01/10/2009 - 00:00

Firepower fallout reaches Aspen pair

01/10/2009 - 00:00

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Three investors are seeking legal redress from the now-defunct company that licensed one of the major Firepower promoters.

Firepower fallout reaches Aspen pair

THE founding directors of Perth property manager Aspen Group have been drawn into the mess left by Firepower, after their financial services business licensed one of the promoters of the failed fuel technology company.

Aspen directors Angelo Del Borrello and Gavin Hawkins owned the financial services business, Sagecorp, but it has since been wound-up.

There are three Firepower investors pursuing Sagecorp and/or Messrs Del Borrello and Hawkins in a bid to retrieve their money; two investors have taken the matter to the Financial Ombudsman Service, while a third is in the Supreme Court.

They are able to pursue the claims because they put Sagecorp on notice just before its QBE insurance ran out in mid 2008.

Litigation funder IMF also considered taking action against Sagecorp - representing more than 300 investors who deposited more than $35 million into Firepower - but told WA Business News it was unable to proceed because it put Sagecorp on notice after the QBE insurance had run out.

During 2008, Sagecorp's insurance stopped, the company was placed into voluntary administration and its financial advisers were transferred to the newly created Peak Financial Partners (see graphic). Sagecorp had $1.8 million worth of assets at the end of fiscal 2007, according to ASIC documents.

In a statement sent to WA Business News, Messrs Del Borrello and Hawkins said Sagecorp always took its legal and governance obligations seriously, and that when an adviser was found to be acting inappropriately, the company took immediate action.

Two of the investors who put Sagecorp on notice before the insurance ceased are Perth residents in their mid-20s. They took their complaint to the ombudsman, which settles disputes between consumers and businesses providing financial services.

"I'm probably the smallest investor Firepower had but I'm making the biggest noise. I don't take kindly to being ripped off," one of the young men said, referring to the failed fuel tech company.

The two investors asked not to be named until the ombudsman handed down its decision.

Firepower purported to have developed a 'pill' that reduced the fuel consumption and environmental impact of petrol-operated vehicles and is estimated to have burned around $100 million of investors' funds.

Formerly chaired by Tim Johnston, Firepower became one of Australia's most prolific sponsors of sporting teams, with members of the rugby fraternity among those to have suffered financial losses.

Investors were expecting the value of their Firepower stakes to rocket once the company listed on the London Stock Exchange, but started to worry when the proposed listing date in 2006 was continually pushed back - and ultimately never took place.

The two Perth friends made their first investment plunge through Sagecorp-licensed adviser Quentin Ward, who has since been banned by the corporate regulator from providing financial services for eight years over the Firepower matter, and is also being pursued in civil proceedings.

The premise behind the ombudsman appeal is that Sagecorp is responsible for the advisers it licenses. A successful claim could mean anything from a moral victory without compensation to helping the investors access Sagecorp's insurance policy.

The QBE insurance policy is a claims-made policy, whereby the insurer only acknowledges claims made while the policy is valid.

A statement sent to WA Business News by Sagecorp's former directors said it was notified by QBE in mid 2008 that the insurer was no longer providing new insurance cover to the industry.

"Alternative insurance was sourced, but at a cost not able to be met by the company, which had ceased trading some time previously. QBE cover duly expired in July 2008," the statement said.

"It is important to note that in September 2008 QBE formally denied all liability for all claims already made against the policy since the policy clearly did not cover the events in the claims."

One other Perth investor also put Sagecorp on notice before the policy ran out. His name is Tim Boase and he is pursuing Sagecorp and the directors through the Supreme Court.

Mr Boase, who is representing himself in the courts, invested a large chunk of his retirement savings through Mr Ward.

His claim is made in a writ of summons, which lists Sagecorp and Messrs Del Borrello and Hawkins among the defendants, along with compliance manager and former Sagecorp director David Mortimer.

Mr Boase contends that the directors were negligent for allowing Mr Ward to operate under the company's licence after they found out he was recommending Firepower, which was an investment the company had removed from its authorised product list.

Messrs Del Borrello and Hawkins said they were seeking to have the claims struck out, and told WA Business News the adviser in question had his licence cancelled as soon as they were made aware of the alleged unauthorised sales.

"When the business became aware that adviser Quentin Ward was operating inappropriately, his licence was immediately withdrawn, he was dismissed and he was reported to ASIC," the directors said.

"This action was immediate and unequivocal."

Mr Ward was also banned by ASIC in the mid to late 1990s, which prohibited him from dealing in securities or providing investment advice.

Mr Ward recommended Firepower through his company Axis International Management, which was licensed by Sagecorp.

Messrs Del Borrello and Hawkins said Sagecorp approved Firepower in 2004 for existing investors of Mr Ward.

"However, the approval related strictly to these existing clients who had already invested before becoming Sagecorp clients," Messrs Del Borrello and Hawkins said.

"A Firepower offer document was later added to the active Approved Product List in September 2004 in order that existing investors could raise further funds for the development of the embryonic company. The issue was at no stage open to retail investors. The issue was closed within two months."

Mr Ward and his company Axis, and Fremantle-based Morgan Alteruthemeyer Commercial Lawyers & Migration Agents are also listed as defendants in the Boase action.

In separate proceedings, litigation funder IMF has set its sights on former WA police minister Gordon Hill. The action centres on Firepower share sales allegedly handled through Mr Hill's Dunsborough-based law firm.

A Firepower website is still running, with customers invited to pay $23.95 for a Firepower Pill 60 litre pack. Shipping and handling is free.

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