bronteblog arp hemton guarantee fraud march 2010

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F r i d a y , M a r c h 1 9 , 2 0 1 0

My tipper on Astarra

Tipping the authorities off about Astarra required as I said no special genius on my part. I was

tipped by a blog reader who noticed that the Astarra investment committee claimed Charles

Provini as a member whilst Provini was the CEO of Paradigm Asset Management. I have written

extensively on Paradigm Asset Management (see here for a decent summary).

Anyway my tipper has now revealed himself. He is Dominic McCormick the chief investment

officer ofSelect Asset Management. Dominic insists his team deserves any credit.

Dominic (and presumably his team) had many of the issues with Astarra nailed by the time he

tipped me off. I worked out a few more.

I reported the story to the Sydney Morning Herald who did not think they had enough evidence to

run the story. [They printed nothing until much later.]

Later I worked a few more things out and using connections ensured that the whole story landed

directly on the desk of Tony DAloisio (the head of our securities regulator).

Dominic found about half a dozen red flags with Astarra. He has since listed them in this article

without revealing that he was my original tipper. Dominics article shows clearly that there were

plenty of reasons not to invest in Astarra and these reasons are valid reasons to be wary even if

you have no strong basis to allege fraud.

The problems are wider than either Dominic or I anticipated. For instance we knew nothing of

ARP Growth and that may be the most seriously impaired fund of the lot. It is also the only fund

on which I am willing to determine absolutely involved fraud. (I have two wildly different sets of

accounts for ARP Growth - at least one of those accounts mustbe fraudulent.)

The rest of the issues with Astarra I will leave in the capable hands of our regulator and perhaps

the class action lawyers. I want to get back to making money for our clients.

John

Posted by John Hempton at 9:37 AM

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Bronte CapitalI t ' s a s m a l l w o r l d b u t I w o u l d n ' t w a n t t o p a i n t i t

Keith - Hermosa said...

Very nice work, again! Would you please take over the Fed? Or at least the SEC?

March 19, 2010 1:42 PM

Ken Taylorsaid...

You're an influential guy. It was your relationship with Ken Henry that made your letter

e Capital: My tipper on Astarra http://brontecapital.blogspot.tw/2010/03/my-tipper-on-as

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The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold

either long or short positions in securities of various companies discussed in the blog based upon

Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation

of business or investment advice. In fact, it should not be relied upon in making investmentdecisions, ever. It is intended solely for the entertainment of the reader, and the author. In

particular this blog is not directed for investment purposes at US Persons.

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A blog from my very cool cousin Nick

Hempton

100 Good economics blogs usefully put

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in this business is both dull and

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to ASIC sufficiently credible to get them interested. ASIC asking questions gave

enough credibility for the Herald to publish, which further encouraged ASIC to take it

seriously. A letter or press article from Joe Blow would be ignored. At least some

people who have had there funds frozen aren't likely to be happy about ASICS

actions. Like you say in your submission to the Cooper Review, an Australian super

ponzi could go on for years before it collapses. The people collecting pensions now

were winners until ASIC stepped in.

Could unallocated gold in the London Bullion Market Association (LBMA) be a

fractional reserve system unbeknown to most account holders as suggested by Paul

Mylchreest http://www.gata.org/files/ThunderRoadReport-10-15-2009.pdf. The

argument goes that in 2008 the total quantity of unallocated gold is estimated to be

15,000 tonnes which supports the 2,134 tonnes on average of spot gold trade

through London every day representing 14.2% of the pool. This compares to average

daily turnover in UK equities of between 0.34% and 0.63% for the 12 months ending

September 2009. While members of the LBMA provide no information on the backing

for unallocated gold the improbably high turnover is suggestive they are operating a

fractional reserve system where unallocated accounts are only partially backed by

physical gold. This makes LBMA unallocated gold accounts susceptible to a run and

gold is not like a fiat currency where the government can make more.

If it is true, unlike the Astarra revelations, your fund could exploit this opportunity.

March 21, 2010 10:51 PM

Alisonsaid...

Well done to Dominic and his team for seeing the red flags and John for getting the

regulators to review Astarra. It certainly has triggered some momentum down in

Wollongong which may improve the quality of the local financial planning profession.

July 23, 2010 9:52 AM


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site of the young uber-nerd (Claus

Vistesen)

Bad Astronomy blog - because markets

are not the only place you find

irrationality

Brad DeLong - sometimes right,

sometimes wrong, always liberal...

Cassandra does Tokyo and lots of other

things

Felix Salmon: I have no idea how he

keeps the quantity and quality this high

Fistful of Euros: another

macroeconomics blog from the

continent with the most interesting

macroeconomics

Gary Weiss: because any journo who

spends that much time chasing

scumbags really is an ornament to our

society...

Ibex Salad: Spanish stocks and Olive

Oil

Interfluidity: An impossibly clever and

well written blog - one of my favourites

Jeff Matthews: Not Making This Up -

this is one of the all time greats and was

my inspiration for starting this blog

Paul Krugman: because he is so darn

smart

Rortybomb - a blog I love to disagree

with...

Santangel's Review: neat interviews

with value investors and other things

The Chronic Investor: A UK link I am

starting to read

The Gonzo Goes - a really good idea for

what you could be doing when you were

not punting financial markets

Bronte Capital .

.


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bronteblog arp hemton guarantee fraud march 2010

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