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LM Investment Management - Lack of confidence

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Re: LM Investment Management - court applications


Well, I think Trilogy are still after FMIF and other funds. FTI are having some sort of 'proceedings' or 'hearing' today and I know no more than that. But I suspect Trilogy is not the flavour of the moment and the news will not be to their benefit - just a guess. But knowing them, they won't give up easily - it is not in their nature.
 
Great News

http://news.silobreaker.com/lm-administrator-slams-rival-5_2266728265307652111
NOTE: Limited assess on this link.

"Despite backing by class action law firm Piper Alderman, the suitability of Trilogy Capital as potential new manager of the funds of the collapsed LM Investment Management has been questioned by administrator FTI Consulting. The latter will also collaborate with the Australian Securities & Investments Commission..."

Well, there we go, Piper Alderman supported Trilogy - of course, it's unlikely there'll be any need for Piper Alderman now there's a receiver in place - no need for a class action. Oh dear .. and no need for Trilogy.

Great news !!!

(more documents now:
http://moneymagik.com/lm_investment_management.php)
 
Thanks ASICK. Is there no end to the byzantine machinations here .. ? I am naive, but I don't fully understand why Piper Alderman would be pushing Trilogy, and how that ties in to the class action lawsuit they are exploring ..? Any illumination gratefully received!

Thanks and regards.
 
"Ants Before Rain"


Actually Taja, it's really quite simple, and in its simplest state, it's all about $$$$$.

There are generally three types of legal costs:
1. THE LOWEST - The rate at which a specific court rates costs - the winning party may recover costs, but not those actually paid, rather those as prescribed by the court. It's unlikely the winner will recover costs actually paid since the court scale is less than the prevailing market costs.
2. THE NORMAL - The rate at which work is normally charged out - these are at the card/market rate as set out by the firm, or as otherwise agreed to between the firm and the client (win/lose).
3a. THE HIGHEST - The rate work is done 'on spec' for individuals or small groups - there's risk here for the lawyer, so the rate goes up - if between a lawyer and client, the lawyer might seek a "cut" of the action - say, 30% of the damages awarded. After all, there's nothing in for the lawyer if the case is lost. In fact, the lawyer might be required to pay the other side's costs. The law firm covers all costs.
3b. THE HIGHEST - Class Actions - actions which the law firm is unable to fund. Typically, the lawyers (solicitors/barristers) will agree to a REALLY BIG charge out rate and a deal is struck between the lawyers, the clients, and a litigation funder. In class actions, the lawyers may not get paid for anything other than "out of pocket" expenses unless there's a win - it depends on the deal between the funder and the lawyers. Members of a class may be required to front up with some $$$$ for investigations.

When it all boils down, it's all about $$$$, business.

In my view, Piper Alderman are "ambulance chasers" - I might be naïve about this too, but I've never heard of a law firm seeking proxies from creditors as Piper Alderman did with LM's creditors. Then we have Piper Alderman backing Trilogy to become manager. To my mind, these actions show a lot of self-interest by Piper Alderman. I mean, there's no case, and there's no assurance of a bag of loot to gain, and just look at Piper Alderman's behaviour!

Take for example the new website:
http://www.investorsactiongroup.com.au/?page_id=11 - read the "about":
http://www.investorsactiongroup.com.au/?page_id=2

and there it is, a group of Sydney barristers - sure, ask them about a class action. They're getting in on the ground floor. That's business. And we have the likes of the PIF Action group spruiking that website. And Piper Alderman's out there too, tying to ensure they get part of the action.

Piper Alderman have been spruiking a class action with Equititrust IF members since 13 April 2011:
http://moneymagik.com/lm_investment_management.php
and they still spruik today. And look at what's happening there:
http://moneymagik.com/Liquidators Reports - 20130325 - Circular to Investors.pdf

I wonder what No Trust (as an EIF investor) thinks of his not-so-favourite entity teaming up with Piper Alderman?

I wonder whether Piper Alderman took a look at Trilogy's history?
http://moneymagik.com/three_part_trilogy_funds_management_tragedy.php

To my thinking, it's unlikely that a fund manager with a good reputation would look to manage the LM funds as there are today - that's where Trilogy comes in, and that's where Piper Alderman probably has to follow.

Fund managers are only paid to manage - masses of legal activity sap off profits. From a profit perspective, it'd make sense for a fund manager to do a deal with a class action lawyer - after all, the 30% of the take isn't coming out of the manager's pocket, it's coming out of any award to the fund (that is, to investors).

