The Gold Coast felt the full im­pact of the world­wide down­turn sparked by US fi­nan­cial firm Lehman Broth­ers go­ing belly-up in 2008

Weekend Gold Coast Bulletin - - LIFESTYLE -

TOUGH eco­nomic times, a change in lead­er­ship of the Lib­eral Party and footy fi­nals.

It’s the head­lines of to­day but they bear a strik­ing re­sem­blance to those of a decade ago this week which saw the Global Fi­nan­cial Cri­sis kick into over­drive.

To­day marks 10 years since US fi­nan­cial firm Lehman Broth­ers de­clared bank­ruptcy, spark­ing a dev­as­tat­ing rip­ple ef­fect which brought the world’s econ­omy to its knees.

It was the same day Malcolm Turn­bull seized the Lib­eral lead­er­ship from Bren­dan Nel­son, kick­ing off a decade of lead­er­ship in­sta­bil­ity within the fed­eral Coali­tion which cul­mi­nated with his re­moval from the prime min­is­ter­ship late last month.

Shock­waves were felt across the world in 2008, es­pe­cially on the Gold Coast where ma­jor de­vel­op­ers im­me­di­ately faced trou­bles.

As the melt­down hit home, we saw mul­ti­ple tower projects put on hold and the Sher­a­ton Mi­rage at Main Beach was put up for sale.

Among the big­gest scalps was the Gold Coast-based MFS Group, later known as Oc­taviar.

In the year be­fore the cri­sis un­folded the com­pany con­trolled more than $5.4 bil­lion of in­vestor funds.

But in the lead-up to September 15 it was later dis­cov­ered some of the com­pany’s ex­ec­u­tives had mis­ap­pro­pri­ated $147.5 mil­lion of funds and il­le­gally shifted it to pay off the climb­ing debts af­fect­ing the com­pany.

In the days fol­low­ing the col­lapse of Lehman Broth­ers, a court ruled it be placed in the hands of ad­min­is­tra­tors as the Pub­lic Trustee of Queens­land sought to im­me­di­ately liq­ui­date it.

At this point it had debts of more than $1 bil­lion to un­se­cured cred­i­tors.

Cor­po­rate watch­dog Aus­tralian Se­cu­ri­ties and In­vest­ments Com­mis­sion launched pro­ceed­ings against the for­mer MFS of­fice­hold­ers and a funds man­ager in 2009.

The case con­tin­ued for years be­fore it fi­nally ended in 2017 when the Queens­land Supreme Court ruled Gold Coast busi­ness­man Michael King, the com­pany’s for­mer chief ex­ec­u­tive, had to pay more than $177 mil­lion in com­pen­sa­tion.

Mr King and four of his for­mer ex­ec­u­tives were pe­nalised for a col­lec­tive 217 con­tra­ven­tions of the Cor­po­ra­tions Act and or­dered to pay to­tal com­pen­sa­tion of $615 mil­lion.

The breaches were com­mit­ted in re­la­tion to their mis­ap­pro­pri­a­tion of $147.5 mil­lion that had been held by the man­aged in­vest­ment scheme known as the Premium In­come Fund (PIF) on be­half of unithold­ers.

Jus­tice James Dou­glas said “the in­sou­ciant at­ti­tude of the de­fen­dants to this mis­use of money in­tended to be used for PIF’s in­vestors beg­gars be­lief”.

The col­lapse of the US in­vest­ment banks saw in­vestors world­wide sell­ing off shares as US politi­cians re­jected plans to bail out the banks and fi­nan­cial in­sti­tu­tions.

Aus­tralian Prime Min­is­ter Kevin Rudd flew to New York and spoke to the United Na­tions Gen­eral Assem­bly where he sup­ported the bailout and met with po­lit­i­cal lead­ers to learn about the cri­sis and de­velop a reform plan.

But the long-term dam­age was done – the credit mar­ket was frozen, con­fi­dence in the banking and fi­nance sec­tor was shat­tered and people’s lives were changed.

At the end of that shock­ing first week Aus­tralia’s su­per­an­nu­a­tion funds had copped a maul­ing.

The $28.5 bil­lion stock mar­ket slump hit su­per funds par­tic­u­larly hard, knock­ing them back to pre-2006 lev­els.

Ac­cord­ing to a pre­dic­tion made that week a 65-year-old hop­ing to re­tire that year would have been bet­ter of quit­ting two years ear­lier.

Now, 10 years on the mem­o­ries of this fi­nan­cial dis­as­ter re­main strong.

Prime Min­is­ter Kevin Rudd addresses the 63rd ses­sion of the United Na­tions Gen­eral Assem­bly on September 25, 2008 and (be­low) a Lehman Broth­ers hoard­ing sold at auc­tion after the com­pany’s col­lapse and Gold Coast busi­ness­man Michael King.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.