The last time Steve Navra laid eyes on Cameron Rhodes was in January 2009.
As Navra recalls, Rhodes, the then chief executive of Australia's largest agribusiness firm, Great Southern, was a shell of a man under increasing pressure and close to breaking point.
Navra had requested the meeting with Rhodes after Great Southern's share price began to plummet.
The Sydney-based financial services veteran and principal of Navra Financial Services had his suspicions Great Southern was in serious trouble before his January meeting with Rhodes.
Navra had long been an agribusiness sceptic. He believed clients were better off investing in direct shares or property over agribusiness. His reasoning? He was yet to see proof of a successful agribusiness investment.
His first contact with Great Southern was in 2005 when representatives of the firm approached him with investment opportunities in a number of managed investment schemes (MIS). He was initially disinterested.
"The only reason I listened to one group and one group only is they convinced me of the following: they were a top 200 company, they were hugely cashed up, they had the lowest debt possible," he says.
"In fact, I researched it at the time and all of that was true and they had successfully completed a project over 10 years in profit. It wasn't a great return but it was 1.2 to 1.3 times. So that leads me to have a little more confidence."
After consulting his clients and inviting them to query Great Southern over any concerns, Navra negotiated tailor-made loans on behalf of his clients in Great Southern's 2006 plantation scheme, 2007 plantation and grapevine scheme and 2008 grapevine scheme.
Close to three years later, with more than 300 clients invested, Navra found himself face-to-face with a man who looked as shaky as his company's share price.
In his words, Rhodes had turned grey overnight and was smoking prolifically.
"He was that nervous that he had two cigarettes lit at once and I actually said [to a colleague at the same meeting], 'this bloke is about to crack'," Navra says.
"And I said, 'you know what worries me most is not that I don't believe the assurances he has given me, it's such a mess that this bloke is so close to cracking and he's the CEO'. So it was a big worry.
"At that meeting I said to him 'look, what's going on? I've got a lot of clients exposed to this product and my clients are really starting to stress'.
"He said 'don't stress, firstly if it all goes wrong the product is the security'.
"I said 'it looks like you guys are going to fold'. He said 'we're not going to fold, we've got this special thing we're doing, the cattle sale recovery thing. We're going to sell this cattle thing and we're going to raise hundreds of millions of dollars and based on that the banks will lend us the money and we'll continue business'."
Rhodes had made mention of an offer involving the firm's cattle scheme four months earlier in September 2008.
At the time, Great Southern had undertaken a strategic review of the company, and in turn introduced a three-pronged initiative to boost its profitability and scope.
"We've been strategically looking at our business and undertaking a comprehensive review of each part of our business in order really to try to build a more sustainable and transparent and, of course, valuable business moving forward," Rhodes told Boardroom Radio in September 2008.
The first initiative involved cost savings, including staff redundancies, and other savings of around $30 million.
The second initiative was a reorientation and refocus of the firm's agricultural investment services business.
The third initiative offered the firm's investors in its MIS projects the opportunity to exchange their interest in two cattle projects and six plantation projects for shares in Great Southern.
At the time of the offer, Great Southern shares were at $2.15 per share, with the proposed offer price of $1.10 per share and a post-transaction share price of $1.46.
"If this offer is accepted, we'll be quite a different company. We would've transformed into a fairly robust agricultural company. We would be Australia's largest integrated forestry company, one of the largest cattle companies as well as still having that market leading position in agricultural investment services," Rhodes said.
In January 2009, Great Southern was still yet to sign off on the shares exchange for its select cattle or plantation projects.
Navra says it was clear to him then that Great Southern was in dire trouble.
"Cameron Rhodes assured me they were doing this bailout thing by selling the cattle and I asked him the question 'and if it doesn't come off' he said 'then we're probably bust'," he says.
Despite Navra taking Rhodes' remark as merely off the cuff, he believes in one manner or another it was an admission that time was fast running out for the company.
