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Super collapse costs investors millions -

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The collapse of an Australian company has cost investors millions of dollars, but could it have
been prevented?

Transcript

CHRIS UHLMANN, PRESENTER: Millions of Australians have ploughed their life's savings into
superannuation since compulsory super was introduced 20 years ago.

$1.3 trillion is now invested, and that's expected to more than double over the next decade.

But hundreds of Australians have been devastated by the loss of their nest eggs in one of the
country's biggest investment frauds. The loss of $180 million with the collapse of Trio Capital
raises questions about just how safe that super pool is.

Rebecca Baillie reports.

REBECCA BAILLIE, REPORTER: Wollongong lies at the heart of the Illawarra region, just south of
Sydney. It's an industrial city built on coal, steel and textiles and its spectacular coastline
attracts retirees looking for a sea change.

But the Illawarra has taken some knocks, with mines closing, local government corruption and
unemployment higher than the national average.

Now hundreds of Wollongong locals have lost millions in the collapse of a superannuation fund
called Trio Capital.

PAUL MATTERS, CONVENOR, VICTIMS OF FINANCIAL FRAUD: This is really middle Australia and it's been
stripped of its assets in what is a very, very clever and insidious scheme.

NORM UPTON, TRIO INVESTOR: It's just soul-destroying. You've gotta make the most of what you've
got, it's just one day at a time and just handle the pressure as best you can.

REBECCA BAILLIE: Norm Upton is a fourth-generation coal miner. He always expected to retire
comfortably at 60 after a life of hard yakka in the mines. But now his life savings are gone.

NORM UPTON: The pits closed, then they re-opened, and I was paid out all my long service leave,
annual leave and sickness entitlements into BHP shares and I thought I was pretty lucky to have
that good investment behind me.

REBECCA BAILLIE: Norm Upton's financial advisor Ross Tarrant told him to take $350,000 out of his
industry super fund and put it into a fund called Astarra, part of a company called Trio Capital.

Did you know anything about Astarra Trio?

NORM UPTON: No.

REBECCA BAILLIE: Did he tell you anything about it?

NORM UPTON: Well he told us the basics, that it was just a - it was a fund and it was making money
and it was a local fund.

REBECCA BAILLIE: 17 years ago John Telford became an incomplete quadriplegic after he was hit by a
car. He spent six months in hospital and hasn't been able to work again. He received a victim's
compensation payout which the court ordered him to invest as it was to last him for the rest of his
life. John Telford was also a client of Ross Tarrant in Wollongong.

JOHN TELFORD, TRIO INVESTOR: Our financial planner called the people in and said he's been watching
this Astarra fund and it was conservative and safe so he suggested that everybody's going to be
changed into that.

REBECCA BAILLIE: So there were no warning bells for you?

JOHN TELFORD: No, not at all.

'SARAH': Just devastated the family. It's caused a lot of stress and strain.

REBECCA BAILLIE: Sarah and her uncle David invested her late father's estate worth $500,000 with
the same financial advisor.

'SARAH': Dad had always said to my mum and to us kids that if anything ever happened to him that
we'd go to Ross Tarrant and seek advice there and that he'd look after us.

REBECCA BAILLIE: Ross Tarrant invested the family's nest egg in Trio's Astarra fund. He assured the
family it was safe.

'DAVID', TRIO INVESTOR: All the eggs aren't in one basket so you can't lose all your money. There's
government protection, watchdogs in place so no-one can come and steal the money.

REBECCA BAILLIE: You were told that?

'DAVID': Yeah, yeah.

NORM UPTON: I was virtually led along. I trusted Ross Tarrant and I thought he was doing the right
thing by me as his client.

REBECCA BAILLIE: The planner who sold them the scheme, Ross Tarrant, is still working as an
accountant in Wollongong. He defends his role in investing in Trio at the height of the Global
Financial Crisis.

ROSS TARRANT, FORMER FINANCIAL ADVISOR: It was a flight to safety. We were trying to protect our
client portfolios and that was the name of the game. We were in a crisis. We were in the biggest
crisis since the 1930s.

REBECCA BAILLIE: Trio Capital was established in Albury. Australian Shaun Richard was a founding
director. Trio was the trustee of a series of super funds regulated by the government watchdog
APRA. It also ran a number of managed investment schemes, including the Astarra strategic fund. Up
to $180 million from these were invested in the British Virgin Islands in hedge funds controlled by
a Hong Kong-based American lawyer Jack Flader.

