Joint Release: Bowen must review & Correct Shorten's inadequate response to Trio collapse

Joint Release: Senator Mathias Cormann, Shadow Assistant Treasurer & Shadow Minister for Financial Services and Superannuation & Paul Fletcher MP, Federal Member for Bradfield

Now that Bill Shorten has been moved out and Chris Bowen has assumed responsibility for the financial services and superannuation portfolio, the Treasurer must immediately review the Gillard government’s highly inadequate response to the Trio collapse.

Over 6,000 Australian superannuation and other investors were defrauded of $176 million in retirement savings.

The fraud began in late 2003 when its perpetrators took over an existing funds manager - but it took almost six years before the regulators APRA and ASIC intervened, only when notified by an alert industry participant.

Bill Shorten as the Minister showed a troubling lack of urgency and engagement on this.

He awarded compensation to some investors with losses totalling $55 million, but criticised other Trio investors, who lost over $120 million, for “swimming outside the flags”.

In taking that approach, he completely ignored the unique circumstances of the Trio collapse.

The bi-partisan Parliamentary Joint Committee on Corporations and Financial Services pointed to the failure of regulators to take appropriate action to protect investors and the failure of the government to pursue the masterminds behind the Trio fraud.

Trio investors did not consciously set out to put their retirement savings into particularly risky investments. They were victims of fraud and, according to a comprehensive parliamentary inquiry, the failure of relevant authorities to act in a timely and appropriately coordinated manner.

It took Bill Shorten nearly a year to consider the recommendations made by that key parliamentary committee - and even then he only provided a preliminary response, merely

announcing further new reviews and 'consultations' as a means of following his longstanding practice of avoiding making actual decisions.

The new Treasurer Chris Bowen must re-consider all the recommendations of the Parliamentary Joint Committee in relation to Trio.

He must ensure that proper investigations are conducted into the key figures responsible for defrauding investors in Trio and explore whether the unique circumstances surrounding the Trio collapse justify at least a level of compensation to victims so far left out in the cold.

It is also critically important that Treasurer Bowen obtain a briefing from ASIC to clarify why they do not intend to intervene before the Federal Court on 8 July to prevent the lifting of travel restrictions currently imposed on alleged Trio fraudster « Paul » Gresham/Tony Maher.

Trio investors fear that with his travel restrictions lifted, Gresham/Maher will seek to evade justice by leaving Australia - and not returning.

Corporate regulator ASIC - reporting to the Minister with responsibility for financial services and superannuation - recently told the Parliamentary Joint Committee on Corporations and Financial Services that it does not plan to go to court to seek to block Maher’s application.

Maher was a key player in the Trio fraud - but so far no charges have been laid against him.

In fact, it is understood that ASIC has not even lodged a brief of evidence yet with the Commonwealth DPP to allow it to lay charges - despite Maher facing a liquidator’s examination in December 2012 and the liquidator having lodged a report with ASIC recommending charges months ago.

Gresham/Maher was a financial planner who induced his clients to put over $30 million into the ARP Growth Fund, a product offered by Trio Funds Management. In many cases, they invested their entire superannuation savings - on average around $700,000.

When the ARP Growth Fund collapsed, his clients lost every cent they had invested in it.

According to evidence presented to the Parliamentary Joint Committee, Maher received undisclosed payments of more than $2 million arising from investments he recommended and he gave fictitious valuations to his clients for many months.

The Trio case demonstrates that Australia’s $1.5 trillion superannuation savings pool is exposed to international criminal activity targeted at defrauding Australian investors, as the unanimous cross party Parliamentary Committee report highlighted.

As Financial Services Minister Bill Shorten showed a disappointing lack of urgency in responding to this threat. There is an opportunity for the new Treasurer, Chris Bowen whose responsibilities include financial services and superannuation to fix up the mess Bill Shorten left behind for him.