The LM Emails (#3): In 2009, Martyn Refused to Support LM, Saying It Would Be Unethical and Irresponsible

An LM sales manager phoned Martyn Terpilowski in December 2009. Martyn missed the call, so he later responded by email.

In that email, he flatly refused to sell any more of LM’s funds, saying that it would be irresponsible and unethical. He expressed shock and disappointment that LM was campaigning for more cash at the same time that redemptions were suspended. He feared that LM was in a lot of trouble, and he explained several reasons why.

The sales manager, Heather McLeish, responded by saying, “We think things are going to continue to get better, but next year at this time if you are right I am taking you out for dinner; you chose where. If not, it is your shout!”

Things did not get better, but Martyn says he can’t recall that Heather treated him to dinner. He says she eventually quit her job and moved to a different company. She was replaced by Martin Venier.

At the time of Martyn’s email, the LM Managed Performance Fund had about AU$100 million under management. By the time LM collapsed, the number had grown to AU$400 million.

If insurance companies and other advisers had faced the facts and acted as responsibly as Martyn Terpilowski did, the life savings of thousands of families could have been spared.

Instead, they enriched themselves by recklessly contributing to what may have been a multi-million dollar fraud.

It remains to be seen whether or not they’ll be held accountable.

First Email to Heather

From: Martyn Terpilowski
Sent: Wednesday, December 16, 2009 9:37 AM
To: Heather C. McLeish
Subject: Hello Heather

Hi Heather

I think I missed your call the other week and I am sorry I never got around to calling you back. Have a great Xmas and NY if you are going away. I will be here I think struggling on.

I cannot pretend that I am still happy with what is going on at LM and my confidence has been rocked a lot. We were having a chat in the pub last Friday and we do fear bad news for next year, maybe very bad news. The fact the fund continues to campaign for new funds in at the same time that redemptions are suspended sets it apart from all other funds that have found themselves in trouble. It is hard to get away from the fact that new money coming in, is being used for redemptions, which is just not allowed in the UK. I also do not understand how LM still cannot get a loan to cover the previous MIF loan [First Mortgage Income Fund loan] from CBA [Commonwealth Bank of Australia]. Australian banks remain healthy and there are only four major lending banks in Australia, so it would seem unlikely that this loan was ever going to happen now. The banks are very likely to have similar concerns to us.

I know you cannot agree with us and Peter [Drake] always tells us about his assets being so strong, but there are concerns still on Australian Commercial Property, however good the economy has been compared to others. It is certainly irresponsible for brokers to invest money in funds where they cannot currently get their money out again, but I am sure people will do for the commission, which is very disappointing.

Anyway – you know my concerns and the reasons why we certainly cannot offer further support to the funds until this is rectified. I think we are showing responsibility on this matter, although I know Peter probably disagrees.



Response from Heather

From: Heather C. McLeish []
Sent: Wednesday, December 16, 2009 9:58 AM
To: Martyn Terpilowski
Subject: RE: Hello Heather

Oh Martin, you always send the sunniest emails.

A couple of things… as of Jan 1, 2010 we will be at 100m AUD owed to CBA. This means 50m AUD has been paid back in one of the worst economic years ever. The remaining amount – 100m  – is a lot more attractive to other financiers. A bit of a breaking point number if you will. It is being investigated and when there is more info you will know.

In fact I think you are staying true to your beliefs and your philosophy by not recommending a fund you are not comfortable with. It shows how much you care for your clients and I have a lot of respect for that. We think things are going to continue to get better, but next year at this time if you are right I am taking you out for dinner; you chose where. If not, it is your shout!

Have a wonderful holiday season and be safe.

Best regards,


Second Email to Heather

From: Martyn Terpilowski
Sent: Wednesday, December 16, 2009 10:14 AM
To: ‘Heather C. McLeish’
Subject: RE: Hello Heather

Sorry for the unsunny mails – maybe I have been here too long and heard so much bs already (not accusing you personally of this). Unfortunately it was very bad timing from you, as I was always a big supporter of LM previously. Maybe that is why I am so worried, as I have a lot to lose.

I struggle to believe anyone claiming to have ethics would put money in a fund when you cannot currently get your money out – they must be lying to customers as no customer in their right mind would put money in if they basically knew they were paying redemptions. It is very, very unnerving and I struggle to see how it can be defended in any way. Yes – I am seriously worried by this. Maybe more so than I was on other things which I always got it right.

I hope I am not right for both of us Heather, but the facts I have stated set LM apart from all other suspended funds. I cannot see why the MPF [Managed Performance Fund] is any different than the MIF when Peter said they could not take money in when people knew that it was just going to pay off the bank loan with CBA – so why is this any different??? The money going into the MPF now (which is being campaigned for) is being used to pay off redemptions – that is very clear. I suggest that this is because this is not sold onshore in Australia. It’s like Peter’s Richard Nixon quote of ‘lying for the greater good’… highly fishy and highly dangerous. I honestly now expect the worse as by continuing to take money in whilst redemptions are suspended they are showing desperation not used by any other manager. Very scary Heather if you look at it objectively (which I understand is difficult) – I really do not want to think like this, but it makes sense the more and more I do.

Have a good Xmas and God I hope I am wrong.