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PIPER ALDERMAN

I too have no connection in any way with the firm BUT to all of us - the ONLY hope any of us for any financial recovery from this mess is to back someone who will run a class action that will drag in to the net:-

- directors
- their advisers
- more than likley auditors
- maybe valuers
- certainly PI insurers

'professionals' know from experience that retiree invvestors lose heart, accept defeat and become apethetic - or worse, are so desperate, that they will listen to and accept any hare-brained proposal. What needs to happen is to accept the loss as final and take and or support a unified action for recovery and redress.

Piper Alderman in Sydney seem to be the only ones running anything - so , logically, they should be contacted.
 
ASICK said:
"Just Observer", would you care to compare and contrast the Cento case with any claim/s that might be brought on behalf of the members of the EIF? It seems to me that given the long line of claimants forming outside of the main players' doors, unless the auditors are drawn into a claim, the Centro case doesn't really give rise to anything apart from hope, perhaps even no more than a false hope.
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Asick, you probable right. I am merely voicing my two bobs comment.

The information and my knowledge about the Centro case is limited to what was written and can be read from the press realeses. Apparently the class action brought against Centro directors and the company's auditor centered on what was said in the company financial report which listed the short term debt as long term liability. The Court accepted that the Centor Directors have failed in their duty to property inform the shareholders and could not claim ignorant as their defence. The Court also held it's auditor guilty as well, to which the Court appropriate one third of the blame to them.

This reminded me of the similarity (from what I have read on this thread) of the failure by the Equititrust's directors of its duty to list the Westpac and BOQ loans (to which the company has provided the guarantees) in the company Financial Report. Furthermore, the report dated 12/4/2012 by the Hall Chadwick also listed numerous serious wrongdoings by the Directors of Equititrust (page 7 of the report and chapter 10.3 and 11) and as alledged by Asic and Piper Alderman.

Whether these alledged serious wrongdoings will later be proven in Court is another matter. But from reading various comments and reports available, plus other evidence that will be collected during the investigation; if I am a betting man, I would put my money that some of the alledged serious wrong doings will stick and the class action will succeed.

This hope (succesful class action) is better than expecting there is something left in the kitty after the Liquidators have taken their fees and secured creditors are paid in full, including the additional default interest rate, legal fees etc.

Furthermore, I don't mean to be negative, but in my opinion the actual realization of assets will be much lower than what were stated in Hall Chadwick reports. So it will only get worse.
 
Liquidator

Why is the liquidator so quiet.... Have they finally got a personal financial statement out of McIvor ? How hard are they chasing him???
 
Kostag,

I am with you 100%.

It is easy for me to sit in the side line and say nothing. For so long I have done so. but I noticed the comments in this thread has slowed down and I am disappointed to know that so few people have joined the class action, whilst I think this is the only hope the investors have in at least getting some thing back.

This has urged me to start writing on this thread.

Yes, it appeared so many investors have given up and lose heart. But they have nothing to lose by joining the class action as Piper Alderman will only get their fee if they are succesfull. Yes they will get their cut from it, but something is better than nothing.

You and other members of this thread are well inform and read all the available reports. You have come to your conclusions much sooner that most other members. But you have been proven correct again and again. You too came to conclusions that nothing will be left in the company once the dust has settled.

All banks's loan agreements have "default interest rate" in their contract. The banks will collect this default interest rate from day one when the loan was either due or in default. I won't be surprised if default interest rate is well in excess of 12% per annum. Maybe this is something the investor can ask the Liquidator. If there is money in the kitty, the bank will definately dig deep to find way of getting their hand on it without any consideration to mum/dad investors.

If the bank can prove the company has been insolvent for some years back, they will apply default interest rate from then, as the banks' loan agreement contain this default conditions. This is a standard loan agreement from any banks that I know.

I hope Mr Whyte can strike a deal with the banks to limit what the banks can take, hence protect the interest of the shareholders.
 
Thanks "Just Observer" for responding. I agree that there won't be much left at all for investors (if anything at all is left). The fact that there doesn't seem to be an audited return to date should be very troubling to investors. Anyway, valuations are moot in any event, it's sales that'll tell the real story about value.
 
Audited Financials

I have been harping on about the audited financials since last year and despite McIvor promising them, where are they ???

They could not produce them as they were hiding the massive impairments...

With default interest etc etc there will be nothing left and as reported in the Courier Mail with McIvor fighting for furniture and a few paintings with Ferrier Hodgson and NOT lodging defenses in various court actions against him by NAB and the liquidator of MM Capital Gerry Collins McIvor it seems does not have any money left to employ legal representation.

