Storm Financial Group

[Frank Ainslie]

Sources are telling me that the Stormers are getting very, very restless. More to come...

Hi Solly,

We've been restless since the end of 2008!

Here's the goss on the BOQ in North Ward:

https://sites.google.com/site/boqnorthward/

I'll be launching more websites outlining the crimes of the CBA and the Macquarie Bank in due course. It may take me some time though because there are a lot of charge sheets to wade through.

ASIC has millions of documents on its data base in relation to Storm and its dealings with these Banks. It probably has one man on the job to go through them all. That's probably the reason it's taken them forever to get these proceedings under way.

Thank God a date has now been set at the latter part of next year for this all to unfold in Court. I think a few eyes will be opened then, and a few "knockers" will have egg on their face.

If some people within Storm and these Banks that have done the wrong thing don't go to prison after all this, then the Law will well and truly be an ass!

Regards

Frank

 

[Harleyquin]

Well done Frank you've done a superb job on the BoQ site. Wish we had your keen eye for detail.

The clients of the financial plainning group have done absolutely nothing wrong except to seek financial advice and to place their trust in a legitimate planning group.

I don't buy the idea that the 'we are only going after the banks because they have the money', you can't go after someone just because they have the money, they have to be guilty of something, and in the case of the banks, they funded this scam. Without that funding storm financial and it's advisors were only spouting rotten advice, the banks knowingly funded that rotten advice to the tune of billions of course they knew exactly what they were doing.

I also don't buy into the idea that we shouldn't go after storm and those advisers who have lied and cheated either just because they claim they are 'broke'.

This unwholely partnership between bank and advisory firm has destroyed thousands of lives, our health is declining at a great rate of knots, and you the public are now picking up the tab for our pension each week. Which means that this debacle is seriously affecting more than just the stormies.

A criminal is a criminal and should be convicted.

 

[Solly]

Hi Solly,

We've been restless since the end of 2008!

Here's the goss on the BOQ in North Ward:

https://sites.google.com/site/boqnorthward/

I'll be launching more websites outlining the crimes of the CBA and the Macquarie Bank in due course. It may take me some time though because there are a lot of charge sheets to wade through.

ASIC has millions of documents on its data base in relation to Storm and its dealings with these Banks. It probably has one man on the job to go through them all. That's probably the reason it's taken them forever to get these proceedings under way.

Thank God a date has now been set at the latter part of next year for this all to unfold in Court. I think a few eyes will be opened then, and a few "knockers" will have egg on their face.

If some people within Storm and these Banks that have done the wrong thing don't go to prison after all this, then the Law will well and truly be an ass!

Regards

Frank

Hi Frank

I see that you are now a participant in the Class Action against BOQ. I will be watching with much interest. Your new website really has some powerful comment.

Today I spent the afternoon with my Stormer mate. He's still looking a bit drawn but this is the most determined I've seen him since this whole saga commenced.

He seems to have a second wind, a fire in his belly to ensure that the momentum is sustained to bring the perpetrators of this injustice to account.

The hierarchy of the banks, the previous principals of the entities involved and those who work in the mechanisms of public administration that oversee the laws, I believe are now recognising the unfailing commitment of all those aggrieved by this event to seek an equitable outcome.

I now believe more than ever that the Stormers are very organised and determined collective that will never ever give up until their total demands are fully compensated for the harm that has been inflicted.

S

 

[Harleyquin]

Solly we have nothing to lose.

We are VERY determined to fight this thing until the very end.

Everyone has let us down and the corporate crime involved is complex but very real.

If the banks get away with this the financial planning industry is as ruined as we are.

 

[bunyip]

The people who sold Storm Financials investment strategy, from the advisers right through to the CEO who couldn’t remember whether he was the CEO, must be delighted to see how the heat is being directed away from them and towards the banks instead.
I won’t be at all surprised if those Storm gurus get off with just a slap over the wrist or maybe even scot free, despite being the primary architects of the financial tragedy that befell so many Storm clients.
Rather than easing up on the Storm henchmen, what’s needed is a concerted and ongoing effort to keep the heat on them if they’re ever to face justice for leading investors into a reckless and highly risky investment strategy.
Yet almost three years after the collapse of Storm and the financial wipeout of their clients, rather than seeing Storm under sustained pressure and criticism, there are articles and comments in circulation that support Storm’s strategy instead of exposing its shortcomings.

One example of comments supportive of Storms strategy appears on the SICAG website in an article about Margin Lending written by Luke Vogel.
Vogel takes a swipe at the media for claiming that Storm investors were greedy because they were choosing high risk/high return investments. He points out that the Storm model promised ‘average market returns’ – nothing more, nothing less.
He appears to imply that Storm had a conservative investment strategy by virtue of the fact that it recommended investment in Index Funds that track the performance of the overall stockmarket, rather than trying to outperform the market.

While this does appear on the surface to be a relatively conservative investment strategy, what needs to be understood is that it was coupled with other aspects of the Storm model that were far from conservative.

Listed below are some of these non-conservative aspects of the Storm model.....Luke Vogel conveniently doesn’t mention them in his article.

* Double gearing, where assets such as real estate are used as collateral for a loan to invest in the stockmarket, then these stockmarket assets (all bought with borrowed money) are used as collateral for further loans for further market investment. Borrowings supported by borrowings.
Not by any measure can such a strategy to be considered as conservative or low risk. It was an accident waiting to happen.

* 100% of investment funds sunk into the stockmarket, which in itself can be a volatile and risky investment vehicle even when using index funds.
We’ve all heard the old adage ‘Don’t put all your eggs in the same basket’. Storms investment model ignored this age old wisdom by heavily investing its clients into the stockmarket, without proper regard to their age or their financial situation or their capacity to service their loans.