"As far as I'm concerned he made an admission that if they didn't get their financing done as early as February that year that they were basically bust, whatever that means, his words," he says.
"It seems that they probably were bust and the whole cattle thing fell apart and it didn't come off to the extent they wanted.
"It was clear to me that they probably knew, if not admitting it, that they were operating as an insolvent entity as early as February if not before."
On 19 May 2009, time ran out for Great Southern. Administrators moved in. A day later receivers were appointed.
At the time, the company's administrator, Ferrier Hodgson, stated in its notes that in the five years prior to May 2009, Great Southern raised $1.8 billion and had around 45 MIS schemes with around 43,000 investors.
The fall of the agribusiness giant was disastrous for Australia's agribusiness industry. It's crumbling had come almost a month after its closest rival, Timbercorp, had collapsed on 23 April with debts of $903 million. The sector was all but in ruins.
Navra was, of course, concerned by Great Southern's fall. He had personally negotiated loans for his clients and despite being assured they were non-recourse, his concerns only slightly cooled.
While there was no way of knowing, it would seem his concerns were warranted. Even though Navra's clients owned different investment structures to the majority of Great Southern's clients, upon Great Southern's demise the firm's financer, Bendigo and Adelaide Bank (BAAB), took over the management of the firm's loans, supposedly including Navra's clients, by executing power of attorney.
Despite never seeing evidence of the transference of management, BAAB has spent the past six to seven months contacting Navra's clients demanding repayment.
Since June 2009, Navra has been fighting the bank on behalf of his clients through Australia's judicial system. He wants proof his clients knew of their power of attorney being exercised.
Like many others in his clients' situation, Great Southern clients have been advised to cease repaying outstanding loans to BAAB.
In May 2009, the bank contacted 8200 clients, including Navra's clients, who allegedly had Great Southern loans under BAAB calling for outstanding loans to be repaid.
Many claim the bank began employing coercion tactics such as threats of credit blacklisting to force clients to repay their loans. The bank flatly denies such suggestions.
"Bendigo and Adelaide Bank believe and would argue very strongly that it has complied with all its obligations on the debt collector guidelines," BAAB spokesperson Will Rayner says.
In recent months, a number of clients have approached the bank to recommence their loan payments.
"We certainly are seeing some people entering arrangements with us to recommence repaying their loans," Rayner says.
He would not comment on the exact number of investors involved in the repayment arrangements, but says it is a sign pointing towards greater clarity for all.
"We're also seeing fewer people join up to the class actions so we think ultimately there will be clarity that these are full recourse loans, that the obligations are not affected by the receivership of Great Southern, and that these loans do need to be paid back to Bendigo and Adelaide Bank," he says.
Despite some clients agreeing to pay back their loans, the bank has increased the number of individual legal cases against investors. It now has nine individual cases against investors in the Supreme Court of Victoria.
Meanwhile, there is a growing list of clients and those linked to Great Southern, including Navra, who are hitting back.
Earlier this month, Navra scored a minor win against BAAB after New South Wales Supreme Court judge Justice Robert McDougall ordered BAAB to provide evidence that it was the owner of Navra's client loans.
As the matter is in court, Navra is unable to make any further comments regarding the case's progress.
However, his legal boost of confidence may be spreading. Last week, the West Australian Supreme Court allowed around 700 Great Southern investors to launch legal proceedings against the group. Litigation firm IMF is funding the class action.
Fellow litigation firm Macpherson and Kelley (M+K) is also moving forward with its action against Great Southern involving 1594 clients.
"[The Great Southern action] is following the course of Timbercorp, which is what we always thought would happen. It's just that it's taken longer to get to this point than what the Timbercorp one did and that's really because Timbercorp Finance started suing people a lot earlier than what the financiers for Great Southern have done," M+K principal Ron Willemsen says.
At present, the firm is set to launch counter claims against seven proceedings BAAB has taken against M+K clients in the Victorian Supreme Court.
