Trio Capital victim Russell Smith was compensated for investing in the fraudulent Astarra Strategic Fund, but his fight is not over. He wants all Trio schemes, not just Astarra, properly investigated and believes all victims, no matter how they invested, should be compensated for the $176 million fraud that swindled thousands of Australians out of their superannuation savings. He believes regulators were ‘‘asleep at the wheel’’ and is calling for a full inquiry into the Trio debacle. CYDONEE MARDON reports.
Trio Capital victim Russell Smith is one of the so-called lucky ones who received compensation for investing in the fraudulent Astarra Strategic Fund, yet his fight is far from over.
He says APRA’s refusal to support a claim for compensation over Trio’s investments in Ualan Property Holdings is further proof the regulators were ‘‘asleep at the wheel’’ and want to cover up their failures.
Mr Smith wants all Trio schemes, not just Astarra, properly investigated and believes all victims, no matter how they invested, should be compensated.
''The whole system needs to be pulled apart and reformatted with stronger laws.''
By the time he retired in 2006, Mr Smith and his wife had $1.2million invested, roughly 60per cent of which was invested in funds where Trio Capital was the responsible entity.
About 30per cent of Mr Smith’s money was in Astarra, 19.5per cent in Millhouse Private Equity Trusts and 14per cent in Ualan.
Mr Smith received compensation for his Astarra investment and was shattered to learn that Trio’s acting trustee, ACT Super, was giving up its fight for compensation for those invested in Ualan.
The sticking point was APRA’s refusal to support a draft application put forward in April this year for consideration by the Finance Minister Mathias Cormann.
‘‘It became clear that there was a divergence of opinion between ourselves and APRA as to whether the conduct the subject of the application met the relevant standard required to establish ‘fraudulent conduct’ within the meaning of the SIS Act,’’ acting trustee director Mike Hill said on Tuesday in a notice to investors on the Trio Capital website.
However, Mr Hill said in his notice to investors that ACT Super ‘‘remain of the view that it does’’. Despite its stance the acting trustee ‘‘formed the view that the minister, acting on APRA’s advice, would be likely to reject the application’’.
ACT Super always maintained it would be more difficult to secure compensation for Ualan compared with Astarra, for which it secured $70 million in government compensation.
‘‘Although the entirety of the Ualan investment has now been lost, the original investments made by the funds can, at least, be traced into a series of property developments in Australia,’’ Mr Hill said in the notice.
Market conditions in the Australian property market in the 2008-09 period contributed to the failure of the Ualan property investments and no criminal proceedings were commenced against the directors of Trio in relation to Ualan, he said.
‘‘Accordingly, no admissions of civil or criminal liability have been elicited in relation to Ualan from any party.’’
Astarra, on the other hand, involved ‘‘a complex series of transactions that resulted in members’ funds being invested into hedge funds in the Caribbean’’ and never recovered, Mr Hill said.
Criminal proceedings were brought against Shawn Richard in relation to Astarra and a Supreme Court judge noted there were strong reasons to believe Astarra funds were ‘‘invested fraudulently’’.
Mr Smith said the acting trustee’s announcement that it would not proceed without the nod from APRA was frustrating.
‘‘It is now quite clear that APRA want this quietly cleaned up so that they do not have to explain why they got it so wrong.’’
To add further insult, the investors who won’t be compensated had now lost $14million in costs, Mr Smith said.
The acting trustee’s report confirmed the $14million in costs incurred since ACT Super’s appointment in December 2009 had been borne by investors. It said a condition of its appointment by APRA was that it would be ‘‘remunerated on an hourly basis for the time spent on the acting trusteeship by its personnel calculated in accordance with the seniority of the staff who worked on the matter’’.
Mr Smith said the whole fiasco was another blow for investors and he called for a full inquiry into the Trio debacle.
‘‘There has been nothing done to ASIC who approved the licences without due diligence, to the APRA who monitored and audited Trio, the internal and external auditors who signed off on the figures, price and accounts,’’ he said.
Mr Smith sought answers from APRA but was told secrecy provisions prevented APRA and its officers from disclosing information relating to the supervision of a particular regulated entity.
APRA this week referred the Mercury to the Trio Capital website for the latest update.
‘‘What chance do you have when the regulator cannot or will not provide any answers to legitimate questions raised by those most affected by this sorry saga and theft of our funds,’’ Mr Smith said.
‘‘Unless the politicians change the laws then we will continue to see these types of occurrences in the future.
‘‘It cannot be stopped by making a few changes for financial planners. The whole system needs to be pulled apart and reformatted with stronger laws.
‘‘My major concern is that all those involved in this from the very beginning right up until now are exposed, brought to account, justice applied and compensation made available to all for each of the investments.’’
Acting trustee updates to Ualan investors via Trio Capital website
- September 3, 2012: Following examinations of Trio directors and employees in the NSW Supreme Court, ACT Super decides to proceed with an application for financial assistance under Part 23 of the SIS Act. The application is expected to be lodged within several months.
- November 25, 2013: APRA raises queries in relation to the draft about the interpretation of fraudulent conduct.
- April 17, 2014: In response to APRA’s queries, ACT Super redrafts the application and submits a revised final draft to APRA for consideration.
- October 23, 2014: APRA makes it clear ACT Super must establish an intent to defraud. However, the evidence doesn’t result in any admissions of fraudulent intent from any party. ACT Super decides not to finalise and submit the draft Ualan Part 23 application.
- November 24, 2014: Acting trustee ‘‘remains of the view’’ its application meets the standard required to established ‘‘fraudulent conduct’’ but confirms it will not lodge its application with the minister because APRA won’t support it. Acting trustee starts to wind up.