The LM Managed Performance Fund was for ‘sophisticated investors only’.
This may come as a surprise to clients whose money was put in property in Australia just before the crash time in a boom and crash market.
In continuing revelations Martin Terpilowksi, who had high end clients in the fund, concludes that independent financial advisers knew that LM was a duck but did not tell clients. Actually the word he used was fraud.
But the combined intelligence of fraud police and the Australian Securities and Investment Commission either did not get it or do not live up to their names. LM invested in the A$1.5 billion Maddison Estate on the Gold Coast which never lived up to its promo.
But many clients were told LM was investing in commercial property nor one built for TV personalities who did not want to live there – and investing in LM was like putting your cash into a bank.
PUBLISHED IN CONJUNCTION WITH AND FOLLOWING COMMENT BY WWW. RAPEOFHONGKONG.COM
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| LM supremo Peter Drake |
“One of Martyn Terpilowski’s clients invested in the LM Managed Performance Fund for a one-year term. When the maturity date approached in 2009, LM offered to pay Martyn’s client an extra 3% bonus if he would renew for another year.
Before accepting this offer, Martyn and his client asked for reassurances that the fund was not suffering from major redemption problems. LM confirmed that everything was okay.
A few months later, Martyn learned that this was a lie. One of his colleague’s clients had attempted to exit but couldn’t. This meant that the 3% bonus offer had been a trick to prevent his client from discovering the truth.
Martyn was livid. Not only was his client trapped in an illiquid fund, but he’d also be prohibited from entering the “queue” for another year.
Below are emails from the period when Martyn’s client officially entered the “queue” (March 2010) and half a year after that (October 2010). Two names have been changed. Martyn’s client is called “Client 1″, and his colleague’s client is “Client 2″. Heather McLeish is an LM sales manager who quit her job sometime not long after the below email exchanges took place. One sentence has been highlighted in red, as it will be of interest to LM victims who were not classified as “professional investors”.
March 2010
Client 1
—–Original Message—–
From: [Client 1]
Sent: Thursday, March 04, 2010 11:07 AM
To: Martyn Terpilowski
Subject: Re: RE: RE: RE: RE: RE: Can you tell me the current LM rates on
USD, GBP and JPY?
Martyn,
Please try to find out the real current situation about the wait time and the interest. By your saying that I may get my money back in July or maybe 6 months later, you are like saying that I may or may not get my money back. With what is happening, I am very worried about my investments I bought through Magellan or [your firm] and wary of the unprofessionalism.
Thanks
[Client 1]
Martyn Terpilowski
—–Original Message—–
From: Martyn Terpilowski
Sent: Thursday, 4 March 2010 10:42 PM
To: Heather C. McLeish
Subject: FW: RE: RE: RE: RE: RE: Can you tell me the current LM rates on
USD, GBP and JPY?
Hi Heather
The client [above] has a few good questions, that I can’t really answer.
Can you help?
Cheers
Martyn
Heather McLeish
—–Original Message—–
From: Heather C. McLeish [hcmcleish@lmaustralia.com]
Sent: Saturday, March 06, 2010 10:20 AM
To: Martyn Terpilowski
Subject: RE: RE: RE: RE: RE: RE: Can you tell me the current LM rates on
USD, GBP and JPY?
Hi Martin,
Thanks for your email. We have a further update on MPF coming out the beginning of next week. I will be in touch then so you can give you client the most up-to-date information.
Have a nice weekend.
Best regards,
Heather
Martyn Terpilowski
—–Original Message—–
From: Martyn Terpilowski
Sent: Saturday, 6 March 2010 3:18 PM
To: Heather C. McLeish
Subject: RE: RE: RE: RE: RE: RE: Can you tell me the current LM rates on
USD, GBP and JPY?
Thanks Heather – I think we need it.
I think the fact that most intelligent clients can see, it does not matter how good the rates are if you cannot realise the money with no serious timeframes to realise it.
Have a good weekend.
I look fwd to receiving this.
Cheers
Martyn
Heather McLeish
—–Original Message—–
From: Heather C. McLeish [hcmcleish@lmaustralia.com]
Sent: Monday, March 08, 2010 4:23 PM
To: Martyn Terpilowski
Subject: RE: RE: RE: RE: RE: RE: Can you tell me the current LM rates on
USD, GBP and JPY?
Hello Martin,
Thanks for taking the time to speak today and for arranging on your side. Much appreciated.
