HEAD-ON COLLISION WITH GFC
The Gold Coast felt the full impact of the worldwide downturn sparked by US financial firm Lehman Brothers going belly-up in 2008
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.