* Recommending that clients sink their super and retirement savings into the stockmarket.
Hardly a safe or conservative investment strategy.


* Margin Loans....great for magnifying your gains when the market is rising, but equally good at magnifying losses when the market falls. And markets always fall much faster than they rise. Not well suited to financing ‘buy and hold’ investments in something as volatile as the stockmarket. Again, hardly a safe or conservative strategy.

Luke Vogel was an adviser with Storm Financial and was later on the committee of SICAG. He would be fully conversant with all the points I’ve mentioned above, but given his background as a Storm employee, I guess it’s understandable why he doesn’t mention these aspects of the Storm model.
His comments can hardly be considered impartial....they paint Storm in a far better light than they deserve to be painted. It’s these sort of comments that take the heat off Storm, and may well help to produce an end result whereby Storm Financial and its cohorts escape being brought to justice for destroying so many clients through dodgy, high risk strategies and incompetent management of their clients investments.

 

[bunyip]

Every so often I hear comments from Storm casualties who still seem to have little understanding of how or why they were so badly burnt.
Below is a link to an excellent article that helps to throw some light on the subject.

http://www.moneymanagement.com.au/news/double-gearing-what-happens-when-markets-fail

 

[Solly]

It's been a while, let's check for the latest update on:

cassimatis.com.au

 

[Frank Ainslie]

The people who sold Storm Financials investment strategy, from the advisers right through to the CEO who couldn’t remember whether he was the CEO, must be delighted to see how the heat is being directed away from them and towards the banks instead.
I won’t be at all surprised if those Storm gurus get off with just a slap over the wrist or maybe even scot free, despite being the primary architects of the financial tragedy that befell so many Storm clients.
Rather than easing up on the Storm henchmen, what’s needed is a concerted and ongoing effort to keep the heat on them if they’re ever to face justice for leading investors into a reckless and highly risky investment strategy.
Yet almost three years after the collapse of Storm and the financial wipeout of their clients, rather than seeing Storm under sustained pressure and criticism, there are articles and comments in circulation that support Storm’s strategy instead of exposing its shortcomings.

One example of comments supportive of Storms strategy appears on the SICAG website in an article about Margin Lending written by Luke Vogel.
Vogel takes a swipe at the media for claiming that Storm investors were greedy because they were choosing high risk/high return investments. He points out that the Storm model promised ‘average market returns’ – nothing more, nothing less.
He appears to imply that Storm had a conservative investment strategy by virtue of the fact that it recommended investment in Index Funds that track the performance of the overall stockmarket, rather than trying to outperform the market.

While this does appear on the surface to be a relatively conservative investment strategy, what needs to be understood is that it was coupled with other aspects of the Storm model that were far from conservative.

Listed below are some of these non-conservative aspects of the Storm model.....Luke Vogel conveniently doesn’t mention them in his article.

* Double gearing, where assets such as real estate are used as collateral for a loan to invest in the stockmarket, then these stockmarket assets (all bought with borrowed money) are used as collateral for further loans for further market investment. Borrowings supported by borrowings.
Not by any measure can such a strategy to be considered as conservative or low risk. It was an accident waiting to happen.

* 100% of investment funds sunk into the stockmarket, which in itself can be a volatile and risky investment vehicle even when using index funds.
We’ve all heard the old adage ‘Don’t put all your eggs in the same basket’. Storms investment model ignored this age old wisdom by heavily investing its clients into the stockmarket, without proper regard to their age or their financial situation or their capacity to service their loans.

* Recommending that clients sink their super and retirement savings into the stockmarket.
Hardly a safe or conservative investment strategy.


* Margin Loans....great for magnifying your gains when the market is rising, but equally good at magnifying losses when the market falls. And markets always fall much faster than they rise. Not well suited to financing ‘buy and hold’ investments in something as volatile as the stockmarket. Again, hardly a safe or conservative strategy.

Luke Vogel was an adviser with Storm Financial and was later on the committee of SICAG. He would be fully conversant with all the points I’ve mentioned above, but given his background as a Storm employee, I guess it’s understandable why he doesn’t mention these aspects of the Storm model.
His comments can hardly be considered impartial....they paint Storm in a far better light than they deserve to be painted. It’s these sort of comments that take the heat off Storm, and may well help to produce an end result whereby Storm Financial and its cohorts escape being brought to justice for destroying so many clients through dodgy, high risk strategies and incompetent management of their clients investments.

The people who sold Storm Financials investment strategy, from the advisers right through to the CEO who couldn’t remember whether he was the CEO, must be delighted to see how the heat is being directed away from them and towards the banks instead.
I won’t be at all surprised if those Storm gurus get off with just a slap over the wrist or maybe even scot free, despite being the primary architects of the financial tragedy that befell so many Storm clients.
Rather than easing up on the Storm henchmen, what’s needed is a concerted and ongoing effort to keep the heat on them if they’re ever to face justice for leading investors into a reckless and highly risky investment strategy.
Yet almost three years after the collapse of Storm and the financial wipeout of their clients, rather than seeing Storm under sustained pressure and criticism, there are articles and comments in circulation that support Storm’s strategy instead of exposing its shortcomings."

Hi! It is somewhat pointless for the former clients of Storm to focus on a defunct company no matter how bad it was or what it did. That’s ASIC’s job and they are in the process of doing just that.

As for articles and comments in circulation supporting Storm, I can only say that Cassimatis must have written them. No one else to my knowledge has done so of late. Storm’s financial model has now been condemned by everyone; the financial adviser Worrells called in to testify, the FPA, the PJC in its report and so on and so on. Which idiot are you referring to when you claim this?

