The ABC television program, Four Corners, ran a story on Monday 21 July 2008 concerning a company known as the fuel technology company, Firepower Holdings Group Ltd (Firepower BVI). Coincidentally earlier on the very same day ASIC (Australian Securities & Investment Commission) commenced civil proceedings in the Federal Court of Australia against parties associated with Firepower.
ASIC's proceedings name a number of individuals and companies as defendants including, Quentin Ward (director of Axis) a financial adviser and former bankrupt from Perth, Axis International Management Pty Ltd (Axis) and Tim Johnston.
In the same week newspaper headlines screamed, 'Firepower reveals $16m of creditors', 'Firepower chief lived in luxury', 'A new cowboy from the wild west' as allegations emerged of how Tim Johnston, the head of Firepower, was believed to have spent a fortune on expensive furnishings and antiques, and how he regularly flew a prominent Sydney antique dealer to Russia to advise on purchases.
Even worse it has emerged that Firepower investors who pumped more than $60 million into the fuel pill company on the promise of spectacular returns when it was to be listed on the stock market in London, now stand to lose all of their investments.
Investors included diplomats, doctors, accountants, media figures and a number of high profile AFL footballers, including Wayne Carey, who now stand to lose six-figure sums after buying shares in Firepower - at up to 35 times their start-up value. Many bought the shares on the promise of a stunning share market listing in London. Carey, the former North Melbourne and Adelaide Crows star, bought $100,000 worth of Firepower shares, his father Kevin invested $60,000, and the AFL Brownlow medallist Mark Ricciuto $175,000 in two parcels.
The foibles and shortcomings of the financial planning industry are a pet topic of Jamie McIntyre, CEO of 21st Century Education, whose book What I didn't learn from my financial planner but wish I had, questions why investors even need to deal with a financial planner.
McIntyre says you must understand that most financial planners are not trained at a high level in investing and in most cases they are not successful investors themselves. "If a financial planner is going to show you how to become financially independent, to retire wealthy and to live your dreams one day, then the obvious question to ask them is why haven't they done it themselves."
The involvement of the former bankrupt Perth financial adviser Quentin Ward, in selling Firepower shares, a company who did not comply with financial regulations and who did not bother issuing a prospectus, highlights the poor ethics in some sections of the financial planning industry according to McIntyre
The original entity that Firepower incorporated in the British Virgin Islands had an authorised capital of a billion shares at US1 cent a share, but footballers later paid 35 cents a share, Federal Court documents show. Others paid as much as $1.40.
For eighteen months prior to this the Sydney Morning Herald ran a series of articles that raised questions and drew attention to the dealings of Firepower. Firepower took the trouble to sue the Herald for defamation but lost the case and had costs awarded against them, which the Herald will never recover.
Firepower was the biggest sporting sponsor in the country and Johnston bought the Sydney Kings basketball team, which has since gone into liquidation with a claim of $265,073 against Johnston. It's sponsorship of high profile sporting clubs included the South Sydney Rabbitohs rugby league team, the Western Force Super 14 club (now owed $55,000) and its top-line players Cameron Shepherd ($27,500), Ryan Cross ($41,250) and Scott Staniforth ($13,750)
Other sponsorships included the boxer Paul Briggs, who used to fight under the moniker 'Firepower' Briggs is now owed $55,000; Tongan Rugby Union ($71,019); Nedlands Rugby Union ($45,000); Russian Rugby Union ($251,294); Tasman Rugby Union ($76,800); and Tasman Motor Sport ($175,000).
ASIC alleges that these individuals and companies were associated with Firepower BVI, a company registered in the British Virgin Islands, raised funds from investors in Australia in breach of the Corporations Act (the Act). ASIC alleges a prospectus or disclosure document was not provided to investors as is required under the Act so investors or their professional advisers have all the information they need to reasonably make an informed investment decision about the company and its shares.
The commencement of proceedings follows an ASIC investigation into the sale of over 80 million shares in Firepower BVI (by persons and companies associated with it) to approximately 1400 Australian investors from mid 2005. These investors collectively paid in the order of $60 million for the shares.
