Storm Financial Group

[cuttlefish]

I read a book once that researched how people behaved when they were lost in the wilderness. When people began to realise they were lost, a common reaction was to increase their pace - i.e. start to walk faster or even run - trying to find a landmark or point of reference that would help them realign themselves to the position they thought they were on on their map. This frantic running around trying to figure out where they were tended to burn valuable energy and make them even more lost.

The survivors tended to exhibit one particular trait - that was that instead of wasting energy trying to figure out where they were, they accepted that they were lost and began to re-map their surroundings based on their local frames of reference, and started to adapt to and 'live' in their new surroundings - finding things to keep them warm, building shelter, locating water, food etc.

The ones that didn't, kept racing around, burning more energy, trying to figure out how to 'get back' to where they were - many perishing in environments where there was ample food and water available.

This might seem like a lot of waffle - but one of the most difficult things for the victims of Storm to accept, particularly those in the later stages of life, will be to accept that life has changed and they will not 'get back' financially to where they were. They need to accept this change and rebuild themselves within their new financial circumstance.

I personally would be backing what Garpal Gumnut has been saying - accept that the money is gone - the legal actions against Storm, the administrators, the banks and even the professional indemnity insurance companies are highly unlikely in my view to reap much of anything. Heading down this path is quite likely wasting time that could be spent moving on with your new position. (but don't take my word for it, seek advice).

The practical suggestion, as Sir O has described, is to make a budget.

Figure out what your incomes and outgoings are - figure out if you are cashflow positive. Figure out the 'fire sale' value of your assets. You will likely be facing one of three scenario's:

(i)If you are cashflow positive, then start planning your new life - are you barely surviving to pay off what is now a large mortgage on a house that is bigger than you need when you could be living in a smaller place and having a better lifestyle? Are there things that could be sold that aren't really used that could be used to pay down some debt which would reduce your outgoings and improve your lifestyle? etc. etc.

(ii)If you are not cashflow positive, then is it possible to sell down assets in such a way that you can be cashflow positive? If so then similar to above - work out what needs to be sold. If trying to adjust cashflow/debt in order to 'save the house' first consider as well whether the house is 'worth' saving or whether its possible to have an enjoyable lifestyle in cheaper accomodation (e.g. sell house, buy an apartment, sell house, buy a townhouse, shift from an expensive suburb to a less expensive one etc.).

(iii)If your are not cashflow positive, and selling down your assets is not likely to bring you into a situation where you can be cashflow positive then you are possibly headed for bankruptcy. This is of course an extremely difficult thing to face - but if it is your new financial reality, then the sooner that it is faced, the sooner you will be on the other side of it - so start investigating the bankruptcy process.


And it might seem ironic - but seeking advice from an experienced financial planner - that doesn't work off commissions and doesn't push their own specialty products - and ideally one that helps people that are facing possible bankruptcy - is probably a very good idea. Its even possible that free financial planning and legal advice for people in financial hardship is available via government support services or via charity services.

 

[sqwark7600]

Here are the excuses for the $30m loan default to CBA and the financial ruination of thousands of their clients from Julia and Emmanuel. I see it as a sickening exposure of their pathetic modus operandi.

http://www.townsvillebulletin.com.au/article/2009/01/07/31725_hpnews.html

Here's a pearl:
"Viewed objectively (and we invite comparisons to any other model) not one of Storm's clients was over-geared as reported in the press."

Read it and weep.

:badsmile:

 

[sqwark7600]

I personally would be backing what Garpal Gumnut has been saying - accept that the money is gone - the legal actions against Storm, the administrators, the banks and even the professional indemnity insurance companies are highly unlikely in my view to reap much of anything. Heading down this path is quite likely wasting time that could be spent moving on with your new position. (but don't take my word for it, seek advice).

I don't see the logic in suggesting that once Storm clients have adjusted to the reality of the situation and restructured their lives that they should allow these two crooks to get away scott free. I could see that happening in Zimbabwe, but this is Australia and we have a proud history of fighting for our rights. I say once the smoke has settled go for them and those that contributed to the tragedy with a vengeance!
:bigun2:

 

[daisy]

I don't see the logic in suggesting that once Storm clients have adjusted to the reality of the situation and restructured their lives that they should allow these two crooks to get away scott free. I could see that happening in Zimbabwe, but this is Australia and we have a proud history of fighting for our rights. I say once the smoke has settled go for them and those that contributed to the tragedy with a vengeance!
:bigun2:

My guess is that this will all take years to resolve. These things usually do. So as Sqwark says, Storm clients need to get on with things now and do whatever they need to do to restore order and control in their lives without hanging their hats on the outcome of litigation. I agree that they should not let this matter go but not hang onto it as their salvation out of this mess.
If claims are successful it will be a lovely bonus but if not.....

