THE Australian Growers Action Group and law firm Slater & Gordon are in talks with blue gum investors about possible lawsuits against financial planners who recommended the schemes.
Slater & Gordon lawyer Mark Walter told the Spectator that the managed investment scheme (MIS) clients could be divided into “two distinct groups”.
“There are some people for whom the compliance paperwork for their financial advice was almost non-existent,” he said.
“There are also some people for whom the advice they received, to take part in the schemes, was inappropriate for their financial situation.
“People with incomes of $40,000 to $50,000 were being signed up – they had no capacity to meet obligations under the scheme.”
Mr Walter said some investors may have been given appropriate advice to take part in the MIS boom but agricultural investments “should be treated like any other”.
“Investors should be able to recover funds lost due to inappropriate or non-compliant financial advice,” he said
The Spectator understands that a class-action lawsuit is not likely at this stage because of the differences between individual cases.
Investors in almond plantation MIS have also come forward to discuss potential legal action.
One of Slater & Gordon’s targets is Timbercorp, a company that went into administration in 2009 along with its major competitor Great Southern after tax benefits were wound back.
Both companies had significant plantation holdings in south-west Victoria and some have been sold to commercially viable companies with institutional investors.
Mr Walter blamed those tax breaks and the system of commissions for the large number of investors who were recommended to take part in MIS.
“There were investors from all over Australia, some 18,000 people from all walks of life,” he said.
“In the pre-Global Financial Crisis environments there were healthy commissions being paid to financial advisors and accountants.
“Those commissions were very attractive and served as an incentive to sign people up.”
Business Day has reported that Timbercorp paid planners and advisers commissions of up to 10 per cent of investment deals.
Former Prime Minister John Howard introduced tax breaks for MIS operations that contributed to the rapid growth of plantations and cost taxpayers $5 billion.
Banks and other financial institutions were left with hundreds of millions of dollars in debt from blue gum companies but many investors also borrowed money to take part.
“Investors were advised of the financial windfall and the tax breaks but the timber companies went broke and both never eventuated,” Mr Walter said.
“However, if they borrowed money to invest in the scheme then the debt is still there.”
Further complicating the situation is the fact that Timbercorp offered loans to the same people who were buying its investment deals.
Financial planners also received commissions from Timbercorp for selling loans to investors for use towards the purchase of MIS products.
Mr Walter also told The Spectator that Timbercorp’s liquidator, KordaMentha, had been pressuring investors to settle their debts for a 15 per cent discount in return for relinquishing rights to sue.
Local blue gum plantation operators have told The Spectator that the timber industry has moved to a more sustainable business model since the demise of MIS.