Untitled Document

BACKGROUND.

The Australian Parliament created ASIC in 1998, and it became operational in 1999. Since its inception, it has drawn much criticism for its retroactive approach - and its for its incompetence. In January 2006, The Auditor General criticised it for its inability to implement an AFSL licencing system [2006_01_25_AFR]. It again criticised it in January 2007 for its abysmal prosecution rate per complaint. Perhaps Neal Prior, the current editor of the West Australian, once best described its time of existence as a "reign of error".

A short list of the larger companies in which it has failed to act in time over the years include HIH, One-Tel, Sons of Gwalia, Harris Scarfe, Westpoint, ACR and Fincorp Then there are those of a smaller size. Hey include Business Capital Australia, Gabriel Pennicott, National Investment Institute, Radison Maine, Robert Orehek, Sonntag, Streetwise, Tasmanian Mortgage Scams, Triscott, Qual Corp, Hanna Bros, Viron Hondros, Pagoda Edward Elecom, and Henry Kaye. In more recent times we have seen the collapses of Westpoint, ACR, Fincorp, Bridgecorp, and more recently Storm. In all of those there were clear warning for ASIC to investigate and take immediate action. That list is anything but exhaustive, and does not include small companies. Nor does it include recent stockmarket failures.

It is natural Westpoint investors know more about how ASIC failed them time and again than they do about how ASIC failed the investors of any other company. However, we know sufficient to state categorically Australia possesses its own WMID. A fact neither John Howard nor Peter Costello want to admit. It doesn't matter how they try to ignore or hide it, ASIC is truly a Weapon of Mass Investor Destruction.

ASIC has made many excuses for its failure to act in the Westpoint disaster - including it didn't have the power to intervene. The latter is disputed by many senior figures in legal circles (including IMF's Hugh McLernon). However, ASIC can't escape the fact Westpoint approached it on a legal matter concerning PN's in 2000, giving it every opportunity to examine the model in which they would be used. Their legal incompetence caused it not to recognise the Westpoint Mezzanine Schemes as Managed Investment Schemes - and illegal ones at that. The sad, but true. fact is every Westpoint Mezzanine Investor put their money in illegal products under the watchful eye of the regulator. It is not Graham MacAulay saying the Westpoint Mezzanine Scheme Model was an unregistered (therefore illegal) illegal MIS, but a finding of theWA Supreme Court. In addition to this catastrophic blunder, Timeline/Need for Royal Commission proides ample evidence of how ASIC failed Westpoint investors time and again in other ways.

Then there is the matter of ethics (and legality). ASIC provided Westpoint Lawyers, Freehills, with a document stating it would not take future action on promissory notes. ASIC did take action against Westpoint on this matter, and Hansard records ASIC clais they had no real evidence to do so>.

Given the evidence, below (and elsewhere) it very difficult to believe the Howard Government did not do everything in its power to suppress the truth in this matter. Using ASIC as a cash cow returning a profit in excess of $300 million a year to Treasury is bad enough, but denying investors their natural rights and covering up for an incompetent regulator is not something one expects from a Government in which the PM, John Howard often uttered the mantra of "a fair go for all Australians".

Matters have not improved with the advent of the Labor Government coming to power. Prior to the election, Senator Sherry promised an open inquiry into the Australian Financial System - including ASIC - if Labor came to power. To date they have not kept that promise.