 

[sqwark7600]

Anyone have a Townsville phone number for the support group? I'm interested in going to hear what people are saying.

The only support groups I have any knowledge of were part of the Storm organisation and were shut down on their going into administration. However

Emmanuel says:
"There are literally hundreds of clients banding together to build positive Storm support groups across Queensland, working together to support Storm and each other through these trying times."
Yeeaar riiight!

I am sure that there are independant networks forming but none have surfaced as yet on this thread or the net.

For a legal update Slater & Gordon can be contacted of 1800555777. I understand that they are registering Storm victims and will then send out an information pack regarding a potential class action. They seem to be still at the assessment stage.
Maybe post your query on Monario's registration site.
Also a post of the minutes of the creditors meeting would be interesting reading.
Anyone?

 

[shibby]

I recieved a reply from Macquarie today on breaking my margin lending loan

Unused interest
$33,204.76

Break cost
$16,179.60

This is 5 months and 10 days early

 

[cuttlefish]

I don't see the logic in suggesting that once Storm clients have adjusted to the reality of the situation and restructured their lives that they should allow these two crooks to get away scott free. I could see that happening in Zimbabwe, but this is Australia and we have a proud history of fighting for our rights. I say once the smoke has settled go for them and those that contributed to the tragedy with a vengeance!
:bigun2:

My view is that vengeance is just a wasted emotion - adapt, survive, move forward and build something different and better. By not letting go, and instead wasting valuable time and emotional energy continuing to pursue these people, they are effectively allowing their lives to still be controlled by this negative event. Anger is an emotion that destroys both physically and emotionally. It will destroy health and relationships.

Sure if there are some simple steps that can be taken to pursue for reclaimation, that does not involve too much effort and expense, go for it - but overall its not where I'd be directing the bulk of my energy were I in the situation.

 

[Duckyt]

Hello all, as soon as the Storm crisis hit - I've been reading the discussions. I once worked for the Cassimatis partners many moons ago when they were just drawing up their strategy. I worked in admin for them and I can assure you all that the 'cult' belief system had started even back then - I fell for it as an employee ! It was all about 'promising' the amazing things that could happen - yet at the same time - and this can be publicly verified via news articles in the Townsville Bulletin (about 10 - 12 yrs ago) that they weren't paying their employees correctly - taking advantage of their young eagerness to please. In fact, they were taken to court - after ex-exmployees once released from the 'spell' realised that they were entitled to paid overtime and that they shouldn't have had to stay back to work until dark without being compensated. I was also signed up for Margin Loans etc. but when leaving realised that if something happened to me (I was a lowely admin worker) and my partner (having only been together for shortly) we were in more debt then we would have been able to handle. I got out as soon as I was able. It sounds unbelievable but the comparisons to a 'cult' are actually quite on the mark. My opinion was that Emmanuel was a showman and spellweaver - that's for sure. As the old saying goes "a leopard doesn't change its spots !" I got out, and when announced I was leaving - was treated literally like dirt - going from one of their golden girls -to a "betrayer"... I was able to warn my immediate family not to get invovled with them (let's just say..that media reports of themselves paying $2 million - whilst clients are imploding all around...sits just right with my opinion of their true characters - what we see behind doors). Unfortunately, my dad's brothers didn't take his advice to stay away and are now both over 60 and ruined financially...they are having to sell their farms - how do you start over at that age ? They are truly broken men. As so many other stories come pouring out - I believe in not blaming the victims but holding those responsible accountable - Doctors would get sued so fast for such fatally flawed advice !!! That's what people paid them for - at $40000 a pop - people would logically assume that they would get good advice. Also, the displayed arrogance infuriates me - here we have a company, clients in a massive implosian - and still its everyone else's fault but their own !!!

had my rant - feel better now.

 

[Glen48]

From SMH
Storm receiver queries $2m 'dividend' paid to founders
Michael West
January 20, 2009

STORM Financial's founders and a select group of clients were the beneficiaries of cash payments from the business as the beleaguered financial services group was imploding before Christmas.

