Storm Financial Group

"Storm Financial collapse left wealthy clients destitute, court told

ONCE-affluent Storm Financial clients have been left destitute by the collapse of their investments, a Brisbane Federal Court heard this morning.

On the second day of the corporate regulator's case against two banks, counsel Allan Myers, QC, said inexperienced investors were seduced by Storm's image of "luxury, lavishness and success"

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Source: heraldsun.com.au

Would love to see the slides they used at their induction seminars. Would be some interesting stuff in them no doubt.

bunyip said:

"A person generally not experienced in financial matters but who is comfortably off, in a home not mortgaged or mortgaged to a modest extent and perhaps having other assets such as superannuation, is put into the Storm system,"
he said.

I can understand that Alan Myers, as a lawyer acting for ASIC against Storm and the banks, is trying to make it look as bad as possible for them.
While I agree with some of what he's saying, he makes one statement that's less than accurate when he says that people were 'put into the Storm system'.

I'm sure that lawyers for Storm and the banks will quite correctly argue that rather than being ‘put into the Storm system’, Storm clients joined the system completely of their own free will after approaching Storm, seeing what they offered, and signing every page of the SOA to say they understood the strategy.
No doubt the lawyers for the defendants will also argue that there was no pressure from either Storm or the banks, that prospective clients were encouraged to go away and take time to consider the strategy before making a decision on whether to sign up.

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bunyip, it is a brave action to add meaning to a statement reportedly made by Senior Counsel and to also question accuracy. It may be prudent to read the full transcript for context and to confirm the actual wording. If the quote is accurate the actual meaning may be only the words. It is refreshing that this forum is not a court room.

S

Solly said:

bunyip, it is a brave action to add meaning to a statement reportedly made by Senior Counsel and to also question accuracy. It may be prudent to read the full transcript for context and to confirm the actual wording. If the quote is accurate the actual meaning may be only the words. It is refreshing that this forum is not a court room.

S

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Solly,

How would one obtain a copy of the transcripts? How long does it take for them to be released after each court day?

I am looking forward to visiting the courtroom in October for a day or two as I plan to see firsthand the difference between reality (as portrayed in the courtroom), the reality of friends and family and the 'reality' of the media and the interpretation of this forum.

On a sad note, a precious friend of mine who is fighting to keep her farm from the CBA has been diagnosed with a type of brain tumour on the same day that ASIC allowed CBA to remove itself from the courtroom with such an insulting offer. It goes without saying that that day was a Black Friday for her. It's yet another example of the toll that this situation is taking on the health and well being of Stormies.

Maccka

bunyip said:

"A person generally not experienced in financial matters but who is comfortably off, in a home not mortgaged or mortgaged to a modest extent and perhaps having other assets such as superannuation, is put into the Storm system,"
he said.

I can understand that Alan Myers, as a lawyer acting for ASIC against Storm and the banks, is trying to make it look as bad as possible for them.
While I agree with some of what he's saying, he makes one statement that's less than accurate when he says that people were 'put into the Storm system'.

I'm sure that lawyers for Storm and the banks will quite correctly argue that rather than being ‘put into the Storm system’, Storm clients joined the system completely of their own free will after approaching Storm, seeing what they offered, and signing every page of the SOA to say they understood the strategy.
No doubt the lawyers for the defendants will also argue that there was no pressure from either Storm or the banks, that prospective clients were encouraged to go away and take time to consider the strategy before making a decision on whether to sign up.

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Hi Bunyip,

"Storm clients joined the system completely of their own free will after approaching Storm, seeing what they offered, and signing every page of the SOA to say they understood the strategy."

At it again I see?

You keep repeating the same old line, "Storm was an obvious scam and people should have seen through it!" Yet ASIC and the Banks involved with Storm saw nothing wrong with the scheme at the time. After all it was a legitimate financial scheme so why are you always trying to make out otherwise?

It's true that nobody twisted any investor's arm so that they would use Storm. However, people in Storm employed deception (something you seem to conveniently forget because it doesn't suit your contention) and the banks turned a blind eye to such because their eyes were full of dollars.

IMPORTANT NOTE: In any agreement, if deception is used by one party, free will is taken out of the equation because there is no meeting of the minds. You cannot therefore as you have repeatedly tried to do judge the mindset of the investors at the time they invested because duplicity was used to get them to sign up to this scheme.

I'll repeat this for the umpteenth time! This trial is not about what the investors did with their money. It's about what Storm and the Banks involved did with their Storm clients/customers' money. It's not about the mindset of those Storm investors but rather about the mindset of those that shafted them! It's not about what you personally think but rather about the facts! It's not about investing in the share market but rather about wrongdoings! It takes a peculiar type of thinking to ignore these pertinent issues and focus on things that are not applicable in this trial. Let's hope the Judge is not likewise distracted!

If you can find any article that lays the blame in any way at the feet of those that invested, please refer me to such. Until then, I suggest that you sit back, listen/read and learn about what really happened because it will be educational, not only for you but for all those that are thinking about investing in the future. "The truth will set you free!"

In the scheme of things your opinion of those that invested counts for nothing. As Solly says, "Thank God this is not a jury trial..." because many members of the public that sit in on such matters are uninformed and bring their prejudices with them. Having served on a jury some two years ago, I have witnessed this first hand. I am happy to leave it to a Judge to decide our fate because he/she has the training and experience to identify wrongdoing under the law! He/she also has the ability to identify the perpetrators; namely the Banks and Storm Financial rather than trying to put the investors in the loop.

If you can't recognize by now with all that has been revealed who the wrongdoers really are, then there's nothing I or others can say that will convince you otherwise.

maccka said:

Solly,

How would one obtain a copy of the transcripts? How long does it take for them to be released after each court day?

I am looking forward to visiting the courtroom in October for a day or two as I plan to see firsthand the difference between reality (as portrayed in the courtroom), the reality of friends and family and the 'reality' of the media and the interpretation of this forum.

On a sad note, a precious friend of mine who is fighting to keep her farm from the CBA has been diagnosed with a type of brain tumour on the same day that ASIC allowed CBA to remove itself from the courtroom with such an insulting offer. It goes without saying that that day was a Black Friday for her. It's yet another example of the toll that this situation is taking on the health and well being of Stormies.

Maccka

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Hi Maccka!

I'm sorry to hear about your friend. The human cost is often forgotten when discussing all this. Quite frankly, people that perpetuate schemes that are designed to make them richer and you poorer are totally unconscionable and lacking in common decency. I think "low-life" is an apt description for them!

I attended Court on Monday and Tuesday and intend to show up most days because I want to see some of these jokers squirming in the dock.

Allan Myers, the QC for ASIC, is doing a wonderful job to date. He has kept the Judge amused (onside) with his description of the Storm scheme and its blatant deceptions, and he has highlighted the major roles the Macquarie Bank and the Bank of Queensland had in the overall scheme. I particularly like the humorous way he has disparaged the Banks’ parts in the Storm saga whilst restraining himself from “kicking them to death” which will, no doubt, come later. (We hope!)

Whilst on the subject of what occurred in the Court these last two days, I must admit that I was surprised by the damning evidence that has already been presented that for me proves beyond doubt the special relationship that Storm had with the Macquarie Bank and the BOQ. Based on what I have seen so far, bearing in mind that we are only on day three, the Banks cannot profess that their relationship with these banks were “arms length” because the evidence is so overwhelmingly to the contrary.

On the first day, Allan Myers defined for the Court what constituted an ‘unregistered managed investment scheme’. I have always thought that this might be difficult to prove but from what I have seen so far, I feel that our chances of proving such have risen from 50/50 to 60/40 in our favour. I am confident that these odds will continue to rise as further evidence is presented. There is no question that “pooling” did take place and it now remains for ASIC and our legal team to pull the pieces into place to prove UMIS. I sense that ASIC has a strong case for UMIS and is holding nothing back. Unfortunately, as we all know, the same can’t be said of ASIC where the CBA is concerned.

I firmly believe that ASIC at some stage went to the Board of the CBA and said, “You guys are going to lose on UMIS and the other charges so why not cough up some more compensation money to appease everyone! That let’s us off the hook as far as you are concerned and you have successfully buried your part in all this.”

This, of course, implies that some special relationship exists between the CBA and ASIC that other banks do not enjoy. I believe that there is enough evidence on hand to support this notion.

Confidence is high in our camp. One way or the other, the banks are going down. It just remains to see how far they sink and what they will be liable for in the end.

Incidentally, the Media has been fairly accurate to date in relation to what has occurred. For those doubters among us, it might pay to follow closely what is happening and also what revelations occur. Sooner or later the penny should drop. "Banks have been allowed to get out of control and unless something is done now, all Australians will find themselves out of pocket as a consequence." Therefore, if as a result of this case, controls are exerted on these banks, it will benefit everyone.

bunyip said:

ASIC calculates the total loss suffered by all investors who borrowed monies from various banks to invest through Storm to be approximately $832 million.
Someone will surely correct me if I’m wrong, but didn’t I see a figure of three billion dollars being quoted as the amount that Storm investors supposedly lost?

