Open Letter to Peter Drake, Founder And Chief Executive of LM Investment Management

When LM Investment Management collapsed last year, thousands of families lost their life savings. Many of the victims are now suffering from severe financial hardship and even depression. At least one victim has committed suicide.

Last month, the South China Morning Post published an article chronicling the events leading up to and following the disaster. It was entitled, “When an investment fund goes bad“. 

The article quoted an investment adviser named Martyn Terpilowski, who had grown suspicious of LM as early as 2009. This is the period when LM began paying higher upfront commissions and extending lock-in periods for investors.

A few of Martyn’s clients had invested in LM sometime around 2005 to 2006. When Martyn tried to help a client cash out in 2009, the client was placed in a “queue” that mysteriously never got shorter. 

Both Martyn and his client were extremely upset. For the next three years, Martyn tried desperately but unsuccessfully to pressure LM to release his clients’ money. He sent hundreds of emails not just to LM, but also to life insurance companies and dozens of advisers, bluntly pointing out that it was unethical, unprofessional, and foolish for them to continue promoting LM’s funds when they knew very well that existing investors were being held prisoner. Martyn voiced legitimate concerns that LM was suffering from undisclosed problems, and he correctly predicted that investors would eventually be greeted by an unhappy ending. 

Martyn thinks that the people who are most responsible for the LM debacle are now blaming everyone but themselves. Their behavior disgusts him. He is considering allowing me to publish hundreds of his emails on this blog, so that LM victims may have an opportunity to learn more about what really happened.

Martyn sent an open letter to Peter Drake on Saturday, but Drake has not responded yet. Here is a copy of that letter:

Open Letter to Peter Drake (Aug. 9, 2014)

Dear Peter

Long time no talk. I have been watching your recent blog and your recent posting of a letter you wrote in response to the SCMP article. I can see that you made no reference to me in your response, for several reasons I would imagine.

Firstly I was very aware of LM throughout their existence and at one point actually believed in LM products. Secondly unlike the adviser you highlighted, I never sold any LM after it was abundantly clear it was going to end this way.

As you are aware I have hundreds of emails to back up my allegations against you, the life companies and other advisers going back to 2009. The fact you have all turned on each now, is sad, but predictable.

It has always been industry practice to stop taking money into funds when redemptions are delayed. Any adviser knows that, as do you and as do the life companies, but whilst keeping hold of my clients money you managed to get a 400% increase in AUM. How do you think you managed this? By feeding the greed of these advisers. 9% indemnified commission is not and never has been industry standard. Your aim was always to keep the clients money tied up to ‘kick the can down the road’ as long as possible. The fund was no where near as popular with advisers when it paid 3% and you were not allowed to put in bonds (Adviser paid twice when placed in bonds). Suddenly it became the flavour of the month with everyone and the life offices turned a blind eye. I have hundreds of emails to you, Martin Venier, other LM employees, the Life Companies, the Brokers who were still pushing this, telling everyone this was going one way. It was that predictable – I hoped I was wrong, but knew I would not be. Clearly these ‘Advisers’ were not telling their clients the redemption delays and you knew this, as client would not have invested. That is common sense and you can keep showing the returns going up if clients can never access their money!!!  My client waited over 3 years and in the end has lost most of his money. It is a disgrace. Even more shocking, was a lot of this investment was not even new money, brokers struggling for business after the Financial Crisis just switched existing money across of their portfolios with the Life Offices and took 9% of their clients money (they had already been paid once). Most clients never saw the prospectus or knew this was an ‘experienced investor’ fund, but instead were just given a rate sheet showing ‘cash like’ returns – I mean how can that be right?? All I got was smart answers from you about not understanding the asset class as well as some megalomaniac comments. Both you and Venier seemed actually angry with me for meddling in your ‘great’ business model, as you ran around Asia cozying up to Advisers.. Life companies wanted to protect their market share so ignored and the advisers bought nicer cars and had better holidays and actually showed off about this on social media websites (many of those also have megalomaniac tendencies) – The whole thing was sick and you were ALL party to this.

I do not think I am some super intelligent person, so how did myself and a few others predict this constantly over a number of years. I am not on the Advisers side or the Life Companies side and certainly not your side and the Action Groups are just run by your former mates who were very rude to me, when I suggested the huge issues with LM 3 years before implosion. There was something very obviously wrong and for these assets to be valued 5c in the dollar, just shows what a disgrace this was and for that you are accountable. However for most advisers and life companies to act shocked and feel cheated is a disgrace also. You all worked in collusion, so clients never knew the reality when investing. I wish I had done more now, but I will not listen to the excuses from any of you people. I have reams of emails to you all, which I will publish and show your formally ‘matey relationship’ with advisers and life companies and how I was just the trouble maker then.

To conclude LM was a massive fraud where you fed the greed of these so called Advisers and which was sadly facilitated by the life companies who could have stopped this circus 3yrs and around $300m earlier. It is beyond belief that any of you have the audacity to act as victims at all. The real victims are real people who lost everything and shame on you all for doing that.

