John Williams (NSW, National Party) Share this | Hansard source

I rise today to speak on a matter of public interest. Members of this chamber will be well aware of the human and financial tragedy that resulted from the collapse of Townsville based investment advisory company Storm Financial in December last year—and, consequently, the early part of this year. Over 2,500 mainly mum-and-dad investors lost approximately $3 billion when the Commonwealth Bank called in receivers and managers on 15 January to recover outstanding loans to Storm, sending the company and its clients into oblivion. Storm Financial was subsequently placed into liquidation by order of the Federal Court on 26 March, with Mr Ivor Worrall and Mr Raj Khatri of Worrells Solvency and Forensic Accountants appointed liquidators.

This has been described as the worst corporate collapse in Australia’s history when measured in terms of the impact on ordinary Australian investors. The Australian Securities and Investments Commission began an exhaustive investigation into the Storm issue into December, including the critical issue of margin lending and, more particularly, where the onus of responsibility for managing these margin loans rested. No doubt in the near future we will have a report from ASIC, when it has completed the inquiry and it is presented.

It was this confusion over who was ultimately responsible for managing the margin loans taken out by Storm investors—that is, whether it was Storm or the margin lender—along with the debt levels, that led to the Commonwealth Bank’s decision to shut Storm down without warning to investors, leaving thousands of Australians financially ruined and without an income stream. Senators will be aware that the Commonwealth Bank of Australia was the principal margin lender to Storm through its subsidiary, Colonial Geared Investments.

Members of this chamber will also be aware that margin lending operated in an unregulated environment at the time of the Storm collapse, and the failure by both Storm and the margin lenders to properly manage these loans resulted in Storm investors having their portfolios sold down from under them without what is known as a ‘margin call’. In layman’s terms, the banks simply sold these people’s portfolios down without prior warning, snuffing out their income streams and forcing many distressed investors into having to sell their family homes to meet their commitments to the bank.

This cruel, unconscionable decision was made by faceless and heartless bank executives purely on commercial grounds, to protect the bank’s own interests. No consideration was given to the consequence of this knee-jerk decision on ordinary Australian taxpayers who had underwritten the Rudd government’s bank guarantees during the darkest days of the global financial crisis. Many Storm clients could easily have met their margin lending commitments and therefore stayed in the resurgent stock market if they had been given the basic courtesy of a margin call. If margin calls had been made in a professional and orderly manner, these investors would be watching their portfolios performing strongly today rather than staring at financial ruin.

I had the honour of serving on the joint parliamentary inquiry into financial products and services in Australia, which looked into recent financial product company collapses including Storm Financial and Opes Prime. The inquiry probed the role played by financial advisors; the state of the general regulatory environment; remuneration models, such as commissions; the role of marketing and advertising in financial product distribution; the licensing arrangements of those who sold the financial products and services; and the consumer protection and insurance arrangements in place.

The committee reported its findings just recently in the House of Representatives and yesterday in the Senate. My time on this committee inquiry has left me with indelible memories of the wholesale human suffering experienced by the victims of these corporate collapses. I note the public apology by Mr Ralph Norris, CEO of the Commonwealth Bank, and his commitment to the resolution scheme. No matter how sincere Mr Norris’s words may be and no matter how generous the resolution scheme turns out to be, the victims of the Storm collapse can never be adequately compensated for the anguish, heartache, anxiety and psychological suffering they have been forced to endure. Sadly, suicides and threats of suicide have been part of the fallout from the collapse of Storm Financial.

Those who are familiar with my background will know that I am no stranger to the bastardry of banks. My family suffered financially and psychologically during the infamous Swiss francs foreign currency disaster during the late eighties and early nineties. Having lived in the bush all my life, I have personally seen and heard many other examples of banks behaving badly. During the foreign currency disaster, I met and befriended a man called John McLennan, a former Westpac bank executive who had turned whistleblower. John’s enthusiastic support, coupled with his inside knowledge of bank procedure and his burning quest for justice for the victims of the banks’ terrible advice, resulted in the formation of the Foreign Currency Borrowers Association. After years of struggling against what sometimes seemed insurmountable odds, and at great personal and financial cost to John McLennan, the government of the day established a parliamentary inquiry. Ultimately, the banks were forced to settle with their aggrieved customers. John’s tireless and fearless contribution to this campaign was recognised in Quentin Dempster’s book Whistleblowers. I regard John as a good friend and a significant player in the never-ending battle to keep the banks honest.

