The Wind Industry: You Know It’s a ‘Ponzi’ Scheme When its Targets Include Schools & Councils

house-of-cards

“Flimsy foundations” doesn’t quite cover the great wind power fraud.

****

STT has pointed out just a few times that the wind industry is little more than the most recent and elaborate Ponzi scheme in a list that dates back to “corporate investment classics”, like the South-Sea Bubble and Dutch tulip mania.

In the wind industry, the scam is all about pitching bogus projected returns (based on overblown wind “forecasts”) (see our posts here and here and here and here); claiming that wind turbines will run for 25 years, without the need for so much as an oil change (see our posts here and here and here); and telling investors that massive government mandated subsidy schemes will outlast religion (see our post here).

In Australia, one of the wind industry’s BIG players – Pacific Hydro – managed to rack up an annual loss of $700 million, last year; in circumstances where the subsidy scheme – on which its profits depend – hasn’t changed at all (see our post here).

But – if you needed any more convincing that wind power outfits are taking their cues from Charles Ponzi and Bernie Madoff – then this little video should do the trick.

In it, Michelle Stirling from Alberta’s “Friends of Science”, raises the red flag on a pitch by a wind power outfit to get Alberta’s School Boards and certain Municipal Councils to invest in wind farms. Michelle covers the fraud with flair, but it’s the fact of the pitch, and to whom it’s being made, that has STT’s Spidey senses tingling.

****

****

What’s that old saying about those who cannot remember the past being condemned to repeat it?

With the inevitable prospect of STT getting to say: “well, don’t say we didn’t warn you”, we think it only fair to draw attention to the parallels between the great wind power fraud and the US sub-prime mortgage fiasco, that heralded the GFC.

The scammers that packaged up low-doc housing loans as guilt-edged securities, and flogged them to unwitting investors around the world, pitched their “too good to be true” financial offerings at Councils in Norway – Narvik’s Council was stung for a cool $64 million when the scam folded – leaving kindergartens, nursing homes and schools in the financial lurch (see this New York Times article from 2007).

In Australia, the gullible and unsophisticated targets included not just Councils, but charities, churches, hospitals, nursing homes, Melbourne’s Metropolitan Ambulance Service and the Victorian Teachers Credit Union.

We’ll let The Age lay out the havoc wreaked by the sub-prime pyramid scheme, on precisely the same class of investor being targeted by wind power outfits; and the so-called, “ethical” investment funds, and the not-so”ethical”, Union Super funds, that round up the cash for them.

Subprime pain sweeps the world
The Age
Michael West
16 August 2008

MORE than 100 local councils, charities, churches, hospitals and nursing homes across Australia are sitting on a $2 billion black hole after buying subprime investments structured by Wall Street banks during the bull market but which are now potentially worthless.

Melbourne’s Metropolitan Ambulance Service and local councils are among those facing losses of hundreds of millions of dollars in the subprime meltdown because of bad debt they bought through a global investment bank.

A document leaked to BusinessDay revealed that Lehman Brothers is managing tens of millions of dollars in funds for Victoria’s community, education and health sectors, much of it invested in high-risk financial instruments now potentially worthless.

Other Victorian entities with millions in subprime exposure are not-for-profit defence personnel insurer Defence Health, which has $39 million managed by Lehman Brothers, and $17 million for the Victoria Teachers Credit Union.

BusinessDay has identified more than 150 government, private and charitable institutions that bought complex financial instruments such as collateralised debt obligations (CDOs). There have been few buyers for CDOs and similar structured finance products since the subprime meltdown this time last year that sent global financial markets into a tailspin.

These toxic investments will wreck the finances of many local government and charitable organisations for years.

Twenty-three local councils are preparing a class action lawsuit against Wall Street bank Lehman Brothers to recover their losses.

Among those that bought the products are four universities, dozens of super funds, ambulance services, the St Vincent de Paul Society, the Starlight Children’s Foundation, the Boystown charity for underprivileged children, and the Anglican, Baptist, Uniting and Catholic churches.