Please respond to this in an open email on your blog. As you know I have the evidence against all parties to back this up.

Regards

Martyn Terpilowski

9 thoughts on “Open Letter to Peter Drake, Founder And Chief Executive of LM Investment Management

  1. Victor John

    LMIM, advisors and insurance companies are guilty of destroying innocent lives. Thousands of honest upstanding individuals with lives of valuable contribution to the evolution of modern society have been robbed of their reward. It was planned and premeditated by evil people. It is nothing less than a crime against humanity.

    There is tremendous determination amongst the victim population to break the divide and conquer barrier that this evil band constructed and bring recovery to victims and the perpetrators to Justice.

    Thank you Lindell Lucy for the featuring the open letter in your blog. Thank you Martyn Terpilowski for coming forward with the most damning evidence yet.

    Reply
  2. Martyn Terpilowski

    Dear Mr. John and other victims

    This is just the beginning of the damning evidence. There is a lot and none of Drake, the life companies or the advisers will be able to challenge it – although I am sure they will all continue to blame each other. At the very least, radical change is needed in the industry and the many people who sold this in the last few years, knowing of redemption issues and for crazy commission are not allowed to carry on and sell the next ‘big thing’. People like Drake and his nonsense will come and go and I also hope for justice for him, but the advisers cannot be allowed to sell the next ‘litigation fund’ or ‘military venture capital fund’ or whetever, that pays ridiclous and undisclosed fees. Furthermore – it is very clear that levels of due dilligence at the life companies are a joke and what is allowed on their platforms is purely driven by the requirements of the scoundrels selling their products. Rgds Martyn

    Reply
  3. Scott

    Martin, long time no speak. Hope you’re well.

    Your letter – Very well said /written.

    I agree that the commission hungry sales people (advisers) and the life companies all turned a ‘usual’ blind eye to this. And yes, it is nauseating to see them all act surprised and like victims now.
    9% commission should have sounded the alarm bells (which it did for the ethical) but the greedy and selfish saw it as an opportunity to make some fast money and those above them that allowed it to happen…

    These problems are a top down issue. i.e the bigger players/businesses at the top are to blame for allowing the sales people & smaller advisory firms the opportunity to sell scams and toxic investments. Those at the top who allow this to carry on are the real crooks / trouble makers. But, as usual they’ll claim “we didn’t sell it” and “it’s not our job to regulate the advisers or to monitor suitability”….

    The investors are the only victims. I hope those responsible are held fully accountable and get what they deserve.

    Reply
  4. Martyn Terpilowski

    Hey Scott

    How are you? Yes mate – all very true and I have seen enough. Someone has to pay (or pay back ) this time… In all the years I have been around this stands out as the must disgusting greed. Total collusion between Drake and Brokers – facilitated by the life companies and I told/warned them all….. Truly terrible. Next week will be uncomfortable for a lot of ppl. You should read all the blogs mate – They are truly amazing.

    Have a good weekend and hope to see u soon.

    MT

    Reply
  5. Harry

    Martin, your comments are generally true but to blame the life companies of being unethical is a step to far. I used to run the broker unit of a life company in HK and the pressure we came under to include LM as an acceptable asset in the mid 90’s was tremendous. We always made it very clear that our level of DD on any fund was minimal – limited to domicile, size ( for liquidity) and frequency of trading generally. We disallowed it as an asset in 2008 when things began to look difficult. There still only seems to be half truths told and hope you will throw greater light on the levels of complicity between LM and IFAs.

    Reply
    1. Martyn Terpilowski

      Hi Harry

      Sorry for the delay in replying – I have been offline for a few days. I do not think I am going too far at all. Have you been reading the emails on this blog? I have repeatedly warned the life offices over a number of years that this would end this way and was told ‘if they do not take it, someone else will’ and it is clear LM was retained to ‘maintain market share’ and ppl in the life offices have said as much. I mean – you can say due diligence is minimal but when you are provided with clear evidence that there are issues and you continue to take it, you then become responsible in some way also. That is very clear to me. It is like Axiom Legal Financing Fund – it took me around 5 minutes to ascertain that would also end in disaster, so it was beyond me how it managed to get on all the bond platforms. Surely with things like this Life Companies have to have some duty of care? I suggest you read all the mails on Lindell’s blog and seriously consider whether I am going too far and how this was allowed to continue? If the Life Companies had heeded my warnings and read the proof that I provided, many hard working people would have been saved from losing their life savings. This was an ‘experienced investor fund’ being sold to retirees, paying brokers 9% commission on top of bond commission, with huge liquidity issues and some people waiting 3 yrs plus for their money back…. I cannot see anyway how other ppl did not see this coming and therefore I totally stand by what I have said here. Rgds Martyn

      Reply
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  7. Ian

    Can you tell me where Financial Partners International (FPI) based inter alia in Hong Kong sit is all of this. FPI were selling this product to their clients, no doubt for their own significant gain. I had some money invested in the LMCPIF which is now worth 15 cents on the dollar I am told.

    Reply

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