THE corporate regulator has described former Gold Coast high flyer Craig Gore's conduct in an offshore scheme that misused more than $4 million in retirement savings as "most egregious".
However, a Federal Court judge has reserved his decision on whether to impose a life ban on the disgraced businessman from dealing in financial services.
Greg Tanzer, the commissioner of the Australian Securities and Investments Commission, says Federal Court Justice Richard White agreed with the regulator's submissions that "Gore's purpose in establishing a share scheme offshore was to avoid compliance with the Australian regulatory regime".
"ASIC will act to ensure those who deliberately deceive investors or misuse investors' money for their own personal benefit are brought to account," he says.
ASIC has been seeking permanent banning orders against Gore, his wife Marina Gore and US-based businessman Geoffrey George.
It also is seeking a 10-year ban by consent against former Gore lawyer Mark Adamson and former ActiveSuper director Jason Burrows, and a 7.5 year ban on former Royale Capital director Justin Gibson. Bans from running a corporation are also being sought against Burrows and Gibson.
Former Gore associate Graeme Stonehouse has been found to be not knowingly concerned with the contraventions detailed by ASIC.
In his decision, Justice White found that Gore, while bankrupt, exerted control over companies associated with his wife Stonehouse to bring the offshore scheme to fruition.
The plan involved the establishment of companies in the British Virgin Islands (BVI) where funds raised from Australian retail investors would be channelled, ostensibly for the purchase of distressed real estate assets in the US.
The funds were raised by Gold Coast companies ActiveSuper and Royale Capital and the court found that of the funds raised from 187 super funds, only $455,000 was used to acquire properties. Most of the funds were forwarded through a loan arrangement to property developer MOGS, a Gold Coast-based company of which Marina Gore and Stonehouse were directors.
ASIC alleged multiple contraventions of financial services laws including the unlicensed provision of financial services, failure to provide disclosure documents to investors, cold-calling practices, misleading and deceptive conduct, and distribution of investor funds to third parties without disclosure to investors.
ASIC says the scheme had intended to raise up to $20 million from investors before it intervened.
ASIC's investigation began in 2011 and civil proceedings were launched in 2012.
ASIC says the investigation looked at the advice given to Australian investors to establish a SMSF and invest money in a share scheme involving offshore entities and investment in real estate.
"The judgment confirmed ASIC's view of the law, namely that those who promote and make recommendations to investors about establishing an SMSF or using an existing one and recommend, facilitate or arrange for the investors to acquire or dispose of superannuation assets, including interests in deposit and payment accounts, are carrying on a financial services business for which they must have an Australian financial services licence," it says.
Tanzer says the incident, which cost investors $4.5 million, should serve as a "timely reminder to SMSF investors to understand the risks associated with do-it-yourself super and their obligations as trustees".
"Investors need to do their homework, check who they are dealing with and remember SMSFs do not have access to compensation arrangements in the event of theft or fraud," he says.
"There can also be significant tax penalties for those trustees of SMSFs who get it wrong."
Justice White announced on May 8 that he has reserved his decision on disqualification and banning orders against the respondents.