[Client 1] does not currently have a redemption logged for any of his accounts. Should he chose that route he may be delayed slightly, but nothing like what we have been dealing with for the past 6 months for the reasons we mentioned on the phone today.
Please do let me know how you would like to proceed with this client after you receive and review the update we are sending tomorrow. It is going out globally at the same time.
Regards,
Heather
Martyn Terpilowski
—–Original Message—–
From: Martyn Terpilowski
Sent: 08 March 2010 16:30
To: ‘Heather C. McLeish’
Subject: RE: RE: RE: RE: RE: RE: Can you tell me the current LM rates on
USD, GBP and JPY?
Thanks Heather
Not your fault but I will be honest not impressed as u will see now.
There have been no sales, this is all just potential and [Client 2] has waited for over a year (fact).
I have nothing else to say and will look tomorrow. I sometimes have the feeling I am talking to a cult who can’t quite see what I am talking about, although I am sure they know exactly.
Have a good evening.
Martyn
October 2010
Client 1
—————————- Original Message —————————-
Subject: LM
From: [Client 1]
Date: Thu, October 7, 2010 4:18 pm
To: “Martyn Terpilowski
————————————————————————–
Martyn,
Can you try to find out from LM what has happened to the properties that they were trying to sell earlier this year?
Thanks
[Client 1]
Martyn Terpilowski
—–Original Message—–
From: Martyn Terpilowski
Sent: Friday, 8 October 2010 10:44 AM
To: Heather C. McLeish
Subject: [Client 1]
Hi Heather
Can we please have an update on [Client 1’s question above]? It does seem strange that this is so hard to sell based on the fact Australia is booming. Although we are being told you are paying redemptions still but they are delayed – the truth is none of our customers have yet received any redemptions and some of that goes back 18mths – so something is wrong surely? Please do not get angry that I am questioning this – but clients have a right to know and this queue must be huge if we are still going back 18mths? Especially if you are taking money in still!!!
We have to be truthful with people.
Please get back to me ASAP.
Thanks
Martyn
Heather McLeish
—–Original Message—–
From: Heather C. McLeish [hcmcleish@lmaustralia.com]
Sent: Friday, October 08, 2010 2:42 PM
To: Martin Terpilowski
Subject: RE: [Client 1]
Hello Martyn,
It IS the right of the client to know what is happening to his money. Please do not hesitate to contact me any time you require further information on the client. I will make it as transparent as possible.
Nothing has fundamentally changed since I last updated you in August. Your company’s clients are in the queue, but are certainly not the only ones in it. Many redemptions have been paid out already. I am not at liberty to discuss the details of other paid out redemptions as they do not relate to your clients.
[Client 1] has two redemptions are far down the queue, but with every redemption paid they are getting closer.
A myriad of factors affect how quickly these are getting paid; not all of them in our control. When the timeframes become more clear I will be on the phone to you ASAP.
Best regards,
Heather
Martyn Terpilowski
—–Original Message—–
From: Martyn Terpilowski
Sent: Friday, 8 October 2010 3:03 PM
To: Heather C. McLeish
Subject: RE: [Client 1]
Heather
There is a [client of our firm, Client 2,] who has been in this queue for 18mths and this is the reason for our initial anger as we found this out later. This clearly sounds fishy, if that is the case. So you only paid out redemptions to people who requested them more than 18mths ago when you did not even mention to clients that this was the case until 12mths ago?
Obviously [Client 1] is my client but I am fully aware of another client and I am sorry – it does not add up, which ever way you do the maths. I believe you can probably see that.
I actually feel guilty for getting angry with you now as it is not your fault and it is before your time – but based on the above it does not make sense and basically this is after clearly misleading people (and that is not debatable and I can show you the correspondence again if you really want,
which you do not).
If I was [Client 1] I would make a complaint to the FSA [Financial Services Authority] as he has an email forwarded from me last July from LM stating there was no issues with redemptions and whatever way Peter wants to cut it, it was a lie and I would stand up in court and protect myself on that. The proof is available. Saying we have been through this before, is not good enough, it was wrong – very wrong and no one has been brought to account for this. [Client 1] would not
have invested if he knew the truth and I do not believe any other client would either – so I believe it is being missold now as who would really send money to an investment they know there is redemption freeze on? Let cut out the semantics now – it is frozen and I know someone who has been in your imaginary queue for 18mths telling me I am right.
