Kristen Paech speaks to the Storm Investors Consumer Action Group to find out how Storm’s former clients are feeling.
Hundreds of former Storm Financial clients have banded together in an attempt to claw back their losses after the group’s demise left some without even a roof over their heads. Noel O’Brien, joint chairman of the Storm Investors Consumer Action Group (SICAG), is pushing for an inquiry into the banking system in Australia and is urging members and ex-clients to lobby parliamentarians for changes.
Surprisingly though, O’Brien doesn’t hold Storm accountable for the fiasco. Like Storm’s founder, Emmanuel Cassimatis, he says the Commonwealth Bank of Australia (CBA) is entirely at fault for allegedly turning a $30 million “paper loss” into a $2 billion “real loss”.
Cassimatis has previously stated that Storm had no choice but to enter voluntary administration following a demand from CBA for full payment, in just one day, of the corporate debt facilities Storm held with the bank. According to Korda Mentha, the receivers appointed by CBA, Storm owes the bank $27.09 million.
“We really believe that had the [CBA] been willing to negotiate with the Storm executives, we may have all weathered the storm better,” O’Brien says.
“Had everybody sat on their hands, things would have been fine, but at some point in time the bank… decided to sell us down. Storm was in discussion with the Commonwealth Bank offering a bail out package, which included an offer [from Storm] to guarantee all of the negative clients’ debt. That amounted to about $30 million.
“They created from a $30 million paper loss a $2 billion real loss and put thousands of people in this horrendous situation they’re in now. They are financially busted, they have incredible mortgages with no possibility of repaying them, and they’ve become a massive burden on the Australian taxpayer when all they really wanted was to have a secure retirement.”
SICAG has more than 1000 registered members and the support of law firm Slater & Gordon and consumer advocate John McLennan.
McLennan is the former Westpac executive who blew the whistle over the Swiss bank loan scandal in the 1990s. The SICAG website says the lobby group was formed out of a need to “seek justice (and restitution) from a banking and financial services industry that has been able to get away with murder”.
Since then, the group has held meetings across Queensland, including Margate, Townsville, Rockhampton, Cairns and Mackay. In a statement to Professional Planner, a spokesperson for the CBA said the bank issued a notice to Storm on December 31 regarding its debt obligations: “We reject the claim we provided one day’s notice [of repayment]. Storm Financial was very much aware that one of its corporate facilities had been in default from early December 2008.”
The spokesperson pointed out that it was the board of Storm, not the CBA, who appointed the voluntary administrator.
“The findings of the voluntary administrator that the company was in severe financial difficulty were evident early, with the administrator closing the company down within a short period of his appointment,” he said.
O’Brien is angry about the portrayal of Storm clients by some commentators as greedy and naive.
“All of this hullabaloo about margin lending and that we should have known better… the basis of the exposure was always that history has shown that when we have a fall in the market it will recover,” he says.
“Our buffers were sufficient to see us through that. We’re getting a lot of comment from people in hindsight saying, ‘You should have seen this’. That’s pretty amazing because no one else in the world saw it. We could sleep at night because we had these buffers built in that allowed for downturns in the market.”
He insists none of the members of SICAG are “high flyers”, despite the overseas trips that Storm arranged and some clients enjoyed, which Professional Planner understands cost $25,000 per head.
“I live a modest life, my wife and I had a modest income and we were really proud that we could call ourselves self-funded retirees, therefore avoiding becoming a burden on the taxpayers,” O’Brien says.
“We were comfortable in our strategy.”
O’Brien is adamant that the actions of CBA, and Colonial Margin Lending, engineered the collapse of Storm and vows to fight to protect the assets of all creditors.
“[If it wasn’t for the banks] we would still be in the game, we would all still have our houses,” he says.
“We would still be scared to death about what’s happening worldwide, because it’s never happened before; it’s unprecedented and has been created by the banks which have rorted their systems, but we’d still be in there fighting. Our aim is to get total restitution; our aim is to get people’s houses back and get them back in the game.”