"Each of them are defending and filing a counter claim. In the counter we're seeking damages and a declaration that the subject loan agreements are void or unenforceable," Willemsen says.
"The thing about the counter claims in each of these individual cases is that it basically will be the springboard for the class action claim and because it's likely that Bendigo and Adelaide Bank would continue filing writs against other individuals, and you end up with this ridiculous situation where there will be numerous court cases all over the place against individuals which involve the same issues.
"Eventually in Timbercorp, the court realised the efficiencies involved in having the litigation proceed to a class action. We expect the same will happen with Great Southern so that you get one court proceeding determining common issues of fact and law which affect all investors in the relevant schemes and all borrowers from those associated financiers.
"Like Timbercorp, in Great Southern there were associated financiers and Bendigo and Adelaide Bank were one of them and there was a close interconnectedness between the financier and the responsible entity, which leads to the financier being sued as well as the responsible entity as well as the directors of the responsible entity. So they are the defendants to the counter claims that our clients have individually brought and they will be the same defendants in the class action which is shortly to be filed."
As Willemsen sees it, Great Southern ran the MIS side by side in terms of the responsible entity and the financier, with Great Southern Finance doing the marketing, promotion and development of the schemes.
"So what one company knew, the other company knew as well. The directors were the same for both companies and the original loans were set up, even the loans with Bendigo and Adelaide Bank, were originally set up through Great Southern Finance, so hence the interconnectedness," he says.
"So any misleading conduct by Great Southern and its directors through non-disclosure of relevant financial information impacts on the financiers as well, including BAAB.
"We would expect to get permission from the court to proceed against the company in liquidation, which is the position now we've achieved in Timbercorp, and then the next major step will be to access the relevant financial documents held by the liquidators of the Great Southern companies or the receivers, the directors of the Great Southern companies and of course Bendigo and Adelaide Bank in terms of their arrangements with Great Southern."
Like Great Southern, Timbercorp has caused detrimental losses since its own collapse in 2009.
The firm's liquidator, KordaMentha, released details of ongoing investigations into the failed group.
ASIC and the Australian Taxation Office (ATO) are continuing investigations into the group, minutes of the Timbercorp Group of companies committee meeting dated December 2009 said.
ASIC has issued 14 formal requests for documents and information to date, while the ATO issued a formal request for information in October last year.
While refusing to speak publicly about its involvement in Australia's agribusiness clean-up, ASIC has begun reviewing client files of dealer groups linked to Great Southern and Timbercorp.
Industry sources claim ASIC began a broad sweeping review in September last year of client documents from Australian financial services licensees with exposure to the agribusiness firms.
One source claims the regulator requested a list of advisers with exposure to the agribusiness firms, asking for particular files on age and demographics.
Another source has backed up this claim, suggesting ASIC's call for specific client details will be used to determine whether the advisers used a one-size-fits-all advice model.
ASIC has refused to confirm or deny a review is underway, stating it is not in a position to comment.
However, a number of industry participants have confirmed they are consulting with ASIC over a review.
"ASIC has made an inquiry for information relating to investments in agribusiness managed investment schemes - Great Southern and Timbercorp," an AMP spokesperson says.
"AMP is responding to the inquiry."
Professional Investment Services (PIS) also has confirmed it has been liaising with the regulator regarding the agribusiness collapses.
"ASIC asked us for a number of files last year," PIS chief executive Robbie Bennetts says.
"I don't have any feedback about that yet. But I think that's just a normal part of business for ASIC."
Parliamentary Joint Committee on Corporations and Financial Services chair Bernie Ripoll says it is important for ASIC to remain vigilant in its policing of the industry.
"I think that is part of ASIC's role and I welcome that they are doing that," Ripoll says.
"It's important for ASIC to continue its role as the policeman on the beat and that's what it is doing, and I welcome that and encourage ASIC to continue its good work."
In October last year, he claimed the collapse of Great Southern and Timbercorp wiped out more than 50 per cent of their market.
