By Elizabeth Knight
THE corporate regulator has escalated its campaign against the billion-dollar tax minimisation industry by raiding the homes of financial planners.
During one raid, which took place at 7.20am yesterday at the Sydney home of a former licensed adviser, officers from the Australian Securities and Investments Commission confiscated a hard drive and some documents. The financial planner was out walking the dog at the time. His pregnant wife was at home.
In another raid in Melbourne, seven officers also raided the offices of a financial planner, seizing files and hard drives containing the client records of investors in the managed investment schemes operated by Forest Enterprises Australia.
ASIC declined to comment on the raids last night. One party subject to yesterday's raids told the Herald he believed ASIC had responded to a complaint by Forest Enterprises that the financial planners had fabricated the existence of investors in Forest Enterprises schemes - a practice known as tombstoning.
The planner claims that these investors, who contributed up to $2 million, were real and that they were financed by Forest Enterprises. The company's chief executive, Andrew White, did not return calls from the Herald.
Last Friday, Forest Enterprises, a listed company, issued a sales downgrade saying it would make much less than the $60 million achieved in 2006 and 2007.
Yesterday's raids follow a financial and public relations disaster for the tax minimisation industry since the collapse of the two largest schemes, Great Southern and Timbercorp.
Great Southern was swept into administration in May owing some 43,000 investors as much as $4 billion. In the year to June 2008 alone, Great Southern spent $62.4 million on commissions, marketing and promotion.
On Monday creditors of Timbercorp voted to wind up the company's 41 corporate entities and put them into liquidation leaving shares worthless and investors in individual schemes with questionable ability to recover any of their money. The group left net debt of more than $600 million.
The collapse of two of the largest investment groups and several smaller ones has opened a can of worms around the practices of all players in the tax minimisation industry.
ASIC and the Tax Office have also found themselves exposed as excessive marketing fees, dubious lending practices and conflicts of interest appear to have flourished without question.
And this is before even addressing the financial worthiness of these schemes. As liquidators, administrators and receivers pick over the bones of Timbercorp and Great Southern it is becoming clear that billions of dollars in shareholder and direct investor money will have evaporated.
The products, now mostly worthless - and in most cases yet to deliver even tax losses - were mostly sold by financial planners.