Forestry schemes failed because of bank self interest

Forestry investment schemes collapsed as a result of ‘predatory wealth transfer’ from investors to banks which pulled their investments too early according to a NSW planner involved with the schemes.

In a submission to the inquiry into the structure and development of forestry managed investment schemes conducted by the Senate Standing Committee on Economics, Newcastle based financial planner and accountant Mark Hoddinott stated the banks were aided by liquidators which also acted as responsible entities and so held positions with a conflict of interest toward scheme investors.

Hoddinott said that he had provided advice to clients to invest in Willmott Forests’ Managed Investment Schemes (WFMIS) and while Willmott Forests Ltd (WFL)  – which was the public company managing the investments – had defaulted on a routine loan, the investments remained solid. However he alleged in his submission that the Commonwealth Bank (CBA), which had loaned money to both WFL and WFMIS investors, wanted to pull out of the sector.

As a result of this action the group went into liquidation which Hoddinott said “was nothing short of a blatant transfer of wealth from Mum and Dad investors to predatory corporate raiders and complicit liquidators who acted in total conflict to their duty of care to the investors and who preferred the interests of the secured creditors (the banks) who are their source of work”.

In his submission Hoddinott claimed that after WFS went into liquidation, the liquidator - PBB Advisory, which was appointed to act for secured creditors was also made the responsible entity and “deliberately and systematically …sought to attack and diminish the assets of the Investors (which are not part of the assets of Willmott Ltd) to enhance the present value of Willmott Ltd Assets to the secured creditors”.

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He alleged PPB Advisory used their dual role “to control the valuable assets of the schemes and in turn portray them as lacking value and love by the investors in order to convince the courts to allow them to be forfeited”.

Hoddinott claimed the assets needed to be forfeited to allow secured creditors to sell them at premium values despite WFMIS investors campaigning to maintain the investments and appoint their own third party investment manager to manage the scheme, a move which he claims was rejected by PBB Advisory.

He said the liquidation reflected badly on the banks involved who were happy to lend money at attractive interest rates until 2010 while accepting the assets of the schemes as the only security required and then undermined the investments for which they had lent money.

Hoddinott, who is an authorised representative of Premium Wealth Management, said the WFMIS “were, and are still, sound financial investments, that were pre-approved by the Australian Taxation Office under specific Product Rulings and were also supported by independent research”.