A former north Queensland cane farmer says Storm Financial founder Emmanuel Cassimatis assured him he had "nothing to worry about" when borrowing hundreds of thousands of dollars to invest in indexed funds.
Mackay maintenance fitter Bruce Milburn, who has been left nearly $300,00 in debt, took the stand in the Federal Court in Brisbane today to outline his dealings with the collapsed advisory firm and its predecessor, Cassimatis Securities.
Liquidator Worrells is using court hearings to gather more information about the collapse of Storm Financial, which was wound up in March with debts of $80 million.
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Relying on tranquilisers to deal with a reversal of fortune
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Mr Milburn, 54, told the court he met with company representatives including Mr Cassimatis after attending a six-hour workshop run by the firm in 1998. Mr Milburn, whose wife of 29 years suffered breast and liver cancer, said the couple was told they were not utilising the equity in their property in Millaroo, 60-kilometres west of Ayr.
Asked if he was warned about the risks of borrowing against his home and taking out margin loans to invest in indexed funds, Mr Milburn said: "Their explantion was 'there's good debt and bad debt, this is good debt because you're buying an investment. It has trigger points in it ... that if the worst comes to the worst, it's not the end of the world.'"
He said Mr Cassimatis has a similar message when advising the couple to take out an additional $250,000 margin loan through lender Colonial in April 1999 to invest in a resourced index fund - advice the company charged $16,000 for.
"[Mr Cassimatis said] that it was good debt, a safety net was in place, there was nothing to worry about."
Mr Milburn said after making numerous changes to his investments and borrowings to boost his portfolio, he had now been left with a $294,986.53 debt to Colonial after the bank failed to issue a margin call and let the loan fall into negative equity.
"I got a phonecall from the bank [in December 2008] asking how I was going to pay the outstanding debt. I said I had no ability to pay it," Mr Milburn said.
Mr Milburn, who now lives in Mackay, said he no longer owned any property.
The court hearing has been adjourned to October 12.
