Finance broker scandal hotting up nationally

West Australian citizens experienced losses from dodgy finance brokers in 1975. Over valued properties, missing money in large amounts and vulnerable elderly retirees being targeted. Solicitors flocked to the game in droves, preparing mortgage documents for “safe as houses” first mortgage loans. WA State Parliament recorded the event and created stunning legislation to prevent such an occurrence from ever happening again. According to Hansard: “consumer protection” was of paramount importance. Yet 25 years later the same scams were being set up using new money to prop up old debt – and all States in Australia were infected with the disease. The Ministry for Fair Trading (“MOFT”) and the Finance Brokers Supervisory Board (“the Board”) knew that the number of defaulting loans had reached a crescendo in 1998. For years, MOFT had asked their top investigator to complete investigation files and hand the files over to legal officers in order to prosecute. No files “ready for prosecution” were ever given to the DPP. WHY? Australian Securities and Investment Commission (“ASIC”) played the same game. WHY?


No-one wanted to don the “wellies” and squelch around in the mud, even though the stench from the scams permeated the corridors of power during the 80’s and 90’s.

One diligent investigator named Wallace, had probed into 150 files, during 1994-1997, and, after writing several complaints to his CEO regarding the “no prosecutions” policy, was conveniently and swiftly shuffled sideways to the “brake and clutch” section (motor vehicle) of the mausoleum known as MOFT. He later became a hardline whistleblower. It took a further four years for the top-flight bureaucrats to wear him down and squeeze him out of the Ministry. In 1996 a new recruit, ex-cop named Jack, took charge of the all the “dusty” complaint files. For three years the victims had been phoning and writing to MOFT and the Board asking what was going on with their cases – were the brokers going to be prosecuted? Jack decided he would ask the executive team: what was the Minister’s and Ministry’s “policy?” Answers were obviously pathetic and poor ole Jack decided to send a politically explosive “letter” to all complainants on 13/7/98 telling the unfortunate, long-suffering victims: the Finance Brokers Control Act 1975 (“the Act”) was inadequate and there was nothing the Board or the Ministry could do because a QC Opinion’s advice to the Ministry claimed “lenders were not a client of the broker.”

Incredibly the Board backed up the claims with another series of letters to consumer victims and the Registrar added to the myth by claiming the Act was inadequate to protect consumers, however, legislative change was on its way and “Cabinet had endorsed the changes.” A few choice questions were raised in Parliament in November 1998 – accompanied by demands from the Opposition sleuth, Ally MacTiernan, the Board must now pounce on the pesky brokers. Three weeks later, on the 11/12/98, unbeknown to the public, someone at MOFT or the Board (Mr Nobody – according to Pat) requested a Legal Opinion from well known Perth silk, Michael Barker QC, on the express subject of the lenders and borrowers being clients of the broker. The twister here for all our legal eagle readers: the opinion was sought five months after “Jack’s Letter” was sent to all the hapless victims of crime. AND – shock horror – when the document finally surfaced into the hands of Brailey and Solomon Brothers solicitors this week, after a three year battle against stodgy shonky bureaucrats and mindless Ministers such as Dodgy Doug Shave, the Legal Opinion confirmed that under Section 83(2) (b) and (d) of the Act, lenders and borrowers were indeed clients of the broker. In other words the Act had very clear guidelines as to who could be prosecuted and had given the Board tremendous powers since 1975 to round up all those responsible for this shameful chapter in Australia’s history.

Lenders living in poverty for the past six years could be forgiven for being a little peeved at this revelation. It gets worse!!! “Mr Nobody” from the MOFT or the Board sought two more QC opinions, during late 1999, after we blew the whistle in parliament in September 1999. These Opinions are also supportive of Mr Barker’s view. The chronology of events is curious. During 1994, MOFT had dubbed Brailey “the Ralph Nader” of the real estate industry. They viewed her as a woman who regularly burst through the revolving door of Fair Trading, armed with files from her own voluntary investigations against real estate agents, valuers, settlement agents, and all things dodgy in property and development. Brailey first spoke to Jack, regarding the stench from finance brokers and solicitors’ dealings in dodgy first mortgage scams in June 1998, four weeks prior to “Jack’s letter.” He told her there was nothing to be done to assist the victims, that he had over 100 files in the drawer, and the reason he could not assist, was due to inadequate legislation. He assured the retirees’ “Joan of Arc” that proposals were underway to alter the code of conduct, but it would not assist those who had already suffered loss. She consulted with Solomon and the rest is history. Today the Board is claiming the letters of appointment for the QCs’ are privileged – privileged in order to conceal a crime?

Consider the bureaucratic and ministerial energy which has been generated into the mechanics of the monumental concealment processes known as a “stuff-up.” Cracks appeared from the 13th July 1998 onwards. Two borrowers walked into the offices of the Board in 1999. Jack sent both to a specific Board member who is currently facing charges of fraud and theft, thanks to the efforts of the Fraud Squad. The Board told the borrowers exactly the opposite words contained in the “Jack letter.” As borrowers – they were not the clients of the broker. For the past three years Jack was able to collect a salary from MOFT, work for both the Board and MOFT, but did not need to investigate cases because the “Act did not provide adequate protection for victims.” They love this word adequate – it teams up nicely with monitoring – the regulatory authorities’ national buzz word for doing zilch.

