Storm Financial Group

Onlooker said:

"Solly", some of those submissions appear like clutching at straws. Mr & Mrs Clare's call their loan application "false" but they do not say who declared those "false" income figures. Are they suggesting that they signed a blank application form and allowed some other person to fill in the blanks afterwards?

While, with some difficulty, I can feel some sympathy for some of those old and penniless pensioners who tried to better their lot, I fail to see why Mr & Mrs Clare, close to retirement age and with a $1.35 million home and an annual income of approx. $65,000, would want to enter into a high-risk poker-game to make even more money?

They take issue with the "falsely" declared annual income of $142,111 by writing, "If we did [have such an income], we certainly would not be borrowing money to make more." Why, was $65,000 a year not enough?

At the time they applied for two CBA margin loans totalling $850,000, they already had an NBA margin loan of an unspecified sum on which they paid between $7,500 and $11,000 a month in interest. That would suggest that the NBA margin loan was around $1 million. What madness made them want to load up with another $850,000 in debt ? If that is not greed, I don't know what is!

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Onlooker , your a very hard marker! a lot of these people were not just influenced by greed , but by the very "Storm Model" that introduced "fear" as a motivator, i went to one of their "over the top" hyped up seminars, it was a bit like going to see some sort of evangelist do his thing , and they preyed on the people's fear of , no pension in the future, becoming a burden on their family , being cast out with no hope for a comfy retirement, then came the clincher , invest with us and all your cares will be gone. Unfortunately a lot in the room fell for it, i suppose it's a bit like time share selling , only way more expensive and disgusting.

But that's my very point, "darkside": how could that kind of "angst" exist with people in that bracket of wealth and income? As stated, I have sympathy with those less fortunate who faced a bleak retirement, but owners of million-dollar homes with above-average incomes from investments? That's where greed comes in! And there is nothing wrong with greed per se which is a powerful driving force in our economy and all our lives but we owe it to ourselves and to our families to control it so that it doesn't lead us down the path of this debt-laden madness! There is no law against hype just as there is no law against gullibility and neither are the two an excuse before the law. In their heart of hearts, these Stromers know they have been stupid - utterly stupid! - but being the gamblers they are, they have one more throw of the dice to see if they can get something back. Good luck to them!

Ok , i think the point you are trying to make , is when something bad happens to us , we need someone to blame, unfortunately that is a scenario thats played out everywhere in life every day, not just in this forum ,a few of them have put their "hands up" and taken some responsibility , but the majority have blamed the banks , with one or two baming EC and his woefull business acumen.

It's a very normal response to try and find the fault elsewhere. This denial is one of the steps in the process of finding peace within oneself. You mentioned that you attended one of those 'stormy' seminars. How did you stop yourself from being sucked in?

As for the Banks, I am no apologist for them but they will have to draw the line somewhere. As for Mr Cassimatis and his troupe of salespeople, words fail me! Let's hope the old saying, 'what goes around, comes around', comes true for them!

Onlooker said:

It's a very normal response to try and find the fault elsewhere. This denial is one of the steps in the process of finding peace within oneself. You mentioned that you attended one of those 'stormy' seminars. How did you stop yourself from being sucked in?

As for the Banks, I am no apologist for them but they will have to draw the line somewhere. As for Mr Cassimatis and his troupe of salespeople, words fail me! Let's hope the old saying, 'what goes around, comes around', comes true for them!

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How did i stop myself from being sucked in , you know the deal " if it looks to good to be true" well maybe it is, they offered me a $100 000 a year on top of my income for doing nothing , even in my world , there is still no such thing as a "Free Lunch"

There you are! You came up with the right answer! And it wasn't rocket science, was it?

Now here's a little twist for all those Bank-haters: why not demand the 7% commission back from Mr Cassimatis? Every $100,000 you borrowed from the Bank and ploughed into the fickle sharemarket, put another $7,000 into Mr Cassimatis's pocket (and that's not counting "kick-back" and trailing commisions!)