I concede that Storm still has a few supporters out there, but they are clearly delusional if they still believe that Storm’s financial model was sound.

A couple of years ago on the SICAG forum I challenged Manny and his wife to a debate on their Storm financial model which I had found on close examination to be hopelessly flawed, Luke Vogel then told me that these two super financial savvy people would "chew me up for breakfast". It was disturbing to hear this from him because it suggested to me that he still admired these two miscreants. I was expelled from SICAG shortly thereafter for upsetting people. I tend to do that apparently!

That’s when I formulated my own Group called SOB (Storming on Banks) or as one wag put it, “sick of bull****ters!” This is an independent Group which is only open to the victims of Storm and the Banks. Anyone that worked for Storm is not permitted to join because it could create a situation where a member is confronted with a Storm employee or adviser that has done the wrong thing by that person. Objectivity and the freedom to say exactly what one thinks without fear or favour is paramount in SOB.

I have now been called back into the SICAG fold but I still post mostly on SOB.

Incidentally, you don’t have to sell me your notion that Storm’s financial model was crap! As I have already said, I completely agree with your assessment. More to the point, so does anyone with a modicum of commonsense now accept that it was crap.

The funny thing though is this! Everyone including the Banks, Storm and its team, ASIC and the people operating in the financial sector before Storm collapsed thought the Storm financial model was the “new coming!” Now, nearly 3 years later it’s all ‘shock and horror’. How quickly people forget! But then the holocaust probably sounded like a good idea to the Germans at the time.

What I am trying to say is that it’s easy to try and be wise in hindsight. We can all do that! We went to Storm for financial advice as many did. We were entitled to get sensible financial advice because we paid good money for it. If you want to blame anyone, don’t blame the people that were duped. Rather, blame the banks who conspired with Storm, and blame a Regulator who didn’t ensure that Storm abided by its compliance obligations. Add the Government to your list for constructing poorly worded legislation that allowed these clowns to take advantage of elderly people who placed their trust in institutions that were completely dishonest, totally unethical and downright deceitful.

If people today cannot trust in so-called professional financial advisers, who should they trust in? God perhaps because at the end of the day, he’s probably the only one left that you can trust to do the right thing!

It was total bull**** from beginning to end. To try and make any sense of it without knowing the full facts is just that as well.

 

[Frank Ainslie]

Hi Frank

I see that you are now a participant in the Class Action against BOQ. I will be watching with much interest. Your new website really has some powerful comment.

Today I spent the afternoon with my Stormer mate. He's still looking a bit drawn but this is the most determined I've seen him since this whole saga commenced.

He seems to have a second wind, a fire in his belly to ensure that the momentum is sustained to bring the perpetrators of this injustice to account.

The hierarchy of the banks, the previous principals of the entities involved and those who work in the mechanisms of public administration that oversee the laws, I believe are now recognising the unfailing commitment of all those aggrieved by this event to seek an equitable outcome.

I now believe more than ever that the Stormers are very organised and determined collective that will never ever give up until their total demands are fully compensated for the harm that has been inflicted.

S

Hi Soll

I sense a kindred spirit!

In Queensland of late we’ve had to contend with a few disasters. Storm Financial wasn’t the only storm that went through here devastating people in the process. The problem is that after a while people become inured to other people’s suffering because one reads about it every day. Only when it’s in your face and personal does it mean anything.

We, Helen and I, are better off than some and worse off than others where Storm is concerned. We’re still alive so that’s a bonus. The one thing that most ‘Stormies’ have in common though is that we are determined to see those that stole our dreams pay for what they have done. It’s not just a question of money! It’s as much a question of principle. When people steal money from you by false pretenses you naturally want your money back and you want the perpetrators punished.

I am seventy in December and I may not make the journey. However, if just one of us is left standing when justice is done, it will have been worth it.

I’ll leave you with my favourite quote:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neiter victory nor defeat.”

 

[Harleyquin]

Bunyip most of us who were burnt by storm agree with your view that the storm people were responsible for formulating this so called financial strategy. The fact that it was so badly flawed was the problem and that's why the banks need to explain why they financed such a ponzi scheme.

The bankers don't finance anything that they don't understand, consequently it stands to reason that they knew exactly what storm were doing to their clients. Without their financial backing the storm model was just a bad idea. The Australian Banking industry made it a reality.

We have been called greedy, the truth is that we were lied to by these advisors, and the banks need to verify all information given to them by storm when applying for loans. Most of us have paperwork which clearly says in our risk profile 'LOW RISK' and that's what the advisors promised us. And all of our SOA were all exactly the same or almost exactly the same ie extremely high risk. Don't you think someone in the Banking industry picked up on this straight away. You bet they did.

When you have an ASIC and Financial Planning approved financial planner tell you that you that they are recommending a low risk investment for you and then you find out too late that it is far from low risk.

Those of you who understand these things can say 'you should have known better' etc, well we didn't know better. We made the mistake of believing that we could place our trust in a licensed financial planner. What these advisors did was clearly criminal no question. We were conned big time. Hindsight is a wonderful thing.

I see the advertisements on TV at present asking you to contact Financial Planning Australia for a financial planner. Our storm planner was a member of the FPA. I see the banks advertising their financial planners, are they going to come under the same rules as the non banking planners or will they do whatever they want to.

What the storm/banking partnership did was highly criminal and it has destroyed thousands of lives. I want to see all of those responsible held accountable.