"I don't want to play down how seriously important they were - the collapse of Great Southern and Timbercorp took out over 50 per cent of the market in that particular sector," he said at the time.
More than 60,000 investors have lost their funds, have funds tied up in the courts or are yet to lose their funds.
However, while investors' financial loss was of concern, the agribusiness sector's greatest loss was investor confidence, which Ripoll said is something that might be irreversible.
"The damage the collapse of those two particular organisations has done to that sector is not quite irreversible but it is massive, it's on a large scale," he said.
"I assure you when we get the data back in from that sector there will be almost nobody reinvesting in that sector because of those two particular collapses."
KordaMentha's own investigations into the affairs of Timbercorp are also continuing with the focus of investigations on the analysis of the group's financial information, including financial reports and management accounts, the minutes say.
In July 2009, KordaMentha commenced action against an initial group of 20 Timbercorp investors in default of their loans. Of the 20 actions, nine are being defended by the investors, it said.
Four investors have been served with bankruptcy notices after obtaining a summary judgment.
M+K represents more than 83 per cent of Timbercorp investors. The firm filed its Timbercorp class action in the Supreme Court on 28 October last year.
Last month, the Supreme Court of Victoria gave M+K's class action of more than 2400 Timbercorp clients the go ahead to begin legal proceedings against the firm and its directors.
The action seeks compensation for investors who borrowed to buy into the company's investment schemes in 2007 and 2008.
"The granting of leave to proceed against Timbercorp Securities and Timbercorp Finance is obviously an important step in the process, as it will allow investors to continue to fully pursue compensation claims against the companies and the directors and challenge the validity and enforceability of the relevant loans," Willemsen says.
The proceedings were originally commenced against Timbercorp Securities (in liquidation) and its former directors, Gary Ladel, Robert Hance, Sol Rabinowicz, and Timbercorp Finance (also in liquidation) on 28 October 2009.
The case was adjourned to 2 March 2010 after Timbercorp Securities drew attention to "difficulties with a statement of claim".
However, Judd overturned the objection made with respect to the "related circumstances" of the parties.
To this day, Navra believes he and his clients were misled. It has returned him to his former sceptic self, never to invest in agribusiness again.
"Agribusiness in today's financial market is basically dead. No financial planner will touch it. It doesn't matter you can put the best name behind it," he says.
"Gunns with all the best intentions are trying and I'm sure others are who might be well-meaning honest groups, but none of them have produced products to completion and no-one wants to believe them or their products anymore because if you couldn't believe Great Southern, who were the biggest and the best, how are we supposed to trust and believe the others.
"It's not as though we only believed in Great Southern. There was an enormous amount of research put out by the research companies. Reams of it, which is all obviously baseless, but a financial planner does research as does the dealer group before you can put a product on their approved list."
In Willemsen's view, financial planners were as much in the dark as investors.
"Those who are squarely in the investors' sights in the class action are the responsible entities, their directors, and the associated financers for both Timbercorp and Great Southern," he says.
"Those responsible entities and the financiers will in due course try and blame the financial planners at least in part. We say the information withheld from the investors was similarly withheld from the financial planners, many of whom actually did invest in [the schemes] themselves and borrowed to invest, and so then it's no good then blaming the planners when the key information was known only to the responsible entities."
In his 30-year career, 17 years of those in Australia, Navra has never experienced the collapse of a top 200 company. He understands it not only a disastrous blow for the sector but a major concern for the financial planning industry.
"The poor planners or the dealer groups have a big problem on their hands that they have put clients into products with absolutely good honest intent based on sound research, very much within all the confines and requirements of the Australian financial planning industry," he says.
"We've done everything right. We've got the research. The products were on independent product lists. There was an ASIC PDS [product disclosure statement], there was a tax office ruling, product ruling. So it was passed off by everyone that this was fine and there was no drama. Then when it folds, who's left carrying the can? The poor financial planner put his clients into a shonky product.
"No-one in the industry will touch agri again. You'd have to have rocks in your head."
