Super swindle linked to sex clinic

by | Jan 4, 2011 | Business

A billboard for the Advanced Medical Institute. Photo: Danielle Smith

THE alleged mastermind behind Australia’s largest superannuation swindle, in which $118 million vanished into a Caribbean tax haven, was also a silent partner in the failed erectile dysfunction company Advanced Medical Institute.

On the eve of his company’s dubious practices being exposed by the Herald last month, the controversial medical entrepreneur Jacov ”Jack” Vaisman placed AMI into administration.

A Herald investigation of company documents, here and overseas, has revealed that while Mr Vaisman was making millions, in the shadows controlling a 50 per cent interest in AMI was a network of unscrupulous financial engineers responsible for Australia’s largest superannuation theft.

The ultimate controller of the group is Jack Flader, 48, The American-born trader, who lives in Hong Kong, has been under investigation in Hong Kong by the Securities and Investments Commission.

Mr Flader is alleged to be behind the collapsed Astarra Strategic Fund, part of the Trio Capital group based in the NSW town of Albury.

Trio, through financial planning networks fed by kickbacks, encouraged Australians investors to put their savings in Astarra. The money was then funnelled through Hong Kong to a British Virgin Islands company associated with Mr Flader.

There the trail goes cold. For a year Australian investigators have been hunting for the missing $118 million without success.

Just before Christmas, Mr Flader’s sidekick Shawn Richard, who had raked off $6.4 million in payments from the Trio Capital scam, pleaded guilty in the Downing Centre Local Court in Sydney to two charges of dishonest conduct. Mr Richard, 35, who is dubbed Shawny Cash on Facebook, faces 10 years in jail. In court, he gave evidence that he was merely the puppet for the alleged mastermind, Mr Flader.

In 2005, Mr Flader and Mr Vaisman’s lawyer, Richard Doyle, concocted a plan to float AMI on the US stock exchange. They gained control of a company shell and bought two Australian companies they had also set up – one with intellectual property rights for the erectile disfunction spray in Australia and one housing international rights to the ”technology”.

Although these rights were based not on a patent but on an ”innovation patent” – which was achieved by filling out a simple form at a cost of only $150 – the promoters sold them to the US company for $24 million. They repeated this deal for the international rights the next year, again for $24 million.

Investigations by the Herald also found that interests associated with Mr Flader and Mr Vaisman were active in trading the US stock AMI among themselves.

No one appears to have informed the US stock exchange of AMI’s woes in Australia. The day after AMI went into voluntary administration, the US share price, which had been wallowing at 1¢, leapt to 8¢. It is back to 1¢.

The same day the administrators were appointed to AMI, Mr Vaisman, who calls himself ”Dr” since earning a PhD from an American university, was informed by the consumer watchdog that it intended to prosecute him and two of his doctors for ”unconscionable conduct”.

Mr Flader’s first run-in with regulators came to light when the Financial Services Authority in Britain exposed Pacific Continental Securities, to which he was closely linked, as a ”boiler room” operation whose share dealers engaged in cold calling unsuspecting retail investors to sell overpriced and worthless company floats.

AMI, famous for its ubiquitous billboards and radio advertisements promoting ”longer lasting sex”, has for years been the subject of a barrage of complaints for unethical medical practices and predatory tactics where callers are pressured to sign up for premature sexual dysfunction treatments costing thousands of dollars when the same medication could be obtained for a fraction of the cost through a family GP.


Michael West

Michael West

Michael West established to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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