Huon Valley: The mystery of the missing $millions

In 2006, the Huon Valley Council invested a substantial amount of public (ratepayers’) money in speculative investments known as collateralised debt obligations (CDOs). A significant amount of funds invested in CDOs was from council’s water and wastewater accounts.

Prior to 2006, the HVC was approached by investment brokers offering CDO investments. Rightly, it declined them. So what was it that made council change its mind in 2006? Was it the Commonwealth Bank, or perhaps some person or persons, who caused that decision to be made? What was the reason for investing in CDOs, and who made the final decision to do so?

To ensure nothing like this happens again, it is important that we are told how all this came about. In the years since, council’s leadership has failed to explain its actions.

The decision to invest some $4m — about a third of council’s total cash and cash-equivalent portfolio — in speculative financial products should only have been made after a logical, sensible and essential decision by council’s elected councillors to take independent advice prior to making investments on such a large scale. Did council seek such independent advice?

The annual accounts of the HVC for June 2010 state that “the $3m CDO investment was reported at a $0.00 balance in the 2008/9 financial year and an unrealised impairment applied”. The Commonwealth Bank, it seems, had advised council that the principal was lost.

Council documents show that another investment of $1m was “sold” by council in 2011 for $240,000. This resulted in a gain on the investment’s written-down value of $146,000. It is believed that council sought to investigate all means to recover its losses. Did this actually happen? If so, what was the cost to ratepayers for this decision? And what were the outcomes?

With the mayor seemingly no longer running council, it is up to the deputy mayor to provide an explanation to ratepayers what actions council has taken to recover these funds, and how much they have cost ratepayers?

HVC’s own reports acknowledge that the loss of these funds was a serious financial blow. What is needed are specifics. For example, what is the total financial impact of the loss? Did councillors know what was going on when these investments were made? If not, council’s leadership should have fallen on their swords, as would directors of any corporate board in similar circumstances. There was no such outcome at the HVC. “Trust us,” seemed to be the response, “we’re here for another electoral term.”

Every local government councillor has a corporate duty to be fully aware of the financial operations of a council, including details of its investment portfolio.

The deputy mayor tells us that council has an open-door policy. If that is so, let it provide its electors (council’s shareholders) with a detailed explanation of what has been going on concerning the lost monies.

With an all-out, all-in election due, it is up to council to abandon its secrecy over what has all the hallmarks of a long-time cover-up of an unacceptable financial loss, and tell it like it is before the October election. And, if I’m elected to council next month, I’ll be asking more questions from the inside on this issue.
Peter Coad, Deep Bay, Cygnet, Tas