... and now it's time for my nightcap, Late Night Live on ABC Radio, and bedtime. I will sleep well as the only money I have to worry about is my own

I started with nothing and still have most of it!

Solly said:

Another two submissions of interest to the
Inquiry into Financial Products and Services in Australia.

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These seem to take forever to download. I read the first one and gave up on the second.

Onlooker said:

"Solly", some of those submissions appear like clutching at straws. Mr & Mrs Clare's call their loan application "false" but they do not say who declared those "false" income figures. Are they suggesting that they signed a blank application form and allowed some other person to fill in the blanks afterwards?

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Just exactly this has previously been described in the thread.

While, with some difficulty, I can feel some sympathy for some of those old and penniless pensioners who tried to better their lot, I fail to see why Mr & Mrs Clare, close to retirement age and with a $1.35 million home and an annual income of approx. $65,000, would want to enter into a high-risk poker-game to make even more money?

They take issue with the "falsely" declared annual income of $142,111 by writing, "If we did [have such an income], we certainly would not be borrowing money to make more." Why, was $65,000 a year not enough?

At the time they applied for two CBA margin loans totalling $850,000, they already had an NBA margin loan of an unspecified sum on which they paid between $7,500 and $11,000 a month in interest. That would suggest that the NBA margin loan was around $1 million. What madness made them want to load up with another $850,000 in debt ? If that is not greed, I don't know what is!

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I agree. If they found the $65,000 p.a. insufficient to live on, they could simply have taken out a reverse mortgage on their home, and stayed away from any margin lending.

darkside said:

How did i stop myself from being sucked in , you know the deal " if it looks to good to be true" well maybe it is, they offered me a $100 000 a year on top of my income for doing nothing , even in my world , there is still no such thing as a "Free Lunch"

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So, Onlooker isn't a 'hard market' at all, darkside. You saw through it because you looked at it objectively. It's hard to see why others couldn't have done likewise, especially when they were not exactly below the poverty line.

It seems as though there are two separate issues here:
1. the involvement of clients in unreasonable borrowings via both equity
loan and margin loans. It's hard to see why they were not responsible
for this, unless Storm actually altered figures and did not inform them.
2. the behaviour by CBA which sounds shonky.

I'm not particularly a follower of Warren Buffet's philosophy, but one thing he said (or is reputed to have said) that is valuable is:

Never invest in something you don't understand.

If Storm clients went ahead with borrowing millions on a low income, they can't possibly have understood what they were doing.

Or perhaps that's being too kind, and they rather just hoped they'd get away with it on the basis that the market wouldn't ever fall.

"BoQ defends its links with Storm"

"THE Bank of Queensland is facing a battle on two fronts over its involvement with failed financial planner Storm Financial, with an investigation by the corporate regulator and the prospect of court action next week."

More by Danny John and Stuart Washington in The Age here;

http://business.theage.com.au/business/boq-defends-its-links-with-storm-20090625-cy73.html

"Bank of Queensland defends dealings with Storm Financial"

"THE Bank of Queensland has defended its dealings with 319 clients of failed Storm Financial, alleging it did no wrong in lending them about $105 million."

More by Anthony Marx in The Courier Mail is here;

http://www.news.com.au/couriermail/story/0,23739,25691093-3122,00.html

As per the heads up from Carey:

"BoQ to admit it is under probe"

"Bank of Queensland will be forced to make a humiliating change today to the strongly worded denial issued about its involvement with Storm Financial, the Townsville-based adviser that collapsed with losses totalling about $3 billion."

See more by Duncan Hughes on page 58 of the Australian Financial Review.....

"Slater & Gordon confirms BOQ action"

"Claims bank hand in glove with Storm"

More by Kate Kachor in Investor Daily

http://www.investordaily.com.au/cps/rde/xchg/id/style/6790.htm?rdeCOQ=SID-3F579BCE-209802F5

"Bank claims no fault in Storm saga"

"However the Townsville Bulletin understands the bank will have to correct a statement issued yesterday claiming it was not being investigated for its part in the financial tsunami which has wiped out thousands of investors."