It’s pleasing to see that Storm directors and Storm financial advisers will not benefit from the agreement between ASIC and CBA. Nor should they – nobody could be less deserving of financial compensation than these people who promoted the highly risky Storm model as safe and conservative.

Another interesting point.....as I read it, investors have until October 17 to abandon any further court proceedings against CBA, otherwise CBA will not be obliged to pay them any compensation.
That’s less than a month – not much time for investors to make such an important decision.

All in all it looks like this UMIS thing has been a bit of a fizzer so far. ASIC would be proceeding with its UMIS allegation against CBA if it felt it could get a conviction. I think it’s a reasonable assumption that ASIC’s agreement with CBA will set the tone for similar agreements to be reached with the other banks in question.
As for CBA, I suspect that their agreement to pay out $136 million is simply the cheapest and most expedient option for them. If they refused to pay out and instead went to court, the cost to them would likely be more than 136 million even if they won the case.

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Hi Bunyip!

"ASIC calculates the total loss suffered by all investors who borrowed monies from various banks to invest through Storm to be approximately $832 million. Someone will surely correct me if I’m wrong, but didn’t I see a figure of three billion dollars being quoted as the amount that Storm investors supposedly lost?"

It makes you wonder about the ASIC compensation model if they can't even get the extent of the loss right?

"All in all it looks like this UMIS thing has been a bit of a fizzer so far."

Your logic at times leaves me somewhat bewildered! The charge of UMIS is very real and I believe the CBA caved in because it knows this! The fact that ASIC is not now pursuing the CBA for UMIS resulted from the CBA's offer of more compensation and has absolutely nothing to do with UMIS being a fizzer. Indeed, from what I have observed in the last few days in Court, I would say that there is a very good chance that UMIS will be proven. Incidentally, I couldn't see you anywhere in Court which may account for your confusion?

"As for CBA, I suspect that their agreement to pay out $136 million is simply the cheapest and most expedient option for them. If they refused to pay out and instead went to court, the cost to them would likely be more than 136 million even if they won the case."

I can't quite see how it would cost the CBA $136 million if they won the case? Certainly legal costs would only be a fraction of this amount. I certainly agree that it is the cheapest and most expedient option because the CBA is as guilty as Hell and it knows it! Banks don't give away this amount of money unless they have plenty to hide! The fact that ASIC has aided and abetted the CBA to buy itself out of trouble is to ASIC's ever lasting shame. The CBA was on the run! Make no mistake about that. It had everything to lose by allowing this matter to be settled in Court. This agreement to offer additional compensation is a last minute bid to avoid exposure and censure.

As for the agreement, 'Stormies' that are members of this forum should look closely at what the CBA is actually offering. I have read through the “ASIC and CBA Storm Financial Settlement” offer and it seems on face value to have some merit. However, if you look at it carefully there is no real substance to the offer. For one it doesn’t offer you certainty! What exactly will you receive back in compensation in “dollar terms”. What does “55% of the amount of loss allocated to CBA under the ASIC Compensation Model really mean when it comes to money in your hands? Has ASIC provided anyone with the total amount of their individual losses so you can verify such? I haven’t heard of anyone that has been so informed! Have you?

Anyone that signs off on any agreement without knowing the exact amount they can receive back hasn’t learnt anything from the lessons of Storm. ASIC and the CBA, to my mind, concocted this deal some time ago. It is therefore up to those parties to provide exact details of the agreed compensation in dollar terms to you before the cut-off date of 17th October 2012.

When’s all is said and done, ask yourself these questions: "Are you going to rely on ASIC getting it right? Are you going to rely on a nebulous 55% when you don’t know what it will be based on dollar wise? Are you going to rely on the accuracy of ASIC’s compensation Model when that organization has been seen to be shoddy and inefficient to date? And finally, are you going to rely on ASIC protecting you from the CBA’s beating down of compensation (and mark me, that bank will) once you are hooked?"

United, we are strong! Divided, we may fall over! The Banks know this and they will do everything possible to test our resolve. “Divide and cnquer!” is the CBA’s prime motivation for making this offer now.

"Storm Financial: Bank 'failed to check' repayment prospects

Macquarie Bank signed off on multi-million dollar margin loans without considering whether Storm Financial clients could repay them, a court has heard"

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More by Christine Flatley @ brisbanetimes.com.au

'Very difficult to get out of Storm'

STORM Financial induction sessions have been likened to Scientology or "other species of odd belief" on day two of a lengthy trial into the company's practices.

