What are the Malaysian and Australian regulatory authorities going to do about this case involving a firm based in Labuan?
Some 400 Australians and New Zealanders, many of them senior citizens, are still trying to recover over US$23 million in principal – and million of dollars of additional missing interest – since the investment scheme collapsed seven years ago. They have written more than 165 letters to regulators and senior officials in both Australia and Malaysia in a desperate attempt to get back their hard-earned retirement savings – to no avail.
Klang MP Charles Santiago had highlighted the matter to Deputy Finance Minister Awang Adek in Parliament in December 2009. Now it is out in the open in the Australian press.
See this Courier Mail report by Anthony Marx:
JOHN Weatherley should be relaxing in the twilight years of his retirement, free from financial hardship.
Instead, the 69-year-old Sunshine Beach resident must work full time in a tedious job just to make ends meet. Across day and night shifts, he watches over a boiler that cooks offal to make pet food.
He continues to toil because his $165,000 nest egg has vanished, seemingly without a trace.
Mr Weatherley placed the money eight years ago with Capital One, a now-defunct investment firm based in a Malaysian tax haven and once overseen by expatriate Australian directors with chequered backgrounds.
One of the directors was a struck-off solicitor, while another was a Perth businessman whose investment company had previously run foul of industry regulators.
Mr Weatherley is among more than 400 mostly senior Australians and New Zealanders still battling to recover in excess of $US23 million ($21.5 million) in principal – and million of dollars of additional missing interest – since the scheme collapsed seven years ago.
Some, including at least one Malaysian politician, speculate that up to $US35 million may have been poured into the debentures, purportedly focused on blue-chip stocks, precious metals and property.
“I’ve never stopped working,” Mr Weatherley said.
“When I invested in there I had already lost money in a franchise and I thought if we invested this money, by 2006 we’d be right and be able to look to retire. And it didn’t happen so I just kept working.”
Since 2005, a complex series of ongoing legal actions has played out in a Malaysian High Court between Capital One, its trustee EC Trust and three former senior executives of the investment company.
Capital One and EC Trust allege in court documents that Australian nationals Phil Crane, David Young and David Eley and five of their companies defrauded investors of $US23.4 million between 2002 and 2004.
Their lawsuit also seeks to recover $US3.9 million allegedly loaned to Mr Crane, $US513,000 borrowed by Mr Young and $US792,000 lent to one of their companies.
But six years after the case was filed in the Malaysian territory of Labuan, there is still no end in sight as all parties wait for a reserved judgment. As a result, investors still have no idea where their money went or if they will recover it.
Complicating matters, some of the investors are wary of EC Trust, a Malaysian entity operated by Australian tax lawyer Peter Searle. They complain he has ignored repeated requests for information and should have been able to retrieve the money by now, allegations he disputes.
Investors are also mystified how Mr Searle’s entity, EC Corporate Management, could have served as a director of Capital One at the same time his EC Trust acted as trustee.
Mr Searle rejects the suggestion that this could pose a potential conflict of interest. “It would be ludicrous for the sole shareholder to renounce its responsibilities as director of the company,” he said.
He maintains that he is doing everything possible to recover the money and takes credit for stopping the alleged fraud in its early stages. “They were certainly conducting a scam in the latter stages and, because we suspected them, we stopped them making any investments on 19 November 2004 and started legal proceedings,” Mr Searle said.
The years since have not dimmed the hunger for justice burning inside investor Don Gardner. The 58-year-old Adelaide resident and his wife put the bulk of their superannuation, $180,000, into the debentures, essentially a loan he expected to come due in early 2005 with about 10 per cent of interest.
Over the past six years he has written more than 165 letters to politicians, government departments, regulators, banks and other officials in both Australia and Malaysia in a vain attempt to get help. Mr Gardner said the Australian Securities & Investments Commission and the Australian Federal Police had each told him that the matter should fall under the other’s purview.
Battling depression and forced to go back to full-time work, Mr Gardner said some investors had lost their homes and at least one had committed suicide. “The only one who can recover that money for us is the Lord. I just can’t sit on my hands and do nothing,” he said.
A Brisbane accountant and a lawyer, who reviewed the scheme for burnt clients, said they believed it had all the hallmarks of a scam and they didn’t believe investors would ever recover their money. “It was a farce from the beginning,” the accountant said.
The lawyer noted that the Australian Taxation Office had already given his clients permission to write off their loss. “They concluded that there was no expectation of a return and authorised it be written down as a capital loss,” he said.
Mr Crane, Mr Young and Mr Eley, who launched unsuccessful appeals in Malaysian court against EC Trust and Capital One, could not be reached for comment.
Mr Crane served as the sole director of Perth-based Secure Finance & Investment Services, which faced allegations by ASIC in 2002 that it was operating an unregistered managed investment scheme. ASIC had also appointed receivers to some entities and had sought to wind up the company.
But the proceedings were settled without an admission of liability, with Mr Crane providing undertakings to ASIC.
The corporate watchdog determined that about 200 investors tipped in nearly $6 million to Secure’s offshore funds between 2000 and 2002.
Mr Crane’s colleague, Mr Eley, was struck off as a solicitor in Perth in 2004 after a tribunal concluded he had “been in breach of fundamental legal and professional obligations to his clients”. Their ruling found that he was “unfit to practise law”.
ASIC also banned a Perth financial planner for life in 2004 after it found he had promoted debentures through EC Trust without proper licensing. The planner, Neil Manning, had enticed 17 investors to commit $1.5 million after claiming returns would exceed 50 per cent and guaranteed at least 9 per cent.