More by Tony Raggatt here in the Townsville Bulletin;

http://www.townsvillebulletin.com.au/article/2009/06/26/60861_hpnews.html

onlooker - much of what u say has been discussed at length in previous posts. the issue with the banks only impact 3500 of storms 14000 clients so only about 25%. the other 75% have done their dough cold - the balance most of whom are either technically insolvent or debt crippled have issues with several banks of which CBA has admitted they were partly to blame for the position these people found themselves in. now banks dont just put their hand up and compensate clients for losses unless their own lawyers etc have said "we have a problem". this problem will now be solved on a case by case basis. these people wont get everything back - what they will get is a fair and just settlement.

as for EC and storm and trying to recoup the comissions etc that is a very futile move as when u shake him upside down u wont get $3 billion falling out of his pockets. Storm has been liquidated by the creditors which includes some storm clients but there is a very large shortfall in the asset sales over what is owed to the first mortgagee (CBA) so there will be no distribution to unsecured creditors. CBA will pursue EC personally for the shortfall through the guarantee provisions on the loans and this will then most likely result in EC being financially liquidated ( i dont suspect the CBA would be in any frame of mind to go easy on EC given the recent history!!). The professionally indemntity insurance is insufficient (only $20m) and most likely invalid but i understand Slater and Gordon are pursuing them anyway on behalf of storm victims. Then there are those storm victims who invested in the last week or two before they closed their doors where it is now known storm traded insolvent - well those storm clients will be suing the storm directors personally.

most of the focus of late has been on the banks as the story has moved on from EC and company - storm has shut, the business sold and they are all under investigation by ASIC. i think everyone is keen to see the results of that investigation which should be come clear by end of august. i believe everyone is now aware that storm very clearly overgeared its clients.

the banks on the other hand have been saying for 6 months they did nothing wrong with some (25%) of the storm clients, wereas for those people who have been involved in sorting the mess out, felt that the banks had done some bad stuff. finally this week CBA fessed up that there were problems.

as for the 7% commissions well if people want to pay that then so be it.

"Carey Ramm", you summarised the situation well and I agree that the focus has shifted to the Bank, if for no other reason than that they are the last ones left with any money!

It appears the Banks will now be blamed for having approved loan applications which should have been refused for various reasons and/or having called in the loans too soon.

If loans were approved based on falsified or omitted information, then those who were 'gilding the lily' must be made to answer for this.

If Banks had a legal obligation to verify that information but failed to do so, then they have to accept the consequences.

All this will no doubt be done in a totally legalistic method devoid of emotive arguments such as "this poor old pensioner should never have taken out a loan", etc. as indeed it should. The days of the friendly neighbourhood bank manager who in fact counselled you not to take out a loan disappeared sometime in the 60s. These days, loan applications are centrally processed, crunched through a computer, and if the numbers stack up, the loan is granted.

As for the Banks having called in the loans too soon (when? towards the end of 2008?): even six months later, the All Ords still has not improved sufficiently to have bailed out those who went into the market too heavy and too high. Anyway, it wasn't the market that was their downfall: it was their gearing!

I am sure that all parties will firmly keep in mind that these transactions took place between consenting adults. Nobody was forced to do anything. Persuaded, yes; coerced, no!

As you very rightly say, "everyone is now aware that Storm very clearly overgeared its clients." So while the immediate focus has shifted to the Banks, the moral condemnation must firmly stay with Storm and its operatives. Storm never factored in the (ever-present) possibility of a rapid downturn in the market, either in its marketing of the scheme or in the staffing that would be required to handle a sudden flood of redemptions.

With regard to your closing comment, "as for the 7% commissions well if people want to pay that then so be it": this argument could equally be applied to everything else that happened in this disgusting display of greed. If people wanted to do it, then so be it! But they must also accept responsibility for it!

Just thinking aloud:

It would be very illuminating to see the financial investment records of Mr Cassimatis and his cohorts. Did they practise what they preached? Did they gear up and buy up at the top of the market?

