HUON VALLEY Council has lost $3 million of the public money it manages in the interests of the people of its municipality. That was the message at last week’s April 14 council meeting.
On April 17, I sent the following letter to the editor of the Mercury:
Huon Valley Council papers presented at its April 14 meeting indicate that its investment fiasco now stands at an acknowledged loss of the $3 million invested in the “Pure Managed – Corsair (Jersey) No. 2 Ltd” collateral debt obligations (CDO) fund and that the “full $1 million remains intact” (an optimistic assertion) in the “Oasis – Helix Capital (Jersey) Ltd CDO fund.
This information was “received and noted” by councillors with no discussion on the losses apart from a muttered “Very disappointing” from one councillor and a couple of Dorothy Dixers about two, probably safer, investments recently made by council’s year-old “finance and risk management committee”.
It is only fair to ratepayers and residents of the Huon Valley that the four people directly concerned with the CDO investments back in 2006 should publicly explain what it was that motivated them to put our money into long-term and high-risk investments. (Local government monies should never be invested long-term, especially by councils that plead financial hardship; and promise of high interest means threat of higher risk.)
The four people I have in mind are the council general manager at the time, the mayor at the time, the council finance manager at the time and the councillor who held the finance portfolio at the time. I invite them, individually, to explain themselves in writing. There are many of us out here in the Huon Valley who would like to know how it was that their council suffered such an investment aberration.
This would be helpful at a time when it seems that Huon Valley Council (Mercury Friday March 26, 2010) appears to be intending, by litigation, to try to blame a financial adviser rather than acknowledge that, in 2006, the council acted fast and loose with our money. Has the council never heard of caveat emptor?
Whichever way you look at this, in the final wash-up, Huon Valley ratepayers are going to be at least $3 million out of pocket, possibly $4 million.
(I have not been able to ascertain whether this letter was published, either in print or electronically.)
This week, a council media release came to my attention. Dated April 15, it is headed: ‘Huon Valley Council CDO update’
Mayor Councillor Robert Armstrong is quoted as saying: “The investments are part of the council’s long-term financial strategy and the losses will not impact in the short term on the services the council provides to ratepayers.”
The release continues: “The council invested the funds with the Commonwealth Bank in 2006 and is currently preparing a legal case against the bank to recover the lost funds, alleging negligence, breach of duty and misrepresentation.”
It then quotes Armstrong as saying: “The local government division of the Commonwealth Bank gave us the indication that these were good secure investments. They did not disclose the third party’s involvement or fully advise us of the risks we faced. I am disappointed it has come to this but we are also determined the Commonwealth Bank will be held accountable for their actions.”
On April 20, on ABC Local Radio, Armstrong repeated that the lost $3 million would not hurt the council’s operations in the short term.
As usual, Armstrong was shouldering none of the blame for a financial disaster that has played out on his watch as mayor. At a council meeting last year he said he did not know the council had invested in CDO funds in 2006 until losses became apparent around the time of the council’s December 2008 annual general meeting.
An admission of that sort should have been accompanied by a resignation. When things go seriously wrong on a local government council — and losing $3 million is things going seriously wrong — the buck, by tradition, stops with the mayor.
— Bob Hawkins is a Huon Valley ratepayer and an advocate for transparency in all democratic institutions. He is not a member of any political organisation.