The Piper Alderman route is the best way forward as we have been highlighting for quite some time...

http://www.couriermail.com.au/busin...p-art-collection/story-e6freqmx-1226338596337
 
Litigation up to the eyeballs

The defense and counterclaim may be a way of stalling the inevitable, just like the stalling and delusion with Equititrust... The Fat Lady has sung, its time to take your medicine. NAB and its lawyers have the medicine ready :)
 
NAB Court Action Against McIvor

NAB are quite clever in that they instructed their receiver Ferrier Hodgson and Lawyers King and Wood Mallesons to go after the furniture and paintings which may have been used to fund some second rate lawyers to delay the inevitble...

Any lawyers being offered furniture and art work in lieu of fees beware... :)

When its over its over...
 
Public Examination - Modern Day Public Stocks

The first time McIvor appears in court and is Publicly Examined will be a spectacle... Expect the public gallery to be packed... Its always good to see the investor's face to face. The "Old People" are still alive and kicking...
 
Artilce in yesterday's Gold Coast Bulletin (ie May 9) on page 31 regarding current and past receivers sales of properties either owned by MM or owned by associated companies.

I dont have a link for the article but the aricle was written by by Martin Rasini. If you email him at martin.rasini@goldcoast.com.au he might be able to provide a link.
 
FINANCIAL ACCOUNTS 30-6-09 - when was it insolvent ?

I am not an accountant. However, an area of concern to me which appears to warrant investigation is in the 30 June 2009 Financial Statements for the Equititrust Income Fund.
These accounts are still posted on the www.equititrust.com.au website. They are worth looking at.
Let me overview what I think happened in these accounts in relation to the subordinated units which Equititrust Limited supposedly took up in EIF.
In the Notes to the accounts (page 13), Note (i) in paragraph 4, there is a comment that the responsible entity made an investment of $40,032,773 in subordinated units. This certainly implies that Equititrust Limited injected cash into the EIF – does it not (that’s my reading of it)? However, if you look on page 9 in the Cash Flow Report, there is no reference in the cash in-flow that refers to this cash investment from the RE. There are new units issued to investors but no reference to a cash injection from the RE.
Nor does this Cash Flow Report highlight any redemption of units to the RE.
So let us dig further. On page 14 under Note 4, it is confusing.
In the section referring to subordinated investments it shows applications of $40,000,000 and transfers of $42,136,143. If you go further down the Note, the transfer amount is then revealed as being “On 1 July 2009 the responsible entity’s investment in the scheme of $42,136,143 was converted into subordinated units”. Now, this is not quite the same as what it says in Note 3(i) about the RE making an investment of $40,032,773. That figure is the closing balance as set out in Note 4 on page 14.
What appears to have happened is the following:
The RE applied for $40,300,000 of units in EIF. It “transferred” some loan account that it had to EIF (it did not invest cash) and that constituted its investment in subordinated units. At the same time (or during the same period) it actually withdrew from EIF (in the same year that redemptions were frozen against all investors) an amount of $42,403,370.
If Equititrust Limited (the RE) had not converted its “loan account” into a supposed investment in subordinated units and took out the same $42,403,730 in cash (which it did), it would have “nil” investment in the EIF.
So, my reading is that in the year ended 30 June 2009 – no new investment was made and, in fact, Equititrust Limited took out $42,403,370 in a period where the directors knew or ought to have known or were certainly forming the view that the EIF was illiquid.
Further, and interestingly, on 30 October 2008 (Note 3(i)) the RE decided to defer withdrawals. However, on 1 July 2009 the RE “converted” its loan account (or whatever it was) into subordinated units.
So, these elections were being made after the fund was already frozen and presumably after $42,403,370 was withdrawn by Equititrust Limited from EIF in cash.
The obvious question is: What was the loan account? Was it a true, bona fide cash investment? If it was, then much of what I raise above becomes irrelevant. However, if the loan constitutes “profits” where those profits were, at best, illusory, then to claim a subordinated investment in EIF at the same time as the RE pulled approximately $40M out of EIF is in the very least misleading.
An ordinary person reading these financial accounts would believe the RE had made a bona fide cash investment in the EIF during this very critical year of $40m. This would invoke confidence in even the most sceptical investor. However, the reality may well be that what actually occurred was that the RE took $40m out during this critical year, being the same year in which it elected to freeze redemptions to all other investors.
The wording in the Notes is vague at best. It also my view that if my suppositions are correct that the auditors would be considered culpable because they have allowed notations to be published referring to cash investment when such investment may have in fact been nothing more than capitalisation of supposed profits at the same time as substantial cash withdrawals were effected.
 
"Kostag", as I recall it, this is something I posted about some time ago.

They simply converted about $42.14m from ordinary units into subordinated units and then redeeemed about $42.3m in subordinated units - it seems this bypassed the need to redeem under ordinary (pro-rata) redemptions.

The money was shifted internally by way of unit type conversion (ordinary to subordinated). In other words, they got $42.3m out of the fund - free and away!
 
