FMF [First Mortgage Fund]

[fleetz]

http://www.asic.gov.au/asic/asic.nsf/byheadline/09-214AD+ASIC+commences+civil+proceedings+against+former+officers+of+MFS+Group?openDocument

"...

In taking this action,

ASIC is addressing

the core obligations

of a responsible entity

and its directors

and officers

to operate the fund

with care

and diligence,

and in the best interest of the fund’s members. ..."

Surely ASIC are looking into City Pacfic's previous conduct now. They would have to have a mountain of complaints. Seems that when the snarring company disappears that ASIC grows balls and takes action!

I know you have been a very active provider of quality information and lots of questions that our belove corporate watchdog should be looking into.

Not sure what one has to do to get there attention....i wrote 3 emails to them and got patronising lip service in return.

What are the chances of them stepping up to the plate albeit belatedly??

Or is a class action the only way like others are doing? Surely there would be plenty for the lawyers to get their hooks into!!

If there were a class action I would happily throws a couple of thousand in...

Fleetz

 

[mellifuous]

Life was never meant to be easy.

 

[mellifuous]

Surely ASIC are looking into City Pacfic's previous conduct now. They would have to have a mountain of complaints. Seems that when the snarring company disappears that ASIC grows balls and takes action!

I know you have been a very active provider of quality information and lots of questions that our belove corporate watchdog should be looking into.

Not sure what one has to do to get there attention....i wrote 3 emails to them and got patronising lip service in return.

What are the chances of them stepping up to the plate albeit belatedly??

Or is a class action the only way like others are doing? Surely there would be plenty for the lawyers to get their hooks into!!

If there were a class action I would happily throws a couple of thousand in...

Fleetz

I'd be stunned if a unit holder-directed 'class action' goes ahead - I'd be there too if there's good advice about liability together with a good chance of recovery.

I think ASIC just reacted very slowly and now there's so much to do that they can't keep track of it all.

Sadly, this loss to Jodie Rich will set them back a long way - I met Jodie once in my office and I'm stunned to see just where we each ended up.

Let's hope ASIC comes out fighting after its 'two black eyes and broken nose'.

 

[mellifuous]

FROM THE LIPS OF THE REGULATOR
http://www.theage.com.au/business/fees-find-foe-but-no-giant-steps-20091124-j9e8.html

"... As the Australian Securities and Investments Commission noted in its submission: "Remuneration based on the amount of funds under advice can also create conflicts of interest. Advisers who are remunerated by reference to funds under advice have an interest in selling investment products to their clients and encouraging their clients to borrow to invest."

This sounds a little like a certain brainchild of Emmanuel Cassimatis up Townsville way called Storm Financial. ..." (emphasis added)

And, sadly for investors in the FMF, it sounds EXACTLY what City Pacific Limited did - they couldn't help themselves borrowing to increase the 'funds under advice (management)' ("FUM").

What is interesting is that it's ASIC that is stating the obvious.

Apart from self-interest and poor management, debt was the biggest killer of the highly impaired funds.

 

[caroljace]

Mellifuous, thanks for taking the trouble to compose and send the letter featured on moneymajik. There are many of us out here who know what they want to say but do not have the expertise. I particularly feel annoyed with regard to tax paid on "dividends" (which of course were our principal in the latter stages) and I had the double whammy were I paid the tax but did not even get that portion of my principal as it was "reinvested"!

I have struggled through the accounts as presented on BTs website and whilst I have some meagre book keeping knowledge the processes used are beyond my comprehension. One thing that comes immediately to mind is the constant use of the words "invested in first and second mortgages" since when was the PDS changed to include "second mortgages". The PDS I read before I invested did not include these words.

Also, CP paid themselves $24+ million. This was based on what! Certainly the funds under management were nowhere near that in December and most probably were nowhere near that on 1st July, 2008. It is more than obvious that management kept the assets artifically high so that they could continue to milk as much as they could. Isn't it interesting that the auditors (the same ones as before) are now predicting gloom and doom for the remaining assets of the fund but they were very gung ho when CP were at the helm!
I can't see where they every pressed CP to obtain more up to date valuations.
I can understand the need for a PDS when people are chosing to invest but what is the point of a PDS if the managers do not adhere to it in the normal course of business. We have been deceived and lied to over and over again.

It will be interesting to see what the real asset values are when BT release this information.

