Ralan Part 5

Why Ralan taking money out of trust was illegal.

Transcript of Ralan Part 5, Recorded 30 August 2019

  1. Today is the part 5 of the Ralan Ponzi Scheme.
  2. Today we are going to talk about the regulation in Australia that should have prevented this happening.
  3. This is the picture of Charles Ponzi.
  4. The hat he is wearing is made from straw, it is called boater, it was very popular in the 1920s.
  5. That is when Charles Ponzi committed his famous crime.
  6. He told the investors that he can get them a 50% on return of their money in 6 months.
  7. He paid the interest promptly, word of mouth spread and more and more investors trusted him with their money.
  8. The problem was he did not have legitimate business.
  9. He was using the new investors’ money to pay interest to the old investors.
  10. Eventually the scheme collapsed. It was widely reported in the newspapers.
  11. Ever since then, when someone uses the investors’ money to pay new investors it is called a Ponzi scheme.
  12. In recent years, the most famous Ponzi scheme was the one run by Bernie Madoff.
  13. This is the picture of Bernie Madoff.
  14. He lived in New York. He had 64 billion dollars in his Ponzi scheme.
  15. When it collapsed, the thousands of investors were left without any money.
  16. It was very sad, because they worked very hard for a very long for their money.
  17. Mr. Madoff was sentenced to jail for 150 years.
  18. Now the administrator of Ralan has said it is a quasi-Ponzi scheme. I think that’s because there was a legitimate business behind it.
  19. My view is that was $277M worth of debts. Those who knew what was going on could not for a long time have believed Ralan was going to be able to pay everybody back.
  20. The size of the debt compared to the small assets of Ralan means they must have known there is no chance of repayment.
  21. As late as July, Ralan’s sales people were calling unit buyers with increasing urgency and asked them to put more money in.
  22. Therefore this is a real ponzi-scheme.
  23. I have said before that I think the Sales staff of Ralan have something to answer for.
  24. If they did not know about it, they were incredibly stupid.
  25. If you are senior sales person in Ralan, you would know how much money you personally are raising.
  26. You would be able to roughly work out in total how much has been raised by knowing how many units have been sold by other salesstaff.
  27. If you knew how much had been raised in total, then you would know it could never been repaid, not from the buildings that have been constructed.
  28. Now I will explain how the Australian legal system outlaws this sort of behaviour.
  29. Because so many people have lost invested money in the past there are strict rules against a company borrowing the way Ralan did.
  30. Those rules are contained in the law called the Corporations Act.
  31. The Corporations Act says you cannot raise money unless you have a prospectus.
  32. A prospectus is a document that explains all of about the company’s finances. These figures must be audited to make sure they are true.
  33. If Ralan’s finances had been explained to any of you, you would not have loaned.
  34. The prospectus has to be lodged with ASIC.
  35. ASIC is the financial policeman of Australia.
  36. They would have read this prospectus and closed down Ralan very early in the crime.
  37. Essentially Ralan has no assets.
  38. I have said before that Ralan only needed $39 million to build Ruby 1 and Arncliffe.
  39. The rest should have come from Westpac and Wingate.
  40. The fact it borrowed so much shows it had no substance.
  41. It was a trick.
  42. It may not always have been a trick but it certainly is a trick after 2014.
  43. The Australian law required that a company raising money from the public must have its accounts audited.
  44. This means an independent company looks through the account and check all the figures are correct and there are no lies.
  45. If this had happened the auditors would have said Ralan was insolvent and ASIC would shut it down.
  46. Then no money could have been raised.
  47. The Australian law also required Ralan to have a trustee.
  48. A trustee is a company which holds the assets of the borrowing company.
  49. The purpose is to keep these assets out of control off the borrower.
  50. The trustee’s job is to make sure that the investors would able to be paid back in the future. I will give you an example.
  51. 5 years ago there was a large company call Provident Capital.
  52. Provident Capital operated a debenture scheme. This means they borrowed off the public like Ralan. However they did it legally.
  53. One day their trustee decided to put them in liquidation.
  54. Provident Capital disagreed and went to court.
  55. The trustee said to the judge. We have looked the accounts. They are going well now and make a good profit. However we can see in two years time it might be a small loss.
  56. Provident Capital said to the judge that the trustee was wrong in their calculations. They made many powerful arguments that they should be allowed to continue the business.
  57. The judge said the way I seen why take a chance. I don’t want the investors lose any money.
  58. So Provident Capital was liquidated. And money returned to investors.
  59. ASIC who is the financial policeman has special rules called benchmarks.
  60. These rules says how much the extra money the borrower must have, in case the investors want to ask for their money back suddenly.
  61. All this means only a profitable company can continue to borrow money from the public and there is no disaster like Ralan where people lose their life savings.
  62. The Ralan Ponzi scheme would never have been possible.
  63. The only reason it was possible here was because no one knew about it. When I say no one knew about it I mean no one in ASIC knew about it.
  64. There were nearly one thousand investors knew about it, but none of you thought it was illegal.
  65. It was not illegal for the victims but it was illegal for Ralan.
  66. Now Ralan has gone and there is no money.
  67. William O’Dwyer has no money. Maybe he has a small amount of money in his house but I don’t think so.
  68. I did a search of his house and there is a mortgage to the National Australia Bank.
  69. There are also two mortgages to Wingate.
  70. And caveat by one of the sales lady of Ralan.
  71. Because of this my feeling is he has nothing left.
  72. So where can you go to get your money back from?
  73. I am focused on three places: Wingate, Westpac and Deloitte.
  74. Each of one those companies may have known what was happening.
  75. I cannot think how Wingate did not know.
  76. I know all of about the construction industry.
  77. I am a specialist in construction finance and my experience tells me they ought to have known.
  78. To win the case we need to get evidence.
  79. If we can prove these companies knew what was going on then we can do a class action and recover the money owed to you.
  80. Thank you.
Scroll to Top