Just over a year ago I wrote a letter to regulators detailing a fraud at an Australian fund manager (Astarra/Trio Capital). This was the Bernie Madoff of Australia. (This required no special genius on my part. I was tipped off by a blog reader.)
The regulator closed Astarra within a month. I have no complaints.
I wrote up part of my thinking for this blog.
But until recently no charges were laid and I was getting increasingly frustrated. I even wrote a (slightly) complaining letter to ASIC (the Australian regulator) only yesterday.
But the Australian regulator rocks! Shawn Richard (the principal malefactor) was charged - entered a guilty plea and will go to prison (probably for five years).
I want to acknowledge the press. The Sydney Morning Herald has kept the story alive with accurate and hard-hitting reporting. The (financial) decline of newspapers is not a good thing.
ASIC has set a standard for the SEC to emulate.
Prosecutions are important. Many thousands of people have lost their life savings in this mess. A strong regulatory response will reduce the chance of repeat problems.
John
28 comments:
Nice job, but only 5 years?
The last one I nailed (Ponzi boy) got a little over 18. Took 6 weeks to issue a subpoena. Charges filed 4 months later. All wrapped up in less than 10 months.
Do you think he flipped on Flader?
i realize you're an agnostic, mr. hempton, but getting asic to nail mr. richards has earned you a place in heaven with 20 (don't read the koran) non virgin hottie fbi women of your choice.
i hope mrs. hempton's not reading this blog.
John,
Well done, obviously.
But what's really interesting from a U.S. point of view is how the individuals on the side of good in this story are all easily identified.
In the US, the SEC has offices all over the place, they fight with each other for jurisdiction, for distinction, for political points.
And if they do get a good tip they worry about what powerful Congressman they'd be offending if they went after the guy.
We need one guy who everyone knows whose job it is to go after the fraudsters wherever they are.
The SEC is far too big for its own good.
JM
Mr. Matthews:
The SEC does NOT have offices all over which fight with one another for venue.
The SEC has offices in Boston, New York, Philadelphia, Atlanta, Miami, Fort Worth, Denver, Salt Lake City, San Francisco, Los Angeles, and the Mothership (DC).
There is NO more fighting. That all stopped at least a year ago after Mr. Cox left.
Yes, Mr. Hempton did a nice job on this one but he did take the time to spoonfeed ASIC.
Have you EVER bothered to pick up a telephone and phone in a securities fraud tip? Try it sometime, you'll be amazed at how responsive the SEC is these days.
Apologies for leaving out our Chicago office. They did a fabulous job on a large Ponzi scam case recently (Trevor Cook/Oxford Global). They beat the CFTC, FBI, and DOJ to the punch by a mile.
Thanks very much, Mr. Matthews, for interest in the new and improved SEC.
Mr. Hempton, it's too bad we don't have an office in Sydney. I'd make you an offer too tempting to turn down, sir.
per Rob@3:52 pm: yes, where is Jack Flader? Has ASIC filed extradition papers for Hong Kong?
Great post John, and many congrats for your relentless perseverance in helping to get this story out there. There is hope in Australia,unlike here in the US. You still live in a first world country where fraudsters go to prison. In the US, they get tax bailouts and continue to play prominent roles in policy making.
Well done John . The idea that good honest men can make a difference is a satisfying one for many of us. Who knows where this would have ended up had you not raised it the way you did. C from Manly
now we wait in hope that the (so called) financial planners who moved their clients enmasse to this fund at the height of the GFC on the basis of performance, and who have since been identified as receiving handsome undisclosed kickbacks will also pay a price. It beggers belief that they are still allowed to retain their AFSL's.
John,
Well done, and well done to ASIC (with a lot of prodding) & Stu Washington at the Herald (he deserves an award).
Shawnee Cash may get more than 5 yrs - depending on whether the judge makes him serve consec or concurrent. Shawnee Cash may say that he is co-operating with ASIC - but he would be mad to in respect of the really bad boys, he has 6 Mill plus overseas - and Fladder and the boys are still out there. When Shawnee gets out, he will need some cash to live on, and he will also want to continue to live on. On the other hand, Shawnee may give ASIC some of the greedy financial planners, who he cultivated so well.
