The scandal of the Westpoint Ponzi scheme is gathering momentum, nudged along over the weekend by The West, The Courier-Mail and McCrann. But it remains early days for the many guilty parties out and about consulting lawyers.
The size of this fraud – $300 million or so, maybe as many of 4,000 investors ripped off – is only part of the pain. The way the crimes were carried out, using so-called “financial planners,” should have ramifications beyond the Westpoint-related thefts.
Colleague Alan Kohler has long campaigned about the structural corruption of alleged advisors actually being product salespeople. When, as is alleged with some Westpoint mezzanine financing, the total commission was as high as 23 per cent, only someone with no concern for their client could possibly flog the stuff.
In the drawn-out wash-up of the Brisbane-based Wattle Group scandal, some of the dodgy advisers who took the big commissions to lose their clients’ money faced a degree of justice, but retribution on the Westpoint sales force should be harsher.
All the paperwork ASIC has foisted on the finance industry with telephone-book sized product disclosure documents has achieved nothing. The watchdog needs to take out and shoot the incompetent and/or crooked salesmen and women.
The big problem for investors is that Westpoint was such a bad fraud that it failed altogether. Ponzi schemes, whereby the money coming in is used to payoff the earlier investors to keep the racket rolling, always do. But there are countless other mini-rip-offs involving high commissions that don’t actually fall over and therefore continue.
There are good, professional financial planners in this country. Some of them are paid by the commission route, but there also are plenty of charlatans. As the Kohler and McCrann pieces show, Westpoint and similar scandals besmirch all of them.