 

[mellifuous]

AN ANNUAL (OR BI-ANNUAL) GENERAL MEETING
FOR MANAGING FUNDS (LISTED/UNLISTED)

A very astute unit holder has come up with a very good idea - an annual general meeting for managed funds.

Companies have them - managed funds don't.

Write to the Hon Chris Bowen MP and request that the Corporations Act be amended to incorporate annual (or bi-annual) general meetings for managed funds.

A great idea.

http://www.chrisbowen.net/contact-chris-bowen/home.do

 

[mellifuous]

Mellifuous, thanks for taking the trouble to compose and send the letter featured on moneymajik. There are many of us out here who know what they want to say but do not have the expertise. I particularly feel annoyed with regard to tax paid on "dividends" (which of course were our principal in the latter stages) and I had the double whammy were I paid the tax but did not even get that portion of my principal as it was "reinvested"!

I have struggled through the accounts as presented on BTs website and whilst I have some meagre book keeping knowledge the processes used are beyond my comprehension. One thing that comes immediately to mind is the constant use of the words "invested in first and second mortgages" since when was the PDS changed to include "second mortgages". The PDS I read before I invested did not include these words.

Also, CP paid themselves $24+ million. This was based on what! Certainly the funds under management were nowhere near that in December and most probably were nowhere near that on 1st July, 2008. It is more than obvious that management kept the assets artifically high so that they could continue to milk as much as they could. Isn't it interesting that the auditors (the same ones as before) are now predicting gloom and doom for the remaining assets of the fund but they were very gung ho when CP were at the helm!
I can't see where they every pressed CP to obtain more up to date valuations.
I can understand the need for a PDS when people are chosing to invest but what is the point of a PDS if the managers do not adhere to it in the normal course of business. We have been deceived and lied to over and over again.

It will be interesting to see what the real asset values are when BT release this information.

Hi Carol,

I think that we as investors find it difficult to face economic truths (re: Paul Clitheroe in the below referenced citation)- I remember when Michael West published articles expressing negative sentiments about the FMF - I remember saying at the time just how stupid it was of M.W. to put our investments at risk.

However, thinking back, if everyone would have listened to M.W. in August 2007 then most of our investment would have been secure.
http://www.theaustralian.news.com.au/story/0,25197,22318180-16942,00.html

Here is an interesting audio clip about Paul Clitheroe (on ABC Nightline) wherein he states (among other things) that 'investors find it difficult to face economic truths'.
http://www.abc.net.au/nightlife/podcast.htm

I cannot understand why B/T doesn't fully impair the second mortgages at Martha Cove.

I cannot understand why KPMG say no more than a 'material uncertainly' exists about those loans.

Why doesn't KPMG come out and say the loans should be impaired - is KPMG working in our best interests by not being forthright about the realities of the fund?

Yes, the tax thing is a big ripoff - the government is happy to grab the tax from us, yet does not to stop these guys over-valuing funds in order to keep the FUM high - City Pacific is a great example.

ASIC should go back to December 2007 and revalue the fund and make the necessary accounting adjustments to bring justice to investors in the FMF.

It really is a sham - from City to Canberra - one right royal stuff-up.

 

[mellifuous]

AN ANNUAL (OR BI-ANNUAL) GENERAL MEETING
FOR MANAGING FUNDS (LISTED/UNLISTED)

A very astute unit holder has come up with a very good idea - an annual general meeting for managed funds.

Companies have them - managed funds don't.

Write to the Hon Chris Bowen MP and request that the Corporations Act be amended to incorporate annual (or bi-annual) general meetings for managed funds.

A great idea.

http://www.chrisbowen.net/contact-chris-bowen/home.do

**** CORRECTION ****

The heading should have been:-

AN ANNUAL (OR BI-ANNUAL) GENERAL MEETING
FOR MANAGED FUNDS (LISTED/UNLISTED)

 

[mellifuous]

HOT NEWS THAT WE'LL READ AND WEEP

2009 FMF Compliance Report

http://www.balmaintrilogy.com.au/pdf/Compliance%20Plan%20Audit%20Report-PFMF%20%28Year%20End%20June%202009%29.pdf

(from B/T's site)

KPMG finds City Pacific in serious breach

 

[mellifuous]

There's proof of self-interest - a breach of the law - and where the hell was ASIC ..

City's self-interested actions were complained of month after month and nothing was done.

 

[mellifuous]

 

[k.smith]

City Pacific told us this....

http://news.iguana2.com/bspectator/ASX/CIY/198716
"......City Pacific and the FMF are separate entities and the assets of the
FMF are held separate from the assets of City Pacific by the Public
Trustee of Queensland as custodian of the FMF......"