Storm's receiver Rob Hutson, of Korda Mentha, confirmed last night that $2 million was paid to the founders Emmanuel and Julie Cassimatis on December 15 in a "dividend". Earlier in the month the Commonwealth Bank had begun notifying clients over breaches on their margin loan positions.

Another $650,000 was paid by Storm to four clients, also on December 15, payments recorded as "financial assistance".

About 150 clients have received payments from Storm since the close of the financial year last June. Storm, which is holding a creditors' meeting in Brisbane this morning, said it had had 13,500 clients and $4.5 billion in funds under management. Many clients have lost their life savings, and some are losing their homes after following Storm's advice to borrow heavily to invest in the sharemarket.

The receiver is investigating the payments, has contacted the Australian Securities and Investments Commission and is seeing legal advice as to their status. "We are assessing the financial position [of Storm]. We have concerns about whether employee interests will be protected because a substantial amount of cash was taken out of the business in non-trading payments," Mr Hutson sid.

"We are currently taking legal advice to recover these funds for the benefit of creditors."

The CBA, which appointed Mr Hutson as receiver last Thursday, is the major secured creditor of Storm, owed about $30 million. Amid a legal dispute with the bank and facing the expiry of its credit facility at the end last month, Storm directors appointed voluntary administrators 11 days ago.

Macquarie Group, which provided margin loans to Storm clients, had a $10 million exposure to the group, but that appears to have been replaced last year with funding from the CBA.

It is unclear how much remains of Storm clients' funds under management. Challenger Financial Services and CBA's Colonial, which managed Storm-branded index funds on behalf of the group, began selling down their shares in October and November after the sharemarket had fallen 40 per cent.

Meanwhile, it has emerged that one related company of the Cassimatises, the Victorian Families Retirement and Investment Group, owns the historic Sladen House in Geelong, which appears to have been used for marketing purposes.

A 2007 report notes that Storm bought the function centre and cancelled weddings that had been booked.

"More than 20 brides have had their wedding dreams dashed with the sale of Newtown's historical Sladen House" the article

 

[stormedup]

I'm another who has been following this thread and an ex employee of Storm to boot!! Have just read a comment (by Lucinda Beamna) in moneymanagement.com.au stating that staff may not get their entitlements. I can only hope that this is heresay as staff have been sacked only being paid up to the day they finished work with all holiday and severence pay still owing.

On Fri 9 Jan, Julie and Emmanuel Cassimatis announced to the staff that "the CBA had pulled out one last bullett" and as a result "Storm is now in voluntary administration". Julie Cassimatis stated that all staff entitlements had been transferred to a separate account and that everyone would be paid all monies owing should the need arise.

The termination letter form Worrells stated:

You will have other outstanding entitlements owing to you by the company. Accordingly we will be approaching the government's Department of education, Employment and Workplace Relations for funding for those entitlements under the General Employee Entitlements and Redundancy Scheme ( GEERS ). GEERS provides funding assistance for the following employee entitlements:

Unpaid wages;
Accrued annual leave;
Payment in lieu of notice entitlements;
Long service leave; and
Redundancy entitlements.​

GEERS funding can only be obtained once the company has been place into liquidation. Further documentation regarding your entitlements and claims ith GEERS will be forwarded to you by mail in the near future.​

The majority of staff were paid at a very low rate, the entitlements owing would be a mere spit in the ocean compared to the CEO's holdings.

 

[awg]

Emannuel Cassimitis...sounds like an Italian name?

lots of Italian descent people live up that way

Some pretty wealthy ones might have ended up investing with him.

you can bet they would be wanting their money back

reckon plenty still adhere to the "old way" of justice

If people are ruined they can become very reckless

If I was him, I would be very worried about my throat

 

[tasmart]

Hello all, as soon as the Storm crisis hit - I've been reading the discussions.

I've also been lurking and reading. I have no involvement with Storm but am saddened by the number of people that appear to have been ruined. Especially those retired or near retirement. Unfortunately having to resort to legal processes is likely to be drawn out, frustrating, probably unrewarding and only draw out the pain and suffering.

The interesting part for me is to consider how to avoid getting into such a mess. A few people have posted their 'recipes' so I thought I would try to document my thinking on this (and my approach)

1. Financial literacy.
I think there is a major failing in our educational systems to address even simple issues in financial literacy. I am grieved to know young folk who are dependant on credit card debt (often multiple) as an example. If nothing else financial literacy will address issues such as budgetting, assets, liabilities, equity and financial planning so there is less likelyhood of being lead astray. At the best it allows you to manage your own financial plan. I regret not starting my own such education earlier - but since I set up a SMSF 10 years ago I have been on a steep learning curve and am currently completing an MBA with a major focus on finance (last two modules were on financial planning).

