10 Steps to Destruction

The 10 Awful, Pug Ugly, ASIC Ignored Steps to LM Investors Destruction

that prompt the question 'was LM left open to extortion?'

Go to References, Graphs, Refutal of ASIC's No Evidence Claim, Death Slide Pictogram

1. Mr. Defrauded 'invests' £1000 in the MPF via an adviser for a 1 year term in 2009
2. LM commit to pay 8% a year interest to investors in 2009.
3. LM pay 3% or £30 to the adviser.
4. LM administration fees are 3-5% lets say 4% which means they pay themselves £40 (they actually reach 7.4% over the 2011/12 years)
5. ( The year ending June 2012 MPF audited accounts section 12 paragraph 7 describes the 2011 and 2012 LM Administration (LMA) payments. )
6. (If a figure of 7.4% is used the demonstration that follows is increasingly astonishing and shown in brackets)
7. The £1000 investment has immediately become £930 (896).
8. The £930 (896) needs to earn £150 (184) to make it £1080 in a year to honor the 8% return plus redemption at 1 year.
9. That's a whopping 16.1% (20.4%) growth to satisfy the investors contract terms. But wait the bigger PUNCH is still to come!
10. Let's say Drake needed £30 of Mr D's £1000 to top up payments to investors due their interest and capital redemption because he found 16.1% (20.4%) growth something of a challenge and he is 3% short. That £930 becomes £900 and the growth required from his machine to satisfy the investors contract terms is an insurmountable 20% (24.7%). But wait the even bigger P U N C H is still to come!
11. The first year Drakes money making machine fails to grow capital by 16.1% (20.4%) his machine not only has to recover that deficiency the following year but deliver further output to replace borrowed new investors monies (a year in which he achieves only 13.1% (17.4%) return on capital m u s t be followed by a year of 20% (24.7%). Now let's drop this pattern over what we know did happen and feel the P U N C H L A N D !
12. In or around 2009 AU$60m of MPF money was delivered to the FMIF that itself was based on the exact same model. That huge amount of money was simply step 8 above (under the brash ruse of MPF 2nd mortgage positions) and bridged the MPF to the FMIF, sentencing the MPF to the same inevitable nihilistic fate as soon as new investor growth slipped behind the demand threshold. An adequate money making machine never existed and the only way money could ever be returned to investors was from an exponential ramp of new investors. The brutal and shameful fact is the ponzi was born during the years of FMIF operations and by 2009 was feeding a plethora of luxury life styles and already growing faster than, and as dangerously as, a continental ebola pandemic.

LM directors disguised it, their accountants facilitated it, their auditors swallowed it, and ASIC didn't even want to think about it. These facts existed in 2009!

This very simple analysis indicts every group involved for behavior from fraud to willful negligence and must now after 2 years of ignorant, dismissive denial by the Finance Ministry of Australia be answered by the ultimate authority of the country, the Australian Senate. Nothing less than a compensation proposal is necessary to avoid the Australian governments complicity in the largest and most elaborate property fraud the country has ever seen.

References:

1. MPF audited accounts year ending June 2012, section 12, paragraph 7 describes the 2011 and 2012 LM Administration (LMA) payments.
2. Korda Mentha Update No.7
  1. page 4 describes total operating expenses and fees paid as being around AU$15m for the whole period between 2002-2009!
  2. page 5 contains information regarding the prepaid administration fees (of AU$28.3m!) to LMA during the June 2012 - February 2013 period.
3. The MPF rate of 8% investor return quoted was actually 9% minus the Australian withholding tax of 10% which produced an effective rate of 8.1% up to the end of January 2009 (according to an intermediary email dated Jan 27 2009).

Graphical Representation:

The following three graphs demonstrate the inevitably fatal result of dependency on new investor monies for return to maturing investors.

In graph 1 above:

1. Adviser commission (not plotted) is 3% of investment each year.
2. Level of dependency is 3% in 2009 growing to 6% in 2012.
3. Such small dependency produces a subsequent very challenging 20 - 23% return on capital to recover.

In graph 2 above:

1. Adviser commission (not plotted) is 3% of investment each year.
2. Level of dependency is 5% in 2009 growing to 15% in 2012.

In graph 3 above:

1. Adviser commission (not plotted) is 3% of investment each year.
2. Level of dependency is 10% in 2009 growing to 30% in 2012.

As can be seen from Korda Mentha Update No.7, (Page 1, Property Overview, Table showing loan value segmentation data) 80% of investments made were in property developments of which only one had commenced construction and 4 of the 10 loans constituting 'Other Assets' were in default, suggesting a dangerously high dependency on new investors monies to satisfy interest and redemption demands. LMIVC propose that asset status from 2008 onwards had never been adequate to create the return that even the smallest dependency on new investor monies for return to existing investors would require.

Refutal of ASIC's No Evidence Claim:

On January 5th 2015 the newspaper 'The Australian' quoted ASIC as saying 'we are not pursuing a criminal investigation at this time but as usual, would obviously reassess if other evidence became available'..

LMIVC claim, on the basis of the above data and the clear conclusion that LM MPF (and FMIF) was more dependent on new investors monies than the business of property loans and property development, that at least 9 of the LMIM promotional documents here heavily misrepresent the promoted investment 'opportunity' and are therefore key evidence of the elaborate investment fraud that LMIM operated. (The same documents are also available in this folder. To properly see the annotations highlighting the misrepresentation, the documents require to be downloaded and read with a capable pdf reader such as Adobe Acrobat.)

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