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More by Rae Wilson @ frasercoastchronicle.com.au

"Close ties create storm as ASIC takes on banks

STORM Financial had such a tight relationship with banks that it was able to secure a range of discounts and even the waiver of credit checks for its clients, a Federal Court in Brisbane heard yesterday."

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More by Anthony Marx @ couriermail.com.au

maccka said:

Solly,

(snip)

On a sad note, a precious friend of mine who is fighting to keep her farm from the CBA has been diagnosed with a type of brain tumour on the same day that ASIC allowed CBA to remove itself from the courtroom with such an insulting offer. It goes without saying that that day was a Black Friday for her. It's yet another example of the toll that this situation is taking on the health and well being of Stormies.
Maccka

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So sorry to hear of your friend's troubles. The impact on both the physical and mental health of those directly affected is something that no court can put a price on, and no compensation can put right, unfortunately.

All the best.

From one of Solly's links above:

The court heard today that Macquarie lent $2 million to Tracey Richards - a mother-of-three on a $24,000 annual salary - in 2006, without assessing her ability to service the loan, paying interest or meeting margin calls.

The court heard Ms Richards, who has since lost everything, applied for the margin loan on the advice of Storm, with whom she had been dealing with since 2001.

Her lawyer said she will give evidence that if Macquarie had refused the margin loan, her fears about Storm's financial advice would have been reignited and she would have left their scheme.

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So did Storm suggest to such a client that the interest on the $2 million loan would have been paid by the returns earned on the index fund which presumably was funded by that loan?
Was the impossibility of the servicing of such a loan on a salary of $24,000 just ignored, by Storm and by the client?

Hopefully some of this essential background will come out as Ms Richards and others give their evidence.

"Brisbane Times Money" has a list of examples of what "strategies" to avoid and an example of each.
They include a reference to Storm as follows:

STORM FINANCIAL

The high-profile collapse of Storm Financial was a textbook lesson in the dangers of gearing and one-size-fits-all financial plans. The Storm model was simple - build wealth through borrowing, in some cases gearing up twice by borrowing once against their homes and then through a margin loan.

The fallout from Storm is far from over, with court actions still pending against the company's founders and some of the banks that lent to Storm investors. Last week the Commonwealth Bank agreed to increase its compensation offer to investors.

Money back is a good thing, but the real lesson is not to get caught in the first place. Gearing substantially increases the risks of any investment and should be undertaken with caution and full knowledge of what can go wrong.

Read more: http://www.brisbanetimes.com.au/mon...n-the-works-20120925-26hww.html#ixzz27fVM8VLo

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"ASIC case against Storm inaccurate: banks

TWO banks have told a court the Australian corporate watchdog's case against them over the collapse of Storm Financial was full of "irrelevance and inaccuracy".

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More by Christine Flatley @ theaustralian.com.au

'Single mum with few assets in financial strife after $2m line of credit to invest with Storm Financial turns sour

A SINGLE mother with few assets and huge loans was trapped in "a dreadful debt spiral" after Macquarie Bank granted her a $2 million line of credit to invest in Storm Financial, a Brisbane Federal Court heard this morning.'

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More @ heraldsun.com.au

maccka said:

Solly,

How would one obtain a copy of the transcripts? How long does it take for them to be released after each court day?

Maccka

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Hi Maccka

I sent a DM to you on the other platform, being a non-party you may need deep pockets

S

"The Storm Financial system was one of considerable merit and worthy of emulation by others in the financial sector?" ASIC 2008

It appears that when ASIC did a full compliance audit of Storm in 2008 when that firm was considering a float, ASIC commented that "The Storm Financial system was one of considerable merit and worthy of emulation by others in the financial sector?" This came out in Court yesterday when the Macquarie Bank's lawyer was giving his opening address.

If the Regulator at that time came to this conclusion how the heck can people now say after the event that the investors that placed their trust in Storm should have known better when ASIC didn't?

There has been so much rubbish talked about Storm since that firm collapsed by the Media, some on this forum, the Banks, the Banks' lawyers, the politicians and the public in general about how foolish we all were! If that is so, how foolish were ASIC, the Banks that dealt with Storm, and this and former Governments that allowed inadequate regulatory laws to exist that permitted financial advisers and Banks to operate unchecked?

If the Regulator was unable to identify any wrongdoing by Storm shortly before that firm collapsed, how can the Storm investors that relied on Storm's financial advisers (so-called experts in their field) be expected to know any differently? Here we have a firm that was lauded by the Regulator as a shining light then and is now being described by ASIC's lawyer as something akin to Scientology! This has to be one of the biggest about-faces in ASIC's history!

