Wednesday, 27 November 2013

A scam is but an investment with comprehensive management fees

US Masters Residential Property Fund (URF.AX) is a scam run by Dixon Advisory. The fund claims to invest in high-yielding American property, purportedly using collected rental income to pay steady high dividends to granny investors. In reality, URF is a ponzi that pays its dividends out of capital raisings. The operators of this scheme manipulate URF's share price while gutting the fund with various hidden fees and related party transactions. URF's half-year report for the six months to June 2013 brazenly describes ongoing securities fraud.

http://www.asx.com.au/asxpdf/20130828/pdf/42hzwfpnj35qh0.pdf

In the six months to June 2013, URF had investment property rental income of $4.4m, with rental expenses of $2.5m, for net rental income of $1.9m. From this $1.9m income, the scheme operators charged fees exceeding $10m:

  • Dixon  is entitled to an annual Responsible Entity Fee of 0.55% of the fund's gross asset value, charging $460,958 in HY13.
  • Dixon is entitled to an annual Investment Management Fee of 2% of the fund's gross asset value, charging $1,057,751 in HY13.
  • Dixon is entitled to a Leasing Fee of 3 months gross rent on new leases, charging $499,987 in HY13.
  • Dixon  is entitled to an Asset Acquisition Fee of 1.99% of the purchase price of assets acquired, charging $1,816,728 in HY13.
  • Dixon is entitled to a Structuring and Handling Fee of 2% of total funds raised, charging $2,947,774 in HY13.
  • Dixon is entitled to a Debt Arranging Fee of 2% of the gross amount of borrowings obtained, charging $614,872 in HY13.
  • Dixon is entitled to on-charge "administrative expenses", charging $3,042,028 in HY13.

These are but a subset of the fees charged by Dixon and related parties. Of these $10.4m in fees, only $1.7m was recognized as management fees in the profit & loss statement, with the rest obscured by fraudulent accounting and deceptively hidden in report footnotes. URF also paid out distributions to unitholders totalling $10.4m. All this was made possible by issuing shares worth $74m. What has just been described is not a viable business plan, it is a ponzi.

If URF shares were to trade freely they would have collapsed in value. Instead, Dixon and accomplices completely control URF's share price, and have ramped the price above reported NTA. URF does not trade at a "market" price, its price is fixed by the scheme operators. ASIC refuses to take any action, instead protecting the criminals. According to ASIC, the URF ramp is a magical market mystery, and not fraud. Dixon would never have been able to commit its crimes if not for the facilitation and legitimization from ASIC, its most valuable partner.


On 28 August 2013 a partner at Deloitte signed off on URF's half-year report, thereby becoming an accomplice to Dixon's securities fraud. From the accounts the auditor would have been perfectly aware of the fraudulence of the scheme, or should have been in any case, yet the scum still signed off on it. The partner did this safe in the knowledge he will never face prosecution for his role in this scam, never have to face any consequences for his crime.

10 comments:

  1. Awww... but the girl is soooo cute, & the two elderly gentlemen just exude respectability. At least that must be the effect they're hoping for!

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    1. "Like the club tie and the firm handshake
      A certain look in the eye and an easy smile"

      Thanks for reading and commenting, Central Scrutinizer.

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  2. Here's another candidate

    http://www.businessspectator.com.au/news/2013/11/28/construction-and-engineering/forge-shares-plummet-90

    Just my opinion, but the entire financial system, which includes the ASX, is a Ponzi scheme. A rising sharemarket in particular is manna from heaven for all listed 'companies', not just LIC's. Issue securities (shares) with no liability attached, only the possibility of your share price falling 90% in an instant. But who cares if you owe your shareholder chumps nothing?

    I'd go so far as to say that's the whole point of the scam.

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    1. Yeah I hear you. Our finance/pension/economic system is based on stock/property prices rising at a higher rate than the increase in productive capacity or wages. To support this, endlessly increasing amounts of debt and granny savings must be pumped in.

      The LICs are a perfect model organism, though, because they are so easily analyzed, with transparent skin showing their cancerous organs. These LICs are objectively and demonstrably ramped and fraudulent, whatever a person may think about the market in general or its prospects.

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    2. The cancer analogy is a good one. If you consider cancer a growth then inflating financial markets is growth.

      The bit I don't quite have my head around in your thesis is just how the shares remain at a price above NTA, rather than fall 90%. Collusion?

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    3. Crossholdings, hidden holdings in themselves, insiders using leverage, buybacks. If the victims are buy-and-hold granny investors it can be a long time before they try to sell. In the meanwhile maintaining a fake price is easy, especially for illiquid investment companies.

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  3. You might be interested in a report published this week by Sydney based Evisor. It reflects all your issues around URF and much much more. I am recent investor who has sold out as I discovered more about this Ponzi, opaque, high fee, risk investment that has preyed on a catchment of older, non financially astute Dixon SMSF clients. Why is it that ASIC does not step into these issues? Is it worth approaching them again. Surely we have all learned since the GFF (Global Financial Fraud) that this practice needs to be punished or it will continue to thrive. I have collected much information on URF over the years and happy to discuss.

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    1. Marty, ASIC has let financial crime in Australia go to such extremes they have effectively become accomplices to the fraud. To backpedal now would be tantamount to admitting criminal negligence, to admit they deserve prison time themselves. Not going to happen. Instead they will do anything and everything to kick the can, to try and sweep things under the carpet for as long as possible. Take a simple example: if ASIC wanted to, they could tomorrow ban the practice of funds reporting deliberately inflated "pre-tax net" tangible assets, an absolutely ludicrous metric. But do so would be to admit they allowed the most basic metric of funds to be fraudulently fudged for decades, because conmen wanted them to. So they don't.

      But it is not just the regulator that is captured and controlled by the criminals. Equally important is how the criminals control the media and "financial analysts", control information itself. Dixon is a good example. Did you know that the head criminal of Dixon actually writes articles for the Sydney Morning Herald? They let the criminal scum write their own articles in the biggest newspaper, reaching tens of thousands victims every time. If it wasn't true this would be unbelievable

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  4. Hi Dr Benway. NTA down to $1.57 on URF now & still trading at $2.00. Still issuing notes /debt, to allow Dixon Advisory to pay dividends. This stock stinks. Surely ASIC can see it is a classic ponzi. URF negative operating cash flow & NTA nearly back to its listing price. Illiquid & tightly held. Is there any way out for shareholders with substantial holdings or have they done their money?

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    1. Hi Julian, according to ASIC, ponzis are legal as long as they fill out the right form. No joke. URF's latest debt raising explicitly states the funds are partly to be used to pay interest on previous notes. ASIC has literally legalized ponzi schemes. The stock is openly manipulated, closing at the *exact* same price for months, which of course would be an impossibility if it was market priced as Dixon claims. Insiders can still get out but the average small investor or smsf is completely toast - the average URF investor will see but a fraction of their money back.

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