In this way, the manager's profit from its management fees is protected. Nice work if you can get it.

Administrators and receivers all charge out at a card (or agreed to) rate for work, so the more work they get, the more money they make - and boy, they're not cheap, but they'll probably work out a much better deal for investors viz-a-viz a slice of the action to class actions lawyers backed by a litigation funder.

I think it's important to get to grips that it's not about investors, it's about $$$$.

The least amount of work managers have to do, the more profit they make. Expect class action. Don't be surprised that Piper Alderman backed Trilogy.

The more work administrators/receivers have to do, the more profit they make. Class actions are unlikely. Don't be surprised that FTI shuns Trilogy and Piper Alderman.

Trilogy spruiked a class action for three years, and in the end sued by way of (1) up to $1m from the fund, and (2) work by Maurice Blackburn on spec (terms not disclosed to members): http://www.moneymagik.com/litigation.php

and IMF? well look at the crap that remains of its website: http://www.imf.com.au/cases.asp?ID=110

After paying $2m to fund the public examination, IMF did NOT fund the current litigation - IMF pulled out long ago: http://www.moneymagik.com/imf_litigation.mp3
(Rodger Bacon speaks to a fund investor - November 2012)

oh! and for the record, Trilogy has NOT disclosed to PFMF members that "it's not looking good"!

How would I describe Piper Alderman's behaviour in these funds?
"Like ants before rain"
 
Maximizing Outcomes

To my mind, a damaged fund with a manager (responsible entity) on an earner calculated by reference to funds under management (which includes debt) together with a lawyer/s on 'spec' or otherwise funded is the worst possible situation investors could possibly find themselves. However, in saying that, investors should be prepared to see some of the recovered monies directed to litigation - for what's it's worth, I think such a spend is a good one indeed.

Michael West reported (in part), "City Pacific, whose once-$1 billion mortgage fund was frozen in March 2008, now limps along under new managers Balmain Trilogy. Half a billion in losses shared by its 10,000 investors."
http://www.smh.com.au/business/the-...-management-20120517-1ysnv.html#ixzz2QTduutG0

Of course, given his bias, he didn't report the fact that Trilogy not only lost about 56% of the fund's value since taking it over, but also the fact that Trilogy's earn has been heading to $20m with only $0.0875/unit (*886m units = $77.5m) to investors in that same period! (With only $0.0075/unit likely for the period 1 July 2012 - 30 June 2013 - next payment? Maybe in the last quarter of 2013).

Neither did he report that Trilogy is going to spend about $1m of investors money pursing certain ex-Citypac directors when IMF would not. Of course, no enquiry by Mr. West into the deal Trilogy did with Maurice Blackburn to bring the proceeding that IMF would not.

That's all very interesting when one reads this portion of a previous report from Mr. West:
"Further, funders are unlikely to bring frivolous cases, or cases coloured by vengeance or other suspect motives, as they are more likely to be governed by a logical view of success."
http://www.smh.com.au/business/open-season-for-litigation-funders-20121016-27nxu.html#ixzz2QTfKnukN

It also seems to me that the luminaries in these management companies tend to make the issues very, very personal - as Mr. West seems to do. I think that's a problem too, because managers have an ability to bring actions which, while such actions are unlikely to recover $$$ for investors, those same actions serve as a vehicle for vengeance.

I maintain my view that an independent receiver appointed to each fund will protect each fund's interests with the potential for the greatest amount recovered for the members of those funds.

I'm pleased that the court appointed KordaMentha and Calibre Capital independently to the LM MPF - just as ASIC was slack in supporting FTI as receiver for the LM MPF, it was also slack in appointing Citypac's liquidator as the liquidator of the Citypac Income fund.

As least in the matter of the LM MPF, the court has seen the merit of independent control of entities which are clearly conflicted.
 
Why Class Actions?

If members of a managed fund/scheme wish to bring proceedings against an entity, say, an auditor, then there's a number of ways to bring such an action:

1. a member may bring an action on his/her/its own behalf - in many cases this is unlikely because of the risk of exposed assets and the upfront cost of the action itself.
2. members may group together in a class, and then bring the action. A funder is generally required because members do not want to expose already diminished assets and perhaps because they can't apportion the cost of the action between themselves. Lawyers and funders will need to group as many members as possible into the class to ensure the commercial viability of the action.
3. the scheme itself is able to bring the action using the fund's resources (best option, the scheme takes all the risk, and all of any rewards)
4. the scheme may bring an action using a litigation funder (may give up 30% of any awards but there's no exposure to loss). Lawyers and funders will need to ensure the commercial viability of the action.