 

[Judd]

bunyip, an informative post but there is one small point that you may have overlooked which has been raised by others; that is the question of hindsight. It would have been interesting if ASIC or others had stepped in in 2006 or so when things were going swimmingly well and said, this investment model is way too dangerous for you punters so we are closing it down or warning you against it. Would Storm clients have then rushed for the exit? Don't know and we never will.

 

[Frank Ainslie]

More by Kate Kachor @ www.investordaily.com.au

‘Was ‘Ignite’ the ignition Storm needed? (Part 1)

“Ignite Financial Systems and Research Pty Ltd (Ignite) was a company controlled by Emmanuel and Julie Cassimatis. Prior to 23 March 2007 (that is about the time Storm was preparing for the IPO) Ignite was renamed Storm Financial Research Pty Ltd.

Ignite was paid significant fees in relation to certain trademarks and in relation to the development and operation of a computer program or platform called "Phormula" In addition Ignite owned and operated an aircraft which Storm used on a commercial basis. And so begins Page 28 of the Worrells Report to Creditors dated 25th May 2010 which I shall be quoting from:

“Storm and Ignite have a strategic partnership. Ignite is a software research and development business owned by the Founders. Storm and Ignite are separate entities which operate separate businesses and perform different roles. Ignite currently receives fees from Colonial and Challenger and will in the future receive fees from Storm.” (Storm’s prospectus)

The liquidators (Worrells) stated that “they were not aware of any commercial reason why the role of Ignite could not have been carried out by Storm itself, or through a Storm subsidiary.”

“The agreements entered into between Ignite and Emmanuel and Julie Cassimatis, and subsequently between Ignite and Storm, are somewhat unusual. In October 2004 an agreement was executed between Ignite, Mr and Mrs Cassimatis and Colonial First State Investment Limited (Colonial Investment), which company is a subsidiary of the CBA. Colonial Investment is in the business of managing investment Funds including a number of the Funds which Storm recommended that clients invest in.

The agreement of October 2004 states that Mr and Mrs Cassimatis had applied for (and had presumably obtained or subsequently obtained) certain trademarks. The trademarks which are the subject of the agreement appear to have principally been trademarks which would normally have been expected to be owned by Storm. Indeed they were subsequently transferred to Storm (see below). Pursuant to the agreement Mr and Mrs Cassimatis assigned their interest in the trademarks to Ignite and Ignite made the trademarks available to Colonial Investments, in exchange for a monthly royalty fee the amount of which was calculated in relation to the funds invested by Storm's clients. Colonial Investments used the trademarks to "badge" the funds managed by them on behalf of Storm's clients as "Storm Funds".

Here’s what the then CEO, Mr. Ralth Norris had to say in 2009 about the CBA’s relationship with Storm“

“Mr Norris””I think the issue here is that certainly the Commonwealth Bank was not identifying customers of the Commonwealth Bank to be customers of Storm. My understanding very clearly is that Storm initiated relationships on the back of financial advice that they gave to their customers. Some of those customers were directed or took out loans with the Commonwealth Bank on the housing side, and some of them took out loans with other banks. Likewise with regard to margin lending: margin lending was taken out with other providers as well. My view is that this was not a tight relationship. From the organisation’s perspective””from my perspective, from the board of the bank’s perspective... “ [PJ-C Hearings 28.102009]

It is evident to even ‘Blind Freddy’ that Storm set this arrangement up with the CBA to churn money out of its customers and the CBA went along with it because it encouraged Storm to send investors its way! Ignite was used for this purpose because it disguised the nature of the arrangement and was also a means of reducing Storm’s own tax liabilities.

“Why the trademarks were owned by Mr and Mrs Cassimatis rather than Storm and why they were assigned to Ignite, so that Ignite would receive the royalty income, is not clear to the liquidators. It does seem clear that Ignite entered into a similar agreement with Challenger Financial Services Group Limited (Challenger) as the Profit and Loss Statement of Ignite for the year ended 30 June 2007 disclosed royalty income from Colonial Investment of almost $1.775 million and royalty income of $1.348 million from Challenger.”

It’s amazing to me how ‘Challenger’ has not been embroiled so far in all this! The Packer influence perhaps!

In Storm’s SOA to us (Page 52) it states:

“…For example Storm Financial is Commonwealth Bank's single largest margin lending client (please note: we do not deal exclusively with the Commonwealth Bank but rather we recommend the margin loan which best suits your needs). As a result we receive a substantially better loan with higher buffers, larger LVR's, longer lead times to margin call and at vastly superior interest rates. For small loans we achieve for our clients a 0.65% per annum interest rate deduction and on larger loans this discount increases up to 1.85% per annum. Similarly, we are able to achieve discounted bank loans for our customers. Additionally, Storm Financial does not receive ongoing (trailing) commissions on loan products (such as margin loans), instead we pass on to you any such commission in the form of lower interest rates.”

In Storm’s SOA to us (Page 53 it states:

“While our fees may be higher than average upfront, over time our fee structure is very competitive with the industry average and you are not continually paying for "add-ons." and there are no hidden kick-back arrangements.”

In Storm’s SOA to us (Page 81) it states:

“Ongoing commission is paid by some product providers and generally continues until the client redeems the investment. The amounts vary over time according to the total value of your funds under management. The ongoing commission noted in the table above amounts to a percentage on the balance of your fund. For example, if you invest $100,000 then the fund manager pays an ongoing commission to us of between $300 per annum and $500 per annum depending on the fund chosen. As the balance of the fund increases or decreases, the value of the ongoing commission paid is also changed. This ongoing commission allows us to service your ongoing needs without having to charge you yearly monitoring fees. This remuneration is included in the Total Management Fees set out above and is not an additional fee to you.

