A Typical $1 Million Fraud

Australian Guardians is complying an extensive file of case histories of how Members have been defrauded out of their lawful superannuation entitlements.

The following is a more extreme case history since this Member was the victim of three frauds:

Click on the link or refer to the tab “Favourite Frauds” to learn more about these frauds and to see if you too may have been a victim of one or more of these frauds.

Australian Guardians fraud case history {AG 2006/14}.

The Member had been a Member of a Government Regulated Superannuation Fund for just over 16 years and was retrenched by the Employer. The Trustee then released a lump sum benefit of $337,157 (before the Superannuation Surcharge).

The Member wanted to check whether this amount was the lawful entitlement so he lodged a request for a copy of the Trust Deed and Rules in accordance with Section 1017C of the Corporations Act 2001 and with Regulation 7.9.45 of the Corporations Regulations 2001.

Specifically the Member wanted a copy of the Trust Deed and Governing Rule extant when the Member accepted an offer of employment. Representations had been made to this Member about his superannuation entitlements if he accepted the offer of employment.

It is a criminal offence under Schedule 3of the Corporations Act 2001 for the Trustee of a Government Regulated Superannuation Fund to refuse to provide a copy (or allow a photocopy to be taken) of the Trust Deed and Governing rules of a Member’s or Beneficiary’s Fund. Specifically subsections 1017C(2) and 1017C(5) of the Corporations Act 2001.

The Trustee ignored this and other requests for a copy of the Trust Deed and Governing Rules for over two years. The Member then contacted ASIC and requested ASIC give a direction to the Trustee to provide a copy of the Trust Document requested.

Then six months after contacting ASIC, the Trustee finally responded with a version of the Trust Deed and Governing rules extant six months after the Member accepted the offer of Employment.

Both the Trustee and two Officers of ASIC tried to convince the Member that earlier version of the Governing Rules and Deeds of Amendment had been “lost“.

The Governing Rules of a Superannuation Fund is not a single document, but a “set” of documents which includes the founding trust instrument plus all subsequent deeds of amendment.

The Member did not believe that the Fund Secretary nor the Officers of ASIC were telling the Truth. {Refer to subsection 52(2)(a) of the Superannuation Industry (Supervision) Act 1993}.  If the Trustee had in fact “lost” the founding trust instrument and many of the later deeds of amendment, then this would be a Prudential Matter of Concern.

Therefore the Member contacted the Prudential Regulator – APRA and asked APRA to investigate.

The then CEO of the Trustee in a letter marked “strictly confidential” (obtained under the Freedom of Information Act 1982) confirmed to APRA that the Trustee did in fact have possession of the founding trust instrument and all subsequent deeds of amendment!

The Member then contacted ASIC and asked ASIC to enforce Section 1017C of the Corporations Act 2001 and Regulation 7.9.45 of the Corporations Regulations 2001.

ASIC under the Chairmanship of Mr Tony D’Aloisio refused to do so.

The Member then initiated proceedings in the Federal Court of Australia against the former Chairman of ASIC, Mr Tony D’Aloisio,  and others (VID 323 of 2011).

Finally after a battle lasting four and a half years this Member finally obtained the Trust Documents that would confirm his lawful superannuation entitlement.

How many Members would be prepared to take the Chairman of ASIC to the Federal Court of Australia in order to obtain copies of the Trust Documents that they are legally entitled to have, but which ASIC was attempting to conceal?

So what did these Trust Documents confirm?

The Trust Deed and Rules at one time did contain an “exclusions list” that empowered the Trustee to deduct certain components of remuneration such as “overtime payments” when determining the final salary Defined Benefit, however the exclusion list had been deleted six months before the Member was retrenched.

Therefore if a valid “Condition of Release” event had occurred the benefit payment for the final salary Defined Benefit should have been $477,000 instead of the $337,157 paid by the Trustee.

This Member had been a victim of the Superannuation Salary Fraud and the Trustee had made unlawful deductions that were no where mentioned in the Governing Rules of the Fund.

However what the Fund Secretary and two Officers of ASIC did not want to reveal was that a Deed of Amendment that had been concealed confirmed that the Fund had been converted to a deferred benefits fund in 1982 when the fund has a large surplus.

Retrenchment was no longer a valid “Condition of Release” and so the Trustee had unlawfully terminated this Member’s Fund Membership.

