Archive for December 2012

Bookmakers Superannuation Fund – Is it Fraud?

The continuing disclosures about the Bookmakers Superannuation Fund  and the arrangement with Super Promoters Pty Limited have raised the question of whether fraud has been committed.

What is Fraud?

A person who, by any deception, dishonestly: …. obtains any financial advantage or causes any financial disadvantage, is guilty of the offence of fraud.

Maximum oenalty: Imprisonment for 10 years. (Section 192E (1) NSW Crimes Act 1900)

Intention to defraud by false or misleading statement is also an offence:

A person who dishonestly makes or publishes, or concurs in making or publishing, any statement (whether or not in writing) that is false or misleading in a material particular with the intention of: …. obtaining a financial advantage or causing a financial disadvantage, is guilty of an offence.

Maximum penalty: Imprisonment for 5 years. (Section 192G NSW Crimes Act 1900)

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Now let’s look at the Super Promoters scheme from the beginning:

  1. John Kennedy, Peter Mueller, Peter Hayes-Williams and Ian Buxton were the Trustees of the NSW Bookmakers Superannuation Fund.
  2. In November 2003, the four trustees formed Super Promoters Pty Limited and in July 2004 it obtained a financial planning licence to allow it to “promote” the BSF. (This step alone must be a breach of their fiduciary duty to the members of the fund)
  3. In July 2004 the fund became a Public Offer Fund, changed it’s name to the Bookmakers Superannuation Fund and issued a Product Disclosure Statement. The Product Disclosure Statement disclosed that .615% of the fund’s assets will be paid to Super Promoters each year as a “Promotion Fee” !!
  4. The Administrator of the fund was Peter Mueller & Associates, who employed Peter Hayes-Williams. Given that members were told, in the Annual Report, to direct any enquiries about the fund to the Administrator, it must have been an advantage to have an Administrator who was part of the scheme.
  5. The first Policy Committee of the fund had John Kennedy and Ian Buxton as Member Representatives and Peter Mueller and Peter Hayes-Williams as Employer Representatives. The functions of a policy committee include assisting the Trustee in dealing with complaints or inquiries about the operation and management of the fund. An independent Member Representative would probably have questioned the “promotion” scheme right away so ensuring that the Policy Committee was controlled by the scheme operators must have helped the scheme to continue.
  6. This pattern continued up to 2010 with Member Representatives being appointed without any say from members.
  7. Other aspects of the “promotion” scheme are questionable. For instance, what result did Super Promoters have to achieve to justify the fee?  And will members always pay this fee even if the fund’s assets are static or declining?
  8. In September 2004 the City Tattersalls Staff Superannuation Fund merged with the BSF. This transaction clearly beneited Super Promoters so the obvious question is: Who proposed this merger and how was it achieved?
  9. The introduction to the Annual Report of the fund told members that it was important that the fund should “grow and thereby achieve economies of scale”. This statement is misleading and, in fact, false. (See Section 192G above). The only people who benefited from the fund growing were Super Promoters and the the others who were paid a percentage of the funds assets. The members got no benefit because the fees were fixed in advance as a percentage of the fund’s assets. This is clear from the accounts. Even though the assets of the fund increased, the total management fee charged to each member in 2007 was 1.1%, just as it was in 2006 and 2005. There was no benefit to members. Every member paid .615% of their accumulated balance each year to Super Promoters in an arrangement where the only beneficiaries were Super Promoters and their associates in the scheme.
  10. The four shareholders of Super Promoters sold their shares (and the administration business) to Diversa Limited in March 2009. The “promotion” scheme continues with a new owner but this transaction did help to shed light on the scheme because Diversa is listed on the Australian Stock Exchange. Some very revealing documents were lodged with the Stock Exchange.
  11. Super Promoters received almost $2 million from the BSF in 2008 but it’s real operating expenses were less than $400,000 resulting in a profit of $1.600,000 to be distributed to the four principals. (In fact, only $24,000 was spent on advertising and promotion in 2008!) This in itself could be fraud. And how could the Trustee, Equity Trustees Ltd, allow this to happen?  But, of course, they have been part of the arrangement from the start and also benefited as the fund grew because they too are paid a percentage of the funds assets.
  12. Diversa also spoke in glowing terms about the opportunity “to generate attractive returns from the Super Promoters business by growing the Funds Under Management”. They also said that this was due to “the relatively low cost base which results in an increasing margin and increasing profitability”. But Diversa must realise that this artificial “business” only exists because the fund paid $2 million for expenses that in reality cost only $400,000.

Overall, the Super Promoters scheme would seem to be a clear case of fraud.

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Posted December 22, 2012 by savecitytatts in Uncategorized

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More on the Bookmakers Superannuation Fund

We are still reflecting on the Australian Financial Review article about the Bookmakers Superannuation Fund. Another statement that caught our eye was:

“Senior counsel confirmed that the four former trustees had an equitable obligation to the members of the fund to account for any profits made by reason of their fiduciary position ..”

Well, yes. – it woukd have been a major shock if senior counsel had said otherwise. It is a long established legal principle that any trustee of any super fund must act in the interest of members. They can not exploit their position as trustee to enrich themselves at the expense of the members.

