No-one has done more to bring unscrupulous finance brokers in WA to task than consumer campaigner Denise Brailey who writes regularly for Crikey and today updates us with a tribute to some of the brass plaques strewn across the state which have cost elderly investors tens of millions.

Sorrento Beach Resort

Plaque unveiled by (deserve to be) ex-Premier of WA Richard Court.

A disastrous venture, involving a prominent ex QC pollie and his fellow winery promoter partner, both of whom provided further spectacular losses to several elderly investors. The chances of these losses being recovered is very slim indeed. Five investors were persuaded to indulge in a rescue plan, which required surrender of their titles in order to demolish their own units in order to make way for further development on the site. Those investors claim they were coerced into the relinquishing of security on the basis “all of those involved would do likewise.”

To their astonishment two years later, they found the developers and entrepreneurs had retained their own holdings. The five investors ended up with no security, and none of their retirement funds were returned. The effects of the betrayal were profound. The investors were generously given shares in a company which collapsed shortly after the promoters had rescued their own “fees.” We presume these fees were for the “expert advice” on how to demolish your own nestegg. One investor remembers the “opening ceremony.” Lavish trappings included curvaceous women dressed as “mermaids” frolicking in the pool. Ex WA Premier extraordinaire, Richard Court, son of Sir Charles, happily attended the ceremony praising the “promoters” of development in Western Australia, and assisted by unveiling another of his memorable plaques on the wall of the Sorrento Beach Resort. At least the investors have something to remember him by.

Powerboat Clubhouse, Burswood Gardens, Perth

Plaque unveiled by Richard Court ex Premier of WA.

The plaque names three of the worst names in the finance broking scandal. Between them over $30 million has disappeared and they are still permitted to continue in the real estate industry. These three kings of grief managed to borrow from three of the most notorious brokers, who are currently facing charges and more are expected. The borrowers also failed to complete the clubhouse an eyesore on the banks of the Swan. Our ex Prem unveiled this plaque 16 days after all three names were read out in Parliament on 12th November, 1998. Richard argued in their defence on this historical occasion, then two weeks later proceeded with the ceremony, but he assisted in the process of retrieving funds for his own relatives. Perhaps he requested others indulge in some “lean-on processes” for the sake of family harmony. No such personal assistance for the rest of the peasants.

Preston Vale Vineyard

Plaque unveiled by Hendy Cowan – ex Leader of the WA National Party

Two years ago WA Parliament was being advised of the hopelessly structured finance raising activities of the brokers involved in the Preston Vale Vineyard. A 30 minute MPI (matter of public importance) in Parliament revealed all the sordid details. ASIC were informed and sent copies of the speech. Meanwhile the plaque laying ceremony went ahead, despite the warnings to the pollies, the police, the regulatory authorities and whoever else cared to listen. The public were left blissfully unaware. Brokers poured retiree funds into the venture. This week the bubble burst. Now read on.

Withering on the Vine

WA Business News, 15/8/02, Pg 9

Editorial By Mark Pownall

I was interested to learn that the financial failings of companies associated with WA’s biggest vineyard development have attracted more than a passing interest from the State’s self-appointed corporate watchdog, Denise Brailey.

Ms Brailey’s dogged pursuit of the finance brokers was arguably, what brought down the Court Government. Well some of those finance broking connections twist and turn their way into the complex web of dealings that surround the Preston Vale Vineyard development at Donnybrook. Put together as a tax effective investment in 1998-99, Preston Vale was close to being the most expensive development of its type, attempting to raise $41.4 million over three years at a cost of $156,545 per hectare to develop.

That’s almost four times the amount Agriculture WA suggested was needed to develop a basic vineyard, and well above the $65,000/ha leading winemakers suggested was necessary to create a top vineyard.

No wonder in November 2000 (then) Opposition fair trading spokesman, and current WA Attorney General Jim McGinty, suggested in Parliament that, of the $28 million raised more than a year earlier, only $9 million was spent on the business of growing grapes. At the time, those figures were disputed by the promoters, even though independent valuations in their own prospectus showed that the fully developed vineyard (had the full $41 million been raised) was only going to be worth $14.1 million after five years.

Well whatever it cost, it has all turned out to be something of a financial disaster. Several companies involved are in some state of receivership or administration, including key company Southern Wine Corporation, the manager of the Preston Vale Vineyard, which is controlled by listed mining junior Tuart Resources.

In an ASX announcement, Tuart has revealed that SWC doesn’t have enough money to keep managing the vineyard, even though it has only just started the fourth year of the project (when it was meant to start making a profit). It is asking for the ‘growers,’ jargon for investors in the grape growing side of the business, for a further $2 million to help them. To some people that might look like throwing good money after bad. Alternatively, the managed investment scheme could be ended.

According to Tuart, the death of the MIS would mean the “ownership structure of the vineyard will be simplified,” enabling the company “to more readily deal with its beneficial interest in the vineyard.” Reading between the lines, that sounds like selling the land might be an option. Given SWC holds 60 per cent stake in the land (including the vineyards), that might be a course Tuart would want to pursue. Of course that might not be in the original MIS investors’ best interest, particularly when the Australian Tax Office takes a dim view of any project that fails, for whatever reason, to follow the plan outlined in the prospectus.

What a mess! Maybe the prospectus had a clause that allowed the investors to sack the manager and take control of their investment. That would need someone to get 800 or more investors together to take on the incumbents, and who would want to organize something like thatMs Brailey?

ENDS

Another little gem on ASIC

Poor ASIC – we believe they are suffering from irrelevance.. Their “monitoring” efforts are second to none. Monitoring (watching with interest) is something ASIC does so very well. Activity is their low point. In WA, ASIC are currently holding “forums” to teach investors how to protect themselves against scams and swindlers. Speakers, including the Commish from WA ASIC, and head honchos of the Institute of Chartered Accountants are providing information and tips on key management issues. They believe this process of talking directly to the public (not listening of course talking) attract only about 40 persons to each seminar. Those who attended are reportedly upset by the lack of understanding. The seminars are attracting those who have lost their savings rather than retirees who are fortunate to have some funds left. ASIC are missing the main point of course: that of corporate fraud. The public wanted to know how they differentiate between the 10% rogues and the 85% professionals who are running honest practices. (the missing 5% are those on the border of insolvency and may be in line to commit an offence.). The fact that the rogues are still out in the public arena and ASIC are aware of their existence, is cause for alarm.

The main issues advertised are: how to identify and avoid scams, how to choose a licensed financial adviser, and how to make informed decisions about investments. The one person who may be able to provide answers to corporate surveillance practices was not invited to speak at these junkets: yours truly. Tax payers are funding this fiasco and retirees are closely monitoring the watchdog. Is this the “we are doing something” approach? Perhaps we need a “best practice guide” for the regulatory regimes, whilst they are still in training.

Denise Brailey

President Real Estate Consumers Association