In a statement issued yesterday, ASIC announced that it has brought civil proceedings in the Federal Court of Australia against LM Investment Management founder Peter Charles Drake and former directors Francene Maree Mulder, Eghard van der Hoven, Simon Jeremy Tickner, and Lisa Maree Darcy.
ASIC alleged Mr Drake “used his position to gain an advantage for himself and the former directors breached their director’s duties for failing to act with the proper degree of care and diligence regarding transactions involving the LM Managed Performance Fund (MPF)”.
Specifically, ASIC stated that the action concerns a series of loans made to Maddison Estate Pty Ltd – which Mr Drake owned – to develop a Gold Coast property development in 2011 and 2012.
The maximum fine for a director breaching their duties is $200,000 for each contravention, ASIC stated.
As well as fines, ASIC is also seeking to disqualify Mr Drake and the former directors from managing companies and providing financial services, according to the statement.
The move comes following the Queensland Supreme Court’s finding last year of a conflict of interest in the winding up process of an LMIM fund.
In an August 2013 statement, ASIC said, “The future for investors in LM First Mortgage Income Fund (FMIF) is more certain after a court ... appointed a receiver to it”.
David Whyte of BDO was appointed as the official receiver, taking over responsibility for the wind-up from the appointed FTI Consulting liquidators of the fund’s former responsible entity LM Investment Management (LMIM).
In ordering the appointment, Justice Dalton said having the appointed administrators also handling the winding up of LMIM’s funds presented a conflict of interest, finding in favour of ASIC’s previously voiced concerns.
“My view is that they have preferred their own commercial interests to the interests of the fund. This is demonstrated in the conduct ... in relation to the 13 June 2013 meeting; their dealings with ASIC; and their conduct with this litigation,” Justice Dalton said.