It is now getting ridiculous. Originally the lies and we are just put off whilst all the time you take money in, something that no other fund manager has done and is not allowed in most other countries or in the onshore market place (it was Peter’s reason for closing the MIF [First Mortgage Income Fund], as he could not take money in, which would just go to CBA [Commonwealth Bank of Australia] – obviously not allowed in Australia).
I am sorry – I know you appreciate the candidness, but I am not stupid… You can believe this as much as you want, there is something wrong and I am sure it is legally questionable to be honest.
You cannot just have faith in something Heather. I have have dealt with LM for nearly 10yrs and for most of the time trusted the company entirely. I have been down there twice and was very impressed. Unfortunately in this credit crunch, lots of people decided to break rules and tell lies.
I am extremely uncomfortable with this situation and I cannot hide that. You should be too – really. To say LM are doing everything right is just propaganda…
[Client 1] is really starting to question how much truth there is here and I really no longer blame him.
Martyn
Heather McLeish
—–Original Message—–
From: Heather C. McLeish [hcmcleish@lmaustralia.com]
Sent: Friday, October 08, 2010 3:08 PM
To: ‘Martyn Terpilowski’
Subject: RE: [Client 1]
Martyn,
I know we have gone over this before, but let me say again that the only client you have that has been waiting a long time is [Client 2] whose redemption was pending since the maturity on his account – May 30th 2009. As he is at the top of the queue you can see we are working from a year
backlog. It matters not when the form gets there, it matters when the original maturity was set.
Best regards,
Heather
Martyn Terpilowski
—–Original Message—–
From: Martyn Terpilowski
Sent: 08 October 2010 16:30
To: ‘Heather C. McLeish’
Cc: [Martyn’s Colleague]
Subject: RE: [Client 1]
Heather
So the queue is basically at least a year and this redemption is the only reason we found out about the redemption freeze or whatever you want to call it? So is this ethical? Is it ethical to take money when you are not paying it out? Is it legal? I am feeling guilty for getting angry when my clients have been stolen from basically. [Client 1] would never have invested money if your Head Office did not lie with these incentives to get more money in and ASSURED us that there were no issues with redemptions. It is a lie. Do not call me childish for saying that. It is a LIE. Peter Drake is a
LIAR. FACT. I am not blaming you personally, but if you continue this ridiculous ignorance of the facts and truth, you have to take responsibility also. This is exactly why the offshore industry has a bad reputation. This would not happen in the US or Australia.
You seem to have been brain washed like [XXXX] and I am sure if the client went to the FSA he would win hands down as I would if Peter sued me like he threatened. The issue is not and has never been a redemption freeze, it is the lies and the misselling that is still going on now. Is anyone selling telling anyone the truth?? as no one would buy it, would they? no they and you are hiding behind semantics which is disgusting.
I hope [Client 1] and/or [Client 2] take legal action and I will no longer stand in the way of this, because someone needs to teach Peter Drake he cannot just make unilateral decisions about what people need to know.
Seriously this is a disgrace and I am furious, that I was put in this position through lies.
You do not want to hear this – but you should.
The fact that you are still promoting this fund and people are still selling it, during this current situation, is shocking.
This will carry on for years and we are going to get constant white elephants about land being sold etc, someone needs to stop Peter Drake NOW as he continues to make money on this and let’s face it the Aussie market is booming. Frankly there is something very wrong.
Martyn
Heather McLeish
From: Heather C. McLeish [hcmcleish@lmaustralia.com]
Sent: Tuesday, October 12, 2010 2:11 PM
To: [Client 1]
Cc: ’Martyn Terpilowski’
Subject: MPF update
Dear [Client 1],
Thank you for your continued patience. We realize and understand the difficult position you are being put in and are fully committed to rectifying the situation as soon as possible. For your information I have included below some information on what is happening in Australia which directly affects our funds.
Firstly, an update on the Australian Property and Credit markets. The property market and the general economy in Australia (as evidenced by the strong AUD [Australian dollar]) has held up well over the last few years, however the credit and financial markets still remain extremely tight. The banks in Australia are just not lending to the levels they were prior to the GFC [global financial crisis], in particular in the commercial and business sector and more specifically transactions over $5m are just not happening in the current market. Commercial lending transactions when they do occur are taking as long as 8-12 months – this makes it very difficult for sellers and purchasers alike. This is the major factor which has led to the delay in redemption payments to investors as the funds assets are primarily in this sector in Australia. Several of the assets within the fund are currently available for sale – they include completed developments in the residential, commercial and industrial sectors in Australia – again the sales process is influenced by the availability of credit which as I mentioned above is slow. One of the larger investments in particular which is located in SE QLD [South East Queensland] (a growth corridor) was offered for either complete or partial sale earlier in the year – this did not eventuate due to reasons outlined above – the fund will continue to hold and develop this asset as it continues to and always did represent an excellent investment opportunity for the fund.