And apart from the general legal responsibility of trustees we have always been advised that the Super Promoters scheme is specifically illegal in a super fund. In fact, we were always convinced that the scheme was illegal for one main reason – no one else has ever tried it. To us, that is the most convincing evidence that the scheme is illegal.

There is one thing we all know about money-making schemes – if they work they will be copied. And this is the best money-making scheme we have ever seen. Don’t forget, in the context of Australian superannuation, the Bookmakers Superannuation Fund is not a large fund. A trustee of a super fund that was ten times bigger could even drop the 0.6% fee to 0.3% and still make 5 times what Super Promoters made. So, if ever there was a scheme that was likely to be copied this is it. But no one has copied it! It must be illegal. And we stress illegal. If it was simply unethical, out of the thousands of trustees and advisers in a position to do this, at least a hundred would try. If it was only immoral, there would be at least a hundred of them. But there isn’t another one! It must be illegal.

We are quite convinced that, in the end, the four amigos (John Kennedy, Ian Buxton, Peter Mueller and Peter Hayes-Williams) will have to give back the money. And any of the gains they do manage to hold on to will go in fees to Clayton Utz. But they might consider that money well spent if it keeps them out of jail. Male no mistake – criminal charges are quite likely out of this.

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Posted December 21, 2012 by savecitytatts in Uncategorized

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The Bookmakers Superannuation Fund – the story that won’t go away!

Another very interesting article in the Financial Review on the weekend about the Bookmakers Superannuation Fund.

What really caught our attention was the comment that the sale of the rights to administer and promote the Bookies Super Fund was “worthy of deeper analysis”, and

“That analysis reveals gaping holes in the regulatory system. It uncovers a regulator that appears disinterested, a legal system that stops members discovering critical changes to their fund’s trust deed, and a public complaints body that is overloaded and unable to cope”

Indeed.

The reason we found this so interesting is that the problems encountered by fund members in trying to hold the management of the Bookmakers Superannuation Fund accountable exactly match the problems encountered by members of City Tatts in their battle to hold the management of the Club accountable.

This is not a surprise since the Bookmakers Superannuation Fund was conceived in, and owes it’s existence to, City Tatts.

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Posted December 19, 2012 by savecitytatts in Uncategorized

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Patrick Campion’s “Airspace Meeting (3) !   Leave a comment

One thing is very clear after the “information session” at City Tatts last week – Campion and Guilfoyle have given up on running City Tatts as a club for members. It is obvious that the dream of a big property development is the only thing on their minds.

Which is quite comical, since they would have to be the worst pair in Sydney to attempt a property development. The track record of failed property projects this pair have been involved in is simply staggering. These are just some of the disasters:

  • The $6 million Zest/Lime Bar/Omega Lounge project – a total failure in every way
  • Countless botched attempts to give the Club a proper front entrance – every one an expensive failure
  • Getting rid of the only successful property venture the Club had – the $800,000 annual rent received from the the retail spaces at street level (at a time when the Club was desperate for cash)
  • The fiasco of buying 194 Pitt Street – they paid too much, didn’t check out the building and couldn’t afford to do anything with it.

Now, how do you think their latest project will go?

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Posted December 15, 2012 by savecitytatts in Uncategorized

More on Patrick Campion’s “Airspace” Meeting!   Leave a comment

As most of you would know, the stated reason for the “informal meeting” last Tuesday was because the Committee were “particularly interested in members’ views and feedback” before a decision would be made to spend the money for a Pre-DA Application advice.

Here at Save City Tatts we never believed that for a second. It was obvious that Guilfoyle and Campion were going to spend the money anyway and that the meeting was a sham.

But, as it turns out, the Committee’s deception will be exposed.

Because it seems that at the “informal meeting” no member spoke in favour of proceeding with the development !

So when the Committee proceeds to spend the $100,000 for the Pre-DA advice they are admitting that members’ views never meant anything.

Of course most members will never know – because no minutes of the meeting will ever be released!

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Posted December 11, 2012 by savecitytatts in Uncategorized

Patrick Campion’s “Airspace” Meeting!   Leave a comment

City Tattersalls Club confirmed it’s reputation as the strangest club in Australia with it’s latest meeting.

On Tuesday last, December 4th, about 10 members turned up to hear about the attempted property development on the Clib’s site. (This, in a club with 17,000 members)

By all accounts, the meeting continued the recent City Tatts format of comedy and dishonesty.

The meeting was originally called an “informal meeting”. And by the time the meeting started this description had changed to to an “information session”. But, despite the “informal”, “information” nature of the meeting, every member attending had to sign in! When Campion was quizzed on this he said that it was to keep the meeting for members only. You will not be surprised to hear that, as he said this, he was looking down on six or seven of the most overpaid employees who were sitting in the front row of the members-only meeting!

And it will come as no surprise either to learn that members were not given even one page explaining the proposed property development. All they got Campion’s slide presentation which means he will be able to deny any statement that turns out to be false or embarassing.

Of course it wouldn’t be a City Tatts meeting without some comedy, nearly always unintended. It seems that when Campion introduced the “expert team” who will attempt this property development he listed what they would bring to the “team”. When it came to Tony Guilfoyle, he said Guilfoyle was on the team because he had “prior development experience”!

Yes, he does – and every one a disaster!

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Posted December 9, 2012 by savecitytatts in Uncategorized