While not revealing the councils’ latest subprime exposure, the document showed East Gippsland Shire Council had $9 million managed by Lehman Brothers after the meltdown in banking markets and $6.5 million for Greater Shepparton.

Gosford Council, on the NSW mid-north coast, is sitting on a $74 million portfolio of CDOs and similar “structured finance” products, Newcastle Council $39 million, Coffs Harbour $39 million and Sutherland $55 million.

NSW and Western Australia are the states most affected, followed by Victoria, South Australia and, to a lesser extent, Queensland, whose investment rules require local councils to invest via Queensland Treasury.

National Australia Bank announced last month it was writing down the value of its CDO portfolio by $1 billion, or 90%, having deemed there was a high probability of a loss on the investments. Most of the charities and councils that hold CDOs are yet to make write-downs, and thereby concede that they will incur losses. Their problem is that the market for CDOs no longer exists. There are no buyers, although many councils claim their CDOs are still producing income and therefore remain a viable investment.

While the exposure of NSW councils has been the subject of an inquiry earlier this year by Platinum Asset Management chairman Michael Cole, the extent of the exposure held by other state and local governments, and charities, super funds, churches and other organisations has until now been unknown.

The list is long and includes co-operatives, teachers’ unions, credit unions, nursing homes, retirement villages, hospitals, listed public companies and state agencies.

Documents seen by BusinessDay confirm the exposure to CDOs is nationwide. The organisations in the table show Charles Sturt and Griffiths universities, Australian National University, Open University and the University of Western Australia are all exposed.

The CDOs were created by investment banks, which bundled thousands of US subprime home mortgages and sometimes even car and credit card debts into a complicated “derivative” security.

They were marketed as a safe investment, akin to a bond. The mix of the underlying home mortgage assets – “bricks and mortar” – was designed to minimise risk to the investor.

In most cases the banks that structured them acquired AA and AAA credit ratings from Standard & Poor’s or rival credit ratings agency Moody’s Investor Services by paying a fee.

When the US credit markets iced over last year and property prices plunged, investors were no longer willing to buy CDOs. The instruments’ very diversity worked against investors as no one could disentangle the product and its component parts: thousands of underlying mortgages packaged together.

The $2 billion in investments identified by BusinessDay pertains only to funds under Lehman Brothers management. Lehman acquired boutique local bank Grange Securities two years ago and Grange had been the biggest player in the CDO market, having undertaken a strategy of selling the product to local government, charity and semi-government agencies.

As Lehman was acting as “agent” to most of its council and charitable clients, it not only sold the products, it also managed them for clients, and in some cases “churned” the CDO portfolios by 200%, 300% and 500%.

In other words, the bank bought and sold the products between its clients and earned commissions on the sales, according to sources close to the councils.

It was able to charge higher fees as the CDOs were considered high-risk products although the councils claim they were not properly advised of the risk involved in the investments, nor of the prospect that there would be no “liquidity” or “secondary market” to sell them.

The CDOs were marketed with traditional Australian names such as Federation, Tasman, Parkes, Flinders, Kokoda, Kiama and Torquay. Some councils even took out loans to buy the CDOs, or sought “leverage” to magnify their returns. In these cases the losses would be deeper.

These Lehman portfolios, or “funds under management”, contained not only CDOs but other structured finance products such as capital protected notes and floating rate notes (FRNs) whose value is also difficult to establish.

Gosford Council, for instance, has $135.5 million in investments, most of which Lehman managed, but the face value of the CDOs and notes is $74 million. The CDO and note exposure of Hastings Council is $45 million from total investments of $82 million, Wingecarribee $32 million of $59 million and Sutherland $55 million from $123 million.

These figures are from late last year. They are not believed to have changed substantially.

Although Lehman Brothers is the biggest player in this CDO market, other banks also had a significant presence (our accompanying table represents only the Lehman funds under management post-credit meltdown – the figures may have changed in recent months).