2. Don't put your eggs (assets) in one basket.
Although the concept of investing in an indexed fund may seem reasonable (to some) to do so through one vehicle (Storm) is inherently risky. It is best to aim to have your assets split around various classes - classically property, equities & fixed interest (both domestic and international). Although this may sound academic it is not that hard to do. And it allows you to vary amounts in each group to meet cylical changes (or you own needs). Similarily all assets into a super fund has risk. Owning (and running) a company may give your desired growth and cash flow but again building up assets outside that entity is desirable.

3. Focus on developing income producing assets.
The bottom line should be to develop income producing assets (whatever class). So any budget should look at current, and future desired: assets, liabilities, equity and specifically income producing assets. I initially developed an Excel spreadsheet 10 years ago with this as the bottom line - and have built on it since. I now have about 20 tables that all link into the main one. I update my financial position at any time (and do daily), including my tax liability. I have a projected future table (for 20 years) of overall equity, income assets and super with realistic growth rates. I exceeded these significantly for 9 of the last 10 years.

4. Cash Flow is the key.
The biggest failing is to not have cash flow to cover your current liabilties. Hence any leverage needs to be set up so the interest payments can be covered. This is the big problem with the Storm strategy for low income clients. A strategy that relies on asset growth to cover current liabilities is doomed to failure. The subprime market collapse in the US is a spectacular example.


My 2 cents worth!

 

[-Bevo-]

I'm another who has been following this thread and an ex employee of Storm to boot!! Have just read a comment (by Lucinda Beamna) in moneymanagement.com.au stating that staff may not get their entitlements. I can only hope that this is heresay as staff have been sacked only being paid up to the day they finished work with all holiday and severence pay still owing.

And $2 million was paid to the founders Emmanuel and Julie Cassimatis on December 15 in a "dividend" how nice.
Buy the way how did that smashed window at the Townsville office happen the day they sacked everyone disgruntled employee or client of storm?

 

[stormedup]

And $2 million was paid to the founders Emmanuel and Julie Cassimatis on December 15 in a "dividend" how nice.
Buy the way how did that smashed window at the Townsville office happen the day they sacked everyone disgruntled employee or client of storm?

$2m plus the $24m they paid themselves a few months back.

Guessing it would be a very unhappy client. Doesn't seem like a Storm staff reaction, most of them brainwashed into the Storm "way".

 

[sails]

...
1. Financial literacy....

2. Don't put your eggs (assets) in one basket....

3. Focus on developing income producing assets....

4. Cash Flow is the key....

My 2 cents worth!

And if something looks too good to be true - run (not walk) away...

And high pressure marketing should always raise the question "is this product being flogged at a heavily inflated price?"...

Just my

 

[awg]

Emannuel Cassimitis...sounds like an Italian name?

lots of Italian descent people live up that way

Some pretty wealthy ones might have ended up investing with him.

you can bet they would be wanting their money back

reckon plenty still adhere to the "old way" of justice

If people are ruined they can become very reckless

If I was him, I would be very worried about my throat

Apologise to quote myself

for the for the purpose of clarification

It seems the origin of the surname Cassimatis may be Greek.

I dont want to make racial offence to any person or group

I used to work for a group that was owned by a New Age Christian family
(the sort that used to talk in tongues)

they used to sell aggressively to members of their congregation, and there was cultish behavior, church members employed, and much pressure to conform the cult.

I, guess the fallout may be concentrated in certain pockets.

would feel sorry for them, got conned.

There is at least one other Group that operated, vary similar model to Storm, I have forgotten the name but they are reasonably high profile, franchised operation.

I was horrified, when I read their glossy literature, using home equity to trade on margin, all glorified.

I expect they would be suffering major contractions at the moment

 

[Jayan]

And $2 million was paid to the founders Emmanuel and Julie Cassimatis on December 15 in a "dividend" how nice.

That's disgusting ... How can they be allowed to do that!

 

[daisy]

My view is that vengeance is just a wasted emotion - adapt, survive, move forward and build something different and better. By not letting go, and instead wasting valuable time and emotional energy continuing to pursue these people, they are effectively allowing their lives to still be controlled by this negative event. Anger is an emotion that destroys both physically and emotionally. It will destroy health and relationships.

Sure if there are some simple steps that can be taken to pursue for reclaimation, that does not involve too much effort and expense, go for it - but overall its not where I'd be directing the bulk of my energy were I in the situation.

