Financial planning group Storm Financial was lost around $16 million in the last six months before collapsing with debts of about $88 million, the company’s administrators have revealed.
Financial planning group Storm Financial was lost around $16 million in the last six months before collapsing with debts of about $88 million, the company’s administrators have revealed.
But Worrells Solvency & Forensic Accountants partners Rajendra Khatri and Ivor Worrell told yesterday’s creditors meeting held in Brisbane that they did not know how much money could be recovered from the ashes of the group.
Commonwealth Bank is the company’s largest creditor and has lodged a debt of $27.09 million over the group. The group’s remaining creditors are owed $51 million, plus a provision for dividends of $10 million.
About 35 creditors attended yesterday’s meeting, which was closed to the media.
Ivor Worrell told the meeting that Storm lost $16 million in the six months to 30 December as fee revenue dried up.
Storm received just $12.3 million from upfront fees and trailing commissions in the period, compared with $67.9 million during the 2007-08 year.
The administrators said the company’s management – well known for its lavish spending on buildings and client entertainment – were unable to reduce costs to stem the losses.
Hours after the creditors meeting, a group of up to 300 former Storm clients met at a restaurant in Brisbane and officially launched the Storm Investors Consumer Action Group.
The group plans to take legal action against the banks that worked with Storm and set some clients up with crippling margin loans. Law firm Slater & Gordon is currently preparing a case on behalf of over 230 Storm clients.
New South Wales Nationals Senator John Williams also addressed the function and has promised to push for a Senate inquiry into the role banks played in the demise of Storm Financial.
“They’ve been sold a car obviously that does not have brakes and they’ve had a crash,” he told ABC Online.
“If the senators of this nation do not carry out a Senate inquiry into our banking and finance situations now, surely we would be failing the people of Australia.
Meanwhile, Storm’s joint receiver and manager, Bill Buckby of KordaMentha, is continuing to investigate a special $2 million dividend paid to Storm founders Emmanuel and Julie Cassimatis (pictured right) on 15 December, just weeks before the company went under.
The company also paid $650,000 to four other select clients.
But in a statement to the Townsville Bulletin, Julie Cassimatis defended the payouts. “Storm has always assisted clients over difficult times in the past and has done so for decades.”
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See also the feature Five lessons from the collapse of Storm Financial
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