If they did not, or worse, if they sold down, while persuading others to keep gearing up and buying up, then their moral (if not indeed legal) condemnation must be absolute!

Will we ever see those records?

I heard something on the radio news this morning about a new law having been passed which places additional responsibility on the lender to ensure the borrower can afford the repayments.

Presumably this is as a result of the Storm debacle. Can only be a good thing if people continue to refuse to take responsibility for themselves.

Promotes the nanny state, though.

No laws will ever protect against greed! When greedy promoter meets greedy investor, you have the perfect storm!

This whole Bank-bashing bit (setting aside any illegalities that may have occurred and which must be brought to account) is akin to having your house burnt down by a mad arsonist but since he is on Centrelink benefits and can't be got at, you move on to the supermarket-chain that sold him the matches ...

Perhaps those Storm clients who did get sold out in November and December ought to thank the Banks for doing so when they did, because the All Ords was around 3300 in November and 3500 in December but dropped even farther to a sickening 3111 on the 6th of March 2009.

Those of us who went through it, live to tell the tale! Why? Because we did so with our own money and did not become greedy and geared up and up and up again! If it was so easy to make money, we'd all be rich! And some of us who are prudent enough and take the trouble of doing the necessary research, ought to be filthy-rich! But that's not how the market works!

Those who borrowed so recklessly against their houses should have kept in mind that the house is only a security to those who lend the money. Those who borrowed it, must still repay it (plus interest!)

P.S. The reason I am in this Forum so early is because I am on the computer going through the daily routine of checking the overnight financial news from London and New York to make whatever changes may be necessary to protect my investments. It's something I have to go through each morning. No pain, no gain! Ex-Stormers, please note!

In yesterday's post I inadvertently stated that "the high-point was the 1st of July 2007 when the All Ords stood at 6853. We were all financial geniuses who had just found the secret of everlasting prosperity!" That was a typo! We all felt like financial geniuses on the 1st of November 2007!!!

With everybody smacking their lips and salivating at the thought of all that money they might be getting back from those naughty, naughty Banks, few people seem to be interested in the details of this disaster. And what a disaster it has been! Take for example Mr & Mrs Clare whose submission is on public record: http://www.aph.gov.au/senate/committee/corporations_ctte/fps/submissions/sub100.pdf

In this submission they state that they took out their first margin loan (of approx. $1 million ?) in March 2008. By that time the market had already been in a continual decline for three months from its high-point in the 6800s to around the 5500s (it had gone as low as 5163 on 18/3/08!) "Never mind all that," I can hear them say, "it'll be up there again at 6800-plus soon," and in they went, boots and all, with $1 million. Not trickling it in, a hundred thousand here, a hundred thousand there, to test the water; no, a cool $1,000,000 ! But even that wasn't enough, oh no! Let's go for the jugular and add another $800,000 (or was it $850,000 ?) in short order. That was in May 2008 when the market had gone through a bit of a sucker-rally and been, very momentarily, above 6000. They were probably jumping up and down and hurrying their loan application along lest they miss the next bull market.

Well, it was all the way downhill from there on out: the All Ords was at 30/6/08 5332, at 31/7/08 5052, at 29/8/08 5209, at 30/9/08 4631, at 31/10/08 3982, at 28/11/08 3672, at 31/12/08 3659, at 30/1/09 3478, at 27/2/09 3296 - but thankfully, by that time the Banks had already sold them out!

Now it's all bleating hearts: "We weren't told"; "The loan application had irregularities." Get real! With that kind of investment approach you would've lost your pants anyway; having used other people's money, you've lost your underpants as well! Personally, I'd be too embarrassed to parade my stupidity in public but, I guess, desperate people do desperate things!

By the way, the All Ords are right now at 3890 which is still about the same level at which most Stormers were sold out, and still a good 30% down from the 5500 at which point many of them would've "stormed" into the market. Ergo: had the Banks not sold them out then and they'd still be in market now, little would have changed for them except that their interest bill on those huge margin loans would have put on another $100,000 or so. I would suggest the Banks did them a favour!