The truth of the matter is that we should be suing ASIC as well as the Banks because they are equally to blame. Better still, if the watchdog has no teeth and sleeps all the time, maybe it's time to put it to sleep permanently and get another watchdog that is alert and can give the wrongdoers a considerable bite?

What a "Mickey Mouse" financial system this really is! What a piss poor way to control the people in it! What a way to run a country!

http://www.couriermail.com.au/money...stors-in-control/story-e6freqox-1226483437690

Storm praised by ASIC Investors 'in control'
Liam Walsh
The Courier-Mail
September 28, 2012

THE corporate watchdog was trying to pin an ``unprecedented'' case on banks in alleging they were tied up in a managed investment scheme with Storm Financial, a court was told yesterday.

The Federal Court in Brisbane also heard investors with the financial advisory business Storm were free to make decisions once given advice.

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Only going by what has been reported in the media but it seems to be a neat piece of covering of collective backsides by Storm. Praised for providing supplementary advice statements.

According to the article a model that can be used by other licensees to assist in servicing the mass market a [ASIC] letter of 2007 advised.

How wonderful but ticking off advice statements still don't mean that the strategy, which Storm Financial devised all by its lil' old self, was also ticked off by ASIC. Not its role and never has been. Upto the investor to consider and accept or reject advice. Whatever rules which have been imposed or are about to be introduced will not change that aspect one iota.

Judd said:

http://www.couriermail.com.au/money...stors-in-control/story-e6freqox-1226483437690




Only going by what has been reported in the media but it seems to be a neat piece of covering of collective backsides by Storm. Praised for providing supplementary advice statements.

According to the article a model that can be used by other licensees to assist in servicing the mass market a [ASIC] letter of 2007 advised.

How wonderful but ticking off advice statements still don't mean that the strategy, which Storm Financial devised all by its lil' old self, was also ticked off by ASIC. Not its role and never has been. Upto the investor to consider and accept or reject advice. Whatever rules which have been imposed or are about to be introduced will not change that aspect one iota.

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Hi Judd

"Up to the investor to consider and accept or reject advice. Whatever rules which have been imposed or are about to be introduced will not change that aspect one iota."

Have you ever signed an agreement with anyone or any corporation? If so, does it state on such what you are actually agreeing to? To extend the argument further, if what you have agreed to is misleading or incorrect, do you have a legal recourse? The answer is, of course, that you do because in contract law it's know as "MISREPRESENTATION".

I don't understand why you and others continue to ignore such a fundamental aspect of all this? Giving bad advice is not a crime! On the other hand, misleading people intentionally or otherwise is a breach of contract. That's why Storm and, by default, the Banks are now facing the music.

Is there anyone else on this forum that has missed this fundamental point of contract law? Is there anyone else on this forum that cannot differentiate between giving "financial advice" and giving "misleading advice and "misleading statements of facts"? Is there anyone on this forum that really understands what is taking place in the Court at this time?

This "advice" argument has been done to death. The day Storm misled its clients was the day this argument died. Bury it and let it rest in peace!

Frank Ainslie said:

Hi Judd

"Up to the investor to consider and accept or reject advice. Whatever rules which have been imposed or are about to be introduced will not change that aspect one iota."

Have you ever signed an agreement with anyone or any corporation? If so, does it state on such what you are actually agreeing to? To extend the argument further, if what you have agreed to is misleading or incorrect, do you have a legal recourse? The answer is, of course, that you do because in contract law it's know as "MISREPRESENTATION".

I don't understand why you and others continue to ignore such a fundamental aspect of all this? Giving bad advice is not a crime! On the other hand, misleading people intentionally or otherwise is a breach of contract. That's why Storm and, by default, the Banks are now facing the music.

Is there anyone else on this forum that has missed this fundamental point of contract law? Is there anyone else on this forum that cannot differentiate between giving "financial advice" and giving "misleading advice and "misleading statements of facts"? Is there anyone on this forum that really understands what is taking place in the Court at this time?

This "advice" argument has been done to death. The day Storm misled its clients was the day this argument died. Bury it and let it rest in peace!

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No Frank. We shall need to agree to disagree. I totally reject your spurious arguments. Under NO circumstances should the person signing on the bottom line and handing over their money totally abnegate responsibility. That is what you seem to be suggesting. Advice is not a decision. The decision to accept or reject advice rests with the investor.

Now off to prepare for a more exciting time to visit my daughter who is overseas. Farewell, Frank. I shall probably not think of you in my absence.