From the Crikey grapevine, the latest tips and rumours…

Melinda Howes may have jumped the gun on criticism over superannuation funds. A Western Sydney developer seems to have left clients high and dry. Plus, allegations of misconduct may spell the end for Tony De Domenico.

Well Howes about that? Two weeks ago Melinda Howes, the general manager of superannuation at former Westpac partly-owned subsidiary BT Financial, took a big whack at industry superannuation funds and their performance in a column in the Australian Financial Review: 

The credibility of the union superannuation sector is therefore damaged by sweeping claims that are clearly self-serving and not supported by data… The performance of a few large funds hides the chronic underperformance of a multitude of sub-scale union funds — which explains why every “compare the pair” union fund campaign uses selective averages which may not compare apples with apples. These funds collectively manage $94 billion in retirement savings which run the risk of sub-optimal consumer outcomes in terms of performance and cost.

Howes probably should have held back, given the proximity of the second session of the royal commission looking at financial advice, and the fact that BT Financial and Westpac would feature heavily. In fact the current round of hearings isn’t going to be good for BT and Westpac either. As was outlined in the opening address on Monday:

… As at 31 December last year, BT Financial Group, through its structured remediation programs, had paid compensation in excess of $3.2 million to 435 clients as a result of issues identified in the ongoing Advice Services Review Program. Westpac also noted that its FY17 annual results provisioned approximately $24 million for refunds of fee payments related to Westpac employed financial advisers identified in the ongoing Advice Services Review Program. Second, Westpac acknowledged misconduct or conduct falling below community expectations and standards in relation to inappropriate or inadequate advice…

A significant review established in 2015 and known as the Advice Compliance Program, had identified 22 financial advisers who had provided inappropriate advice and who were reported to ASIC. BT Financial Group also participated in ASICs advice compliance project, as a result of which a further 11 financial advisers were identified as potentially providing what was referred to as problematic advice.

Since 2015 BT Financial Group has identified a further 15 advisers with inappropriate advice issues, and as at 29 January last year, Westpac had paid a total of $12.568 million in compensation to 205 clients with a further approximately $1 million in compensation offered but not yet accepted.

And so on (there’s a lot more). Now what was that about industry super funds?

Millions lost in Kellyville. More than 50 clients of a small Sydney property development company in the Kellyville area of far Western Sydney appear to have lost millions of dollars in deposits after the developer went bust. Normally deposits are supposed to be held in trust accounts (lawyers or real estate agents), but reports suggest these deposits started out as such, but ended up being described as put and call options whose payments do not have to be held in trust and instead can be paid into ordinary bank accounts of individuals and corporates.

A total of 55 clients are involved and together the supposed deposits total around $5 million which is proving hard to track down. It is suggested that when the property development (all house and land packages on blocks of around 400 square metres) slowed, the clients were approached and informed of the delays, but told the deposits lodged could be converted to put and call options for greater flexibility.

The developer has now gone into liquidation, leaving the clients high and dry and without any claim for their funds to be repaid, or so it would seem. Lawyers for the developer have gone silent, the liquidator is proving hard to contact and a right royal mess is developing as there are suggestions that a new company has arisen in place of the failed developer, phoenix-style.

Damn De Domenico. Development Victoria deputy chairman Tony De Domenico has ensured there is a rich and varied pallet of Victorian Liberal embarrassments this week. He’s expected to resign his position after allegations he used his position as president of the Italian Chamber of Commerce and Industry to make alleged mobster Tony Madafferi a chamber member last year.

You may remember Maddafferi as the man who gave headline writers everywhere a timeless gift when he enjoyed a lobster dinner with opposition leader Matthew Guy.

This is not the first time allegations have dogged De Domenico. In the mid-90s, when he was deputy chief minister of the ACT, he was accused of sexual harassment by a staffer. It’s a charge he denied (and was cleared of); per The Canberra Times, December 30, 1995:

Mr De Domenico again denied he had ever sexually harassed his former staffer, Margot Marshall, maintaining that the allegations had been politically motivated.

He did admit to using the term “Mintie bum” to describe a third party but said anti-discrimination legislation had not been set up in order to catch people out calling each other nicknames.

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