Husband and wife directors Emmanuel and Julie Cassimatis were each fined $70,000 by the Federal Court for breaching their duties as directors of the failed business. They were also banned from managing companies for a period of seven years.
Storm Financial operated a system of advice, which encouraged clients to take out mortgages and loans to buy into its investment options. However, with the onset of the global financial crisis in late 2008, many clients had found themselves shouldering heavy losses.
The judge found that many investors were given inappropriate advice for their circumstances, breaching the requirement for the Cassimatis as directors to act with due care and diligence.
“A reasonable director with the responsibilities of Mr and Mrs Cassimatis would have known that the Storm model was being applied to clients such as those who fell within this class and that its application was likely to lead to inappropriate advice,” the original finding said.
“The consequences of that inappropriate advice would be catastrophic for Storm (the entity to whom the directors owed their duties). It would have been simple to take precautionary measures to attempt to avoid the application of the Storm model to this class of persons.”
While the maximum penalty for a breach of director’s duties is $200,000, the couple were fined $70,000 each.
Since 2012, ASIC has been able to determine compensation arrangements with a number of banks relating to the losses generated, including $268 million from the Commonwealth Banks, $82.5 million from Macquarie Bank and $17 million from Bank of Queensland.
Social media lit up on news of the penalties, which some described as a “slap in the face”. One Twitter user claimed “the lack of acceptable penalties for Storm Financial directors and the sight of them walking away with a sneer AND the money” was a major reason why so many Australians are against tax cuts being given to big business.
Yet this case is just the latest in a long line of penalties handed to business directors who breach the law that many SME operators have lambasted as being too lenient.
“Where is the jail sentence? When will courts learn that money does not mean anything to these people. How many other scams have they done & got away with? How soon ‘til they start the next one?” one My Business reader said in response to the $600,000 penalties handed to a business that was found to have duped distributors with fake supply contracts.
“After being a victim myself of a phoenix company I am fully for jail time as this is in fact theft and should be treated with the same degree as other criminals. Perhaps then they will think twice before robbing hard[-]working people,” claimed another My Business reader in response to the director of nine failed businesses being banned for phoenix activity worth millions of dollars.
“Why aren't these people in jail? If you burgled that money from a safe, you'd be sentenced to jail. But for a white-collar theft, [he] cops a fine which he will probably avoid,” said a third in response to the banning and $650,000 fine for a director of three financial firms found guilty of misappropriating clients’ superannuation funds.