Storm letter calls on the CBA to engage in new negotiations

STORM Financial victims in the Sherwood class action against the Commonwealth Bank are rejecting the compensation deal made on the eve of a trial in the Federal Court last year.

Class action group members will participate in a mass mail-out to the Australian Securities and Investment chairman and CBA chief legal officer charging that the compensation deal they announced on September 14 was the product of ASIC's conflict of interest.

"It is wrong that I should be asked to consider accepting or rejecting an ASIC compensation amount, funded by CBA or otherwise, which is the product of negotiations in which neither I nor my legal representatives were invited to participate," the letter reads.

"There has been no transparency with respect to the data used in any calculation or the opportunity for my own lawyers to appoint their own forensic auditors, to determine what our total Storm-related losses and my individual losses actually were."

ASIC has calculated investors lost about $830 million after Storm's collapse in 2008 but the letter suggests that figure depends on their definition of "losses".

The letter calls on the CBA to immediately engage in "new, good faith negotiations with all of us" through Sydney law firm Levitt Robinson, which is running the class action.

It asks the CBA to open its books and records to victims' nominated forensic auditors to come to their own conclusions, based on access to primary bank data.

The letter writers also take issue with the bank and ASIC referring to them as investors instead of borrowers.

"It is sad when ASIC uses the language of the bank to make me and other borrowers seem more sophisticated and hence, less the victims that you know we were," it reads.

The September deal involved ASIC entering an agreement with CBA to make up to $136 million available as compensation for customer losses suffered on investments made through Storm Financial.

The letter questions whether the timing of the agreement, on the eve of CBA's scheduled trial, was "calculated to undermine the Sherwood Class Action against CBA and Colonial First State".

"Repeatedly, ASIC through its public statements and its counsel in court said it wanted to use its legal proceedings, brought in its role as regulator, to seek declarations to set a higher bar for dispensers of financial products and services. How does ASIC see its latest collaboration with CBA as achieving that?

CBA, upon being asked to respond to questions about the letter and a renewed negotiation, said it "does not propose to respond" because the claims could be part of class action proceedings before the Federal Court.

A CBA spokeswoman said the bank had consulted with ASIC, Storm clients and their representatives since 2009 and had resolved claims for more than 2000 people.

"The bank believes that these measures delivered outcomes for its customers that were commercially sensible and in their best interests as they avoided uncertainty and years of litigation," she said.

"Commonwealth Bank is defending, and will continue to defend, the Sherwood class action proceedings. The bank believes that the class action is misconceived.

"Commonwealth Bank did not provide and will argue that it is not responsible for any financial advice provided by Storm Financial to its clients."

An ASIC spokesman said the watchdog believed the compensation deal is "a timely, fair and certain outcome" for Storm investors who borrowed from CBA.

The spokesman said those who did not accept the offer had the option to continue with court proceedings.

"Storm investors can be confident we would not have agreed to a settlement unless we thought the compensation was appropriate," he said.



Bobcats ready to fight for their season

premium_icon Bobcats ready to fight for their season

Do-or-die time for Maclean as they look to reach top four

REVEALED: Coffs Harbour's Most Influential list

premium_icon REVEALED: Coffs Harbour's Most Influential list

The final instalment of our 12-part series.

bcu opens at Coffs Central

bcu opens at Coffs Central

The old firm in a new site

Local Partners