASIC to be able to purchase full immunity for such a meagre cost.  The price that the racketeer ASIC is selling Storm clients silence to the CBA for is a mere 0.3% of the banks $88 Billion market capitalisation.  This is equivalent to someone who is worth $1,000,000 compensating a grievous wrongdoing with $3,000 and getting complete immunity.

To make matters worse, the CBA has so far only paid out less than half the amount claimed with the words, “up to” prefacing the last $136M.  The CBA has received immunity from ASIC prosecution by offering an amount of money to victims which is clearly unacceptable to those victims and far short of the extent of CBA’s wrongdoing.  This has been confirmed to The Plain Truth by an independent group of forensic accountants.  The dastardly ASIC Compensation Model provides CBA with immunity even if the aggrieved victims do not accept the minimal compensation offered and it remains in CBA coffers.

Credible information from an internal ASIC source which has come into our possession recently claims that in the recent secret negotiations between CBA and ASIC, the Commonwealth Bank agreed to keep quiet about the role ASIC played in the demise of Storm and the losses suffered by clients.  The Plain Truth must declare however that although we trust our source and find the information consistent with other allegations, we are unlikely to get documentary evidence confirming this assertion.  Our source will however make best endeavours to accommodate us with more than…a statement.

Although we have not seen a deed yet we suspect that claims against ASIC will be prohibited as well as claims against the CBA.  Maybe ASIC has been reading our previous articles, “ASIC ‘PANIC ATTACK’ HAD FATAL CONSEQUENCES FOR STORM CLIENTS.”,  “Part I – ASIC liable for ‘gagging’ compensation”  and “The ASIC ‘gag’ of Storm now exposed as the key for compensation.”, that highlight ASICs involvement and subsequent requirement for them to compensate victims as well.  By creating the ‘ASIC and CBA Storm Financial Settlement’ and any subsequent ASIC disclaimer absolving them of responsibility, ASIC found another method of covering their past mistakes.

At this juncture it is important for those who were unable to speak to their advisor in late 2008 as a result of ASICs gagging that each such individual put in a separate claim for compensation against ASIC.  Such claims should be put directly to ASIC with the question, “WHY DID YOU GAG STORM WHEN ASIC HAD NO AUTHORITY OVER MARGIN LENDING?” and “WHAT IS ASIC GOING TO DO ABOUT COMPENSATING ME?”

The Editor

The Plain Truth,

PO Box 2783

New Farm  QLD  4005

Content : ASIC & CBA compensation, ASIC compensation model, Storm Financial settlement, CBA UMIS.

Reporter : Tom Tucker

Content : Storm advice, Storm / CBA compensation, Conservative advice, CGI margin call notice.

Tuesday 11^th September 2012

One of the most difficult concepts I have had to write about exists in the apparently innocuous and seemingly obvious notion of whether Storm advice to its clients was conservative or not.  The difficulty in addressing this issue stems from its abstract nature.  It is this nature that allows parties to launch an argument which appears to be grounded and seems to contain plausibility when in fact the argument relies on the subjective assessment that each person places on the term ‘conservative’.

After doing the research for this article I was compelled to write my conclusion first and then fill in the body of my work. 

Einstein once said…All things are relative.

Because the term conservative is a relative term, the situation it describes in this case [Storm advice] must be compared to something else before it, or anything, can be described as conservative.  Here is the core of the analysis problem. An elephant is huge…compared to an ant, but small…compared to a Blue Whale.  The dilemma now is – how does one describe an elephant?  Is it big, or is it small?  Clearly an elephant can only be described relative to something else.

Similarly was Storms advice to its clients conservative, or not?  After researching this topic I have concluded that this notion as it relates to Storm advice has no significance, does not matter and is quite irrelevant. Neve-the-less I will now proceed and fill in the facts, given I have already put in the hard yards.

The law takes no issue with whether financial advice is conservative or aggressive.  Indeed the law makes no distinction between good advice or bad advice.  It allows for all advice.  If any legal criticism is to be directed at Storm it can not be done so on the basis that its advice was not conservative.  Such criticism can not even be levelled if the advice was bad.  Legal criticism can only be levelled at Storm if the relevant disclosures required in its advice were deficient or defective.  Accordingly the sole question that needs to be addressed it, ‘whether Storm made the appropriate disclosures’.

It is by now well recognised that only 1 in 4 people who had contact with Storm took on their advice whilst 3 out of 4 either did not find Storm advice suitable for them OR Storm saw the clients as unsuitable for whatever reason.  As seen in our previous article “Investigation done on alleged Storm one-size fits all model” there is ample evidence to show that Storm declined to advise numerous people.  Lightweight and glib arguments have been put forward that the 1 in 4 who took Storms advice were either ‘greedy’ or ‘stoopid’ or both whilst the 3 out of 4 who walked away ‘were the smart ones’.  Such arguments are so devoid of intellect and factual foundation that those comments can only come from either the feeble minded and / or those with an axe to grind.  The truth is often inconvenient but nevertheless remains the truth and should always reign supreme.