"...........FMF investor funds are not able to be used by City Pacific to operate
its business (the operations of the FMF are separate to the operations
of City Pacific)......."

 

[mellifuous]

City Pacific told us this....

http://news.iguana2.com/bspectator/ASX/CIY/198716
"......City Pacific and the FMF are separate entities and the assets of the
FMF are held separate from the assets of City Pacific by the Public
Trustee of Queensland as custodian of the FMF......"

"...........FMF investor funds are not able to be used by City Pacific to operate
its business (the operations of the FMF are separate to the operations
of City Pacific)......."

City Pacific Fund Update - January / March 2008, page 3
http://news.iguana2.com/bspectator/ASX/CIY/198716

Yes, the spiel goes on (in part):-

"... The FMF had a bank facility of $240 million. Repayment of which has already commenced and is aligned with current cash flows of the fund. ..."

However, in a document sent to unit holders on 13 October 2008, City disclosed (among other things) this graph:-

Why wasn't City picked up on the statement that the repayments had '... already commenced and is aligned with current cash flows of the fund ..."?

The Fund Update was released on the 8 April 2009 (see the 'document properties' by right clicking on the .pdf document when you download it).

On the graph you will see the evidence as to why the above referenced statement is clearly misleading and incorrect - there was no cash flow - on the 8 April 2009 there were nearly $400m in defaulters (which we didn't find out about until 13 October 2008.)
http://www.moneymagik.com/letter_13_oct_08.pdf

Further, one wonders why KPMG accepted $50m of impairments as at 30 June 2008, when the amount of defaulters up until 30 June 2008 was around $500m.

Oh! how blind trust has made us broke.

How did the board of City Pacific allow such a statement to be made?

Why did the CBA allow it?

Why didn't KPMG pick it up?

How about ASIC?

How about the PTQ?

We deserve an explanation & those at fault should pay.

 

[seamisty]

City Pacific told us this....

http://news.iguana2.com/bspectator/ASX/CIY/198716
"......City Pacific and the FMF are separate entities and the assets of the
FMF are held separate from the assets of City Pacific by the Public
Trustee of Queensland as custodian of the FMF......"

"...........FMF investor funds are not able to be used by City Pacific to operate
its business (the operations of the FMF are separate to the operations
of City Pacific)......."

All too familiar k.smith, stuff senate enquiries, there is enough evidence of misconduct of monumental proportions to warrant a full forensic investigation in relation to the WELLINGTON CAPITAL PIF and the FMF on their own!! And while the :fan our respective RE's are busy :hide: and :couch and our unit values are :flush:!!!! We can only hope the day of reckoning will see those responsible suitablly punished! :behead::whip:bbat::rocketwho:badass::samurai:: Seamisty

 

[mellifuous]

City Pacific made the statement in the preceding post when it was implementing its 'idiotic fundamentals' (that is, making advances to defaulters in a downwards heading market, and not pushing for payment from borrowers) - see item (4) on page 1 of this document sent to unit holders on 19 August 2008:-
http://moneymagik.com/q_and_q_19_08_2008.pdf

City also continued to pay distributions.

The likelihood of repayment of the bank on schedule would have been non-existent.

City just kept the whole thing up and doing with the help of the CBA without any regard for unit holders' interests.

In the past I opposed writing to the CBA, but on reflection, it was the right thing to do. The CBA should not have increased the facility in September 2007 and should not have continued to support City's folly.

Now we're in the position we're in, the CBA should give our fund special consideration and help us though this difficult time

 

[mellifuous]

Seamisty

I have a feeling that the managers, who deserve it, will get the :behead:

And we get some satisfaction for :chimney:

Time will tell.

 

[mellifuous]

City Pacific Fund Update - January / March 2008, page 3
http://news.iguana2.com/bspectator/ASX/CIY/198716

Yes, the spiel goes on (in part):-

"... The FMF had a bank facility of $240 million. Repayment of which has already commenced and is aligned with current cash flows of the fund. ..."

However, in a document sent to unit holders on 13 October 2008, City disclosed (among other things) this graph:-

Why wasn't City picked up on the statement that the repayments had '... already commenced and is aligned with current cash flows of the fund ..."?

The Fund Update was released on the 8 April 2008 (see the 'document properties' by right clicking on the .pdf document when you download it).

