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Storm Financial targeted retirees before collapse, court is told

Posted by on in COURTS & LEGALS
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Andrew Fraser

FAILED company Storm Financial consciously pursued as clients people either retired or approaching retirement who owned their own homes but had little knowledge of the workings of the stock market, a court has heard.

The case against Storm Financial and several banks associated with the North Queensland-based financial company, which folded in early 2009, began in the Federal Court in Brisbane today.

Storm's clients, many of them retirees and small investors, lost about $3.6 billion in the collapse.

Allan Myers, QC, representing the Australian and Securities Commission, said Storm had rarely tried to capture clients from other existing financial institutions.

He said the standard Storm client was “a person, not experienced in financial matters, but comfortably off, having a home that is not mortgaged or mortgaged to a modest extent, plus other assets such as superannuation”.

“The people Storm went after were not those who had other investments but had what (Storm principal Emmanuel) Cassimatis would call `lazy money'.”

Mr Myers said the Storm system was “based on a notion that property was not a safe investment and was likely to reduce in value” and that clients were told: “You should get into the share market.”

Banks such as the Bank of Queensland and Macquarie Bank were central to the operation of the scheme, as they were needed to provide the loans against the houses and other assets which Storm then invested.

He said Storm published material which associated the firm with the “rich and successful”.

The court was shown pictures of Mr Cassimatis with James Packer, and also of he and his wife Julie with former US president Bill Clinton.

Mr Myers also said banks were “motivated by profit” when they involved themselves with Storm.

He described the scheme as a “well-oiled machine” which was “based on optimism about ever-increasing values of listed shares”.

“Once you were in the Storm system all you had to do was sit back and relax and wait until you got richer,” Mr Myers said.

“What's the end? We all know the end. It's tears, because having leveraged yourself, you expose yourself to market volatility.”

Mr Myers said ASIC wanted the court to declare that the banks “were knowingly concerned in the operation of the unregistered scheme” and were aware investors would lose their money if the market crashed, as it did during the global financial crisis.

“The banks knew what was happening ... they were motivated by profit,” he said.

About 40 former Storm clients were in court for the start of the case, which is expected to last for several months.

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  • doyla66
    doyla66 Monday, 24 September 2012

    ARIP - Asset Rich and Income Poor. Wonder who taught Mr Cassismatis this!!

  • doyla66
    doyla66 Monday, 24 September 2012

    Exactly, JJ. Signing up retirees to 30 year loans is illegal. Targeting them is deceptive and misleading conduct and inducement to commit crime in my non-legal opinion. I'm looking forward to seeing these Laws put into practice. What is the point of having laws if no one applies them? In future the Banks will have to find another type of product for retirees who want to borrow money.

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Guest Friday, 25 September 2020