While the collective exposure to Lehman may be less than $2 billion, there are hundreds of millions of dollars in CDOs and other structured finance products sold by other investment banks and promoters.

Even if 50% of the face value of these derivative investments could be recovered – and remember NAB recently wrote down the value of its CDO holdings by 90% – losses across the country from structured finance products may reach $2 billion.

Most of the holders can hardly afford any losses, particularly in the present economic climate where their income is coming under pressure.

The Cole report into local government exposure to CDOs and related instruments in NSW found that the book value of highly structured credit products in NSW alone was $590 million and the exposure to “capital guaranteed” products (also considered to be riskier than they sound) was $450 million from $5.64 billion in investments among 152 councils in NSW.

Further to the Cole findings, the Federation CDO series sold by Lehman/Grange had already fallen 85% in face value as of January this year.

The report found that NSW councils were down collectively $320 million on book value. Many held more than 45% of their assets in CDOs and FRNs.

That was January and globally investment product write-downs have more than doubled since then. Moreover, the valuations are considered conservative as they were in many cases guided by the product promoters.

Nor did the inquiry examine the exposure of other states and other bodies such as semi-government agencies and charities.

The first NSW council to take legal action has been Wingecarribee in the Southern Highlands. Piper Alderman, the law company acting in the matter, has now signed up 20 councils including Armidale, Blaney, Deniliquin, Gilgandra, Kiama, Narrabri, Parkes, Walcha, Wingecarribee, Port Macquarie and Carbonne.

Lehman Brothers declined to answer specific questions, but said it did not know about the class action and was defending a single action from Wingecarribee Council.

“Lehman Brothers will vigorously defend any legal proceedings commenced where we do not feel there is merit,” Lehman said.

“Lehman Brothers denies the claims Wingecarribee Council has made in its statement of claim filed with the Federal Court.”
The Age

As PT Barnum said: “every crowd has a silver lining”.

In the 2000s, it was pitching “CDOs” to a gullible “crowd” of councils, schools, nursing homes, etc.

In 2010s, as seen in the video from Alberta, it’s the wind industry and its parasites pitching “ethical investments” in wind farms, to precisely the same class of unwitting investor.

For an eerily familiar style of operation to that used in the CDO scam, check out the effort by neo-Marxist front, Getup!’s founder, Simon Sheik to plug a Super Fund that’s throwing $millions into wind farms (linked here), in which we’re told to “divest” from firms with interests in life-and-prosperity-giving fossil fuels; and that wind farm investments are as “safe as houses”.

Perhaps, the giveaway in Sheik’s wind farm investment pitch – to those in the know – is the description of Simon Holmes a Court as “an investment angel”.

Our angels

The idea of Australia’s first fossil fuel free super fund made some folks pretty excited. Our angel investors have been vital in helping us launch by providing seed capital.

Simon Holmes a Court Simon built Australia’s first community owned wind farm – Hepburn Wind – along with 1900 other investors. He is a strong supporter of community renewables.

 

While Getup! might consider Holmes a Court an “angel”, his numerous, long-suffering victims at Leonard’s Hill see him for what he really is (see our post here).

Simon’s Hepburn operation is yet to return a cent to its gullible, greentard investors; and, ever since the Coalition’s RET Review panel went to work this time last year, Simon has spent every waking hour either fretting about the future of wind power subsidies, or lobbying Federal MPs to keep the REC Tax/Subsidy scam rolling for just that little bit longer.

We’ve said it before, and we’ll say it again: if you think you’ve got any of your hard-earned anywhere near wind power outfits, like Pac Hydro and Infigen – in the form of superannuation or shares – then grab it, and get out now.

You have been warned.

exitsigns

Got money in wind power outfits? Then RUN, don’t walk …

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Hepburn Results in Wind says:

    The electric wind karma is running over the green dogma…
    (The HepW turbines’ true names are Fail and Busto, not Gale and Gusto.)