Just so you are aware, the only reason this particular property was ever offered for sale was to satisfy those investors with a redemption request as it was always meant to be a long term hold – bearing in mind the decision to invest in this asset was taken well before the GFC.
The MPF is a vehicle which is designed for sophisticated investors only as the nature of a large component of its assets are in the property development sector in Australia (this is how we provide the additional returns) – as we have seen over the last year in particular this can lead to timing issues in relation to the realisation of assets back into cash and cause delays in redemption payments.
The fund also offers investments in multi-currency – this enhances the fund as an investment choice for advisers and their investors.
In order to provide this the fund needs to hedge its FEX [foreign currency] exposure via two providers – they require a certain percentage of margin which increases as you know with the very strong increase in the AUD.
Conversely, the strength in the AUD is a good sign however of the ongoing performance and expectations of the Australian economy and even though this issue is extremely frustrating for those investors who wish to exit – over the medium to longer term this will see the credit and financial markets return to normal and the fund operating within its normal redemption timeframes once again.
Please let me know if you have any further questions
Best regards,
Heather
Heather C. McLeish
HELM GK, President
Martyn Terpilowski
From: Martyn Terpilowski
Sent: 12 October 2010 15:59
To: ’Heather C. McLeish’
Cc: [Martyn’s Colleague]
Subject: RE: MPF update
Heather
This is just more of the same. We understand liquidity issues – it is the way it has been dealt with and the lies that have been told, that make LM very different to every other company who have faced this situation.
At the end of the day he is no longer patient. I hate to reiterate here for the umpteenth time – but this client has been put in a particular position as he has lied to by LM, who stated there were no redemption hold ups, whilst prospecting for new business and offering incentives for customers who extended their terms, even terms that were not up for extension. There is no way in the world that is anything but wrong. I hope you have not gone so far down the avenue of ‘believing’ in Peter and LM –that you cannot see that. I cannot believe that educated people could view it any other way if they looked at it with no bias.
In the mail to [my colleague] the following statement is made by Lisa [Darcy],
“[Client 2’s] payment will be one of the first to be released once our funds management committee determines that the assets are protected and that we can apply funds to redemption payments again”
– this actually suggest no redemptions are being at all right now and probably have not been for some time and that is my serious suspicion. I know that we will not get the truth from LM as has been shown previously – but this wording is either very bad, or that is the case – I believe it is the second of those two.
Obviously this cannot be stated truthfully as Peter and LM have been hiding behind semantics for over a year now. There are only delays, not suspensions… Anyway whatever, it means the same to our clients and it is an absolute disgrace that LM continue to market their funds (offshore) and take in new money. I think you know that brokers are mostly not telling clients this situation, so it is basically fraud.
I honestly think that regulators in various jurisdictions would have an issue with this and [Client 2] and [Client 1] would be entirely in their rights to take further action here. If new investments had been stopped and lies had not been told, it would be easier to accept – but this has not been the case.
Do my emails sound like the ramblings of a fool? I am very educated and have worked as a Financial Adviser for 13 yrs. The last few years have been challenging for us all, but blind faith has got a lot of people badly burned Heather. The suggestion it is ok to lie to customers is wrong. There is no debate and no semantics – I have it in black and white. I believe we are still being lied to and I do not believe redemptions are being paid right now at all. If they are being made, they must be being made from new money coming in, which is a Ponzi scheme and is illegal. I can’t see how anyone can say anything different? [Client 2] and [Client 1] have MBA’s and Doctorates from Ivy League Universities – they like me , can see that and will not be appeased by conference calls and the same old story when the actual facts are as above. Think about it.
Again Heather this is not personal – I actually feel for you having to defend this. I tried to give time after my original anger, which was totally justified, but a year on – this is still going on, well after other companies who put their cards on the table initially, are fully liquid again. I believe if you lie, you have something to hide – Don’t you?
Rgds
Martyn
