Brite Advisors ‘systematically’ mishandled superannuation money, court hears

Brite Advisors, a company managing $1bn worth of client pension funds, is set to be wound up after the corporate regulator accused it in court of systemically mishandling customer money.

Brite Advisors, a company managing $1bn worth of client pension funds, is set to be wound up after the corporate regulator accused it of systemically mishandling customer money to cover its own expenses and acquire other businesses.

The claims were made in the Federal Court on Tuesday.

Company officers including John Lymer and Mark Donnelly are yet to explain why assets the company held were $US69m ($106m) less than what beneficiaries had been told.

The court heard “large amounts” of money were being transferred from client accounts to Brite’s “house” Hong Kong account, according to an internal email sent to Mr Donnelly.

Appearing for the Australian Securities & Investments Commission, barrister Jonathon Moore KC said the email stated there was “no legitimate reason” to move the money from client accounts to Brite’s house account.

“In my opinion some of our acts already violate SFC (Securities and Futures Commission of Hong Kong) rules,” Mr Moore reported the email as stating. “I will try to see if we can make up some documents and present them in a way the SFC may think our acts are controversial instead of intentional violations,” he said.

Mr Moore said a further email, included in a report by investigative accountants Linda Smith and Robert Kirman of McGrathNicol, who were also appointed as receivers in December, explained “what has previously been suspected but now plainly (shows) the fact of gross misappropriation of client funds”.

“Funds are withdrawn whenever required and for any amounts required at any point in time,” he said. “Brite in reality … knew (it) could not justify the amounts it had been withdrawing.

“Rather, what they were trying to justify IE make up, was a false explanation. To cover what had really been happening. No doubt under direction of Mr Donnelly and Mr Lymer.”

Mr Moore told the Federal Court Brite was suspected of a “long list” of contraventions, including the systemic mishandling of client funds, using client funds for Brite’s own expenses and to acquire other businesses. Brite also probably failed to comply with its obligations as the holder of an Australian financial services licence, Mr Moore said.

Receivers McGrathNicol noted there were no supporting documents for a “huge amount of transactions” between Brite and Brite companies around the world, Mr Moore said.

The Federal Court in October granted ASIC interim asset preservation orders against Brite, after receivers were appointed to carry on the operations of the company. ASIC brought the application to wind up the company on the basis “there is a justifiable lack of confidence in the management of the company’s affairs”, Mr Moore said.

Federal Court judge Patrick O’Sullivan made an order to wind up the company.

“(The) reality is there is a huge amount of money at stake,” he said. “Retirement savings are at risk.”

Justice O’Sullivan will publish his reasons by the end of the week.