$123m in lost retirement savings
INSIDE STORY: Susannah Moran From: The Australian July 17, 2010 12:00AM THEY were the gophers in their early 20s who started out doing the "menial" tasks, fetching the boss's laundry.
They also picked up airline tickets and made coffee.
Working in the finance industry, Shawn Richard and Eugene Liu also watched and learned from their jetsetting bosses who worked on multi-million-dollar deals.
After stints in Taiwan and New York respectively, Richard and Liu landed in Australia, where they were made directors of various companies and managers of funds with impressive titles such as the Astarra Strategic Fund.
As Richard said in a Sydney court this week: "I went from nothing at the age of 26 to the position of co-CEO."
His rise was quick, and lucrative. He had a bank account in Liechtenstein, he told the court this week, where "a couple of million" went for the fruits of his labour.
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Richard and Liu were examined in the NSW Supreme Court for their roles in Trio Capital and in moving $123 million of Australian investors' superannuation to offshore funds, whose only role, it appeared, was to move the money elsewhere for further "investment".
According to evidence presented in court, those investments appear to have been made up of buying assets from their boss in Hong Kong, Jack Flader.
This wasn't the result of highly sophisticated investors deciding to invest in some speculative deals or exotic financial products.
It was mums and dads from places like Townsville, Ballarat, Wollongong and Coffs Harbour, and whose retirement money is now most likely lost. From a base in Albury, a country town on the border of NSW and Victoria, the Trio Capital company was able to pull in $426m in funds, not least because of the generous commissions it paid to some financial planners.
Trio Capital's liquidators, PPB, are trying to unravel what happened to the $123m sent offshore by the Astarra Fund.
As part of their inquries, they ordered Richard and Liu to court to answer questions. As many well-known businessmen have discovered recently, liquidators', or receivers', examinations take place in public.
Allco's David Coe and Gordon Fell have fronted the Federal Court, and MFS Financial's David Anderson and fellow executives have appeared in the NSW Supreme Court this year.
But the Canadian-born Richard and American-born Liu were not so keen on being grilled in public. They took legal action on Monday in a bid to have their examinations held in secret, wanting their roles in the Trio collapse to be kept forever out of the public eye. While Liu didn't give the court any evidence as to why there were "special circumstances" in his case, Richard provided an affidavit in which he revealed concerns about his personal safety and stress levels.
But the judge gave his affidavit little weight, rejected both applications, and the examinations began on Tuesday afternoon.
Richard - a smart dresser and smooth talker when appearing in public on TV shows to spruik his financial products - was in the box for an hour and Liu was there to support his friend and colleague. Both men seemed cool enough and Liu was even keen to go for a beer after court finished.
But as the days progressed so did the bombshells.
When Liu was in the box on Thursday he was so nervous he continually read from a piece of paper he had been allowed to take in with him.
It said such things as "answer the question", and his lawyer also told him to say "privilege" before answering questions, so his evidence could not be used against him in any potential criminal suit.
By this stage it had emerged that Richard had been enjoying kickbacks from one of Flader's companies. He said he was "maybe naive enough, maybe dumb enough" to believe at the time what he was doing was legal.
By their own evidence, Richard and Liu slavishly followed the instructions of bosses Matthew Littauer and Jack Flader. Richard told the court he was only given senior positions "so I could carry out their objectives". In court, Liu described his job as "doing whatever Matthew asked me to do".
Asked in court why Bella Donna, the Caribbean-registered ultimate holding company of Trio, had its address at Richard's home in Bondi Beach when it was really controlled by Flader, Richard replied: "I know that on paper I had something to do with Bella Donna, that's how Jack and Matthew wanted it - whether I was a director or shareholder I don't know."
When asked about investment decisions the pair were apparently responsible for - and the glossy product disclosure statements with impressive oversight procedures by fund managers with a combined 24 years' experience - Richard told the court it was all Flader. "Jack Flader was the controller of what was to happen inside the . . . fund," he said.
Not that Flader is talking to Richard any more. The pair haven't spoken since September. The tens of thousands of dollars regularly deposited into the Astarra accounts have also dried up.
Richard has expressed his desire to help Trio's liquidator, but was also criticised for some of his answers, in particular for a lengthy justification of Flader's involvement in one fund.
"Do you have any idea what the words you just said meant?" barrister Robert Newlinds SC asked.
But while Richard and Liu were in the spotlight this week, the examinations are not over yet.
The liquidators already have court dates in November for further questioning - other Trio directors are likely to be called to give evidence. Then there are the compliance and financial auditors. WHK, the financial auditors, are also likely to be required to help the liquidators.
There is also the wider question of how all this could happen without earlier intervention by regulators and the role of third parties.
It emerged this week that the Australian Securities & Investments Commission first interviewed Richard in 2008.
The Australian Prudential Regulation Authority also reviewed Trio, in 2005, but despite a board reshuffle, no follow-up appears to have occurred.
Neither Richard nor Liu has been charged with any wrongdoing. And as for Littauer?
He was stabbed to death in his office in 2004 in Tokyo, dying later in hospital. The murder remains unsolved. |