Why haven't the little ladies at ASIC pursued the 3 Alberta based oil and gas issuers one of JF's investment vehicles had action in? Stock promoters were paid to pump them up for him.
Are the little ladies at ASIC afraid to ask the Alberta Securities Commission for help? Someone please teach those little ladies at ASIC how to speak Canadian, okay?
http://www.scribd.com/full/45187791?access_key=key-2b2iittfn9yrp29jnyk9
http://www.scribd.com/full/45252371?access_key=key-1j0fe9ovlmb9e6cqdmy
These are the documents that newspapers were sent that are circulating from Flader.
I think documents 1 and 7 through 9 are the most telling.
Richard owned everything, even detailing the sale from the then deceased Littauer's estate to him.
Nice job all round.
If the documents accessed by Anonymous's links in the comment above are reliable, then we might have to reassess the respective roles of Flader and Richard. Indeed, it could be that we still don't know the truth even though action has been taken against Richard and other people on the basis of a version of the "facts" that might be at least partly false. Any comments, Mr Hempton?
The documents are from Flader.
He complained to the Press Council about the SMH coverage - and he also threatened defamation.
He did not sue.
He now lives in Pattaya.
You can decide.
Oh ... I see ... it's yesterday's issue ... so no more thinking about the possibilities is allowed ... of course, it's not yesterday's issue for the people who lost their money and were not compensated ... nor for the honest people who lost their reputations and careers ... and, I note, there are still no comments from Mr Hempton, even though he continues to bask in the glory of his role as a "whistle blower" ad nauseum ... how did he and his informants know so much? There is no doubt that Richard was a crook. He's in gaol. But the whirlwind he unleashed keeps creating havoc. Surely there was another way to deal with this fraud. Dare I draw comparisons with the tragic death of a young man by police tasers?
Wow.
Yes - Jack Flader was involved. Yes the money went to Flader.
And yes - there were more people involved than Sean Richard.
I am amazed - simply amazed - at the defence of these people now.
John
No-one is defending anybody. Who else was involved other than Richard and Flader?
Amazing.
No response.
I have my views on who was involved.
I sat in on the liquidators hearings. They were plenty interesting.
However I will leave that decision to the authorities (even though I fear they will take no action).
I am staggered that you could possibly think that ONLY Flader and Richard were involved.
J
Speaking of being staggered ... having read the transcripts of the Parliamentary Enquiry and the submissions made by those who were robbed by Richard and his associates ... I am staggered by the incompetence of APRA and, to a slightly lesser extent, of ASIC ... but I am even more staggered by their attempts to cover their tracks ... almost as much as I am staggered by Mr Hempton's superciliousness and his lack of humanity.
Give John a break! It's not his fault you lost your money. Blame the independent directors of Trio who ignored John when he tried to tell them they had a problem. John had not choice but to go to the regulators then.
Shawn Richard's written response to questions from the Parliamentary Joint Committee on Trio is now on the PJC's website if anyone is interested.
Yeah - I did not directly approach the independent directors because I did not know whether the directors were active dupes or participants in the fraud.
Had they been participants in the fraud it would be stupid to approach them as it would just tip them off and they would steal all the remaining money.
I did try again to approach one of them who I am now fairly sure was a dupe as opposed to a participant.
If you chase frauds - as I do - you know the directors are mostly the perpetrators.
I did ask some simple questions of one director - but not so as to give the game away. I could not tell at the time whether they were a crook or a fool. ASIC thinks they are a fool and I have nothing to add now.
John
"He that thinks himself the wisest is generally the greatest fool." (Francis Bacon)
Does the regulator still rock? Today ASIC announced it had given up on investigating Jack Flader.
Flader has lots of money so he can pay for legal advice to make sure the regulator does not rock him. The Trio directors were easily rocked when their insurers deserted them and they had no way of funding lawyers who could keep ASIC honest.
You may remember Carl meerveld who was Jack flare's associate in Hong Kong he was also the managing director of global financial managers Ltd the underlying manager of the exploration fund where AU$70 million was lost either by theft or fraud.
Well things have changed for him he had just been elected as deputy to the states parliament of Guernsey which is one of the largest offshore financial centres in Europe and nobody seems to care. He must feel like a child let loose in a sweet shop I suggest all you had lost money send him congratulations card to the States of Guernsey Channel Islands.
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