On the graph you will see the evidence as to why the above referenced statement is clearly misleading and incorrect - there was no cash flow - on the 8 April 2009 there were nearly $400m in defaulters (which we didn't find out about until 13 October 2008.)
http://www.moneymagik.com/letter_13_oct_08.pdf

Further, one wonders why KPMG accepted $50m of impairments as at 30 June 2008, when the amount of defaulters up until 30 June 2008 was around $500m.

Oh! how blind trust has made us broke.

How did the board of City Pacific allow such a statement to be made?

Why did the CBA allow it?

Why didn't KPMG pick it up?

How about ASIC?

How about the PTQ?

We deserve an explanation & those at fault should pay.

Another of my famous errors - the fund update was released in 2008, not 2009. - I have now amended the quote to reflect the proper year.

My apologizes.

 

[mellifuous]

http://www.zibb.com/article/5695251/Marina+Cove+mired+in+debt

"... Marina Cove owes $A129 million to the Pacific First Mortgage Fund and $A71.8 million to Commonwealth Bank of Australia. ..."

It used to be $100m to City, $100m to the FMF, and $100m to the CBA --- oh! how times have changed.

As I understand it, B/T hasn't impaired second mortgage loans down at Martha Cove.

No wonder KPMG expresses that a 'material uncertainly' exists in regard to the fund's loans, especially second mortgage loans.

From the $36m the fund lent Marina Cove Pty. Ltd. (100% owned by CP1, a relative of City), the fund took on board second mortgage loans.

I stated at the time, that if the first mortgage loans had no chance of recovering, then what is the use of second mortgage loans.

I somehow think KPMG is being as generous to B/T as it was City when it was the manager.

Where is the independent auditor?

Where is ASIC?

 

[mellifuous]

For once, a little support from the media:-

http://www.smh.com.au/business/senate-probe-bodes-badly-for-asic-20091129-jyy1.html

"... The role of ASIC also needs to be examined. In many of the big collapses, ASIC was warned well in advance of concerning issues but appears to have done nothing, and in smaller cases, when a company was put into administration, it also turned a blind eye. ..."

"... Meanwhile, the carcass is being ripped apart, and if ASIC eventually decides to investigate, the case will be cold and the damage already done. ..."

The descriptor 'undertaker' sits well with ASIC - as

The US have their problems too - the SEC is not unlike ASIC:-

http://curiouscapitalist.blogs.time.com/2008/12/18/harry-markopolos-really-did-have-the-goods-on-bernie-madoff/

Even accusations of 'turning a blind eye':-

"... After the revelation of a massive fraud scheme, a former government investigator has accused government law enforcement officials of repeatedly turning a blind eye to Wall Street crime and, in doing so, allowing the foundational trust of the global financial system to crumble. ..."

The following in an (edited) email I sent to Ruth Williams at businessday on 10 August 2009 in relation to her article on 8 August 2009 http://www.theage.com.au/business/asic-calls-for-a-debate-on-its-role-20090807-ed17.html

As expected, I didn't get a reply.

http://www.watchdog.asic.gov.au/fido/fido.nsf/byheadline/Complaining+about+companies+or+people+FIDO+version?openDocument

ASIC's website states (in part) "... If you cannot resolve the problem with them, or if your complaint is about misconduct or illegal activity by a company or person, then ASIC may be one of a number of government and non-government organizations able to help you. ..."

I think that ASIC confuses investors' expectations that "ASIC will investigate matters of concern and will act on complaints", or as it holds out that it will. However, when many complaints were made to ASIC about City Pacific, ASIC replied back, that investors' losses related to "investors' prudential choices" rather than taking our complaints seriously.

Clearly, Mr. D'Aloisio thinks that "... At the end of the day, we (ASIC) are responsible for oversight and as the supervisor of the markets - we (ASIC) are not a guarantor of last resort. ...". This excerpt from your article clearly shows the dichotomy of views of ASIC's role with respect to regulation viz-a-viz the regulator and investors: Investors don't see ASIC as the 'guarantor' of last resort, I think it's more that ASIC thinks that investors see ASIC in that role.

This following excerpt discloses ASIC's lack of understanding of the market - "... we think the efficiency of the market will deliver such benefits that offsets the need for regulation ...". Could it be that ASIC doesn't believe that there are bad guys out there who are willing to fill their bags of gold at investors' expense?

