Investors defrauded of $176 million in Trio collapse, parliamentary committee finds

Over 6000 Australian superannuation and other investors were defrauded of $176 million in the Trio scandal according to a Parliamentary Committee report just released, Member for Bradfield Paul Fletcher said today.

Mr Fletcher, a member of the Parliament's Corporations and Financial Services Committee, said the Committee began its inquiry last year on his recommendation, after he was approached by constituents who had lost money in the collapse of Trio.

The fraud began in late 2003 when an existing funds manager was taken over by those involved in the fraud – but it took almost six years before the regulators APRA and ASIC intervened. It is very concerning that it took the regulators so long to act – and they did so only when notified by an alert industry participant.

'The Committee found that there is presently no criminal investigation into the fraud. While a Mr Shawn Richard has been jailed, he appears to be merely the local foot soldier, while the international masterminds (particularly a Mr Jack Flader) have not been pursued.

‘The Committee has called on ASIC, APRA and the AFP to urgently reopen an investigation into the likely criminal activity in this matter.

We also want ASIC to fund the liquidator of Trio to continue its factual investigation into where the money went. We know it went offshore to the British Virgin Islands, but surprisingly the final outcome is still not known.

 ‘Last year Minister for Superannuation and Financial Services Bill Shorten announced $55 million of compensation to some of those defrauded in Trio – those who invested via ‘APRA Regulated Superannuation Funds’.  This is under a longstanding provision of superannuation law which allows for compensation in the case of fraud or theft.

‘Minister Shorten said that all of the other investors in Trio – who lost over $120 million – were “swimming outside the flags.”

‘To try to sweep the issue under the carpet in this way is not good enough. These investors put their money into a ‘Managed Investment Scheme’, the Responsible Entity of which, Trio, held an Australian Financial Services Licence issued by ASIC. 

‘The government should consider whether another group of Trio investors – who were originally in an (APRA regulated) pooled superannuation trust before being induced to move into the ARP Growth Fund – are also entitled to compensation under the existing law.

 ‘The Committee has also made recommendations about other potential regulatory changes including requiring managed investment schemes to disclose details of underlying investments.

‘We have recommended that the government further consider the question of loss suffered by investors in managed investment schemes by reason of fraud or theft, recognising that the recent St John Review has recommended against a general compensation scheme for financial products’.  

‘When a parliamentary committee concludes that $176 million of superannuation and other investments has been stolen, it is incumbent on the relevant Minister to respond with great vigour’.

‘Minister Shorten’s response to the Trio scandal so far has been quite inadequate’.

‘I hope that with the publication of this report we will see a new urgency from the Minister – to direct his agencies to reopen a criminal investigation, to leave no stone unturned in finding where the money went, and to fully investigate all options for compensation under the existing law, for example for ARP Growth Fund members,’ Mr Fletcher concluded.