The State Government will set up a $30 million ex-gratia compensation fund for investors who lost their savings in the finance broking scandal, a settlement for the damages claim lodged by the Insolvency Managment Fund.
The State Government will set up a $30 million ex-gratia compensation fund for investors who lost their savings in the finance broking scandal, a settlement for the damages claim lodged by the Insolvency Managment Fund.
IMF executive director Hugh McLernon said he considered the deal a reasonable settlement, and the company would be recommending it to claimants.
While the settlement was half of the maximum amount IMF was seeking from the state government, for the role the Finance Brokers Supervisory Board played, Mr McLernon said it was only the first step in seeking justice for his clients.
IMF will now pursue a number of law firms implicated in the scandal for the remaining $90 million sought.
Consumer Protection Minister Michelle Roberts said that although the Government was confident of successfully defending the IMF damages claim, the State's strong financial position meant it could offer some compensation to the victims.
"It is important to remember that it was the dishonest behaviour of finance brokers and their advisers in the 1990s that caused these losses," she said.
The full text of an announcement from the Minister's office is pasted below
The State Government has offered a $30 million compensation package to the investors who lost their savings in the finance broking scandal of the 1990s.
Consumer Protection Minister Michelle Roberts said the proposal had been offered as a settlement for the damages claim lodged by the Insolvency Management Fund on behalf of 2,100 investors.
"Between 1990 and 1999, thousands of investors, mostly elderly retirees, lost a great deal of money in mortgages and schemes organised by unscrupulous and dishonest finance brokers," Mrs Roberts said.
"The previous Liberal Government did nothing during this scandal and we now want to bring this disgraceful chapter in our State's history to a close."
The Minister said that if IMF accepted the settlement proposal, the State Government would set up a $30 million ex-gratia compensation fund for all victims of the finance broking scandal.
"This ensures that compensation is available to all those who lost money, not just the clients of IMF," she said.
"We expect there could be several hundred more investors on top of the 2,100 IMF clients who would benefit from this package."
Under the proposal, IMF would receive a total of $3.4 million, comprising $1.4 million to cover legal costs and a further $2million to administer the compensation fund and distribute payments to all eligible investors.
"This means that a total of $26.6 million of the compensation fund will be paid directly to the finance broker victims," Mrs Roberts said.
"This is considerably better for the victims than a proposal put forward by IMF that would have seen the litigation funder reap $8 million in legal costs and success fees.
"We have always maintained that we want to see the bulk of any compensation money go directly to the victims of the finance broking scandal, rather than the corporate backers of the legal action."
The Minister said the offer was also conditional upon IMF agreeing that no money would be paid to Brian Burke and his services in relation to finance broking matters would cease.
"If there is to be any settlement, we will not be prepared to see any money going to Brian Burke," she said.
IMF has indicated that Mr Burke's retainer ceased in September this year.
Mrs Roberts said that although the Government was confident of successfully defending the IMF damages claim, the State's strong financial position meant it could offer some compensation to the victims.
"It is important to remember that it was the dishonest behaviour of finance brokers and their advisers in the 1990s that caused these losses," she said.
The compensation package comes on top of five commitments already delivered by the State Government to help people who lost money in the finance broking scandal. These commitments were to:
- hold a judicial inquiry into the Finance Broking Industry: The Temby Inquiry held in 2001 revealed the full extent of the wrongdoing;
- provide legal assistance to help investors recover losses from finance brokers, company directors, valuers, accountants and lawyers or anyone responsible for losses: Legal Aid has taken action or entered into negotiations on behalf of more than 700 investors;
- ensure full disclosure of documents from the now defunct Finance Brokers Supervisory Board and other Government bodies that the Liberal Government refused to release;
- ensure any legal action to resolve liability is done in a timely and effective manner. Lengthy delays in the legal proceedings brought by IMF were caused by problems with funding arrangements between IMF and its lawyers; and
- pay up where liability is established: The Government has provided assistance to determine questions of liability and to date, there has been no finding of liability against the Finance Brokers Supervisory Board for the dishonest actions of finance brokers.
"The Labor Government inherited the mess in 2001 and has been at pains since then to ensure that every possible assistance has been afforded to those investors who lost their savings in this outrageous scandal," Mrs Roberts said.