I think I've been caught up in all the talk of class actions indemnities etc.
As more information about certain business practices associated with the banks and some of Cassimatis's private dealings have emerged, I have been struck with a deep sense of injustice over all of this and yes it would be nice to see these people get their just desserts over the cavilier way that they have behaved.
But the more I think about this, the more I'm left wondering where this compensation and justice is going to come from. If I play devils advocate this is where I end up:

1. That 2 million dividend just shows that even as cassimatis was making all those nice words for the newspapers he was busy stashing as much as he could get his hands on out of the system. The application for the FP licence for Ignite also shows he was already plotting his next dynasty even as this one was falling around his ears.
My cynical opinion is that he will have got whatever money he could get his hands on into structures where it will be untouchable by receivers, court cases etc. Unless much has changed since the Alan Bond days and you can't do things like that anymore.

2. So, from what I've read the lawyers are going to go after the banks.
Which banks....the ones that gave the overly inflated equity loans that clients so eagerly wanted and were so naive they didn't even know the approximate market value of their property? Even in my sympathetic opinion that's just a bit too naive to be acceptable.
The banks might get into trouble for not doing their homework properly but that's no guarantee they will be made to return people's money. And even if the first case rules they have to, I bet they will appeal that decision and drag the whole thing on for years and years. Look at what James Hardie did and how long they dragged that case on.

3.So that leaves the banks that provided the margin loans on the security that the clients provided on overinflated property values. They can wiggle out of this I bet.

4.The only thing that I can see that they won't be able to wiggle out of is not closing out some margin loans when the LVR dictated that they should have. But that's just going to be a drop in the bucket compared to peoples' losses. I imagine it will just be the difference between when they should have and when they did.

5. All of this might get the banks into trouble with various regulatory authorities and change things so this can't happen again but that won't necessarily restore peoples' financial status.


I hate to sound so negative and I don't want to sound like a wet blanket here and I'm not a lawyer so I don't really know whether I'm talking a lot of hot air and I'm not suggesting that people don't go through with the class action. You just never know.... But Cuttlefish is right, the first priority is using all your energy and focus on rebuilding what is...not what might be.

 

[Solly]

My view is that vengeance is just a wasted emotion - adapt, survive, move forward and build something different and better. By not letting go, and instead wasting valuable time and emotional energy continuing to pursue these people, they are effectively allowing their lives to still be controlled by this negative event. Anger is an emotion that destroys both physically and emotionally. It will destroy health and relationships.

Sure if there are some simple steps that can be taken to pursue for reclaimation, that does not involve too much effort and expense, go for it - but overall its not where I'd be directing the bulk of my energy were I in the situation.

Agreed cuttlefish, hence my attitude, to get on with it, no matter how angry, upset you get it, it changes nothing. Don't waste the energy, by getting angry & upset it allows those who caused you harm to continue to have control and influence over you.

The reality is in the long run only those who are really close to those affected will really care. Others, including me, come along to view the wreck and commotion, offer kind words, opinion, advice, etc.
I wonder how many of us here will reach into our pockets and hand over hard cash to help those in trouble. ??

Hence my hard line, that's why it's imperative for those affected to act now, and get on with it and don't waste time on non productive actions & behaviours. The reality is there is no magic wand, the journey will be long and hard, whether you make it to the finish line is up to YOU.

 

[Solly]

Storm losses may top $100m

Update Collapsed Queensland-based Storm Financial Group is believed to owe creditors more than $72 million, while losses may top $100 million.

Attendees at a creditors meeting in Brisbane today were told the Commonwealth Bank was the major creditor of the financial planning company, with secured loans of about $27 million.

Commonwealth Bank has already appointed receivers Korda Mentha.

.................................

Emmanuel and Julie Cassimatis, the company's founders, were also believed to be owed several million dollars.

BusinessDay understands Storm Financial, which was closed down by administrators from Worrells Solvency & Forensic Accountants last week, was losing about $850,000 a month.

Even so, about 40 clients are believed to have received unsecured, interest-free loans as the company unwound.

The loans, which were allegedly to help them deal with margin calls on their accounts, amounted to between $3.5 million and $4 million.

One person who attended the creditors' meeting said the administrators were mystified by the loans.


Complete story by Vanessa O'Shaughnessy and Georgia Waters is here.

http://business.smh.com.au/business/storm-losses-may-top-100m-20090120-7ldq.html