In my view, in order of preference, it's best to:

1. bring an action by the scheme, using the scheme's resources.
2. bring an action by the scheme, using a litigation funder.
3. bring a class action, using members' own money.
4. bring a class action, using a litigation funder.
5. bring an individual action.

If an action is too risky for a funder, it'll probably be too risky anyway:
http://www.moneymagik.com/litigation.php

If a funder is willing to fund, then the scheme should be willing to take the risk by itself.
 
ASICK, it's slowly sinking in - many thanks for the time and effort in your detailed response.
 
"A Brave New World"


"Piper Alderman has filed an application to replace the responsible entity of the LM First Mortgage Income Fund and expects that application to be heard shortly."

Yes, "ambulance chasing" has taken on a new face. I just couldn't imagine Slater & Gordon doing likewise - but - will they be forced to do likewise given that lawyers such as Piper Alderman are going to the "scene of the accident" (so to speak) to be first in line?

I confess I was surprised at what's happened. It showing me that avarice is quite a powerful driving force.

I also confess that I'm for independence on both sides, "This will ensure that the same party is not acting on both sides of the fence (a factor that the judge in the Performance Fund matter before the Court on Friday thought was determinative (amongst other things) in appointing a new trustee to the Performance Fund)."

However, having said that, the same law firm is driving the whole show - the self-interest is mind-boggling.

I find it difficult to believe that such effort has been exerted by Piper Alderman merely to get a job of work out of getting its preferred entity in place - the real money's in class actions or alternatively, in getting "part of the action", a percentage - a BIG percentage, like a base of 30% of the take, a job on spec.

If there's $$$ in these funds, then why go the class action/spec path? ah .. let's see which way they go.

I take a stab at the future: if there's litigation, it's probably going to go down the class action path with Piper Alderman in the box seat. (my prediction)

In the PFMF, Trilogy done a deal with Maurice Blackburn and still intends to spend $1m of PFMF money ($500k spent by early 2013). While Balmain Trilogy's Griffin spruiked the 30% cut to IMF and the benefits of same, now that IMF's pulled out, no similar disclosure's been made about the deal struck with Maurice Blackburn. A BIG % (say, 30%) could still be in the offering, but just not to IMF.
http://www.moneymagik.com/litigation.php

Back to LM: I don't believe that either of KordaMentha or Trilogy (or any other entity) are compelled to disclose deals they make with lawyers on behalf of the punters locked up in these funds, but there's no harm in asking them.

Bottom line, investors stand to hand over 30% to a funder and the lawyers if a class action or spec deal is struck - much more $$$$ than if the fund brings an action on its own behalf.

Of course, all this is subject to the existence of a cause of action against the directors' indemnity insurance, the auditor, or valuers - but I wouldn't be expecting anything from the directors themselves, as I understand it, the juicy exposures will probably already be well and truly gone.

Don't be surprised to see filings for bankruptcy - and remember, creditors can't snap up $$$$$ snugly tucked away in super funds.

It's up to FTI to put on its "thinking cap" - but fronting up with a viable replacement in the LMFMIF might be a good move. Some knowledge of Trilogy's past performances might be of value:
http://moneymagik.com/three_part_trilogy_funds_management_tragedy.php

Yes, it's a Brave New World.
 
Taja said:
ASICK, it's slowly sinking in - many thanks for the time and effort in your detailed response.
Click to expand...

Good morning Taja.

There are the fundamentals, and there is the breaking of new ground: you've got it all as an investor in an LM fund.

The most important thing that should be sinking in is that it's NOT about investors, it's about $$$$$$.
 

Yes, it could be true. Keep in mind, "major" is not "majority" or "most"

"major" = "Important, serious, or significant":
https://www.google.com.au/#hl=en&gs...38,d.aGc&fp=5776ac008959927f&biw=1920&bih=934

Don't be surprised by spruiks from Piper Alderman - they're known for them.

