Tuesday, August 26, 2014

Space junk deal sees Electro Optic Systems shares rocket more than 30 percent



Shares in a small company that tracks space junk have gone into orbit after it struck a deal with the US defence giant Lockheed Martin.

The strategic partnership announced this morning by Electro Optic Systems will see the development of a tracking centre in Western Australia to detect and monitor 25 percent of all space junk.

The massive problem of space junk was illustrated last year in the film "Gravity".

News of the deal with Lockheed Martin saw E-O-S shares rocket by more than 30 percent.

I spoke with chief executive of E-O-S, Dr Ben Greene, on the The World Today.

Actuaries call for review of retirement income system; worried about limited guidelines for reverse mortgages

The professional body representing actuaries is urging the government's inquiry into the financial system to recommend ways to make retirement income streams work better.

The Actuaries Institute says the current choices for retirees of lump sums, account-based pensions or annuities are not necessarily appropriate given the rapidly ageing population.

The Institute is also worried about the lack of regulatory oversight of reverse mortgages where retirees are able to access the equity in the family home.


Second round submissions to the Financial System Inquiry led by former Future Fund boss David Murray close later today.

Read the FSI's terms of reference which were announced in December last year.

Monday, August 25, 2014

Construction sector plagued by phoenix tax, pay dodges


Some of Australia's biggest construction projects are being probed by regulators in relation to claims of corruption and tax avoidance.

The Australian Tax Office (ATO) and the Australian Securities and Investments Commission (ASIC) are paying special attention to what is known as phoenix activity in the construction sector, where companies go into liquidation to avoid paying entitlements to their staff.

The ATO and ASIC have joined forces with the Fair Work Building and Construction directorate to examine illegal phoenix scams which are costing as much as $3.2 billion per year.

AUDIO: Listen to Peter Ryan's report. (AM)

The investigations will also examine allegations that some scams in the construction industry have links to organised crime.

ASIC commissioner Greg Tanzer told the ABC's AM program that the phoenix activity was focused on "off-the-books" sectors such as transport, security and cleaning services.

"Our intelligence suggests that there's a range of issues that arise in the construction industry," he said.

"What we're finding is that there is a disproportionately large number of cases perhaps because of the nature of the industry and the number of workers involved in those industries but, whatever the reason, it seems to be a target for this type of activity.

"We have found that the construction industry is a particular hotspot for phoenix company activity, and this affects not just the employees in the construction industry who might be affected directly because their superannuation entitlements might not be paid, or their leave entitlements might not be paid.

"But also, critically, other contractors - sub-contractors and sometimes head contractors - are affected by companies going out of business, doing so intentionally with the absolute deliberate intent of defrauding all of those creditors and employees."

Consulting firm PwC, in a study for the Fair Work Commission in 2012, found that illegal phoenix activity costs between $1.2 billion and $3.2 billion per year.

"From our perspective, we see just far too many individual problems that are caused by this type of activity, because it doesn't need to be a large amount of money if you've been gutted out of your leave entitlements or your superannuation entitlements," Mr Tanzer said.

ASIC has commenced a wide ranging program aimed at the construction industry in which 6,000 smaller companies were targeted, and hundreds visited, to be reminded that heavy penalties apply for proven phoenix activity.

Mr Tanzer said the investigations would examine claims that organised crime is involved in construction sector corruption.

"We are concerned that the construction industry in particular seems to be a target for this type of activity and it really can be quite pernicious and cause very serious effects for the employees and the other creditors of companies that phoenix," he added.

Phoenix activity, where a company "rises from the ashes" of liquidation, without paying taxes or entitlements, is constantly in the sights of ASIC and the ATO.

Greg Tanzer told AM that such activity appears to increase during softer economic times, such as those being experienced now.

Sunday, August 24, 2014

Small bank shows up big end of town on boardroom diversity

Sometimes it takes a small player to prove that diversity is possible in company boardrooms and the ranks of senior management.

While the big end of town often often talks about diversity, the financial minnow Teachers Mutual Bank can boast four women from a Board of nine.

It's an important and interesting case study in a world where blokes still rule in the boardroom.

Although almost all ASX 200 listed companies have policies on improving diversity, only around 19 percent of companies have turned an unenforcable ambition into reality.

The Australian Council of Superannuation Investors (ACSI) last year expressed its concern at the slow progress and the Sex Discrimination Commissioner Elizabeth Broderick recently warned quotas might be necessary.

So how has Teachers Mutual Bank done it?

I spoke to chief executive Steve James on the ABC's "AM" program.

He says it's all about representing members - of whom 59 percent are women.


Friday, August 22, 2014

Bank of America pays US$16.6 billion to settle claims on role on subprime mortgage collapse


The Bank of America has paid almost $US17 billion to settle allegations about its role in the events leading up to the global financial crisis.

US regulators had been probing claims that the bank misled investors into buying dodgy mortgage-backed securities which exploded when America's housing boom went bust more than six years ago.

It is a record payout, but Bank of America was not on its own in spruiking these risky subprime mortgages.

There were trillions of dollars of bets that US housing prices would continue to rise.

However, at almost $US17 billion, Bank of America is paying a much bigger price than other banks to resolve around a dozen state and federal investigations.

This morning, the US attorney-general Eric Holder said Bank of America's unlawful, unethical and immoral behaviour in marketing dodgy products had taken to US economy to the brink of collapse.

"These loans contained material underwriting defects. They were secured by properties with inflated appraisals. They failed to comply with the federal, state and local laws and they were insufficiently collateralised," he said.

"Yet these financial institutions knowingly and fraudulently marked and sold these loans as sound and reliable investments."

AUDIO: Bank of America fined US$17b over role in subprime crisis (AM)

Around $US7 billion of the settlement will be used for what is being called "consumer relief" for Americans who found the value of their home was suddenly a lot less than the outstanding mortgage.

Some will see their mortgage debts reduced, others will get lower interest rates and some of the settlement will be used to build affordable rental housing.

While that is a long-awaited positive, there is criticism that, so far, no banking boss has faced criminal charges in relation to the subprime mortgage collapse.

Dennis Kelleher of US financial watchdog Better Markets says, while a $US17 billion fine for Bank of

America sounds like a lot, it might be only be a fraction of what banks made from marketing dodgy products.

"There's no way to evaluate whether or not it is a lot of money, or whether or not it's fair punishment, or whether or not it will deter or incentivise future crime unless you actually know how much money the Bank of
America actually made from its illegal conduct, how much money its investors, customers and clients lost," he argued.

"So, for example, if they paid $US17 billion but they actually made $US200 billion from illegal conduct, then that's not much money and not only won't it deter future crime, it actually incentivises future crime."