The Plain Truth has done extensive analysis on Storm material in our possession which includes full copies of the Education Seminars, various Investor Updates and many Statements of Advice (SoA).  What we found that was unique to Storm was the overweight emphasis to the various risks involved when compared to SoA’s from other dealer groups.  The information and knowledge provided was extensive and relevant with no punches pulled when describing risk whilst at the same time there was a clear absence of exaggerated promises and expectations.

Following you will find some examples of the types of disclosures emphasised by Storm.  These examples are but a few and are by no means exhaustive.

Extract from Storm Statement of Advice – identifying some risks

Extract from Storm Statement of Advice – consequences of default

Extract out of Storm Education Seminars showing negative impact of geared v non-geared portfolio

 

Furthermore, our analysis of the Storm Statement of Advice could only find the use of the word conservative in 3 places.  Each of these places applied the term ‘conservative’ appropriately and properly as follows.

1)      When describing the assumptions in Storms viability test, Storm claims that the assumptions made were conservative. In order to test whether the assumptions were conservative we tested each assumption (e.g. interest rates, distributions figures, returns, tax rates etc) relative to its benchmark as would be required by Mr Einstein.  We found that indeed each assumption was discounted or inflated to impact negatively in Storms stress tests, therefore making Storms ASSUMPTIONS conservative.

2)      When talking about gearing, Storm was urging in its advice to err on the side of caution and borrow ‘conservatively’ to reduce the possibility of default. “Apply the same caution if you are thinking of using your home as security – borrow conservatively as a default on the loan could mean loss of the security for the loan. If you have used your home as security, this means you could lose your house.”

3)      Again Storm urged a conservative LVR (among other things) as a mechanism to reduce the likelihood of a margin call occurring. “The best way to avoid margin calls is to be conservative in the amount you borrow”.

Given these findings, the comments that ‘Storm claimed to issue conservative advice’ was a surprise.  When looking at the disclosures no such claim of ‘conservatism’ was found, nor did Storms documentation claim that its advice was ‘aggressive’.  Rather Storms advice models a scenario as an option and ensures that the appropriate disclosures are made with an overweight emphasis on negative aspects whilst down playing any positives.

So, Why the criticism when the facts do not support such criticism?

All at The Plain Truth after considerable discussion unanimously agreed that there was little wrong with Storm’s advice to warrant the criticisms levelled at it.  The reality is that many people were substantially hurt and the vacuum created by CBA’s actions in shutting Storm down left the banks as the only avenue for compensation.

This advantage contrived by the banks meant that conditions for compensation could ONLY be determined by the banks that offered compensation even though the compensation was only token.  Accordingly the banks orchestrated a condition for compensation that required an acknowledgement by those hurting that a) the bank was in no way at fault and b) that Storm indeed was to blame.

In a nutshell the entire Storm / CBA problem was caused when the CBA system failed to issue margin call notices as it previously had done.  This in turn prevented from implementing its protection strategy, as it had done in previous crashes (see article – Storm Financials reparticipation strategy).  The CBA’s cunning cover up was to shift the blame onto an entity that had no voice because CBA was able to force Storm into administration and silence.

All of this manoeuvring by the CBA left the CBA with the only voice and the ability to dictate the minimal level of compensation it would pay for its mistakes.  Accordingly regardless of what each Storm thought or believed after the collapse, they were left in a position where they either towed the CBA line (to receive compensation) or were left out in the cold.

The Editor

The Plain Truth,

PO Box 2783

New Farm  QLD  4005

 

Content : Storm advice, Storm / CBA compensation, Conservative advice, CGI margin call notice.

Reporter : Ted Baxter

Content : Storm Financial advice, one-size-fits-all, Mythbusters, Storm UMIS.

Tuesday 4^th September 2012

The good thing about a myth is that it is just that, a myth.  Myths can be easily ‘confirmed’ or ‘busted’ simply by looking at the truth.  The current myth that has raised its ugly head again is the ‘one-size fits all’ / ‘cookie cutter’ advise emanating from Storm.

The Plain Truth has been asked by lawyers currently litigating to investigate this matter.  We take this opportunity to write a short article with a summary of our results.  

When we were first approached we felt rather daunted by the prospect of attempting to either prove or dispel something that Australia’s heavyweights with all their resources have not successfully been able to do.

ASIC has spent tens of millions to date and has little to show for it (mainly because they insist on looking in the wrong area) including no evidence that Storms advice was the same for everybody as well as no documented evidence of a UMIS.

Lawyers such as Damian Scattini formerly of Slater & Gordon and other lawyers have also failed to adorn their allegations with evidence.

The media similarly has only spruiked 3^rd and 4^th hand innuendo with no substance to back its reports, however when one understands that it is all about making money then heaven forbid that the truth should get in the way of profit.