This was posted on Piper Alderman's website over a year ago (13 February 2012), "Piper Alderman is currently finalising the pleadings to commence a class action against Equititrust Limited ("the Company") and a number of its directors. The Court documents are expected to be filed in the coming weeks." http://www.piperalderman.com.au/firm/equititrust-limited-class-action

Anyone seen the pleadings?
 
BIG $$$$$ & Fish & Chip Wrappers

http://www.itnews.com.au/News/335266,law-firm-mum-on-vodafone-class-action-sign-ups.aspx

"Vodafone last week said the firm was known for promoting class actions suits, a claim Ivantsoff rebuffed."

rebuff = "Reject (someone or something) in an abrupt or ungracious manner."
https://www.google.com.au/#hl=en&q=...83,d.aGc&fp=fcb5ee69c662e450&biw=1920&bih=934

That's quite an interesting exchange:

1. Vodafone says Piper Alderman (PA) promotes class actions.
2. PA rebuffed the claim by asserting it only "does" something if it's got merit.

To my mind, PA's retort has nothing to do with Vodafone's claim. It's all very well to "do" class actions with merit, but really, that's got nothing to do with whether (or not) PA promotes class actions.

For my part, I agree with Vodafone, PA promotes class actions (whether or not PA "does" them) - three examples are (1) Vodafone, (2) Equititrust, and (3) LM. I wonder if PA has adequate evidence to proceed in any one of these three cases?

I get the impression that PA operates very differently to the likes of Slater & Gordon and Maurice Blackburn - and the difference is that PA is actively going out to get business - so much so that in the matter of LM funds, PA has been actively interfering in fund matters.

Investors in at least one LM fund have been contacted by PA - I wonder whether advice to those investors from PA could really be considered independent when PA is motivated by self-interest? that is, since it's motivated by the allure of the massive fees which flow from class actions.

Investors might believe that they won't be able to make a claim without the likes of PA, but it's really the likes of PA who can't make the BIG $$$ without the likes of LM investors.

FTI states (in part), "A firm of Sydney lawyers wrote to investors lobbying them for support to appoint either Trilogy Funds Management Limited or KordaMentha. These circulars drew support from only 7 investors, who were represented at the hearing."
http://www.lmaustralia.com/Download...nvestors-(MPF)-E-Letterhead.aspx?ext=.pdf.pdf

PA needed LM investors because PA sought standing in the court - without investors to give standing, PA and those it promotes (Trilogy & KordaMentha) would be "out in the cold" (so to speak).

I get the impression that investors get caught up in PA's flurry of activity in its rush to "capture" investors in funds such as Equititrust and LM - the Statute of Limitations Act provides a time frame of six years within which to bring an action, but if one was caught up with PA's spruiks, one might think that the time frame was only six days.

I also think that investors are led to believe that there will be a claim for BIG $$$$$ - this belief comes about by the fact that they've lost money and therefore they're entitled to recover - but losses by themselves do not give rise to recovery, there has to be a breach of duty (statutory or otherwise).

It seems to me that PA gives investors an impression that an action will proceed, proceed at a time well before actual evidence to sustain a cause of action is established. But there is not fire in every case of smoke, consequently investors might be hanging on year after year in anticipation of an event (a class action) that simply does not materialize.

It might be that investors may find themselves forking out up to 50% of a recovery (and giving up all recovered legal costs) by way of a class action when such an action may have be undertaken by a receiver or administrator without having had to give one cent to a litigation funder, and with recovery of the substantial part of the legal costs. Has choice for investors been unnecessarily narrowed down to PA?

The sooner members of damaged managed funds realise that there's BIG $$$$$ to made from their predicament, the sooner they'll understand the motivation of the likes of PA.

FTI: from all to nothing? - what a surprise? At the outset, there was FTI as administrator of LM making all those $$$$ from looking after the LM funds as well. Suddenly, the LM MPF is gone .. and now there's more legal activity by PA to see the LMFMIF gone. From all to nothing for FTI?

Remember that old adage?

"Today's headlines are tomorrow's fish & chip wrappers".
 
Well said ASICK. I totally agree with your message 617. You say it like it is. A pity not every investor in LM will read what you have to say.

Being an investor in the WFMIF under Trilogy and after the Performance Fund was hived off to Kordamentha, I am worried that the courts may decide to also put the FMIF under Trilogy. Probably would make a nice little package in their eyes. While this may reduce the total fees we are now burdened with, it is not a desirable situation, given all that we have heard about Trilogy's performance in other funds. Another RE or administrator for both funds together would be best but not likely to happen. What are your thoughts on this ASICK?
 

