Storm investor urged to risk it all
By Anthony Marx
March 12, 201310:15AM
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THE Commonwealth Bank offered an unsolicited home loan to a Storm Financial investor just days after company head Emmanuel Cassimatis urged clients to squeeze more value out of their property, a court heard yesterday.
Leslie Sherwood, a retired airconditioning technician, told the Federal Court in Brisbane he was “surprised” to receive the offer after attending a 2007 Storm seminar at a Redcliffe hotel which attracted about 300 investors.
The 65-year-old investor, who is one of the lead plaintiffs in a class action by Storm victims against the bank, said he did not want another home loan and that his wife only earned $30,000 a year as a part-time receptionist.
Based on Storm’s recommendations, he eventually changed his mind and took the $71,571 loan secured against the increased equity in his Brisbane home. Mr Sherwood said he started borrowing from the bank to invest with Storm after retiring in 2005 and was “quite comfortable” with his loan-to-value ratio.
He believed Storm’s assurances that he faced no risk and his life savings would not be threatened.
“I did not want to put our house and assets at risk,” Mr Sherwood said.
He said he would have been “very surprised” had he been turned down by the bank for a loan, and would not have considered turning to another lender.
“I’ve dealt with the Commonwealth Bank all my life and I trusted them,” he told the court.
The court was told that Storm advisers Terry Webb and Stuart Drummond assured him numerous times that his home was safe, there was no chance of getting a margin call and the company had “a very close working relationship” with the Commonwealth Bank.
These assurances were repeated throughout 2006 and 2007 on numerous occasions as Mr Sherwood borrowed even greater amounts of money to invest.
Eventually, Mr Sherwood and his wife Julianne had $1.27 million worth of margin loans and a $464,000 home equity loan from the bank.
The sharemarket crash of 2008 wiped out the value of their Storm-based index funds, one of 3000 portfolios with a collective loss estimated at $830 million.
The class action accuses the bank of unconscionable conduct, breaches of the banking code, failure to warn of margin call and misleading and deceptive conduct. Up to $600 million in damages are being sought.
The bank rejects the allegations and has told the court that borrowers were fully informed of the risks.