When those hedge funds collapsed the Australian investors' funds disappeared.

PAUL FLETCHER, FEDERAL LIBERAL MEMBER FOR BRADFIELD: It appears that the master mind of the scheme
is well known to the US regulatory authorities and it appears very clear from the trail of evidence
that he's been heavily involved in Trio.

REBECCA BAILLIE: Trio fund manager Shaun Richard has been sentenced to two and a half years' jail
for his part in the fraud.

ASIC has also suspended the licences of a number of financial advisors across the country,
including Ross Tarrant, who was banned in November last year for seven years for breaching
financial services law.

The mantra usually is, or the rule of thumb, "Never invest your eggs in one basket". Did you do
that with your clients' money?

ROSS TARRANT: Absolutely not. It started off in April 2008 as only 20 per cent exposure. As markets
deteriorated, this fund continually performed, it continually made positive returns, although not
great positive returns where the other funds were in significant decline. We did increase our
exposure to it as markets deteriorated and we were only there to protect client positions.

REBECCA BAILLIE: But didn't you think that was risky, doing that?

ROSS TARRANT: Not at all.

REBECCA BAILLIE: But it was all six funds underneath the one umbrella of Trio Capital.

ROSS TARRANT: Yes, but that's part of the fraud. We were not aware of that. We understood all of
the different funds that were being used were completely separate.

REBECCA BAILLIE: Ross Tarrant referred more than 220 clients to Trio. As a result, Trio paid him a
so-called marketing allowance of more than $800,000. But Mr Tarrant claims he too was taken in,
investing $500,000 of his own money. He's appealing the ASIC ban and blames the regulators.

ROSS TARRANT: We're not selling steak knives here. We've got audited accounts. We have APRA, we
have ASIC, we have government bodies regulating and licensing these investments. We have monthly
reports. We have the ANZ Bank and National Bank as trustees and custodians.

REBECCA BAILLIE: Paul Matters is a former union boss and convenor of activist group Victims of
Financial Fraud. He's campaigning for compensation for the victims of Trio. He says the problem is
while industry superannuation funds are regulated by APRA, Australian self-managed super funds
worth $400 billion aren't.

PAUL MATTERS: There's government negligence here, there's regulatory failure. There's gaps in our
protective system that people trusted the system because the Government said you could trust them.

JOHN PRICE, ASIC COMMISSIONER: It is possible to make it harder for that fraud to occur and the
Government has introduced some reforms that hopefully will make it less likely that something like
this will occur in the future. But I don't think you can ever completely eliminate the risk of a
fraud from our financial system.

REBECCA BAILLIE: Investors who put their money in the APRA-regulated funds associated with Trio
will be compensated. Nearly 700 others, like John Telford, won't get anything.

BILL SHORTEN, FINANCIAL SERVICES AND SUPERANNUATION MINISTER: People who invested in APRA-regulated
funds have been compensated, but there are some hundreds of people who swam beyond the flags, who
weren't in APRA-regulated funds.

PAUL FLETCHER: It's surely not acceptable that you are left exposed to fraudulent and criminal
behaviour. I must say, the issues are rather more substantive than that glib response from Minister
Shorten would suggest.

PAUL MATTERS: When this capital is invested into a global money market with hedge funds, they don't
worry about flags and there's no flags out there.

REBECCA BAILLIE: A joint parliamentary inquiry into the Trio collapse will report back next month.
It may recommend changes to protect Australia's $1.3 trillion superannuation pool. But that'll be
too late for those who've already lost their life savings in Trio.

JOHN TELFORD: I'm hoping that my home doesn't get taken away from me.

NORM UPTON: Now I can only hope that I can keep on earning a wage because all my superannuation is
virtually gone.

'SARAH': We've already lost a dad and a husband; now we've lost everything that he ever worked for.

PAUL MATTERS: And I'd ask anyone watching this tonight: do you know where your money's invested?
There's a lack of transparency in the Australian superannuation system which allows these scams and
scandals to occur.

REBECCA BAILLIE: So could this happen again then?

PAUL MATTERS: Certainly could. It could be happening now as we talk.

CHRIS UHLMANN: Rebecca Baillie reporting.