Our paths crossed again in January this year when John became involved with the Storm Investors Consumer Action Group, formed after the collapse of Storm Financial. John, who at the time was retired and calling himself an ‘international leisure consultant’, once again was moved to pick up his sword and ride into battle on behalf of the little battler after meeting a devastated Storm victim who was contemplating suicide. On 17 January he attended a meeting of distressed former Storm investors at the Scarborough home of Noel and Kath O’Brien, and enthusiastically endorsed the idea of forming a consumer action group. Also in attendance at that meeting were former Storm investors Mark and Ann Weir, Graham Anderson and Mike Fishpool; Max Tomlinson, a media consultant; and former Storm advisers Andrew O’Brien and Ron Jelich. This group had come together at short notice after fielding dozens of calls from fellow Storm investors. The original intention was to provide support and a central point of information for people who were confused and were facing financial ruin.

At a public meeting in Margate on 20 January, attended by nearly 400 people, Mark and Noel were formally elected to co-chair the SICAG and Graham Anderson was elected secretary-treasurer. Other committee members elected on the day were Mike Fishpool and Peter Wallace. John McLennan and Max Tomlinson—a semi-retired former News Limited executive—agreed to act as consultants. I attended that meeting in Margate and was amazed at the similarities between the Storm collapse and the foreign currency loans affair, which I experienced. I saw the same looks of fear, confusion and despair in the faces of the crowd and sensed the same feeling of helplessness.

I listened as John McLennan, Mark, Noel and Damian Scattini of law firm Slater and Gordon spoke of the importance of sticking together and fighting the good fight. When I was invited to speak, I was able to relate my experiences from the foreign currency debacle and stress the importance of sticking together for mutual support. I also told them not to be daunted by the prospect of fighting the banks. ‘You can win,’ I told them. I also guaranteed them that I would seek a Senate inquiry into the collapse of Storm. This was later taken on, of course, by the parliamentary joint committee. Since that meeting, I have watched SICAG develop into a highly effective ‘people power’ organisation. Its website provides timely updates on developments, links to support organisations such as Lifeline, the Salvos and beyondblue, form letters for SICAG members who wish to contact politicians or industry bodies, and a lively forum page.

SICAG’s submission and supplementary submission to the joint parliamentary inquiry accurately captured the grief and suffering experienced as a result of the Storm collapse and provided committee members with a comprehensive set of recommendations to ensure such a disaster never occurs in this country again. I have watched the SICAG committee members—Mark Weir and Noel O’Brien in particular—develop into measured and credible spokesmen for their members. Their informed public comments, well-researched arguments and firm leadership have significantly enhanced the reputation of SICAG as a credible and respected player by politicians, lawyers, regulators, the media and, of course, their members.

Despite enormous personal financial losses, these men—and I am happy to single out Mark Weir, Noel O’Brien and Graham Anderson—have devoted thousands of man-hours of work to SICAG. This has involved fielding thousands of phone calls, emails, letters and text messages from the group’s 1,500 members, often from people who have reached the end of their tether and are contemplating the darkest of thoughts. Many of SICAG’s members are what might be termed unsophisticated investors and they have therefore come to rely on Mark, Noel and Graham to give them advice on how they may retrieve themselves from their financial quicksand.

In addition to this the SICAG committee has conducted 10 public meetings in places as far-flung as Brisbane, Rockhampton, Mackay, Townsville and Cairns as well as many meetings with local, state and federal politicians, lawyers, bank representatives and financial regulatory institutions. I know for a fact that these men have never used their positions to push their own case of financial hardship, or those of their families, to the top of the pile ahead of other SICAG members. They prefer simply to wait in turn like everybody else.

It is impossible to measure their contribution to righting the wrongs that were done to them and their members, and the lives that they may have saved, simply by putting aside their own personal hardships and lending a sympathetic ear or hand when it was most needed. This is the essence of what makes this a great nation. This is the Australian way. I take this opportunity to publicly congratulate these men—Mark Weir, Noel O’Brien and Graham Anderson, in particular, and their fellow SICAG committee members and supporters—for their untiring and selfless work on behalf of their members. I also commend their long-suffering wives, partners, relatives and friends, who have stood by them during this most distressing time.

I urge the banks to show compassion and sympathy. The banks are dealing with human beings, not just money. If I see that the banks have been all talk during the PJC inquiry and show in the future that they are not sticking to their word, no doubt this parliament will call them to an inquiry again. Justice and compassion not only must be seen to be done, justice and compassion must be done. I thank the Senate.