Mr. D'Aloisio stated (in part) "... Because of what we've seen and the losses to investors, should we be turning the dial to more protection, and taking the risk that that might make the markets less efficient, and could marginally add to cost [of] capital? ...". I just wonder which planet he must have been on when he made this statement? Clearly ASIC had the 'dial' set where it expected investors losses in favour of an 'efficient market', so it should have been of no surprise to them to see the failures of recent months. Investors should be aghast that such a statement was made at all - I'd guess that it's not what they would have expected to hear.

"... What else could we have done? What should we have done? What did we miss?'' ...". Well, I think that ASIC could have properly acted on investor's complaints and given proper and timely feedback with respect to those complaints. ASIC should have been proactive and acted at the soonest possible opportunity to protect investors as it promised as Fido at www.watchdog.asic.gov.au. ASIC should have looked at the substance of a company's behavior (what is was really doing) rather than its 'form' (that is, that the right forms are filled out etc.)

It is interesting to note the following two transcripts from an interview on 60 minutes (USA) by Mr. Harry Markopolous. Mr. Markopolous tried on 7 occasions between 2000 and 2008 to have the U.S. S.E.C. investigate Bernie Madoff.

(1) http://www.youtube.com/watch?v=E_AT...ymagik.com/others.php&feature=player_embedded

Q. So, if they're not trained at securities work, then what are they trained at? --- A. How to look at pieces of paper that the securities laws require. They can check every piece of paper perfectly and find misdemeanors and they'll miss all the financial felonies that are occurring because they never look there. Even when pointed to fraud, they're incapable of finding fraud.

(2) http://www.youtube.com/watch?v=-g3V...ymagik.com/others.php&feature=player_embedded

Q. So he turned himself in before anyone in authority began a serious investigation? A. That's typically how the SEC does it. They come in after the crime has been committed, they toe-tag the victims, count the bodies, and try to find out who the crooks were after the fact, which does none of us any good.

I consider that Australian investors' experiences have not deviated from U.S. investors' experiences . We have each been badly let down by the very ones in which we placed so much of our trust. No one expected that the regulators would be no more than 'corporate undertakers'.

In my view, it has been (a) ASIC's defective view that investors lose money based solely on their respective prudential choices rather than attempting to believe that there are really bad guys out there, together with (b) ASIC's obsession for 'form' over 'substance' that has caused serious damage to both investors' wealth and investors' confidence in the Australian financial markets.

 

[mellifuous]

THIS IS VERY SERIOUS BUSINESS

and my guess is that the star witness for the fund's defence will be Philip Sullivan himself.

"... The relationship flourished with new facilities obtained and the terms of existing loan agreements altered in the normal course of business. But Mr Gore alleges City Pacific approached him about June 2007 with the news that City Pacific 'was, or was about to be, in default' of loans with the Commonwealth Bank and that it 'required access to liquid funds in order to remain solvent'.

Mr Gore alleges he then took steps to refinance existing loans and sell assets to assist City Pacific at the behest of then City Pacific chief executive Phil Sullivan and current director Steve McCormick. He alleges this was done despite a letter being received from City Pacific in February last year stating that Atkinson Gore Group and AGG Treetops were not in default on any loans.

He further alleges City Pacific said it would refrain from appointing receivers to four of Mr Gore's companies 'in the event of any default' of loans that had been forwarded by City Pacific. Mr Gore alleges he was 'induced' by City Pacific to refinance loans -- some were cheaper than rates offered by City Pacific; others were as high as 48 per cent -- and sell assets at a 'less favourable' price. Receivers were appointed to the Gore companies on February 12.

Mr Gore claims that, according to the terms of the deed, the appointment of receivers is void. He is suing the receivers for 'damages in trespass'. The action against City Pacific alleges 'misleading and deceptive' conduct. Mr Gore is claiming $300 million in damages, citing his inability to 'finalise negotiation with Mayfair Ltd (Lord Ashcroft's company) with respect to refinancing each of the facilities with City Pacific'.

He is also claiming loss of opportunity. The parties also entered into a deed of settlement, which is alleged was to insure Mr Gore's companies against any recovery action by City Pacific until March 31 this year. ..."

(goldcoast.com.au)
http://www.goldcoast.com.au/article/2009/03
/23/62171_gold-coast-business.html

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http://www.goldcoast.com.au/article/2009/11/19/159961_gold-coast-business.html

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http://www.goldcoast.com.au/article/2009/09/11/135995_gold-coast-business.html

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http://www.news.com.au/couriermail/story/0,23739,25310050-3122,00.html