Mr EOIN CAMERON(6.08 p.m.) —Earlier this year I spoke in the House on the subject of second-hand goods dealers and pawnbrokers. I bemoaned the fact that these dealers were, in many instances, a cancer in the community. They contribute to a major cycle of crime involving stolen goods, burglary, drugs and institutional crimes such as money laundering and tax evasion. I asked how state and federal law enforcement authorities were addressing these problems.

Since that speech in the parliament, I have been the recipient of much correspondence from the Cash Converters group, which is the self-confessed largest player in the industry. Together with their spin doctors, Cash Converters have sought various meetings with me and challenged the validity of my claims. They have organised letter campaigns by their franchisees and generally pulled out all stops in attempting to cause me to back off in my push to clean up the industry. They have gone so far as to have my own colleagues contact me, telling me that it would be `politically unwise' to continue with this issue.

I subsequently received a letter from the managing director of Cash Converters which purports to be a response to my criticisms. The contents of that letter should not, and cannot, go unchallenged. The statements made in my previous speech and in the Donnelly report, which I tabled, demonstrate a good comprehension of Cash Converters Pty Ltd's accounts, despite the statement by the directors that my report displayed ignorance of Cash Converters' accounts, and their statement that the `whole business comprises a franchise chain of independently owned stores'.

Cash Converters claim that they have nothing to hide. To the contrary, they have a great deal to hide. On 9 March 1997, in the Perth Sunday Times newspaper, Brian Cummins stated that Cash Converters made `more than 60,000 transactions per week in Australia alone', and that `about one per cent of these involve stolen goods'—that is, 600 stolen goods transactions per week, or 31,200 stolen goods transactions per year. The value of the stolen goods transactions processed by Cash Converters, allowing a conservative valuation of $500 per stolen item—based on the value of the item, not the Cash Converters purchase price—is $300,000 per week, or $15 million per year.

In addition, a very conservative three per cent of Cash Converters transactions are unreported stolen goods—that is, goods stolen by family members and not reported to the authorities; these amount to an approximate $45 million per annum. The police report on the raid on the Gouger Street store of Cash Converters in Adelaide will more than back up these assertions.

Neither I nor Mr Donnelly ever stated that the 135 completely independent franchise stores were involved in money laundering. Even on the evidence of disclosed accounts, huge amounts of cash have been injected into Cash Converters businesses, always provided that they have been stores in which Brian Cummins has had a personal financial interest. This happened systematically during the company's expansion in Victoria during 1991. As happened then, the managing director of the trading company, Brian Cummins, lent or invested cash sums totalling not less than $634,043.62 in Cash Converters stores at Dandenong, Moonee Ponds, Preston, Clayton and Forest Hill—all of them stores in which he was financially involved. Cash Converters have said that these were his own funds and not the company funds.

You then have to ask the question: how did the cash injections by Brian Cummins in the Forest Hill store become a loan from Cash Converters Pty Ltd? In relation to this store alone, I also want to know: why are there significant differences in the treatment of the cash outstanding, as well as the cost of goods sold, and the baseline profit between the cash books and the prepared accounts for the period to the end of February 1993? Why also have the cost of goods and the purchases been manipulated to reflect 50.5 per cent of sales? Actual purchases through the cash books indicate a difference in costs paid for purchases that varies by some $45,000 over an eight-month period. And why are there discrepancies in the taxation return for 1992—which was also prepared by the `associated' auditing and accounting firm; namely, why was the taxable profit less than the accounting records?

Despite Cash Converters Finance Corporation Ltd's accounts and audits being overseen by an audit committee in accordance with the highest standards of corporate governance, all accounts being audited by Price Waterhouse and company, and National Mutual Trustees Ltd subjecting CCFCL's accounts to close scrutiny with monthly reporting and half-yearly audits, I am astounded that a myriad of breaches have not been detected on audit. I have documentation, instructions that show in a weekly report how to skim 20 per cent off the daily sales and how to avoid detection. Where, may I ask, is the Australian Taxation Office? There are more questions to pose than I have time available for this evening.

I believe the process of stripping Cash Converters public facade to reveal their true face has begun, and that it is time for their franchisees, their investors, as well as the authorities and the government to stand up and eliminate cancers in our society, like Cash Converters, by ensuring the introduction of proper corporation laws regulating franchises and fully protecting franchisees. In the document which I will seek leave to table in just a few moments, I have gone through some background on this fairly extensively. In the House earlier this year I made the statement that 70 per cent of Victorian franchisees have failed.

Cash Converters have responded, in response 5.1, which I have detailed in all of the documents I have to table, that this is simply false. Out of all the stores opened in Victoria since Cash Converters started in that state, two were closed by consent because they were located in small towns whose population could not support a franchise store. A further two were closed by reason of serious breaches of the franchise agreement by the franchisee. These too were replaced with new stores. Three were closed as part of a settlement of litigation in which Cash Converters terminated the subfranchisor agreement for Victoria so that it could manage that state directly. There are 23 stores open and trading, including all the stores opened there save for the seven mentioned.

Now for the facts. My statement `nearly 70 per cent of their Victorian franchises have failed' made in parliament on 5 March this year is correct. CCIL's statement that there are 23 Victorian stores open and trading is incorrect. In June this year another Cash Converters store in Victoria—namely, Ferntree Gully—was placed in the hands of the receivers leaving 22 stores in Victoria. `Open and trading' does not mean the Victorian stores are successful.

Before exemplifying my statement, according to the Collins Australian Gem English Dictionary `fail' means `be unsuccessful; stop operating or working; be below the norm; become bankrupt'. In addition to the seven stores already mentioned, in the last 12 months three Cash Converters stores went into liquidation. Prior to this, six stores controlled by Tony Cummins—who is now bankrupt—were sold at basement prices or for no consideration. One store is refusing to renew its franchise. Eight stores are struggling to break even. A minimum of 78 per cent of Victorian Cash Converters stores have failed.

In New South Wales the position is similar. Five to six Cash Converters franchisees are in dire straits, 10 to 13 Cash Converters franchisees are breaking even; two Cash Converters franchisees are doing well; and the position is unknown for approximately eight to 10 Cash Converters franchisees. Many franchisees in New South Wales and Victoria have been endeavouring to sell their stores for many months without success.

This document which I propose to table in a few moments is not only damning of the Cash Converters organisation; sadly it demonstrates the inability of both the civil and criminal legal systems to address a problem that reaches into the lives of very many Australians. I now seek leave to table this document, a response to Cash Converters, together with the evidence in support of the contents of that response.

Leave granted.