As a Representative of Storm Financial Pty Ltd, Stuart Drummond is entitled to an amount of 10% of the upfront fees paid to the Licencee. This equates to an amount of $13,020.10 (excl GST). This remuneration is included in the fees set out above and is not an additional fee to you.

Disclosure of Interest in the Challenger Managed Investments Limited Storm Australian Indexed Trusts

• Ignite Financial Systems and Research Pty Ltd is a research company owned in shareholding by Emmanuel and Julie Cassimatis.

• Ignite Financial Systems and Research Pty Ltd is entitled to receive an ongoing royalty of 0.165% pa including GST based on the value of your holding in the Fund. The ongoing royalty is paid by the fund manager and is contained in the management fees. This is not an additional cost to you.

• For the life of the Prospectus, Storm Financial Pty Limited customers will not pay a buy/sell spread in the Storm Australian Indexed Trusts. The brokerage associated with withdrawals and investments will be reimbursed to the Storm Australian Indexed Trusts by Storm Financial Pty Ltd.”

You can see by reading this that Storm mentioned payments to Ignite in passing so they could always say at the end of the day, “We did tell you all about this!” They knew, however, that unless some one trained in financial accounting and financial advice was reading this, no one would pick up that this was a double-gearing scheme with many add-ons. That’s why Storm deliberately made the SOA 107 pages long and made it incomprehensible to the man in the street.
I was trained in corporate financial matters and I didn’t pick up on it. Nor for that matter did other professional people that invested using Storm’s financial advisory service. How then could anyone expect ordinary Australians to have any idea how this all worked if we who had worked in business didn’t?

“In the lead up to the IPO (see section 8 of this report) a new series of agreements were executed. These agreements cancelled the original agreements and had the effect of transferring the ownership of the trademarks to Storm, but oddly also allowed Ignite to continue to retain the royalty income without any payment to Storm. As stated above the liquidators are unaware of why the income from trademarks which, it appears, could at all time have been the property of Storm should have been received and retained by Ignite. That being said it is also true that at all material times each of Storm and Ignite were solvent, were beneficially owned by Mr. and Mrs. Cassimatis, and as such, subject to the requirements of the Corporations Act they were entitled to arrange the affairs of the respective companies as they wished.”

What Worrells are basically saying in this report is that Storm was effectively operating inside the law. However, the reasons for operating in this way appear somewhat confusing to them. We, the poor bloody investors, know why they had such arrangements in place – for Storm’s financial benefit and not ours!

 

[Frank Ainslie]

"Was Ignite' the ignition Storm needed? (Part 2)

“Apart from holding and or getting the income from the "Storm" trademarks, Ignite also developed and retained ownership of a computer program called "Phormula", which was used by Storm in connection with its business. Although Ignite was tasked with the development of "Phormula" it seems that Ignite did not initially have the financial resources to pay the development costs. An analysis of the financial records of Storm shows that Storm progressively advanced the required funds to Ignite by way of an unsecured and interest free loan. As at 30 June 2007 Ignite owed Storm $3.44 million. “

Wait for it! Now we have the biggest joke of all:

“The agreements entered into between Storm and Ignite during 2007 included two service agreements.

Pursuant to what was described as the "Research Service Agreement" Ignite undertook to provide Storm with "research related services" on an ongoing basis. No fee was payable by Storm during the first two years of the agreement but thereafter it was agreed that a commercial rate was to be negotiated between the parties. The agreements entered into by Storm and Ignite during 2007 also included an agreement whereby Ignite agreed to provide certain services to Colonial First State Investment in return for certain fees calculated in accordance with the amount of Storm badged funds which Colonial First State Investment had under management.

As noted above Storm advanced $3.44 million to Ignite principally to fund the development of "Phormula". In the period from 1 July 2007 until the close of business in January 2008 Storm collected royalties on behalf of Ignite such that the balance was progressively reduced, and eventually converted to a liability of in excess of $1.2 million.”

In the above it states, “…it seems that Ignite did not initially have the financial resources to pay the development costs.” Yet Ignite owned and operated an aircraft which Storm used on a commercial basis? Give me a break!

The reason Storm did not develop the “Phormula” software fully is now apparent. Storm didn’t want any of its clients to be able to identify the “high risk” nature of it financial model in terms of the ‘liabilities’ its clients took on when adopting such. Effective software has a way of doing this!

Storm knew that the ratios it quoted in its SOA were false because the housing loans and margin loans were not correctly factored in, but it didn’t matter to Storm. Storm’s clients were happy and they would not ask too many questions when they were asked to inject more capital so what the heck! Storm was also happy because its ‘financial colander’ was never questioned until the markets collapsed in late 2008.

Storm, of course, always had the clients ‘dam accounts’ to fall back on. If no revenue was forthcoming on clients’ share portfolios, the clients merely funded themselves out of the cash reserves set aside. For most of 2008 this is what occurred. Ponzi would have been proud of the way Storm went about this!

“In summary, it may be observed that Storm's trademarks provided a substantial income stream for Ignite, a company which appears to the liquidators to have no obvious reason to own the trademark or to receive the income stream. Also, Storm specified what it required from "Phormula" and advanced the funds to pay for the development of that program. The repayment of the funds advanced came from the income stream generated by the trademarks and Ignite retained ownership of "Phormula". As stated above each company was solvent when these arrangements were entered into and were each beneficially owned by the same parties who were, subject to the Corporations Act entitled to arrange the affairs of the companies as they saw fit.”

In the Worrells case, Manny was asked the following:

“Liquidator's Barrister: Do you now accept that Ignite, instead of losing money by having the jet, would have been better to use its money to develop capabilities in the Phormula software which would have enabled advisers easily to identify clients who were in, or getting close to, margin call territory?--

E Cassimatis: Privilege. No.”