ASICK said:
"Kostag", as I recall it, this is something I posted about some time ago.

They simply converted about $42.14m from ordinary units into subordinated units and then redeeemed about $42.3m in subordinated units - it seems this bypassed the need to redeem under ordinary (pro-rata) redemptions.

The money was shifted internally by way of unit type conversion (ordinary to subordinated). In other words, they got $42.3m out of the fund - free and away!
Click to expand...

To expand on the deal - it's the old 'shell game' - about $40.3m was invested into the fund as a subordinated investment. About $42.14m was converted from ordinary units into subordinated units, and about $42.3m was redeemed out of the fund.

That's:-

$40.3m + $42.14m - $42.3m = $40.03m

In fact, the manager took out $2m more than it put in. It also shifted $40.3m out of a fund which was about to be frozen.

I don't know the train of events, but let's say that the fund didn't have much cash, then converting the units cost the fund $0.00 in real money - so, it could have been a case of $40.3m in and $42.3m out - within minutes? within a day? a week? only Equititrust Limited and the auditors know - with the added benefit of leaving $40.03m as a subordinated investment.

As I understand it, the balance of the subordinated investment would remain unaffected by the freezing of the fund at the later date, a very different outcome had the money been caught in the freeze as ordinary units which would have to be paid out on a pro-rata basis with all other investors.

The investment is accounted here:
Proceeds from issue of redeemable units – investors $53,493,674 on page 9 of the 30 June 2009 report. This amount included the $40.3m application made by the manager.

In the end, the subordinated investment was lost in any case.
 
Sorry to post another time, I didn't realise the fund was frozen earlier. This tightens the time frame for the "application" and "redemption" in/out from subordinated units.

"Kostag", it's hard to believe that a manager could make these transactions between 1 Jul 2008 and 31 October 2008 without an inkling of the forthcoming deferral of redemptions.

Now I remember about my previous posting some time ago, and saying something like "It's all about timing".

As posted above, the manager actually came off worse in the end by having the subordinated investment set off against fund losses in any event.
 
this needs very serious investigation.....

ASICK said:
Sorry to post another time, I didn't realise the fund was frozen earlier. This tightens the time frame for the "application" and "redemption" in/out from subordinated units.

"Kostag", it's hard to believe that a manager could make these transactions between 1 Jul 2008 and 31 October 2008 without an inkling of the forthcoming deferral of redemptions.

Now I remember about my previous posting some time ago, and saying something like "It's all about timing".

As posted above, the manager actually came off worse in the end by having the subordinated investment set off against fund losses in any event.
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www.insightequity.com.au ..... it could only happen on Gold Coast

Equititrust execs Damien Gywne and Wayne McIvor jump ship and start Insight Equity.... now look whos there... Craig 'buried' Treasure and Sid 'where's my' Super....unbeleivable.....
 
ASICK said:
As posted above, the manager actually came off worse in the end by having the subordinated investment set off against fund losses in any event.
Click to expand...

Not in any way having a go at you, ASICK, but what makes you think that? Or, to phrase that another way, I'll set this exercise for the 'reverse engineering class': "if you were a black and midnight soul, how would you have engineered the subordinated investment so it did not require ANY cash from you, but looked like $40million from an accounting perspective AND then allowed you to pull out $20,455,144 in real cash as payments for this subordinated investment in the following two years?"

You see, I've just begun to get REALLY interested in the Equititrust accounts and I ask this question because I think you'll find it's not just a 'what-if'? It's one thing to shear the fleece off the herd of investors, quite another to send a pack of werewolves through the middle of it.

On another angle, the Hall Chadwick report is the gift that keeps on giving. Endlessly interesting document, that. I see that on page 25 it contains a number of creditors claims against Equititrust Limited ( M.M. Holdings : $10,766,519; Westpac $25,447,309; BoQ $7,000,000) that they are arguing should be indemnified out of the Fund ie: out of Investors remaining monies. Apparently, the werewolves have not yet satiated their appetites! They do this on the basis that the Fund constitution indemnifies the Responsible Entity - that is Equititrust Limited - against any costs 'reasonably and properly incurred by it". That is where the Hall Chadwick quote stops and I think that is quite odd. The more normal way that this is written up in constitutions is 'reasonably and properly incurred by it in the carriage of its' duties as Responsible Entity of the Fund'. I strongly suspect that's what the constitution actually says, because Hall Chadwick alludes to this later in their report. As Hall Chadwick notes on page 25 of their report these creditor claims arise from guarantees and indemnities provided by Equititrust Limited to secure obligations of MM Holdings. Investors should ask how Equititrust providing sureties for one of McIvor's personal vehicles was in any way related to carrying out it's duties as a steward of the Investors' monies?

It couldn't possibly be the case that M M Holdings might even be attempting a triple-dip of fees with that contingent creditor claim. Could it?

