Enough buck-passing, it’s time for action

By Denise Brailey (President Real Estate Consumer Association)

Denise Brailey is a full-time consumer advocate, and a woman of passion and integrity. This article was originally published on November 14, 2003, on Neil Jenman's 'Ethics in Real Estate' site and can be found here. It is reprinted here with the permission of the author.

Alex claimed to have lost over $15,000 dealing with a man called Roy McDonald and his company Strategic Management Works (“SMW”).

Roy McDonald holds courses where he promises to turn ordinary working citizens into millionaires within 7 years. He fills their open hearts and minds with the sounds of hope and good fortune. He rings the bells of financial freedom.

But sadly, after several years of this nonsense, many have lost all of their hard-earned money. They have been coaxed on to the endless treadmill of debt.

After speaking with, and listening to, scores of Roy’s victims, one has no doubt that these people have been horribly and unconscionably deceived.

It appears that Roy McDonald has been running courses in the Hunter Valley in NSW, along similar lines to many of the more infamous cults, such as WACO. Several people have reportedly consulted with psychologists for treatment as the effects of the “mind processing” took its ghastly toll. Some victims reported chronic suffering, months after the entire process had ceased. The financial strain only added to the burden.

The letters and emails all tell the same story – days at boot-camp, with sleep and food deprivation practices, chanting until the wee hours of the morning, everybody told to love and hug each other for support and just when the body is immersed in the powers of persuasion, Roy plays his trump card. According to camp survivors, the exhaustion from lack of sleep, followed by feelings of euphoria, is the moment for Roy to strike and demand they leave their jobs and follow him to the promised land. The self-styled guru will make them all fabulously rich if they follow him, their master.

However, before all of those dreams can come to fruition, a small matter of fees is discussed. Anything from $5,000 to $55,000 is poured into Roy’s coffers in the name of helping each other. The trouble is, only Roy seems to be doing nicely out of this rort, leaving his faithful disciples wallowing in debt. Sadly, many of the true believers did leave their jobs and certainly all who contacted us, were plunged into debt.

Documents verify the existence of “kick-back” arrangements should any of the faithful invest their homes in Roy’s lavish plans. The “lessons” were nonsense according to Alex and all of the others who contacted us. The commissions were not made known until after the fees had been paid. The speakers were other licensed Financial Planners who were moving in for the kill to flog dodgy products to Roy’s captive audience. These crafty planners knew that for Roy and the Boys to make 20% commissions on certain transactions (undisclosed at the point of signing – according to the victims), they needed to teach Alex and others about FINANCE.

With Alex and his friends developing a reasonable “yearn to learn” approach to life, they were unwittingly being groomed as cannon fodder for the greedy piranhas of the finance industry.

The Australian Securities and Investment Commission (“ASIC”) who are constantly attempting to convince the long suffering public that they are not asleep at the wheel, admitted recently they have known about Roy McDonald’s dubious activities for some years.

Indeed, the first complaint regarding Roy’s conduct was some 14 years ago to the then Trade Practices Commission (now known as the Australian Competition and Consumer Commission or ACCC).

Finally, after media pressure, ASIC responded to the victims saying they only dealt with complaints regarding financial planners and these scams were about property. This is clearly incorrect.

Primary evidence suggests the scams involved financial advice, financial products and financial planners. Very few people purchased property. Roy was indeed a licensed financial planner and so was another one of the boys. Byron Lei offered investments and advice in wine, coffee and tax schemes. This was all about Financial Advisers, yet ASIC brushed all the complaints aside – a seemingly common occurrence, despite their obvious duty as a consumer protector.

ASIC helpfully suggested the victims wander down to the ACCC. One of the staff admitted it was financial products and planners and therefore ASIC’s jurisdiction. Curiously, the order apparently came from higher up – get rid of these people.

And now, the newly appointed Chairman of ACCC, Graeme Samuel, suggested that victims wander off to Fair Trading. No-one it seems, wants to bother with consumers.

This was not good enough for Alex. He lobbied outside Roy McDonald’s office in North Sydney demanding his money back. That got Roy’s attention. A cheque was presented but only after making Alex sign a “silencer” letter. Shhhhhhhhhhhh. Tell no one.

Alex deserves a Consumer Badge of Courage. Bravery in the face of Corporate bullying. Now that he has got his own money back, what about all the others? Alex developed an acute sense of community – so rare these days –and offered to assist the rest of those caught in this dilemma.

He said: “I have worked hard and saved as much money as I could when I first met Mr. McDonald. I wanted to learn what I could do with my money and, as a young man, I wanted to plan my future. When I attended the introductory evening with Mr. McDonald, he and his consultants led me to believe that I would be crazy to put a deposit on a house. He advised me to put my money into doing courses with him because I would earn a lot more money. He was a licensed financial expert and I trusted him. I thought that I was going to learn about finance and how money worked in our society. I met other ordinary people like me. We all wanted similar things – to get ahead in life and plan for our future.

I was deceived because I learnt nothing of any value in the course. I paid $15,000 in good faith. He promised we would recover that in a matter of months. It was all rubbish. I even gave up work to attend his courses. He bullied us into doing this – that we could not get ahead if we had closed minds. He would get his assistants to tell us that they are making heaps of money using this system. It was all commission driven to suck more people into his camps. He is a clever manipulator and should be closed down. The sooner the better.”

After he received his money, Alex received an extraordinary call from an officer at the ACCC. The officer said: “Since you have received your money, we need you to sign a form to close the file.”

Alex refused. He told the officer: “No, it is irrelevant that I recovered the funds. The complaint is specifically to alert the authorities in order for them to take action against this man. He is a menace to the community and the other financial planners also. I insist you investigate this matter.”

According to Alex, the officer got agitated, “He said he needed me to sign this form and tried desperately to persuade me to do so. I still refused.” The ACCC officer rang back a few hours later. He told me had referred the file to the NSW Department of Fair Trading. “They have more power, there has been a change in legislation and they will follow the matter up.”

Alex asked the officer to put that in writing. Well done Alex.

Where is the consumer protection in all of this? No-one wants to own the responsibility. Consumers shouldn’t spend time arguing which department will be the best to handle their complaints. The regulators’ activity in all of this has been constant buck-passing. The only ones winning are the rogues.

Imagine if the Police closed the files on bank robbers, simply because the robbers paid the money back. Parliament says false and misleading advice is a criminal offence. So, who is instructing the regulators?

Something smells awfully rotten in all this.

The Corporations Act dictates that ASIC must use its powers to protect consumers not protect those who are breaking the law.

A National Inquiry into the Regulatory Watchdog should be high on the government’s agenda right now. The paper-trail of evidence is enough to build a second opera house out of paper-mache.

Consumers beware. Consumer protection in Australia is sadly, only a myth.

Denise Brailey
Real Estate Consumer Association (Inc)

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