The Member is lawfully entitled to remain a Member of the Fund until he attains the Normal Retirement Age of 65 {or elects to voluntarily retire after the Early Retirement Age of 55}.

At the Normal Retirement Age of 65 this Member’s final salary Defined Benefit entitlement will be $826,000 {Note if the Member had remained an employee and received no further promotions his final salary Defined Benefit entitlement would have been $1,350,000}.

So instead of receiving a lump sum benefit of $826,000 at the Normal Retirement Age of 65 and having ongoing death and disability cover, this Member had his fund Membership unlawfully terminated at the age of 54 and then receiving only  $337,157.

Thus the Member was a victim of both the Superannuation Salary Fraud plus the Unlawful Termination Fraud.

But there is more.

When the Member accepted the offer of employment representations were made to the Member of what his superannuation entitlement would be if he remained in the service of the Employer until the Normal Retirement Age of 65.

The accrual rate of the final salary Defined Benefit Fund was based on this assumption.

However in the 1990s it became common practice for Employers to force Employees out of the workforce by the age of 55 if not earlier. Actuarial firms were advising Human Resources Department to “cull” workers over the age of 55 since a final salary Defined Benefit follows a “hockey stick” curve with most of the benefit accruing between 55 and 65 so that means there is a great incentive for Employers to retrench Employees well before that can attain their best superannuation accrual years, completely ignoring the Age Discrimination Act 2004.

Since the Member was a Member of a hybrid superannuation fund that had an associated “top up” accumulation Fund into which additional contributions could be made to increase the total superannuation benefit, the Employer started making additional contribution into superannuation as part of the Member’s “salary packaging” arrangements.

These contributions were specific to that Member, however these additional contributions that amounted to over $200,000 have simply “vanished” and the Trustee has no record of what happened to these additional “top up” contributions! {Note the final salary Defined Benefit Fund has a substantial surplus and the Employer was on an extended “Contribution Holiday” so the $200,000 was not placed into the common asset pool of the final salary Defined Benefit Fund}.

If the investment return of these additional contributions average 6% then at the age of 65 the value of the $200,000 would be around $550,000.

So this Member was also a victim of the Contribution Skimming Fraud!

Hence if there had been no fraudulent conduct by the Trustee and agents of the Trustee this Member should have received around $ $1,380,000 at the Normal Retirement Age of 65, instead of only $337,000 at the age of 54.

Reg Flag Agencies

This member initially believed that he was only a victim of the Superannuation Salary Fraud, since the Trustee refused to provide copies of any Trust Documents lodged a Complaint with the Superannuation Complaints Tribunal. In this case the Tribunal made the correct ruling on the Tribunal lack of jurisdiction and so the Complaint was “Withdrawn”.

However the Tribunal did not clearly state the the Tribunal was making a ruling on the Tribunal’s statutory powers to deal with this complaint. Instead the Tribunal issued a Section 22 Notice which simply stated: “Your Complaint has been withdrawn on the basis that the Complaint was misconceived“. The Tribunal provided a copy of the Section 22 Notice to the Trustee.

The Trustee then dishonestly misrepresented the ruling of the Tribunal claiming: “See the Tribunal has dismissed your Complaint as misconceived now go away and do not contact the Trustee again.“.

When the Complainant advised ASIC that the Trustee had committed criminal disclosure violations and had contravened subsections 1017C(2) and 1017C(5) of the Corporations Act 2001, ASIC refused to take any enforcement action. Instead an Officer of ASIC fabricated evidence in an attempt to limit further inquiry.

When the Complainant advised the Prudential Regulator  APRA that the Trustee was in breach of a condition imposed on the Trustee’s RSE Licence issued by APRA, APRA just turned a blind eye to this breach.

Implications for all Members of Government Regulated Superannuation Funds

If this Member could be defrauded out of $1 Million of his lawful retirement benefit with Officers of ASIC attempting to block assess to the very Trust Documents that would confirm this fraud, how confident are you that you received you lawful superannuation entitlement? How large a claim for a Breach of Trust might you have?

To either have “peace of mind” that you did receive your lawful benefit or to establish your claim for a Breach of Trust against your Superannuation Trustee, become a Members of Australian Guardians today.

Australian Guardians is assisting some Members confirm claims that run into the 100s of thousands of dollars and in some cases like the case above into the $ millions of dollars.

Email audguardian@gmail.com or leave contact details below.

Membership is free.

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