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Tuesday, 13 May 2008
Page: 1665

Senator Webber asked the Minister for Superannuation and Corporate Law, upon notice, on 13 February 2008:

(1)   What action is the Australian Securities and Investment Commission (ASIC) taking against the directors of Westpoint Corporation Pty Ltd.

(2)   Is the Minister aware of any proposed legislation or amendments that would have prevented the actions of the Westpoint directors.

(3)   Is the Minister aware of any representation made by ASIC to have legislation amended that would have prevented mezzanine finance deals similar to those employed by Westpoint.

(4)   Did ASIC believe that Westpoint mezzanine funds were regulated products.

(5)   On what dates did KPMG sign off on Westpoint’s accounts in the past 6 years.

(6)   What action did the Australian Prudential Regulatory Authority (APRA) and ASIC take when they first discovered that Westpoint was acting as a bank without a licence.

(7)   Why did APRA and ASIC take a long time to realise that Westpoint was breaking the law.

(8)   Why has APRA not increased the limits for Financial Industry Complaints Service jurisdiction.

Senator Sherry (Minister for Superannuation and Corporate Law) —The answer to the honourable senator’s question is as follows:

(1)   ASIC’s court action relating to the Westpoint collapse is well advanced with a number of ASIC court proceedings having commenced against some of the parties, including the company’s founder, Mr Carey, and two other directors and the banning of a number of financial advisers. ASIC’s investigations to August 2007 included 62 investigations, 29 proceedings to preserve assets or place travel restrictions on persons of interest, and the winding up of companies to stop misconduct and preserve assets. ASIC has orders in place freezing the assets of the Westpoint founder, Mr Norman Carey and other associated parties up to March 2008. The court declined to extend travel orders preventing Carey from leaving the country but instead has put limited travel orders in place. On 13 September 2007, following action by ASIC, Mr Neil Burnard was committed to stand trial in the NSW District Court on charges relating to him making false statements in relation to Kebbel Investment Bank in order to obtain financial advantage for various Westpoint mezzanine finance companies. In December 2007, the Supreme Court of NSW also extended asset preservation orders against Mr Burnard until 11 February 2008. ASIC’s investigations into the collapse of the Westpoint group of companies is continuing. ASIC determined late last year that it is in the public interest to commence action under section 50 of the ASIC Act to recover damages on behalf of Westpoint investors. Action commenced so far amounts to potential damages claims of around $98 million for approximately 1500 investors.

(2)   No.

(3)   In July 2006, ASIC conveyed its view to the Department of Treasury that consideration should be given to lifting the exclusion for promissory notes from $50,000 to a figure of, for example, $500,000. The Government is considering options to implement this recommendation.

(4)   Yes, ASIC believed the Westpoint mezzanine funds were regulated products.

(5)   In the past six years, KPMG signed the audit reports of Westpoint Corporation Pty Limited on the following dates: Year ended 30 June 2002, 2 December 2002 Year ended 30 June 2003, 5 December 2003 Year ended 30 June 2004, 4 March 2005 Year ended 30 June 2005, Not finalised; ASIC sought orders for compliance

(6)   ASIC received a complaint about the use of the term ‘Kebbel Investment Bank’ in April 2005. ASIC referred the complaint to the banking regulator, APRA. Subsequently APRA wrote to Kebbel (WA) Pty Limited stating that no appropriate authority to use the term ‘bank’ had been given and that the conduct was to cease.

(7)   Westpoint is not an APRA regulated body. ASIC advises that it became concerned about Westpoint’s fundraising activities after it became clear that Westpoint was deliberately setting out to avoid the disclosure requirements in the law.

(8)   APRA has no jurisdiction in relation to the Financial Industry Complaints Service (FICS).