Note also that on page 29 Hall Chadwick's Mr Albarran writes: "I have conducted investigations....and have identified offences that may have been committed by the directors of the Company. I propose to report the results of my findings to ASIC in accordance with Section 438D of the Act."

That Section of the Corps Act reads as follows:
"Reports by administrator
(1) If it appears to the administrator of a company under administration that:
(a) a past or present officer or employee, or a member, of the company may have been guilty of an offence in relation to the company; or
(b) a person who has taken part in the formation, promotion, administration, management or winding up of the company:
(i) may have misapplied or retained, or may have become liable or accountable for, money or property (in Australia or elsewhere) of the company; or
(ii) may have been guilty of negligence, default, breach of duty or breach of trust in relation to the company;

the administrator must:

(c) lodge a report about the matter as soon as practicable;"

Note that it's not optional - the Administrator "must lodge a report....as soon as praticable:.

Might be worth someone formally enquiring of Hall Chadwick just WHEN they lodged that report. They wrote that on 12th April, so you'd assume that they'd had plenty of time to meet that requirement. Or, if they have not, why not ask ASIC their view on whether Hall Chadwick has complied with the Act?
 
Serious Matters

As Brethren states the breaches of the Corporations Law identified by the Administraitor are very serious matters which need to be investigated. The games need to stop and answers given to investors as to what the status is in terms reporting the matter to ASIC.

In time other authorities will also have to get involved... McIvor ran the show and it looks like buck's literally stop with him.
 
Good morning "Brethren", I'm speaking only to the act of converting the ordinary units to subordinated units and nothing more.

I'm a little surprised it was as high as $40m given that the minimum stated in the PDS was $20m:-

"7.5 Capital Warranty Investment

Equititrust holds a Capital Warranty Investment in the Fund. The Capital Warranty Investment is the amount invested by Equititrust as a subordinated investment. This is a minimum sum of $20 million with no maximum."
http://equititrust.com.au/Pdfs/EIF_Pds_200902.pdf

As well as wondering who the manager converted ordinary units to subordinated units, I was also wondering why Equititrust Limited didn't trim the subordinated investment down to $20m, and then I found this pearl:-

http://equititrust.com.au/Pdfs/FinReport062010.pdf

"Interests of the Responsible Entity - The Responsible Entity entered into an investment agreement dated 18 February 2009 to maintain a minimum investment in Equititrust Income Fund of $40,000,000. The Responsible Entity has the discretion to reduce the minimum investment to $20,000,000 provided it has the approval of the bank credit line providers. The investment is subordinated to the rights of other investors. The subordination affords further protection to investors and assists the Scheme’s liquidity.

The constitution of the Scheme was amended on 29 January 2009 to reflect the above subordination and also alters the manner of income distributions. Previously the Responsible Entity’s investment in the Scheme was at normal investor rates, terms and conditions and the Responsible Entity received separately an interest warranty fee after the payment of investor warranted return and any associated costs or outlays of the Scheme.

Under the revised constitution income distributions during the year from the Scheme were conducted in the following order of priority:

 expenses of the Scheme;
 benchmark distribution return to Members;
 payment of management fees of the Responsible Entity;
 distribution of remaining surplus to be paid to the Responsible Entity as a return on Responsible Entity’s subordinated units.

The changes in the constitution were made retrospectively with effect from 1 July 2008 and the Responsible Entity’s interest has been presented in the financial statements on this basis. The following fees and returns were paid to Equititrust Limited out of Scheme property during the financial year:

2009 2008

Interest warranty fees - 2008 $21,072,761
Management fees - 2009 $5,494,519 -
Return on Responsible Entity’s subordinated investment - 2009 $9,913,410 -
Total fees and returns - 2009 $15,407,929 - 2008 $21,072,761

The fees and returns paid in 2009 are represented by the surplus of receipts from mortgage lending after payment of the Scheme investors’ warranted or benchmark returns and expenses of the Scheme. Management fees were calculated at 1.5% of funds under management.

Associates of the Responsible Entity or its directors had 40,904,625 subordinated investment units in the Scheme at 30 June 2009. At 30 June 2008 associates of the Responsible Entity or its directors had 42,136,143 investment units in the Scheme on normal terms and conditions." (emphasis added)

Among other things the constitutional amemdments (unilateral? or voted by members?) changed the return on the subordinated investment to skim the fund of excesses - and of course, up come the questions about whether the fund really was worth its stated value at that time (and later).

Of course, we shouldn't forget the $13,228,929 paid to Equititrust & Ors by way of skimming the surplus out of the fund until 31 December 2010.

I can't believe that investors haven't received an audited financial statement since 30 June 2010 - ASIC should be ashamed of itself. Investors are entitled to be told the truth.

I wonder if permisson was sought from Bank Credit Line Providers to reduce the subordinated investment to $20m?
 
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