JACK Flader, the former Hong Kong businessman exposed as the mastermind of Australia's biggest superannuation theft, has been cleared of breaking any Australian laws.
Despite previously naming Mr Flader the "ultimate controller" of a network of dodgy offshore funds that ripped off $123 million in the Trio Capital scam, the corporate watchdog yesterday said Mr Flader was in the clear.
"Based on inquiries about Trio to date, ASIC believes there is currently insufficient evidence to prove a breach by him of Australian law," the Australian Securities and Investments Commission said.
Two weeks after a parliamentary committee gave a scathing assessment of regulators' lack of action over the Trio thefts, ASIC defended its investigation.
John Telford, who lost a disability payout of $600,000 in the collapse, said he was "bowled over" that Mr Flader had escaped authorities for so long.
"What I can't understand is that it's public information that he's pulled off various large amounts of capital from around the world," he said. "What boggles my mind is: why haven't they done something more thorough?"
The head of the parliamentary inquiry, Deb O'Neill, said ASIC's statement should not be the finish of the matter. "People want this to be pursued to the very end it's now the responsibility of the Australian Federal Police and the Australian Crime Commission to investigate," she said.
Mr Flader has become a poster boy for regulator indifference after detailed exposure of his central role in the December 2009 collapse of Trio Capital.
BusinessDay has reported how Mr Flader enjoyed the fruits of his activities including luxury sessions at the $1500-a-night Bulgari Resort in Bali, globetrotting to 80 destinations over 3 years, and twice visiting Hugh Hefner's Playboy mansion all the time siphoning off Australian investors' funds.
BusinessDay has also revealed Mr Flader's links to two other offshore investment scandals, disgraced UK stockbroker Pacific Continental Securities and his role as a defendant in the $US1billion Derivium scandal in the US.
When Shawn Richard was jailed in December 2010 for 2 years for his role in the thefts, Justice Peter Garling accepted ASIC's evidence that he acted on Mr Flader's instructions.
"I accept that . . . Mr Flader was the architect and ultimate controller of the scheme," he said.
In yesterday's statement, ASIC said it "would provide relevant information relating to Mr Flader to the Australian Federal Police and the Australian Crime Commission".
Not only did ASIC clear Mr Flader, but it sided with its fellow regulator, the Australian Prudential Regulation Authority, in blaming losses in a Trio fund called ARP Growth on failed investments.
The committee did not accept APRA's assessment, favouring a view that $53 million in the fund had been stolen. The whistleblower who uncovered the Trio fraud, John Hempton, said: "The reluctance of ASIC to prosecute fraud at ARP Growth is extraordinary."
Frequently Asked Questions about this Article…
Who is Jack Flader and why did ASIC clear him in the Trio Capital scandal?
Jack Flader is a former Hong Kong businessman named by investigators as the alleged mastermind behind the Trio Capital scam. The Australian Securities and Investments Commission (ASIC) said it found insufficient evidence to prove he breached Australian law and therefore has cleared him, though it will share relevant information with other law-enforcement agencies.
What was the Trio Capital scam and how much money was involved?
The Trio Capital scandal involved a network of offshore funds that siphoned money from Australian investors, with reports citing around $123 million linked to the broader scam. One specific Trio fund, ARP Growth, is at the centre of a separate $53 million dispute about whether losses were stolen or due to failed investments.
What did ASIC say about its investigation into Flader and Trio Capital?
ASIC said its inquiries to date have produced insufficient evidence to prove a breach of Australian law by Jack Flader. The regulator defended its investigation publicly and indicated it would provide relevant material to the Australian Federal Police and the Australian Crime Commission for further action.
Why have some investors and a parliamentary committee criticised regulators over Trio Capital?
Investors who lost savings—such as a man who lost a $600,000 disability payout—have expressed anger that Flader ‘escaped’ authorities for so long. A parliamentary inquiry gave a scathing assessment of regulators’ lack of action, and its chair, Deb O’Neill, said the matter should be pursued to the end by law-enforcement bodies.
What differing views exist about losses in the ARP Growth fund?
The Australian Prudential Regulation Authority (APRA) said losses in the ARP Growth fund were due to failed investments, while the parliamentary committee did not accept that view and favoured a conclusion that about $53 million in the fund had been stolen.
Did any court findings link Flader to the Trio fraud?
Yes. When Trio associate Shawn Richard was jailed in 2010, Justice Peter Garling accepted evidence that Richard had acted on Jack Flader’s instructions, describing Flader as the ‘architect and ultimate controller’ of the scheme. Despite that judicial finding, ASIC says it still lacks sufficient evidence to prosecute Flader under Australian law.
Are there other alleged offshore links or scandals associated with Jack Flader?
BusinessDay reporting, cited in the coverage, has linked Flader to other offshore investment scandals, including ties to disgraced UK broker Pacific Continental Securities and his role as a defendant in the US Derivium scandal, which involved about US$1 billion.
What are the next steps for investigators and what does this mean for everyday investors?
ASIC has said it will pass relevant information to the Australian Federal Police and the Australian Crime Commission, so criminal investigators may pursue the matter further. For everyday investors, the case highlights ongoing concerns about regulator effectiveness and the importance of scrutiny around offshore funds and superannuation investments.
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