Christine Milne (Tasmania, Australian Greens) Share this | Hansard source

I rise today to note the report of the Parliamentary Joint Committee on Corporations and Financial Services in relation to managed investment schemes. I have to say that it is one of the weakest reports I have seen presented in this Senate and I am extremely disappointed in it. When it is printed and the public get to see this report, I think they are going to ask some serious questions about why this committee did not have a good look at ASIC’s oversight of managed investment schemes.

That is the key issue here. I have a policy view that managed investment schemes have been an appalling idea for rural and regional Australia and I can demonstrate that through what they have done to rural communities, to the price of land and to the cost of water and through their displacement of people. I can do all that, but the issue here is that this committee was to look into the collapse of these managed investment schemes, what went wrong with them and who was responsible. Instead of that, ASIC oversight gets about three-quarters of a page and the recommendations do not go anywhere near what needed to happen.

There is no justification whatsoever for the view put that managed investment schemes should continue for forestry. All that is reiterated in this report is what the National Association of Forest Industries and A3P have to say. There is no real analysis whatsoever.

I want to put on the record that I wrote to ASIC at the end of last year and I gave them figures, box and dice, on what is going on with Great Southern Plantations in Tasmania. I sent them photos of cattle grazing on these supposed plantations at Temma. I gave them facts in relation to claims that had been made by so-called independent foresters. For example, an independent forester, in the Great Southern Plantations 2005 and 2006 product disclosure statements said:

… it is reasonable to assume … the Plantations will be capable of being managed as a whole to produce an average growth rate of 250 m3 gross of timber produce per hectare of Woodlots … after approximately 10 years growth for each product.

At the time, Great Southern knew that that was not achievable and had not been achieved. They were aware, when they released their 2005 and 2006 product disclosure statements, that they had failed to achieve those returns. In fact not only did the woodlot crop planted in 1994 failed to deliver those returns, but Great Southern went ahead and arranged for a subsidiary company to purchase not only the 1994 woodlots but also the 1995 and 1996 woodlots. They did that and then they used money invested in future years to go back and inflate the price that they gave to investors in order to pretend that the returns were in line with the 250 cubic metres that they had put in their product disclosure statements.

I sent all that to ASIC and I said: ‘This is a Ponzi scheme. They are buying back, they are inflating the return to investors in the early years to make it look as if this product is returning to investors when it clearly is not.’ I sent them details of those product disclosure statements—the whole shebang. I asked them a series of questions about how it was that these false and misleading claims were in the product disclosure statements and why ASIC had not gone back and had a look at the claims. I sent them the photos of cattle grazing on these woodlots. I sent them the whole lot. In return, in January this year, I get back a letter from ASIC which would indicate to anybody reading it that you do not get oversight of these schemes. For example, they said, ‘I advise that concerns about alleged mismanagement should first be raised with the responsible entity of the scheme.’ Don’t they appreciate that the ‘responsible entity’ of the scheme is the scheme manager? These were not independent responsible entities; they were lending money to investors to invest in the product. There was a conflict of interest at every level. If you went and complained to them, you would not get anywhere. Then ASIC wrote: ‘If your constituent is not satisfied, you can go to the Financial Ombudsman Service.’ Great, you can go there. They go on to say ‘perhaps you could get independent legal advice’. ASIC are meant to be overseeing and monitoring the managed investment schemes—and it is not happening. They do not even require a product disclosure statement to be made, except under certain circumstances. They then went back, when this investigation was done, and said they had surveillance over a range of things. But the classic was their response to my allegation that it was a Ponzi scheme, that it would collapse because they were using the investments over these years to go back and subsidise and so on. In their answer to whether or not it was a Ponzi scheme they said:

Generally, Ponzi schemes are investment schemes where returns are paid to investors entirely out of the incoming funds of new investors entering into the scheme. An indicator of such a scheme is a lack of assets … I advise that there is insufficient evidence to indicate that Great Southern Plantations is a Ponzi Scheme. The 2007 financial report for Great Southern’s managers indicate that its controlled entities’ profit after tax was—

blah, blah, blah—and they went on with all the profits that they have got. Therefore, because the financial statements were audited, and Great Southern had profits, it could not be a Ponzi scheme. They did not actually go back and examine the allegation that the returns on those woodlots had been inflated by the investments from subsequent years. They just said: ‘We went to their financial statements. They were audited statements. They’re making a profit. Therefore it can’t be a Ponzi scheme.’ If that is the confidence this committee has in ASIC to oversee forestry managed investment schemes, I do not share that confidence—and I do not think the community shares that confidence. I would like to see ASIC brought to account over why they did not exercise real monitoring and oversight of the managed investment schemes.

I do not support the fact that this committee has recommended that forestry managed investment schemes continue to get 100 per cent tax deductibility. It is a disaster for rural Australia. Now we are having these schemes wound up, we are getting these plantations put on the market, with windfall profits for companies like Gunns that are going to run around and buy them up—because somebody has to manage them, and it is better that they are managed so they do not go to rack and ruin; at least that is something. I raised that in here as well, saying I do not want these taxpayer subsidised plantations to be overrun by weeds and feral animals, not thinned and become useless in the end. It is incumbent on us to actually make sure that they are managed at least, and that there is a return on them. But to turn around now after this inquiry, after this mega-disaster in rural Australia with Timbercorp, with the Elders subsidiary, with Great Southern, and say, ‘Oh, it’s okay; we think it’s a good idea because we get investment in rural Australia in plantations, therefore it should continue.’ I think the real question has to be: what level of influence did NAFI, A3P and the forest industry have such that this parliament failed to properly assess what went wrong with the collapse of these particular schemes? And how could we just turn around after such a spectacular collapse and say that it should continue? It is beyond me. It means there is not real due diligence in relation to these schemes; and there is clearly a philosophical view, an ideological perspective in here that we will continue to give 100 per cent tax deductibility to investing in plantations, to the detriment of food production, to the detriment of rural communities throughout Australia, to the detriment of people on the land, because we want to give these returns to Collins Street investors, returns to the forest industry.

Farmers around the country are having to pay inflated land prices and inflated water prices because of these particular managed investment schemes. The dairy industry in Tasmania is under pressure, for example. In will come these schemes now, with their 100 per cent tax deductibility, and a lot of those farmers in trouble will eventually sell because of the way that the pressure comes onto those rural communities. We have a food security issue globally. We need to be protecting our best agricultural land to provide food. The best land and the best water produce the best trees. We are in competition. This is not about marginal land versus valuable land. This is about the best use of that land, and I do not support subsidising plantations to the destruction of rural Australia.