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Alleged misconduct at Senate inquiry into investment schemes

The chairman of a Senate inquiry into forestry managed investment schemes is alleging criminal conduct by some of the parties involved. Source: ABC Rural

Tasmanian Greens Senator Peter Whish Wilson also questioned the integrity of some banks and financial advisers. He said some advisers did not disclose large commissions they would receive, when signing investors up.

Senator Whish Wilson said evidence from credible witnesses also showed some schemes grossly overstated timber yields and dividends in their prospectuses.

He said he intended to raise those issues with the Director of Public Prosecutions (DPP) and the Australian Securities and Investment Commission (ASIC).

“So far, there’ve been civil convictions in relation to wind-ups of Timbercorp and Great Southern,” Senator Whish Wilson said. “But there has been no criminal prosecution.

“It was discussed in evidence yesterday what role ASIC or the DPP may play in this.

“And it’s certainly something we’ll be putting directly to ASIC and the ATO [Australian Taxation Office] and others when we call them in Canberra.

“Because there are people out there who’ve essentially got a slap on the wrist. They’ve made tens of millions of dollars in some cases.

“Some of them are still working in the financial planning industry, and it is unacceptable.”

Public policy advisor John Lawrence told an inquiry hearing in Launceston that Managed Investment Scheme tax incentives created an unsustainable supply-driven market.

He said some of the projected yields from the plantation forests were grossly overstated.

Mr Lawrence also said some proponents actively sought to hide the facts.

“The first scheme that I ever saw the harvest results for, it yielded less than half what was predicted,” he said. “They had to organise an associated company to buy the timber, in order to inflate the prices received.

“Because I was a tree grower too, I knew that the growth rates being achieved by these other schemes weren’t anywhere near what they said.

“In 2008, Great Southern showed signs of real distress, and it finally became public that they were struggling financing their operations.

“Managed Investment Schemes, as they were run, is an awfully expensive way for governments to encourage a plantation industry.

“That is basically the lesson, and for investors, beware.”

The inquiry heard retired farmer Ian Farquhar’s belief that Australian governments needed to facilitate commercial tree growing and cropping.

Mr Farquhar said he thought primary industry also needed a mechanism to get small investors involved.

“Some of the justification has been the need for trees in the Australian landscape,” he said.

“That it was poorly structured and mismanaged doesn’t detract from the fact that those underlying needs are still there.

“[Trees] can potentially benefit both investors and agriculture.”

Former chief executive of the Tasmanian Farmers and Graziers Association, Jan Davis, said government support for Managed Investment Scheme plantation forests was a mistake. She said government support, backed by generous tax concessions, had created a disaster for hundreds of Tasmanian farming families.

“Governments need to learn from this and understand that putting their support – which is what they did by allowing Managed Investment Schemes such generous tax concessions – is fraught with risk.

“Really it does nothing but compromise existing businesses.

“We need to see support for the farmers, the leased land owners to take the administrators, the liquidators who are doing the stuff to court and get some clarity.

“Thirdly, they need to give some compensation for the income and the cost and the disruption that’s been caused.”