Unfortunately, Manny, it was not a privilege knowing you!

Frank Ainslie – 11th October 2011

 

[bunyip]

bunyip, an informative post but there is one small point that you may have overlooked which has been raised by others; that is the question of hindsight. It would have been interesting if ASIC or others had stepped in in 2006 or so when things were going swimmingly well and said, this investment model is way too dangerous for you punters so we are closing it down or warning you against it. Would Storm clients have then rushed for the exit? Don't know and we never will.

Judd, it's an interesting question - would they or wouldn't they have jumped ship if ASIC or anyone else had told them what they were doing was fraught with danger? Perhaps some would and some wouldn’t. As you say, we’ll never really know.
My experience with human nature is that prudent people sometimes tend to become imprudent when exposed to the lure of big money.
A friend of mine bought a ten thousand dollar software package that was going to make him his fortune in the stockmarket. I told him not to buy it and why, but he bought it anyway, and of course lost heaps of money.
A relative of mine borrowed a six figure sum to invest in the stockmarket. She was sitting on a 100% gain when the bull market showed clear signs of running out of steam just prior to the 2008 crash. The warnings were loud and clear in every newspaper and every news program for months before the crash. I told her to sell out but she didn’t. Years later she’s still holding her shares and still paying interest on the loan. Her shares are worth much less than she paid for them.
She’s normally a prudent person, but the lure of money clearly affected her judgment.

Many people knew the dangers inherent in heavily gearing into the stockmarket - they well remember the lessons of 1987. They didn't get caught by the likes of Storm.
Others did get caught. Most of them were around in 1987.
Others will get caught in the future by dodgy investment schemes.
That's how it's always been and always will be.
No corporate watchdog and no amount of legislation will ever change that.

 

[Judd]

......I told him not to buy it and why, but he bought it anyway, and of course lost heaps of money.............

Many people knew the dangers inherent in heavily gearing into the stockmarket - they well remember the lessons of 1987. They didn't get caught by the likes of Storm.
Others did get caught. Most of them were around in 1987.
Others will get caught in the future by dodgy investment schemes.
That's how it's always been and always will be.
No corporate watchdog and no amount of legislation will ever change that.

You're a braver person than I, bunyip. I learnt my lesson on the provision of advice many years ago when I was asked for my opinion on a business venture by a neighbour. I simply asked whether he was certain he had the appropriate management and financial skills. I copped a mouthful. Sadly he went bankrupt and lost his home. So now, I attempt to hold my tongue (not always successful in that) and just watch the trainwrecks of which there are, unfortunately, a few.

And you are right. Others will be caught by dodgy - and not so dodgy - investment schemes. Simply because margin loans are now a regulated product following the Ripolli report doesn't mean that you can't blow one up. And they are not non-recourse, so you can still loose your home. You just have to misuse the product.

If there is anything to be grateful for in this whole sorry saga it is that of the 100% who attended a Storm seminar, according to the great man himself, 75% walked away from the product so the damage has been limited to only 3,000 or so.

 

[doobsy]

I have sat back and kept up to date with this forum for my own personal reasons without posting.

I am part of the hated industry that supposedly has done so much wrong and yet I did not lose a single client over the past 4 years. I am however still picking up the pieces for Storm clients who we stepped in to assist.

My question to those who were suckered (and that is the greatest pity of all) is this:

My example client couple walks in to my office aged 65 with a house worth $500,000 paid off and $400,000 in super. My advice (and that of most advisers) would be to start an allocated pension/s, draw a sustainable amount of 5% tax free money and apply for the aged pension. They could have expected somewhere in the order of $40,000 - $50,000 per annum from that strategy. A comfortable retirement.

Storm clients were told to borrow against the home to 80% ($400,000) and pull out the super. Invest that $800,000 into nothing but Aussie shares and then gear against it with a margin loan of another $800,000. With $1.6M now invested and assumed(always dangerous) returns of 10% per annum they were drawing incomes of around $100,000 per annum. Interest was capitalised so was never part of the costs. Massive interest costs meant tax deductions to offset income earnt.

Should the bank be found liable for their part and clients receive some sort of compensation, will Storm clients be paying back the extra money they happily received and spent on OS holidays etc????

There is no question wrong has been done but someone who was part of the strategy for 5+ years probably received and spent more than $250,000 above what the average retiree would have lived on. This was part of the strategy Storm used to sucker clients but that doesn't make it acceptable for storm clients to forget they lived a pretty high life while the going was good.

 

[Frank Ainslie]

Judd, it's an interesting question - would they or wouldn't they have jumped ship if ASIC or anyone else had told them what they were doing was fraught with danger? Perhaps some would and some wouldn’t. As you say, we’ll never really know.
My experience with human nature is that prudent people sometimes tend to become imprudent when exposed to the lure of big money.
A friend of mine bought a ten thousand dollar software package that was going to make him his fortune in the stockmarket. I told him not to buy it and why, but he bought it anyway, and of course lost heaps of money.
A relative of mine borrowed a six figure sum to invest in the stockmarket. She was sitting on a 100% gain when the bull market showed clear signs of running out of steam just prior to the 2008 crash. The warnings were loud and clear in every newspaper and every news program for months before the crash. I told her to sell out but she didn’t. Years later she’s still holding her shares and still paying interest on the loan. Her shares are worth much less than she paid for them.
She’s normally a prudent person, but the lure of money clearly affected her judgment.

