Storm founders hit with fines and ban
STORM Financial founders Emmanuel and Julie Cassimatis have been hit with $70,000 fines each and bans on managing companies for seven years, while a judge has also blasted their lack of contrition.
The penalties were handed down yesterday after the Federal Court ruled the directors of Townsville-based Storm had breached their duties to the failed wealth advisory outfit.
But a key financial issue will be costs after the courtroom fight between the Australian Securities and Investments Commission and the Cassimatises dragged on for six years, involving highly paid silks and millions of dollars in legal fees.
Yesterday’s penalty ruling said the Cassimatises had to pay some of ASIC’s legal costs – but the corporate watchdog in turn has to pay some of the couple’s costs related to claims it failed to prove, such as Storm being guilty of criminal conduct.
Storm’s failure had a devastating impact on customers; some 3000 clients lost an estimated $830 million from late 2008. The clients, on Storm’s advice, had borrowed from banks to invest in shares, only for their investments to be decimated as stockmarket’s plunged.
ASIC has since pursued the Cassimatises in court. In August 2016, Justice James Edelman ruled while they had acted honestly, they still had each once breached their director duties. Justice Edelman went on to the High Court, and Justice John Dowsett took over to rule on penalties.
The court ruled Storm’s advice model was not suitable for some clients – seniors with few assets and little prospect of rebuilding their wealth in the event of a significant loss.
This caused Storm to contravene parts of the Corporations Act and risked the company losing its financial services licence, hence the court found the Cassimatises had breached their duties.
The Cassimatises were not in Brisbane Federal Court to hear the penalty.
The ban started yesterday, with the court ruling next week if the Cassimatises are still able to remain directors of certain family companies.
But in deciding penalties, Justice Dowsett also criticised some of the Cassimatises’ legal team’s submissions, which had argued the couple’s breaches were not serious. “The submissions bespeak a refusal to acknowledge, even at this stage, the obvious seriousness of their misconduct,” he wrote.
At another stage in deciding penalties, he said: “The respondents’ (Cassimatises) refusal to accept the seriousness
THE SUBMISSIONS BESPEAK A REFUSAL TO ACKNOWLEDGE ... THE OBVIOUS SERIOUSNESS OF THEIR MISCONDUCT JUSTICE JOHN DOWSETT
of their misconduct demonstrates a lack of insight and contrition.”
Still, Justice Dowsett also said ASIC bore some responsibility for the length of proceedings, with some of its pleadings having been “defective” and some parts of its case being unsuccessful.
The judgment detailed how the Cassimatises at one stage tried to settle, with their lawyers arguing the case had “completed drained materially all of our clients’ resources”.
“There are no material assets to which ASIC could gain access by success at trial, including any bankruptcy administrations,” they said.
ASIC had separately argued the Cassimatises previous earnings and current lifestyle were such that they could not claim a $70,000 penalty would have resulted in hardship.