Some years ago I discovered that the tax-driven investors in Timbercorp had stumbled into a ponzi scheme. Normally I can unravel these schemes quickly — but this one took me three days!
Here’s the problem:
Someone owned the land
Perhaps half the land was never purchased
Someone else owned the trees and grape vines
Someone else has the right to pick the fruit and chop down the trees
Someone else had the right to sell the end product
Here is some commentary:
Timbercorp investors face bankruptcy, after collapse of timber business. Senate Inquiry calls for investigation into their legal firm who failed in a class action and gave them bad advice to not service their loans until the results of the trial.
ABC Rural News
A Senate committee has called for a compensation fund for some of the victims of the collapsed forestry and horticulture managed investment schemes (MIS).
The committee has slammed Bendigo Bank for how it secured its own profits at the expense of failed investors, and calls for Bendigo to compensate them.
The two year long inquiry, which had nine postponements for reporting, has been tabled on the parliamentary website and makes 24 recommendations.
"Bitter Harvest" recommendations include a call for legislation to ensure that "loans for investment" are subject to responsible lending laws, to address the existing anomaly in federal and state laws.
ABC Inside Business
Timbercorp attracted 14,000 investors who borrowed millions from Timbercorp Finances to make their investment, paying high up-front and trailing commissions for the financial advice.
There are still 2500 people on Timbercorp Finances' loan books, and because of penalties for late payment, they now owe $380 million.
Even nine years after Timbercorp and Great Southern brought in the liquidators, debt collectors are still hounding the investors to pay the maintenance on their loans.
Victims have pleaded for justice, in the form of punishment of the financial advisors, and compensation for how the schemes and the regulators that let them down.
But while they won't get justice, the former chairman of the committee, Labor Senator for NSW Sam Dastyari, said they should get some financial compensation.
"I don't believe they're ever going to get the justice they deserve, but what we're now talking about is economic justice," he said.
"The reality is they are victims who were taken for a ride, used and abused.
"The real damage, is the psychological damage to peoples' lives and marriages, that will never be compensated for.
"Can we get enough economic justice, but that will be very difficult."
The recommendation is that Bendigo Bank set up a compensation fund for Great Southern victims, because of how the two have treated victims/investors.
"It's been deplorable, Great Southern and Bendigo Bank's involvement, how they secured themselves in all of this, how they've profited, how they've behaved, it's been reprehensible," Senator Dastyari said.
"ANZ, and its association with Timbercorp, has not showered itself in glory, but at least they've gone through the process through the liquidators Korda Mentha of setting up hardship provisions and a hardship fund, but Bendigo is not prepared to do that."
ABC TV News
Communities still recovering from collapse of Managed Investment Schemes
The collapse of these schemes by 2009 left rural communities with unmanaged timber, the scars of overpriced irrigation water and gluts of horticultural produce like grapes.
But farmers are unlikely to see any joy in this report. Senator Dastyari said the agribusiness MIS were a sham and communities were destroyed as a result. "There really is no way to compensate them, and these entities don't exist anymore, Great Southern and Timbercorp, so there is no one to pay compensation to farmers and their communities," he said.
The list of failed schemes is on the Australian Tax Office website. It includes;
Timbercorp forestry and olives and almonds,
Great Southern forestry,
Gunns forestry,
Environinvest's tomato,
Palandri Wines,
Arafura Pearls,
Australian Bight Abalone,
Forestry Enterprises Australia
Rewards Group - citrus, berries and tropical fruit,
Willmott pine Forests Ltd,
Coonawarra wines.
Bendigo Bank’s role
IT seemed too good to be true, and it was.
Thousands of ordinary Australians now risk losing their homes after the collapse of Managed Investment Scheme giants Timbercorp and Great Southern.
A Senate inquiry heard in Melbourne yesterday how ANZ was still pursuing the thousands of Timbercorp “victims” on its loan books.
Bendigo and Adelaide Bank is doing the same with the money still owed from the Great Southern collapse.
The Senators came asking questions about how so many people could still owe money after they were convinced by financial investors to get involved in something they couldn’t lose on.
The many small investors want their debts wiped, or at least the interest charges dropped.
The Federal Government’s involvement is also being questioned after it created the tax concessions which set up the schemes in the first place.
The inquiry has heard the financial advisers could get up to $15,000 for each new client they signed.
Timbercorp and Great Southern both loaned the investors the money to buy into their failed schemes involving forestry, olives and almonds.
Many of the failed agricultural enterprises were based in Victoria and several, under new ownership, are now operating profitably.
The two MIS companies collapsed into bankruptcy in 2009, basically when the streams of investors’ cash dried up.
Timbercorp’s lending arm was bankrolled by ANZ, which now wants its money back.
On its own calculations this week, ANZ is still owed $193.5 million relating to the Timbercorp group and ANZ said it had not provided direct loans to individual investors.
Ordinary people, not necessarily from the big end of town, but mums and dads looking for a little “legal” tax avoidance, have been paying interest and penalty charges ever since.
In some cases what began as a debt of about $50,000 is now over $200,000.
ANZ failed to attend yesterday’s Melbourne hearing but promised to make a statement at a further hearing next month.
On some estimates 20,000 people risk losing their homes over the joint MIS disaster.
Liquidator KordaMentha is pursuing the investors for their owed money, plus five years of interest, on behalf of ANZ.
ANZ said it has a duty to its shareholders to recoup as much money as possible from its failed investment.
During the hearing, former Timbercorp executive Andrew Peterson said by February 2007, outstanding loans in the scheme amounted to $24.5 million.
Five months later it was $49 million.
Mr Peterson said despite the ballooning debt, ANZ continued to put money in the scheme.
ANZ said in a statement earlier this week: “All of Timbercorp’s lenders had a positive view of the group until late 2008 when the Harvard sale transaction fell through following the collapse of Lehmann Brothers.”
It was the onset of the global financial crisis.
The ANZ statement said claims made by the investors of Timbercorp has been extensively reviewed by various courts and has been dismissed at every level with no allegations of wrongdoing substantiated.
Peter’s Conclusion
Bendigo Bank has acted with the greatest possible avarice and greed in this matter. I will be forwarding this article to the Haynes Royal Commission with the suggestion that the banking license of the Bendigo Bank be revoked permanently!
Peter