I tend to think that the funds will be palmed off to receivers - there's no point paying a management fee based on funds under management (FUM) which includes debt. I agree, after the taste of $20m or so in fees to date from the PFMF, Trilogy knows that there's "$$$$ in these damaged funds" - probably not much for investors, but working off these unattainable gross asset values, managers have a field day.

I still marvel at how pleased investors are with the posted unit values even though those same values drop year after year - punters really do live for the day.

I don't think the court will appoint a manager for the FMIF, I think its days as an operational managed fund are well and truly over - and if properly informed in the material, I couldn't see a court appointing Trilogy anyway. While I'd be surprised if Piper Alderman would fully disclose Trilogy's failures, I'd hope that FTI would.
http://moneymagik.com/three_part_trilogy_funds_management_tragedy.php

On that point, I'm curious to know whether (or not) Piper Alderman disclosed Trilogy's past failures to investors in its mail-out seeking support for Trilogy? Is anyone able to post a copy of the letter Piper Alderman sent out to members?

Just in case members haven't read about it, investors in Trilogy's Healthcare REIT lost ALL of their capital - in fact, the good ol' ANZ bank lost nearly $900k! To me, that's great news about the ANZ - the bank deserves to lose for being part of a scheme that caused so much loss to so many, while permitting to use of nearly $500k of investors' money to lure investors into the fund so Rodger Bacon's relative, Rojacan Pty. Ltd. could escape unscathed with its seed-money together with a bag-full of interest.
http://moneymagik.com/analysis_REIT.php
 
Piper Alderman

Here's the substantive excerpt of an email sent to an LM fund member by Piper Alderman,

"Further to our earlier correspondence, we are considering applying to the court seeking a change in responsible entity of one or more of the funds managed by LM Investment Management Limited (LM), which are now in the control of administrators. The primary reasons for applying for such an order are as follows.

Pursuance of Claims Against LM and related parties relating to the mismanagement of the funds

A change in responsible entity will enable claims available to unit holders to be brought against LM and its associated parties relating to the mismanagement of the funds and the resultant losses sustained by unit holders. Such claims may provide a second source of money that unit holders will not otherwise have available to them if such claims are not pursued. If LM remains responsible entity this will present a significant hurdle to the investigation and pursuance of these claims as LM is unlikely to bring a claim against itself. This hurdle is already apparent as the administrators have confirmed that unit holders will not be treated as creditors of LM unless they are able to properly particularise and quantify their claims against LM and that will be extremely difficult unless a new responsible entity is able to access the books and records and undertake a proper investigation of the potential claims.

Independence

The administrators have had previous dealings with LM and its advisors and whilst the administrators are independent practitioners, we consider that the potential conflicts that may arise in relation to their duties owed to LM as a company and their duties owed to unit holders will present a conflict in due course, which can be avoided if an independent responsible entity is appointed.

What We Need From You

We wish to understand the desires of unit holders. Accordingly, please answer the following:-

1) Which LM managed fund(s) did you invest in?
2) How much money did you invest in the fund (s) and have not been repaid?
3) Would you be supportive of a change in responsible entity in principle?

Please provide answers to the above by return email (or otherwise by close of business on Tuesday 9 April).

Yours sincerely,"

What's missing? Geez, "What's in it for Piper Alderman?" that's what's missing. Also missing is whether the spruiked legal action would be brought by way of a class action or by the receiver, and what circumstances would dictate which way the litigation would go, and ON WHAT TERMS?

This excerpt is interesting, "This hurdle is already apparent as the administrators have confirmed that unit holders will not be treated as creditors of LM unless they are able to properly particularise and quantify their claims against LM ..."

yes, true - but do investors really, seriously think that this is a matter of LM investors being creditors? - I find that a nonsense - it's about a potential insurance claim, and really, it's of no concern to LM administrators which entity gets what that's left of LM Investment Limited, FTI would merely dole out what's left according to law.

I'm stunned why investors should have found anything of concern in Piper Alderman's spruik given that it's the FMIF that's lent to the MPF, and not the other way around - it's the FMIF which holds the first mortgages. In my view, FMIF members need an entity in control which has NO association with KordaMentha to ensure independence in order that FMIF first mortgage rights are indeed exercised to the clear detriment of MPF unit holders (since first mortgages are unlikely to be satisfied).

The plot thickens.
 
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