Cant wait to see what MFS come up with and the media back track and then publish "What a turn around" ....if it happens.
MFS's roots in solicitors scandalBy Anthony Klan
January 25, 2008 07:20am
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THE failing MFS group - which is chaired by former Opposition leader Andrew Peacock - was created out of a Gold Coast law firm embroiled in the nationwide solicitors' mortgage broking scandal of the late 1990s.
MFS founders Michael King and Phil Adams, who have both resigned from the group in recent months, were partners with McLaughlins Solicitors until 2000 when they formed MFS from the finance arm of that law firm, following an industry-wide crackdown by the corporate regulator.
The revelations come as McLaughlins Solicitors managing partner Geoff Horne - a former close colleague of Mr King - said Mr King had a "very aggressive risk profile''.
McLaughlins Solicitors was one of a number of law firms which offered to invest clients' savings by on-lending them as high-risk loans to borrowers such as property developers, a practice which ultimately cost thousands of elderly Australians much of their life savings.
The failures of many of those loans - including some made by McLaughlins Solicitors - caused a public outcry in 1999 after media exposure of the problem, which in turn led to the crackdown by the Australian Securities and Investments Commission.
Shares in MFS crashed almost 70 per cent last week, wiping more than $1.5 billion from the company's market value. MFS suspended its shares from trading indefinitely on Wednesday amid a funding crisis.
Consumer advocate Denise Brailey said she had been so concerned about solicitors' loans that she conducted seminars in each capital city in 2000, calling for people who had lost money in the schemes.
Ms Brailey said clients of McLaughlins Solicitors were heavily represented at the Queensland seminars.
"Investments with McLaughlins Solicitors were the first ones mentioned almost every time,'' Ms Brailey said yesterday.
She said Gold Coast-based elderly investor Des Blandford was one of those investors who had invested in a failed McLaughlins mortgage loan.
"He was devastated and said he had no idea there was any risk involved,'' Ms Brailey said.
"Investors at the time were telling me they were having huge problems with McLaughlins, with people telling me their income payments had stopped and they couldn't recover their capital.''
MFS founder Mr King resigned as chief executive of MFS on Monday following the share price collapse. He did not return calls yesterday.
MFS chairman Mr Peacock, who pockets annual directors' fees from MFS of $250,000, also declined to comment.
McLaughlins Solicitors managing partner Mr Horne said he was not an "equity partner'' at the time the law firm was investing clients' money and had no knowledge of people losing "large sums of money''.
"Of the loans that were written by McLaughlins, even the ones that ultimately turned into bad loans, there were very few instances where people didn't recover their principal,'' he said yesterday.
"Those loans were typically recognised as loans of last resort but in McLaughlins they were pretty well managed and there were certainly no issues that arose with this business as far as loans.''
Mr Horne said Mr King had no history of being involved in "bad business dealings'' at the firm but he said Mr King had a "very aggressive risk profile''.
"To me the MFS thing is just typical big ego - trying to do too much too soon,'' Mr Horne said.
"Now there seems to be extra things coming out such as the claim the debt (MFS) owes is higher than reported.
"Michael is a very brilliant man but ... he certainly had a very different risk profile to myself and (fellow partner) Cameron Delahunty.''
It is understood Mr King and Mr Adams left McLaughlins on poor terms after refusing to make a requested payment to the law firm for what its partners saw as expenses they had incurred in building up the financial services arm.
MFS is currently trying to sell its Stella hospitality arm to private equity player CVC Asia Pacific to help it pay down $220 million of debt that is due immediately. The company also operates financial services under MFS Financial Services.
That arm derives the bulk of its money from managing syndicates which raise retail investor funds and invest in a range of property and tourism-related assets.
That retail investment arm continues to raise money from investors despite the crisis facing the MFS head stock.
ASIC declined to comment on MFS yesterday.
In a bizarre move, ASIC spokeswoman Emma Forehan also refused to comment on the broader laws surrounding struggling companies which continue raising money.
http://www.news.com.au/business/story/0,23636,23106209-462,00.html
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