Westpoint Corporation

Westpoint Corporation Pty Ltd was the head company of the Western Australian based Westpoint Group of Companies ("Westpoint Group") which was primarily engaged in property development. The company was founded by Norm Carey^[1] and operated under a risky business model.Receivers and managers were appointed on 2 February 2006 and the company was subsequently liquidated. The collapse of the company ultimately cost debtors & investors billions of dollars, many people lost their life savings. Due to its small pool of capital, loans were frequently taken out at high interest rates in order to undertake construction projects, meaning Westpoint's expenses were far higher than other companies in the industry.

History

Westpoint Corporation and its mezzanine funds constituted a Ponzi scheme, in which investors' own money was used to pay their interest. New money was pooled, turned around and, in part at least, shoved out to service old money. Financial planners encouraged their clients to make what were obviously bad investments because the promoters kicked back an average up-front commission to planners of 10 per cent out of the money that they raised. Thus, every $10 invested became $9 from the beginning.

A total of $304,370,984 was invested by 3524 unsuspecting people in a series of seven mezzanine funds devised by Westpoint's Norm Carey and Richard Beck, and now controlled by PricewaterhouseCoopers. Another two funds have $37 million invested and are controlled now by Ferrier Hodgson. The money was immediately and entirely transferred into the same number of property development companies which in turn churned it back into Westpoint Corporation from which it was spent.

From this money, Westpoint paid interest to the investors who provided that money, and the commissions to financial planners via Richard Beck, a director of Westpoint, former West Australian head of property firm Colliers Jardine and former head of KPMG's national corporate governance practice.

The salaries of 400 Westpoint workers were paid, plus interest to first mortgage lenders who financed the acquisition of land at rates of 10 per cent and more, upon which the hotels and apartment blocks were supposed to be built with investors' money.

The debts total $312 million, including $3.5 million in unpaid super. According to one administrator, Ian Francis of Taylor Woodings in Perth, the net assets available for distribution total roughly $21 million, after ING, which appointed the administrators to Westpoint Corporation, has been paid. Cash at bank at the time of the collapse late in 2005 was about $975,000.

None of the nine mezzanine funds that actually raised the funds and the related property development companies that existed to build the buildings, had any money at all. Every cent was advanced to Westpoint and then vanished. The investigation by ASIC has continued throughout 2006 and 2007.

The Australian Securities and Investments Commission is investigating possible action against the directors, Norm Carey, Graeme Rundle, John Dixon and Richard Beck.^[2] ASIC has sought specific information about Westpoint from financial planners whose clients invested in Westpoint and requires planners to provide monthly reports about how they are dealing with Westpoint related client complaints and losses.^[3]

In June 2006, ASIC has successfully sought orders against Mr Neil Austin Burnard, whose company was believed by ASIC to be involved in raising substantial funds of more than $100 million for Westpoint from retail investors, mainly in NSW and Queensland, and earned commissions from Westpoint of approximately $6.5 million.^[4]

Projects

Bayview Apartments Port Melbourne

Bayview Apartments in Bay Street, Port Melbourne

Heritage National Bank building became part of the Bayview Apartments

The Bayview Apartments, located on 78-92 Bay Street, Port Melbourne, was a $130 million project value and one of Westpoint's development projects. The land of the apartment block was stretched from the east, Little Bay Street, to the west, Rouse Street, and from the south, Dow Street, to the north, Bay Street. It contains 280 apartments including a heritage bank building (1874) and a heritage bluestone warehouse (1864) in the Bay Street and Dow Street respectively. The main part of the Bayview Apartments development is on the old envelope manufacturing plant site. The outlooks of both heritage buildings are well preserved. The construction of Bayview Apartments commenced in October 1999, and was completed in July 2003.

Westpoint originally organized two schemes to investors providing either buying the units of the apartments or the promissory notes through the financial planners and its sales network. Today, units in the development still have the market value but investors who bought the promissory notes issued by Westpoint have been told they were unlikely to get their investment back in the Westpoint collapse. 2,000 of the 4,000 investors in the failed Westpoint are suing their financial advisors in one of Australia's biggest class action litigations.^[5]

The former National Bank building on 96 Bay Street was constructed in 1874. Tenders were called for this building by Terry and Oakden on 1 January 1874. By 1874 the rate books recorded the 9 rooms of brick building valued at £250. In 1889, G. Jobbins, Architect, undertook the addition of the extra bay to the south in a sympathetic manner.

This building provides an excellent example of an intact bank in the conservative classical style, employing all the correct architectural mouldings of the Italian Renaissance Revival. Also this building provides extremely important streetscape element to Bay Street.

The heritage bank building was integrated as the part of Bayview Apartments development and converted to 12 heritage apartments.

Heritage bluestone warehouse became part of the Bayview Apartments

A large early bluestone warehouse at Dow Street has historic importance as being built by Messrs. Morley and Carrick, important figures in the history of Port Melbourne.

In December 1864 allotments 6 and 7 contained various wood and iron building owned by Reynolds & Co. in the rate book entry, the name is crossed out and the name Morley & Carrick is penciled in.

The rate book entry for November 1865 has description “Bond’d & Free Store Stabling for 30 horses”. By 1868 the description of the building was “Store Bond & Free Store” and 1870: “Large Bluestone Store”.

The heritage bluestone building was integrated as the part of Bayview Apartments development and converted to 26 heritage apartments.

References

• Korda Mentha: creditor information for Westpoint Corporation - Receivers appointed
• Summary of news articles associated with liquidation
• Low, Catie (2006-01-26). "Receivers focus on Carey" (PDF). Business News. The West Australian. p. 30. Archived from the original (PDF) on September 27, 2007. Retrieved 2006-10-30. 
• Pallisco, Marc (2006-09-13). "Westpoint carparks unloaded" (PDF). Property. The Age. p. 6. Archived from the original (PDF) on September 27, 2007. Retrieved 2006-10-30. 

External links

• Report on the liquidators report
• Westpoint Justice web site - Information and help for victims of Westpoint Investments