To describe the genesis of Jack and friends’ “Great White Lie” is a dream for a script writer who revels in stories of farcical bureaucrats and ministerial madness. During 1999, the Registrar of the Board advised the Commish, who advised the Minister, who advised the Cabinet, who advised the Parliament, which advised the public: “we are going to amend our inadequate FB Control Act” – to protect the public from future nasty brokers who are currently raping, pillaging and plundering elderly people’s bank accounts. Furthermore, “we have truck-loads of QC Opinions” to explain why Jack was unable to investigate or prosecute since 1996. The fact that Trust accounts had been mixed with greater ferocity than fruit in a blender, and inspected by auditors with poor eyesight or political connections, escaped those on the cover-up strategy team. The assumption is that if the lie is kept going long enough, “Ralph Nader” will give up the pursuit.

Judge Gunning read the elusive Legal Opinions – and expressed shock, but believed it was in the best interests of the “public”, not to release them, knowing they were used for cover-up purposes. Naughty “Boy Judge” refused to hand the documents over to Solomon in September 2000, and refused permission for Solomon to cross examine the mindless Minister, dear Jack and the Commish. No sense in stirring up the truth. After all, it’s only $200 million at stake. Besides, elderly people die, and there may be a few less to pay out in a few years time. It’s called the “drag-out” policy, well known in public sector management circles.

For months Brailey lobbied the Upper House for an Inquiry. Chairman Travers demands the Board or the MOFT or anyone else playing musical documents – to hand over the incriminating Legal Opinions which created the “Great White Lie.” The Minister instructed the Board’s legal Officer, Suzy N, “not to comply with the Upper House.” Do not hand over the documents, he thundered!!!!! Poor ole Suzy, obeyed the command of the Minister and refused. The Upper House become a little incensed with insolence and served writs on Suzy for her “contempt of parliament.” Yet the docs remained hidden.

The ALP promised to hand over the docs when they came to power – if the voters swung from right to left. RECA members caused writs to be served on the Board once again in early 2001, and on the 10/2/01, the new Minister Kobelke took over the reins. Five months later Solomon was still fighting for “all relevant documents.” A subtle letter to the new Minister, with an appropriate deadline attached, finally uncovered the “dreaded Legal Opinions.” The truth was out, yet crucial documents giving authority to engineer this diabolical crime, remain hidden.

Message to the new Minister: Changing the name from MOFT to Consumer Affairs is useless if you continue to support those in the bureaucracy who are responsible for this fraud against the innocent public. Taxpayers pay $9 million per year for this farcical department, and its wretched self-interested industry Boards, to exist. This particular bureaucracy needs a demolition team. Academics should be lining up to ask whether the separation of powers in WA is a myth. Who engineered “the Great White Lie” which caused so much suffering to the older citizens? Lying to parliament is a crime, lying to the people who pay for the structure’s very existence is a monstrous crime.

Brailey campaigned yet again: for a third inquiry. Ian Temby QC, heads the Royal Commission, due to start in one weeks time. Message for young Ian: what will you do with the new Attorney-General? Jim McGinty’s latest trickery: The Terms of Reference to accommodate the election promise of an Inquiry with “wide sweeping powers,” has been watered down. Ian Temby can only look into the “adequacy” of the Ministry’s conduct. That is not even a legal term – it means nothing. Tom Baddeley, at the ABC raised that point with McGinty, live on Stateline, last week. The A-G looked a little lost for words. Gunning refused to allow the investors lawyer, Solomon, to cross examine witnesses. Over 150 investors in a meeting with McGinty three weeks ago demanded Solomon be involved in the Temby Inquiry. Jim said “he would consider the matter.” Once again investors have been duped. Could it be possible, the bureaucrats have convinced our Jim it’s better to continue the cover-up. The State pays yet again: $5 million for a watered-down version of an inquiry which presents more like “who’s crying now?” A change of government has not changed the antics of the bureaucracy, the same players are hard at work and the current Minister Kobelke, is assisting with recommendations to protect the Boards, rather than listen to the support groups who want the entire system scrapped and rebuilt.

All witnesses in the MOFT and the Board from here on are ducking for cover. Everyone blames the other. Commissioner Patrick Walker, said to intrepid West Australian reporter Michael Southwell: “we can’t be held responsible for that letter and I don’t know who is.” Southy splashed Walker’s immortal words on the front page of the West on Thursday. Walker insisted it was all a mistake. This blooper may well cost the State Government of WA $200 million – the estimated losses of thousands of innocent West Australian retirees.

On the national front, almost $2 billion of savings are missing in action, and these girls and boys from yesteryear want answers. Message for ASIC chairman David Knott: your figures don’t match ours – please seek a legal opinion, and change your advisors. This is bigger than HIH because an estimated 250 people were involved and earning an outrageous “income” from these scams.

But you’ve got to hand it to these “diggers from the past.” They call them the “salt of the earth.” They’ve lost not only their life savings (there are 33,000 Australia wide), they have lost an era where you trusted your solicitor, you trusted the broker, the auditor and the valuer; you trusted the privileged professionals. An era where your word was your bond, where “gentlemen” arranged deals on the shake of a hand. The battle has just begun for these people. Several retirees (RECA members) braved four-degree temperatures to protest against the Tassie Law Society in Hobart last week. They need a hand – they need encouragement and they deserve a medal for persistence.

Democracy has taken a battering in Australia, and particularly in the Wild West, and readers can be forgiven for believing these old timers might just show us all a thing or too about old-fashioned courage, decency and why we should all stand for a set of principles. Into the trenches and the nation better mind its manners. Retirees in each State are drawing up the battle lines. First mortgage scams crossed all State boundaries and there is a call to arms. Retirees are the most unlikely political activists, yet their fathers were the founding fathers of our democracy. It may pay us all to remember those early struggles for a set of principles and values in the anniversary years of Federation. And the depth of their courage? They have gathered the nerve to ask the grandchildren for lessons on the net, lessons on taming the mouse, and the emails are flooding in. Now that is awesome and positively dangerous!!!!