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Botched timber schemes

More than a decade after being left out of pocket by a multi-billion dollar timber scheme collapse, thousands of investors are still seeking compensation. Source: ABC News

Under a scheme introduced by the Howard government and maintained by Labor, businesses were granted big tax deductions for investments in managed timber plantations.

The dream was to establish more than 2.5 million hectares of taxpayer-funded forests to make Australia self-sufficient in plantation timber.

Around 61,000 investors, called growers, were lured into such schemes by companies like TimberCorp and Great Southern but most of the schemes collapsed, and today vast swathes of the blue gum plantation timber cultivated across central Victoria and other states are being set ablaze.

The collateral damage to rural centres like Casterton, near the Victorian-South Australian border, has been huge.

Land owners like John Diprose and David Marshall have been left in limbo. Though rental payments for trees on their land had ceased, they could neither harvest nor get rid of the trees.

Investors have haggled endlessly in court with liquidators and banks.

“The court is ruling in favour of growers who say they have rights to the trees,” Diprose said. “Albeit if they aren’t paying the rent, and if I go in and damage the trees, I’m accountable.”

Foster said it was very difficult to speak out against the schemes.

“You couldn’t say anything against it, you’d go to a meeting and try and get up and mention some of these practices that were wrong and you’d just get hounded down,” he said.

Victoria’s Supreme Court is currently hearing Australia’s largest class action against Great Southern. It involves 20,000 investors.

Company director and general manager of forestry Gavin Ellis said he will give evidence that he personally discussed concerns that the company had misled investors with Great Southern’s founding director John Young.

Young has already spent $2 million mounting his defence. His lawyer said the promoters never guaranteed the success of any investments.

Analyst say investors were misled ABC’s 7.30 has obtained documents from the former Great Southern Group, revealing internal data on past and forecast timber yields.

Prepared by key executives including Ellis, the figures are very different from numbers used in Great Southern’s prospectuses.

The figures were shown to agribusiness analyst David Marshall, who feels investors were misled.

“This information has been hidden but it’s slowly coming out,” he said. “Internally their general manager of forestry, the director of forestry on the board, they were submitting papers to the board showing the average growth rate and the stumpage price.

“They’re the two key drivers of investment on a timber plantation. Both of them were between 40% to 60% below what the prospectuses were saying.”

He said the botched schemes have cost the Government billions.

“It was greed and it was naivety driven by totally unscrupulous people,” he said. “Probably 20 schemes were profitable, out of maybe 1000. I would estimate a minimum loss to Government of $5 billion.

“It’s an absolute smoking ruin. Yet the executives of these big companies are extremely rich and that’s what really upsets me, because the small people really got nailed.”

Agribusiness analyst Sam Patton said there was no accountability under the scheme.

“They could make these statements and yet no-one was independently auditing on behalf of the taxpayer,” he said. “There was just this unilateral lack of accountability by government in not supervising them.”