TrioFraudManualVictimsofFinancialFraud(VOFFInc)January2018

VOFF’sresponsetoASIC’sfailuresconcerningthedisappearanceofsuperannuationandinvestmentsavingsfromtheAustralianfinancial

system

JohnTelfordSecretaryVOFFInc

Email:johnt@1earth.net

ASICsaytherearenounresolved issuesaround theTrioCapitalLimited

fraud.VOFFstronglydisagree.

ASIC’swebsitestatesthatitsroleis,

‘…. an independent Commonwealth Government body. We are set up

under and administer theAustralian Securities and Investments

Commission Act 2001(ASIC Act), and we carry out most of our work

undertheCorporationsAct2001(CorporationsAct).

VOFF allege that in regards to the largest superannuation fraud in

Australian history, ASIC was directed by the office of Minister of

Superannuation, Bill Shorten to prosecute the financial advisor that had

recommendedTrioproductstotheAustralianWorkersUnion‘slushfund’.

Littleattentionwaspaidtothe internationalarchitectsof theTrio fraud

whilemuchattentionwasplacedonEnforceableUndertakings.

2

ThankyouVOFFIncmembers,•JennyButlerand•AndrewGreyForreviewing,editingandguidanceinwritingthisdocument.Alsothankyoutomyneighbourforofferingalaypersonperspective.

Content

Abbreviations-------------------------------------------------------------------------------page3

Reference–people-------------------------------------------------------------------------page4

TrioFraud–abriefsummary------------------------------------------------------------page5

1.1Introduction-----------------------------------------------------------------------------page6

1.2FAILUREASICignoredTriocrime--------------------------------------------------page9

1.3FAILURENoevidenceofaforensicinvestigation---------------------------------page15

1.4FAILURESystemicfailure-------------------------------------------------------------page21

1.5FAILUREShiftblame-------------------------------------------------------------------page35

2.1VOFFHistory---------------------------------------------------------------------------page45

2.2Superannuation------------------------------------------------------------------------page53

2.3Harmcausedbyfraud-----------------------------------------------------------------page58

3.1OfficialdocumentsaboutTrio-------------------------------------------------------page67

3.2FAILUREPaulRB&FrankRB--------------------------------------------------------page70

3.3FAILURENobackgroundchecks-----------------------------------------------------page86

3.4FAILUREMillennium-------------------------------------------------------------------page89

3.5FAILUREMatthewLittauer’ssuddendeath---------------------------------------page94

3.6FAILURELittauer’sbackground-----------------------------------------------------page99

3.7Marbella,Spain--------------------------------------------------------------------------page106

Expandedreferenceofnames-------------------------------------------------------------page111

3

AbbreviationsandkeydefinitionsACC AustralianCrimeCommission

AFP AustralianFederalPolice

AFSL AustralianFinancialServicesLicence

APRA AustralianPrudentialRegulationAuthority

ASF AstarraStrategicFund

ASIC AustralianSecuritiesandInvestmentsCommission

ATO AustralianTaxationOffice

AUSTRAC AustralianTransactionReportsandAnalysisCentre

CNMV ComisiónNacionaldelMercadodeValores(Spain)

FBI FederalBureauofInvestigation

FINOP FinancialandOperationsPrincipals

FINRA FinancialIndustryRegulatoryAuthority

FMA FinancialMarketAuthority

FMANZ FinancialMarketsAuthority(NewZealand)

FOI FreedomofInformation

FOIA FreedomofInformationAct(UnitedStates)

FOIAct FreedomofInformationAct1984

GCSL GlobalConsultantsandServicesLimited

IOSCO InternationalOrganisationofSecuritiesCommissions

PJCreport TheParliamentaryJointCommitteeonCorporationsandFinancialServices

InquiryintothecollapseofTrioCapitalMay2012

NASD NationalAssociationofSecuritiesDealers

OAIC OfficeAustralianInformationCommissioner

PI ProfessionalIndemnity

PDS ProductDisclosureStatement

RE ResponsibleEntity

SEC SecuritiesandExchangeCommission(US)

SFC HongKongSecuritiesandFuturesCommission

SISAct SuperannuationIndustry(Supervision)Act1993

SMSF Self-managedsuperannuationfund

Trio TrioCapitalLimited

VOFF VictimsofFinancialFraud

WGAM WrightGlobalAssetManagement

WGI WrightGlobalInvestmentsPtyLtd

4

Referencetosomeofthepeoplementionedinthisdocument.Expandedreferenceatendofthisdocumentseepages111to118.NamesareinAlphabeticalorder.Bell,FrankRichardmanagedTrio’sunderlyingExplorationFund.

Cormann,MathiasMPsatonsomeTriohearingandbecamefamiliarwithsomeofTrio’sissues.

Flader,JackW.Jr.AmericancitizenandAttorney,livesinAsia.

Fletcher,PaulMPonPJCCommitteeandbattledforARPGrowthvictims.

Frazer,TimothyStevenAccountantresponsibleforTrio’saudits.

Garling,PeterJusticeoftheSupremeCourtofNSWwhosawthecaseagainstShawnRichard.

Hart,StevenIrvineaccountantembroiledintaxfraudagainsttheCommonwealth.

Littauer,MatthewNguyenFounderoftheTrioscheme.

Medcraft,GregformerChairmanofASIC.

Meerveld,CarlassociateofFlader,basedinHongKong.ManagedtheExplorationFund.

Millhouse,DaviddirectorofTrio.PartoftheTrioacquisition.

O’Neill,DeborahMPChairofthePJCInquiry.

Phillpott,RexformerassistantcommissionerattheAustralianTaxationOffice.AdirectorofTrio.

Provini,CharleschiefexecutiveofParadigmGlobalandUSassetconsultantforTrio.

Revell-Reade,JeffreyAustralian-bornbrokerwithassociationwithTriocharacters.

Richard,ShawnDarrellCanadianandprincipaldirectorofTriowhodeceivedeveryone.

Shorten,BillMinisterforFinancialServices&Superannuation.

Sutherland,JamesCampbellScottishaccountant.ContributedtothepurchaseofTrio.

Tarrant,Rossfinancialadvisorwhowasmadeintoascapegoat.

Unicomb,GlenforensicinvestigationforASIC.

Villavert,FlorissalegalcomplianceofficerforTrio.

5

TrioFraud–abriefsummary.

OrdinaryAustraliansdoingwhatthegovernmentsuggested,savingfortheirretirement, investedinto

theconservativeTrioCapitalLimited(Trio)products–regulatedandlicencedbyASICandAPRA.But

the financial regulators, the auditor, the Custodians, the Research Houses and the Star-rating firms

failed to identify that Trio had set up a fraudulent scheme in the Australian financial system. Total

failureofthesystemistestimonytoasystemicfailure.

From 2010 to 2012 the Minister of Superannuation and Financial Services, Mr Shorten and ASIC

deflectedattentionawayfromthecrimebypoliticizingtheTriomatter.

In2017twoimportantpiecesofevidencesawthelightofday.

1) InFebruary2017VOFF learnt thatanoverseasTriooperator in2010hadoffered tohelpASIC in

theirinvestigations,butASICrefusedhishelp.In2011ASICwithheldthatinformationfromthetrialof

theTrioperpetrator,ShawnRichard.Thisraises thequestionas towhetherASIC’s involvementwith

Triowasaninterferencewiththecriminalinvestigationandanobstructionofjustice?

2)October27th2017VOFFlearntthatMrShorten’sofficehadissuedadirectivetoASICtobringdown

Mr Tarrant. Mr Tarrant was the financial advisor who had recommended Trio to the AWU Officers

ElectionFund.TheAWUfundbecameexposedtotheTriofraud.

MrShortenasMinisterofSuperannuationdidnotdisclosehishistorywiththeAWU,orthattheAWU

fundwasexposedtotheTriofraud,althoughhewasinchargeoftheTrioinvestigations.

MrShorten’spoliticizingtheTriomatterisperceivedasaformoftamperingwithacrime.Hepointedto

“poorfinancialadvice”;suggestedSMSFswere“swimmingoutsidetheflags”;saidthatAPRA-regulated

fundslostmoneyfor‘nofaultoftheirown’buttheSMSFsanddirectinvestorsplacedtheirsavingsinto

‘troubled funds’andare thereforeresponsible for theirown losses.ASICandMrShorten ignoredthe

Triocrimeorbotheredtocarryoutaproperinvestigation.

DidASICandMrShortenbringdown1financialplanneroutof155asretribution?

6

1.1IntroductionThePJCReportpointsoutthat,

‘nearly6,090AustraliansinvestedinTrioandlosttheirmoney.5,400ofthoseAustralianshad

theirmoneyinvestedinTriothroughAPRA-regulatedsuperannuationfunds.Oftheremaining

690 Trio Capital investors, 415were direct investors, and around 285 investorswere in self

managedsuperannuationfunds(SMSFs)’.1

ThePJCadded,

‘theAPRA-regulatedfundsthatinvestedintheseschemesreceivedfullcompensationunderthe

provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act).’… ‘The SIS Act

excludesSMSFsfromfinancialassistancewherecertainsuperannuationentitieshavesuffered

lossasaresultoffraudulentconductortheft’.2

Victims of Financial Fraud’s (VOFF Inc) are pursuing justice over the Trio Capital Limited (Trio)

scheme,atrustfund,discoveredinSeptember2009tohaveoperatedfraudulentlyoveritsoperational

life(2004to2009).Triowasnotjustanyfraud.ItchangedtheAustralianfinancialsystemlandscape.

TheTriofraudwasoftencitedwithcollapsedcompaniessuchasWestpointandStormFinancial.There

isnoevidencethatathoroughforensicinvestigationwasevercarriedoutintotheTriofraud.Itremains

unknownwhyASICneverquestionedthedirectors thatoperatedTrio’soverseas fundswhere$70to

$80mAustraliandollarsdisappeared.

ASICsaytherearenounresolvedissuessurroundingTrio.VOFFdisagree.

In2016new informationcametoVOFF’sattention fromGuernsey.3ASICwithheldevidence fromthe

court hearing before Justice Garling in the NSW Supreme Court in 2011. 4 ASIC also withheld

informationfromthePJCInquiry-2011toMay2012.

Australians are denied an accurate acknowledgment of the weaknesses in the financial system. In

respecttotheTriofraud,8%oftheTriovictimswereblamedand2financialadvisorsoutof155.

InAustralia, crime against the Commonwealth is handleddifferently comparedwith a crime against

ordinarycitizens–seeVOFFPressReleasedated21.05.17.5

1ParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintothecollapseofTrioCapitalMay2012page2PJCReportMay2012page151.3VOFFPressReleaseSept252017http://www.mysuperrights.info/resources/VOFF%20Press%20Release%20Sept%2025%202017.pdfhttp://tinyurl.com/yb5l88yp4ReginavShawnDarrellRichard[2011]NSWSC8665http://www.mysuperrights.info/media-release-p3.php

7

Forexample,theAustralianFederalPolice(AFP)carriedoutathoroughinvestigationintothealleged

$165mtax fraudandproduceddetaileddiagramswiththeexplanationaboutwhathappened.Onthe

otherhand,ASIC’s so-called investigationofTriohasnodiagrams,no informationorevidenceabout

howtheTriomoneydisappearedandnothingaboutthemoneytrail.

Duringthelastthreeyears,VOFFlodgedcomplaintstotheCommonwealthOmbudsman,theAttorney

General Office and the Independent Commission Against Corruption (ICAC) about Mr Shorten and

ASIC’shandlingoftheTriofraud.ThefollowingcorrespondenceexampleshighlightVOFF’sfrustration.

OnJanuary14th2014MichaelSmith&BobKernohanon2GBradiodiscussedMrShorten’stieswiththe

AustralianWorkers’Union slushFundandhowMrKernohanapproachedMrShortenover theAWU

slush fund fraud,butwas told itsbest to forget about it.6VOFFbecameconcerned thatMrShorten’s

handling of the fraud in the AWU might be repeated in Trio. VOFF wrote to the Commonwealth

Ombudsman,letterdatedJanuary28th2014ofourconcerns.

OnFebruary4th2014WaleriaSiuta,SeniorInvestigationOfficersaid, ‘TheofficeoftheCommonwealth

Ombudsman’s investigates complaints about the administrative actions of Australian Government

agencies (that is ‘Federal’ or ‘Commonwealth’ Government agencies). ….‘Please note that our office is

unabletoinvestigatetheactionsanddecisionsofMinistersorMembersofParliament.Complaintsabout

legislationarebestdirectedattherelevantFederalMinisteroryourlocalMemberofParliament.Itisour

office’sroletoinvestigatecomplaintsabouttheadministrativeactionsofAustralianGovernmentagencies,

ratherthanthelegislationthatguidestheactionsoftheagency.’

OnFebruary10th2014,WaleriaSiutaprovidedSection5(2)oftheOmbudsmanAct1976,showingthe

reasonswhytheOmbudsmanOfficewillnotinvestigateourcomplaint.

OnNovember 20th 2014VOFF informed the ICAC of ameeting between2VOFFExecutivemembers

withtheExecutiveDirectoroftheAssociationofIndependentlyOwnedFinancialPlanners(AIOFP)at

theRadissonHotelSydney.VOFFlearntatthemeetingofMrShorten’sdemandfor$3,000incashina

paperbag.TheissueofMichaelSmith&BobKernohanon2GBradio7(January14th2014)talkingabout

howMrShortenignoredtheAustralianWorkers’Unionslushfund.

OnJuly3rd2015,JDHeydon,Commissioner,said,‘IregretthatitisnotpossiblefortheRoyalCommission

toinvestigateMrShorten’sconductinthisrespect.MrShortenceasedtobeatradeunionofficialin2007.

HisbehaviourasMinisterforSuperannuationin2012isoutsidethecommission’sTermsofReference.’

On April 27th 2015 VOFF informed ICAC about potential corruption in superannuation and ASIC’s

failure todoanything.TheexampleVOFFprovidedwashow in2007AustcorpGroupredeemed$30

6http://tinyurl.com/y7d3jxlg7AnthonyKlan‘Cleaneventstafflost$400munderdealbyBillShorten’sAWU’July8,2015http://tinyurl.com/hwqmqae

8

million for its 700 investors. Then in 2009, theMeat IndustryEmployees’ Superannuation Fund lost

$30millionitinvestedintoAustcorp.VOFF’sletterprovidedalinktoa15-minuteaudiofromVOXFM

Radiothatraisedtheconcern.

On May 1st 2015 Linda Madgwick, Senior Assessment Officer said, ‘that the Commission’s role is to

investigate and expose corrupt conduct in the NSW public sector, as defined in the Independent

Commission Against Corruption Act 1988’. …. ‘unfortunately, as the concerns you have raised do not

involveaNSWpublicauthorityorNSWpublicofficial,wearenotabletopursueit’.

OnMarch 24th 2016 a complaint about some of theweaknesses of the financial systemwas sent to

GabrielleUptonMP,attheAttorneyGeneral’sOffice.OnApril20th2016TheAttorneyGeneral’sOffice

said, ‘Unfortunately,theAttorneyGeneralisunabletoassistinsuperannuationmatters.’…‘Itmayalsobe

appropriate for you tobeguidedby independent legaladvice regardinganyotheroptions thatmaybe

availabletoyou.Iattachafactsheetonsourcesoflegalassistancethatmaybeofassistancetoyou’.

OnApril1st2016KellyO’DwyerMP,saidinamediastatement,"TheGovernmentconsideredtheaction

takenbythefinancialregulators,ASICandAPRA,andissatisfiedthatinrelationtothecollapseofTrio,

bothregulatorscarriedouttheirrolesandresponsibilitiesappropriately,inaccordancewiththelawand

theregulatoryframework."8

MsO’Dwyerdidnotprovideanyevidencetobackupherstatement.

OnOctober23rd2017VOFF informedtheCommonwealthOmbudsmanthatASICwithheld important

informationabouttheTriofraudfromtheNSWSupremeCourt(NSWSC).OnOctober25th2017Ellisha

Hill,ActingDirectorfromTheCommonwealthOmbudsman’sOfficesaid, ‘Wecannotinterveneincourt

matters.IfyoubelieveASICdidnotproviderelevantinformationtothecourt,thatwouldbeamatterfor

the court and the parties involved in the dispute. I can only suggest you seek your own legal advice or

makefurthercontactwithMembersofParliament.’

BecauseASICfailedtoprovideevidencetotheNSWSCthatmayhaveaddedtotheunderstanding

ofthecrime,didthisdenytheTriovictims,honestandfairtreatment?

Itwasa2010 letter that ledVOFF todiscover thatASICwithheld information fromtheNSWSC. The

letterbytheGuernseyFinancialServicesCommission(GFSC)concernedcorrespondencebetweenMr

CarlMeerveldandASIC.MrMeerveld,wasbasedinHongKongwhenheoperatedtheTriounderlying

fund.About2008hebecamearesidentinGuernseyandappliedtobecomeaDeputyin2016.Citizens

inGuernseyfoundoutabouttheconnectionbetweenMrMeerveldandtheTriofraudinAustralia.This

causedconcernandin2016MrMeerveldpresentedhisGFSCletter,likeacleanbillofhealth,toprove

that he tried to offer ASIC his help in 2010 but ASICwasn’t interested.MrMeerveld became the St

8GovernmentdecisiononfinancialassistancerelatingtothecollapseofTrioCapitalhttp://kmo.ministers.treasury.gov.au/media-release/032-2016/

9

Sampson'sDeputy.VOFFreceivedacopyoftheGFSCletterinearly2017.

InadditiontoMrMeerveld’swillingnesstoassistASIC,MrMeerveld’sHongKongworkcolleague,Jack

Flader, inMarch 2010, provided the SydneyMorningHeraldwith information about Trio to set the

publicrecordsstraight.

Two of the key overseas Trio operators from the largest superannuation theft inAustralia’s history,

offered their assistance to Australia in respect to an investigation into themissingmoney and ASIC

showedno interest.Furthermore,ASIC failed to informtheParliamentary JointCommittee thatwere

assigned to investigate the fraudandASIC failed to inform theNSWSupremeCourtaboutMrFlader

andMrMeerveld’swillingnesstoassistintheTrioinvestigation.

InAugust2011attheNSWSCtrialoftheTrioperpetrator,(oneyearafterMrMeerveldofferedtoassist

ASIC)thecourtnotedthatMrRichardhadassistedASICbyprovidinginformationthatsavedASICfrom,

‘significant time and resources seeking to gather independent admissible evidence, including evidence

fromuncooperativewitnessesfromnumerousoverseasjurisdictions’.9

ASIC’somissionsdisadvantagedtheTriovictims.

ASIC’s failing to inform theNSWSC about the two cooperativewitnesses fromoverseas jurisdictions

who did indeed offer assistance, left the court in a position where it possibly overvalued the

significanceofMrRichard’sassistancetoASIC.ThecourtrewardedMrRichard’spleasofguilty,witha

discountof25%offhissentencewithanadditional12.5%discountallowedfortheutilitarianvalueof

thepleasofguilty.10

1.2FAILUREASICignoredthecrime.VOFFallegeASICfailedtoacknowledgetheTriofraudortheseriousnatureofthiscrime.

In the 1940s sociologist Edwin Sutherland noted that the treatment of white-collar criminals by a

biased criminal justice system, favoured the executive class over the common citizen. White-collar

criminals belong to the ‘respectable class,’ and their crimewas considered to be a victimless crime

activityandconsequentlywas‘notordinarilycalledcrime’.11

ASIChavenotallegedanywrongdoingbytheinternationalTriooperators.ASICcontinuetoprotectthe

confidentialityofcompanydocumentslongafterthecompanieshadclosedandtheoperatorshadlong

sincedisappeared.

9ReginavShawnDarrellRichard[2011]NSWSC866(12August2011)beforeGarlingJ.10ibid.11Fletcher,DrRobin,White-collar,Blue-collarandCollarlesscrime,DepartmentofCriminologyandSociology,MiddlesexUniversity.p4.Ref.SutherlandE.H.(1940)WhiteCollarCriminality,AmericanSociologicalReview,Vol.5,No.1(Feb.,1940),pp.1-12

10

At the NSW Supreme Court trial of the Trio offender in August 2011, Justice Garling expressed his

concernovertheabsenceofvictims,

68. The material tendered by the Crown did not establish the identity of any of the

victimsoftheoffencesofMrRichard.Obviously,itcanbesaidthatthosewhoinvestedinoneor

otherofthesuperannuationfundsoftheTrioCapitalGroupwhowerepromotedandrunbyMr

Richard were victims. However, no individual detail of the personal circumstances of those

investorsisprovided.

FurtheronJusticeGarlingadds,

74. The terms of the financial assistance grant announced by the Commonwealth

Governmentmeansthat,ifthereareindividualinvestorsorelseself-managedsuperannuation

funds who are victims of Mr Richard's conduct, they will be required to bear the losses

themselves.

75.However, I am quite uncertain as to the detail of any of these victimswho are not to be

compensatedbytheCommonwealthGovernmentandfindmyselfunableonthepresentstateof

theevidencetomakeanyspecificfindingaboutthepersonalcircumstancesofanyvictimofthe

offence.12

TheTriovictimswerenotinformedaboutthecourthearingortoldtheyhadRightsunderthe‘Victims

RightsAct’ tosubmita ‘Victims ImpactStatement’ to thecourt. JusticeGarlingcouldnothaveknown

thattheMinisterforSuperannuation,MrShortenmadediscreditingcommentsagainsttheTriovictims,

likesuggestingtheywereswimmingoutsidetheflags.

JusticeGarlingcouldnothaveknowthattheabsenceofTriovictimsfromhiscourtwasbecauseASIC’s

perceptionoftheTriofraudvictimswasfromthe1940sera-whenwhite-collarcrimewasregardedas

avictimlesscrime.

It took ASIC six months from first being notified that the Astarra Strategic Fund (ASF) might be a

potentialPonzi,untilASICacknowledgedthatthemissingassetswereindeedmissing.Fromthisearly

perioditappearsASICcompromisedanyproperinvestigationintotheinternationalcrimebyfocussing

on local issues. ASIC’s correspondencewith the Australian Federal Police (AFP), obtained under the

FreedomofInformation,datedJune21st2012,states,

‘Triowasa fundsmanagementgroupbased inAlbury,NSWandprovideda complex suiteof

managedinvestmentfundswhichwereheavilymarketedthroughseveralfinancialadvisorsin

Australia.ThesefinancialplannersearnedfeesandcommissionsbasedoninvestmentsintoTrio

funds…It is alleged that financial advisers provided recommendations to clients due to high

12ReginavShawnDarrellRichard[2011]NSWSC866(12August2011)beforeGarlingJ.

11

commissionswhichwerepaidbyTrioItisfurtherallegedthatthecomplexstructureoftheTrio

schemewasdesignedtoconcealfraudulentactivity.’13

ASICmakenomentionof theoverseasTriooperatorswhohadpreviouslybeen introublebeforethe

courtsintheUnitedStatesoverfinancialmatters.ASICalreadyknewabouttwoTriooperatorsbasedin

HongKongasASIChadtravelledtotheirHongKongofficesin2002tosecure100,000documentsthat

were used as evidence in a fraud against the Commonwealth matter. Why would ASIC keep such

important information out of reach of the AFP? The AFP document also noted that ‘the material

providedbyASICdoesnotprovidesufficientinformationtosupportaninvestigationintoanyCriminal

CodeAct1995offences…’

TheCompanyandSecuritiesLawJournal,apublicationthat isrecognisedasthe leadingcommentary

and analysis of Australian, International Corporate and Securities Law and the relevant regulatory

regimes published an article byWatson BJ in 1990, could well have been describing the 2009 Trio

fraud.Thearticlenotes,

‘These collapses have been accompanied by allegations of fraud and mismanagement by

companydirectors,ofimpropermovementoffundsbetweenassociatedcompaniesandentities

andfinanciallydisadvantageoustransactionsoutsidethecontemplationofshareholders.’14

Similartypesoffraudulentschemescanbefoundintheliteratureaboutwhite-collarcrime,suggesting

that criminologists, law enforcement and financial regulatory authorities knew about fraudulent

schemes.However,VOFFcannotfindanyevidenceofwarningspriortoSeptember2009informingthe

Australian public about international crime gangs who could exploit weaknesses in the financial

system. There were no warnings about the weaknesses in the Australian financial system due to

limitations of ASIC’s licencing and APRA’s governance. Also, nowarning that Part 23 of the SIS Act,

compensates APRA-supervised funds only. Perhaps the public were not given the facts about such

crimebecause,

“Law enforcement and regulatory authorities are, at best, reticent, possibly fearing that any

untowardrevelationswouldtriggeralossofconfidenceintheinvestmentindustrygenerally”.15

13VOFFFOINo373totheAFPJuly28201517pagesand2pageshttp://www.mysuperrights.info/resources/CRM2016-45%20Documents.pdfhttp://www.mysuperrights.info/resources/Schedule%20-%20Released%20Documents%20-%20CRM2016-45.pdf14ArieFreibergConfiscatingtheProceedsofWhite-CollarCrime.Ref.WatsonBJ1990CorporateCollapses:TimetoReintroducetheUltraViresRule?CompaniesandSecuritiesLawJournal,vol.8,p.240.15ArieFreibergSuperannuationCrimeNo.56AustralianInstituteOfCriminologyJune1996page2.

12

TheTriofraudsters,byexploitingweaknessesinthepoorlyregulatedAustralianfinancialmarketwere

able to redirectAustralian investors savings to their chosen locations.ASIChave failed to showhow

and why the funds disappeared. As of writing this document there is no evidence to show that

transparencyhasimprovedforconsumerstoseewhethertheweaknesseshavebeenfixed.

ASIC rely on self-reporting to notify them as soon as the financial market become aware of any

breach.16The United States Financial Industry Regulatory Authority, Inc. (FINRA) use a proactive

approach claiming its, “technology is powerful enough to look across markets and detect potential

fraud.”17

ThePJCquestionedwhyTrio, oneof the largest financial frauds inAustralianhistory,wasnotmore

thoroughly investigated by agencies such as the Australian Federal Police (AFP), and the Australian

CrimeCommission(ACC).18ASICsoughtlimitedinvolvementfromtheAFP19andtheACCinformedthe

PJCinquirythatitdidnotconductanyspecificinvestigationsintotheTriocase.20

ASIC’s submission to theParliamentary JointCommittee Inquiry into the ‘collapse’ofTrio, illustrates

thatASICisgivingnothingawayabouttheTriocrime.Its123-pagesubmissiondoesnotmentionthe

words: ‘predatory fraudsters’; ‘international gang’; ‘Ponzi’; ‘White-collar crime’; or even the word

‘crime’.

ASIC’savoidanceofcommentregardingfinancialfraudingeneralhascontinuedforthelast15years.In

that time ASIC has not recognised the problem of international predatory fraudsters, or the

collaborationoforganisedgangsoperatingsophisticated fraudulentschemesthatexploitweaknesses

in the financialmarkets. International law enforcement agencies and criminologists have recognised

theproblemsofpredatoryfraudstersandsophisticatedschemesforthirtyyears,whyhaveASICfailed

todoso?

Clearly,TriodemonstratestheurgentneedforASICtoaddressthis.

On the one hand, ASIC demonstrated that it knows very little about ‘financial fraud’ particularly the

sophisticated organised crimes carried out by international predatory fraudsters. However, ASIC

acceptsthataministerwithnobackgroundtrainingincriminologyorforensicaccountancyisableto

makeadecisionaboutasophisticatedorganisedcrime.16ASICMarketSupervisionUpdateIssue51October2014http://asic.gov.au/about-asic/corporate-publications/newsletters/asic-market-supervision-update/asic-market-supervision-update-previous-issues/asic-market-supervision-update-issue-51/17https://www.finra.org/about18TheParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintothecollapseofTrioCapitalMay2012ppxx&84.(PJCReport).19PJCReportpage142Ref.CommanderPeterSykora,ManagerofCrimeOperations,AustralianFederalPolice,CommitteeHansard,4April2012,p.25.20PJCReportpage143

13

The decision aboutwhether criminal activity has occurred in superannuation funds is left up to the

minister of superannuation, who has the authority to grant compensation to the APRA-supervised

fundsintheeventoffraud,“It isuptotheMinister’sdiscretionwhetherornottograntfinancialassistanceandtheamountofthat

assistance.Thismeansthatacourt,tribunalorotherdisputeresolutionbodydoesnothavetofindthat

therewasfraudortheft;rather,theMinistermustbeconvincedintheirownmindthatfraudortheftdid

infactoccur.”21

MrShorten,thethenMinisterforSuperannuationhadtheultimatesayaboutwhethertherewasfraud

in Trio. A decision that Mr Shorten made based on the ACT Super Report that has remained

confidential,restrictedandnotpubliclyavailable.EventhroughtheFOIprocesstheTriovictimsarenot

permittedtoseethereport.The$5millionACTSuperreportwentintoAPRA’shands,APRAaccepted

the document and theminister accepted the document. The document confirms ‘fraud’, opening the

wayforMrShortentograntcompensationunderpart23oftheSuperannuationIndustry(Supervision)

Act1993(SISAct).Althoughthereportfulfilleditsfunction,theinformationremainshighlysensitive.

Uncompensatedinvestorsinthesamefundthatlosttheirsavingstothesamefraudaredeniedaccess

toseewhatthereporthadtosayabouttheirlosses.

APRA appears to have ignored the Trio crime by its22andASIC’s lack of action due to limitations in

international jurisdictions as acknowledged during a 2013 Parliamentary Joint Committee Statuary

Oversight,

"Fraudulent activity where money is siphoned to other jurisdictions is an international problem. The

committeeisoftheviewthatMrMedcraft'snewpositionasheadoftheinternationalcorporateregulator

provides an opportunity to negotiate measures that would close the loopholes in international fraud

detectionandresponse."23

HowcouldASIChaveignoredtheweaknessesthatlimiteditsregulatorypowerswhen,it,atthesame

time licensedoperations to conductbusiness inASIC’sblind spots?WhatactionshaveASIC taken to

progressinternationalco-operationinthesematters?

KumarLagnesh’sthesisaboutTrionotesthatthe‘investmentschemethattheAstarraStrategicFund(ASF)usedto

deceptively transfer investment funds into overseas tax havens and defraud investors’. Lagnesh adds that ‘The

fraudulent conduct of ASF provides significant insight into the disregard of operational risks within managed

investmentschemesandpotentiallythebroaderfundsmanagementindustryinAustralia.TrioCapitalwaslicensedas

21ASICSubmissionPJCInquiryintothecollapseofTrioCapitalLimitedSept2011page50RefTreasury,ReviewintoPart23oftheSuperannuationIndustry(Supervision)Act1993,ReviewPaper,3June2003,p.522StuartWashingtonUproarasASICclearsmanbehindTrioscamJune6,2012http://www.smh.com.au/business/uproar-as-asic-clears-man-behind-trio-scam-20120605-1zude.html23ParliamentaryJointCommitteeonCorporationsandFinancialServices,StatutoryOversightoftheAustralianSecuritiesandInvestmentsCommission,Number2,May2013.page47

14

a superannuation fund trust and the responsible entity of various managed investment schemes with complex

structuresincorporatedinAustraliaandlinkedtotaxhavensinvariousjurisdictions...‘24ref&ref.

SincetheTrioschemeinSeptember2009wasreportedasbeingpotentiallyaPonzischeme,ASICdid

notinterviewtheoverseasTriooperators.ASICenteredintoarrangementswiththeperpetratorofthe

Triofraud,ShawnRichardbutthepublicweredeniedanyevidenceofwhatarrangementsweremade.

ASIC’sinteractionswithTrioanditsentitiesisnotpubliclyavailable.AsofJanuary24th2018VOFFhave

submitted258FOIstoASISofwhich38oftheFOIsreceivedsomeformofdocumentation.

VOFFreleasedthefollowing9PressReleasesin2017.Theycoversomeof theunresolvedissuesthat

have arisen from the Trio crime. Because the crime in Australia was ignored, unresolved issues

appearedontheothersideoftheworld.NowresidentsofGuernseyareconcernedaboutwhatmight

unfoldoveroneoftheTriodirectorslivingintheirmidst.VOFFsuggestthatiftheTriocrimehadbeen

approached professionally from the start, there would be no need for the press releases urging

disclosureofvitalinformationsoughtbycitizensandTriovictims.

May212017-Doublestandardsinfraudinvestigation.

June12017-ClosebookonTrio&MrMeerveld.

July92017OpenLettertoAustralian&Guernsey.

July162017-Unavoidablefraud.

Sept172017-AML_CTFLaws.

Sept252017-FarewellGregMedcraft.

November52017-MrMedcraft'swarning.

20.11.2017-OpenlettertoASIC'snewChairman,JamesShipton.

27.11.2017OpenlettertoFinancialAuthorities&LawEnforcementinGuernsey.25

24Lagnesh,K.2013opcit.pageiiiref.TrioCapitalLimited(AdminApp)vACTSuperannuationManagementPtyLtd&Ors[2010]NSWSC941,at[3]and[5].andref.Goonetilleke,T.(2011),"ObligationsandLiabilitiesoftheKeyPlayersinManagedInvestmentSchemes:ContentiousQuestionsArisingfromTrioCapital”,CompanyandSecuritiesLawJournal,vol.29(7),pp.419-438p.42125http://www.mysuperrights.info/press-release-2017.php

15

1.3FAILURENoevidenceofaforensicinvestigation.TheAustralianSecuritiesandInvestmentsCommission(ASIC)describesTrioCapitalLimited(Trio)as

a super fund trustee that operated five super funds worth $300million, with 10,000 investors and

invested the superfundmoney itwas entrusted into 17 activemanaged investment schemes (MISs).

Trio operated as responsible entity and its MIS schemes were available to 700 non-super fund

investorswithassetsofabout$126million.26

ASIC said in September 2009, it already had been carrying out a pro-active surveillance into hedge

fundssincemid2009andaTriofundwasonitslist.27Suspectingsomethingwaswrong,onOctober2nd

2009, ASIC commenced an investigation to check the legitimacy of Trio’s investments, focussing on

Trio’s conduct between 2005 and 2009. It appears ASIC and APRA relied solely on “self-reporting”

duringthisperiod,despiteroutineauditsshowingalarmingreportingdiscrepancies.

During December 2009, the Australian Prudential Regulation Authority (APRA) appointed an acting

trusteetoTrio’ssuperannuationfunds,ASICsuspendedtheAustralianFinancialServicesLicenceheld

byTrio28andASIC’sMediaCentreannouncedonDecember7th2010 that theperpetratorof theTrio

fraud, ‘pleadedguiltytotwochargesofdishonestconductinthecourseofcarryingonafinancialservices

businessandadmittedathirdchargeofmakingfalsestatementsinrelationtofinancialproducts.’29

NooneexplainedwhetherTrio’sassetswereretrievable.Ittook6monthsbeforeASICconfirmedthat

Trio’s assets are not verifiable. In 2011ASIC noted, ‘the liquidatorofTrioCapitalhasbeenunable to

recoverthevastmajorityoftheinvestmentsmadebytheAstarraStrategicFund’.30ASICsaid, ‘Mostofits

assetsweredirected intowhatwere calledhedge funds, located in theCaribbean.There is little, if any,

credibleevidencethatthepurportedinvestmentswereactuallymade,oriftheywere,thattheyhaveany

realisablevalue.Mostoftheassetsinvestedweresubsequentlylost.’31

ASIC’s account is vague andmakes suppositions aboutwhatmay ormay not have happened to the

missingmoney.ASIC’s account clearly shows that aproper forensic investigation into theTrio fraud

wasnotcarriedout.

LevittRobinsoninasubmissionintotheperformanceofASICin2013encapsulatewhathasoccurredto

VOFFintheTriofraudmatter,

26ASICMediaCentre10-261AD7December201027ASICMediaCentre12-116MR5June201228ASICMediaCentre09-261MR17December200929ASICMediaCentre10-261AD7December201030ASICMediaCentre11-133MR4July201131TrioandAstarraMay28,2015http://asic.gov.au/about-asic/media-centre/key-matters/trio-and-astarra/

16

‘Toooften,ASICperceivesitsroleasbeingtoimposeinformationlockdowninordertoachievedamagecontrolorcontainment,soastominimisetheexposuretopublicscrutinyoftheinnerworkings of important financial institutions, as if, by approaching its remit in thisway, it issomehowprotectingthefinancialsystem.’32

VOFFhavetriedpersistentlytoaccessinformationheldbyASICsuchasASIC’sAppendix4.ASICrefer

toAppendix 4 in their submission to theParliamentary Joint Committee Inquiry into the collapse of

TrioCapitalLimited,September2011.ASICwrite,

‘ConfidentialAppendix4setsoutASIC’sinteractionswithTrioovertherelevantperiodandthestatusof its ongoing investigations.Appendix4 isprovided to thePJCona confidentialbasisbecause disclosure of the information set out in this appendix may prejudice our ongoinginvestigationsinrelationtoTrio.Whenourinquiriesandinvestigationsarecomplete,wewillreviewtheappendixtoassesstheextenttowhichitcanbemadepublic.’33

Appendix 4 is a prime example ofwhat the public cannot find out about ASIC’s actions/inactions in

whatitdoestokeepAustraliansuperannuationsafe.ThelackoftransparencyinwhatASICdoordon’t

doisnotanexampleofdemocracyatwork.ASICandAPRArefusetodisclosetheirinteractionwithTrio

directorsandTrio’sentities.

VOFF’s brief history in attempting to access Appendix 4 through Freedom of Information started in

2014.

1.FOInumber143Feb9th2014.VOFFrequesttheAppendix4documentafterASIChadterminatedits

investigation of the Trio mastermind and therefore could no longer refuse on the basis that their

investigationwascontinuing.

April2nd2014,ASICrefusedundersection46oftheFOIAct.