Many people knew the dangers inherent in heavily gearing into the stockmarket - they well remember the lessons of 1987. They didn't get caught by the likes of Storm.
Others did get caught. Most of them were around in 1987.
Others will get caught in the future by dodgy investment schemes.
That's how it's always been and always will be.
No corporate watchdog and no amount of legislation will ever change that.

Bunyip, old chap! You are still not getting it.

“My experience with human nature is that prudent people sometimes tend to become imprudent when exposed to the lure of big money.”

People did not invest in Storm because of the lure of big money! 75% of those that invested in Storm were self-funded retirees that had worked hard all their lives to insure that they would be financial self-sustaining when they grew old. They didn’t go to the Casino every night to gamble their hard earned money away as many do. We are talking now about conservative Australians that certainly didn’t have a gambling mentality.

The Storm financial model was sold to us as a ‘low risk scheme’ with a capital growth over 7 to 10 years with little risk attached because investments were made in shares on a broad market front.

We, Helen and I, were millionaires when we invested in Storm, having 1.7 million in unencumbered assets including $1 million that we received for our shopping centre. We went to Storm who had 13,500 clients because we were seeking professional financial advice from a large and reputable company. Storm was an FPA ASIC approved organization that came highly recommended. You make it sound as though the people in Storm were all greedy individuals that were prone to taking chances. Quite the reverse in fact! It is unfortunate that many share your point of view because it makes our cause that much harder.

The financial sector has changed as a result of the Storm collapse. New regulations have been put into place to control margin loans and housing loans for investment purposes. Financial advisers have now been put on notice that the industry will no longer tolerate shonky operators. This didn’t come about because we, the people that used Storm, were at fault, but rather because the financial sector was at fault, and the people that operated therein.

We are now fighting the Banks not only for our future but yours as well. The banks have had it their own way for far too long, riding rough shod over peoples’ lives. When we beat these banks in court, we will be protecting the future of those that come after us. The financial sector will be a safer place for investors in the future because we are standing up now for our rights. If someone steals your money you have a right to prosecute that individual. That's exactly what we are doing!

Rather than call us greedy, embrace what we are trying to do. One day it may be you that has been shafted by someone, be it a bank or someone else. For that matter, it may be your parents that are deceived by people that promote themselves as professionals but act in a most unprofessional way. “And don’t tell me it couldn’t happen to you because it can happen to anyone!”

All anyone in Storm is asking for is a fair go! It’s the Australian way. It’s who we are as a nation! We are ordinary Australians that have been deceived by the likes of the CBA, the BOQ and the Macquarie Bank because they conspired with Storm to churn money out of us for their own ends.

We, Helen and I, lost 1.7 million dollars in 15 months and ended up with a $340,000 debt – a turn-around of $2 million dollars. That wasn’t caused by the global financial crisis or the fact that we had a gambling problem. Far from it! It was cause by the wrongdoings of those we dealt with, namely Storm and the banks involved with it.

“Others will get caught in the future by dodgy investment schemes.” 13,500 clients bought it! What makes you think you are any different?

Come back in 2013 when this is all finished with and let me know what you think then – when criminal charges have been laid and some of those responsible for this grand deception are languishing in prison.

Fraud is fraud no matter how many ways you want to look at it! This is not a normal situation where people invested and lost their money when the markets went belly-up. I suggest therefore that you don’t treat it as such or make judgements on people when you are not abreast of all the facts.

 

[Julia]

My example client couple walks in to my office aged 65 with a house worth $500,000 paid off and $400,000 in super. My advice (and that of most advisers) would be to start an allocated pension/s, draw a sustainable amount of 5% tax free money and apply for the aged pension. They could have expected somewhere in the order of $40,000 - $50,000 per annum from that strategy. A comfortable retirement.

Storm clients were told to borrow against the home to 80% ($400,000) and pull out the super. Invest that $800,000 into nothing but Aussie shares and then gear against it with a margin loan of another $800,000. With $1.6M now invested and assumed(always dangerous) returns of 10% per annum they were drawing incomes of around $100,000 per annum. Interest was capitalised so was never part of the costs. Massive interest costs meant tax deductions to offset income earnt.

Should the bank be found liable for their part and clients receive some sort of compensation, will Storm clients be paying back the extra money they happily received and spent on OS holidays etc????

There is no question wrong has been done but someone who was part of the strategy for 5+ years probably received and spent more than $250,000 above what the average retiree would have lived on. This was part of the strategy Storm used to sucker clients but that doesn't make it acceptable for storm clients to forget they lived a pretty high life while the going was good.

People did not invest in Storm because of the lure of big money! 75% of those that invested in Storm were self-funded retirees that had worked hard all their lives to insure that they would be financial self-sustaining when they grew old.

If they were self funded retirees, why would a simple and safe strategy such as outlined above by Doobsy not be more acceptable than double gearing?

The Storm financial model was sold to us as a ‘low risk scheme’ with a capital growth over 7 to 10 years with little risk attached because investments were made in shares on a broad market front.

You didn't think that borrowing up to 80% on your freehold property to buy shares and then taking out a margin loan on those shares bought with borrowed funds was risky????

 

[Frank Ainslie]

Judd, it's an interesting question - would they or wouldn't they have jumped ship if ASIC or anyone else had told them what they were doing was fraught with danger? Perhaps some would and some wouldn’t. As you say, we’ll never really know.
My experience with human nature is that prudent people sometimes tend to become imprudent when exposed to the lure of big money.
A friend of mine bought a ten thousand dollar software package that was going to make him his fortune in the stockmarket. I told him not to buy it and why, but he bought it anyway, and of course lost heaps of money.
A relative of mine borrowed a six figure sum to invest in the stockmarket. She was sitting on a 100% gain when the bull market showed clear signs of running out of steam just prior to the 2008 crash. The warnings were loud and clear in every newspaper and every news program for months before the crash. I told her to sell out but she didn’t. Years later she’s still holding her shares and still paying interest on the loan. Her shares are worth much less than she paid for them.
She’s normally a prudent person, but the lure of money clearly affected her judgment.