ASIC commenced its investigation in March 2007, prompted by inquiries it made in the latter part of 2006 and early 2007. In May 2007, Firepower parties (Firepower Operations Pty Ltd, Firepower Holdings Pty Ltd, Timothy Johnston and Firepower CEO, John Finnin), challenged ASIC's section 30 notices that had been served.
ASIC allegations include, a charge that Axis and Ward (the sole director of that company) acted as intermediaries and unlawfully distributed application forms to Australian retail investors for the sale of nearly two million shares in Firepower BVI for a total price of more than $1 million without the necessary disclosure document.
ASIC is seeking the following orders from the Court:
• Declarations that the conduct of the defendants contravened the Corporations Act.
• Orders banning Johnston and Ward from managing a company in Australia.
• Additional disclosure to investors so that investors can assess any rights they may have to redeem their money or to pursue other compensation actions which may be open to them.
ASIC will assess potential claims for compensation for investors as part of these proceedings or fresh proceedings. ASIC's investigation is continuing in relation to Firepower BVI.
The Australian Securities and Investments Commission was warned the fuel technology company Firepower "may in fact be a scam" more than six months before it became a public issue, but it chose not to investigate.
This allegation was raised in the ABC TV program Four Corners, in which John Finnin, the former CEO of Firepower also criticised the Australian Trade Commission, or Austrade, for its part in promoting and supporting the company. John Finnin, who was a former senior trade official before joining Firepower, said almost $100 million was raised from investors, but when he had worked for the company he could only account for about $30 million "at best".
Finnin said many of Firepower's alleged multimillion-dollar deals were never concluded, including a huge contract with Russian railways that was repeatedly presented to shareholders as a certainty.
"We're talking about contracts across dozens of countries that we claimed to have: Pakistan, Romania, Germany, Russia. We were claiming to have contracts which we didn't have," Finnin said.
"They made further claims that … they had supplied the Australian and New Zealand military [with products], which of course was incorrect."
Finnin said the support Firepower had received from Austrade gave it a layer of credibility it should never have been afforded. "They were able to say they were being supported by the Australian Government, which in essence they were," he said.
Former Firepower CEO, John Finnin, was previously a senior Australian trade official, who was dumped from his highly paid Firepower job in August 2007 after a court heard he might be charged with child-sex offences. Finnin told a Melbourne magistrate that he denied the allegations, which were revealed when he applied for the return of computers and associated equipment seized by police under a search warrant in May 2007. The father of four said in evidence that the company paid him $500,000 a year, which allowed him to drive a Maserati Quattroporte that he leased for $5000 a month.
Finnin was once linked to the Jordanian trucking company Alia, which was central to the AWB scandal. He resigned as Austrade's director for Europe, the Middle East and Africa in June 2006 to become CEO of Firepower.
Four Corners reported that an accountant whose client was offered shares in Firepower made a complaint to the Australian Securities and Investments Commission in May 2006 alleging it could be a scam. The commission said it was "taking no further action at this time".
The complaint was made at the height of investment euphoria in Firepower and at a time when the company was on its way to being the biggest sporting sponsor in the country.
Firepower chairman, Tim Johnston, is thought to be in Britain after refusing to return to Australia to answer questions from authorities over the demise of the Sydney Kings basketball team.
ASIC is also seeking to have Johnston and the former bankrupt Perth financial adviser Quentin Ward banned from managing future companies in Australia.
Note: Jamie McIntyre is currently authorised to provide general advice and dealing services in Derivatives, Deposit Products, Managed Investments and Securities (ASIC No. 321 315).
21st Century Education have a range of books by Jamie McIntyre available, including:
What I didn't learn at school but wish I had
What I didn't learn from my real estate agent but wish I had
What I didn't learn from my financial planner but wish I had
What I didn't learn from Google but wish I had
These books are available from good bookshops or from:
www.21stcenturypublishing.com.au
For further information:
Phone: 1800 999 270 email - lnaude@21stca.com.au
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