  2. When Daniel Andrews isn’t ripping up contracts for gridlocked Melbourne’s desperately needed new road infrastructure projects, or repealing laws countering union thuggery on Victorian building sites, (on a promise to his CFMEU benefactors) he is scheming to administer the final solution to those few, long suffering, manufacturing industries still surviving in Victoria. This latest Andrews master stroke is intended to prop-up the subsidy dependent wind industry, the Ponzi scheme that keeps the Greens happy and the unions supplied with rivers of members, super gold. Predictably Andrews’ new renewables tax grab is supported by all the usual wind industry shills:

    “The Victorian Labor opposition has identified renewable energy as a key growth sector in a new jobs plan.

    Labor’s Back to Work policy released yesterday commits the party to “Establish a $200 million Future Industries Fund to drive the six high-growth sectors.” This fund will support “new energy technologies.”

    The party also announced a $200 million Regional Jobs Fund that will support job-creating projects, including “companies investing in renewable energy.”

    Friends of the Earth welcome the focus on renewable energy in the lead up to a state election on November 29.

    “Renewable energy is a high-growth, job-creating sector globally. Victoria’s economy can benefit from the shift to renewables, but only with political leadership,” said Friends of the Earth renewable energy spokesperson, Leigh Ewbank.

    The Back to Work policy announcement comes a week after Labor candidate for the hotly contested seat of Ripon, Daniel McGlone, supported a Victorian Renewable Energy Target. Mr McGlone told The Maryborough Advertiser:

    “Daniel Andrews has made a commitment that should the RET be scrapped at a federal level Labor will revist the VRET and re-instate it,” he said. “I’m obviously going to be deeply in favour of that.”

    Yes 2 Renewables say credible energy policy must include a state target for renewable energy, saying the renewable energy sector was languishing due to uncertainty around the federal government’s RET.”

  3. Martin Hayles, Curramulka says:

    I have been watching this investor of other peoples hard earned spout his bullshit.

    Is it true that there has been NO return to the investor?
    When do they expect a return to happen to happen?

    When can his name be shown to be and acknowledged as that of a shyster?
    Why does his name hold any credibility at all?

    It appears to me that he is trading on nothing more or less of a name of a bygone era, that has no relevance to today.

    • In Hepburn Wind’s annual report for the year ended June 2013 the Notes to the Financial Statements, we find:
      18 Dividends
      There were no dividends declared or paid in the current or previous financial year.”

      The annual report for the year ended June 2014 does not appear to refer to payment or non-payment of dividends although there could be a reference buried somewhere in the report.

      • Hepburn Results in Wind says:

        Thanks Bon. I also checked the more recent Hep W 2014 Annual report. Nice green photos, and HaC is smiling in this one.

        But board is clearly worried. They clearly cut back their own ‘community bribe’ so as to tinker with their bottom line loss so it did not look worse than the year before to their shareholders. It would logically be consistent therefore for the Feds to follow suit and to cut the REC bribe don’t you think, so as to tinker with their own negative balance sheet? You know, to follow the example set by Hep W.

        Perhaps STT could do a forensic analysis? The Hep W’s also seem a wee bit concerned re maintenance costs and “mechanical issues” now the turbines are out of warranty. And I thought turbines were oh so reliable and the wind was free!

        And thanks for the warning STT.

      • Yes “Hepburn Results in Wind” and why wouldn’t Simon Holmes a Court and his mates be more than a little worried about being on their own in maintaining their two REpower 2.05MW wind turbines. REpower was rebadged after numerous turbines bearing its former name Suzlon started chucking their blades off, sorry I mean started liberating components.

        I note that REpower has recently taken on another name, the new moniker is Senvion?

        Compounding questions over the dubious ancestry of Hepburn Wind’s REpower turbines is recent research showing that the useful life of wind turbines in general falls well short of the 20 plus years claimed by manufacturers.

        But I suspect the long suffering locals of once peaceful Leonards Hill might see any early demise of Hepburn Wind’s two noisy monsters as simply a matter of karma.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: