THOUSANDS of people who put $1.8 billion into in a failed blue gum, grape vine and olive tree scheme and who face being paid a paltry $16 at best for every $10,000 they invested are also threatened with the double jeopardy of bankruptcy as banks are given the green light to foreclose on the estimated $398 million in outstanding loans used to finance plantations.
Of the 47,000 people who invested in the Great Southern Managed Investment Schemes between 2005 and 2008 — many had lost their life savings, their superannuation and houses — thousands now face a threat of unrestrained bank proceedings to recover failed investment loans within four weeks.
Hundreds of people, who were unable to repay the loans or stopped paying on legal advice, now face the prospect of Bendigo and Adelaide Bank, which bought the bad loans only two weeks before the collapse of Great Southern, laying claim to their savings or homes.
A Victorian Supreme Court hearing due on October 27-28 would decide whether to approve a settlement deal on the Great Southern investment failure between some investors, former directors, liquidators and the Bendigo and Adelaide Bank, which could give the people who invested the $1.8bn a return of $3.35m, or about 0.16c in the dollar.
Almost $20m would be given to MacPherson and Kelley, the lawyers acting for the investors in the settlement.
In determining whether the settlement is just, the court would also decide whether Bendigo Bank could demand payment of the loans — some of which have doubled since 2009 due to compound interest — from the investors within two weeks. If the court rejects the settlement the decision would revert to a prepared 2000-page judgment by Justice Croft in the Victorian Supreme Court last July, which was suspended because the parties agreed to settle.
Since the settlement in May there have been more than 1000 objections lodged by investors who are arguing they were poorly advised and that Bendigo Bank should share the responsibility for the losses and bad loans.
If the Supreme Court approved the agreed settlement it would declare the loans valid and authorise the bank to seek 100 per cent repayment with interest.
The decision would also cut off various cases of maladministration brought against Bendigo Bank’s handling of the Great Southern loans that are being pursued with the Financial Ombudsman, which have been suspended pending a decision.
Rebecca Dillon, a mother of three who lives in Glenmore Park in western Sydney, yesterday said she and her husband Glenn borrowed about $300,000 in 2007 on financial advice to invest in Great Southern as a long-term investment for superannuation.
“We were close then to owning our own house, I was having another baby and we were looking for an investment for the future,’’ Ms Dillon said.
“Now we owe Bendigo Bank $600,000 and if that is called in we will have to sell the house — and that won’t even cover it all,” she said.
Phillip Brown, of Oyster Bay in south Sydney, appealed to Parliamentary committee chairman Bill Heffernan, who inquired into the managed investment schemes involving blue gums supposedly for woodchips, to get Bendigo Bank to share some of the responsibility for the “bad judgments and mistakes” that were made.
“Why should they be given the power to recoup all outstanding loans and interest in full, rather than equally share the loss with the borrower, particularly under the very dubious circumstances of issuing the loans in the first place?” Mr Brown said.
Senator Heffernan told The Australian last night that there should be a full parliamentary inquiry into the collapse of the Great Southern managed investment schemes and the sale of the debt to Bendigo Bank just two weeks before the collapse.
“It seems to me the law has protected the perpetrators of what is a tragedy for many families and they have been smart enough to stay ahead of the game by going into bankruptcy and other methods to avoid the wrath of giving poor advice,” he said.
“Having conducted an inquiry into part of these schemes it was evident that this was a dead set dodgy deal. A deal driven by profits for the promoters out of fees and not out of productive product,” Senator Heffernan said.
“Most of the investors thought they owned the land where the trees and grapes were grown — it wasn’t the case and if nothing was produced from these investments the investors lost but the promoters won.
“This is a couple of billion of dollars in pain for mum and dad investors who have lost their houses and superannuation. “The questions of conflicts of interests between banks and promoters also need to be investigated,” Senator Heffernan said.
Alan People, of Ryde in northwest Sydney, was introduced to the Great Southern scheme through his accountant, also an “accredited” adviser for Great Southern, in June 2008.
Mr People made a $45,000 investment in Great Southern’s olive groves through loans, in what was an attempt to invest in his children’s education over the long term.
“There would be little or no returns over the short-term, but we were told there would be investment return in the medium- to long-term.
“That time period was good for my children’s education as my wife was pregnant and it lined up nicely with the idea of having money down the tract for school or university,” Mr People said.
He has now been told with interest, penalty interest and “exit fees” he owes Bendigo and Adelaide Bank $90,000 if the settlement in the Victorian Supreme Court is approved.
His accountant was encouraging an investment of $140,000 which would have meant a $14,000 commission for him.
“I was recommended to invest $140,000. I just said ‘no way I don’t know enough about this’. I would have gone bankrupt if I had.”
Bendigo Bank refused to comment yesterday but in May stated: “Bendigo and Adelaide Bank has entered into an agreement to conclude the class actions brought by investors in managed investment schemes operated by Great Southern.
“Under the agreement, which is subject to approval of the court, the bank’s borrowers who are members of the class actions have admitted that their loans are valid and enforceable and have provided broad releases from future litigation.”
The Abbott government has come under fire for how a similar plantation managed investment scheme, Timbercorp, was handled and the Commonwealth Bank’s handling of investors and finanical planners.
Great Southern investors have also been critical of the corporate regulator ASIC, with one investor telling The Australian they are “gobsmacked” by ASIC’s lack of action. The Great Southern scheme attracted investors with the promise of long-term returns on their investment and a short-term tax incentive.
Large amounts of the investments were funded through loans provided by Great Southern, facilitated by financial planners who recommended investments and received a 10 per cent commission for each investment.
One financial planner, Stephen Navra, had 247 of his clients invest with Great Southern.
Now Mr People says he can see Great Southern for what it was: a Ponzi scheme.
“You saw people were making money off this and you thought ‘oh it’s fine’. But they were just using the money from new people they had signed on.”
By May 2009, less than a year after making his investment, Great Southern was in administration. Mr People said he was advised only a month before that his loan had been transferred to Bendigo and Adelaide Bank.
“The loans were transferred about a month after I signed up for it in July 2008. Then in August the grove lots were assigned.
“By April, I got a letter saying that my loan had been transferred to Bendigo Bank. By May the company was in administration.”
Even then Mr People said he was not particularly concerned due to the insurance he had paid on the loans, which he was assured by Great Southern was extensive.
That $20m in insurance for Great Southern is set to be eaten up by lawyers, administrators fees and some clients, but goes next to nowhere to covering the almost $400m still owed
“Now they are demanding we all pay our loans back, plus the interest over the last 4½ years, plus penalty interest on top and an early exit fee.”Author: Dennis Shanahan
Source: The Australian