The failed $740 million funds management empire overseen by flamboyant Gold Coast businessman Peter Drake lent $301 million to Mr Drake and his companies, administrators have revealed.

Related-party loans probed in LM fund

April 3, 2013, Ben Butler

The failed $740 million funds management empire overseen by flamboyant Gold Coast businessman Peter Drake lent $301 million to Mr Drake and his companies, administrators have revealed.

Administrators John Park and Ginette Muller, of FTI Consulting, said the loans were made from the LM Managed Performance Fund, which operated outside Australian company law.

The related-party loans, representing about three-quarters of the $397 million fund, included $17 million lent directly to Mr Drake, the administrators said.

They said they would apply to the Queensland Supreme Court on April 12 to take control of the fund as its receivers.

”MPF has to date been operating as an unregulated fund outside the Corporations Act,” the administrators said. ”The administrators are continuing to work with ASIC [the Australian Securities and Investments Commission] to address the regulatory concerns.”On Tuesday night, Mr Park said ASIC was concerned that because not all investors in the fund were from overseas it should have been regulated under Australian law.

He said LMIM had not resigned as trustee of the fund, despite a provision in the fund constitution that it must do so upon the appointment of administrators. He denied it would represent a conflict of interest to be appointed as both receiver of the fund and administrator of LMIM.

Mr Park and Ms Muller, who were appointed administrators of LMIM on March 19, appear to have backed away from earlier suggestions they would hand the company back to directors, possibly including Mr Drake, under a deed of company arrangement.

It would be ”very rare” for a deed of company administration to be entered into in a large and complex failure such as LM, Mr Park said. He said administrators had been in regular contact with ASIC officers who ”haven’t indicated at all what their desired outcome is”.

In a statement since removed from the LMIM website, Mr Drake, who also addressed LM staff on Tuesday, said the decision to enter administration was taken after a ”relentless 10-month campaign of alarming and misleading statements to our domestic and international advisers and investors” by rival fund manager Trilogy.

He represented administration as the appointment of ”independent and professional advisers”, saying that ”neither LMIM nor any of its funds are in liquidation or receivership”.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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