Beware Thief in a Suit

Beware the thief in a suit

PUBLISHED: 12 May 2012 00:06:01 | UPDATED: 12 May 2012 03:54:13PUBLISHED: 12 May 2012 PRINT EDITION: 12 May 2012

Duncan Hughes

The nation's top law enforcers are investigating links between tens of millions of dollars in thefts from dozens of self-managed superannuation funds and major organised crime syndicates.

Task Force Galilee, a multi-agency task force led by the covert Australian Crime Commission, believes sophisticated criminal syndicates consider the $400 billion sector a lucrative target.

Their concerns have been underlined by claims from convicted self-managed super fund, or SMSF, fraudster Shawn Richard about how easy it is to elude the financial regulators when the assets are shipped offshore.

Fears that the nation's single largest pool of superannuation assets - they account for about one-in-three dollars of retirement savings - will be heightened next week when a Senate investigation into losses from Trio Capital are published.

Investigators estimate that about $123 million of assets, much of it in SMFSs, were siphoned offshore, using Trio as a conduit to a global network of purported hedge funds.

Not one cent of that has been recovered and people of interest, such as Hong Kong-based financier Jack Flader, and his investment advisers, Frank Bell and Carl Meerveld, have disappeared.

Lessons on how to harvest billions of vulnerable dollars are not being lost on criminal syndicates with the networks and know-how to transfer assets around the globe at the tap of a computer key.

John Lawler, chief executive of the Australian Crime Commission, said the taskforce had so far identified losses of about $113 million from 2600 people, including about 800 companies and more than 50 SMSFs.

"They are watching, they are looking, they are exploiting," he told a recent Senate committee hearing.

Lawler, who believed the loss estimates were conservative, said Australia's $1.4 trillion in superannuation assets, the world's fourth largest pool of savings, were an "attractive market for organised crime". He debunked the popular belief that a white-collar fraudster was a fly-by-night opportunist who preyed on the vulnerability and naivety of the gullible with charm and a good story.

"In many cases, victims of this type of fraud are well-educated, baby boomers, most likely a business owner, or professional person and have invested money in legitimate schemes previously," he told the inquiry into the Trio collapse.

The new-generation fraudsters used sophisticated marketing techniques to create the impression of "legitimacy, trustworthiness and success", he said.

Syndicates establish virtual offices online, or fictitious corporations that mirror legitimate businesses.

"They build a perception of legitimacy through highly professional looking web sites that provide press releases and make false claims of outstanding corporate performance," Lawler said

"They are often linked to false regulator sites and can manipulate search engine data so that those undertaking due diligence are provided with affirmative responses in relation to the investments that are being undertaken," he said.

In some cases, the duped investors are so convinced of their sincerity that they do not believe authorities claims that they are a victim and are "quite happy and content to keep investing".

Authorities are increasingly alarmed at the scale of the scams.

Andrea Slattery, chief executive of SMSF Professionals' Association of Australia (SPAA), a lobby group for the sector, agrees there is a problem but disputes that SMSFs are the main target. "This is a financial services problem," Slattery says. "It is not only a SMSF problem."

Lawler said organised crime was "all about money and profit" and that "if there is no money to be made, we won't find them".

"They are attracted where there are large money flows, where money is in the control of people who may not be sophisticated and as worldly as one might like and progressively will provide a very fertile ground for fraud and other criminal activity."

Trio Capital's flagship offshore funds continued to report global financial crisis-defying double digit performance results to financial advisers and investors as competing funds crashed. But it was the competitors, rather than the regulators, who are believed to have blown the whistle on the scam.

A Sydney-based hedge fund