Many people knew the dangers inherent in heavily gearing into the stockmarket - they well remember the lessons of 1987. They didn't get caught by the likes of Storm.
Others did get caught. Most of them were around in 1987.
Others will get caught in the future by dodgy investment schemes.
That's how it's always been and always will be.
No corporate watchdog and no amount of legislation will ever change that.

Bunyip, old chap! You are still not getting it I’m afraid!. But then you are not alone judging by some of the other remarks on this forum.

“My experience with human nature is that prudent people sometimes tend to become imprudent when exposed to the lure of big money.”

People did not invest in Storm because of the lure of big money! 75% of those that invested in Storm were self-funded retirees that had worked hard all their lives to insure that they would be financially self-sustaining when they grew old. They didn’t go to the Casino every night to gamble their hard earned money away as many do. We are talking now about conservative Australians that certainly didn’t have a gambling mentality.

The Storm financial model was sold to us as a ‘low risk scheme’ with a capital growth over 7 to 10 years with little risk attached because investments were made in shares on a broad market front.

We, Helen and I, were millionaires when we invested in Storm, having 1.7 million in unencumbered assets including $1 million that we received for our shopping centre. We went to Storm who had 13,500 clients because we were seeking professional financial advice from a large and reputable company. Storm was an FPA ASIC approved organization that came highly recommended. You make it sound as though the people in Storm were all greedy individuals that were prone to taking chances. Quite the reverse in fact! It is unfortunate that many share your point of view because it makes our cause that much harder.

The financial sector has changed as a result of the Storm collapse. New regulations have been put into place to control margin loans and housing loans for investment purposes. Financial advisers have now been put on notice that the industry will no longer tolerate shonky operators. This didn’t come about because we, the people that used Storm, were at fault, but rather because the financial sector was at fault, and the people that operated therein.

We are now fighting the Banks not only for our future but yours as well. The banks have had it their own way for far too long, riding rough shod over peoples’ lives. When we beat these banks in court, we will be protecting the future of those that come after us. The financial sector will be a safer place for investors in the future because we are standing up now for our rights. If someone steals your money you have a right to prosecute that individual. That's exactly what we are doing!

Rather than call us greedy, embrace what we are trying to do. One day it may be you that has been shafted by someone, be it a bank or someone else. For that matter, it may be your parents that are deceived by people that promote themselves as professionals but act in a most unprofessional way. “And don’t tell me it couldn’t happen to you because it can happen to anyone!”

All anyone in Storm is asking for is a fair go! It’s the Australian way. It’s who we are as a nation! We are ordinary Australians that have been deceived by the likes of the CBA, the BOQ and the Macquarie Bank because they conspired with Storm to churn money out of us for their own ends.

We, Helen and I, lost 1.7 million dollars in 15 months and ended up with a $340,000 debt – a turn-around of $2 million dollars. That wasn’t caused by the global financial crisis or the fact that we had a gambling problem. Far from it! It was cause by the wrongdoings of those we dealt with, namely Storm and the banks involved with it.

“Others will get caught in the future by dodgy investment schemes.” 13,500 clients bought it! What makes you think you are any different?

Come back in 2013 when this is all finished with and let me know what you think then – when criminal charges have been laid and some of those responsible for this grand deception are languishing in prison.

Fraud is fraud no matter how many ways you want to look at it! This is not a normal situation where people invested and lost their money when the markets went belly-up, no matter what the would-be-experts on this forum say. For them I will ask only this, "why do you think ASIC is litigating against the 3 banks involved?" Because it has nothing better to do perhaps? Or could it be that the people in Storm have been wronged and the Regulator is seeking to put it right?

If ASIC is now pursuing these banks on our behalf because it has now decided that these banks have a case to answer who are you or others on this forum, who are not abreast of all the facts, to say otherwise? They have the evidence! You don't! I therefore suggest that you suspend judgement until this plays out in Court. After you have viewed the evidence, that is! Only then can anyone be truly objective which seems somewhat lacking on this forum at the moment.

 

[Judd]

If they were self funded retirees, why would a simple and safe strategy such as outlined above by Doobsy not be more acceptable than double gearing?

You didn't think that borrowing up to 80% on your freehold property to buy shares and then taking out a margin loan on those shares bought with borrowed funds was risky????

Obvious questions, Julia, but let us not forget that those former Storm clients are hurting and hurting badly. However, it is a bit odd that Mr Ainslie is dumping on bunyip when bunyip was actually replying to me.

And the "reforms" have done nothing to lessen the potential danger associated with margin loans or any other form of debt. You can be completely debt free, apply for a margin loan and go down the toilet due to misuse (I have personally proved that as I have said way, way back on this thread.) All that has happened is that the product provider has been given a free kick to gather additional data on the applicant that wasn't available before.

Strange, I was at a dinner held by an accountancy firm - long story but knew a friend and I scored a free dinner out of it - and I got talking to one of the number crunchers. She had only recently joined the firm and the conversation moved to Storm. She sort of grimaced at one point saying that she had told some of her then clients to get another accountant if they wished to go to Storm as it was obvious that it would eventually all blow up in their faces. She was a nice lass (well, I thought she was) but, heck, was she unsympathetic to the plight of her former clients. I suppose if it doesn't impact directly on yourself you tend to be a tad callous.