STORM FINANCIAL VICTIMS FUMING
EXECS FINED $ 70K EACH
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 the Townsville business had breached their duties to the failed wealth advisory outfit.
But a key 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.
The 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 to invest in shares, only for their investments to be decimated as stockmarkets 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 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 the Brisbane Federal Court to hear the penalty. They were represented by Stephen Russell of Russells Law and ASIC by Hugh Copley.
The ban starts from today, but the court will rule 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’ refusal to accept the seriousness 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 that the lawsuit 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. The Cassimatises had “travelled overseas on a regular basis” since Storm failed in 2009, ASIC alleged.
The Cassimatises declined to comment on the judgment.
Storm Investors Consumer Action Group co- chairman Mark Weir said some victims would have liked to have seen the Cassimatises hit with higher penalties, but he thought the impost was possibly excessive because others have gotten off “scot- free” and the Cassimatises had not sought to financially hurt people.
Mr Weir argued lenders bore some responsibility, as did ASIC, which he said probably should have earlier “done something to ensure the ( Storm) model didn’t continue”.
Emmanuel, 66, is said to be retired, and Julie, 52, works in reception casually at their son’s veterinary clinic.
Their lifestyle is far more muted to 10 years earlier when they even had a private jet.
Now they live in a five- bedroom home on Brisbane’s east side, which was bought for $ 960,000 in 2010 without a mortgage. It is owned by trusts for other family members.
The couple are also named as shareholders of companies with stakes in the veterinary business and a food truck.
But company documents state Emmanuel and Julie hold those shares on behalf of other entities, which Ms Cassimatis said were trusts for their adult children.
THE SUBMISSIONS BESPEAK A REFUSAL TO ACKNOWLEDGE, EVEN AT THIS STAGE, THE … SERIOUSNESS OF THEIR MISCONDUCT