MP Geoff Shaw sanctioned over financial scandal

By Chris Vedelago, Henrietta Cook
Updated July 27 2014 - 8:08am, first published 7:30am

Rogue MP Geoff Shaw has been implicated in a series of financial scandals that saw the former financial adviser reprimanded for providing dodgy investment advice and forced to compensate more than a dozen families who lost their savings.

The Sunday Age can reveal the career of the self-described "successful" accountant and financial planner - who is currently suspended from State Parliament for misusing his taxpayer-funded car - was marked by complaints and warnings about his ethics and competence.

The saga raises serious questions about the effectiveness of industry regulator ASIC and the Liberal Party's vetting process for candidates.

But Mr Shaw says he is unaware of ever being sanctioned or fined for his conduct.

The Sunday Age investigation has also found the Commonwealth Bank continued to employ Mr Shaw as a financial planner despite official findings exposing his misconduct, which included a rebuke from the Financial Ombudsman Service and suspension from the peak professional association.

The CBA was recently the subject of a damning Senate investigation that uncovered widespread malfeasance inside the bank's financial planning arm, including the division that accredited Mr Shaw.

Before being elected as a state Liberal MP in 2010, Mr Shaw worked as an accountant and financial planner out of the Frankston offices of his firm, Geoff Shaw & Partners. He was licensed as a planner first through Bongiorno Financial Advisers (Aust) and then Financial Wisdom, a subsidiary of CBA.

The official findings against Mr Shaw were handed down in 2009 - just a year before he was endorsed as the Liberal Party's candidate for the marginal seat - and concerned his conduct in recommending a client couple invest their savings in a business in which he had a major stake. The now defunct business, HotBoats, was supposed to restore and sell yachts.

The clients, who were looking for a safe short-term investment before buying a home, lost nearly all of the $65,000 given to Mr Shaw. "You can always wait longer to buy a house. An opportunity like this may not present itself again," Mr Shaw allegedly told them.

Investigations by the FOS and Financial Planning Association found Mr Shaw had violated his ethical and legal obligations by recommending such a risky investment and for failing to disclose his financial stake in the yacht business.

Mr Shaw stood to reap a 17.5 per cent share of any profits from the deal, a fact that was kept from investors.

"This is unlawful conduct, and it was also a departure from sound commercial morality," the FPA's Conduct Review Commission found in 2009. "The CRC considers there has been a gross disregard of the rules and a lapse in integrity."

Mr Shaw was fined $5000, suspended from the professional assocation for a year, and ordered his work be closely supervised.

Shortly afterwards, the FOS also ruled Mr Shaw had breached his duty of care and statutory obligations under the Corporations Act, branding the investment scheme "ill-conceived" and Mr Shaw's conduct "negligent". 

FOS ordered the client should receive $56,700 in compensation plus interest.

But the inquiries also revealed Bongiorno had been aware for years about serious problems with the quality of Mr Shaw's financial advice but had repeatedly ignored "warning signs" about his conduct.

The FPA finding was forwarded to Mr Shaw's then licensee, Financial Wisdom, who nonetheless continued to employ him as a financial planner for another year.

CBA has ignored repeated requests to comment on Mr Shaw's tenure at Financial Wisdom or whether the bank has been the subject of any complaints as a result of his conduct.

But a bank insider has revealed that CBA compliance staff had flagged concerns about Mr Shaw's activities, including his practice of referring customers to unusual business investments such as the yacht scheme.

ASIC, which was blasted in the Senate report for its failure to adequately regulate the financial planning sector, declined to comment on whether it has ever investigated Mr Shaw.

But The Sunday Age has found that problems with Mr Shaw's work practices began as early as 2002 when the savings of 18 clients of his accountancy firm were wiped out as a result of bad advice provided by his then business associate, Robert Pearce.

Mr Shaw referred clients seeking investment advice to Mr Pearce, a former bankrupt-turned-financial planner who worked at Mr Shaw's Frankston office. The safe investment turned out to be a high-risk product that lost nearly all its value.

In a bid to head off legal action, Mr Shaw and Mr Pearce paid about $690,000 in compensation by 2006, according to affidavits filed in the County Court.

Another former client said he discovered his financial records were in disarray when Mr Shaw was running the accountancy firm and complained to the new operators when the business was sold. 

"I refused to pay for the service because proper records were not kept. They didn't do the work they were supposed to."

It's the latest saga to plague the balance-of-power MP, who is enduring an 11-sitting-day suspension from Parliament for misusing his government car. He also triggered the demise of Ted Baillieu as Premier and Speaker Ken Smith and recently said he would support a no-coinfidence motion in Premier Denis Napthine.

The now independent MP has previously sparked controversy for simulating masturbation in Parliament and failing to disclose he was charged with assault while working as a bouncer in 1992. The spate of scandals has called into question the way political parties vet candidates.

A spokesman for the Liberal Party said they were not aware of any of the financial scandals surrounding Mr Shaw. They were not disclosed to the party when they vetted Mr Shaw during the pre-selection process, he said.

A spokesman for Mr Shaw said the Frankston MP was never told he was reprimanded as a result of the FOS and FPA investigations.

He said while Mr Shaw was aware of the complaint, he had resigned from the FPA before any determination was to be made. 

"He had hundreds of clients he was responsible for, so the complaint of one client was considered in such a context."

cvedelago@theage.com.au

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