2. FOI number 236 August 26th 2014. VOFF request from ASIC ‘Spreadsheet & Appendix 4’. ASIC

providealistofdocuments(55items)butallwererefusedundersection37(1)37(2)(b)45,47Eand

47Fwhiletwoitems,(TimelineofAppointmentofDirectors)werereleased.ASICdidnotacknowledge

theAppendix4partoftherequest.34

3.FOInumber368July26th2015.VOFFrequestinformationabouttheexpertsandresourcesassigned

totheforensicinvestigationofTrio.

August28th2015,ASICsaidnosuchdocumentexists.

4.FOInumber391September15th2015.VOFFsoughtfromASICAppendix4inviewthattheAssistant

Treasurer, JoshFrydenbergMP,metwithVictimsofFinancialFraud,ASIC,APRAandTreasuryat the32LevittRobinsononSubmissiononthePerformanceoftheAustralianSecuritiesInvestmentCommission29October2013page4.33ASIC’ssubmissiontothePJCInquiry,Sept.2011page11.34http://www.mysuperrights.info/resources/20141124%20-%20FOI%20236%20-%20letter.pdf

17

CommonwealthParliamentOffices,1BlighStreet, Sydney, September3rd2015.At themeetingASIC

confirmedithadfinisheditsinvestigationsintoTrio.

November23rd2015,ASICrefusedunders46oftheFOIAct.

5.FOInumber393September16th2015.VOFFsoughtASIC’sreviewofitsinteractionswithTrioand

itsassociatedentities.Thereviewismentionedonpage11inASIC’ssubmissiondatedSeptember2011

tothePJCInquiryintothecollapseofTrioCapitalLimited.

November 24th2015,ASIC refusedunder section46 of the FOIAct adding thatASIC found that the

documentrequestedistheAppendix4.

6.FOInumber431April7th2016.VOFFsoughtfromASICAppendix4inviewthatASIChascompleted

its investigationsandasofMarch2016had ‘morethan11peoplehaveeitherbeenjailed,bannedfrom

providingfinancialservices,disqualifiedfrommanagingcompaniesorhaveagreedtoremovethemselves

fromthe financialservices industry foratotalofmorethan50years.35The government announcedon

April 1st 2016 that no compensation would be given to groups of self-directed investors and SMSF

trusteesconcerningTrioCapital.JackFlader,theAmericanlawyerbasedinHongKongwasalsocleared

ofanywrongdoinginthewayhehandledinvestor’smoney.

May6th2016,ASICrefusedundersection46oftheFOIAct.

ASIC’s Appendix 4 remains covered up despite ASIC claiming, ‘Wewill not agree to keep regulatory

outcomessecret.Thisisimportantforregulatorytransparencyandeffectivedeterrence’.36

Appendix4wouldillustratetoconsumersjustwhatASICdoesintheeventofalargefraudsuchasTrio

infiltrating the Australian financial market. Denying consumers information about the loss of their

savings,helpkeepssecretthefraudster’smethodofcarryingoutthecrime.Australiansarecompelled

into superannuation, refusing to reveal thedetails ofwhathappens if superannuationor investment

savings are exposed to fraud, is questionable and raises concerns about bullying tactics by vested

interestsinthefinancialmarket.Citizenscanbeledlikesheeptotheslaughter.Secrecyaroundmajor

frauds isproblematic.For instance,ASIChaveX-employeesnowwith liquidatorand insolvencyfirms

thatprofit frombelly-up companies. Secrecyabout the lossof citizen’s savings ispotentially inviting

corruption.

InSouthAfrica,PresidentJacobZumausedalawfromapartheidtimestokeepinformationsecret.The

lawdefined an area as a ‘national key point’ andnational key points are protected sites of ‘national

35ASIC'smediareleaseona2016updateofTrioandAstarra23/03/2016https://asic.gov.au/about-asic/media-centre/key-matters/trio-and-astarr36InformationSheet152(INFO152),1Sept.2017.http://asic.gov.au/about-asic/asic-investigations-and-enforcement/public-comment-on-asics-regulatory-activities/

18

security’.PresidentZumadefinedhisownhome‘Nkandla’underthelawandnoonehadanyrightto

informationaboutthepublicmoneyhespentonhishomebecauseitwasa‘nationalsecurity’protected

matter. In 2016 the South African Court found President Zuma breached constitution over home

upgradesandorderedhimtorepaymoneyforlavishhomeimprovements.37

PresidentJacobZuma’sexorbitantspendingofpublicmoneyonhisownhomeinSouthAfricaandkept

secretunder‘nationalsecurity’legislationisanexampleofclosedand/ordysfunctionalsystemsand/or

badgovernancethatcanleadto'corruption'.38

Governments see the value in having accountability and transparency in decision-making but in

regardsofASICandAPRA’sinteractionswithTrioanditsentities,informationremainssecret.ASICand

APRAhaveseverallevelsoflegislationtopreventinformationfrombecomingpubliclyavailable.APRA

refuseinformationunderSection56oftheAPRAAct,ASICseldomusesection127ofASICActbecause

bothregulatorshaveamplesectionsundertheFreedomofInformationAct,wheretheycanrefuseby

citingforexample,section33,37,s38ands46oftheFOIAct.

Charles Hugh Smith notes that when there is a lack of transparency, the damage done by financial

predatorsandparasitesisunlikelytoberecognisedormeasured.Financialpredatorsoptimizeprivate

gain because there are no powerful vested interests in their way. Predators buy protection of their

racket from the state and the financial system is stacked favouring their vested interests. Vested

interestsaremainlywealthyindividuals,corporations,cartelsandpublicunions.39

VOFFnowrecognisethattheinvestigationsintoTriobyASIC,thePJCandtheliquidatorPPBAdvisory

are flawed. The PJC Inquiry published May 2012 (204 pages) provides a chronological timeline,

detailingthenetworkofpeopleandfunds,butfailstoexplainthemoneyflow.ThePJCcouldnothave

achieved an understanding of themoney flow because ASIC did not provide the PJC with themain

moneyflowdocumentsshowingmoneyflowfromAustraliatoHongKong.ASICdidnot,andcouldnot

providethemoneyflowdocumentstothePJCastheinformationwasprotectedunderaMemorandum

ofUnderstandingbetweenAustraliaandHongKong.

The Securities and Futures Commission of Hong Kong gathered a tranche of documents from Jack

Flader’s Hong Kong based company Global Consultants and Services Limited (GCSL) that received

moneytransactionsfromAustralia.ThetrancheofdocumentswashandedovertoASIC.Thethousands

37Elgot,JessicaNkandla,JacobZuma’sprivateresidence31March2016http://www.theguardian.com/world/2016/mar/31/jacob-zuma-ordered-repay-upgrades-nkandla-home-south-african-state-funds38Elgot,JessicaNkandla,JacobZuma’sprivateresidence31March2016http://www.theguardian.com/world/2016/mar/31/jacob-zuma-ordered-repay-upgrades-nkandla-home-south-african-state-funds39CharlesHughSmithFinancialPredatorsandParasitesJune17,2015https://dailyreckoning.com/financial-predators-and-parasites/

19

ofGCSLdocumentsareavitalpieceofevidenceintheprocessofunderstandingthemoneyflowfrom

AustraliatoGCSLandfromGCSLtoinvestmentlocations.ASICneverprovidedthePJCwiththetranche

ofdocumentsfromGCSLorsaythatitheldinformationundertheMoUagreementordidASICprovidea

summarizationaboutthedocuments.

TheGCSL documentswould automatically constitute essentialmaterial for a forensic investigator to

study.Thecommitteecannotbeblamedfornotknowingaboutvitalinformationwithheldfromthem.

ThePJCReportdoesmentionoftheGCSLCompany.HereiswhatthePJCReportnotes,

‘TheGSCLGroup, ofwhichMrFladerwas theChiefExecutiveOfficerandChairman,was thecustodian of the assets of the Flader Controlled Funds at allmaterial times. In addition, theGCSLGroup,providedadministrationservicestoEMA.’40

Twice GCSL is mentioned. [First, written as the GSCL group and then as the GCSL Group.] The

informationonlyexplainsMrFlader’srelationshipwiththecompanybutnotthesignificanceofGCSL.

FurtheroninthePJCReporttheCommitteeprovidessomerecentnewsaboutGCSL,

‘In January 2011, it was reported that Mr Flader sold his business, Global Consultants andServicesLtd.,totwoLiechtensteinbusinessmen.41Heisnow,apparently,livinginThailand.’42

Butoverall thePJC failed to recogniseoracknowledgewhatGCSL’s rolewas in thedisappearanceof

hundredsofmillionsofAustraliandollars.

The liquidator,PPBAdvisory,assigned to investigateTriowasdeniedaccess to theGCSLdocuments.

ASICsoughtaSupremeCourt suppressionorder toprevent the releaseof theGCSLdocuments in its

possession.PPBAdvisoryhadtotakeASICtocourttogainaccess.EventhenASIConlyprovidedpartof

thedocuments.

PPB Advisory informed VOFF43that each company the liquidator searched led to a complex web of

more companies. PPB carried out its investigation with limited funding. Legal expenses were the

biggest expense. PPB did not bring people to Australia to question. Nor did PPB go overseas to

specifically question people connected with operating the Trio scheme. While on other business in

HongKong,PPBwenttheofficesofGCSLonlytobetoldtogoandthedoorslammedintheirface.

PPBsaidASIConlyprovidedPPBwitha tinyamountof informationand theyweredeniedaccess to

manyoftheoverseasdocuments,referringtothisasthe‘corporateveil’thattheycouldnotpenetrate.

ASIC’s discretion as to what evidence of crime exists or not, raises questions. For example, Frank

Richard Bell, while he was in jail in the Philippines sent information to Australia about Trio’s

40PJCReportMay2012page28.41RJCReportMay2012page139ref.StuartWashington,'Fladerlinktofatherandsonin$1billionscam',SydneyMorningHerald,25January2011,http://www.smh.com.au/business/flader-link-to-father-and-son-in-1b-scam-20110124-1a2v0.html(accessed17April2012).42PJCReportMay2012page139ref.TonyBoyd,'It'sajoke,butnoone'slaughing',AustralianFinancialReview,9March2012,p.52.43MeetingwithPPBonJune25th2015attheirSydneyoffice.

20

underlyingfunds.ApparentlythisvolunteeredinformationhelpedPPBgainanunderstandingintothe

networkofunderlying funds,whichbegs thequestion,whatelsecouldhavebeenachievedhadASIC

botheredtoquestionthoseinvolvedinrunningTrio’sunderlyingfunds?

Whydidn’tASIC investigate theSydneyMorningHerald’s attempt to checkwhetherTrio’s custodian

bankcouldconfirmthattheTrioassetsitheldwereverifiable?Thetimeisimportant,asitwasabout

sixmonthsbeforeTriowasdiscoveredtobefraudulent.IfASICareactivelymaintainingthefinancial

healthof themarket, itwouldbe inconsumer’sbest interest forASICtorecognisethatabanksenta

HeraldjournalistawaywithincorrectbankingdatamonthsbeforetheTriofraudwasdiscovered.Will

thesamethinghappenagain?

InDecember2014ASIC’sMrMedcraftataPressConference, ‘warnedthatthecorporateregulatorwill

notbeable todo its jobproperly if itdoesnothaveaccess to criticalmetadata thatotherenforcement

agencies such as the federal police and ASIO have access to.’44The telephone conversations from the

AustralianTrioOfficetotheHongKongOfficecould,haveofferedametadatagoldmine.ButbeforeASIC

acquire new toys it must be remembered that it didn’t use the technology at hand, such as the

telephoneandemail tocommunicatewith itspeers toshare information.ThePJC Inquirynotedthat,

had the regulators communicatedwith each other and shared their concerns, the fraudwould have

beenstoppedmuchearlier.

At the samePress Conference, ‘MrMedcraftsaidhewould liketoseepenalties introduced inAustralia

that "scare the pants off" white-collar criminals to increase the deterrent effect….Whatwe really need

[are]penaltiesthatamplifythefear...weneedpenaltiesthatactuallymeanthatifyouhaveanill-gotten

gainthepenaltyshouldbeamultipleofthatgain."45

IncreasingpenaltieswouldnothelpthecourtsifASICwithholdvitalevidencefromtheNSWSupreme

Court46as it did in Trio and appears to be ASIC’s pattern - not to show information it doesn’twant

otherstosee.

44GarethHutchensandGeorgiaWilkinsASICwantsaccesstometadataDECEMBER3,2014http://www.abusinessherald.com/2014/12/asic-wants-access-to-metadata/45Ibid.46VictimsofFinancialFraud(VOFFInc)PressReleaseSept252017http://tinyurl.com/yb5l88yp

21

1.4FAILUREsystemicfailure.

The'SatyamComputerServices,scandalwasa2009corporatescandalaffectingIndian-basedcompany

SatyamComputerServiceswherethechairmanRamalingaRajuconfessedthatthecompany'saccounts

hadbeenfalsified.–Wikipedia

A. N. Raman writing for the Hindu Business Line said 'The Satyam episode has made a mockery of

corporategovernance.Itisaclearindicationofsystemicfailureandhasexposedtheinadequaciesofthe

compliance-orientedcorporategovernance.'47

Lecturers Ms. Shruti Mehta and Ms. Rachana Srivastavaare in ‘Reasons for Corporate Governance

failures’statethatacriticalfactorinmanycorporatefailureswas:

• Poorlydesignedrewardspackage

• Includingexcessiveuseofshareoptions(thatdistortedexecutivebehaviourtowardstheshortterm)

• Theuseofstockoptions,orrewardslinkedtoshort-termsharepriceperformance(ledtoAggressive

earningsmanagementtoachievetargetshareprices)

• Tradingdidnotdelivertheearningstargets,aggressiveorevenfraudulentaccountingtendedtooccur.

ThiswasveryapparentinthecasesofAhold,Enron,WorldComandXerox(IFAC,2003).

Someofthebetterknowncasesoffinancialirregularitiesaresummarizedinfollowingtable.

Company Country Whatwentwrong

Ahold NL earningsoverstated

Enron USA inflatedearnings,hiddebtinSPEs

Parmalat Italy falsetransactionsrecorded

Tyco USA lootingbyCEO,impropersharedeals,evidenceoftamperingandfalsifyingbusinessrecords

WorldCom USA expensesbookedascapitalexpenditure

Xerox USA acceleratedrevenuerecognition

Intermsofcorporategovernanceissues,Ahold,EnronandWorldComallsufferedfrom,• Questionableethics• Behaviouratthetop• Aggressiveearningsmanagement• Weakinternalcontrol• Riskmanagement• Shortcomingsinaccountingandreporting

47A.N.RamanSystemicfailureJanuary21,2009http://www.thehindubusinessline.com/todays-paper/tp-opinion/article1040124.ece?css=print

22

MehtaandSrivastavaaresaidinregardingtothecorporategovernancefailureatEnron,

‘Everytimeyouturnastone,anotherwormcreepsout.ThatseemstobethestoryoftheEnrondebacle. Not a day goes by without a new expose of wrong doing in the company that onebegins towonder if there is anything in our systems and structure of an enterprise that canpreventsuchacatastrophe.

Enron is an excellent examplewhere those at the top allowed a culture to flourish inwhichsecrecy,rule-breakingandfraudulentbehaviourwereacceptable.’48

Whetherthesystemicfailureistheconsequenceofshortcomingsinauditing;managementbehaviour;

oroutrightbreachoftheCorporationsAct;(factorsfoundintheTriofraud)consumersshouldnotbe

heldresponsiblejustbecausetheyaretheweakestandeasiesttoblame.

GrantKirkpatrick’sreportpreparedforTheOrganisationforEconomicCo-operationandDevelopment

SteeringGrouponCorporateGovernancein2009,commenceswith,

‘This report analyses the impact of failures andweaknesses in corporate governance on thefinancialcrisis,includingriskmanagementsystemsandexecutivesalaries.Itconcludesthatthefinancial crisis can be to an important extent attributed to failures and weaknesses incorporate governance arrangementswhich did not serve their purpose to safeguard againstexcessive risk taking in a number of financial services companies. Accounting standards andregulatoryrequirementshavealsoprovedinsufficientinsomeareas.49

The understanding of systemic failure around the world reflects exactly what occurred in the Trio

fraud.Duringthe6monthperiodASICtooktoconfirmifTrioassetswererealisable,thefirstsignsof

misinformation had started to surface in the media. Misinformation in terms that the narrative

inferring it isOK forAPRA-supervised funds tobehitby fraudbut it’s theSMSFsordirect investor’s

ownfaultiftheywereexposedtofraud.

The thenMinister forSuperannuationandFinancialServices,Bill Shorten, following thediscoveryof

theTriofraud,said,theself-managedsuperannuationfunds(SMSFs)anddirectinvestorsinTriochose

to be in unprotected funds and chose to place their savings into a troubled fund. Prior to 2009,

investors could not havemade an informed decision about choosing Part 23 of the Superannuation

Industry (Supervision) Act 1993 (SIS Act) because there was no information to inform consumers

aboutthefraudprotectioncontainedinPart23.Alsoconsumerscouldnothavelearntaboutorganised

international crime gangs targeting superannuation, because there was no information about

superannuationbeingthetargetofseriousfinancialfraud.

48MsShrutiMehta&MsRSrivastavaareReasonsforCorporateGovernanceLecturersSkylineInstituteofEngineering&TechnologyMarch18,2009http://www.indianmba.com/Faculty_Column/FC974/fc974.html49GrantKirkpatrickTheCorporateGovernanceLessonsfromtheFinancialCrisisOECD2008https://www.oecd.org/finance/financial-markets/42229620.pdf

23

Some investors hit by the Trio fraud had stared a self-managed superannuation fundwith APRA. In

about 2004APRAgave the regulatory control of SMSFs to theTaxOffice. Trusteeswerenot given a

choicenorweretheywarnedthattheyhadnoprotectionundertheSISAct.

Thegovernment’sofficialnarrative fails toacknowledgethat therewasno informationprior2009to

have warned consumers about massive organised fraud, or about fraud protection. The official

narrative also fails to acknowledge that Triowas set up to exploit theweaknesses in theAustralian

financial system, allowingmoneys to be sent to undisclosed overseas locations. Therewere also no

consumer warnings of ASIC and APRA’s limited powers, to follow the activities of an Australian

registeredcompanythatinvestsoffshore.

VOFF highlight some of factors that contributed to the systemic failure of the Australian financial

system. Strange how the systemic failure is denied yet the Trio fraud, according to journalist Ben

Eltham,waspartofthereasonfortheInquiryintothePerformanceofASIC.50

VOFFhavefoundwiththeissuessurroundingTrio,everytimeVOFFturnastone,anotherwormcreeps

out.Often theworm isanotherunansweredquestion.Withsomanyunansweredquestions,VOFFdo

notregardtheTriofraudasresolved.Therearemanyunresolvedissuessuchas,

•Whatevidencedoesthegovernmenthavetobaseitsdecisionthat ‘APRAandASICcarriedouttheir

rolesandresponsibilitiesappropriately’?51

•WhywereagroupofinternationalbrokerswhensomehadbeendrivenoutofEurope,barredfrom

operatinginthefinancialindustryintheUnitedStatesbutwelcomedintoAustralia?

•SomeoftheTriooperatorshadconnectionswithfundsintheUnitedStates,theUnitedKingdomand

NewZealandwhere largesumsofmoneydisappeared,yet theywereable to takeovera respectable

business in Australia, turn it into the Trio Capital Limited scheme andmake 194.5m52in Australian

dollarsdisappear?

• The government and ASIC need to explain to the Australian public why ASIC’s failures have been

ignored?

•Andwhythevictimsofthecrimewereblamed?

•Afterall thereformsand legislationchangesmadeasaconsequenceof theTrio fraud,whyhas the

governmentrefusedtoacknowledgethesystemicfailureoftheAustralianfinancialsystem?

50BenElthamTheCorporateWatchdogIsFastAsleep25June2013https://newmatilda.com/2013/06/25/corporate-watchdog-fast-asleep51'ReviewoftheTrioCapitalFraudandAssessmentoftheRegulatoryFramework'April2013)52FinancialSystemInquiry:SubmissionbytheAustralianSecuritiesandInvestmentsCommissionApril2014page192

24

AftertheTrioschemeexploitedweaknesses intheAustralianfinancialsystem,deceivingASIC,APRA,

the NAB and ANZ banks acting as custodians, the Research Houses, the Star Rating Firms, the legal

firmsthatdrewupcontracts,includingtheauditingfirm,thePJCsaid,

‘there appears to be an expectations gap within the community about the regulatory

responsibilitiesofAPRAandASICandtheirabilitytosafeguardagainstallinvestmentrisksaswell

asanexpectationsgapwithin thecommunityaboutwho is responsible formanaging investment

risksforSMSFtrustees.’53

ThePJCinquiryfoundthatthefinancialmarketheldonedefinitionforcertainwordswhileconsumers

held a different definition. The community’s understanding of certain words was akin to dictionary

definitions. Some of the definitions have remained unchanged for centuries. The interpretation of

words, sometimes reflecting job responsibilities, did not match the consumers’ interpretation. The

differentunderstandingofthesamewordiswhatthePJCcall"expectationgaps."54Sevenarelisted:

1NoProtection

2FinancialAdvisors

3AFSLicence

4Auditors

5Custodians

6ResearchHouse

7LevelofDisclosure

Thefinancialsystemintowhichpeopleareencouragedtoplacetheirsavingsisopentointerpretation,

yet the PJC did not ask whether the few who manage the savings of the masses might owe the

consumersaresponsibilitytoensurethereisaclearandconcisecommunication.TheTriofraudisan

examplewhereinformationasymmetryleftconsumersatadisadvantage.

1)No‘fraud’Protection

Trio investors in SMSFs seemed unaware theywere not protected in the sameway as APRA regulated

superannuationfunds;55

The committee said superannuation investors never considered whether there was compensation

available in theeventof fraudandtheftbefore theychose theirsuperannuation fund,be itanAPRA-

regulated/APRA-supervisedfundoraSMSF.56

53Treasury'ReviewoftheTrioCapitalFraudandAssessmentoftheRegulatoryFramework'26thAPRIL2013(ISBN978-0-642-74891-1)Page5.54ParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintothecollapseofTrioCapitalMay2012page12355page123

25

PriortoSeptember2009therewerenowarningsavailableabout internationalcrimegangstargeting

superannuationorthatASICandAPRAallowedknowncriminals intotheAustralianfinancialsystem.

Consumers had no chance to consider their options about fraud protection because there was no

informationonthesubjecttoprepareconsumersfortheTriofraud.

ASICisrequiredundertheASICActto:

• maintain,facilitateandimprovetheperformanceofthefinancialsystemandentitiesinit

• promoteconfidentandinformedparticipationbyinvestorsandconsumersinthe

financialsystem

• administerthelaweffectivelyandwithminimalproceduralrequirements.57

In regards to Trio, ASIC failed on each of the above points. APRAnever informed consumers that it

attended the meetings where decisions were made to selectively protect the APRA-regulated funds

under the SIS Act. At the same time, APRA had direct contact with Trio directors throughout the

operationallifeofTrioandin2006hadformedtheimpressionthattheTriodirectorswerea‘bunchof

incompetents’.58APRAneverwarnedthemarketaboutthebunchofincompetentsrunningTrio.

ASIC’sroleto ‘promoteconfidentandinformedparticipationbyinvestorsandconsumersinthefinancial

system’ appearschallengedwhenASIC’sex-employeesholdpositionswith insolvencyand liquidation

firms.ThereislessevidenceofASICex-employeesworkinginfraudprevention.

If consumerswant to learn about companies, ASIC’s company registration database has information

available. It is good thatASIC charge for the service, but the flip side, it discouragespublic research.

ASIC’schargesareclearlyavailablebutwhatyouget foryourmoney, likethenumberofpagesbeing

purchasedisnotalwaysdefined.Thecostscanbeapowerfuldeterrenttokeepthepublicaway.

CompaniesthatwanttocarryoutfraudulentactivityinAustraliaprobablybenefitbycompanydetails

remaining behind ASIC’s fee charge, compared to beingmore readily available as it is in the United

States.

“Fraud protection” proved useless when ASIC failed to check the histories of the international

characters that came to Australia and founded the Trio scheme. In early 2016, two of the founding

membersofTrio,JackFladerandJamesSutherland,stoodbeforeSouthwarkCrownCourtinLondonon56page12457http://asic.gov.au/about-asic/what-we-do/our-role/58July5,2012meetingAPRA'sofficeinMarketSt.attendeesVOFFdelegation,thethenSuperannuationMinister,BillShorten,APRA'sRossJonesandASIC'sGregMedcraft.Alsosee,Hansard,ParliamentaryJointCommitteeonCorporationsandFinancialServices,CollapseofTrioCapital.(30.8.2011)-Sydneyp38

26

money-launderingcharges.Thechargeshadnothing todowith theTrioscheme.During thehearing,

thecourtlearnedthat,

‘oversevenyearsofinvestigation,fraudpolicehaduncoveredanetworkofoffshorecompaniesand bank accounts across Europe and the world, through which "multiple unnecessarymovements of money" were used to launder the fraud's proceeds, make them clean anduntraceableandthendistributethembacktothoseinvolvedinthefraud.Theentireedificeofcompaniesandaccountswassetuptodeceive.The two accused money launderers were directors and managers of that process, banksignatoriesandinsomecaseseventhebeneficialownersofthecompaniesinvolved.’59

The court was not informed that Flader and Sutherland were behind the Trio scheme that had

successfullycarriedoutasimilarwebofdeceptionintheAustralianfinancialsystem.

In2011theNSWSupremeCourtrecognised,MrJackFlader,as‘thearchitectandultimatecontrollerof

theTrioscheme’.60However,in2013ASIC‘abandonedaninternationalinvestigationintoJackFlader,the

mastermindofAustralia’sbiggestsuperannuationfraud,sayingthereisinsufficientevidencetoproveMr

FladerbreachedAustralianlaw’.61

Financial regulators and law enforcement knew about the risks from organised crime attacking the

superannuationpoolasearlyasthe1990sbuttheinformationwasnevermadeavailabletoconsumers.

Recognising in 1996 that serious fraud occurred around the world, the Australian Institute Of

Criminologywarned,

The sheer sizeof theassetpoolandevents elsewhere in theworldhave soundedalarmbells.Before his mysterious demise, British media tycoon, Robert Maxwell, allegedly stole theequivalentofover$A900mfromthepensionfundsoftwoofhispubliccompanies.InAustralia,examples of theft and fraud in relation to superannuation funds are slowly emerging andexperts have warned the industry of the dangers of crime. But how vulnerable to theft andfraudareAustraliansuperannuationfunds?62

TheAustralianInstituteOfCriminologyunderstoodthepotentialdangeroflarge-scalecrimeinrelation

tosuperannuationinthe1990s,whydidn’tthisimportantwarningreachconsumers?

ASIC’spublications(priorSeptember2009)showthattheAustralianInstituteofCriminology’swarning

aboutthevulnerabilityofsuperannuationdoesnotappearinthefollowing:

59NickMillerBustingtheboilerroomMarch28,2016http://www.smh.com.au/business/markets/busting-the-boiler-room-20160323-gnpuxj.html60ReginavShawnDarrellRichard[2011]NSWSC866(12August2011)beforeGarlingJ.61BenButlerTriokingpinJackFladerfreeofASIC'seyesOctober29,2013http://www.smh.com.au/business/banking-and-finance/trio-kingpin-jack-flader-free-of-asics-eyes-20131029-2wdi6.html62ArieFreibergSuperannuationCrimeAustralianInstituteOfCriminologyJune1996page1.

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•AReportonEnforceableUndertakingsAcceptedbyASICfrom1998to2008byCarolTaing(74pages).

•ASICAnnualReport1998/99(67pages).

•Enforcementandcomplianceseminar27–28March2001Melbourne,Regulatory compliance in the

borderlesscommunityof2001bySeanHughesDirector,ASIC(27pages).

•Don’tkissyourmoneygoodbye-7Smartsteps,ASIC&FPAMarch2002.(17pages).

•REPORT14InternationalcoldcallinginvestmentscamsJune2002(69pages)

•REPORT15Hook,line&sinker:Whotakesthebaitincoldcallingscams?June2002(99pages).

Theabovearticlesonlyreferto‘fraud’inthecontextof:cold-callingscams;peoplebannedbyASICfor

fraud; fraud in an electronic environment; and theNigerianAdvanceFeeFraud.Noneof the articles

mention about organised crime attacking superannuation. With no publicly available warnings,

consumerscannotformaneducateddecisionabouttheirinvestmentsavings.

2)FinancialAdvisorsdetectfraud

Theexpectationamonginvestorsthatfinancialadviserswillchecktheinvestmentsthattheyrecommend

to their clients, to ensure not only that there are prospects for good returns but that they are run

legitimately;63

ThePJCfound,

The strength of single responsible entity regime is its clean lines of accountability. With somenotableexceptions,mostsubmitterssupportedtheregimeprimarilyforthisreason.However,thesystemcan falterwhen the responsible entity stallsanddeceives. In these circumstances, as theTriocaseamplydemonstrates,therearevariouspointsofsystemicweaknessrelatingtotheroleoftheregulators,theauditors,custodians,researchhousesandfinancialadvisors.64

TheTrio ‘fraud’experience illustrateshow informationwasshapedbyvested interests.Forexample,

the official narrative about the Trio fraud presented the ‘fraud’ as ‘poor financial advice’ ‘secret

commissions’andself-managedinvestors‘swimmingoutsidetheflags’.Thenarrativewasabletoshift

thefocusawayfromasystemicfailingofthefinancialsystemandtopointblameattheconsumersand

theiradvisors.DecisionmakersbehindtheAPRAsupervisedfunds,madethesameinvestmentchoices

butwerenotnamed,blamedorshamed.Why?

ThePJChelpedkeeptheselective focuson financialadvisorandconsumer.ThePJCdidnotconclude

that some financial advisors were highly educated and had studied the Trio investments carefully

beforemakingrecommendations.ThePJCfailedtosaythatwhenadvisorswerecheckingtoseeifthe

Trio fundswererun legitimately, they foundthe fundsmetall theregulatoryrequirementsandwere

approvedbyASICandAPRA.

63page12364PJCReport2012Op.cit.page154

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3)AFSLicence

ConsumerexpectationisthatanAustralianFinancialServicesLicences(AFSLs)wouldnotbeissuedto

knowncriminals;

TheTriovictimswereinfuriatedtolearnthatthemanchargedovertheTriofraudwasissuedanAFSL

byASICthatenabledhimtohandlesuperannuationmoneys.ButASICinformedthePJC,

“TheAFSLattachestothecompany,notthedirectors”65

InthePJC'sopinion,

“theTriocasedoesreflectaproblemwiththecurrentlicensingsystem.ThefactthatASICdoesnotmake checks when there are changes in ownership of an AFSL creates a loophole for awould-becriminalsyndicatelookingtoacquireareputablecompanyholdinganAFSL.”66

4)Auditor

PJCfoundthat‘auditorscitethelimitationsontheirroleandthattheprimaryresponsibilityfordetecting

fraudrestswiththeresponsibleentity’…67

Consumersexpectedauditors toprovideanaccurateaudit,butauditorshadadifferent idea.ThePJC

found,

“KPMGconsidered that there isan 'expectationsgap'betweenwhat thepublicbelieves is theworkofacomplianceplanauditor,andtheworkthatbylawheorsheisactuallyrequiredtoperform. It suggested that this expectation gap could be reduced 'through Auditing andAssurance Standards Board (AuASB) and ASIC working together to provide additionalguidance'.”68

Triovictimswereangrythatauditorsdidnotprovideaccurateaudits.ButthePJCfoundthat,

‘…both the regulators and investors have expressed frustration at the role of Trio Capital'sfinancial statement and compliance plan auditors, particularly their inability to verifyinformation.Theauditorscitethelimitationsontheirroleandthattheprimaryresponsibilityfordetecting fraud restswith the responsible entity.Theynote thatauditors canonlyobtainreasonable assurance that a financial report is free from material misstatement, whethercausedbyfraudorerror.’69

Inotherwords,auditorsdon’tneed torelyonevidence-based information.Theydon’thave toverify

amounts.ThePJCsaid,

“Thecommitteeisparticularlyconcernedatthe'expectationgap'betweenwhatisexpectedofauditors andwhat they are actually responsible for doing.… Clearly in the case of Trio, the

65PJCReport2012Op.cit.page12366PJCReport2012Op.cit.page12867PJCReport2012Op.cit.page12368PJCReport2012Op.cit.page9769PJCReport2012Op.cit.page123

29

requirement for the auditors to demonstrate 'professional scepticism' about the informationgiventothemwasinsufficienttopreventthelossofinvestors'funds.”70

Clarke and Dean (2007)71have highlighted concerns for many years about the weakness in how

financialreporting isnotevidencebasedandalsoclaimASIChavefailedtomanagethewayfinancial

reportingiscarriedout.Inthissense,theTriofraudowesitssuccesstothefinancialreportingsystem

thatapprovesandendorsesatalllevels,thedishonestyandfabricationofreports–thataredesignedto

deceiveanddefraud.

SomeASICstaffdidstarttheircareerbyworkingforKPMG.Forexample,ASICChairmanGregMedcraft

hadworkedasacharteredaccountantwithKPMG;ColinNicolandTonyMcGrathwhohadbeenpartof

the corporate recovery team of KPMG, left in about 2004 and set up their own boutique insolvency

practice,72McGrathNicol was part of the investigation into the collapse of Trio Capital in 2009.73

AdministrativeAppealsTribunalDeputyPresidentProfessorRDeutschwhopresidedover,‘EugeneLiu

v.AustralianSecuritiesandInvestmentsCommission[2013]AATA117(6March2013)’andwasDirector

KPMG2007–2011(4years).74ProfessorBobDeutschinMay2007becamethefirstKPMGsponsored

ProfessorofTaxationattheAustralianSchoolofTaxation(Atax)intheFacultyofLaw.75MrDeutschis

alsoBoardMemberKPMGLLP.76

InrespecttoTrio,noactionwastakenagainsttheauditors’failuretodetectfraudulentactivitiesother

thantoagreetoanEnforceableUndertaking.ThePJCfoundtheproblemswith inaccurateauditswas

theconsumer’sexpectationgap.Consumersexpectedaccuracy.Thecommitteeneverexploredwhether

theauditorswhoprovidedmisleadinginformation,couldhavebeenasourceforcompensation.

The dangers of a faulty auditing systemhas been knownbyASIC formore than two decades and is

recognisedasamajorflawinthesuperannuationandAustralianfinancialsystem.Consumersdidnot

knowbefore theTrio fraud that audits inAustralia didn’t have to be correct and theydon’t need to

verifytheirassets.

70PJCReport2012Op.cit.page13071ClarkeandDean,IndecentDisclosure:GildingtheCorporateLily,2007.72LeonGettlerKPMGinsolvencyteambecomes'corporatedoctor'May27,2004http://www.theage.com.au/articles/2004/05/26/1085461833039.html?from=storylhs73Superannuation:APRA’ssuperwaytomanagefraudriskSept.7,2015http://www.mcgrathnicol.com/superannuation-apras-super-way-manage-fraud-risk/74https://www.linkedin.com/in/robert-deutsch-a456514275http://newsroom.unsw.edu.au/news/inaugural-kpmg-professor-taxation76http://www.zoominfo.com/p/Robert-Deutsch/25461090

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In August 29th 2016 a $7.3b fraud detection failure lawsuit by Colonial Bank against

PricewaterhouseCoopers was settled in a landmark case that shone a light on the responsibility of

auditorstodetectfraud.77

Thedefence for thebankclaimed thatPwCwas inaposition to catchandstop the fraudbutmissed

multipleredflags.PwCcounteredthatnoauditorcanreasonablybeexpectedtocatchawell-organised

anddeterminedfraud.However,PwCsettledthefrauddetectionlawsuitfor$5.5bn.78

InDec5,2016TheUSPublicCompanyAccountingOversightBoardfinedauditorsoftheBrazil-based

Deloittea record$8million forwhatamounts tomassive fraud involving low-costairlineGolLinhas

AéreasInteligentes.79

In April 25th 2014 VOFF submitted a Freedom of Information request to ASIC for a copy of the

insurancepolicyclaimmadeonbehalfoftheTrioCapitalLimitedunitholders,lodgedbytheassigned

liquidatorPPBAdvisory.ASICrefusedinformationsayingitisexemptunders45(1)oftheFOIAct.

In November 2010 and July 2012 ASIC investigated whether there was any possibility for legal

compensation under the Proceeds of Crime Act 2002. In May 2014VOFF sought under the FOI Act

documentationofwhatASIChad found, ASIC refused to release the information and theydidnot

suggesttotheTriovictimsofapossibilitytoclaimcompensationagainsttheauditor.

MichaelRapoportintheWallStreetJournalwritesthatarulingbyUSDistrictJudgeBarbaraRothstein

opens an accounting firm to litigation for failure to detect fraud. The Judge found

‘PricewaterhouseCooperswasnegligentinconnectionwiththefailureofColonialBank,oneofthebiggest

bank failuresof the financial crisis.’…‘PwC failed todesign itsaudits todetect fraud, violatingauditing

standards.ShealsosaidPwCcouldhaveuncoveredthefraudsimplybyinspectingsomeoftheunderlying

documentsforthemortgagesatissue,butitdidn’t’.80

BenMcLannahanintheAustralianFinancialReviewpointedoutthat,

PricewaterhouseCoopers ‘hadgiventhebank'sparent, ‘ColonialBancGroup’,acleanaudit for

years before it emerged that huge chunks of Colonial's loans to Taylor, Bean & Whitaker,

(TBW)weresecuredagainstassetsthatdidnotexist.

77BenMcLannahan'PwCsettles$7.3bfrauddetectionfailurelawsuit'Aug292016http://www.afr.com/business/accounting/pwc-settles-55bn-fraud-detection-failure-lawsuit-20160828-gr2v4u78BenMcLannahanPwCsettles$5.5bnfrauddetectionlawsuitAugust27,2016https://www.ft.com/content/befa9e50-6ba4-11e6-a0b1-d87a9fea034f?mhq5j=e679TylerDurden'AuditorDeloitteFinedARecord$8MillionForMassiveFraud'Dec5,2016http://www.zerohedge.com/news/2016-12-05/auditor-deloitte-fined-record-8-million-massive-fraud80MichaelRapoport,JudgeSaysPricewaterhouseCoopersWasNegligentInColonialBankFailureDec.31,2017https://www.wsj.com/articles/judge-says-pricewaterhousecoopers-was-negligent-in-colonial-bank-failure-1514762610

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PwC argued— and the judge accepted — that it was duped by a determined gang of

fraudsters.LeeFarkas,TBW'sfounderandchairmanwhoskimmedmillionsofdollarstobuya

private jet, vacation homes and vintage cars, was jailed in 2011 for 30 years. Several other

seniorexecutivesatTBWandColonialweresentencedtolongstretchesinprisonfortheirroles

inaseven-yearscamthatgrewto$US2.3billion.

But PwC fell short nonetheless, wrote Barbara Jacobs Rothstein, US District Judge, in her

judgmentdelivered lastweek. She citedprofessional standards, saying that the firm failed to

performadequatechecksthatColonial'sfinancialstatementswerefairlystated.81

TheWallStreetJournalarticlehashundredsofreaders’comments,somesuggestingthatthe‘Auditsare

notdesignedtorootoutfraud’andthat'ContractswiththeBigAuditorsspecificallystate,theyarenot

responsibleforfindingfraud.’

SuchpointswouldhavebeenrecognisedbyBarbaraJacobsRothstein,whoaccordingtoWikipedia,isa

United States District Judge on senior status since September 1, 2011, having served on the United

StatesDistrictCourtfortheWesternDistrictofWashingtonfromFebruary20,1980.

MrMedcraftbeforedepartinghispositionasASICChairman,warnedonAM-ABCRadio82(03.11.2017)

thatAustraliacouldhaveanEnron-stylecorporatecollapseiftheaccountingfirmsDeloitte,KPMG,PWC

andErnstandYoungdon’timprovetheirauditingstandards.

InvestigativejournalistStewartWashingtonpointsoutthatTrioCapitalistheresponsibleentityanda

responsible entity has legal obligations to employ a series of third-party gatekeepers, such as the

auditor. WHK was a listed accounting business for Trio. KPMG was paid to perform another

gatekeepingrole…butitisunclearwhetherKPMG'sauditaskedquestionsofTrio.

Particularlywhen the scheme's financial position as at June 30th 2009 showed that $47millionwas

transferredbetweenTrio funds,with anoverseas fund expanding to $75million.KPMGshouldhave

asked:

Wheredidthe$47millioncomefrom?

Whomovedit?

WhytherushonJune30th?

Whywerethesetransactionsgoingunreportedinannualreports?

81BenMcLannahanPwCfalls'short'inavertingoneofthebiggestUSbankcollapses,judgesaysJan22018http://www.afr.com/business/accounting/pwc-falls-short-in-averting-one-of-the-biggest-us-bank-collapses-judge-says-20180101-h0c9u182PeterRyanonAM-PoorauditingrisksEnron-stylecollapses:ASICboss03.11.2017http://www.abc.net.au/radio/programs/am/poor-auditing-risks-enron-style-collapses-asic-boss/9114592http://www.abc.net.au/news/2017-11-03/asic-boss-concerned-over-poor-auditing/9114490

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The June 30thmovement of $47million into one of Trio’s offshore fund, affecting several other Trio

funds, was not something that was noted in particular. KPMG signed off on all the affected funds'

complianceplans.83

5)Custodians

TheTriovictimsreliedon theANZand theNABbanks toaccuratelyandresponsiblyaccount for the

Trioassetstheyhandled,butthePJCfound:

‘..there isanexpectation inthepublicmindthatcustodianswillacttoprotectandsecuretheunderlying investment. By contrast, Trio's custodian, theNational Australia Trustee Limited,hasnotedthatthecustodiandoesnothavetheexpertisetoquestionunderlyingvaluesofeitherdomesticoroffshorefunds.’84

ThePJCInquiryfound,

‘Thecustodian(inTrio'scase,theNationalAustraliaBank)doesverylittletoprotectthefundsofinvestors. It makes no independent checks before transferring money offshore. Instead, thecustodiansimplyactsontheinstructionsoftheresponsibleentity’.85

ThePJCpointout,

‘ASICinitssubmissiondrewattentiontoitscurrentreviewofcustodiansandflaggedthatoneaspect of the review will be to consider whether custodians should be more proactive inidentifyingandreportingsuspiciousmattersinvolvingtheirclients.’86&Ref.

InresponsetoTrio’smissingmoney,theANZandNBAbanksblamedtheresponsibleentity,whowas

ShawnRichard.TheANZandNBAneverreportedthe largeandcontinuouscashdeposits,notevena

$50mtransfertoaforeigntaxhaven.WhywereTrio’stransactionsthatwereinbreachofthemoney-

launderingandanti-terrorfinancinglawsnotreported?Whydidn’tsuchtransfersringalarmbells?

ThemoneystolenthroughTriorightfromunderAUSTRACtheANZandNABbanks,wassaidtobethe

fault of SMSF trustees and financial advisors. Again APRA regulated union run industry funds that

receivedcompensation,madethesameinvestmentdecision.AustralianinvestorswithsavingsinTrio

hadnoideathattheirmoneyendedupintaxhavenlocations.Onlyafterthefraudwasdiscovered,was

ituncoveredthatmoneyhadbeendirectedtotaxhavens.

In early2009 the SydneyMorningHerald contactedTrio’s custodian, theNationalAustraliaTrustee,

andenquiredaboutTrio’sAstarraStrategicFundsassets.Thebankprovideda statementconfirming

thattheassetswereindeedinthesafecustodyofthebank.Thestatementquelledanyconcernsbythe

83StuartWashingtonTrioproblemsareafailureonthepartofitsgatekeepersJan22010http://www.smh.com.au/business/trio-problems-are-a-failure-on-the-part-of-its-gatekeepers-20100101-llqf.html84PJCReport2012Op.cit.page12385PJCReport2012Op.cit.page12386PJCReport2012Op.cit.page12RefASIC,Submission51,p.77.

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Herald.Butthebankhadmadeamistakeandhadsimplypassedoninformationgiventothebankby

the Trio scheme.87The mistake suggests the custodian was not fulfilling its role as an independent

gatekeeperasrequiredunderlegislation.Byincorrectlyconfirmingthatassetswereindeedinthesafe

custodyofthebank,theHeraldwasinadvertentlypreventedfrompossiblydiscoveringthefraud.There

isnoevidencethebankwasquestionedoverthisincident.

6)ResearchHouses

ThePJCfoundtherewasalackofunderstandingastotheclaimsmadeinthereportsissuedbyresearch

housesandinparticular,whetherthedataprovidedbytheresponsibleentityuponwhichthesereports

arebasedhadbeenverified.Thereisalsosomeconfusionastowhethertheratingsareintendedasan

indicatoroffutureperformance,orsimplyanassessmentofpastperformance.88

The PJC found a number of expectation gaps between what consumers had expected and what the

industrywasoffering.Oftenthetwodidnotmatch,forexamplethePJCfound,

‘There is a reasonable expectationamong investors that researchhouseswill verify the datauponwhichtheirreportsandratingsarebased.Again,thisisnotthecase.’89

ResearchhousesandstarratingfirmslikeMorningstarandVanMacprovided4or5starsoutof5for

the low risk Astarra funds but it was discovered after September 2009 that all their supportive

informationwasirrelevant.Morningstar’sreportsamountedtonothing,goingbywhattheyinformed

thePJCin2011,

‘In order to be added to the Morningstar database, a fund must have a product disclosurestatementregisteredwith theAustralianSecurities& InvestmentsCommission.Morningstar'sdatabasecontainsauditchecks,althoughMorningstarultimatelyreliesonfundmanagersandtheiragentsprovidingaccurateinformation.’90

Inaddition towhat turnedout tobeallegedlymeaninglesspromotionalmaterialby researchhouses

and star rating firms, the ASF Product Disclosure Statement was also found to be a misleading

document. Only later after the fraud was uncovered was it discovered that the PDS had misled

investors.Forstarters,thePDSfailedtodisclosethepersonalbenefitsthatsomeoftheTriooperators

obtainedbythefundsinvestments.ThePJCdidnotacknowledgeorexaminethatthePDSwascompiled

(bylawyers)andapproved(byASIC).

Fromeachandeveryexpectationgap,consumersendedupcarryingtheblame.ThePJCfound,

87PJCReport2012Op.cit.page34ref.MrJohnHempton,'Adarkprivatisedsocialsecuritystory:Astarra,themissingmoneyandhowexaminingafundmanagerownedbyJoeBiden'sfamilyledtosubstantialregulatoryactioninAustralia',BronteCapital,2January2010,http://brontecapital.blogspot.com.au/search?q=trio(accessed17April2012).88PJCReport2012Op.cit.page12389PJCReport2012Op.cit.pagexxiii90SubmissionbyMorningstartotheParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintotheCollapseofTrioCapitalandAnyOtherRelatedMattersAugust2011page5

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‘There is a reasonable expectationamong investors that researchhouseswill verify the datauponwhichtheirreportsandratingsarebased.Again,thisisnotthecase.’91

7)LevelofDisclosure

TheTriovictimsreliedongovernanceoftheAustralianfinancialsystemtoallowonlyacceptable law

abidingproductsbutthePJCfound,

‘ASIC has noted that, compared to the United States and Europe, the level of underlyingportfoliodisclosureofmanagedinvestmentschemesinAustraliaisverylimited.BothASICandMorningstarhave suggested there shouldbedisclosureatasset level for registeredmanagedinvestmentschemestohelpinvestorsassessboththetypeoffinancialproductstheyareexposedto,andtheextentofthatexposure.’92

ThePJCsawapossibleareaforreform,concerningthedisclosurerequirementsofManageInvestment

Schemes(MISs).InthecaseoftheTriofraud,thePJCwrite,

‘The question has arisen during this inquiry as to whether the regulators, the auditors, theresearchhouses, the financialadvisersand investors themselveswouldallbenefit frombetterdisclosurebythemanagedinvestmentschemesoftheirassetportfolioholdings.’93

Fromwhat ASIC informed the PJC, it is evident that ASICwas aware of disclosure weaknesses that

disadvantagedconsumers inmanaged investmentschemes(MIS).MrMedcraftexplained the issueof

theunderlyingportfoliolevelofdisclosure,

‘…thesystemisaboutefficientmarkets,andefficientmarketsareaboutmakingsurethatthereisnotanasymmetryofinformation.’…‘ifyoucannotactuallyfindoutwhatisintheunderlyingportfolio,itisakeyweaknessintermsofnothavingthatinformationavailabletoinvestors.’94

ASICdidnot informconsumers that theyhadno rights to informationon theportfolioholdings in a

MIS.

The Parliamentary investigation into the Trio fraud had no committee members with forensic

accountancybackgrounds.Thecommitteeoverlooked the internationalTriooperatorswhoexploited

theweaknessesoftheAustralianfinancialsystemandinsteadfoundreasoninthe‘expectationgaps’to

pointtheblameatconsumers.ThePJCfailedtoinformthepublicabout:

•whytheoverseasTriooperatorswerenotquestioned;•whyvitalinformationwasnotgiventoPJCInquiry;• why the APRA-regulated financial advisors were not named in the same way that SMSF financialadvisorswerehighlighted;•whythewhereaboutsofthemissing$194.5misprotectedunder‘nationalsecurity’legislation;•whyASICandAPRA’sroleingoverningTrioanditsentitiesisandcontinuestobeasecret;and• maybe the committee can explain in hindsight – why ASIC withheld vital information from thecommittee.

91PJCReport2012Op.cit.pagexxiii92PJCReport2012Op.cit.page12493PJCReport2012Op.cit.page13494PJCReport2012Op.cit.page134refMrGregMedcraft,CommitteeHansard,6September2011,p.6.

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1.5FAILUREshiftblame.

ThecommentsmadebyMrShortenandASICinblamingthefinancialadvisorsandDIYinvestorsover

theTriofraudareflawedonanumberoflevels,forexample:

(i) Consumers could not have taken defensive action against organised international crime

gangstargetingsuperannuationorconsideredlegislationprotectionagainstfraudbecause

therewasnoinformation,warningsorguidanceavailablepriortoSeptember2009;

(ii) Itisanonsenseargumenttosuggestthat4financialadvisorsoutof155areresponsiblefor

thelossoftheirclient’sinvestments,whiletheotheradvisorswhohadclientsinthesame

Trio fraud are blameless. There is no evidence to suggest that DIY investors knew they

wereinvestinginafraudulentscheme.Ofthe690DIYinvestors415weredirectinvestors

and 285 investors were in self-managed superannuation funds (SMSFs). Over 6,090

investorswereaffectedbytheTriofraud.95Toblame4outof155advisorsandblame8%

ofinvestorsisnonsense;

(iii) Onesectorofthemarketisblamedfortheirlosstoacrime.Buttheinformationaboutthe

crime and about the systemic failure is covered up. The public are denied an accurate

accountofwhathappenedanddeniedinformationaboutASIC’sinteractionswithTrioand

itsentities;

(iv) EnoughinformationhasbecomeavailabletoshowthattheinvestigationsintoTrioby(1)

ASIC; (2) theParliamentary JointCommittee; and (3) theassigned liquidatorare flawed.

ASICfailedtoquestiontheoverseasTriooperators;thecommitteedidnotknowaboutor

have access to vital information; and the liquidator had limited resources and faced

difficulties in accessing information in overseas jurisdictions. All of the above

investigationsfailedtorecognisetheinternationalTriooperators’histories;

(v) Gatekeepers, custodians, auditors and research houses, the entire Australian financial

systemfailedtodetect‘fraud’butthevictimsandtheirfinancialadvisorswereblamedby

theMinister Bill Shorten. The cover up of what happened around Trio raises questions

about vested interests in the $31 billion per year superannuation financial services

industry;and

(vi) TriodemonstratesthatASICandAPRAarenotresponsibleoraccountable forcompelled

superannuation. Meanwhile the government has its eye on the savings pool for use in

large-scalelong-termprojects.Itiswellunderstood,thatwherethereisnotransparency,a

systemiswideopenforcorruption.

One of the greatest legal figures in recent history did not suggest that victims of fraud should be

blamed.LordDenning’sknowledgeshineswhenhestates,95TheParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintothecollapseofTrioCapitalMay2012pxvii.(PJCReport).

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‘Fraud unravels everything…once it is proved it vitiates judgments, contracts and alltransactionswhatsoever’96

MrShorteniswrong,theTriovictimscannotbeheldresponsibleforbeingvictimsofacrime.ThePJC

Report notes that financial advisors were paid hefty commissions by recommending Trio to their

clients,97but no one other thanMr Tarrantwas revealed. ASIC initiallywent after about 4 financial

advisors that had directed their self-managed clients into Trio products. Those 4 financial advisors

werenamedinthepressbutnotawordwasmentionedabouttheother151financialadvisors.

The financial advisor accused of accepting commissions became the media focus, which moved the

attentionawayfromtheASIClicensedandAPRAregulatedandgovernedTrioCapitalschemerunninga

fraud.Unknown to the public, themarketing allowancehelped in the transferring of clients into the

newfund.MrTarrantdisclosedthemarketingallowancetoovertwohundredclientsbutduetoerror,

failedtodiscloseto6or8clients.MrTarrantwaschargedoverfailingtodisclosetothose6or8clients.

Mr Tarrant argues that he was made into a scapegoat because the crime happened outside ASIC’s

jurisdiction and left ASIC powerless. ASIC could not show it was powerless after a massive fraud

becausethatwouldsendfearintotheAustralianfinancialmarket.

There are political forces at work surrounding the Trio fraud, like the alleged directive from Mr

Shorten’s office to prosecuteMr Tarrant, as hewas the financial advisorwho encouraged the AWU

OfficersElectionFundABN30450889656(slushfund)toinvestintheTrioscheme.

Michael Smith recognised the forces around theAWUslush fundbecause, ‘(f)oryearsBobKernohan

hadbeenthevictimoftheJuliaGillard,BillLudwigLudwigandBillShorten’ssmearcampaign’.98The

AWUOfficersElectionFundisperceivedascentraltoASICandMrShorten’shandlingofTrio.

InSeptember2015VOFF receivedunderFreedomof Informationaheavily redacteddocument from

theAustralianFederalPolice(AFP).Thedocumentconsistedof17pagesandhada3-pagesection in

the document headed AFP Minute and titled ‘Referral from ASIC regarding TRIO collapse’. The

documentnotes,

‘It is alleged that financial advisors provided recommendations to clients due to highcommissionswhichwere paid byTrio. It is further alleged that the complex structure of theTrio schemewas designed to conceal fraudulent activity. The ASIC investigations discovered

96LAZARUSESTATESLTD-V-BEASLEY;CA1956DenningLJ,LordParkerLJhttp://swarb.co.uk/lazarus-estates-ltd-v-beasley-ca-1956/97PJCReportpage15398IfRalphBlewittischargedintheAWUScandal,GILLARDwillbechargedtoo.Here'swhy.25February2017http://www.michaelsmithnews.com/2017/02/if-ralph-blewitt-is-charged-in-the-awu-scandal-gillard-will-be-charged-too-heres-why.html

37

that investors’moneywas channelled into financial entities and then distributed to differentcompaniesinplacessuchastheBritishVirginIslands,LiechtensteinandCuracao’99

Onpage3ofthesameAFPdocument,under‘Recommendations’therearethreepoints,-thefirstisof

interesthere,becausetheAFPmakearecommendation,theywrite,

‘Inform ASIC that the material provided to the AFP to date does not contain sufficient

informationtoinitiateaninvestigationintoMrFladerforCriminalCodeAct1995offences’.

Theminutesectionisdated26February2012.

DidASIChavemore informationorwere theyusing theirdiscretion in the sameway it chosenot to

informthePJCoftheGCSLdocuments?

WasASICwithholdinginformationinthesamewayitdidfromtheNSWSupremeCourt?

By2012itisapparentthatASIChadnointerestinpursuingtheallegedperpetratorsoftheTriofraud.

Was it incompetenceordidASIC cover-upweakness or apparent inability topursue thematter into

internationaljurisdictions?

TheAFPdocument releasedunderFreedomof InformationhelpsVOFFpiece togetherevidence.The

informationillustratesASIC’sfocusonfinancialadvisorsandnotenoughinformationtoassisttheAFP

togoafterthe‘ultimatecontroller’oftheTrioscheme.

TheblamingofDIY investors, in the contextof theGlobalFinancialCrisis,was the resultof industry

superannuationfundsdoingpoorlywithmanagementfeeseatingintoinvestor’ssavingsandtheoption

ofgoingintoaself-managedfundwithlowerfeesbecomingveryattractive.

Mr Shorten's decision to grant compensation for the APRA-supervised funds under Part 23 of the

SuperannuationIndustry(Supervision)Act1993(SISAct)removedanyneedforaproperinvestigation

into theTrio crime, removedanygenuineattempt to clawback theproceedsof crimeand reekedof

politicalopportunism, favouring theALP’sunion links to industry superannuation funds.MrShorten

presentedself-managedsuperannuationfundsasdangerous,whichputastopto,orsloweddownthe

exodus.

AMinisteroftheCrownisrequiredunderthe2014CodeofConductforMinisterstotakeallreasonable

stepsthatdecisionsaretobeunaffectedbybiasorirrelevantconsiderations.100

MrShorten’sremarksaboutfinancialadvisorsandSMSFinvestorscaughtupintheTriofraudappear

toshowlittleconsiderationforaccuracyornon-bias.MrShortenblamed:

SMSFtrusteesforputtingmoneyintoatroubledfund;

99ReceiveddocumentsfromAFPSeptember29th2015inresponsetoVOFFFOINo.373.100http://www.dpac.tas.gov.au/__data/assets/pdf_file/0016/53503/Code_of_Conduct_for_Ministers.PDF

38

DIYinvestorsforgoingoutsideflags;

DIYinvestorsfortheirlackofskill;

SMSFtrusteesforhavinggreaterchoice;

SMSFtrusteesfortakinggreaterrisk;and

BlamedtheSMSFtrusteesbecause‘theyareresponsiblefortheirownchoices.’

“Investing between the flags” is a term ASIC used to guide and encourage investors in the financial

market to invest safely. InMarch2009, the thenASICDeputyChairman, JeremyCooper, at theSPAA

NationalConferenceinreferringto"swimmingbetweentheflags"MrCoopersaid, ‘Wewantinvestors

tounderstandwhentheyare:

•swimmingbetweentheflags–investinginbankdeposits,diversifiedbluechipshares,vanillamanaged

fundsandotherinvestmentswithknownrisksorwithprofessionaladvice...’.101

InvestorsinTriowerebetweentheflags.Theydidhaveaprofessionalfinancialadvisor.

In December 2009 ASIC’s previous Chairman Tony D’Aloisio launched the free practical guide to

investing for retail investors, titled ‘Investing between the flags’. Tony D’Aloisio said ‘It's just a

metaphor but when you go swimming at the beach, you will reduce the risk of drowning if you swim

betweentheflags,similarly,whenyouinvest,youwillreducetheriskoflosingyourmoneyifyouadoptthe

investingbehaviorsidentifiedinthisguidewhichhasbeendevelopedoveralongperiodoftime.’102

'Investingbetweentheflags'103setsoutthelegalrequirementsforinvestingbetweentheflags.Afterthe

Trio fraud occurred, Trio investors checked those requirements with their investments in Trio and

found they had followed each and every recommendation made by ASIC. The Trio investors were

investingtheirsuperannuationanddirectinvestmentsinexactlythewaythelawrequired.

TheTriofraudwasdiscoveredinSeptember2009.SixmonthslaterMrShortencommencedusingthe

term “swimming outside the flags” when discussing the Trio fraud. Mr Shorten likened the Trio

investorstobeachgoersswimmingoutsidetheflags.

"The swimming may be better [outside the flags], but it is more risky and you don't have a lifeguard

watchingoveryou,"hesaid.104

101JeremyCooper,DeputyChairman‘Helpingretailinvestors’2009SPAANationalConference,Adelaide2009Page3http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/SPAAspeech-110309.pdf/$file/SPAAspeech-110309.pdf10209-244MRInvestingbetweentheflags-Tuesday8December2009.http://www.asic.gov.au/asic/asic.nsf/byheadline/09-244MR+Investing+between+the+flags?openDocument103'Investingbetweentheflags'publishedFebruary2011(64pages)(ASICpublication).http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/InvestingBetweenTheFlags.pdf/$file/InvestingBetweenTheFlags.pdf104Hasham,NicoleTriofallout:DIYinvestors'swimmingoutsideflags'14Apr,2011http://www.illawarramercury.com.au/news/local/news/general/trio-fallout-diy-investors-swimming-outside-flags/2133491.aspx

39

TheAustralianpublicrelatedtotheflagsat thebeachmetaphor.OnceMrShortensuggestedthatthe

self-managedsuperannuationfund(SMSF)trusteeswere‘swimmingoutsidetheflags’mostAustralians

would recognise they were doing something wrong, something that is frowned upon in Australia’s

beach culture. Australians would have sided with Mr Shorten’s comment, recognising that it is

unacceptabletoswimoutsidetheflags.

WheneverMrShortenmentionedanythingaboutTriohewouldcriticizeSMSFinvestors,accusingthey

were swimming outside the flags and that they had sacrificedinvestment security for higher risk,

higher benefit investments.105 During the period the PJCwere investigating the collapse of Trio,Mr

Shortenwentonnationalradioandtelevision,claimingSMSFinvestorsinTriowere"beyondtheflags"

and"outsidetheflags".106&107‘UnluckyWollongonginvestorswhomissedoutonaFederalGovernment

bailoutpackagewere"swimmingoutsidetheflags"andriskingtheirlifesavings’.108

Mr Shorten claimed, ‘If youmetaphorically swim outside the flags for APRA regulated funds that is a

choice that if we're going to ask the whole of the superannuation industry to bear the cost of

compensationwhichwearethenthecurrentpolicyforthatisthepeoplethatshouldbeeligibleforthat

shouldbeoneswhobelongtofundswhichsubmitthemselvestoAPRAsupervisionoftrustees'.109(TheTrio

victimsperceiveMrShorten’scommentasasserting that thevictimsareaburdenon thecommunity

andthattheydon'tdeserveanythingfortheirownwrongdoing).

On16thMay2012MrShorten saidonABCRadio, ‘PeoplewhoinvestedinAPRAregulatedfundshave

been compensated, but there are somehundreds of peoplewho swambeyond the flags,whoweren't in

APRAregulatedfunds’.110MrShorten’sincorrectandmisleadingstatementgivestheimpressionthatby

beingonthewrongsideoftheflagsiswhyvictimsremainuncompensated.

In the same radio interview, Stephen Parbery, a founding Partner of PPB Advisory, noted ‘It is

unfortunate that the relevantminister appears to have tried to sweep this under the carpet by saying

things like, "I've compensated people who - in one category, but everybody else was, in essence, in his

words,'swimmingoutsidetheflags'."Thatisnotanaccuratecharacterisationofwhathappened’.111

MrShortenblamedonesectorofthemarketforbeingoutsidetheflagsdespitetheSupremeCourtof

NewSouthWaleson12August2011,found,‘TheCrownsubmittedthatthiswasacasewhichindicated

105IllawarraMercury(Investors'caughtoutsideflags')byNicoleHasham14.4.2011pp4&5106http://www.abc.net.au/worldtoday/content/2012/s3425783.htmGovernmentcompensatesmostTrioCapitallosses,AshleyHallreportedthisstoryWed,February8,201212:26:00107abc730reportTriofraudstory-April182012.108ibid.109SympathyforburntTRIOcapitalclientsApr13,2011.http://www.abc.net.au/news/stories/2011/04/13/3190435.htm110RebeccaBaillieAustralianBroadcastingCorporationBroadcast:16/05/2012.http://www.abc.net.au/7.30/content/2012/s3504474.htm111ibid

40

"...a veryhighdegree of criminality not previously encounteredbyAustralianCourts." It also submitted

thatthecriminalitydemonstratedinthecase" ...approachestheveryworstcategoryofoffencesoftheir

nature."’

Despitethecourts’finding,ASICmadetheTriomatterandthedisappearanceofmoneyappearthatit

wastheresultof‘poorfinancialadvice.’MrShortenandASICusedtheterms,‘collapse’,‘badadvice’and

investorswere‘swimmingoutsidetheflags’.Suchtermsdistancedtheregulatorfromitsroleandhow

it failed to carry out a background check of the international Trio Capital architects that came to

AustraliatosetupbusinesswithintheAustralianfinancialsystem.

ThepublicwereleftwiththeimpressionfromMrShorten's‘flags’analogythattheuncompensatedTrio

investorshaddeliberatelydisobeyedrulesandregulationstoswim“outsidetheflags”.Itisinexcusable

that Mr Shorten was running a politicization campaign at the same time he was executing his

Ministerialduties.Hispoliticizingthe‘crime’wasachievedbytheseinflammatory,invectiveandhighly

offensive comments aimed at the uncompensated victims, who were doing exactly the same as the

compensatedvictims.MrShorten’sclaimthat,"theyareresponsiblefortheirownchoices"112-suggests

thattheTriovictimsmadeaconsciousdecisiontoventureoutsideoftheflags.

ASIC,byfailingtocorrectMinisterShortenpublicly,alsodiscreditedtheSMSFsectorofthemarketand

ignoredthecrime.WhileunderMrShorten'swatch,ASICfailedtoensurethemarketoperatedlegally

andseeminglysupportedtheactionsofMinisterShorten.ASICareyettoclarifyiftheyagreewithMr

Shortenscharacterisationof theTrioCapitalFraudas“swimmingoutsidetheregulatoryflags”.Given

theseweretheflagsofASIC’smaking,surelythisdeservedclarificationforinvestors.

Mr Shorten's comments achieve clout for the union industry funds but add nothing to the

understandingabouthoworwhythebiggestsuperannuationtheftinAustralia'shistoryhappened.Mr

Shorten stated, "Ibelieve in caveatemptor;Latin for "let thebuyerbeware"meaningyouneed to take

responsibilityforyourowndecisions,ifyoubuysomethingwithoutdoingyourhomework,well,you'rean

adult,that'syourresponsibility."113

Asaministermakingpublicstatements, thepublic relyon the information tobeaccurate.But in the

case of Trio, Mr Shorten’s comments are often inaccurate andmisleading. Harvard Business School

ProfessorD.QuinnMillssays,"letthebuyerbeware" isapoorwarningfor investors.MrMillsmakes

this claim in the context of his systematic analysis of both the Internet stock bubble and the Enron

112http://www.theaustralian.com.au/business/year-director-ban-on-former-trio-ceo-rex-philpott/story-e6frg8zx-122608748646615-yeardirectorbanonformerTrioCEORexPhilpottbyANDREWMAIN,TheAustralianJuly05,2011113TheAssistantTreasurerBillShorten'sarticle"Clean-uptimeforfinancialadvisers"(Telegraph6May'11p34)

41

scandal.114

Stephen JamesParbery in thecapacityasoneof the liquidatorsofTrioCapitalLimited,AstarraFund

Management Pty Limited, and ASI Administration Pty Limited was well placed to have an in-depth

understandingoftheTriofraud.May16th2012onABCRadioStephenParberysaid,

"It is unfortunate that the relevant minister appears to have tried to sweep this under the

carpetbysayingthingslike,"I'vecompensatedpeoplewho-inonecategory,buteverybodyelse

was, in essence, in his words, 'swimming outside the flags'." That is not an accurate

characterisationofwhathappened".115

MrShorten’scommentshavenocredibility.Hedifferentiatesbetweenpeoplestruckdownbyexactly

thesame fraud.MrShortensaid the industry fund"victimswhoarevictims throughno faultof their

own"…buttheself-managedinvestorsventured"directlyintotroubledfunds".116

Investigative journalist Stewart Washington asked whether DIY super investors, who account for a

thirdofthe$1.3trillioninAustraliansuperannuationsavingswereawareoftheirlackofasafetynet,

MrShortensaid:“Iwouldsaytheyaregoingtobecomealotmoreaware.”117

Thevictimsof theTriocrime findMrShorten’sanswer toStewartWashingtonan insult.Thevictims

perceiveitisanunacceptablecomment,madebyaMinisteroftheCrown.

Mr Shorten’s handling of the Trio fraud continually demonstrated that he fails to respect evidence-

basedinformationaboutthecrime.Healsofailstorespectthat“victimsofcrime”dohaverightsunder

TheVictimsofCrimeAct1994andtheVictimsRightsandSupportAct2013.TheTriovictimsdeserved

the opportunity to provide the courtwith a ‘Victim Impact Statement’ but ASIC andMr Shorten did

nothingtoseethatthevictimsexercisedtheirright.

VOFFperceiveMrShorten’suseofPart23wasusedasawaytodestroymarketcompetitionbetween

the APRA-supervised superannuation funds and SMSFs. That Part 23 assisted some victims but not

others, served as an ideal market-signal to deter superannuation newcomers from opening a SMSF

account.Thusdirectingmorecustomerstotheunionmanagedfunds.SimilaritiesofMrShorten’sunion

biascanbefoundelsewhere,suchas:

114D.QuinnMills-Buy,Lie,andSellHigh:HowInvestorsLostOutonEnronandtheInternetBubble,2002.115RebeccaBaillieAustralianBroadcastingCorporationBroadcast:16/05/2012.http://www.abc.net.au/7.30/content/2012/s3504474.htm116Washington,StuartSMH'Fraudvictimsget$55mback,butsomeleftempty-handed'April13,2011http://www.smh.com.au/business/fraud-victims-get-55m-back-but-some-left-emptyhanded-20110412-1dcpn.html117StuartWashington'Largestgovernmentpayoutof$55mforTriosuperfraud'April132011http://www.theage.com.au/business/largest-government-payout-of-55m-for-trio-super-fraud-20110412-1dcm5.html?skin=text-only

42

i) The AWU National Secretary kept quiet about the Australian Workers’ Union slush

Fund;118

ii) AWU-Cleaneventdealthatcost5000-oddworkersasmuchas$400million;119and

iii) Attempt todestroy thesmallbusiness trucking industryby forcing the littleguys to join

thetruckinggiants.120

SenatorMathiasCormannechoesasimilarconcerntotheTriovictimswhenhestated,

‘Bill Shorten's problem is that he continues to let his union bias get in the way of his

responsibilityasaMinistertoactinthepublicinterest. ‘It'stheforgottenfamiliesofAustralia

whoarebeingaskedtopaythepriceforBillShorten'sshamelessunionbias’.121

MrShorten’sallegedunionbiaswasnotedinaletterbyVOFFdatedAugust2017totheHonMichaelia

Cash.HerChiefofStaff,BenDavies, repliedon6thSeptember2017saying, “theactionsofMrShorten

when he was the Minister responsible for Superannuation consistently fell short of the standards of

unbiasedconductthatAustraliansareentitledtoexpect.”

Blaming the self-managed investors over the loss of their savings in Trio is like blaming the people

travellinginbusesandcarskilledinHiroshimainAugust1945,suggestingtheydiedbecausetheywere

not wearing seat-belts. The fact that seat belts were unavailable until the 1970s is akin to the

knowledge about Part 23 made available after September 2009. Ignoring that the atomic bomb

destroyedHiroshimacityandmostlyeverylivingcreature,islikeMrShortenandASICareblindtothe

Trio fraud.The140,000deaths inHiroshimahadnothing todowithseat-belts, thedisappearenceof

retirementsavingsfromTriowasnocausedbyconsumer’susingself-managedfundsorbecausethey

usedfinancialadvisors.

ASICregulateFinancialAdvisors.TheyoperateunderandtheCorporationsAct.Onehundredandfifty

five financial advisors invested in Trio. The Professional Pensions Pooled Superannuation Trust

(PPPST)isanexampleofaconservativeindustryfundthatchosetoinvestinTrio.ThePPPSTbecame

victim to the Trio crime. The fraud is not about one particular financial advisor. TheNSW Supreme

Courtidentified‘fraud’intheTrioscheme.

TheFinancialSystemInquiry(FSI)lumpedTrioCapitalwithexamplesofcollapsedfunds.VOFFargue118http://tinyurl.com/y7d3jxlg119AnthonyKlan‘Cleaneventstafflost$400munderdealbyBillShorten’sAWU’July8,2015http://tinyurl.com/hwqmqae120GraceCollierUnion,Gillardrulesdrivingowner-truckersoutofbusinessMarch5,2016http://tinyurl.com/l9nsuxw121Shortentoblameforworkers'superlosses09/06/11http://www.liberal.org.au/Latest-News/2011/06/09/Shorten-to-blame-for-workers-super-losses.aspx

43

thatthat’smisleading.TheFSIstate,

‘Retail investment failures following the GFC, including high-profile cases such as Storm andTrio,highlightedconcernswithfinancialadviceregulation.’122

Furtheron,‘Anumberofcollapseshaveledtosignificantconsumerlosses,includingStormFinancial,TrioCapital, Opes Prime, Westpoint and Commonwealth Financial Planning. In some cases,consumers receivedpartial compensation; however, a significant proportion of losses remainuncompensated.’123

Was theFSICommitteemisledby themisleading informationdisseminatedbyASICandMrShorten?

The inference that Trio collapsed or was a market failure, investors ‘outside the flags’ and ‘poor

financial advice’ et cetera, add nothing to educating Australia about a crime that subverted the

Australianfinancialsystem.

MrShortensaidinthewakeoftheTrioCapitaldebacle,theFederalGovernmentwas

workingtoensureSMSFinvestorsknewthatnocompensationsafetynetexisted.124

VOFFknowofovertwohundredinvestorsaffectedbytheTriofraud.Mostlyallhadneverheardabout

Part23.SomeprofessionalbusinessesthathadoperatedintheAustralianfinancialsystemfortwenty

yearsdidnotknowaboutPart23.

MrShortenorchestratedtheeventsthatfollowedinthewakeoftheTriofraud,likethedirectivefrom

hisofficeforASICtoprosecuteMrTarrant,advicetoSharonBirdMP,FederalMemberforCunningham

- to keep VOFF at arms length. Sharon Bird also said to VOFF victims, ‘not everyone invested in

Astarra’.125

StephenJones,MP,FederalMemberforWhitlam,mademanydisingenuous,inaccurateandmisleading

remarksagainstMrTarrant.Like,‘Thereasonthesepeoplelosttheirmoneyisbecausetheyfollowedsome

very poor financial advice’126and ‘What sort of financial advisor in their right mind would encourage

someonetoputtheirentirelifesavingsintoasingleasset?’127

Mr Jones repeatedly and publically blamed the victims for their losses due to fraud. He never

acknowledged in his public comments that the PJC Report said, ‘the fraudspecificallyandprincipally

122FinancialSystemInquiryInterimReportJuly2014page1-20123FinancialSystemInquiryInterimReportJuly2014page3-83124NICOLEHASHAMTriorescuepackagebringsjoy,heartacheAPRIL122011http://www.illawarramercury.com.au/story/635150/trio-rescue-package-brings-joy-heartache/125MeetingwithVOFFdelegationinSharonBird’sOffice,WollongongJuly13,2012126Thompson,AngelaIllawarraMercuryTrioangerspillsoverasvictimsprotest16thFebruary2013127Ibid.

44

targetedsuperannuationsavings,andappearstobedesignedtotakeadvantageofvulnerabilities inthe

superannuationsystem.’128

Due to Mr Jones’ repeated public claims, on February 22nd 2013 over fifty VOFF members hand

deliveredadefamationactionagainstMrJones.VOFFdidnotproceedwiththematter.

Senator Deborah O'Neill, Member of the Australian Parliament for Robertson, made inaccurate and

misleading comments not only in the media but also during the Estimates Hearing, in Canberra

(February25th2015).DeborahO’NeillaskedASIC,

"Ihavemadeitmymissiontoaskandputontherecordatestimatesoneveryoccasionsofar

thatIhavebeenabletobehere;whatishappeningwithTrio?Couldwegetanupdateofwhat

isavailabletobesaidinthepublicdomain,becausethosepeoplearestillverymuchsuffering

fromtheimpactofbadfinancialadvice?"129

ItisanirresponsibleandmisleadingcommentforMsO’Neilltomake,toignorethefactthataserious

financial crime against the Australian financial systemhad occurred and simply focuses on financial

advice,asifthiswasthecatalystthatledtothesufferingof6,090Australiansthatwereexposedtothe

Triofraud.

DeborahO’Neill’sstatementismisleadingtotheSenateEstimatesandallAustraliansbutnottoASIC.

Herstatementalignsandechoesthedisingenuous, inaccurateandmisleadingcommentsmadebythe

otherLabormembersinlinewithwhatBillShortenwasdisseminatingandsayingaboutTrio.

TheTriofraudisanexampleofacrimethatwasnotproperlyinvestigated.Norweretherightsofthe

victimsofcrimerespected,asrequiredunderthevictimsofcrimelegislation.

128PJCReportMay2012page146129ProofCommitteeHansardSenateEconomicsLegislationCommitteeEstimates25February2015Canberrapage98

45

2.1VOFFHistory

Superannuationhasresultedinpeoplediscoveringtheyuninvitedlyandunexpectedlybecame

anvictimoffinancialcrime.Alinkcanbemadebetweentheunexpectednessoffinancial

crimeandroadaccidents.ThemultitalentedlateWilliamPlowden,130authorofThemotorCar

andPolitics:1896-1970recognisedinthe1960sthattheunexpectednessofaroadaccident

wasafactorwhypeoplewerenotapoliticalforceinregardstoroadsafety,

‘thevictimsofaccidentsandtheirfamiliesarepoliticallyweakintwoways.First,as

membersofthis“interest”theyhavenoexistenceuntilitistoolate;onlyoccasionally

dosmallgroupsoflocalresidentsagitateforactiontopreventanticipatedaccidents.

Secondly, they share with other consumers groups the crushing weakness of being

evenly distributed throughout the community, both geographically and

sociometrically. It is thusalmost impossible for thesurvivors toorganisethemselves

effectively.'131

Plowden’sinsightfitsatimebeforeGoogle.TheVictimsofFraud(VOFF)arelessfragmented

andtheInternetoffersglobalresearchincyberspace.

VOFFarestandinguptothesystemthatallowsthevictimsoffinancialcrimetobedeniedany

legal rights. Victims of financial fraud can and did throwmoney at lawyers but in the Trio

example,tothrowgoodmoneyafterbadachievedlittle.Citizensinthe21stCenturydeserve

better. Victims of financial crime should not be dragged through the trauma and political

nonsense that the Trio victims had to endurewith all the disingenuous comments fired at

investors and financial advisors, particularly in view that Australians are compelled into

superannuation.

TheTriofraudvictimswaitedforsevenyearsfortheAustraliangovernmenttoacknowledge

the systemic failure of the Australian financial system and consider restitution. During the

waitVOFFweatheredseveralpoliticalstorms.AroundthetimetheTriofraudwasdiscovered

(September 2009) it was also the start of the transitions evolving Kevin Rudd PM to Julia

130Jenkins,KateInnovative,radicalinternationaladviserongovernmentpolicy,hehadalifelongassociationwiththeLSEJuly6th2010http://www.theguardian.com/education/2010/jul/05/william-plowden-obituary131Plowden,William.TheMotorCarandPolitics1896-1970TheBodleyHeadLondon1971p390

46

GillardPM,backtoMrRuddthentotheTonyAbbottandovertoMalcolmTurnbullasPrime

Minister.

TheAustralian governmentduring thisperiod, focusedon its own internaldamage control,

including the need by both sides of government to attend the Independent Commission

AgainstCorruption(ICAC)hearings. Itappears tohavebeennoconcerntogovernment that

duetoweaknessesintheAustralianfinancialsystem,peoplelosttheirretirementsavings.

VOFF’s fight to see justice and to ensure the same financial loss does not happen to other

AustralianspromptedaVOFFdelegation tomeetwith theMinister for Superannuation,Bill

Shortenin2012.

AtthemeetingVOFFprovidedtheMinisterwithalistofquestionsaimedatASIC,APRAand

theAustralianTaxOffice (ATO)concerning thesafetyof theAustralian financial system.Mr

Shorten later informedVOFF that thequestionswerevery important andheprovidedeach

agencywithacopyofthequestions.Hesaidheispersonally lookingafter itandassuredus

wewouldgettheanswers.Wearestillwaiting.132

InMay2013VOFFappliedundertheFOIActforthedocumentcontainingtheanswerstoour

questions.AbriefsummaryofVOFF-Treasurycorrespondenceisprovidedbelowtoillustrate

thedifficultysometimesexperiencedinAustraliatoaccessinformationundertheFreedomof

InformationAct.

VOFFFOINumber42RequestdatedMay28th2013toTreasury.

(01) VOFF requests the answers to our questions. The ‘VOFFQuestions to theMinister for Financial

Services and Superannuation, APRA, ASIC and ATO’ were delivered to the Minister, Bill Shorten at a

meetingon July5th2012.MrShorten informedVOFFaweek later thatheregardedthequestionsas

veryimportantandgavethentoTreasurytoanswer.VOFFrequestacopyoftheanswersundertheFOI

Act.

(02)May30th2013fromTreasury

Treasuryrequireathirty-dayextensionbecausetheyarebusy.

(03)July8th2013fromTreasury

Chargeof$87.00.

132ThequestionsVOFFprovidedtheMinister.http://www.mysuperrights.info/issue-9-voff-questions.php

47

(04)July15th2013toTreasury

Chequefor$87.00

(05)July31st2013toTreasury

Enquireiftheyreceivedchequeandwherearedocuments?

(06)August2nd2013fromTreasury

Refusedaccesstodocumentsonthegroundsthatnodocumentsexist.

(07)August3rd2013toInformationCommissioner(IC)

Complainedaboutourmissingmoney.

(08)August11th2013toTreasury

Askedwhereisourmoney?

(09)August12th2013fromTreasury

WantedVOFFtosendbankdetailsforrefund.

(10)August22nd2013toTreasury

Providebankdetails.

(11)August30th2013fromTreasury.

ArefundofthechargespaidinrelationtotheabovementionedFOIrequestwasprocessedonTuesday

27August2013.RegardsFOITeam

VOFF’scomplaintlodgedwiththeInformationCommissionerwaswithdrawn.

WilliamThompsonfromMelbournejoinedtheVOFFdelegationthatmetwiththeminister.Heflewup

for the meeting and directly after the meeting he boarded his return flight back to Melbourne. Mr

ThompsonaddedsignificantlytothequestionsVOFFprovidedtotheminister.His26-yearcareerwith

theAustralianTaxOffice(ATO),gavehimanunderstandingofhowimportanttheAUSTRACdataisin

money transactions. In 2010, Mr Thompson provided certain material to the Inspector General of

Taxation, pursuant to what was then a Section 15 Notice (is now a Section 9 Notice) to furnish

informationbutheneverreceivedanyresponse.

MrThompsonhasattemptedmorethanoncetoblowthewhistleaboutmoney laundering issuesbut

his impression is that federal agencies seem quite keen on burying theirmistakes. In June 2017Mr

Thompson sawKellyO'Dwyer at aMelbourne Law School event about the proposed protections for

whistleblowers.

Kelly O'Dwyer said there have been "...five official reviews regarding Trio, or aspects of Trio's

collapse..."butMrThompsonnotedthatnoneofthereviews-especiallythePJCTrioInquiry,madeany

referencetowhathadhappenedtopotentiallydozens,scoresorperhapsevenhundredsofAUSTRAC

reports-possiblyevenspecificSuspectTransactionReports.MrThompsonisconcernedthatduringall

48

the years while Trio siphoned $millions from Aussie retirees super fund deposits, transferring the

moneytooffshoretaxhavens,theAUSTRACreportsdidn’traisedanyredflags.

Mr Thompson sent a submission dated November 2nd 2011 to the PJC Inquiry. Tim Bryant’s letter

datedNovember4th2011acknowledgedMrThompson’ssubmission.ThatwasthelastMrThompson

ever heard about his submission. The PJC Report released in May 2012 did not list Mr Thompson

among the 77 that are listed in Appendix 1 at pages 157 to 160. No one from the office of the

Parliamentary JointCommitteeonCorporationsandFinancial Services informedMrThompsonas to

why his submissionwas not accepted. Important information inMr Thompson’s submission did not

appearinthePJCReport.

After the PJC released its report,Mr Thompson saw the PJC’s failure to point a finger specifically at

blatant failuresbyoversightagenciesasevidenceofadeliberatecover-up.VOFFsubmittedanFOIto

the Parliamentary Joint Commission in June 2017 seeking information about Mr Thompson’s

submission.133

ThePJCrepliedJune23rd2017andrefusedanyinformationunders46(c)oftheFOIAct.

During the 2013 pre-election period, VOFF campaigned in the electoral seat of Throsby, canvassing

issues about the safety and fairness of superannuation. The area is known for its rusted on Labor

supporters.VOFF’sstreetcampaigninganddoorknockingmadeanoticeableswingofvoters.

In June2013,aVOFFdelegation travelled toCanberraandmetwith threeLiberalministers, Senator

ConnieFierravanti-Wells,SenatorMathiasCormannandMrPaulFletcherMP.Themeetingsuggested

andagreedthatanindependentinvestigationintotheunresolvedTrioissueswouldbemoreefficient

and expedient (where time is an important factor as Trio has elderly victims) than a protracted

governmentinquiry.

WhentheTonyAbbottGovernmenttookoffice(18thSeptember2013),VOFFwasinvitedtopresentthe

government with a submission arguing a case for compensation. VOFF’s Submission (46 pages)

presentedthecaseforcompensatingtheTriovictimswithoutdiscrimination.Thedocumentwashand

delivered(29thJanuary2014)totheofficeofTheAssistantTreasurer,SenatorArthurSinodinos.

A few weeks later, before VOFF received a reply, the Independent Commission Against Corruption

(ICAC) required Mr Sinodinos to face a corruption inquiry in respect to his salary from Australian

WaterHoldings(AWH).Itisfairtosaythatthegovernment’sfocuswasonitsowndamagecontrol.

133VOFFFOI460PJC–Thompson’ssubmissionJune14th2017.

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In September 2015, a VOFF delegation met with some of the Senate crossbenchers in Canberra to

proposecompensation,paidbyclawingbackthestolenmoneyundertheProceedsofCrimeAct.

VOFFpromisedtosendtheSenatorsfurtherinformationbutshortlyafterthemeeting,thegovernment

wentthroughareshuffle,VOFFrefrainedfromsendingtheinformation.Unfortunatelywedidnotmeet

ourpromisestotheSenators.

Alongourjourneyforjustice,VOFFhavereceivedin2012,supportfromtheABC7.30Reportwhena

two-partstorywenttoair.SeveraljournalistsandonlinefinancialnewspublicationshavekepttheTrio

story alive. In 2016, the documentary filmmaker David Blackall from the University of Wollongong

producedashortdocumentaryaboutTrio.VOFFwasdisappointedthegovernmentdidn’tconsiderthe

suggestionsmadeinMay2013bySenatorMathiasCormann,

‘…therecentTriofraud–wedothinkthatthereareaseriesofuniquecircumstanceswhichjustifyacloserlook at what government could and should do in that circumstance. Essentially, there are peoplewhoinvestedthroughTriowhodidn’tinvestinparticularlyriskyinvestments.Theychannelledtheirfundsintoinvestmentschemesthatwere licensedbyASIC, thatweresupposedtobescrutinisedbyASICandAPRAandothers.Therewas,inourview,acomprehensivefailureofregulatorstodotheirjob.Asyouknow,theParliamenthashadaprettycomprehensiveinquiryintoallofthis.Thatinquiryreportedalongtimeago.IttookBillShortenwaytoolongtorespondtoit.Hisresponsewasinadequate.Somepeopledomesticallyhavegonetojail,butthegovernmentisnotreallythroughitslawenforcementagenciesdoinganythingtopursue thehighly sophisticated international criminals thatwentout todefraudAustralians saving fortheirretirementthroughprettysophisticatedschemes.Inallofthecircumstances,wedobelievethatthereisacaseforthegovernmenttolookmorecloselyastowhethertherewouldbesomejustificationforalevelofcompensation,ifnotforthefullamountoftheloss,butatleastalevelofcompensation.ThatiscertainlysomethingthatIhopethatBillShortenwilllookatinthenottoodistantfuture.That’scertainlymymessagetohimthatIwouldlikehimtodothatbutI’mhappytoexplorethisfurtherwithyoudirectly.134

Thegovernment’ssilenceaboutan independent investigation intotheunresolved issuessurrounding

Trio and about compensation were blasted away by the release of the Minister for Small Business,

AssistantTreasurer,TheHonKellyO’DwyerMP’spress release and letter toVOFFon the sameday,

April1st2016.KellyO’Dwyer’sApril1stletterandpressreleasebringsmemoriesofASIC’sAprilFool’s

DayMillenniumBugInsurancecyber-scamanditsAprilFoolsDayJoke.

Theopeninglinestated,

‘After careful and extensive consideration, the Minister for Small Business and AssistantTreasurer, Kelly O'DwyerMP, has advised two groups of investors in the now collapsed TrioCapital,thattheGovernmentwillnotprovidefurthercompensation.’135

134SenatorMathiasCormann,ShadowAssistantTreasurerShadowMinisterforFinancialServicesandSuperannuationSenatorforWesternAustraliaTranscriptSpeechandQ&ACedaSuperannuationUpdateForum(CommitteeForEconomicDevelopmentOfAustralia)7MAY2013HiltonHotel,Sydney135http://kmo.ministers.treasury.gov.au/media-release/032-2016/

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The next line said, ‘The government has already provided $71.7million in compensation to eligible

investors.’ This comment ismisleading becauseAustralian superannuationAPRA-regulated funds all

contribute tomeet this cost. The press release failed to disclose that an administration fee of about

$17mwaspaidtodistributethemoniesbetweenfunds.

Theproceedingsentencessay,

‘The investor groups are made up of direct investors and Self Managed Super Fund (SMSF)trustees, andneither of these groups are covered by the compensation frameworkunder theSuperannuationIndustry(Supervision)Act1993(SISAct).

‘BecausetheyarenotcoveredbytheSISAct,ingoodfaiththeGovernmentconsideredwhetherthere were any other relevant contributing factors to the losses suffered by these investors,whichwouldcallforcompensationtobepaid,’MinisterO'Dwyersaid.’

ItisashockreadingtheaboveasclearlytheauthorhasnotreadtheVOFFsubmissiondeliveredtoMr

Sinodinos.Alsothenextline,withoutonesinglepieceofevidenceaboutthefinancialregulators,states,

‘TheGovernmentconsideredtheactiontakenbythefinancialregulators,ASICandAPRA,andissatisfied that in relation to the collapse of Trio, both regulators carried out their roles andresponsibilitiesappropriately,inaccordancewiththelawandtheregulatoryframework.’

ASIC demonstrate incompetence by not knowing whether the Paul Richard Bell who ASIC jailed in

Queensland is also the Frank Richard Bell that ASIC allowed into the Australian financial system to

handle superannuation savings under the Trio scheme.How canASIC’s uncertainty about the ‘Bells’

and all the other failures that VOFF highlight be ‘in accordance with the law and the regulatory

framework’?

The next line of the April 1st press release states, ‘Trio collapsed in2009and therehavebeen five ofofficialreviewsregardingTrio,oraspectsofTrio'scollapseoverthelastsixyears.’

VOFFknowoftwoinquiries/reviewsbutnotfive.

VOFFFOI428requesttoTreasuryApril4th2016requestedthethreeofficialreviewsthathaveTrio,or

aspects of Trio's collapse in their terms of reference, but not, ‘The PJC Report May 2012’; or the

‘TreasuryReviewoftheTrioCapitalFraudandAssessmentoftheRegulatoryFramework’.

Treasury’sreplyApril18th2016saiditestablishedapproximately1,000documentswhichcomewithin

thescopeofourrequestbutrefuseundersection24and24AAoftheActasitis“toomuchwork”.

VOFFinletterdatedApril25th2016toTreasury,providedalistoffinancialreviewspostTrio,

1. theParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintothecollapseofTrioCapital(2012);

2. the Richard St. John Report on Compensation arrangements for consumers of financialservices(2012);

3. the Treasury's Review of the Trio Capital fraud and assessment of the regulatoryframework(2013);

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4. the Parliamentary Joint Committee on Corporations and Financial Services Inquiry intoproposalstolifttheprofessional,ethicalandeducationstandardsinthefinancialservicesindustry(2014);

5. theFinancialSystemInquirychairedbyMrDavidMurray(2014);andthefinalReporttoCreditors(andsupplementaryreports)preparedbyTrioCapital'sliquidator,PPBAdvisory(2015).

The scope of VOFF’s FOI request was aimed at the Richard St. John Report; the Inquiry to lift the

professional,ethicalandeducationstandards;andtheMurrayInquiry.

VOFFrequestedthedocumenttoshowthatTrioCapitalwasinthe“termofreference”-expectedtobe

onepageinlengthineachcase,thetotalofthreepages.Thethreereportsinquestionhadnopublicly

availableinformationshowingtheyhadanyrelationshipwithTrioCapital.

April29th2016Treasuryrepliedsayingnodocumentsexist.

Serious financial crime issues deserve accuracy. Not used as part of some propagandamachine like

ASIC’spressreleasesthatareoftenlikeaspielreekingofself-promotion,

‘AsaresultofASICinvestigations,morethan13peoplehavebeenjailed,bannedfromprovidingfinancialservices,disqualifiedfrommanagingcompaniesorhaveagreedtoremovethemselvesfromthefinancialservicesindustryforatotalofmorethan50years.’136

ReturningtotheApril1stpressrelease,thelastpartnotes,

‘Onbehalfof theGovernment Iwish toexpressmysympathies toall investorsaffectedby theTriocollapse,andtoacknowledgethesignificantfinancialandpersonalstressthatthecollapsehascausedthemandtheirfamilies,includingtothosewholosttheirentireretirementsavings.‘AlthoughtherecentFinancialSystemInquiryconsideredthatAustralia'sfinancialsystemandregulatory architecture does not require wholesale change, the Government is furtherstrengtheningthefinancialsystemtoimproveconsumeroutcomes.‘TheGovernment has also established themulti-agency Serious Financial CrimeTaskforce todisruptanddeterfinancialcrimes,’MinisterO'Dwyersaid.

VOFFarguethatsomeofthelegislationchangesmadewereabsolutelynecessaryaftertheweaknesses

in the systemwere exploited. Also the need to establish a body that deals specifically with serious

financial crime isa reflectiononASIC’s limitationsand indifference itbrought to theTriocrime.The

victims of the Trio crime have not received justice. The victims have been thrown into the too-hard

basket.Thefinancialsystemunderwentmanychangesasadirectconsequenceofthesystemicfailure

oftheAustralianfinancialsystemseenintheTriofraud.

Prior to September 2009, the financial market was not informed about part 23 of the SIS Act. Post

September2009,aftertheTriofraudwasdiscovered(September17th2009)Part23oftheSISActwas

dustedoff andbrought into the light.After September2009 the regulators joined ranks in attacking

136http://kmo.ministers.treasury.gov.au/media-release/032-2016/

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SMSFs.Inadditiontononsensecommentslike,“swimmingoutsidetheflags”,anX-ASICstaffer joined

in, claiming, “you can't have your cake and eat it too”. The X-ASIC staffer now manages a large

superannuation fund – his competition is SMSFs. The attack against one sector of themarket is an

exampleofvictimization.

ASIC took sixmonths from the time Triowas considered a potential Ponzi to realising Trio’s assets

weremissing.ThePart23solvedthelostassetsforover90%ofthevictimsandconsequentlyclosed

theneedforaproperinvestigationofthecrime.Part23closedtheneedtounderstandexactlyhowthe

weaknesses in the financial system were exploited or why ASIC’s limitations in international

jurisdictionsrendereditpowerlesstorespondtotheseriousfinancialcrime.TheTriofraudwasnotthe

typeof‘fraud’theauthorsofPart23consideredwhentheydraftedthelegislationin1993.ThePart23

authorshadnoknowledgeoftheMISstructureoritsweaknessesorthelimitationsinASIC’spowersto

functionininternationaljurisdictions.

TheTriofraudwas100%avoidable.Itisareasonableexpectationtoexpectthatthefinancialregulator

remember the names of people who had previously come to its attention in regards to having a

connection with a massive fraud against the Commonwealth. It was not just a matter of forgetting

namesthatappearondocuments.ASICwenttoHongKongtotheofficestosecure100,000documents

from the same people. It is unacceptable that ASIC let the same people purchase a trust fund in

AustraliathateventuallybecametheTrioCapitalLimitedoperation.ASICfailedtokeepaneyeonwhat

theywereupto.

WasitinASIC’sinterestsnottoletoutthedetailsofhowtheentiresystemwasfoundtobewanting?

TheTriofraudtookadvantageoftheblindspotsintheASICregulatedmanagedinvestmentscheme.It

isperceivedMrShortenandASICmadescapegoatsof financialadvisers theywanted to ‘bringdown’

and justice was denied to hard-working Australians due to the systemic failure of the Australian

financialsystem.

53

2.2SUPERANNUATIONSuperannuation in Australia is partly compulsory and is further encouraged by the government’ssupported tax benefits that enable people to accumulate funds to provide them with income inretirement.–Wikipedia.YetsuperannuationaccountholdersanddirectinvestorsexposedtothelargestsuperannuationfraudinAustralianhistoryweretargetedinapoliticisationcampaignthatdeniedjusticetoonesectorofthefinancialmarket.In2007PrimeMinisterPJKeatinginapaperaboutthestoryofsuperannuationsaid,

‘The firstmove towards universal access under the newly shaped superannuation provisionscameaspartofthethengovernment’sAccordwiththeAustralianCouncilofTradeUnions.Ledby Bill Kelty, the Australian Council of Trade Unions (ACTU) and its constituent unions hadparticipated ina seriesofwage settlementsdesigned to restrainwagesgrowth following theunsustainableincreasespresidedoverbytheearlierFrasergovernment.’137

MrKeatingasearlyas1989urgedthetradeunionmovementtousethebillionsofdollarsgenerated,by

superannuationoverthenext20years,toincreaseitsownindustrialclout…andthatthedevelopment

of union-run superannuation funds would give the union movement "institutional muscle" to

supplementitsalreadysubstantialindustrialstrength.'138

ConsideringMrKeatingmadesuchclaimsin1989itissurprisingthatTheAustralianCouncilofSocial

Service139putforwardaproposalastothepurposeofsuperannuationin2016.Howeverthepurpose

neededtobewrittenintolawandtheACSCintheirsubmissiontotheSuperannuationObjectiveBillin

2016suggested,

‘The purpose of superannuation is to ensure that as many people as possible can attain anadequate income in retirement, higher than the Age Pension, through an acceptable level ofcompulsorysaving,andfairandsustainabletaxationsupport.’140

It is alarming that superannuation is only now being acknowledged for its purpose. In 2014 TheFinancial System Inquiry looked at theGovernmentprerequisites of the financial system and the FSIpointedoutthat,

‘Competitivemarketsneedtooperatewithinastrongandeffectivelegalandpolicyframeworkprovided by government. The characteristics required for the financial system to contributeeffectivelytosustainableeconomicgrowthare:• Predictable rule of law with strong property rights, providing certainty of contract;protectionfromfraudulent,predatoryandanti-competitivebehaviour;andaccesstoredress.141

137PJKeatingTheStoryofModernSuperannuation31October2007AustralianPensionsandInvestmentSummit138MichaelMillettSydneyMorningHeraldKeatingseessuperasunionshieldSept28,1989page4.139AustralianCouncilofSocialService23December2016Superannuation(Objective)Bill2016Submission35page2140BILLSDIGESTNO.69,2016–172MARCH2017Superannuation(Objective)Bill2016page11

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OnethingthattheTriofrauddemonstratedwasthattherewasnopredictableruleof lawconcerning

thecrime,theinvestigation,theapprehensionofallegedcollaboratorsthathadaroleinthefraudorthe

clawingbackoftheunjustenrichments.RatherwhatoccurredwithTriowasapoliticisationoftheTrio

crime.Rulesoftheunionmovementseemedmoreapparent,suchasbullyingandintimidation,rather

thantheruleoflaw.

TheTriofraudisademonstrationofunionpower.TheSuperannuationObjectiveBillacknowledgesthe

purposeofsuperannuationassupplementingretirementincome;TheMurrayReportacknowledgesthe

“protection from fraudulent, predatory and anti-competitive behaviour” as basic government

prerequisites;andMrKeatingwanted superannuation to strengthenunion "institutionalmuscle" and

thisiswhatoccurredwithTrio.

MrKeatingwantedcompulsorysuperasanewAustralianindustry.Duringthe1990s,thegovernment

emphasised beneficial relationships between superannuation, national savings and investment. It is

only possible for superannuation to have a positive effect in termsof aging – i.e. for an increasingly

largegroupofretireestolivecomfortablyofftheirsavings–ifthosesavingsareinvestedinamanner

thatimprovesproductivityandeconomicgrowth.142&ref.

According to Craig Isherwood‚ National Secretary of the Citizens Electoral Council of Australia,

‘Superannuation was never intended to fund retirements…’ Keating intended to fund the world's

investmentfundsand"investfundsacrosstheworldintollroads,airports,powerutilities,waterutilities,

bridgesacrossgreatrivers,skyways,skyscrapers,tunnelsthroughtheworld'smountains,andwindfarms

acrossitsplains."143

The $2.6 trillion superannuation pool is like the government’s own huge Automated teller machine

withmultibillionsofdollarsavailableforinvestinginlarge-scalelong-termprojects.Thegovernment

wouldsimplyneedtoinforma$100billionindustryfundmanagementboardaboutanopportunityto

invest,say$10billion,intoafreewayconstructionandthegovernmentwouldhaveitsanswerwithin

days.Ontheotherhand,tryingtoconvincethousandsofindividualself-managedsuperannuationfund

(SMSF) trustees of the same opportunity would be time consuming and involved extensive costly

administration.

141DavidMurray,FinancialSystemInquiryFinalReportNovember2014(MurrayReport)page1014210JournalofAustralianPoliticalEconomyNo53-SuperannuationPolicyCommentaryonanInterviewwithPaulKeating,formerPrimeMinisterBryan(thisvolume,pp.100-114)explorestheparadoxofawholecommunity‘inretirement’tryingtoliveoffthesurplusofashrinking(ornon-existent)youngerworkingclass.143MediaReleaseCitizensElectoralCouncilofAustralia24May2012.Referencetotwobooks,UnfinishedBusiness:PaulKeating’sinterruptedrevolutionbyDavidLoveandPaulKeating,PrimeMinisterbyEdnaCarew.http://cecaust.com.au/main.asp?sub=releases&id=2012_05_24_Protect_Retirement.html

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The government’s access tomulti-billion dollar funds is a plausible reasonwhy the APRA-regulated

funds are the only superannuation funds covered by the Part 23 of the Superannuation Industry

(Supervision)Act1993(SISAct).LegislationcouldeasilyimposetheAPRA-regulatedboundariestoall

superannuationfundsandprovideallfundswiththeSISActfraudprotection.APRA’sroleinthemarket

doesnotrequireittoselectivelyadministeritsdutiestoonegroupandnotanother.NorareASICand

APRA assigned to destroy the democratization of superannuation by disadvantaging every type of

investmentotherthanAPRA-regulatedsuperannuationfunds.

The Trio fraud provides a real-world example, illustrating little to no interest by the government to

solve theTriocrime.Ontheotherhand,analloutattackagainst the financialadvisorswhohadself-

managedclientsinTrioandascaremongeringofconsumersawayfromSMSFsisthemessagethatASIC,

TreasuryandtheAustralianTaxOffice(ATO)articlescarry,forexample,

•ASIC ‘isworriedself-managed fundsareagiant trainwreckabout tohappen following thesector's

explosivegrowth’;144

• ASIC in 2013 said half of do-it-yourself schemesmaybe uncompetitive considering SMSFs needed

assetsofatleast$500,000tomakethemcost-effective;145

• The ATO warned SMSF trustees that the ATO could enable a fine of 93 per cent of part of their

retirementsavingsifatrusteeexceedsthecontributioncaps;146

•MoreoverTreasurystatethatSMSFsmightoffermoreflexibilityandpotentiallygreaterreturns,but

remindtheyalsocarrygreaterrisks;147and

•Warningsofriskandpropertyspruikers,ASICsay, ‘ifanSMSFmemberlosesmoneyduetotheftor

fraud theydonothaveaccess to any special compensation schemes’nordo they ‘haveaccess to the

SuperannuationComplaintsTribunaltoresolvedisputes’.148

Theabovearticlesare justsomeofmanythatshowabiastowardsAPRA-supervisedfundsandscare

anynewconsumerfromstartingaSMSF.

Why is there not a single positive article by government praising the benefits of SMSF for the

consumer?

Whythedisincentive?

144Durie,JohnTheAustralian‘Redlightsflashingasself-managedsupersoars’July12,2013.http://www.theaustralian.com.au/business/opinion/red-lights-flashing-as-self-managed-super-soars/story-e6frg9io-1226677888913145afr‘Self-managedsuperiscostlyforsome:ASIC’Sep252013http://www.afr.com/business/banking-and-finance/financial-services/selfmanaged-super-is-costly-for-someasic-20130925-j0e98146ChristineStAnneMorningstar20Aug2013http://www.morningstar.com.au/smsf/article/traps-avoid/6103?q=printme147SMH‘Dangersrisingonself-managedsuper,saysTreasuryhead’November29,2012.http://www.smh.com.au/business/dangers-rising-on-selfmanaged-super-says-treasury-head-20121128-2ae9s.html148https://www.moneysmart.gov.au/superannuation-and-retirement/self-managed-super-fund-smsf

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The government is able to use and lose the superannuation pool without accountability or

responsibility. If the APRA-supervised pool disappears due to fraud, the in-built compensation

mechanismkicksin,costingthegovernmentnothing.TheAPRA-supervisedfundsneverneedtoknow

whathappenedifmoneydisappears.IfSMSFsmoneydisappearsinafraud,consumerswanttoknow

whathappened.Thegovernment’smessagefortheAPRA-supervisedfunds,

The levy is imposedonAPRA-regulated superannuation entities,which collectivelyhold$740

billioninassetsinthe$1.32trillionsuperannuationindustry.Inthecurrentcasethetotalcost

of the levy is very small relative to total fund assets (less than one hundredth of a basis

point).149

It’samessagethatdoesn’tsatisfySMSFswhenthe$194.5mlostintheTriofraud,isregardedbyAPRA

as insignificant - less thanonehundredthofabasispoint. In theTriomatter,MrShortenblamedthe

SMSFsforplacingtheirsavingsintotroubledfunds.Themumanddadsuperannuationfundsanddirect

investors in Trio are supposed to investigate and know there was fraudulent activity despite ASIC,

APRA, the auditors, the ATO, ANZ and NAB banks being unable to detect fraud.Will mum and dad

superannuation funds be expected to know other potential events thatmay lead to the loss of their

savings,suchaswhenthegovernmentmightpulltheplugonalarge-scaleinvestmentprojectlikethe

EastWestLink?ThescrappingoftheEastWestLinkprojectcostthetaxpayers$1.1billion.150

BenjaminPreissandTimnaJacksarticle in theAgeabouta large-scale long-terminvestmentproject,

raisesconcernsifthebackinginthefuturecomesfromsuperannuationfundstoinvestinsuchprojects.

Howcantheinvestorsbewellinformedaboutwheretheirmoneyisbeinginvestedwheninthecaseof

theWestGateTunnelitappearsthatgovernmentpoliticiansareleftinthedarkoverwhatisgoingon.

PreissandJackswrite,

‘Thereleaseofa1500-pagecontractforthe$6.7billionWestGateTunnelprojectonthefinal

businessdayoftheyearhasseenthestategovernmentaccusedofattemptingtododgescrutiny

ofthecontroversialplan.

The toll road, linking theWest Gate Freeway at Yarraville with CityLink at Docklands, now

facesaroadblockintheVictorianParliamentwiththeOppositionwarningitwillvotetorevoke

planningapprovals.

WhatistheWestGateTunnelproject?

With a price tag of $5.5 billion and a promise to reduce congestion, the West Gate Tunnel

projectisanambitiousone.Butdoesitstackup?

149APRASubmissiontotheParliamentaryJointCommitteeonCorporationsandFinancialServicesInquiryintothecollapseofTrioCapital24August2011page7150JeanEdwardsEastWestLink:Costofscrappingprojectmorethan$1.1billion,auditor-generalsays9Dec2015http://www.abc.net.au/news/2015-12-09/auditor-general-reports-on-east-west-link-costs/7012618

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Thecontract, releasedquietlyonFriday,details tollingrequirements for thetunnel, including

anadditional"administrationfee"ifadriverfailstopaytollsontime.

It shows there will be key performance indicator benchmarks that Transurban will need to

meetorfaceadditionalpaymentstothestate.’151

The contract apparently fails to spell out exactly everything clearly. There is the possibility that the

projectintendstoraiserevenuethroughotheractivities.Thegovernmentreleasedthecontractwhile

muchofVictoriawas inshutdown.TheWestGateTunnelcontractshasbeenpraisedas"settingnew

standardsfortransparency,butatthesametime,amessagewassentto

Transurban warning "at the earliest available parliamentary opportunity" it would vote against the

planning scheme amendment, which is required for the project to proceed. Others slammed the

governmentforreleasingthecontract"underthecoveroftheChristmasNewYearperiod"callingit"a

secretgovernment".Thereisnopossiblewaythatmumanddadsuperannuationaccountholderscan

knowallthebackgroundtowhatisgoingonandwhatmayormaynothappenconcerningalarge-scale

long-terminvestmentproject.

TheHighCourtOfAustraliainregardstosuperannuationsaid,

‘Because of the potentially lengthy time periods over which superannuation savings are

accumulated,itwasnatural,anditisnowinmanyinstancesmandatory,foratrustmechanism

tobeemployed.These fundshave increasinglycomeunderdetailed statutoryregulation.The

governmentconsiders that the taxationadvantagesof superannuation shouldnotbeenjoyed

unlesssuperannuationfundsareoperatingefficientlyandlawfully’.152

The Australian citizens who were exposed to the Trio fraud lost large sums of money. Their

government had encouraged them to save for retirement. They followed statutory regulations and

requirements to invest in APRA and ASIC regulated, licenced and governed funds in the Australian

financialmarket.Twothings thesepeopledidwrong:1) trust theAustralian financialsystem;and2)

trustthatASICandAPRAwerecarryingouttheirroles,ensuringthatthoseoperatinginthefinancial

systemareoperatinglawfully.

151B.PreissT.JacksAndrewsgovernmentaccusedofdodgingscrutinyas$6.7billionWestGateTunnelcontractquietlyreleasedDec302017http://www.theage.com.au/victoria/67-billion-west-gate-tunnel-contract-released-20171229-h0bc4z.html152HighCourtOfAustraliaFinchvTelstraSuperPtyLtd[2010]HCA3620October2010M5/2010

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2.3Harmcausedbyfraud.

TheTrio schemewas governed, licenced and regulatedbyASIC andAPRA.This gave consumers the

confidencethattheTriofundwasendorsedandlegitimisedbytheregulators.PriortoSeptember2009,

(before the Trio fraud was discovered) consumers had no knowledge that the Australian financial

systemwas in prime condition for predatory fraudsters. Consumerswere uninformed,misinformed

andunpreparedforanypredatorybehaviorofthelikesofTrio.Nowarningorguidanceexistedbefore

Trio to informconsumersof sophisticated financial crime thatoutsmarts the lawsof thecountry the

fraud targets. Then after the Trio fraud, the victims discover that ASIC and APRA will not release

informationaboutthecrimeorabouttheiractionsandinactions.

Richard Brody and Kent Kiehl, note that the public does not have a clear perception ofwhite-collar

crimesanditsconsequences.Theyargue,

‘thatinorderforpublicperceptiontochange,anaccuratedepictionofwhite-collarcrimeanditsdangers

mustbepresentedinsuchawaythatthegeneralpublicunderstands’andare‘abletoidentifytheproblem

withthecommissionofaparticularoffense.Itisonlythenthattheymightbeabletorealizethetrueharm

thatcanresultfromwhite-collarcrimes.’153

Theharmlikelytoresultfromfinancialregulatorybodiesineffectivenesstodotheirjobisnowbetter

understoodthanadecadeago.Forexample,JamesGooldCutlerProfessorofLaw,William&MaryLaw

SchoolnotethatgriefofsomeonewhoselovedonediedwithoutwarningasseenintheWorldTrade

Centerstory-hassimilaritiestosomeonewhosemoneyhasdisappearedinaPonzischemesuchasthe

experienceofBernieMadoff'svictims.154

ThegriefexperiencedfromtheTriofraudwasacontributingfactorthatcausedtwopeopletoendtheir

livesby suicide. It’snotASICorAPRA’s role to acknowledge suicidedue to financial hardship in the

AustralianfinancialmarketortoinformtheTrioperpetratoroftheoutcomeresultingfromhiscriminal

actions.TwodeathscausedbyTrio,likemanyoftheotherunresolvedissueabouttheTriofraud,will

mostlikelyremainunacknowledged.

ASICsayitisfinishedinvestigatingTrioandstatethattherearenooutstandingissues.VOFFargue,by

ignoring the grief caused by the Australian financial system letting down ordinary Australians who

weredoingtheirbesttobegoodAustraliancitizens,placesverylittlevalueonhumanlife.Twoloving

hard-workingcitizenswerecrushedandaffectedsobadlybyexperiencinglossesinTriothattheytook

153RichardG.BrodyandKentA.Kiehl,Fromwhite-collarcrimetored-collarcrimeUniversityofNewMexico,Albuquerque,NewMexico,USA2014page12ref.Rosenmerkel(2001,p.325)154Barnard,JayneW.,"TheYearofMagicalThinking:Fraud,Loss,andGrief"(2014).FacultyPublications.Paper1719.http://scholarship.law.wm.edu/facpubs/1719

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their lives. Due to the Trio crime being politicised, some of the victims were subjected to bullying

victimizationandblamedfortheirloss.

ASIC appear not to act in the best interest of Australian consumers. It made no steps to improve

legislationsoitcanpreventanotherTriotypefraudfromdestroyingmorelives.ASIC’slegalteamneed

to propose a CorporationManslaughter Act as introduced in theUnited States, theUnitedKingdom,

Canada andHongKong.Under theCorporationManslaughterAct, victim(s) of financial crimewould

receivejusticebyseeingcompanydirectorscompelledtofacetheirlegalresponsibilityandpredatory

fraudstersmadeaccountablefortheharmtheycausevictim(s).

In2011ASICcommissionedastudybySusanBellResearch155toexaminethesocialimpactofinvestors

notbeingfullycompensatedwhentheysufferfinanciallossbecauseoftheirlicensee'smisconduct.

Although the survey recognized that victims do suffer catastrophic impact due to financial loss, the

reportfailstoacknowledgepredatoryfraud,failstomention‘crime’andonlyreferstotheword‘fraud’

ontwopointsthathavenothingtodowiththetypeofinsidiousfraudasseenwithTrio.Itisaninsultto

theTriovictimsthatexperiencedthesystemic failureof theAustralian financialsystemtohavetheir

griefcomparedtotheSusanBellResearchstudy.

TheASICREPORT240,Compensationforretailinvestors:thesocialimpactofmonetarylossMay2011156

makesnotasinglementionof‘Trio’.Theresearchexaminedtheimpactoffinanciallossbutthe81-page

reportaddsnothingtotheunderstandingoftheimpactcausedbypredatoryfraudsters.

ASIC’shistoryindealingwithvictimsofcrimedemonstratesaformofcontemptagainsthonesthard-

working Australians. According to ASIC’s 2002 Report about unlicenced international cold-calling

scams,consumersexposedtofinancialfraudintheAustralianfinancialmarketarelabelledfinancially

illiterateorgulliblefools.

Leadingup to2002ASIC ran theASIC’s 'GullAwards'competitionwherethepublic is invitedtoshare

theirexperiencesoffinancialfraudanddishonesty.157Thecompetitionrewardsthebestfraudstorywith

a'GulloftheMonth'award.

A year before the cold-calling report was published, Sean Hughes, Director ASIC Enforcement and

complianceinMarch2001said,

155NicoleHashamInvestorsguttedbyfinanciallosses-study.30May,2011http://www.illawarramercury.com.au/news/local/news/general/investors-gutted-by-financial-losses-study/2178201.aspx156ASICREPORT240,Compensationforretailinvestors:thesocialimpactofmonetarylossMay2011157ASICREPORT14-InternationalcoldcallinginvestmentscamsJune2002page45ref.AlistofthesepressreleasesisprovidedinAppendixD.ToperusetheGullAwards,goto:www.fido.asic.gov.au(scrolldowntoGullAwardsinHottopicssectiononrightmenupanel).

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‘ASIC has taken a fairly aggressive position on education to drive home the message thatconsumersshouldnotbetrippedupbytheirowngullibility.’158‘ThestrategyhaditsmostpublicexpositioninwhathasbecomeknownastheAprilFool’sDayMillennium Bug Insurance cyber-scam,whichwas designed to educate consumers about therisksof investingonthe internet.On1April1999,ASICsetupascamwebsiteofferinga fakeinvestment scheme in an effort to highlight thewillingness of people to invest in companiesabout which they know nothing. Exposed a month later, ASIC’s April Fools Day Joke hadsucceeded in convincingmore than 1400 people to seek out further investment informationfromthe"site"and233peoplepledgedover$4milliontoourscheme.‘Alliedwith thathoax, inMay1999,ASIC launched the ‘GullAwards’which is locatedon theASIC website. The Gull Awards feature precautionary, but eye-catching, tales of money anddeceitandcontinuetoalertconsumerstoinvestmentscamsandhowtoavoidthem.TheASICwebsitenowincludes‘InternetSafetyChecks’thathighlightbasiccheckswhichshouldbemadebyconsumersbeforeinvestingininternet-basedschemes.Thesetipsincludecheckstoascertainwhether a company exists, whether or not it has issued a prospectus, whether the peopleinvolvedholdaninvestmentadviser'sordealer'slicenceoraproperauthorityfromalicenseddealer.159

Another 2002 ASIC publication titled ‘Hook, line & sinker’ explained that ‘Cold calling operators

thereforeneedtobeunderstoodassophisticatedfraudsterswhomakeconcertedeffortstoappearas(and

evenmimic)legitimateoperators’.160ASICsuggestthatinthecaseofunsophisticatedconsumers,‘….the

coldcallers'successwasprobablydue,atleastinpart,totherelativelackofsophisticationinfinancial,

technological,legaland/orregulatoryliteracyoftheirtargets.161

ASIC’sGullAwardsdrawnodistinctionbetween1)fraudwherediligentinvestorsshouldhaveseenthe

warningsigns;2)investorsaffectedbyasophisticatedfraud(likeTrio)thatdeceivedASIC,APRA,the

banks,auditorsandresearchhouses.

ASIC’sGullAwards is a classic exampleof victimisation,where thepeople thatbecomeexposed to a

financial fraud are automatically regarded as ‘gullible’. Blaming the victims of ‘fraud’ for their

predicament is contrary to Lord Denning’s understanding, ‘Fraud unravels everything…once it is

proveditvitiatesjudgments,contractsandalltransactionswhatsoever’162

Perhaps amusing is that the Gull Awards ‘entrant of themost outrageous, far-fetchedorunbelievable

scamwillwin$50’.163

158SeanHughesDirectorASICEnforcementandcomplianceseminar27–28March2001Melbournehttp://download.asic.gov.au/media/1310209/ACCC_speech.pdf159SeanHughesseminar27–28March2001Melbournepp20to21160REPORT15Hook,line&sinker:Whotakesthebaitincoldcallingscams?June2002page26http://download.asic.gov.au/media/1338350/HookLineSinker.pdf161Ibid.162LazarusEstatesLtdv.Beasley;CA1956DenningLJ,LordParkerLJhttp://swarb.co.uk/lazarus-estates-ltd-v-beasley-ca-1956/163http://mailman.anu.edu.au/pipermail/link/1999-August/040356.html

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Consumerswant toseeASICproperlyregulateandgovern the financial system,notuseresources to

trapandcatchgullibleinvestors.

WilliamK.Black,authorofTheBestWaytoRobaBankIstoOwnOnesays“fraudisdeceit”164andthe

CEO’swhouse a companyas a fraudvehicle are able to cause greater losses thanall other formsof

property crime combined.CompanyCEO’swhouse theirposition tooperate fraudulent schemesare

regarded as “financial super-predators”. ProfBlack refers to such crime as “control fraud”.165 Black

alsosays,

‘Control frauds are a disaster on many different levels. They produce enormous losses that

society(alreadypoorinmanyinstances)mustbear.Theycorruptthegovernmentanddiscredit

it.Theyinherentlydistortthemarketandmakeitlessefficient.’166

In2014ASICsaid thatAustralia isaparadise forwhite-collarcrime.167Theharmcausedby financial

frauddoesnotappeartobeunderstoodbyASIC.

Harmcausedbywhite-collarcrime is14timestheamountofblue-collarcrime168and18timesmore

costlythanstreet-crime.169

Asofthe30June2017,thereareover14.8million170superannuationaccountholders,compelledinto

superannuation,orfollowingtheAustraliangovernment’sadvicetosavefortheirretirementthrough

voluntarycontributions.Consumersdeservebetterthantobevictimisedandconsumersdeservethat

the regulatory framework provides at least a reasonable level of security. Trio is an example and

illustrationofgrossnegligenceintheprovisionofsuchsecurity.

Predatory fraudsters destroy families, destroy marriages, destroy friendships and destroy lives and

theyneedtobeheldaccountableandresponsiblefortheconsequencesoftheiractions.Thereisample

evidencearoundtheworldtoarguethatfinancialhardshipcanleadtosuicide.171

TheCorporateManslaughterActasfoundintheUnitedStates,UnitedKingdom,CanadaandHongKong

specificallyhaspowerstorespondtoseriousfinancialfraud.

164TheJournalinterviewBillMoyersandWilliamK.Black.April3,2009http://www.pbs.org/moyers/journal/04032009/transcript1.html165Black,WilliamK.‘WhenFragilebecomesFriable:EndemicControlFraudasaCauseofEconomicStagnationandCollapse’InstituteforFraudPreventionIDEASWorkshop:Delhi,IndiaFinancialCrimeandFragilityunderFinancialGlobalizationDecember19-20,2005166Blackop.cit.p10167SueLanninASICbosssaysAustraliaaparadiseforwhitecollarcrime22Oct2014http://www.abc.net.au/news/2014-10-22/asic-boss-says-australia-a-paradise-for-white/5832040168MeganGrahamWhiteCollarCrimeandtheUnitedStatesUniversityofNewHampshire169https://www.bcsdschools.net/cms/lib010/SC01916775/Centricity/Domain/4845/Ch.%207%203-5.pdf170https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview/171RossLevineAnautopsyoftheUSfinancialsystem:accident,suicide,ornegligenthomicide2010http://www.emeraldinsight.com/doi/abs/10.1108/17576381011085421

62

The2004attemptby the formerSenatorNickXenophon to find justice for asbestos relateddiseases

and liabilities was considered unnecessary because there are sufficient and adequate legal systems

were found to be in place to deal with the consequences of a workplace death. Recently it was

suggested the territory government should introduce corporate manslaughter laws to improve

accountabilityfordeathsincustody.172

In2010theSenateacceptedtheneedforstrongnationalindustrialmanslaughterlaws.173

AustraliamustrecognizethatfinancialfraudcanresultinharmandtheTriofraudwasafactorinthe

deaths by suicide of two people. It is a sad indictment on the Australian financial system that the

victims of the Trio fraud were subject to bullying victimization by comments suggesting they were

‘swimmingoutsidetheflags’and‘youcan’thaveyourcakeandeatittoo.’

Amongthe6,090Triovictims,manyfamilieshadalovingfamilymemberwhoselifewascutshortby

thegriefcausedfromtheconsequencesoftheseriousfinancialfraud.

See paper, Grief from fraud, see “The year ofmagical thinking: Fraud, Loss and Grief” that examines

parallelsbetweenfinanciallossduetofraudandthedeathofalovedone.174

172KatieBurgessEx-chiefministerJonStanhopewantscorporatemanslaughterlawsforgovernmentJULY172017http://www.canberratimes.com.au/act-news/exchief-minister-jon-stanhope-wants-corporate-manslaughter-laws-for-government-20170717-gxcq1q.html173KevinJonesIndustrialManslaughtermentionedinAustralia’sParliamentFebruary26,2010https://safetyatworkblog.com/2010/02/26/industrial-manslaughter-mentioned-in-australias-parliament/174Barnard,JayneW.,"TheYearofMagicalThinking:Fraud,Loss,andGrief"(2014).FacultyPublications.Paper1719.http://scholarship.law.wm.edu/facpubs/1719

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Furthersuperannuationpains.

OnJune13th2017aVOFFdelegationmetwiththeSaveOurSuperfounderJackHammondQC.175

SaveOurSuper‘believesthatmajorchangestotheexistingrulesoftheAustraliansuperannuationsystem

shouldnotbemadeunless,at the sametime,appropriategrandfatheringprovisionsare included in the

legislation.

“Grandfatheringprovisions”arequalifyingclauseswithin legislationwhichexemptthosepeoplealready

involvedintheactivitywithwhichthelegislationdeals’.176

The ‘Save Our Super’ group’s dissatisfaction with the unfair legislative changes introduced by the

MalcolmTurnbullgovernmentwasairedonABC7.30April24th2016with JackHammondandKelly

O’Dwyer,FinancialServicesMinister,presentingtheirviewsaboutthelegislationchanges.Thereporter

AndrewProbynsays,

‘The Government argued that only the very rich were affected and with Labor support, the

changespassedParliament lastNovember, includinga15per cent taxonearnings for super

nesteggsworthmorethan$1.6million.

KellyO'Dwyer:Superannuationisn'tsimplyarevenuegrab.Itisaboutmakingsurethesystem

issustainable.Itisaboutmakingsurethatitisfairand,aboveall,itisaboutmakingsurethat

itisflexibleanditisaboutmakingsurethatwelookafterallAustralians,notjustafew.

AndrewProbyn:OneofthoseangeredisJackHammond,abarristerwholivesinMsO'Dwyer's

leafysuburbanseatofHigginswhoquicklymovedtosetupthe'SaveourSuper'group......

JackHammondQC:Itisnotrichpeopleinterveningtoprotectthemselves.It'speoplewhohave

reliedonpromisesofgovernmentoverdecades,whohavedonenothingmorethanobeythelaw

andthenonbudgetnightwithoutanyforewarning,youaresuddenlysprungwithacompletely

changedpolicy.

The way in which it is framed is, this will only affect a few wealthy people. How puerile,

really’.177

Save Our Super group pointed out to VOFF that they found the cover of the Grattan Institute’s

publicationtitled ‘Supertaxtargeting’178offensive.Thedocument isaboutstrippingtaxbenefits from

superannuationandthecoverdisplaystheimageofpigs.

175FromSaveOurSuperwebsite,OurPeople.http://saveoursuper.org.au/about-us/176GrandfatheringprovisionsDecember13,2016http://saveoursuper.org.au/177AndrewProbyn,KellyO'Dwyerfightsforhercareerwhileonmaternityleave25April2017http://www.abc.net.au/news/2017-04-24/kelly-odwyer-fights-for-her-career-while-on/8468526#178https://grattan.edu.au/wp-content/uploads/2015/11/832-Super-tax-targeting.pdf

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The pigs in question are the bronze sculptures known as ‘A Day Out’ and are in the Rundle Mall,

Adelaide.VOFFwrotetotheSouthAfricansculptorMargueriteDerricourt,letterdatedJune15th2017

informingherthattheSaveOurSupergroupfoundtheGrattanInstitute’suseofthepigsonthe‘Super

taxtargeting’coveroffensive.

MargueriterepliedinemaildatedJune20th2017,thankingVOFFfortheinterestingletter.Marguerite

said,

‘I had actually spotted the article as people often send me information regarding the pigsculpture.Myoriginalconceptbehindthepigswasafairlysimpleone-thatofagroupoffarmanimalsonthelooseinacityshoppingmall….MysculpturewasintendedtohavealiberatingmessageandalsobringabitofwitandwhimsyintoRundleMall….’‘Iunderstandthatpigsareassociatedwithgreedandcansymboliseall sortsof things.Manypeoplethinkthattheyrepresentpoliticianswiththeirlackofprinciplesandcorporategreedintheprivatesector.Iamfondofmypigsandsympathetictotheseintelligentandmisunderstoodanimalsbutunderstandtheirsymbolicmeaningscanhavemanyvariations.Ihopethisgoessomewaytoexplaining“ADayOut”.Kindregards,Marguerite

65

On June22nd2017VOFFemailed theAdelaideCouncil to findout if theyknowthat their ‘ADayOut’

sculpture is featured on the cover of one of theGrattan Institute’s publications. An immediate reply

said, ‘Thankyou foryouremailregardingapublicationthat includesanassetof theCityofAdelaide.A

work request has been raised and has been forwarded to Edward James, our Public Art Consultant for

actioningandaresponse’.Kindregards,CassandraCustomerServiceOfficer.

VOFFisawaitingareply.

June22nd2017JackHammondthankedVOFFforourporcineresearchandadded,

‘Weandmanyotherself-fundedsuperannuantsbelievethattheGrattanInstitute’suseofthosebronzepigs

on the cover of their publication was not an attempt at humour. It was a none-to-subtle insulting

implicationthatAustralianswhomhadfollowedthegovernment’ssuperrulesandhadsubstantialsuper

savingswere,nonetheless,greedypigswiththeirsnoutsinthetrough.Bywayofexample,theInstitute’s

publicationsummarystates:’

“Summary

Taxbreaksforsuperannuationcontributionsandearningsshouldbetargetedmoretightlyattheirpolicy

purpose.Thecurrentsystemisexpensiveandunfair.Superannuationtaxbreaksmeanthatlesstaxispaid

onsupersavingsthanispaidonother formsof income.Thesetaxbreaksshouldonlybeavailablewhen

they serve a policy aim. Although the $2 trillion superannuation system does not have legislated aims,

mostbelieve it shouldencouragesavings tosupplementorreplace theAgePension.Yet superannuation

tax breaks often gowell beyond this purpose and their costs are unsustainable. The tax breaks reduce

incometaxcollectionsbymorethan$25billionayear.Morethanhalfthebenefitsflowtothewealthiest

20percentofhouseholdswhoalreadyhaveenoughresources to fund theirownretirement,andwhose

savingschoicesaren’taffectedmuchbytaxrates.….Ofthe$33billioninposttaxcontributionseachyear,

around half are made by just 200,000 people who already have at least $500,000 in super…. [T]he

changeswouldreducethetaxbreaksfarmoreforalotofricholdmen……”179

Thanksagainforyourinformativeresearch.

Regards,

Jack

179Seepage2,https://grattan.edu.au/wp-content/uploads/2015/11/832-Super-tax-targeting.pdf

66

KellyO'DwyersaidinanABC7.30Reportinterview,superannuation...‘isaboutmakingsurethesystem

issustainable.Itisaboutmakingsurethatitisfair,...anditisaboutmakingsurethatwelookafterall

Australians,notjustafew’.180

The Trio fraud, which affected superannuation, is a clear demonstration that the system is not fair.

Testimony to thisunfairness is the fact that theTriovictimscannot findoutwhathappened to their

moneyorfindoutaboutASIS’sinteractionswithTrioanditsentitiesoraboutwhatactions/inactions

ASICtooktokeepAustraliansuperannuationsafe.Thereisnotransparencyandanythingdamagingto

thesuperannuationimageseeminglygetscoveredup.

Trio isanexampleofanunfair financial system thatdoesn’tbenefit allAustralians. In responding to

Trio, ASIC compromised its independence by carrying out a directive from the Minister for

SuperannuationMrShorten’soffice.ASIC followedorders toprosecute the financialadvisorwhohad

recommendedtheTrioinvestmenttotheAWUOfficersElectionFund.Theactionagainstonefinancial

advisoroutof155 isperceivedbyVOFFasMrShorten’srevenge.TheattackagainstMrTarrantwas

revealed when an ASIC operative mentioned to ASIC witnesses, during the court case against Mr

Tarrant,“thatASICaregoingtotakehimdown”,(orwordstothateffect).

ASIC charged Mr Tarrant with breaching the Corporations Act and consequently, financial advice

became the catchword in theTrio fraud.ASIC’s attackofTarrantdistractedattentionaway from the

fraudagainsttheentirefinancialsystem.MuchoftheinformationdisseminatedbyMrShortenandASIC

surroundingtheTriofraudisincorrect,inaccurateandmisleading.ASICkeptdetailsofthefraudaway

fromthepublic,thePJCinquiryandtheNSWSupremeCourt.ASIConlyprovidedlimitedinformationto

the assigned liquidator. ASIC’s silence, omissions and inactions benefited the perpetrators as they

managed to remain out of the picture. The perpetrator, Shawn Richard, whowas jailed for his lies,

becameASIC’skeywitness.

AustraliansweremisledabouttheTriofraud.MrShortenandASICignoredtheevidenceofthecrime,

and ignored the systemic issues. Finding a scapegoat in one sector helped established distinctions,

whichshowedtheAPRA-supervisedfundstobesafewhiletheircompetitors,weredeemedunsafe.

180AndrewProbyn,KellyO'Dwyerfightsforhercareerwhileonmaternityleave25April2017http://www.abc.net.au/news/2017-04-24/kelly-odwyer-fights-for-her-career-while-on/8468526#

67

3.1OfficialdocumentsabouttheTriofraud.

(a) TheParliamentary JointCommitteeonCorporationsandFinancial Services Inquiry

intothecollapseofTrioCapitalMay2012(204pages).

IthasbeensixyearssincethereleaseofthePJCReport,nowthereisevidencetoarguethat

the PJC’s investigationwas flawed. i) ASICwithheld vital evidence from the PJC inquiry; ii)

submissionbyapublicservantwithinsideknowledgewasignored;andiii)somecommittee

membersmademisleadingcommentsthatattackedanddiscreditedtheself-managedtrustees

andtheirfinancialadvisorscaughtupinthefraud.

Many victims of the Trio fraud gave evidence at a PJC hearing in good faith thinking the

purposeofthehearingwastolearnaboutthefraudandperhapstheimpactthatthefraudhad

onconsumers.Manyconsumerswereshell-shockedbythefraud.Personalaccountssaidthey

werenaïvenottorecognisethatthehearingwasaboutcoveringupthegovernment’sfailures

andthatmadeitnecessarytoturn690Australiansintosacrificiallambs.

Apartfrompoliticizingthecrime,thePJC’sworkdoesprovideunsurpassedinformationabout

theTriofunds.

(b)The 'ReviewoftheTrioCapitalFraudandAssessmentoftheRegulatoryFramework'

byTreasury26thApril2013(24pages).

Treasury’sreviewisheavilypepperedwithmisinformation.Tolearnaboutthebackgroundof

the misleading statements, VOFF submitted 22 FOIs to Treasury.181The final outcome was

that VOFF received no documents. VOFF was unable to learn how Treasury reached the

conclusionsitpresentedinitsTreasuryReview.HerearesomeofTreasury’sstatementsand

commentsbyVOFF.

Treasury write, ‘Notwithstanding the conduct of some financial planners in Australia who

appear to have been influenced by high commissions in recommending their clients into Trio

Capitalproducts,thefraudlargelytookplaceinoffshorehedgefunds.’(Page5)

Thisstatementismisleadingandseamlesslyconnectedaseparateissuewiththecrimeevent.

Nofinancialadviserwaschargedoveracceptinghighcommissions.

181TheVOFFFOIsarenumbers106toNo118.

68

Treasurywrite, ‘The impactof theTrioCapitalcollapsehashadasignificantanddetrimental

impactonanumberofAustralianinvestors.’(Page5)

Nosurveyswere conductedordata collected toassesswhether the funds that lost$10,000

sufferedmoreorlessthanthefundsthatlostdoubleorevenmanytimesthatamount.

Treasurywrite,‘TheextentofpersonallossessufferedbyinvestorswasgreatestamongstSMSFs.

InsomeinstancesSMSFtrusteeshad100percentexposuretothefraudulentassets.’(Page5)

The information is not a fact. It’s more to do with discrediting the self-managed

superannuation funds while at the same time, promoting the APRA-supervised funds. The

BernardMadoff investment scandal sawabout24,000victims182lose17.5billiondollars.183

Thatequalsanaveragelossof$729,166.TheTriofraudsaw6,090victimslose194.5million

dollars,whichequalsanaveragelossof$31,937.TheMadoffPonzilossesperheadaremuch

greater thanTriobut theywerenotattacked.Thehundredsof internationalbanks that lost

the largest amounts money in the Madoff scam, did not come under the same type of

discreditingattackasseenagainst theTrio’sSMSF investors.SomeTroll-likecommentators

lashedout at thepeople that fell victim toMadoff’s Ponzi scheme. Four ofMadoff’s victims

took theirown lifeby suicide184includingMadoff’ sonMark.Asof the19thDecember2017,

TrusteeoftheMadoffmatterhasrecovered73%of$17.5billioninlostprincipal.185

IntheTriofraud,notasinglecentwasrecovered.

Treasurywrite,‘Overall,regulatedsuperannuationfundshadlowerexposurestothefraudulent

MISduetohigherlevelsofinvestmentdiversification—asrequiredbyAPRA—thantheirSMSF

counterparts.’(Page5)

Treasury’sargumentisbasedontheamountofmoneyafundhadinvestedinTrio.Treasuryis

inferringthatthefundsthathadlowerexposureswereoperatingmoreappropriatelythanthe

funds thathadagreaterexposure.No literaturesupports thisapproach to investigating the

impact of a crime. Treasury fail to properly acknowledge that whatever amount is lost is

significanttoeachinvestor.

Treasurywrite,‘IntheirsupervisionofTrioCapitaltherewasnoevidencetoalerttheAustralian

182JillDisisMadoffvictimssettoreceive$772millionpayoutNov9,2017http://money.cnn.com/2017/11/09/news/bernie-madoff-government-payments/index.html183ErikLarsonMadoffVictimsNearFullRecoveryofPrincipalWithPayout19December2017https://www.bloomberg.com/news/articles/2017-12-18/madoff-victims-near-full-recovery-of-principal-with-new-payout184ArdenDier4thPersonConnectedtoMadoffCommitsSuicide,FatheroffourjumpedfromNYhotelMar28,2017http://www.newser.com/story/240439/4th-person-connected-to-madoff-commits-suicide.html185ErikLarson2017Opcit.

69

Prudential Regulation Authority (APRA) or the Australian Securities and Investments

Commission(ASIC)thattherewasafraudoccurring.’(Page5)

Treasury fail to acknowledge that ASIC travelled to Hong Kong in 2002 to secure 100,000

documentsinrelationtoamassivefraudagainsttheCommonwealthcase.Theaddresswhere

ASIC secured the documents was the offices of Jack Flader and James Sutherland. Fast-

forwardto2011andtheTriofraudmatter,JusticeGarlingintheNSWSC,namedJackFladeras

the‘ultimatecontroller’oftheTrioscheme.ASIChadinvolvementwithFladerin2002andhis

name was on ASICs company registration database to purchase the Trio fund, giving ASIC

plentyofevidencetoalertthatapotentialfraudwasabouttounfold.

The Treasury Review found ‘that some SMSF trustees had an insufficient understanding and

knowledge of the risks pertaining to their investments. Inadequate financial advicemay have

beenacontributingfactor.’(Page15)

Treasury’s Review carried an unfounded attack against the SMSFs Trio victims but failed

alongwithASICandMrShortentoacknowledgethehighleveloffinancialskillsheldbysome

ofthepeoplethathadSMSFswhowereexposedtoTrio.Theyalsofailedtoacknowledgethat

someoftheTrioperpetratorswerenotquestioned.

(c)ThereportbyliquidatorPPBAdvisory,AstarraStrategicFund,UpdatetoUnitHolders,

May 2015, (32 pages) provides details about Trio’s underlying funds and some of the

overseasmanagersthatoperatedTrio’sunderlyingfunds.

(d)ASICaccepted10EnforceableUndertakings (EU)andAPRAaccepted9EU.Criticssee

EUsasaneasywaytogetresultswithoutgoingtocourt.EUalsoensuresinformationremains

undisclosedandfailingsbyASICandAPRAkeptoutofthepublicdomain.

(e)CourthearingsintheNSWSupremeCourtandtheAdministrativeAppealsTribunalof

Australia, concerning the liquidation of Trio’s funds; two Trio operators and two financial

advisorsfacedchargesofbreachingtheCorporationsAct.However,thefoundingmembersof

theTrioscheme,the ‘ultimatecontroller’andTrio’sunderlyingoverseasoperatorswerenot

compelledtoattendcourt.

(f) Someof theTriooperators living inAustraliawerequestionedundersection 19 of the

ASICAct,buttheinformationfromthisprocessisnotpubliclyavailable.

70

3.2FAILUREPaulRichardBellandFrankRichardBellTheThailandbasedcoldcallingscamoperatorPaulRichardBellcametoAustraliaforavisit

in 2001 and ASIC orchestrated his arrest.186In October 2001 ASIC obtained a court order

preventing Paul Richard Bell from leaving Australia.187ASIC’s Media Release (November

2001)said,

‘AmericancitizenPaulRichardBelltodaypleadedguiltyintheBrisbaneMagistratesCourtto

21chargeslaidbytheAustralianSecuritiesandInvestmentsCommission(ASIC)inrelationto

hisactivitiesasacold-calleroperatingoutofThailandandthePhilippines.

MrBell, anAmericancitizen,wasknown toAustralian investorsasDrRichardKing.Hewas

employed by Thailand-based International Asset Management (IAM), and Philippines-based

TridentInternational,companiesthatsoldoverseassharesthroughcoldcalling.’188

The FinancialMarkets Authority (New Zealand) (FMA) published an alert in October 2000

about Trident International, naming Richard Bell. 189 ASIC published warnings in its

internationalcoldcallingreport190andalsoinASICMoneySmart191aboutInternationalAsset

Management (IAM) and Trident International. Tony Hetherington, writing for the United

Kingdom,MailonSundaymentionsIAM,

‘The National SecuritiesMarket Commission (in Spanish: Comisión Nacional delMercado de

Valores)(CNMV)warnedin2003againsttheSpanisharmofPacificContinental,linkingittoa

notoriousunlicensedsharedealingfirminAsia,calledInternationalAssetManagement(IAM).

Hetherington said, IAM's website was hosted by an Internet company called Momentum,

American lawyer Jack Flader was a director. Also Jack Flader was major shareholder of

unlicensedbrokerspushingsharesinacommunicationscompanycalledeSat.’192

In July 2015 VOFF requested from the United States Securities and Exchange Commission

(SEC) the Form 144 to sell over 60,000 eSat shares filed by Jack Flader in 2000. Thomson

186ASICMR01/263‘ASICwelcomesThaicoldcallingaction’27July2001http://asic.gov.au/about-asic/media-centre/find-a-media-release/2001-releases/01263-asic-welcomes-thai-cold-calling-action/187ASICMR01/3614October2001http://asic.gov.au/about-asic/media-centre/find-a-media-release/2001-releases/01361-asic-obtains-court-order-against-cold-caller/188ASICMR01/3969November2001http://asic.gov.au/about-asic/media-centre/find-a-media-release/2001-releases/01396-cold-caller-convicted/189http://www.fma.govt.nz/keep-updated/warnings-alerts-and-scams/names-of-firms-and-individuals-to-be-wary-of/190ASICREPORT14InternationalcoldcallinginvestmentscamsJune2002page6191https://www.moneysmart.gov.au/scams/companies-you-should-not-deal-with/unlicensed-companies-list/t/trident-international192Hetherington,TonyDarklegacyofPacificContinentalcropsupoversees4March2010http://www.thisismoney.co.uk/money/midasextra/article-1690232/Dark-legacy-of-Pacific-Continental-crops-up-oversees.html

71

ReutersonDemandsentthetwo-pageForm144inAugust2015.OntheFormisJackFlader’s

addressandsignature.193

ASICwereinstrumentalinsendingPaulRichardBelltojailbutfailedtocheckthebackground

ofthecompaniesconnectedtoPRBell.HadASICcheckedtheywouldhavediscoveredthelink

to Jack Flader, seen Flader’s address on the eSat 144 form and recognised it is the same

address on the holding company registered with ASIC in 2001 and is on ASIC’s company

register database. Its the same holding company thatwent on to purchase the Trio Capital

fundin2003;thesameHongKongaddresswhereASICtravelledtoin2002toobtain100,000

documents to help solve a case involving fraud against the Commonwealth; and had ASIC

recognised that sSat address and the addresswhereASIC collected the100,000documents

werelinkedtoitscompanyregistrydatabase,thentheTriofraudcouldhavebeenprevented

beforeitstarted.

OthernamesthatappearwhensearchingforinformationaboutPaulRichardBellareDanny

Sterk and Stephen Robert Casciola.194Research into Sterk and Casciola shows that the

Securities and Exchange Commission, Thailand (SEC Thailand) filed criminal complaint

againstSterkandCasciolaonthegroundthattheyconspiredtoconductunlicencedsecurities

businesses inThailandandengaged in fraudulentactivitiesagainst foreign investors.195The

SEC share the information internationally with financial regulatory authorities, but ASIC

appearreactionaryonly.

ASIC demonstrate it is not pro-active against organised fraudulent crime. From VOFF’s

perspective, it appeared ASIC learnt nothing from the jailing of Paul Richard Bell. VOFF

endeavoured to learn about the Paul Richard Bell court hearing. A search for Paul Richard

Bell’scourthearingstartedinSeptember2015andcontinuedinto2017.VOFFcorresponded

with the Brisbane Magistrate Court; the Brisbane Criminal Registry; the Queensland State

Archives;Auscript,theUniversityofWollongongandtheStateLibraryCanberra.Courtlisting

detailsexistedbutnowrittensummaryortranscriptwasfound.

InNovember2015,Auscriptprovidedthefollowingdetails:193VOFF’sreferenceVOFFFOIANo370194http://www.crimes-of-persuasion.com/boilerrooms/international_asset.htm195SECNewsReleaseNo.32/2001Friday,October19,2001http://capital.sec.or.th/webapp/webnews/printnews.php?preview=Y&cboType=S&lang=en&news_id=&news_yy=2001&news_no=32&sdate=&edate=

72

Jurisdiction:MAG-DJAG

Presiding:CJTaylorM

MatterNumber:57588/2001

Matter:PaulRichardBellv.CommonwealthDirectorofPublicProsecutions

HearingDate:09/11/2001

TheBrisbaneMagistrateCourt

InFebruary2017, theUniversityofWollongongOutreachLibrariancarriedoutasearch for

thePaulRichardBellv.CDPPcase.Thenationallibraryservicewasunabletofindthehearing

orsummaryofthecase.

InJune2017theBrisbaneCriminalRegistrysaid,

‘IadvisethattheCourtfilesfrom2001havebeendestroyedinaccordancewiththedestruction

anddisposalschedule,thatCourtdisposesoffilesafter15years.

IhavebeenadvisedthatallrequestsfortranscriptsaremadeviaAuscriptregardlessofwhen

the hearing date occurred. Auscript contacts a Transcript Coordination Team in the

Departmentof Justice to locatetherecordingduetobeing in2001. I’mnotable toconfirmif

thisoccurred in this instance.Youmaywish to re-contactAuscript tohave themre-look into

yourrequest.’

InJune2017Auscriptsaid,

‘..we do not have records prior to 2013 and rely on The Department of Justice to supply

recordingsortranscriptsforanyorderswereceiveforinformationpriortothistime.

Aswithyourorder,AuscripthavecontactedTheDepartmentofJusticetoobtaintherelevant

informationhoweverwereadvisedthatthemastertapecannotbelocated.

Thiswouldalignwiththeadvice fromthecourtregistrywhohaveadvisedthatthefileshave

beendestroyed.

Unfortunately we do not have our own independent records and are unable to assist any

further.

InJune2017VOFFwrotetotheLawSocietyLibraryandaskedifit’spossiblethatthecaseis

publishedinalawjournalorthehearingorsummaryisarchivedsomewhere?Itisdifficultto

understandwhytherecordofauniquecourthearingwouldbedestroyedandremovedfrom

Australia’shistory.

VOFFreceivedanautomatedacknowledgeandouremailremainsunanswered.

73

November272017TheNationalLibraryofAustraliasaid,

‘In terms of the destruction of information from a court case, Iwould have assumed that atleastessentialdocumentsandrecordswouldhavebeenpreservedinarchivalformat.However,I'm not sure of the specific requirements for legal record keeping in Queensland. You couldcheckwithanorganisationsuchasLegalAidQueenslandtogetasenseofhowrareoroftensituations like thishavebeennoted. Failing that, you couldalso speak toQueensland'sLegalServicesCommission.’

VOFFtriedtoaccessacopy(transcript)ofBell’shearingthroughtheFreedomofInformation

process.TwoFOIsrequestsweresent:

1) December1st2015toASIC.December22nd2017ASICrefusedsayingthedocumentisnotinASIC’spossessionorthedocumentdoesnotexist.196

2) December 1st 2015 to the Queensland CDPP. The CDPP letter datedDecember 18th2017refusedonthebasicthatthedocumentdoesnotexist.197

Information about Paul Richard Bell is more compelling when it is considered that ASIC

introduceduncertaintyastowhetherPaulRichardBellakaDrRichardKingmightbeindeed

theFrankRichardBellthatwasoneoftheinternationalbrokersthatoperatedtheTrioCapital

scheme.

ASIC’s Section 19, according to Justin Brereton, is one of the most common and effective

investigativetoolsusedbyASICtoconductcompulsoryexaminations.198

TheexaminersintheOctober2009Section19examinationofaTriodirector,wantedtoknow

about the identity of Paul RichardBell and FrankRichardBell andwhether theywere one

person. The examiners asked more questions about the Bells than any other person

mentioned during the examinations.More questionswere raised about Bell’s identity than

other issue. ASIC’s questioning about Bell’s identity covers 16 pages of the Section 19

transcript.

ThemanASICarrested,tooktocourtandsenttoprisonbutdidn’tknowhisidentity?

How could ASIC let another man (who maybe the same man they sent to jail) return to

AustraliaandbeallowedtohandleAustraliansuperannuationsavings?

196VOFFFOINo416(VOFF'sreference)datedDecember1st2015.197VOFFFOINo417(VOFF'sreference)datedDecember1st2015.198JustinBrereton,BarristerASICdeterrenceanditsapproachtosecuritieslitigationpage10

74

ASIC’scuriosityofwhethertwoidentitiesareone,showsa lackofskill tosolveacrimethat

affected6,090honesthard-workingAustralians.WhileASIC flounderedover itsuncertainty

aboutthetwoBells,othermoreseriousquestionswereneverraised,suchas,wheredidthe

missing$194.5mgo?

WhodesignedthefraudulentTrioscheme?

WhydidASICwastetimeaskingaTriodirectorwhatPaulRichardBelllookslike?Whydidn’t

ASICaskthepoliceortheDepartmentofImmigrationandBorderProtection?Whydidn’tASIC

accesstheinformationin2009aboutPaulRichardBellintheBrisbanecourtasthedocument

wouldhavestillexistedatthattime?

