Collapse cost us dearly
It’s been almost three decades since Pyramid’s downfall decimated Geelong
HUNDREDS of worried and angry people started to queue early outside a popular building society’s branches almost three decades ago.
They had heard rumours for weeks that their deposits and investments at Pyramid Building Society weren’t safe.
So they waited outside branches on February 12, 1990 to try and get their hardearned cash back.
Staff were threatened with violence and security guards had to be posted at the branches.
One man even threatened to drive his truck into a branch unless he got his money back, according to reports at the time.
The next day Victoria’s Attorney-General Andrew McCutcheon told people their money was “secure”.
“There is no reason for people to withdraw their funds” he said.
By the end of the week more than $200 million had been withdrawn from the society.
And it was the beginning of the end. Less than three months later the administrator closed the doors of Pyramid, Geelong and Countrywide building societies.
People lost their life savings, businesses and homes in the collapse.
Former New Zealand air force member Glen Busby had moved his family to Melbourne to buy his dream home. But it turned into a nightmare.
The then 40-year-old invested $182,000 in Pyramid when he arrived and put down an $18,000 deposit on a threebedroom house in Mooroolbark.
“We were going to use the money to pay for the house. I’d already paid the stamp duty, land tax and for furnishings,” he said of his loans in 1990.
“When I went to get my money in June the Pyramid doors were closed.”
The programmer supervisor was planning to move to Saudi Arabia in order to pay off his debts, he said at the time.
“But my wife, Meilien, and the kids won’t be coming. Nearly all the money I make will be sent back here,” Mr Busby said.
Even wealthy businessmen were hurt by the collapse.
John Farnham’s promoter and a part-owner of the Sydney Swans, Glen Wheatley said he and his family had been hit by the failure of the society.
“I think I have got problems. At least I’ve got my company and I am still going to be OK,” he told the Herald Sun in July 1990. Wheatley said he felt sorry for all the people who had lost their life savings in the Pyramid crash. “There is a lot of misery out there,” he said. The promoter received a $7 million loan from the Farrow Corporation, the owner of the society, to build a nightclub in Flinders Lane. His wife’s grandparents had lost their entire life savings in the collapse. In all, an estimated 220,000 Victorians were victims of the collapse with many from Geelong, where the group had its headquarters. The disaster was blamed on company chairman Bill Farrow, in a parliamentary report tabled in 1994. But even as the run was happening, Farrow claimed he was a victim of “tall poppy syndrome” and blamed the run on competitors.
But the parliamentary report found otherwise.
“(Farrow) arrogantly assumed that he knew best and ignored the warning signs that his chosen path was leading to disaster,” report author David Habersberger, QC found.
He pursued “reckless and imprudent lending policies” which deliberately breached the provisions of the Building Societies Act, the report found.
Taxpayers were eventually forced to fork out more than $900 million to cover for the mess.
Farrow was later found guilty of breaching the Building Societies Act and fined $50,000 and $70,000 in costs. $200 million withdrawn from the Pyramid Building Society in a few days. Treasurer Rob Jolly and Attorney-General Andrew McCutcheon assure depositors there is no reason to withdraw funds.
Pyramid, Countrywide and Geelong societies close. Up to 200,000 accounts at 54 branches, 19 of them in the group’s Geelong heartland, are frozen. Ken Russell appointed administrator for Farrow Group.
Premier John Cain rules out a government bailout. Customers are offered a one-off, $200 advance.
A bid to sell the group falls through. Mr Russell decides to liquidate the group.
The Government agrees to guarantee about $1.3 billion of unsecured deposits.
A government inquiry is announced.
Depositors get their first payment.
Depositors told their last payment is in August 1995.
A 2.75c-alitre petrol tax imposed. Friends of Pyramid urge depositors to reject bond offer. Liquidator Tony Hodgson sues Farrow Corp directors Bill Farrow and David Clarke for $70 million in management fees.
Farrow charged with breaching the Building Societies Act. Clarke is facing 50 other charges. Liquidation costs top $35 million. Bill Farrow fined for breaching Building Societies Act.