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Thursday, 26 September 2002
Page: 5027

Senator BUCKLAND (4:36 PM) —I rise to speak in support of the motion standing in the name of Senator Sherry and relating to superannuation. I want to speak on the Howard government's failure to adequately compensate victims of superannuation theft and fraud. The issue of fraudulent losses of superannuation funds is a highly emotive one, as you can well imagine. Primarily, if you are one of the many people whose retirement savings have vanished due to someone else's dishonesty and you are close to retirement age with barely any chance of making up the losses, you must be seen as a hard case and as being unprotected by this government. That says much about the minister's idea of choice. The minister's dorothy dixer today was on the question of choice, and I have to say that I do not think she convinced anyone in the chamber that it is the way to go.

But it is the question of fraud and theft through these funds that particularly interests me today, because we are talking about the largest sum of money in one pot that most Australian workers and their families will ever have at one time. It is something they should be able to rely on having when they leave employment upon retirement—a nest egg for the future. It is fortunate that the majority of Australians' super nest eggs are safe. However, recent occurrences have verified that the super industry has more than its share of underhanded individuals. Such was the case with the scandal of Commercial Nominees. This particular case clearly revealed significant failings on the part of Peter Costello's world's best practice regulator, APRA, and the mean-spirited response of the government.

The Senate inquiry revealed that APRA was very slow to respond to signs of trouble with Commercial Nominees and was too willing to take the directors at their word when making commitments they had no intention of keeping. Commercial Nominees were engaged in systematic fraud and mismanagement involving the investment of superannuation in secondary vehicles with reassuring names like the Enhanced Cash Management Trust, which suggested a conservative and highly liquid choice of assets when, in reality, the money was invested in disastrous projects with close links to the directors of Commercial Nominees. An article in the Business Review Weekly quotes the Director of Policy and Research for ASFA, Michaela Anderson, as saying:

We found it amazing that the regulators hadn't been keeping a close watch on Commercial Nominees. Without too much trouble, we found a lot of publicly available information [such as from ASIC company searches] that should have been sounding warnings bells to APRA before its collapse.

The most disturbing news yet to eventuate from this disgraceful saga is that the government's response has been a refusal to provide full compensation for losses incurred, including the significant fees levied by the replacement trustee.

For the past six or seven months, Minister Coonan has had a copy of a report by the government's working group on the safety of superannuation chaired by Don Mercer, former Chief Executive Officer of the ANZ Banking Group. The committee's draft report, drafted on 4 March, recommends that all superannuation trustees be licensed by APRA and that the regulator be given powers to set prudential standards. In March, the Productivity Commission recommended that the superannuation industry be made more accountable in relation to its operational investment and governance risks. Where is the report and where is the action taken by the minister? In actuality, the compensation regime in the superannuation legislation provides for up to 100 per cent compensation. Labor does not accept the government's response.

Senator Watson —It was only 80 per cent under Labor.

Senator BUCKLAND —Senator Watson is saying it was only 80 per cent under Labor and now it is 100 per cent, but what did these people who lost their money through this fraud of Commercial Nominees get? They were not fully compensated. It is no good waving the banner now. It is a bit late for that.

On 27 June, Labor moved amendments to the SI(S) Act to ensure full compensation for eligible losses. This gave the government and the Democrats the opportunity to support full compensation but they rejected these amendments. The government should take advice from its own regulator, APRA, who says:

The amount of the grant should equal the amount you determine to be the eligible loss suffered by the fund.

Labor remains determined to guarantee 100 per cent compensation in the event of theft and fraud. Michaela Anderson from ASFA was also quoted in the Business Review Weekly as saying:

APRA should be following the links [between directors and companies]. Commercial Nominees has provided some real lessons.

But what has the government learnt? The government has learnt nothing. It is sitting on its hands while decent working people are losing their money because of fraudulent operators.

It is startling to note that no-one has been charged for any of the offences arising from the Commercial Nominees affair. In disbelief we also find that these people are still free to work as APRA approved trustees. Extensive searches by BRW of ASIC's records and other inquiries show that at least five members of the board and management of Commercial Nominees for some or all the period of the `theft or fraud' remain in the superannuation industry. They are still there; they are still waiting for the gullible. And here we have a government promoting the idea of choice. That will only expose people to the dangers of the rogues of the world, but the government is supporting that idea.

A former director of Commercial Nominees, Anthony Hall, is doing consultancy work for another APRA approved trustee, Australian Superannuation Nominees. He was a director of Commercial Nominees from July 1997 until December 1999. Anthony Hall's father, Ernest Hall, is listed in ASIC's records as a shareholder in Australian Superannuation Nominees. Ernest Hall has also been a director of Combined Mushroom Farms, a venture that received large financial support from the Enhanced Cash Management Trust—a part of Commercial Nominees. Anthony Hall was one of those directors who fraudulently took money from workers. The people who had entrusted their money to them have nothing left. They did not get their money fully restored. So the banner waving by the government earlier on does not do them any good at all—these people did not get their money. It is imperative that the government not only compensate the victims 100 per cent but also ensure that there is a system in place to prevent this from happening again. This is a classic case, but there are others recorded.

The government says that now we should have choice of superannuation fund and the minister—I think I am correct in saying— indicated in her remarks, `Well, people can buy a house; they know how to fill out a form to buy a house.' That is true. But when you are confronted with a raft of folders and glossy brochures each telling you how good the fund is and each containing 50 or 60 pages that you have to read through, fill out the 30 or 40 pages of forms so that you can join the fund and then pay your exit and entry fees, what choice at all in superannuation is there for workers? It is a simple way of getting people to take their money from sound funds and put it into those funds which want to take the best deal from them. There is no choice in superannuation if it is left to the individual to find their own market.

The individual should be in funds that are industry based or are proper corporate funds. That is where the money should be placed, not in those funds run by fly-by-nights who are there to line their own pockets and then, as we saw with Commercial Nominees, commit fraud, divert the money into areas of their own operations—toward their own families, as we saw in the case of Commercial Nominees and the mushroom farm. Workers are not compensated for that loss. They got nothing out of that; they lost. Fraud has to be attacked; it has to be taken care of by this government. But the minister is sitting on her hands and doing nothing at all to address the question.