Bad news for 1,800 investors in suspected Pilbara Ponzi scheme
The 1,800 investors who handed over $120 million to a suspected Ponzi scheme masterminded by Pilbara businesswoman Veronica Macpherson are unlikely to get their money back, according to the liquidator of her Macro group companies.
What is a Ponzi scheme?
- Ponzi schemes often have little or no real investments or assets
- Investor returns are paid from money generated from later investors in the scheme
- Warning signs include a rate of return on an investment that’s too good to be true
- Eventually the scheme falls apart
They were promised rates of return of up to 36 per cent if they gave their money to Macro to invest in Pilbara property developments around Newman and Port Hedland.
Instead, the investment scheme collapsed last year, with ASIC alleging it was a Ponzi scheme where investors’ money was allegedly used to pay the expenses of the company, including the interest payments to early investors.
Now corporate investigators like ASIC and liquidator Hayden White of KPMG are trying to unravel the vast and complex web of companies and international money flows left behind.
“There’s rightfully a lot of questions being asked — what happened, where did the money go, what wrongdoing has happened here, is this involving Veronica or has the market just gone against them?” Mr White said.
Although his investigation is in its early stages, Mr White recently reported to unsecured creditors and investors — who were mostly from overseas, predominantly from Singapore and Malaysia — that they were unlikely to see their money again.
“We do not, at this stage, consider a realisation of the assets will produce an outcome sufficient to allow for a return to unsecured creditors or investors,” he wrote in his first report to creditors.
Land price drops from $410k to $75k
The biggest land asset is the Newman Estate, a 244-lot subdivision marketed by Macro as an upmarket development that would attract mine and service workers to live in the town and prompt a shift away from fly-in, fly-out workers.
It is now an undeveloped tract of land on the outskirts of the dusty mining town with a population of about 7,000 people and where the Pilbara property downturn has bitten hard.
The median price of land has dropped from $410,000 to $75,000 in the past year, according to the Real Estate Institute of WA.
“They continue to incur costs, rates and taxes and they’re difficult to sell,” Mr White said.
“I’ve never had a situation where you can’t sell property. I always tend to have that view there’s always a buyer at some price. Unfortunately this matter is changing my view on that.”
Investors’ eyes on new Government: Macpherson
But Ms Macpherson claimed money being returned to investors was dependent on the WA Government, especially its treatment of BHP’s Kurra Village mining camp in Newman.
“It is still unknown whether it will be closed and if any mining company will be permitted to use mining camps in the Pilbara instead of proper housing for their workers and sublet the rooms for profit,” she said.
“I think all investors in the Pilbara Cities vision are watching closely to see what our new government will do about an 80 per cent drop in market value, the number of bankruptcies that have been caused as a result and whether we intend to walk away from the mission.”
The Pilbara Cities program was established under former minister for Regional Development Brendon Grylls to boost the permanent population of Newman to 15,000 by 2035.
In 2014, Mr Grylls appeared in a corporate video with Ms Macpherson, where he outlined the program’s vision and said he hoped to “talk to some of the potential investors … about where I see the next level of opportunity”.
Mr Grylls later requested the video be taken down from the company’s website but this has not been done.
Macro raised at least $120 million from investors who were offered rates of return of between 10 and 36 per cent, according to Mr White.
“That’s what I suspect was generating a lot of interest for overseas investors in what they thought was a property-backed investment with high returns,” he said.
But Mr White said they, as well as secured lenders and unsecured creditors, could be owed as much as $250 million because of the growing cost of interest payments.
Ms Macpherson claimed she had lost more money than any other investor and said she knew many people were angry about the collapse of her companies.
“They have been waiting a long time for their property or return and assume that with the uncertainty and drop in current land valuations, there is no hope for their investment,” she said.
“Others who understand the situation are asking how we can work together to get the best outcome possible.”
Mr White also told creditors he had identified potential breaches of the Corporations Act which would be investigated further, including trading while insolvent, breaches of directors’ duties and concealing, destroying, mutilating or falsifying records.
He will report to ASIC, which is investigating Ms Macpherson over her suspected Ponzi scheme.
The Singapore Police Force is also examining one of her Singapore-registered companies, Macro Realty Developments Pte Ltd.