Our investigator was able to view summaries of thousands of pieces of Storm advice and shock horror was unable to find even two (2) cases that were the same.  It gets worse.  Whilst applying the technique of ‘comparative investigation’, The Plain Truth looked at five other advisory groups and found an extraordinary consistency of advice to clients not only within each group but across the groups.  This was particularly evident with retirement planning where around 90% of the advice was effectively to ‘just do an allocated pension’.  There is no allegation that this is ‘cookie cutter’ advice although we found a greater variation of advice through Storm than we did with the 5 other groups looked at.

To further confirm this view, we have uncovered an email from the FPA (Financial Planning Association) as early as 1999 which was consistent with and confirmed the conclusions drawn by our own investigation.   (Click here to view the relevant extract from the FPA email to Storm in 1999).

Our investigators found that each and every piece of advice scrutinised by us had a clear and coherent summary of the client positions BEFORE the advice and AFTER the advice.  By analysing these graphic summaries it began very quickly evident that ‘one size fits all’ did not apply.

IMPORTANT NOTE – out of the 14,000 approx clients that Storm had, only 3,000 approx had margin loans.  The focus of this analysis is to highlight the difference in advice among those 3,000 clients.  For the purpose of this article The Plain Truth will completely ignore the remaining 9,000 clients that received a range of different advice covering Risk, Superannuation, Investment, Allocated Pensions and other.  Each piece of advice within each of these areas also happened to be different.  This simple point alone debunks the cookie-cutter argument. Nerver-the-less….

Client A analysis summary

–          Recommendation made July 2008

–          Asset diversification improved

–          Liquidity improved from 5% to 17% of total asset base

–          All existing debt was private (bad) debt

–          Overall debt increased from moderate 26% to a still moderate 34%

–          Bad debt concentration improved by a reduction of private debt from 26% to 20% of total assets

–          Margin loan recommended – $3,000 with a MLVR of 3.53%

 

Client B analysis summary

–          Recommendation made November 2000

–          Asset diversification improved

–          Liquidity marginally improved from 4% to 6% of total asset base

–          All existing debt was private (bad) debt

–          Overall debt increased from a moderate 23% to a still moderate 40%

–          Bad debt concentration improved by a reduction of private debt from 23% to 19% of total assets

–          Margin loan recommended – $40,000 with a MLVR of 55%

 

Client C analysis summary

–          Recommendation made December 2001

–          Asset diversification significantly improved

–          Liquidity improved from 10% to 31% of total asset base

–          All existing debt was private (bad) debt

–          Overall debt increased from very low 6% to a moderate 31%

–          Private (bad) debt completely eliminated

–          No margin loan recommended

 

Client D analysis summary

–          Recommendation made December 2000

–          All existing debt was private (bad) debt

–          Client completely illiquid with a liquidity ratio of 0%

–          Although overall debt position within Storm guidelines of 40% – 60%, consumption debt was considered too high and consumption spending left insufficient surplus for servicing.

–          Storm recommended that circumstances were not suitable for investing until consumption debt and spending was reduced

 

Client E analysis summary

–          Recommendation made July 2004

–          All existing debt was business (good) debt

–          Client had a liquidity ratio of 10%

–          Overall debt position of 61% was too high for his circumstances and outside Storm guidelines of 40% – 60%

–          Storm recommended that circumstances were not suitable for investing until debt reduced and any surplus be used to reduce the debt rather than be invested

 

Client F analysis summary

–          Recommendation made October 2006

–          Asset diversification significantly improved

–          Liquidity remained unchanged at 100% of total asset base (can’t improve on 100%)

–          Client has no existing debt

–          Client had no capacity to service new (or any) debt

–          No margin loan recommended

–          Recommendation was to alter existing asset allocation

 

As can be seen above we have presented a fair cross section of the types of advice that Storm recommended gave its approx 3,000 securities clients out of a total client base of 14,000.  Quite clearly no 2 clients in the sample were given the same advice or even close to the same advice.  On the contrary, Storm did in-depth analysis on all its clients before it gave advice

Myth : Storm had one-size-fits-all advice

 

The Plain Truth has been inundated from Storm clients with the question: What can we do to help?  The following 2 actions each and every one of you should do.

1)      Pass on the information on this website to as many people as possible.

–          Family

–          Friends

–          Neighbours

–          Your Professionals (e.g. dentist, doctor, accountant, financial planner, bank manager and bank staff)

–          Politicians (local, state and federal)

–          Anybody you can…

2)      Contact Senator John Williams who is one of the good guys and direct him to the truth with the aim of re-opening the Parliamentary Inquiry.  John can be contacted via email at [email protected] or 02 6721 4500 or 0427 029 918.

The Editor

The Plain Truth,

PO Box 2783

New Farm  QLD  4005

 

Content : Storm Financial advice, one-size-fits-all, Mythbusters, Storm UMIS.