LGS/Active Super fined $10.5 million plus costs
- Details
- Published: Monday, 14 April 2025 14:00
The February issue of depaNews was, as we expected, a revelation to just about everyone working in the industry and, as we’ve discovered subsequently, also to some councillors alarmed about issues of governance and the role of LGNSW directors.
The only negative feedback came from circulating depaNews to the other LGS Shareholders, drawing a response from the LGEA shareholder representative, their president Bede Spandangle, “could you please remove my email from further correspondence regarding this matter.” Probably not. While ever depa remains a shareholder we will communicate with the other shareholders whenever we think it appropriate.
The LGS story gets worse.
On 18 March 2025, Justice O’Callaghan of the Federal Court concluded his role, having already found LGS/Active guilty of greenwashing, by fining Active $10.5 million. In the last issue we dealt with what we regarded as an inadequate response by Active in the hearing in December over penalties, and our expectation that Active’s lawyers, having humiliated the fund and all its members by describing LGS as “a very poorly-resourced entity”. As if the SMH describing LGS as the “disgraced superannuation fund” on multiple occasions, having been found “to have misled and deceived investors”.
The Judge was clearly disappointed at the lack of contrition evident from the LGS/Active defence of their position during the hearing of the case and this continued in the sentencing hearing.
The Orders issued by the Federal Court on 18 March rejected the flawed arguments presented on 17 December and took LGS’s apology to task. He noted “some contrition for its contravening conduct” but the contrition and the apology came in the sentencing hearing rather than before. “Although Ms Heffernan made that apology, it must be seen in light of the response of LGSS when it was confronted by ASIC with allegations of the contraventions and in particular the contentions it made at trial in its defence... Many of the submissions that it pressed in its defence at the liability hearing were contrived”. He listed eight submissions in particular, using terms like “threadbare” and “indefensible”.
And while he accepted LGSS/Active cooperated with the regulator/prosecutor “by attending voluntary conferences with ASIC, but again, such cooperation must be seen in light of the way that LGSS chose to run its case at the liability hearing”, for Justice O’Callaghan it was clearly not enough.
Strategic decisions made by LGS, always explained as based on legal advice, whether it be initially with ASIC, the trial itself, its reluctance to accept responsibility, its failure to disclose to members, and it’s crying poor at the sentencing hearing, were all bad decisions.
Justice O’Callaghan made it clear in his Reasons for Judgement that were it not for Active disappearing into Vision, and the potential that a more significant fine would also penalise the other party in the takeover, then the fine would have been higher than the $10.5 million.
The Orders also provide for an Adverse Publicity Order, in the form pressed by ASIC which will provide the details that were not disclosed to members during the course of this legal action. Even on this issue, the Judge’s disdain was evident:
“LGS asserted, without evidence, that there may be practical difficulties with an order that the text of the adverse publicity order remain available on relevant webpages after the merger is effected. But in my view, an order substantially in the form sought by ASIC is appropriate…”
And finally, the Court rejected the argument from LGS that they pay 90% of ASIC’s costs, to order “that LGSS pay ASIC’s costs of the proceeding.” All of it.
The parties had three weeks from 18 March in which to file any appeal, that three weeks has expired. There has been no advice to members or anyone else about the $10.5 million fine, the implications of the costs order, and there is no Adverse Publicity Order on the Active site, nor on the Vision site.
Clearly there will be more to this story.