It’ssixyearssincetheTrioSection19Examinationswastedtaxpayers’money, letdownthe

Triovictims,as there isnoevidence that the investigationsaddedanyunderstandingabout

theTriocrime.ThelimiteddepthintheSection19Examinationscanbeseenbynofollowup

in regards to ASIC’s concern about Bell’s identity. For instance, a Freedom of Information

request toASICdated July11th2017, requestedwhatASIC foundconcerningFrankRichard

BellandPaulRichardBell.OnAugust10th2017ASICrefusedunder24A(1)(b)(ii)oftheFOI

Act.Meaning thatASIC tookall reasonablesteps tosearch/didnot find/or thedocument

doesnotexist.199DoesthissuggestASICreturnedtoitsofficeafterquestioningabouttheBell

mystery,leavingthemysteryunsolved?

There is a history of fraudsters that have used aliases, such as the alleged mastermind of

charity fraud gang, Christopher Ellingburg, with a history of fraud stretching back to the

1980s, has up to 18 aliases and changed his name 10 times.200In 2015 The Securities and

ExchangeCommissionchargedaknownsecurities fraudsterwithconductinganewscheme

sincehisreleasefromprisonbyusingfakenamestosolicitinvestorswhilehidinghiscriminal

past.201

OnAugust15th2017VOFFrevisedandexpandeditsFreedomofInformationrequesttoASIC

concerninginformationaboutFrankRichardBell/aliasesPaulRichardBellandDrKing.The

new request included photographs, and/or comments / observations made by ASIC or by

199VOFFFOI461toASIC(VOFF'sreference)July11th2017.200AdamHolmesAllegedmastermindofcharityfraudgang,ChristopherEllingburg,has18aliases,courttoldJune12017https://tinyurl.com/yc2sppay201PressReleaseConvictedFraudsterUsingAliasesChargedAgainforDefraudingInvestorsDec.18,2015https://www.sec.gov/news/pressrelease/2015-285.html

75

third party. On September 1st 2017 ASIC refused under 24AB of the FOI Act, saying our

requestwouldinvolvetoomuchwork.

ASIC’sresponsetotheFOIsuggeststhatASICdonotknowtothisdaywhetherthetwomen

areone.ItisofconcernthatASICstilldon’tknowwhoheisbecauseduringthesameperiod

he was registered with ASIC in Australia he was barred from operating in the financial

services industry intheUnitedStates. It isdoubtfulASICwasawarethatFrankRichardBell

had repeatedly breached security laws in the United Stateswhile he remainedmanager of

Trio funds and registered onASIC’s company register database. ASIC grossly let down the

Triovictims.

FrankRichardBell#1425780.

Anactivehistoryofrun-inswiththelaw,hispresencewithoperatingtheTrioCapitalscheme

shouldhavebeenawarningtoASICthatsomething“dodgy”washappening.

RichardBell’snameassignatorycanbefoundonSECdocumentsofvariouscompanies,such

asNewWorldFinancial,Inc.(NWF)ownedbyMatthewLittauerandtheGlobalBeveragesInc

thatislinkedtoFlader.

Bell is also the signatory of Huntleigh Investment Fund Ltd., and Global Beverages, Inc.

[formerlyYarramanWinery,Inc.]202

StewartWashingtonsaidBellisaveteranBritishbroker.Born29August1940inLondon,UK.

The Financial Industry Regulatory Authority (FINRA) BrokerCheck Report shows he has

“RegulatoryEvents4”and“CustomerDispute1”.HehashaddisciplinaryactionbytheUnited

StatesFINRAandthatheisnotcurrentlyregisteredwithanyFINRAfirm.

TheFINRABrokerCheckReportstatesthatFRBellwaspreviouslyregisteredwith15FINRA

firms.TwofirmslinkedtoLittauer,EugeneLiuandShawnRichardare:

•NewWorldFinancial,INC.(CRD#47747)-Marbella,Spain

05/2000-04/2004and

•PacificContinentalSecuritiesCorporation(CRD#2398)-BeverlyHills,CA

10/1998-11/2001

202http://www.secinfo.com/$/SEC/Name.asp?S=richard+bell

76

Frank Richard Bell was the subject of disciplinary action by the United States Financial

IndustryRegulationAuthority (USFIRA) that resulted inanumberof sanctionsandadverse

findingsagainsthim.203

FRBellwaswithPacificContinentalSecuritiesCorporationfromOctober1998toNovember

2001.SourceFINRA.

The British arm of PCS UK collapsed in June 2007 and investor losses from dodgy stocks

exceeded £300 million. The Financial Services Authority found PCS had acted without

integrity between 2005 and 2007. Pacific Continental's shares were owned by a Delaware

companyandcontrolledbyZetlandFinancialGroup,registered in theBritishVirgin Islands.

TheultimateownerwasJamesSutherland(JackFlader’sbusinesspartner).

ConcerningtheTrioCapitalscheme,FRBelldidnotinforminvestorsthathewasbehindthe

Exploration Fund that handled Trio funds. FR Bell was not questioned by ASIC over his

involvementintheTriomatter.

Australians with superannuation or investments in the Australian financial market had no

ideathatASICisnotrequiredtorunchecksonbrokers.TheTriobrokerswereabletoarrive

unchecked,bepartoftheTriooperationanddepartuncheckedafter$70mdisappearedfrom

theExplorationFundundertheirmanagement.

FINRA, SEC and NASD have been a valuable source to access criminal matters, regulatory

actions,civil judicialproceedings,orarbitrationsandcivil litigationsthatFrankRichardBell

facedbeforeandevenduringtheperiodhewasmanagingTrio’sunderlyingfunds.

OnMarch19,1997,TheCommodityFuturesTradingCommission(CFTC) issuedareportof

investigation concerning the conduct of Merrill Lynch, Pierce, Fenner & Smith, Inc. The

investigationconcernedtheconductofRichardBell,who,whileanassociatedperson(AP)of

Merrill Lynch but outside his employment, operated an unregistered commodity

pool/''Ponzi'' scheme that raised approximately $16million from investors. The report, the

first of its kind issued by the Commission, indicates that Merrill Lynch received several

inquiries regarding Bell, but did not follow up other than by interviewing Bell. The report

concludedthatinformationregardinganemployee'soutsidebusinessactivitycanberelevant

toanassessmentof theemployee'sability todohis joband theemployer'sdischargeof its

203TrioCapitalLimited(AdminApp)vACTSuperannuationManagementPtyLtd&Ors[2010]NSWSC941(25August2010)JusticePalmer

77

obligationtoprovidepropersupervision.ThereportexpressedtheCommission'sbeliefthat

Merrill Lynch's inadequately inquired into Bell's activities.Merrill Lynch did not admit the

facts or conclusions stated in the report because the Commission had not previously

considered the level of inquiry required of a registrant regarding outside activities, the

Commission, in its discretion, determined to issue the report instead of bringing an

enforcementaction.204

FirmsFined,IndividualsSanctioned

In2003WorldFinancialCapitalMarkets, Inc. andFrankRichardBell, submittedaLetterof

Acceptance,Waiver,andConsentinwhichthefirmwascensured,fined$100,000—$40,000of

whichwas jointlyandseverallywithBell—requirednot topostany research reportson its

Websitefortwoyears,andrequiredtoprovideNASDwithitsrevisedAnti-MoneyLaundering

(AML)ComplianceProcedureswithin30daysoftheeffectivedateoftheAWC.Thefirmisalso

required to hire an outside consultant within 60 days of the effective date of the AWC to

conduct independent testing to determine if the firm’s AML procedures are in compliance

withNASDRule3011.

Bell was barred from association with any NASD member in a principal capacity and

suspendedfromassociationwithanyNASDmemberinanycapacityforeightmonths.

Without admitting or denying the allegations, the respondents consented to the described

sanctionsandtotheentryoffindingsthatthefirmsoldsharesofequitysecuritiestoforeign

customersthroughpersonsnotregisteredwiththefirm.Thefindingsalsostatedthatnoneof

thefirm’sregisteredrepresentativeshadcontactwiththecustomerspriortothetransactions

and failed to receive written authorization from the customers to accept the orders from

unregisteredpersons.NASDalsofoundthatthefirm,actingthroughBell,knowinglyaccepted

customerordersandrecordedtransactionsinthismanner, improperlyexercisingdiscretion

in the customers’ accounts, and created and maintained inaccurate books and records. In

addition,thefindingsstatedthatthefirm,atthedirectionofBell,postedresearchreportson

issuers that contained exaggerated, unwarranted, or misleading statements and failed to

disclosematerialfacts.Moreover,thefindingsstatedthatthefirm’ssupervisorysystemsand

procedures failed to adequately set forth procedures and systems reasonably designed to

achieve compliance with federal securities laws and NASD rules regarding publishing and204ReportofInvestigationintheMatterofMerrillLynch,Pierce,Fenner&Smith,Inc.(March19,1997)http://www.cftc.gov/anr/anrenf97.htm

78

distributingresearchreportsandthehandlingofcustomerordersplacedbythirdpersonsor

discretionary trading. Furthermore, the findings stated that the firm and Bell failed to

establishandimplementpoliciesandproceduresreasonablydesignedtodetectandcausethe

reporting of suspicious transactions: failed to establish and implement policies, procedures

and internal controls reasonablydesigned toachievecompliancewith theBankSecrecyAct

and implementing regulations thereunder: failed to provide for independent testing for

compliance by member personnel or a qualified outside party and failed to provide for

ongoingtrainingforappropriatepersonnel.

ThebanningofBellbecameeffectiveNovember24,2003.Bell’ssuspensionbeganJanuary5,

2004,andconcludedSeptember4,2004.(NASDCase#CAF030057).

2004Ruling:Bell,actingforWFCMandPCSorderedtopay$US67,000.Duringthissame2004

suspensionperiodFRBellwaslistedonASIC’scompanyregistrationdatabase.

2005FINRADisputeResolution, againstRichardBell et alNewWorldFinancial, Inc.(A.K.A.

Pacific Continental Securities, Corp.World Financial Group, Inc. &World Financial Capital

Markets,Inc.).

2005RegulatoryactioninitiatedbyNASDagainstPacificContinentalSecuritiesCorp.Alleged

respondentfailedtocomplywithanarbitrationawardorsettlementagreementorfeesorto

satisfactorily respond to an NASD request to provide information concerning the status of

compliance.SanctionsOrdered-Suspension.

2008Regulatory action initiatedbyFINRAallegedBell failed to complywith an arbitration

award or settlement agreement or to satisfactorily respond to FINRA request to provide

informationconcerningthestatusofcompliance.SanctionsOrdered–Suspension.

2008ruling,NWFandseveralstaff,includingBell,wereorderedtopay$378,000forbreaches

offiduciarydutiesandsecuritieslaws.

October1998toNovember2001BellwaswithPCSCorp.TheBritisharmofPCSUKcollapsed

in June 2007 and the investor losses from “dodgy” stocks exceeded £300 million. The

FinancialServicesAuthorityfoundPCShadactedwithoutintegritybetween2005and2007.

PacificContinental's shareswereownedbyaDelaware companyand controlledbyZetland

79

Financial Group, registered in the British Virgin Islands. The ultimate owner was James

Sutherland.

BellwasnotinvestigatedbyASICoverhisroleinmanagingtheunderlyingTriofundsandhe

didnothelpoutwiththeinquiry.BellwasdirectorofExplorationFundLimitedfromOctober

8th2003untilSeptember20th2004andagainfromJanuary12th2005todate(2015?).205Itis

important to acknowledge that it was never disclosed to Australian investors that Frank

RichardBellwashandlingtheirsavings.AlsoinAustralia,Australianinvestorshavenoright

toknowwhohandlestheirmoney.

According to the Australian Financial Review, Huntleigh and Exploration Funds were

managed or directed by Frank Richard Bell and Carl Meerveld. About $75 million of

ExplorationFundassetsanda linkfoundbetweentheExplorationFundandasophisticated

networkofinvestmentcompaniesandfundsunderinvestigationbyregulatoryauthoritiesin

theUnitedStates,EuropeandAnguilla.206GlobalFinancialManagersLtd,aStLuciacompany

wastheinvestmentmanageroftheExplorationFund.207

FrankRichardBellworkedatPacificContinentalSecurities,WorldFinancialCapitalMarkets,

and in Spain atNewWorld Financial. In 2006, Spanish authorities issued a publicwarning

thatNewWorldFinancialwasnotlicencedtosellsharestothepublic.InJuly2009,Bellwas

namedinawarningbyHongKongwatchdogsoverunauthoriseddealingsmadeinthename

ofacompanycalledSmithMoore&Co.208

UnitedStatesSECdocumentsfortheperiod2005to2006,showRichardBell(meaningFrank

RichardBell) as signatory onHuntleigh Investment FundLtd209&210(May4th 2006) and as

Managing Director (December 6, 2005).211Also on the same SEC documents can be found

Advanced Medical Institute Inc., Alexandria Australia and Yarraman Winery, Inc., Nevada,

UnitedStates.

JusticePalmerintheNewSouthWalesSupremeCourtnotedthatFrankRichardBellhasbeen205AstarraStrategicFund,UpdatetoUnitHoldersMay2015PPBAdvisorypage18206DuncanHughesTrappedintheglobaltentaclesofTrioMay152010http://www.afr.com/business/trapped-in-the-global-tentacles-of-trio-20100514-ivjih207PPBAdvisoryAstarraStrategicFundUpdatetoUnitHoldersMay2015page18208TonyHetheringtonDarklegacyofPacificContinentalcropsupoversees4March2010http://www.thisismoney.co.uk/money/midasextra/article-1690232/Dark-legacy-of-Pacific-Continental-crops-up-oversees.html209http://www.secinfo.com/d12TC3.vYaz.f.htm?Show=1#1210http://www.sec.gov/Archives/edgar/data/0001096620/000114420405039581/0001144204-05-039581-index.htm211http://www.sec.gov/Archives/edgar/containers/fix240/1346763/0001144204-05-039585.txt

80

thesubjectofdisciplinaryactionbytheUnitedStatesFinancialIndustryRegulationAuthority

thatresultedinanumberofsanctionsandadversefindingsagainsthim.212Sanctionsagainst

FRBellconsistofseveralFINRAandNASDreports.

In 2010 Frank Richard Bell faced amurder complaint over the deaths of two teenagers in

Cebu,Philippines.Bellwasaccusedofhittingthemotorcycledrivenbya19-year-oldFilipino-

Americanandhis16-year-oldcousinbutBelldeniedtheallegations.Bellallegedthatthetwo

menonamotorcyclecutinfrontandfiredfiveshotsfromagunathisvehicle.213

According to PPB Advisory, Frank Richard Bell while in a jail in the Philippines, sent

informationabout theunderlyingTrio funds.Bellwas in fearofhis life, ashebelieved Jack

Flader was behind the shots fired at his car. The information helped PPB understand the

underlyingfunds.214Triohasadarkpast,itsfounder,MatthewLittauerwasmurderedin2004

inTokyoandthemurderremainsunsolved.ShawnRichardwhileinsideSilverwaterprisonin

Australiansaidhefearedforhissafety.MrRichardsaidJackFladerhadtriedtoorganisethe

murderofhisoldbusinesspartner,JamesSutherland.

TheinformationBellsenttoPPBadvancedtheunderstandingoftheTriofraud.Whetherthe

informationwasFRBell’sinsuranceagainsthisexecutioner(s)remainsunknown.

VOFFwanted to see the information FRBell sent to PPB. InOctober 2015VOFF requested

fromASIC thedocumentsFrankRichardBell sent toPPB/ASICbetweenFebruary2010 to

September2010, about and concerningTrio’sunderlying funds.215ASIC refused stating that

thedocumentdoesnotexist.

ASIC has demonstrated in its handling of Trio that it doesn’t recognise how sophisticated

predatory financial fraudsters operate. Most of the information that has assisted VOFF in

understandinghowtheTriofraudwasorchestratedhascomefrominternationalsources.The

UnitedStatesFinancialIndustryRegulatoryAuthority,Inc.(finra)[not-for-profitorganization

authorized by Congress to protect America’s investors by making sure the broker-dealer

industryoperates fairly andhonestly]produce reports aboutbrokers and companies, these

have proved helpful to VOFF. The BrokerCheck Report of Frank Richard Bell (15 pages)212TrioCapitalLimited(AdminApp)vACTSuperannuationManagementPtyLtd&Ors[2010]NSWSC286(16April2010)213BritonfacesmurderchargeanewByAdorS.Mayolhttp://newsinfo.inquirer.net/tag/frank-richard-bell214June17th2015PPBheldameetingintheStateLibrary,Sydney215VOFFFOI407toASICOctober28th2015(VOFFreference)

81

detailshisworkinghistoryandthedisclosureevents,showtheactionstakenwhensecurities

lawwerebreached.

There is very little information available about FR Bell in Australia other than what was

provided by investigative journalists who were reporting about Trio. ASIC’s database for

companyregistrationhasthefollowingdocuments:

(1)ASIC’sCurrent&HistoricalCompanyExtract,

WrightGlobalInvestmentsPtyLimited

Name:RichardBell(meaningFrankRichardBell)

Address:Unit2008,348-354SussexStreet-SydneyNSW2000.

Born:29/08/1940,London-UnitedKingdom.

Appointmentdate:12/07/2001

Ceasedate:13/09/2006.

On same document among themany names are Eugene Liu, Shawn Richard, andMatthew

Littauer.

(2)ASICApplicationforregistrationasanAustraliancompany,theproposednameis

WorldFinancialGroupAustraliaPtyLtd–Applicationlodged12/07/2001.

Registeredoffice79AGeorgeStreet,TheRockNSW2000

DirectorandSecretaryDetails

Name:Bell,Richard.

Address:5135FiftyFifthStreetCircleWest,BradentonFlorida,USA.

Birthdetails:29/08/1940LondonUnitedKingdom.

Office:Director

Onsamedocumentare:Littauer,M.,HongKongandRichard,S.,Canada.

Justice Palmer in the New South Wales Supreme Court referred to Frank Richard Bell’s

troubledpast.AlsoFrankRichardBellwasreferredtoinacaseagainstEugeneLiu.Firstina

question toMr Liu, ‘Andyou say thatatone - youhada conversationwithRichardBell that

suggested to you thatMrFladerwas controlling things.When -whenwas that conversation?’

andsecondlyatsection104wherethecourtstates,

MrLiudescribedthe“duediligence”heundertook inrespectofMrRichardBellandMrCarlMeerveld, whowere themanagers for the Sierra, Pacific, SBC and Exploration Funds, in his

82

privateexaminationon24June2010.MrLiu’sbackgroundchecksforMrMeerveldconsistedofaGooglesearchandareferencefromMrFlader.HischecksforMrBellconsistedofreviewinghisNASDAbrokercheckrecordthatoutlinedhisemploymentrecordanddisciplinaryhistory.MrLiuworkedwithMrBellatWorldFinancialCapitalMarkets.AccordingtoMrLiu’sevidenceinhisexaminationon26April2010,hewassatisfiedthatMrBellwasappropriatelyqualifiedeventhoughhisNASDAbrokercheckdisclosedthatMrBellhadapoorcompliancerecordandhe had been banned from running a brokerage firm. Neither Mr Bell nor Mr Meerveld hadexperienceinfundmanagement.MrLiuwasaskedwhetherhewasconcernedaboutthisinhisprivate examination of 26 April 2010. He did not directly respond to this question and hisresponse, as recorded a page 126 of his transcript of evidence, is confusing and difficult tounderstand.216

AnaccurateaccountoftheTriofraudincludesFrankRichardBell’stroubledworkinghistory.

WhydidASIC lethimbepartofa financial scheme thathandledAustraliansuperannuation

andinvestments?

Throughout the legal cases regarding the Trio matter, Frank Richard Bell is mentioned 7

times.On theotherhand,MrTarrant andhis financial business arementioned in the same

court documents 853 times. The Parliamentary Joint Committee Inquiry does not mention

FrankRichardBell,butreferstoTarrant35times.

WhyignoreakeyTriooperatorthathasatroubledworkinghistoryyetbepreoccupiedwith2

or 3 financial advisors out of the 155? Despite Justice Palmer, in the NSW Supreme Court

stating, ‘Yetevenacompetentandresponsible financialadviserwouldhaveheardnowarning

bellssoundingfortheseSchemes.’217

VOFFrelatetothedifficultiesthecold-callingvictimsexperiencedin2001.TheTriofraudin

2009 saw ASIC uninterested to investigate properly, failed to question the overseas Trio

operators, failed to follow the money trail and was uninterested in using its power under

section50oftheASICActtolauncharestitutioncaseonbehalfofthevictimstoclawbackthe

missingmoneyundertheProceedsofCrimeAct.SimilaritiesappearwiththeBrintonGroup.

Forexample,inthe2001,ASICjoinedlawenforcementandfinancialregulatorsfromCanada,

Hong Kong, Japan, New Zealand, Philippines, Thailand, the Netherlands, Singapore, South

Africa,andUSAtoassisttheRoyalThaiPoliceinarresting,84foreignersoperatingcoldcalling

216EugeneLiuv.AustralianSecuritiesandInvestmentsCommission[2014]AATA817TribunalMsJLRedfern,SeniorMember217TrioCapitalLimited(AdminApp)vACTSuperannuationManagementPtyLtd&Ors[2010]NSWSC286(16April2010)

83

firmsinBangkok.ASICwaspartofthejointinternationaloperation,tohelpclosedowncold

callingfirmsfromThailandtoIndonesia.218

The 2001 Thai cold calling scam became known as the “Brinton Group”, netting about

£120m.219In 2002 The Australian Brinton Group Recovery Association (ABGRA) decided to

launch a civil suit to stop theHongKong banks from returning frozen assets back into the

hands of the Brinton Group executives (as the Thai authorities had dropped all criminal

charges).220

ABGRAwrote to ASIC seeking urgent assistance to launch a criminal investigation and lay

chargesagainsttheperpetrators.ASICrepliedtoABGRAsaying,

“After the raids in Thailand in 2001, ASIC assessed the potential options for taking furtherregulatoryactioninrelationtocoldcallingorganisationsincludingbutnotlimitedto,TheBrintonGroup. Careful consideration was given to the evidence available and all legal issues, and weobtainedexternaladviceonthese issues in2001. It isverydifficult to takeeffectiveenforcementactioninthesemattersbecausetheactsoccurredinanumberofdifferentcountries/jurisdictionsincludingAustralia,Thailand,HongKong,USAandCanada,Considerationhasalsobeengiventothe statements of Australian investors, other sources of admissible evidence, jurisdictionalproblemsandtheprospectsofrecovery.Incasessuchasthesetherearemanyobstaclestocivilorcriminalactionsbeingsuccessful.Afterreviewingtheexternallegaladvice,considerationwasgivenbyASIC'sNationalEnforcementCo-ordination Committee as towhether any enforcement action could be taken. It was decidedthatitwasnotfeasibletotakesuchaction,andtheinvestigationwasclosed.”221

ASIC’slettertoABGRAgivestheimpressiontheregulatordoesn’twanttogetinvolved.ASIC

acted the same with Trio. A fraud against the Commonwealth, such as, CDPP v. Hart, gets

immediate action from ASIC but civil crimes are ignored. When the Commonwealth is

defrauded, ASIC has no obstacles. Such double standards are the subject of VOFF Press

ReleaseMay21st2017.222

ABGRA were unable to access documents of their own money transactions deposited in

Standard Chartered and Hong Kong Banks in Hong Kong in 2001-2. ASIC informed the218ASIC-Report14.Internationalcoldcallinginvestmentscams.June2002.Pages47&48.219Spillius,Alex‘ThaischargeBritonsover£120mscam’27Jul2001http://www.telegraph.co.uk/news/worldnews/asia/thailand/1335542/Thais-charge-Britons-over-120m-scam.html220Mayes,Andrea‘CivilmoveoverThaiscam’July112002http://www.theage.com.au/articles/2002/07/10/1026185064444.html221Cox,AdrianTheperformanceoftheAustralianSecuritiesandInvestmentsCommissionSubmission91dated16Sept2013p16222http://www.mysuperrights.info/resources/May21%2C2017-VOFF%20Press%20Release.pdf

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AustralianBrintonGroupRecoveryAssociation(ABGRA),

‘…ithasreceivedexternallegaladvicefromalegalfirminHongKongstatingthatASIChasnostanding to take civil or criminal proceedings in Hong Kong. According to the advice ASICreceived, the law in Hong Kong states that only the contracting parties to a contact havestanding to initiate civil proceedings in Hong Kong. Further, the Hong Kong Courts will notenforcethecriminallawofanotherjurisdiction,includingoffencesunderAustralianlaw.’223

The Australians who lost money to cold calling were powerless to act, despite one of the

ABGRA members having been an employee at the company in Hong Kong, Acceptor

ProfessionalDirectorsLimited (“Acceptor”),where the fraudwasperpetrated. ‘Hisdutiesat

Acceptorweretoreviewallthetransactionsforthiscaseandprepareadetailedreportonwhat

theallegedfraudstershaddoneandwheretheytransferredalltheinvestormoney’.224

ABGRAalreadyknew,

‘Theallegedfraudsters inthiscaseusedoffshorecompaniesandbankaccounts inHongKongtoaccept“investments”whichweresupposedtobebeingmadeonthe“LondonMoneyMarkets”butin actual fact large proportions of their money were retained by the alleged fraudsters andportionsofitwerepaidbacktootherinvestorsas“so-called”returnsontheirinvestments.’225

ABGRAmember Adrian Cox noted that ASIC found no evidence of “key figures” thatmade

misleading statements to Australian victims and they found no possible offences under

variouslegislationsincludingtheCrimesAct.ButCoxclaims,

‘SuchevidencewouldnotreallybenecessaryunderCommonwealthorStateCrimesactsforchargesrelatingtotheftandfraudIfASICalreadyhadbankstatementsshowingtransfersofinvestorfundstopersonalbankaccountsof"keyfigures"intheBrintongroupandIfASICalsohadcopiesofsignedservice agreements by "key figures" of the Brinton Group showing they In fact owned all thesecompanieswhichinvestorswerebeingtoldtheywereinvestingin,butwhichwereinfactbeingusedfortheftandfraud,andwhichisinformationthattheHongKongpoliceheldandcouldeasilyhavebeenprovidedtoASICuponrequest,underHongKong'sMutualLegalAssistanceinCriminalMattersOrdinance.226

TheBrintonGroup,werescammedbyunlicensedoperators,powersellingunregulatedstock.

TheTriofraudwasaregulatedAustraliancompany,licencedandoverseenbyASICandAPRA.

Notwithstandingsuchdifferences,ASIC’sresponsetobothcrimesissimilarlydismissive.

223Cox,AdrianTheperformanceofASICSubmissionnumber91dated16Dec2013p17224Cox,AdrianTheperformanceofASICSubmissionnumber91.02dated30September2013p1225ibid.226Cox,AdrianTheperformanceofASICSubmissionnumber91dated16Dec2013p7

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AdrianCoxofABGRAinasubmissiontothegovernment,saysASIC’sMoneySmartwebsiteis

misleadingwhenitanswers,“WhyoverseasscammerstargetAustralians”.

‘Manyscamscomefromcompaniesbasedoversees.ThesescamstargetAustraliansbecauseASICdoesnothaveinternationaljurisdictiontoinvestigateandprosecutethem.’227Coxclaims,“NotonlyistheabovequotedstatementafalserepresentationtotheAustralianpeopleofASIC'struelegalpowers,italsorepresentsanoutrageousinvitationtointernationalfraudsterstocomeinandtakeevenmoremoneyfromAustralianretireesandotherinvestors.Tomakesuchfalsestatementstopeoplewhohavebeendefraudedoflifesavingsbysuchfraudulentactivityisanabsolute disgrace and to attribute the fraud problem to such a false legal position isunconscionable.”228

Cox made his point known to the Australian government in 2013 in a submission to the

performanceofASIC.ASIC’sresponsetotheBrintonGroupscamisitselfascam.ASICcanbe

seenashavingafootinbothcamps.ASICdecideontheoutcomeofanygivensituation.Inthe

BrintonGroupcase,ASICexpressedconcernabouttheimpacttheBrintonGroupscamhadon

individualconsumers,butASICconsistentlystated its limitationsandabilitytotacklescams

acrossborders,whichiswhyconsumers“shoulddealwithlicencedAustralianadvisers”.229

WellTriofraudvictimsdidhavelicencedAustralianadvisers.ButASICfoundanotherexcuse

suggesting self-managed investorswere not in APRA-supervised superannuation funds. It’s

thistypeofflexibilitywhereASICcanavoidanddistanceitselffromacrisis,thatisperceived

asdishonest.

227Cox,AdrianTheperformanceofASICSubmissionnumber91.04dated16Dec2013p2228ibid.229Cox,AdrianTheperformanceofASICSubmissionnumber91dated16Sept2013p18

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3.3FAILURENobackgroundchecks.ASICfailedtocarryoutbackgroundchecksonthefollowing:

•WrightGlobalInvestmentsPtyLtd097478487,registeredinJuly2001.

Amongthenameslistedare:

ShawnDarrellRichard-Appointmentdate:12/07/2001Ceasedate:16/09/2009

MatthewLittauer-Appointmentdate:12/07/2001Ceasedate:03/12/2004

EugeneLiu-Appointmentdate:10/07/2006Ceasedate:05/01/2009and

RichardBell-Appointmentdate:12/07/2001Ceasedate:13/09/2006

TheMembersfundlistedis:

Name:AstralInvestmentsLimitedOrgNo.:134393392

Address:Suite18b148ConnaughtRdCentral,HongKong

•WorldFinancialGroupAustraliaPtyLtd097478487registeredin2001.

(Noteitissamecompanynumber)ThreenamesarementionedontheASICregistrationform.

Bell,Richard–officeDirector

Littauer,Matthew–officeDirector

Richard,Shawn–officeDirectorandSecretary.

ShareholdingAstralInvestmentsLtd

13FSilverFortunePlaza

1WellingtonSt.,HongKong

•WrightGlobalAssetManagementPtyLtd(WGAM)105796754

RegistrationDate:05/08/2003

Amongthenameslistedare:

EugeneLiu-Appointmentdate:17/12/2009Ceasedate:08/01/2012

ShawnDarrellRichard-Appointmentdate:17/12/2009Ceasedate:19/01/2011

JackFlader-Appointmentdate:16/12/2004Ceasedate:08/08/2005

Adderss:13thFloor,SilverFortunePlaza,1WellingtonStreet,Central,HongKong

MatthewLittauer-Appointmentdate:05/11/2003Ceasedate:02/12/2004

PreviousMembers

Name:BellaDonnaLimited

WGAMpurchasedTolhurstFundsManagementinNovember2003.230

HadASICcheckedtheShareholdingAstralInvestmentsLtdinHongKong,itwouldhavefound

ASTRALINVESTMENTSLIMITEDCRNo:0747585

230PJCReportp19.

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DateofIncorporation:21-Feb-2001

RegisteredOffice:SUITE18B148ConnaughtRdCentral,HongKong

Presentor's Name & Address – Gemini Financial Services Nominees Limited and Gemini Corporate

ServicesLtd

16/FSilverFortunePlaza,1WellingtonStreet,HongKong.

Thenames,MatthewNguyenLittauerandFrankRichardBell,

OnanotherD2FormforAustralInvestmentLimiteddated2003istheaddress:

ZetlandSecretariesLimited

16/FSilverFortunePlaza,1WellingtonStreet,HongKong.

Theaddress16/FSilverFortunePlaza,1WellingtonStreet,HongKongwasthesellers’addresswhen

JackFladerputontheUnitedStatesSecuritiesandExchangeCommissionForm144dated4/20/00for

the65,828eSatshares.

InvestigativejournalistStuartWashingtonnotesthat,

‘In one link, Astarra Asset Management is wholly owned by a Hong Kong company called Century

InvestmentsHoldings.

NosuchcompanyexistsontheHongKongcompaniesregister,butitgivesitsaddressasLevel13,Silver

FortunePlaza,1WellingtonStreet,CentralHongKong.

Thisisthesameaddressuseduntillate2008byacompanycalledZetlandFinancialGroup,reportedinthe

BritishpressastheultimateownerofPCS.JamesSutherlandisnamedasZetland'sowner.’231

TheInternationalConsortiumofInvestigativeJournalists(ICIJ)OffshoreLeaksDatabasehaveprovided

some transparency to the information that is often hidden away from the public. A search of the

panamapapersfortheaddress:13thFloor,SilverFortunePlaza1WellingtonStreetCentralHongKong

findsseveralcompanieswithZetlandamongthembutthatwasneverasecret.232WhatASICcouldhave

discoveredisthatfinancialauthoritiesinothercountries,suchastheUnitedKingdomwhichfollowed

links from the troubledPacificContinental Securities to C/o13/FSilver FortunePlaza, 1Wellington

Street,Central,HongKong.

AnothersourceforinformationisfromtheGlobalIntelligenceFiles,WikiLeaks.Ithasanemaildated,

2005-05-30 from Carl P. Meerveld who was the Managing Director of Global Financial Managers

Limited. His contact address is C/o 13/F Silver Fortune Plaza, 1 Wellington Street, Central, Hong

Kong.233

231StuartWashingtonAstarraandthecaseofthemissing$118millionJANUARY112010http://www.smh.com.au/business/astarra-and-the-case-of-the-missing-118-million-20100110-m0my.html232https://offshoreleaks.icij.org/nodes/233935233https://search.wikileaks.org/gifiles/emailid/485847

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The above companies, names and addresses are just tip of the iceberg of what ASIC could have

discoveredintheearlybeginningsofTriobeforethedamageset in.Themainpointhere is thatASIC

already had information available before traveling to Hong Kong in 2002 to subpoena 100,000

documents from Jack Flader and James Sutherland’s Hong Kong offices. The offices were named

Zetland. The documents gathered from Zetland assisted CDPP in the Queensland tax fraud case

Commonwealth Director of Public Prosecutions (CDPP) v. Steven IrvineHart. Zetland provided

documents that enabled the court to charge Hart with nine offences of defrauding the

Commonwealth.234&235

WhenASICtravelledtoFladerandSutherland’sHongKongbasedoffice,theZetlandwebsiteinabout

2002informedthatJamesSutherlandfoundedtheZetlandFinancialGroupin1987andthatJackFlader

joinedtheZetlandFinancialGroupin1997.FladerandSutherlandarebothmentionedintheCDPPv

Hart case, curiously Flader is mentioned as “Flader” – no Christian name. See VOFF Press Release

21.05.2017.236

234CommonwealthDirectorofPublicProsecutionsvHart[2010]QDC457(30November2010)235CDPPvHart&Ors;Yak3InvestmentsP/Last/teeforYak3DiscretionaryTrust&OrsvCommonwealthofAustralia[2013]QDC60(2April2013)236http://www.mysuperrights.info/media-release-p3.php

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3.4FAILUREMillenniumFinancialLtd.VOFFareconcernedoverthe2001and2002NewZealandSecuritiesCommission’swebsitewarnings

abouttheunlicencedMillenniumfund. 237The2001postcontainedalistof15people;the2002listhad

17 names. Among the names for 2001 were Gary Artzt and Jon Lopresti, they were employees at

Matthew Littauer’s company New World Financial (NWF). The 2002 list in addition to Artzt and

LoprestialsoincludedGregRullo,andShawnRichard.RulloandShawnRichardhadalsoworkedwith

Littauer.

TheappearanceofShawnRichard’snameontheNewZealandwebsitepre-dateshiscommencement

withtheTrioschemeinAustraliaandoffersaninsightintothathewasoneoftheunlicencedoperators

operatingoutofthePhilippinesbasedMillennium.

The United Kingdom Financial Services Authority (FSA) in 2003warned aboutMillennium238and in

2002 the United States SEC acted against the Millennium Financial Ltd. ("Millennium") noting that

‘Millenniumpurportstobeaninternationalsecuritiesandfinancialconsultingfirmheadquarteredinthe

MontevideoFreeTradeZoneinUruguay,withofficesinBrazil,Mexico,Singapore,andSwitzerland.Infact,

MillenniumconductssomeofitsactivitiesfromorthroughtheUnitedStates’.239

TheSECalsostated,

1. This case involves an ongoing worldwide scheme by Defendant Millennium to defraud

investorsthroughtheofferandsaleofpurportedpre-initialpublicoffering("pre-IPO")stock

ofat leastthreeU.S.companiesonthebasisof falseandmisleadingstatements.Millennium

hasengagedinboilerroomtacticsand,amongotherthings,hasfalselytoldinvestorsthat(i)

itisanoffshore"internationalsecuritiesandfinancialconsultancyfirm"withofficesinBrazil,

Mexico,SingaporeandSwitzerland;(ii)aparticularU.S.companywouldhaveanIPOwithin

atimeframethattypicallyrangedfromonetofivemonthsinthefuture;(iii)investorswho

purchasedpre-IPOstockcouldselltheirsharesataprofitbeforetheIPO;(iv)theIPOoffering

237sourcehttp://www.siliconinvestor.com/readmsg.aspx?msgid=16875210OVERSEASBROKERS,SinceAugust2000theSecuritiesCommissionhaspublishedonthiswebsitedetailsofoverseasbrokerswhohavetargetedpeopleinNewZealandwhodonotholdaNewZealandbroker'slicenceorfuturesdealerauthorisationand,ontheinformationavailabletotheCommission,donotcomplywithNewZealandlaw,inparticular,theInvestmentAdvisers(Disclosure)Act1996ortheSecuritiesAmendmentAct1988,whenpurportingtoactforNewZealandpeople.ThebrokershavenotprovidedevidencetotheCommissionthattheyareregisteredintheirhomejurisdictiontoundertakethistypeofsecuritiesbusiness.MilleniumFinancialGroup23rdFloor,Tower1,TheEnterpriseCenter6766AyalaAvenue,MakatiCity1200PHILIPPINESAssociatedindividuals:RichardArrowsmith,GaryArtzt,G.EdwardBuell,BenCattaneo,NicaGelera,RayGordon,JonJones,JonLopresti,MatthewMcAllister,GeorgeMitchell,LennyMazzola,JosephPaterno,ShawnRichard,GregoryRullo,KenSheffield,RomsonVelez,andRobertVelis.TheabovebrokerscametotheCommission'snotice.238http://www.fsa.gov.uk/library/communication/pr/2003/129.shtml239https://www.sec.gov/litigation/complaints/comp17528.htm

90

pricewouldbesubstantiallyhigherthanthecostofthepre-IPOshares;and(v)thestockprice

would increasesubstantiallyyetagain inpost-IPOtrading. In fact,Millenniumdidnothave

offices in Brazil,Mexico, Singapore and Switzerland, no IPO occurredwithin the time that

Millenniumrepresented, therewasnomarket inwhich to sell thepre-IPOstockataprofit,

and there was no basis for claiming that the pre-IPO stock would substantially rise in

value.240

The United States froze the assets of the international fundMillennium for operating a boiler room

scam that had targeted ordinary mum and dad investors and the ‘Commission acknowledged the

cooperation and assistance of the regulatory and law enforcement officials of several foreign

jurisdictionsinconnectionwiththismatter’.241

Whoare the “several foreign jurisdictions in connectionwith thismatter” asnotedbySEC?TheSEC

alsonotethat,

‘Documents filed in support of theCommission's Complaint further allege thatMillenniumhas

solicited investors on a worldwide basis. Investor funds have come from Australia, Belgium,

Denmark, England, France, Germany, Greece, Guernsey, Indonesia, Ireland, Italy, Luxembourg,

Malaysia,TheNetherlands,NewZealand,Portugal,SaudiArabia,Scotland,Singapore,SriLanka,

Sweden,Switzerland,theUnitedStates,andtheUnitedArabEmirates.Themajorityoftheknown

investorsarefromtheUnitedKingdomandIreland.’242

WasASICcarryingoutitsroleunderthe“ASICAct”?

•maintain,facilitateandimprovetheperformanceofthefinancialsystemand

entitiesinit

•promoteconfidentandinformedparticipationbyinvestorsandconsumersinthe

financialsystem

•administerthelaweffectivelyandwithminimalproceduralrequirements

•enforceandgiveeffecttothelaw

•receive,processandstore,efficientlyandquickly,informationthatisgiventous

•makeinformationaboutcompaniesandotherbodiesavailabletothepublicas

soonaspracticable.243

240ibid.241SecuritiesandExchangeCommissionv.MillenniumFinancial,Ltd.,andNewpontFiduciaries&Nominees,S.A.,CivilActionNo.02CV3901(MBM)(S.D.N.Y.)(filedMay22,2002)https://www.sec.gov/litigation/litreleases/lr17528.htm242ibid.243http://www.asic.gov.au/about-asic/what-we-do/our-role/accessedAug9th2015

91

In June 2002 ASIC published a warning about Millenium244(Note spelt with one “n”) and lists the

companyname as, ‘MilleniumFinancial Group’. ASICpublished a list of companies,warning that the

companiescouldbeoperatingunlicenced,coldcalling,boilerroomtypescams.ASICdidnotlistanyof

thepeoplewhowereoperatingtheMilleniumFinancialGroup/MillenniumFinancialLtd.

Investigative journalist Stuart Washington in 2010 noted that in 2001 the New Zealand Securities

CommissionnamedShawnRichardasbeinganassociateoftheunlicencedbrokerMilleniumFinancial

thatoperated inthePhilippines.Washingtonaddsthat, thewarningwassubsequentlyremovedfrom

the NZ Securities Commission website at the same time Mr Richard’s and the Trio fraud was

discovered.TheSecuritiesCommissioncouldnotprovideareasonforitsremoval.245

AtanASICOversight,MrTanzersaid,"....WespeakalottoourcounterpartsintheUKandNewZealand

andtoadegreeinplaceslikeSingaporeandHongKongandsoon."

•DidASIClearnwhyMillenniumwarningwasremovedfromtheNewZealandSecurities’website?

•DidASICknowthattheNewZealandSecuritiesCommissionwebsitenamedShawnRichard?

•WheredidASICgettheinformationaboutMillenniumforASIC’sCold-CallingReport14?

•DidASICknowAustralianscontactedSECaboutMillenniumFinancialLtd?

•DidASICassisttheAustralianconsumersthatneededtoalerttheUnitedStates?

VOFFtriedtoeducateitselfthroughthefollowingFreedomofInformationrequests:

•VOFFFOI255datedSeptember25th2014,totheMinisterofFinanceNewZealand246soughtthelist

the unlicenced brokers who operated in the Philippines who came to the attention the then NZ

SecuritiesCommissionandwerelistedaswarningsontheNZSecuritiesCommission'swebsite.

October15th2014therequestwastransferredtotheMinisterofCommerceandConsumerAffairs.The

requestwastransferredtotheFinancialMarketsAuthorityforconsideration.

October 16th 2014 the Minister of Finance provided a link to view the requested document.247See

documentonVOFFwebsite.248

•VOFFFOI382datedAugust20th2015,toASICregardingtheMillenniumwarning.249

VOFFsoughtfromASICthedocument/emailcorrespondence/faxortelephonetranscriptofwarning

aboutMillenniumin2002sentfromASICtoSECandalsoallcorrespondence/documentation/phone

transcript received byASIC from the SEC concerningMillennium.ASIC’s reply dated September 11th

244REPORT14InternationalcoldcallinginvestmentscamsJune2002.MilleniumFinancialGroupislistedNo53of82p.55.245http://www.smh.com.au/business/how-investors-in-trio-backed-the-wrong-horse-with-$426-miliion-Stuart-WashingtonMarch27,2010246VOFFFOInumber255datedSeptember25th2014toMoF247https://fyi.org.nz/request/2055-minister-of-finance?nocache=incoming-7018#incoming-7018248https://tinyurl.com/yd7xzx5shttps://tinyurl.com/yd5mb36b249VOFFFOI382ASIC–Millenniumwarning,August20th2015.

92

2015said,Docdoesnotexist.

•VOFFFOI383datedAugust21st2015,toSECconcerningtheMillenniumalert.250VOFFrequestedundertheFreedomofInformationAct(FOIA)copyofSEC2002correspondencethat

alerted about Millennium and also the SEC correspondence acknowledging the cooperation and

assistance of the regulatory and law enforcement officials of several foreign jurisdictions, regarding

Millennium.

September25th2015SECprovidedtwofiles.Thecourt,ordersto freezeMillennium’sAssets251anda

coverletter.

•VOFFFOI402datedSeptember30th2015,toASICregardingASIC’s2002Reporttitled‘REPORT14

InternationalcoldcallinginvestmentscamsJune2002’.252

VOFFrequestedthesourceforthe2002listofcoldcallingfirms.ASICsaidOctober26th2015thatthe

requestistoobroad,andwouldrequiretoomuchwork.

VOFFreviseFOIinNovember11th2015butASICstillrefusedNovember27th2015citingtoomuch

work.

•VOFFFOI459datedMay25th2017,toASICregardingthespellingof‘Millenium’.253

VOFFrequestedanASICorthirdpartydocumentthatconfirmsthespellingofthe‘Millenium’(asspelt

inASIC’spublication,‘REPORT14InternationalcoldcallinginvestmentscamsJune2002’)254

or‘Millennium’asspeltinSECdocuments.

AlsoVOFFsoughtthesourceforASIC’sinformationaboutMilleniumorMillennium.

ASICletterdatedJune27th2017refusedsaying,thatrequestsmayberefusedifdocumentscannotbe

found,donotexistorhavenotbeenreceived.Iamsatisfiedthatallreasonablestepshavebeentakento

findthedocuments.

ASICsaid,

‘our email clarified that you are seeking the source of the report that alerted ASIC about

MillenniumFinancialGroupbeingaboiler-roomoperation.WewerealertedaboutMillennium

Financial Group and cold-calling activity by two misconduct reports in late 2000. I have

includedmoreinformationaboutthesemisconductreportsandmysearchesbelow.

1.Reportofmisconductreceived2October2000

I searched for the physical file for this report ofmisconduct. Unfortunately, our physical file

doesnothaveacopyofthereportofmisconductonitorfurtherinformationaboutthesource.250FOI383SEC–Millenniumalert,August21st2015.251http://www.mysuperrights.info/resources/15-06151-FOIA%20Enclosures.pdf252http://download.asic.gov.au/media/1339370/International_Cold_Calling_report.pdf253VOFFFOI459ASIC–Millenium,May25th2017254http://download.asic.gov.au/media/1339370/International_Cold_Calling_report.pdf

93

Instead,thephysicalfileincudesdocumentsaboutadifferentcompanyanditdoesnotrelateto

cold-calling.

Ialsosearchedourelectronicrecords.The informationthatwehaveelectronicallyaboutthis

misconduct report shows that an Australian resident contacted us about calls they were

receiving.ThecallswereaboutUSinvestmentsandthemisconductreporterwantedtoknowif

the company was legitimate. We do not have a copy of the report of misconduct that we

receivedsavedelectronically.

2.Reportofmisconductreceived17November2000

Isearchedforthephysicalfileforthisreportofmisconductandourrecordsshowthatitwas

destroyedin2009.

Ialsosearchedourelectronicrecords.The informationthatwehaveelectronicallyaboutthis

misconductreportsuggeststhattheycalledASICaftertheyreceivednumerousphonecallsfrom

an offshore broker about investment opportunities.We did not record calls to our Customer

ContactCentrein2000.

Wedonothaveotherdocumentsfromthemisconductreportersavedelectronically.’

Unfortunately the effort thatASIC applied in the above search throwsnonew light on the troubling

questionsthathangovertheMillenniumFinancialgroup.

MillenniumFinancial,Ltd.,isnottheonlycompanytohaveredflags.NewWorldFinancial(NWF),and

Pacific Continental Securities UK (PCS) had warnings posted by financial regulatory authorities in

Spain, Europe, Hong Kong and New Zealand. Authorities around the world between 2002 to 2004,

raised red flags or they had warned the operators, sometimes forcing the operators to leave the

country.Authoritiessuchas,

•TheNetherlandsAuthorityfortheFinancialMarkets(AFM);

•TheFinancialSupervisionCommissionoftheIsleofMan(FSC);

•TheAustrianFinancialMarketAuthority(FMA);

•TheComisiónNacionaldelMercadodeValores(CNMV)Spain;

•FinancialMarketsAuthority(NewZealand)and

•TheSecurities&FuturesCommissionofHongKong.

ASICmirroredthewarningaboutMillenniuminitspublicationReport24,butevidently,didnotlook

intothebackgroundofthecompany.

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3.5FAILUREMatthewNguyenLittauer’ssuddendeath.CRD#2027330ASIC failed to gather sufficient information to establish a fit and proper person test concerning

MatthewLittauer.Hewasaninternationalbroker,letintotheAustralianfinancialsystem,whereheset

up structures that ultimately handledAustralian superannuation and investmentmoney.Australians

thatwereencouragedbythegovernment–tosavefortheirretirement,weretargeted.

Had ASIC investigated Littauer’s background, they would have found connecting companies and

employees that had often flouted the law. Littauer came to the attention of the Federal Bureau of

Investigation(FBI)-theyhadadossieronMatthewNguyenLittauer.

After the discovery of the Trio fraud, ASIC demonstrated that it doesn’t have an adequate legal

frameworkforidentifyingfraud;tracingthemoneytrail;ortheabilitytoconfiscateimproperlygained

assets.ConsumerscouldnothavefoundoutthatMrRichardwaslyingtoASICbecauseconsumersare

not privy to see documentation such as his applications for a licence.ASIC andAPRA independently

foundirregularitiesinthewaytheTriodirectorsmanagedTrioCapitalbutfailedtocommunicatewith

eachotherandtooknoaction.HadASICdoneabasiccheckonTrio’scharacterswiththeircounterparts

aroundtheworld,ASICwouldhavereceivedafloodofconcernsandwarnings.

Forexample,ShawnRichardandEugeneLiuhadworkedoutofthePCSofficesbasedinTaiwan.Jack

Flader,JamesSutherland,MatthewLittauerandFrankRichardBelloperatedgloballywithofficesbased

in the United States, United Kingdom, Europe, the British Virgin Islands, Philippines, Australia, New

Zealand,andHongKong. JackFlader, JamesSutherlandandCarlMeerveldwerebased inHongKong.

Matthew Littauer and Frank Richard Bell appear to have been based in the United States from late

1990s to about 2002. There are many United States documents with their signature or they were

presentduringnumerouscourthearings.

April272014VOFF’sFOIAtoFBIrequesteddocumented informationaboutMathhewLittauer.VOFF

received a 37 pages FBI dossier onOctober 16th 2014. The dossier had considerable redaction and

manypagesweredenied.TheFBIdossierincludescorrespondencefromtheImmigrationandCustoms

Enforcement(ICE),statingthatLittauerisasubjectofanongoinginvestigationinthePhilippinesashe

wasidentifiedasbeinginvolvedinatelemarketingstockBoilerRoomscam.

The dossier questions a possible link between Littauer’s murder and the murder of the American

citizenChristopherAndrewCoppolawhowasstabbedtodeathinManila.Coppolahadreportedlybeen

employedbyaPastranaboilerroominManila.TheTokyometropolitanPoliceandtheForeignPolice

Co-operation Homicide Investigation unit were interested in comparing the type of knife used in

Coppola’smurdertothatofLittauer.

95

TheFBItookthepotentiallinkseriouslyasa5pagearticle'LawsandRaidsFailtoThwartBoilerRoom

Activities'bySheilaSamonte-Pesayco is included inthedossier.Samonte-Pesayconamessomeof the

biggest global scammers such as Pangasinense Amador Apungan Pastrana, Regis Possino, Sherman

MazurandAdnanKhashoggi.

In2015VOFFsentarequesttoINTERPOLwhichwasforwardedtotheFBIandnewinformationabout

themurder investigationwas located.May 4th 2015 an 8-page document255 said two DNA samples

werefoundatthecrimescene.DNAnotbelongingtoLittauerwassenttoInterpolWashingtonbythe

FBI forarequestedsearchagainst INTERPOL’sDNAdatabase. Interpolrequiredcertificationthat the

DNAsampleswerecarriedoutbyqualifiedagents.Itappearsnofurthercorrespondence(datedMarch

2012)proceededpastthatpoint.AccordingtotheFBI,Littauerwas“involvedinillegalstockexchange

businessbasedinHongKong.Therefore,itishighlypossiblethatthismurderwascausedbyforeignerfor

somekindofmoneytrouble”.

AtthetimeofhismurderLittauer’snameremainedactiveonASIC’sdatabase.

WrightGlobalInvestmentsPtyLtd,wasappointed12/07/2001andceased03/12/2004;

WorldFinancialGroupAustralia,LittauerwasOfficeDirector;and

WrightGlobalAssetManagementPtyLtd,wasappointed in05/11/2003andceased in02/12/2004.

Hiscessationdatescoincidewithhissuddendeath.

Littauer death remains an unsolved murder of a businessman. The Japanese and American police,

includingtheUSembassyandtheexpatcommunitiesofWesternerlivingintheEast,wouldhavelearnt

aboutLittauer’smurder.SomewouldhaveknownofhisconnectionwithAustraliayetASICappearsto

have remained uninformed. Littauer’s name was simply removed from ASIC company registration

documents.

255LittauerFBIdocumentVOFFFOI338Feb232015(8pages)http://www.mysuperrights.info/resources/May4%2C2015-from%20FBI.pdfLittauer-InterpolWashingtondocumentVOFFFOI338Feb232015(19pages)http://www.mysuperrights.info/resources/2015-082%20%28Matters%29%20Response%20Letter.pdf

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3.6FAILURELittauer’sbackground.ASICfaileddismallywhenitcomestoLittauer. InAugust2002TheNationalAssociationofSecurities

Dealers(NASD)finedLittauer$20,000forbreachesofUSSecuritylaw.256LittauersubmittedaLetterof

Acceptance,Waiver,andConsentinwhichhewasfined$20,000andsuspendedfromassociationwith

anyNASDmemberinanycapacityfor30days.Withoutadmittingordenyingtheallegations,Littauer

consented to the described sanctions and to the entry of findings that he allowed amember firm to

open new customer accounts using his representative number with the firm for public customers

whosenewaccountswere solicitedbypersonsnot registeredwith the firm.The findingsalso stated

thatLittauerallowedthe firmtousehisrepresentativenumberon transactions forpubliccustomers

thatweresolicitedbypersonsnotregisteredwiththefirmandwhoprovidedthefirmwithinstructions

for the transactions. NASD also found that the firm did not have written authorization from the

customer that was approved by a principal of the firm, authorizing the firm to accept the trade

authorizationfromtheunregisteredperson,andLittauerfailedtospeakwiththecustomersaboutthe

transactionspriortotheirexecution.

Furthermore, NASD found that Littauer’s actions of allowing the firm to use his registered

representative number in thismanner caused the firm to create andmaintain inaccurate books and

recordsreflectingthatLittauerwastheregisteredrepresentative forthecustomerswhosolicitedthe

newaccountsandtransactions.Littauer’ssuspensionbeganAugust18,2003, tothecloseofbusiness

September17,2003.(NASDCase#CAF030037)

During this same period that Littauer was suspended by NASD, Littauer remained active on ASIC’s

database.

WrightGlobalInvestmentsPtyLtd,wasappointed12/07/2001andceased03/12/2004;

WorldFinancialGroupAustralia,Littauerwasofficedirector;and

shortlyafterhisNASDsuspension,LittauerwasappointedwithWrightGlobalAssetManagementPty

Ltdin05/11/2003andceasedin02/12/2004.

MatthewLittauerwasmurderedDecember3rd2004 at his office inTokyo, Japan. CauseofDeath is

Homicide,shockandseverebloodlossduetostabwounds.AccordingtotheLiaisonBureau,Interpol

HongKong,(intheFBIdozier)Littauerwasstabbedatleast11times.

Thedates of 2000and2001 in theheavily redactedFBIdocument suggests that Littauerwasunder

surveillancewellbeforethedateofhismurder.

LittauerwastheowneroftheTrioCapitalfund.

256http://www.finra.org/sites/default/files/DisciplinaryAction/p007442.pdf

97

At6yearsoldheescapedfromVietnamthedaySaigonfellandwasadoptedbyaLarchmontcouplein

USA.Littauer'snephewCol.NguyenBewasaformerleaderintheArmyoftheRepublicofVietnamwho

helpedorganizeaUSbackedresistancemovementknownastheRevolutionaryDevelopmentProgram,

or"theblackpajamaprogram".

Littauer came to the attention of the regulatory authorities in the United States for security law

breaches.

“Littauerhashis fingerprintsonstockbrokingcheatsandswindlesdateback to the Internetboomof

thelate1990s.”257

SummaryofLittauer’sfalloutwiththelaw.

1997 Nevada incorporated firm called Styx Group Inc., now listed by ‘NevadaCorporates’ as

“PermanentlyRevoked”MatthewwasPresidenthiswifewasTreasurer.258

1999 Littauer was one of the respondents in the ‘NASD Disputes’ for Pacific Continental Securities

Corporation(PCS).

2001 Littauer was one of the Respondents in the ‘NASD Dispute Resolution’ for PCS and World

FinancialGroup,Inc.(NWF).

2002NASD finedNewWorld Financial Inc., $12,500.00 for acting through an individual, it failed to

maintain its minimum Net Capital Requirement despite its Financial and Operations Principals

(FINOP’S)knowledgethatthefirmrequiredasignificantcapitalinfusion.

2003 World Financial Capital Market (WFCM) fined $100,000.00 for reports prepared by an

unregisteredpersonthatcontainedexaggerated,unwarranted,ormisleadingstatementsandfailedto

disclosematerialfacts.

2003NASDfinedLittauer$20,000forbreachesofUSSecuritylaw.

2005(thelate)Littauer’sNewWorldFinancialInc.(NWF)wasterminated.

2006(thelate)Littauer’sNewWorldFinancialInc.(NWF)wasexpelled.

2006NWFfailedtopayfinesinconnectionwithNASDcomplaint.Firm’smembershipwasrevoked.

2006NASDCaseallegationsforaccountactivity-breachoffiduciaryduty,accountactivity-omissionof

factsandunauthorizedtrading.Sumrequestedwas$1,114,634.00.Sumawardedwas$377,955.01.

Pacific Continental Securities Corp, (USA) had a United Kingdom branch called Pacific Continental

Securities(UK)LimitedthatwasembroiledinUK’slargestpensionfundfrauddiscoveredin2007with

lossesofover300millionpoundssterling.

In2004–2006regulatoryauthoritiesinEuropeissuewarningalertsagainstNWF.

Littauer’scompanyNWFCRD#47747.

Littauer,MatthewNguyen,ownerofNewWorldFinancialInc.

257StuartWashington‘Murder,intrigueandmissingmillions’January11,2010http://www.smh.com.au/business/murder-intrigue-and-missing-millions-20100110-m0s1.html258http://www.corporationwiki.com/p/2ceu0c/styx-group-inc

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AlternateNames:

WorldFinancialCapitalMarketsInc.;

WorldFinancialGroup,Inc.and

WorldFinancial.

ThisfirmwasformedinCaliforniaon06/16/1998.

Mainoffice:AvenidaRicardoSoriano34,10thFloor,No.A,Marbella,Spain29600.

Businessbased:Honolulu,HI.EmployerLocation:NewYork,NY.

NWFInc.,FormedinCalifornia06/16/1998.Terminated12/31/2005.

FINRAexpelledNWFInc.,in06/2006.

NewWorldFinancialbooksweremaintainedbyHuntleighSecuritiesCorporation,7800ForsythBlvd

5thFloor,StLouis,MO63105.

NWFInc.,Disclosures(total3)

Disclosure1of3-Firmfailedtopayfinesand/orcostsof$9,472.38inconnectionwithNASDcomplaint

CAF030057.Dateinitiated01/27/2006.

Firm’smembership in the association has been revoked as of June 29, 2006 pursuant toNASDRule

8320.

NWFInc.,Disclosure2of3-NASDDocket/CasenumberCAF030057.DateInitiated:11/07/2003.Fine

$100,000.00.

Sanction details, without admitting or denying the allegations, World Financial Capital Markets

consented to thedescribedsanctionsandto theentry findings.Therefore, the firm iscensured, fined

$100.000,$40,000ofwhich is jointlyandseverallyrequiredtoprovidetheDept.ofenforcementand

District10 itsrevisedanti-money launderingcomplianceprocedureswithin30daysofacceptanceof

thisAWC.Call forallofthefirm’srecordstobedeliveredtoNASDby30days.Thefirmpostedonits

web site research reports prepared by an unregistered person that contained exaggerated,

unwarranted, or misleading statements and failed to disclose material facts; failed to disclose in

researchreportsthatthecompanieshadanagreementtoprovidethefirmwithsharesofitssecurities

in consideration for research services; the firm’s supervisory systems and procedures failed to

adequatelysetforthproceduresandsystemsreasonablydesignedtoachievecompliancewithFederal

SecurityLawsandNASDRuleswithrespecttopublishinganddistributingresearchreports.

NWFInc.,Disclosure3of3-NationalAssociationofSecuritiesDealers,Inc.CasenumberC10020113.

DateInitiated:11/25/2002.Monetary/Fine12,500.00.

Without admitting or denying the allegations, the respondent member consented to the entry of

findings that, acting through an individual, it failed to maintain its minimum NET CAPITAL

99

REQUIREMENTdespite itsFINOP’Sknowledge that the firm requireda significant capital infusion.A

fineof$2,500.00paidbyWorldFinancialonDecember23,2002.Afineof$10,000.00paidbyacontrol

affiliate on December 23, 2002. The control affiliate was suspended from any association with any

NASDmemberfirmfortenbusinessdaysbeginningJanuary6,2003:andwassuspendedfromserving

asafinancialandoperationsprinciplefor60businessdaysbeginningJanuary6,2003.

NWFInc.,ArbitrationAward-Award/Judgment

Brokerage firms are not required to report arbitration claims filed against them by customers:

however,BrokerCheckprovides summary information regardingFINRAarbitrationawards involving

securitiesandcommoditiesdisputesbetweenpubliccustomersandregisteredsecurities firmsinthis

sectionofthereport.

ThefulltextofarbitrationawardsissuedbyFINRAisavailableatwww.finra.org/awardsonline.

NWFInc.,ArbitrationDisclosure

1of1-NASDCaseInitiated:01/23/2006.Casenumber:05-06360.Allegations:Accountactivity-breach

of fiduciary duty, Account activity-omission of facts; Account activity-suitability; Account activity-

unauthorized trading. Sum of all relief requested: $1,114,634.00. Sum of all relief awarded:

$377,955.01.

MatthewLittauercanbefoundasasignatoryoncompanydocumentssignedonbehalfofPCSInc.such

astheSECdocumenttitled“VpgiCorp–‘S-3’on7/20/98–EX-99.1”.Atpage3of5MatthewLittauer,

President of Pacific Continental Securities Corporation (a California Corporation) signed an “Entire

Agreement” with Pat Custer, President of UniView Technologies Corp (a Texas Corporation) dated

6/3/98.259

DetailofLittauer’shistorysourcedfromlegalactions:

1999NASDDisputes: Littauer andRichardBellwere part of the respondents for Pacific Continental

Securities Corporation (PCS). Claimant asserted the following causes of action: improper business

conduct and trading practices; fraud; misrepresentations and deceit; unauthorized transactions;

unsuitability; failuretosupervise;breachof fiduciaryduties;breachoftheimpliedcovenantsofgood

faithandfairdealing.Alsoarenegligence;violationsoftheExchangeActandtheSecuritiesActof1933;

andviolationsoftheNASDRulesofFairPractice.260

2001Littauer’scompanyNewWorldFinancialGroupwasforcedbythePhilippineauthoritiestoCease

259http://www.secinfo.com/dN1Gy.7z.7.htm260StatementofClaimfiled:August20,1999CaseNumber:99-03856

100

andDesist.261

2001 NASD Dispute Resolution, Littauer was one of the Respondents for PCS and World Financial

Group,Inc.(NWF).SomeofthepointsintheCaseSummaryare:Fraud;Negligence;BreachofContract;

Breach of Fiduciary Duty; Respondent Superior; Violation of NASD Conduct Rules; Violation of

CaliforniaCorporateSecuritiesLaw;ViolationofCaliforniaConsumerLegalRemediesAct;andPunitive

Damages.262

LittaueralsoownedandwaspresidentofNewWorldFinancialInc.(NWF).

NWF was formed in 1998 in California, terminated in 2005 and expelled by Financial Industry

RegulatoryAuthority(FINRA)in2006.

Littauer’s NWF operated a branch in Europe where its illegal trading came to the attention of the

followingsupervisoryauthorities:

•TheNetherlandsAuthorityfortheFinancialMarkets(AFM);

•TheFinancialSupervisionCommissionoftheIsleofMan(FSC);

•TheAustrianFinancialMarketAuthority(FMA)and

•TheComisiónNacionaldelMercadodeValores(CNMV)Spain.

TheyallissuedwarningsagainstNWF.

CNMV named NWF operators Gary Steven Artzt, Gregory Scott Rullo and Raiza Tulan. The FMA

suggestedthattheregulatorywarningsbyCNMV,theIsleofManandtheNetherland’sauthorities,had

causedNWFtoshiftitsbusinesstoAustria.FMAsaidthiswasevidentfromenquiriesandcomplaints

theyreceived.TheFMAwarnedinvestorsagainstfinancialservicetransactionswithNWFastheywere

offering financial services via the Internet and telephone, such as the brokerage of the purchase of

securitiesortheopeningofaccounts,withoutholdingthenecessaryofficialapproval.263

Note,Littauer’semployees(Artzt,RulloandTulan)workedalongsideShawnRichardinthePhilippines

inearly2000.

Littauer was connected with Pacific Continental Securities Corp, (PCS Corp) a firm that formed in

California in 1960, with main office in Beverly Hills, CA. PCS Corp was terminated or withdrew

registrationon:11/09/2001.Littauerisnotmentionedonthe“FINRAbrokercheckreport”howeverhe

ismentionedinNASDhearings.FrankRichardBellislistedastheComplianceOfficerofPSCCorp.

PCSCorp(USA)hadaUnitedKingdombranchcalledPacificContinentalSecurities(UK)Limited.Shawn

RichardandEugeneLiuworked forPCSUK:Liubased in theUSAandRichardwasbased inTaiwan.

261RepublicofthePhilippinesDepartmentofFinance,SecurityandExchangeCommissionComplianceandEnforcementDepartment(April102001)262NASDDisputeResolutionStatementofClaimfiled:October26,2001CaseNumber:01-05745263http://www.fma.gv.at/en/about-the-fma/media/press-releases/press-releases-detail/article/fma-veroeffentlicht-investorenwarnungen-zu-barlow-ramsey-und-zu-new-world-financial.html

101

PCS UK used the Hong Kong address used by Zetland. Prior to 2006 Jack Flader and his business

partnerJamesSutherlandwerebasedinthesameZetlandofficeaddress.264

Asalreadymentioned,in2004-6authoritiesfromSpain,theIsleofMan,theNetherland'sandAustria

warned about NWF. Duncan Hughes in the Australian Financial Review noted that St Lucia-based

ExplorationFundandHuntleighInvestmentFundwereeithermanagedordirectedbyFrankRichard

BellandCarlMeerveldareNewWorldFinancial,andfundmanager,GlobalFinancialManagers,were

used to sell stocks owned by Huntleigh. Like their Australian counterparts, investors from the UK,

Sweden,Denmark, Poland andAustriahave learnthoweasy it is for their assets todisappear into a

mazeofoverseasfunds.265

In 2001 and 2002 the New Zealand authorities posted warnings of the unlicenced Millennium

Financial (MF) potentially a boiler room scam and listed theMF brokers.266Some of the people

operating out of MF are linked with NWF. In 2003 Matthew Littauer purchased the reputable

TolhursttrustfundinAustralia,laterin2004itbecameAstarraCapitalandwasnamedTrioCapital

in October 2009. Littauer’s colleagues Shawn Darrell Richard, Frank Richard Bell & Eugene Liu

helpedmanageandruntheTrioCapitalfund.

Freedom of Information (FOI) requests to the United States Federal Bureau of Investigation (FBI),

SecuritiesandExchangeCommission(SEC),theFinancialServicesAuthorityUnitedKingdom(FSA)and

New Zealand Securities Commission assisted in being able to present a clearer picture of Matthew

LittauerandtheprincipalsbehindtheTrioCapitalLimitedscheme.

Littauer’sNASDDisputes.

(1)StipulatedAward-NASDDisputeResolution,Inc.

WangTai-Jan, (Claimant)vs.PacificContinentalSecuritiesCorporation, JayAllen,RichardBell,Gregory

Rullo,andMatthewLittauer,(Respondents).CaseNumber:99-03856.HearingSite:NewYork,NewYork.

StatementofClaimfiledonorabout:August20,1999.

CaseSummary.

Claimant asserted the following causes of action: improper business conduct and trading practices;

fraud; misrepresentations and deceit; unauthorized transactions; unsuitability; failure to supervise;

breachof fiduciaryduties;breachof the impliedcovenantsofgood faithand fairdealing;negligence;

violationsoftheExchangeActandtheSecuritiesActof1933;andviolationsoftheNASDRulesofFair

264Hetherington,Tony‘DarklegacyofPacificContinentalcropsupoversees’4March2010.http://www.thisismoney.co.uk/money/midasextra/article-1690232/Dark-legacy-of-Pacific-Continental-crops-up-oversees.html265Hughes,DuncanTrappedintheglobaltentaclesofTrioMay152010http://www.afr.com/business/trapped-in-the-global-tentacles-of-trio-20100514-ivjih266https://www.sec.gov/litigation/complaints/comp17528.htm

102

Practice. Claimant's claim involved the stockofHarrisonDigicom, Inc., TeledataWorld Services, Inc.,

WinfieldCapitalCorp.,andTCIMusicInc.

Unlessspecificallyadmittedintheiranswer,RespondentsdeniedtheallegationsmadeintheStatement

ofClaimandassertedthefollowingdefenses:theclaimsarebarredbythedoctrineofuncleanhands;

Claimant knew prior to opening the subject account the type and kind of investment strategy that

wouldbeemployed;Claimant'sclaimsarebarredbythedoctrinesofwaiver,estoppel,ratification,and

assumptionofrisk;allriskswerefullyexplainedtoClaimant,whothereafterknowingly,willingly,and

voluntarily assumed market risks inherent in such investment activities; Claimant failed to use the

requisiteduediligence inmonitoring,managing,andhandlinghisaccountand investments;Claimant

failed to reasonablyand/orproperlymitigatehisdamages; thedamages forwhichClaimantseeks to

holdRespondents liableresulted, inwholeor inpart, fromClaimant'sactsandomissions;Claimant's

alleged damages were caused by his own conduct or negligence, for which he is more than 50%

responsible; Claimant, throughhis own conduct, haswaived any and all entitlement to relief against

Respondents;Claimantknewatalltimesofthetransactionsintheaccountandoftheprofitsandlosses

incurred therein, but failed to act or change his investment strategy; any breach of contract by

Respondentsdidnotconstituteasubstantialdeviationfromtheapplicablecontractorcontractssoas

to constitute a legal violation or default thereunder; and there is no cause of action for breach or

violation of the rules and regulations of the New York Stock Exchange, National Association of

SecuritiesDealers,Inc.,oranyoftheotherself-regulatoryorganizations.

(2)Award-NASDDisputeResolution.

IntheMatteroftheArbitrationBetween;

Doug P. Barnes, Doug P. Barnes & Jerri P. Barnes, as Joint Tenants with Rights of Survivorship and

BarnesLivingTrust,Claimantsv.PacificContinentalSecuritiesCorp.,WorldFinancialGroup,Inc.,James

A.Allen,GeorgeF.Balmer,Craig J.Summa,MatthewN.Littauer,FrankR.Bell,RoccoA.Mongelliand

RobertJ.Wesolowski,Jr.,Respondents.CaseNumber:01-05745.HearingSite:SanFrancisco,California.

StatementofClaimfiled:October26,2001.

CaseSummary.

Claimantsallegedthattheabove-referenceddisputeinvolvesinvestmentsinUniformsforAmerica,Inc.

andGlobalAccessPagers,Inc.Claimantsalsoallegedthefollowingclaims:

1)ViolationofSecuritiesExchangeActof1934;

2)ViolationofCaliforniaandNewYorkCommonLaw;

3)Fraud;

4)Negligence;

5)BreachofContract;

6)BreachofFiduciaryDuty;

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7)RespondentSuperior;

8)ViolationofNASDConductRules;

9)ViolationofCaliforniaCorporateSecuritiesLaw;

10)ViolationofCaliforniaConsumerLegalRemediesAct;and

11)PunitiveDamages.

Respondents denied Claimants' allegations of wrongdoing and denied any liability to Claimants.

Respondentsalsoassertedaffirmativedefenses.

Award.

Afterconsideringthepleadings,testimony,andevidencepresentedatthehearingandthepost-hearing

submissions,thePaneldecidedinfullandfinalresolutionoftheissuessubmittedfordeterminationas

follows:

1)Respondent JamesA.Allen is solely liable for and shall pay toClaimants, the sumof $7,410.00 in

compensatory damages plus interest at the rate of 10% per annum from September 1, 2000 until

paymentofthisawardamount.

2)RespondentsRoccoA.Mongelli,FrankR.Bell,Craig J. SummaandPacificare jointlyandseverally

liableforandshallpaytoClaimants,thesumof$66,685.00incompensatorydamagesplusinterestat

therateof10%perannumfromSeptember1,2000untilpaymentofthisawardamount.

3)RespondentsJamesA.Allen,RoccoA.Mongelli,FrankR.Bell,CraigJ.SummaandPacificarejointly

andseverally liable forandshallpay toClaimants, thesumof$150.00asreimbursement for50%of

Claimantsfilingfee.

4) All claims by Claimants against Respondents,World Financial, MatthewN. Littauer and Robert J.

Wesolowski,Jr.aredenied.

5)Claimants'claimsforpunitivedamagesaredenied.

6)Exceptasmentionedinparagraph3above,eachpartyshallbearallotherrespectivecosts,including

attorney'sfees.

7)Allotherreliefnotexpresslygrantedisdenied.

FeeSummary.

1.Claimantsarechargedwiththefollowingfeesandcosts:

InitialFilingFee=$300.00.

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LessPayments=$(1,425.00).

RefundDueClaimants=$(1,125.00).

2.RespondentPacificischargedwiththefollowingfeesandcosts:

MemberFees=$4,600.00.

LessPayments=$(0.00).

BalanceDueNASD-DR=$4,600.00.

3.RespondentWorldFinancialischargedwiththefollowingfeesandcosts:

MemberFees=$4,600.00.

LessPayments=$0.00.

BalanceDueNASD-DR=$(4,600.00).

4. Respondents Pacific, World Financial, James A. Allen, George F. Balmer, Matthew N. Littauer and

FrankR.Bellarechargedjointlyandseverallywiththefollowingfeesandcosts:

AdjournmentFees=$1,125.00.

LessPaymentsbyWorldFinancial=$(1.125.00).

BalanceDueNASD-DR=$0.00.

5.RespondentsJamesA.Allen,RoccoA.Mongelli,FrankR.Bell,CraigJ.SummaandPacificarecharged

jointlyandseverallywiththefollowingfeesandcosts:

ForumFees=$13,500.00.

LessPayments=$(0.00).

BalanceDueNASD-DR=$13,500.00.

Allbalancesarepayable toNASDDisputeResolutionandarepayableupon the receiptof theAward

pursuanttoRule10330(g)oftheCode.

In2003Littauerwasfined$20,000byNASDforbreachesofUSSecuritylawandwassuspendedfrom

operatinginthefinancialservicersbutthisdidnotstophimfromstartingabusinessinAustralia.Legal

actionsurroundingcompaniesandoperatorsthatlaterformedTriodemonstratethatLittauer,Eugene

Liu,ShawnRichardandFrankRichardBellhadworkedtogetherineitherNWForPCSbeforeoperating

Trio.Australiaofferedthemanewregulatory freedom,away fromtheattentionof theUSregulators.

Littauer and Shawn Richard were directors and acting Compliance Officer of Trio Capital, Liu was

directorandChiefInvestmentStrategistandFrankRichardBellwasdirectoroftheExplorationFund

Limited.TwocharactersfromtheUSfirmsNWFandPCS,GaryArtztandJonLoprestiworkedalongside

ShawnRichard in theManilabased firmMillenniumFinancial in2001and2002.Artzt, Lopresti and

ShawnRicharddidnotholdaNewZealandbroker's licenceor futuresdealerauthorisation, theydid

105

notcomplywithNewZealandlaw,inparticular,theInvestmentAdvisers(Disclosure)Act1996orthe

SecuritiesAmendmentAct1988,whenpurportingtoactforNewZealandpeople.267

Asearlyas2004,APRA foundShawnRichardhada “conflictof interest”.TheTriodirectors came to

APRA’sattention4or5timesoverthenextfouryears.In2006APRAfoundtheTriodirectorswerea

“bunchofincompetents”.ASICnevercarriedoutbackgroundchecks.

MatthewLittauerwas34-years-oldandoperatingaconsultingfirminTokyowhenlateThursdaynight

his employees, 31 year oldmale and 34 year old female, heard shouts and running footsteps in the

hallwayandwhentheywenttolook,theirbosswaslyingneartheelevator,withabout10stabwounds,

dying.

267http://www.siliconinvestor.com/readmsg.aspx?msgid=16875210

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3.7Marbella,Spain

MarbellaisSpain’ssouthernMediterraneancityontheCostadelSolwiththeSierraBlancaMountains

asbackdropandpopularwithtourists.Overthelastdecadesithasservedasthetemporaryhomefor

brokerslearninghowtoswindleinnocentpeopleoftheirhardearnedmoney.

CharlesFrederick"Charlie"WilsonamemberoftheGreatTrainRobberygang,livedinMarbella,Spain

untilhewasshotdeadbyahit-manonabicyclein1990.268

JamesSutherlandandJeffreyRevell-ReadecameundertheattentionoftheSpanishauthoritiesin2003

for running boiler room scams and connectionswith Pacific Continental Securities (PCS) but it took

authoritiesanotherfouryearsbeforePCSwascloseddown.269

From 2004 to 2005Matthew Littauer’s NewWorld Financial firm set up a branch in Spainwith its

office in Marbella. Greg Rullo & Gary Artzt operated NWF until moved on by the Spanish Financial

Authorities.270TheAustrianFinancialMarketAuthorityandtheNetherlandsAuthorityfortheFinancial

MarketsalsowarnedaboutNWF.271

March-June2014JeffreyRevell-ReadeappearedbeforetheSouthwarkCrownCourtalongwith8other

people foroperating theMadridbased fraudulentscamthatsoldpennystocktoBritishretirees.One

thousand investors in Britain lost $126.4million. Over six thousand Australian investors lost about

between $123m to $194.5m in Trio. Nine individualswere convicted in two trials, the last ofwhich

concludedon6June2014atSouthwarkCrownCourt.Revell-Readewassentencedtoeightandahalf

yearsinprison.

The Hon Judge Gledhill QC in 2014 when he handed down the sentences in the Revell-Reade trial,

commented,

"Many investors lost every penny they had... the consequences of those losses have beendreadfulandinsomeconsequencescatastrophic."Even in the process of one firm dying and another being born, deceit and fraud wereemployed."Somebelievefraudisavictimlesscrime;thiscaseprovesthefallacyofthat."Aconfiscationinvestigationisbeingconductedandanyordersforcompensationand/orcostswillbedealtwithinduecourse.

268https://en.wikipedia.org/wiki/Charlie_Wilson_(criminal)269Hetherington,Tony‘DarklegacyofPacificContinentalcropsupoversees’4March2010.http://www.thisismoney.co.uk/money/midasextra/article-1690232/Dark-legacy-of-Pacific-Continental-crops-up-oversees.html270http://fraudforum.newtech.fi/index.php?t=tree&goto=40&rid=0#page_top271http://boards.fool.co.uk/would-this-be-the-new-world-financial-you-11054359.aspx

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TheinvestigationwasassistedbytheCityofLondonPolice,theNationalCrimeAgency,theFinancial Conduct Authority (FCA) as well as overseas law enforcement partners andregulators,includinginNewZealand,HongKongandtheUS.”272

HowdifferentistheinvolvementbylawenforcementintheRevell-ReadecasecomparedtoTrio.

AninvestigationintoRevell-Reade’sactivitiesstartedfouryearsbeforehewascalledtostandtrial in

2014. In the years leading up to the trial, the Serious FraudOffice (SFO) requested that the London

media refrain from writing or printing any articles about Revell-Reade that might jeopardize any

possible court trial that may arise in the future. During this same period, ASIC granted a financial

servicelicencetoRevell-Reade.

InvestigativejournalistStuartWashingtonin2010intheSydneyMorningHerald(SMH)revealedthat

Revell-Readeacquired licences tooperate in theAustralian financialmarket.TheSMH’sBusinessDay

asked ASIC whether Revell-Reade and Sutherland could be regarded as being of ''good fame and

character'',thenecessarytesttobecomeafinancialserviceslicenseeinAustralia.ASICreplied:

''NeitherpersonisadirectororanofficerofanAFSLholderunderASIC'sjurisdiction.''

Askedwhethercompaniesownedby thepaircouldberegardedasofgood fameandcharacter,ASIC

replied:

''Atthetimethelicencewasissued,[thecompany]metthelicenceconditions.''273

Two years after Revell-Reade was locked away (he spent 12 months in jail prior sentencing) ASIC

releasedamediastatement(May21st2015)saying,

“ASIC has permanently banned Australian Jeffrey Revell-Reade from providing financialservicesinAustraliafollowinghisconvictionovera£70millionfraudinGreatBritain.”274‘ASIC’sbanprotectsAustralianconsumers.ItwillpreventhimfromeverworkinginfinancialservicesinAustraliaagain.’275

In2010(wellbeforehewasarrested)Revell-Readesaidhe“admitstoreceivingabitofbadpress",as

heisthesubjectofacourtapplicationbySeriousOrganisedCrimeAgency(SOCA)inBritainconcerning

thefreezingofassetsfromthesaleofhishouseinWimbledon,SouthLondon,underproceeds-of-crime

laws.SOACactionagainstRevell-Readewasbasedonhis "boiler rooms" involvement.Revell-Reade’s

responsewas,"IfeelIhavebeendrawnintoanunnecessarycase,and[I'm]abitofavictim,actually.

272http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2014/two-sentenced-in-70m-boiler-room-fraud-trial-----------.aspx273Washington,Stuart'Noconcerns'aboutpairdespiteBritishlinksFebruary8th2010http://www.smh.com.au/business/no-concerns-about-pair-despite-british-links-20100207-nkvi.html274http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-119mr-asic-permanently-bans-australian-mastermind-of-uk-fraud/275http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-119mr-asic-permanently-bans-australian-mastermind-of-uk-fraud/

108

TheauthorityfoundRevell-Readerecklesslyordeliberatelymisledcustomersbetween2005and2007

butRevell-Reade’sanswertothiswasthathehaddealtonlywithinstitutions,notprivateindividuals,

asan"introducer"ofstocks."Ican'tbeheldresponsibleforwhathappensthereafter."276

InApril18th2016Revell-ReadereappearbeforetheSouthwarkCrownCourt.TheRvAnthonyMayand

Jeffrey Revell-Reade trial was a Confiscation Hearing.277Some of the proceeds to be confiscated are

Revell-Reade’s £37million from the frauds, three apartments in Marbella, Spain, a £5million luxury

homeinWimbledon,South-WestLondon,and£13,000RolexandCartierwatches.Revell-Readespenta

lotofmoneyonhiringprivatejetsandlivingtheWolfofWallStreetlifestyle.278

ApossibleconnectionbetweenRevell-ReadeandtheAstarraStrategicfundisthepurchaseof50,000

Multi-TechInternationalCorpsharesin2009.279AccordingtotheSecurityExchangeCommission(SEC)

Form 8-K dated May 6, 2004, Revell-Reade acquired 60,000,000 shares of Multi-Tech International

Corpfor$440,000andplacedRevell-Readeas75%ownerof theCompany.280It isunknownwhether

Astarra purchased the Multi-Tech shares directly or indirectly from Revell-Reade. To learn if the

transactionreportcontainsthenameofRevell-ReadeVOFFsentaFreedomofInformationtoASICin

October 2015 requesting information on the purchase of 50,000 shares in Multi-Tech International

Corp(DateofShareCertificate29/05/2009).281

ASICfailedtoacknowledgeFOI.

InanewFOI282toASICinFebruary2016VOFFrequestedinformationaboutthepurchaseofMulti-tech

InternationalCorpstockandcopyoftheShareCertificate.OnMarch30th2016ASICcited,document

lostordoesnotexistreferringtoSection24A(1)oftheFOIAct.

OnOctober31st2015VOFFwrote toSouthwarkCrownCourt enquiringhow toobtaina copyof the

SouthwarkCrownCourthearings(MarchtoJune2014)transcript.OnNovember2nd2015thecourtlet

VOFFknowthatathirdpartywillneedtoletthecourtknowthefollowing:whoyouareandthereason

youare requesting a transcript.Once your request is received, your requestwill thenbe sent to the

Judge for their direction. Oncewe received the outcome of the judge’s direction (i.e. if he grants or

deniesyourrequest)wewillcontactyou.276Washington,StuartSMHOZGroupManStillCallsAustraliaHomeMarch24th2010https://www.investsmart.com.au/investment-news/oz-group-man-still-calls-australia-home/13035277https://beta.sfo.gov.uk/court-calendar/page/2/278Hetherington,TonyJailfor£70millionboilerroomsharefraudstersweexposed9June2014http://www.thisismoney.co.uk/money/experts/article-2651479/TONY-HETHERINGTON-Jail-70m-fraudsters-exposed-Mail-Sunday.html279PPBAstarraStrategicFundUpdatetoUnitHoldersMay2015page19.https://www.ppbadvisory.com/uploads/i175-ASF-Unit-Holders-Update-Report-May-2015.PDF280SECForm8-KdatedMay6,2004.http://www.sec.gov/Archives/edgar/data/1083743/000090901204000375/t301055.txt281VOFFFOI406toASIC–reg.50,000sharesinMulti-TechInternationalCorp282VOFFFOI425toASICreg.PurchaseMulti-techFebruary24th2016.

109

On November 5th 2015 VOFF provided information about the SEC Form 8-K and the Multi-Tech

InternationalCorppurchasebyAstarra.

OnNovember6th2015SouthwarkCrownCourtinformedthatVOFF’srequestwentbeforeHHJGledhill

QC,whograntedpermissiontohaveatranscriptofthetrialofRVRevell-ReadeT20127056.

However,theletterfromthecourtpointedoutthat1.thetrialwasmanyweekslongandthecostofthe

transcriptswillbemany,manythousandsofpounds.Youwouldhavetopaythecostayourself.2.The

Judgedoesnot recall anymentionof theAstarraStrategicFundduring the trial, and therewasvery

littlereferencetoMulti-TechInternational.Hedoubtsthatthetranscriptswouldbeofmuch,orindeed

any,usetoyou.

The Judge’s recollection of no mention of Astarra and that little attention was paid to Multi-Tech

International during the trial ofRevell-Reade is indication thatnoone representedor fought for the

rightsoftheAustralianinvestors.Therewasenoughevidencetoseethatonegroupoffraudstersused

Australian superannuation and investmentmoney, to purchaseworthless penny stock from another

groupoffraudsters.Thereisevidencethattheyeachhadahistoryintradinginworthlesspennystock.

WherewasASIC?

Why didn’t ASIC have a representative at the Southwark Court trial in London considering it was

Australians that were apparently the target of the Revell-Reade owned worthless Multi-Tech

Internationalstock?

ThevictimsoftheTriocrimewouldliketoknow:

HowmuchwaspaidbyAstarraStrategictopurchasethe50,000shares?

Whowerethebeneficiariesofthetransaction?

Whodecidedandinitiatedthepurchase?

DidtheTriodirectorsknowthatRevell-ReadewasmostlytheownerofMulti-tech?

Whatwas therelationshipbetween theTriodirectors thathad influence in thepurchaseandRevell-

Reade?

Whydidn’tASICputaclaiminforpartoftheproceedsofcrimethatwasclawedbackfromtheluxury

homesthatwereownedbyRevell-Reade?

MrMedcraft’s 50 days spending a quarter of amillion dollars on overseas trips during 2013 didn’t

allowfortimetoserveAustralians,despitebeingchairmanofInternationalOrganisationofSecurities

Commissions(IOSCO)thatheclaimsit'simportantandbenefitsAustralia.283

283PatMcGrathASICreleasesdetailsofchairman'stravelexpensesJanuary14,2014http://www.abc.net.au/pm/content/2013/s3925389.htm

110

EuropeCorrespondentNickMiller, inanarticleabout the JackFladerand JamesSutherland’s trial in

2016at theSouthwarkCrownCourt,describesa2001meetingatagolfingresort inMarbellawhere

Matthew Littauer helped Revell-Reade set up the boiler room operation thatwould eventually sting

1000Britsoutof£70million.Littauer introducedRevell-ReadetoFladerandSutherlandatthesame

meeting.284

Flader and Sutherland faced the charge laid by the Serious Fraud Office (SFO) of ‘entering into or

becomingconcerned inamoney-launderingarrangement, contrary toSection328of theProceedsof

CrimeAct2002’285andafteranine-weektrial, theSouthwarkCrownCourt juryacquittedSutherland

andFladeroflaunderingtheproceedsfromtheschemethattargetedmorethan1,000investorsinthe

U.K.,accordingtotheU.K.SeriousFraudOffice.

TheTriofraudinAustralia,withalltheconnectionsofFladerandSutherlandwasnotevenanitemthat

gotamentionintheLondontrial.ThejuryhadnoknowledgeofFladerandSutherland’shistory.

InDecember2014attheNationalPressClubeventinCanberra,MrMedcraftsaid‘It'sabsolutelybroken

myhearttoseewhatfinancialadvisershavedonetopeopleandwhattheyoftencontinuetodotopeople’.286

MrMedcraftandASIC failed todistinguishbetween - failuredue to financial adviceor failuredue to

systemicissues.TheAustralianfinancialsystemallowedafund,regulatedandoverseenbybothASIC

andAPRA,toexploitweaknessesandfunnelmoneyintojurisdictions,beyondASIC’sandAPRA’sreach.

ASICcoveredupvital informationaboutthefraud.Thefinalresultwasascaremongeringmessageby

vestedinterests inthe32billiondollarperyearfinancialservices industry.A legitimatesectorof the

financialsystem,operatinglegitimatelyandfollowingalegitimateprocesswasdamned.

284NickMillerBustingtheboilerroomMarch28,2016http://www.theage.com.au/business/markets/busting-the-boiler-room-20160323-gnpuxj.html285https://beta.sfo.gov.uk/cases/james-sutherland-jack-flader/286JulieMayVOFFlabelsMedcraftoutburst“sickening”09Dec2014http://www.financialobserver.com.au/articles/voff-secretary-labels-medcraft-outburst-sickening

111

ExpandedReferenceofsomeofthepeoplementionedinthisdocument.NamesareinAlphabeticalorder.Bell,FrankRichard

Frank Richard Bell was the subject of disciplinary action by the United States Financial Industry

Regulation Authority (USFIRA) that resulted in a number of sanctions and adverse findings against

him.287FRBellwaswithPacificContinentalSecuritiesCorporationOctober1998-November2001.288

TheFinancialServicesAuthorityfoundtheBritisharmofPCSUKactedwithoutintegritybetween2005

and2007andcollapsedinJune2007withinvestor lossesfromdodgystocksexceeding£300million.

PCS's shares were owned by a Delaware company and controlled by Zetland Financial Group,

registeredintheBritishVirginIslands.TheultimateownerwasJamesSutherland.TheinvestorsinTrio

werenot informedthatFRBellwasbehindtheExplorationFundwhichhandledTrio funds.Bellwas

notquestionedbyASICovertheTriomatter.

Cormann,MathiasMP

CormanndemonstratedaninteresttofindoutwhymoneydisappearedfromTrio.CormannaskedRoss

JonesofAPRA"DidtheATOevercommunicatetoAPRAthatMrFladerhadbeeninvolvedinafraudulent

schemethattheATOhaddiscoveredandsuccessfullyprosecutedtotheextentthatMrFlader’sAustralian

associatewasjailedforsevenyears?”

MrJonesanswered"No"adding"Wecheckedourfiles,andwehavenocommunicationfromtheATOon

that."289

ThefraudulentschemereferredtobyCormannismentionedthecourtcaseCommonwealthDirectorof

PublicProsecutionsvHart [2010]QDC457 (30November2010. InCDPPv.Hart thedefendantwas

chargedwith nine offences of defrauding the Commonwealth. In about 2002ASIC travelled toHong

Kongtoretrieve100,000documentsfromtheZetlandOffices,abusinessthatbelongtoJackFladerand

James Sutherland. The same address and names were already on ASIC’s company registration

documentslodgedin2001.Thatsame2001companyeventuallypurchasedtheTolhursttrustfundthat

bacameTrioCapital.

Flader,JackW.Jr.

AttorneyandCounselloratLawofTheStateBarofCalifornia.From2004 to2006Fladerwas James

Sutherland’s business partner in Zetland Financial. In 2006 he was the Chief Executive Officer and

ChairmanofGlobalConsultancyServicesLimited(GCSL)whichwasthecustodianoftheassetsforthe

Trio scheme.Wright Global Investments Pty Ltd (WGI)was set up in Australia in 2001 andWright

GlobalAssetManagementGroup(WGAM)wasregisteredon05/08/2003andbyNovember2003had

287TrioCapitalLimited(AdminApp)vACTSuperannuationManagementPtyLtd&Ors[2010]NSWSC286(16April2010)PalmerJ288FINRABrokerCheckReportFRANKRICHARDBELLCRD#1425780Report#93332-65779289Hansard,SenateEstimates,CanberraAPRA29thMay2012Page178)

112

purchasedTolhurstFundsManagement.Heassistedwith settingup theTrio schemeacrossmultiple

jurisdictions.Fladerhasbeenaroundseveralfundswherehundredsofmillionsofdollarsdisappeared.

In2011JusticeGarlingintheNSWSupremeCourtcalledFladerthe“UltimatecontrollerofTrio”.290

Fletcher,PaulMP,

won the seat of Bradfield at the 2009 federal by-election. In his early career, Paul worked as a

managementconsultant, a corporate lawyer forMallesonsStephen Jaques,andacorporatestrategist

for TNT Limited. From 1996 to 2000, he worked as Chief of Staff to Minister for Communications

RichardAlston,aLiberalPartypolitician.291HewasrecognisedbyVOFFasfightingfortherightsofhis

constituents,theARPGrowthclientsofPaulGresham,whowereexposedtotheTriofraud.OnanABC

7.30segmentabouttheTriofraud,herebuttedMrShorten’sremarksaboutsuggestingtheTriovictims

were‘swimmingoutsidetheflags’.

Frazer,TimothySteven

RussianaccountantWHKAudit&RiskAssessment.AccordingtohisEnforceableUndertaking,Frazer

started with the Trio scheme on August 23rd 2004. There are unsupported suggestions that Trio

broughtTimothyFrazertoAustralia.ApparentlyCameronAndersonwasassociatedwithhimandwas

responsible for offering him the jobwith Astarra. There is no confirmationwhether Frazer had just

returnedtoAustraliaorCameroncontactedhiminRussia.TheauditfortheAstarraCapitalLimited,the

responsible entity of Alpha Strategic Fund for the financial year ended June 30th 2008 is signed by

FrazerofWHKAudit&RiskAssessment.FrazersignedunderKPMGdatedatAlburyMay7th2007,the

CharlesSturtUniversityBranchoftheNationalTertiaryEducationIndustryUnionfortheyearsended

30 June2003 and30 June2004.Thedocumentswere lodged in the IndustrialRegistry on8August

2007.

Garling,PeterJustice.

AdmittedtothebaroftheSupremeCourtofNSWin1979,BarristerPeterGarlingSCwasappointeda

SupremeCourt judge in2010.Heheadedan inquiry intoacutecareservices inNSWpublichospitals

followingthedeathofschoolgirlVanessaAndersonatSydney'sRoyalNorthShoreHospitalin2005.She

wastakentothehospitalafterbeinghitintheheadbyagolfball.

Garlinghasbeeninvolvedinanumberofsignificantcourtcases,theThredbolandslide,theWaterfall

andGlenbrookrailaccidentsandthecollapseofHIH.292

290ReginavShawnDarrellRichard[2011]NSWSC866(12August2011)291http://www.abc.net.au/tv/qanda/mp-profiles/brfd.htm292GarlingappointedSupremeCourtjudgeMay27,2010http://www.smh.com.au//breaking-news-national/garling-appointed-supreme-court-judge-20100527-wh49.htmlReginavShawnDarrellRichard[2011]NSWSC866(12August2011)

113

JusticeGarlingwrites, “Iaccept, asdoes theStatementofFacts, thatMrFladerwas thearchitectand

ultimatecontrollerofthescheme”.Healsonotedtheabsenceof‘victims’orunderstoodtheimpactthey

suffered.

Hart,StevenIrvine,

accountant,who became embroiled in a taxminimization scheme thatwasmeant to save taxpayers

largeamountsoftax.293HartcarriedouthisbusinesswithJamesSoutherlandandJackFladerattheir

HongKongbasedfirm‘Zetland’.

ASIC, AFP, ATO, CDPP and the Commonwealth appointed forensic accountant, Mr Vincent secured

100,000 documents294from Sutherland’s Hong Kong based UOCL, European Grand Assurance Ltd

(EGA)andMerrellinabout2002.

Hart’spassionisaircraftandflyingandasanexperiencedpilotheperformsadvancedaerobatics.His

considerable collection ismainly “warbirds” – that is, planesbuilt formilitarypurposes.Among the

collection,adeHavillandDH82TigerMoth,a50VH-YAX,AerovodL-39C,Yak3Fighter,RedYak50,

NorthAmericanTrojanT-28VH-AVCandanAmericanDecathlon.Harthas twoaeroplanehangarsat

ArcherfieldAirport.

Littauer,MatthewNguyen

Born Nguyen Nhat Thai on April 16, 1969 in Saigon, Vietnam, fled during the fall of Saigon and in

September1975,hewasadoptedbytheAmericanLittauerfamilylivinginLarchmont.

LittauerpurchasedthereputableTolhursttrustfundinNovember2003anditsnamewaschangedto

AstarraCapitalLimitedin2004toTrioCapitalLimitedOctober1st2009.

MatthewLittauerwaskilledDecember2nd2004.295

Medcraft,Greg,

joinedasASICCommissionerinFebruary2009.HestartedhiscareerasaCharteredAccountantwith

KPMG. Prior to ASIC, he was Chief Executive Officer and Executive Director at the Australian

Securitisation Forum (ASF). He worked in investment banking at Société Générale, becomming the

ManagingDirectorandGlobalHeadofSecuritisation,basedinNewYork.HewaselectedbytheIOSCO

BoardinMay2012asitsChairandalsoamemberoftheFinancialStabilityBoard,whichreportstothe

G20.296

293CDPPvHart&Ors;Yak3InvestmentsP/Last/teeforYak3DiscretionaryTrust&OrsvCommonwealthofAustralia[2013]QDC60294CDPPvHart&Ors;Yak3InvestmentsP/Last/teeforYak3DiscretionaryTrust&OrsvCommonwealthofAustralia[2013]QDC60(2April2013)295Hughes,BillTheJournalNewsDecember7,2004http://www.freerepublic.com/focus/f-news/1295583/postshttp://www.thejournalnews.com/newsroom/120704/a01p07bankerslay.html296http://asic.gov.au/about-asic/what-we-do/our-structure/asic-senior-executives/

114

TheUSgovernmentinvestigatedbankSociétéGénéraleovermassivetransactionsinvolvingsubprime

home mortgages. The bank was accused in the US of breaking corporate laws and engaging in

misconduct.297

From2007to2014JeffreyRevell-ReadewasundersurveillancebyUK'sSeriousFraudOffice.Hewas

investigatedforhispartinaboiler-roomfraudthatoperatedoutofSpainbetween2003and2007.The

fraud ripped-off British investors for about 70million pounds or about 124million dollars. Revell-

Readewas jailed inMarch 2014 to serve eight and a half years in prison.During the period hewas

under surveillance, the SFO informed TheMail on Sunday to take downmore than 40 investigative

reports from its website in case the articles influence the jury in the event of a trial.298The SFO

investigationextendedglobally,fromUnitedKingdom,UnitedStates,HongKongandNewZealandand

thewarningwentout fornewspapers inUKnottosayanythingaboutthe investigationasthatcould

influence a potential trial. During this same period, ASIC issued Jeffrey Revell-Reade with "three

financialserviceslicences."299

Meerveld, Carl –manager of Global FinancialManagers thatmanaged Exploration Fund and Sierra

Fund,thatonpaperwasmeanttomanageAstarraStrategicmoney.About$80millionwasseengoing

intoExplorationFundandafewmonthslaterapparentlytheliquidatorsfoundnotraceofthemoney.

ASICneverquestionedMeerveldalthoughhedidofferhisassistancetoASIC.300FladerandMeerveld’s

historyandassociationdatesbackovertwentyyears,bothoperatingoutofHongKong.Thelinkbelow

isa24pageOpenLettertotheAustralianandGuernseyauthoritiesconcerningMrMeerveld’srolein

Trio.301

Millhouse,David,

directorofTrioandmemberoftheTrioInvestmentCommitteefromNovember2003toOctober2005.

In2003MillhouseinvestmentsunkmoneyintotheacquisitionofTolhurst.Hebecameadirectoronthe

samedayasformerdirectorsShawnRichardandMatthewLittauer.Hewasalsoadirectorandowner

ofoneofTrio’sinvestmentmanagers,MillhouseIAGLimited(MIAG).Duringhistenureontheboardof

Trio,MrMillhouseapprovedaround$85mofinvestmentswithoutadequateduediligence;werenotat

297NickMcKenzie,RichardBakerandSimonMann'QuestionsbeingaskedoverASICchief'spreviousrole'November11,2011.http://www.smh.com.au/national/questions-being-asked-over-asic-chiefs-previous-role-20111110-1n9nz.html#ixzz1n6spWvea298TonyHetherington‘Jailfor£70millionboilerroomsharefraudstersweexposed’9June2014.http://www.thisismoney.co.uk/money/experts/article-2651479/TONY-HETHERINGTON-Jail-70m-fraudsters-exposed-Mail-Sunday.html299StuartWashington'ASICclearsduoforfinancelicences'February8,2010http://www.theage.com.au/business/asic-clears-duo-for-finance-licences-20100207-nkth.html300http://www.mysuperrights.info/resources/VOFF%20Press%20Release%20Sept%2025%202017.pdf301VOFFOpenLettertoAustralian&GuernseyJuly2017-5.TrioJustice

115

arm’slengthandweremorefavourabletotherelatedpartiesthanwouldreasonablybeexpectedhad

theybeenatarm’slength.302

O’Neill,DeborahMP

AtaSenateEstimatesDeborahO'NeillMPaskedASIC,

‘IhavemadeitmymissiontoaskandputontherecordatestimatesoneveryoccasionsofarthatIhave

beenabletobehere;whatishappeningwithTrio?Couldwegetanupdateofwhatisavailabletobesaid

inthepublicdomain,becausethosepeoplearestillverymuchsufferingfromtheimpactofbadfinancial

advice?’303

O'Neill’squestionasserts that the sufferingof6,090Australian citizenswhohad their savings stolen

fromAsatrraStrategic/TrioCapitalisduetobadfinancialadvice.Suchaclaimisnotevidencebased.

Fromthe155financialadvisorswhoplacedinvestorsmoneyintotheTriofunds,notasingleadvisor

wasarrestedfortheft.It’sanunsupportedclaim,tosuggestpeoplelostmoneyinaninternationalfraud

becauseof‘badfinancialadvice’.

Deb O'Neill was part of the PJC inquiry into the Collapse of Trio Capital.When the PJC released its

Report (May 16th 2012)MsO'Neill said tomedia, self-managed investors have greater choicewhich

comeswith greater risk and they have to take responsibility for their choice – they are adults. Her

statement to the media did not reflect the overall findings of the PJC Report, as the inquiry did

recognisethesystemicfailureofthefinancialsystem.

Phillpott,Rex,

former assistant commissioner at the Australian Taxation Office. Phillpott was director and chief

executiveofTrioCapitalfromOctober2005totheend.Phillpottwasinvolvedintheinvestmentsinto

offshore hedge funds, without being aware of the valuation methods used to value the funds. Mr

Phillpottwas also instrumental in the2009 transfer of $50million in one of Trio's hedge funds, the

ExplorationFund,intoitssuccessorhedgefund,AstarraStrategic.Hedidthis''notwithstandingthathe

wasawareofliquidityproblemswiththeExplorationFundandconcernsaboutthelackofinformation

being provided by the Exploration Fund''. Phillpott agreed to a 15-year ASIC ban from acting as a

directororworkinginanyroleinthefinancialservicesindustry.

Provini, CharleswasthechiefexecutiveofParadigmGlobal(ownedbyHunterBiden)wasAstarra's

USassetconsultant.ProviniwasaleadershipinstructorattheU.S.NavalAcademy,ChairmanoftheU.S.

NavalAcademy’sHonourBoardandisaformerMarineCorp.officer.Heisfrequentspeakeratfinancial

seminars and has appeared on “The Today Show” and “GoodMorning America” discussing financial

302APRAEnforceableUndertaking.303EstimatesHearing,CanberraFebruary25th2015

116

markets.He is oneof theoldestmembersof theNewYorkStockExchange.HisBrokerCheckReport

CRD#1037471hasanumberofcompanieslistedbutParadigmGlobalorAstarra’sAbsoluteAlphaare

notmentioned.HiscurrentNATCORETECHNOLOGY,INC.ismentioned.304AnotherdocumentofPacific

CapitalMarkets, New York, NY and Cayman has Charles Provini listed as Registered Office 646 247

5278besideRomanWaslyLyniuk.ProviniandLyniukhadpositionswithPacificCapitalMarkets.305

Revell-Reade,Jeffrey

Australian-born, became regarded as an international Wheeler Dealer. In 2004, the Financial Mail

reportedthatReadeasbeingbehindaNewZealandshareracket.Revell-ReadewastheownerofSMA

Consultants and Endeavour Securities - granted financial services licences by ASIC 306 and the

patriotically titled Oz Group, which administers $540 million in Australian superannuation money.

AccordingtotheBritishFinancialServicesAuthority,Revell-Readewasthecontrollingfigureidentified

in a report into Pacific Continental Securities. Revell-Reade faced court action by theBritish Serious

OrganisedCrimeAgencyandsoughtorderstofreeze£3million($5.2million)fromthesaleofhishouse

in Wimbledon, South London, under proceeds-of-crime laws. Reade and Sutherland are linked in

company filings to companies used in "boiler room" activities internationally, particularly through

stockbrokerPacificContinentalSecuritiesthatfailedinBritainin2007.

Richard,ShawnDarrell

Had10yearsexperiencebeforehebecamedirectorofTrioCapital.Hegainedexperienceinoperating

MillenniumFinancialandPacificContinentalSecurities (PCS).HewasamanagerwithPCS inTaiwan

1996to2000,workingalongsideLittauer.AfterLittauer’sdeathinDecember2004,Richardreliedon

JackFladerforassistance.RichardwasAstarraAssetManagement(Trio)directorandAstarraStrategic

investmentmanager from5thNov2003until15thNov2005. JusticeGarling foundRichardguiltyof

seriouscrimesofahighorderandsentencedtoabout30monthsimprisonment.307

Shorten,BillMP

MinisterforFinancialServices&Superannuation(14September2010-1July2013)onthe13thApril

2011,heannouncedthatthe5,350industryfundinvestorswillbefullycompensatedfortheirlossesin

Triobutnotthe690DIYinvestors.MrShortenmanagedtousepart23oftheSISActtodistinguisha

differencebetweenpeopleaffectedbythesamecrisis.Ratherthanacknowledgingwhatevidentlywasa

systemic failure of the Australian financial system,Mr Shorten used part 23 to assist the union run

industry funds while destroying their competition - the DIY funds. Mr Shorten accepted that the

304www.finra.org/brokercheck305http://home.comcast.net/~pacificcapmarkets/directory.htm306StuartWashingtonPennystockstrailleadstosuperFebruary2,2010http://www.smh.com.au/business/penny-stocks-trail-leads-to-super-20100201-n8we.html307ReginavShawnDarrellRichard[2011]NSWSC866(12August2011)

117

industryfundswereaffectedby“fraud”butheblamedtheself-managedtrusteesfor“swimmingoutside

theflags”308andthey“placedtheirmoneydirectlyintotroubledfunds”.309

VOFF are concerned about howTriowas handled byMr Shorten, in light of allegation over corrupt

tradeunionsandslushfunds;310rippingofftheCleanersinbackroomdeals;311andthetraptodestroy

Aussietruckies,312particularlyconcerningthattherearenosignsthattheTriocrimewasinvestigated

thoroughly.

SutherlandJames,Campbell

Scottish accountant. Contributed one million to the purchase of Trio. Sutherland and Flader were

Optechdirectors2002to2005basedinHongKongZetlandOffice.

Sutherland has lived in Hong Kong for more than twenty years and founded the Zetland Fiduciary

Groupin1987.

In 2007 Sutherlandwas embroiled in racketeering charges alongwith Flader and the Jeeves Group

before the California Northern District Court which found Citibank employee Charles Cathcart had

offered a '90 per cent loan' scheme through the company Derivium where Sutherland and Flader

helpedinvestorsavoidUS$234millionintax.TheUSGovernmentfoundthatSutherlandandFlader’s

HongKongbaseOptechCompanywasthesolelenderforthe90percentloantransactions'.313

Tarrant,Ross,

owner of family business that came under attack after the Trio fraud was uncovered. By bringing

charges against a financial advisor, the understanding of the fraudwasmuddied because the public

were left with the message that people lost their money because financial advisors received

commissions.Thepublicweremisledandthemisinformationstuck.ASICdidnotretract its incorrect

comments. Going after Mr Tarrant shifted the focus away from the systemic failure of the financial

system.TheuncompensatedvictimsremainunderashadowofdoubtafterMrTarrantwaschargedby

ASIC.

308SympathyforburntTRIOcapitalclients,April13th2011http://www.abc.net.au/news/stories/2011/04/13/3190435.htm"MrShortensaystheGovernmenthasnopowertohelpthosepeoplewhowerenotinanAPRAregulatedfund."IfyoumetaphoricallyswimoutsidetheflagsforAPRAregulatedfundsthatisachoicethatifwe'regoingtoaskthewholeofthesuperannuationindustrytobearthecostofcompensationwhichwearethenthecurrentpolicyforthatisthepeoplethatshouldbeeligibleforthatshouldbeoneswhobelongtofundswhichsubmitthemselvestoAPRAsupervisionoftrustees,"hesaid."309Washington,Stuart'Largestgovernmentpayoutof$55mforTriosuperfraud'April13,2011http://www.smh.com.au/business/largest-government-payout-of-55m-for-trio-super-fraud-20110412-1dcm5.html310Emsley,NadineTheRoyalCommissionintoTradeUnionGovernanceandCorruptionMarch16,2016http://www.kreissonlegal.com.au/news/the-royal-commission-into-trade-union-governance-and-corruption/311Bolt,AndrewHeraldSunWorkerstakentothecleanersJune15,2015http://www.heraldsun.com.au/news/opinion/andrew-bolt/workers-taken-to-the-cleaners/news-story/b50ca66a3471f733d1e96d1f07bd3dec312Peacock,MattAustralianBroadcastingCorporation13/04/2016TruckiestodescendonCanberratocampaignagainstaminimumpayratehttp://www.abc.net.au/7.30/content/2015/s4442768.htm313Washington,Stuart‘AussiesuperthiefcaughtupinUSfraud’11/08/2010http://www.stuff.co.nz/timaru-herald/business/4012208/Aussie-super-thief-caught-up-in-US-fraud

118

Unicomb,Glen,

forensic accountant (20 years) for ASIC314and his three months investigation of Astarra strategic

(September2009toDecember2009)tookhimtoHongKong.MrUnicombsaid,‘Ihadalotofsleepless

nightsbeing involved in thisbecauseat theendof theday IhadexaminedMrRichardveryearly in the

pieceand,basically,forASICtogoawayallhehadtodowasprovideindisputableevidenceoftheveracity

andworthoftheseinvestments.Astimewentby,thelongerittookandnothingwasforthcoming,themore

confidentIbecame,buttherewasneveranysituationwheresomeoneputonthetabletomethatthiswas

ablatantfraudupfront.Ittookaboutthreemonths,Iwouldestimate.’315

MrUnicombisanowManagingDirectorintheForensicAccountingandAdvisoryServicespractice

ofFTIConsulting,andisbasedinSydney,Australia.316

Villavert,Florissa,

withabackgroundofmorethan15yearsexperienceasatechnicalandcomplianceprofessionalinthe

financial services industry, she becameHead of Legal Compliance for Trio Capitalmanagement. She

also had connections with Silverhall BT and Royal Sun Alliance, both considered as major wealth

managementorganisations inAustralia.Villavert's earlier career asAssistantDirectorofCompliance

commencedwiththeformerInsuranceandSuperannuationCommission,madeherhighlyappropriate

for the Trio team, she knew what the Government Regulators required. Villavert's key expertise

includesindustryandregulatoryknowledge,andtheabilitytoapplythatknowledgeinastrategicand

practicalmanner tomeetbusinessneeds.Villavert isaSolicitorwithdegrees inBusiness,Lawanda

MasterofLawsinFinancialServices.

314http://www.kordamentha.com/our-people/glen-unicomb315OfficialCommitteeHansard,ParliamentaryJointCommitteeonCorporationsandFinancialServices,CollapseofTrioCapital,6September2011SydneyPage10.316http://www.fticonsulting-asia.com/our-people/glen-unicomb