Monday 21 December 2015

KPMG pair clinging to fees despite ARITA ruling

KPMG partner Ian Hall
KPMG's Ian Hall and Chris Giddens have for months been resisting calls from the insolvency practitioners' representative body to resign as liquidators of Engineered Surface Preparation Pty Ltd and repay fees earned on the appointment.

The dispute between the Australian Restructuring Insolvency and Turnaround Association (ARITA) and two of its members came to light today when ARITA published details of a Professional Conduct Committee review that found that the Brisbane-based pair had not demonstrated sufficient independence.

KPMG director John Christian Giddens 
According to SiN's sources the professional conduct committee determination was made on August 18, 2015. While Hall and Giddens eventually complied with the requirement to resign they are resisting calls to repay $167,269.00 in fees.

A search of the ASIC companies database shows that the pair resigned as liquidators on November 26, 2015. 

When contacted Hall declined to comment, instead referring SiN to KPMG's media team. Giddens did not return calls or respond to email prior to publication.

KPMG later responded with the following statement: "KPMG Australia believes ARITA's allegations and 'findings' against Ian Hall and John Christian Giddens are erroneous. Full disclosure of all prior relationships with the company were made to stakeholders and no party raised any concerns about conflict of interest - perceived or otherwise. KPMG fully supports Mr Hall and Mr Giddens."

In a statement headed"Liquidators required to resign and remuneration disallowed due to conflict issues", ARITA said today:

"ARITA has reviewed the appointment of ARITA Members Mr Ian Hall and Mr John Giddens to Engineered Surface Preparation Pty Ltd (In Liquidation).

Following careful consideration of this matter by ARITA’s Professional Conduct Committee and its National Board, it has been determined that:

1. Mr Hall and Mr Giddens should immediately call a meeting of creditors or apply to the Court for a replacement practitioner to be appointed, and should only continue as the appointee if the Court so determines (or as the Court may otherwise order).

2. Subject to any determination of the Court, Mr Hall and Mr Giddens repay all remuneration drawn in this matter and not draw further remuneration.

3. Mr Hall and Mr Giddens undertake ARITA’s independence workshop by 30 June 2016."

The pair were appointed administrators of the Mackay-based business on May 26, 2014 and liquidators a month later. 

Hall is currently acting ceo of Racing Queensland, and a director of Greyhounds Australasia, Racing Australasia and Harness Racing Australasia. He and Giddens head up KPMG's restructuring team in Brisbane.

Got a SiNful tale to tell?

Friday 18 December 2015

ASIC benches Sydney liquidator

AFTER months of speculation the regulator has moved to shut down an inappropriately cosy referral relationship between Sydney liquidator Adam Farnsworth and Drummoyne-based accountant Frank Bruzzano.

In a statement released today the Australian Securities and Investments Commission (ASIC) said it had extracted an enforceable undertaking from Adam Edward Patrick Farnsworth which suspends his liquidator's registration for six months. Given Farnsworth has not accepted an appointment since April, it effectively benches the Farnsworth Shepard partner for more than a year.

The EU follows a review as part of ASIC's liquidator compliance program which found Farnsworth "had failed to adequately discharge his duties". This is ASIC speak for the conclusion that Farnsworth had overlooked or failed to notice that getting almost half his fees from one source over a two and half year period might raise doubts about his independence.

In the context of the referral relationship, ASIC said that between February 2011 and June 2013, almost half of Farnsworth's fees came from external administrations referred to him by Bruzzano & Associates or Frank Bruzzano.

Further, ASIC said that Farnsworth had failed to advise creditors of one of the administrations it reviewed that the referrer may have received a voidable transaction.

Thursday 3 December 2015

Mystery behind bankrupt's bid to be excused

Bankrupt Dolores Lavin, who has applied to have her
summons for public examination discharged on the
basis of an unspecified medical condition
ONE can only imagine what Worrell's Aaron Lucan is making of the application by self-declared bankrupt Dolores Lavin to be exempted from being examined about her financial affairs.

In the Federal Circuit Court yesterday Lavin's barrister Geoff McDonald said that a 'medico' had been identified who could provide the expert testimony upon which Lavin will rely in her application to have her summons to appear at a public examination discharged.

The court has previously heard that an initial assessment of Lavin's undisclosed medical condition had proved unsatisfactory for the purposes of the application because that doctor had been unwilling to sign the appropriate code of conduct declaration as it relates to independence. However a sufficiently independent specialist has since been identified.

At one point Judge Nicholas Manousaridis asked McDonald who was instructing him. When McDonald replied: "solicitors", the judge asked: "Who's instructing them?"

McDonald's reply, if there was one, was indistinct but outside the court he counselled against making "dangerous assumptions".

Tuesday 1 December 2015

Oswal accuses receiver of throwing colleague "under a bus"

PPB partner Simon Theobald
Barrister Martin Greenblatt
WITH judgement pending on Justice Antony Siopi's inquiry into the handling of the Burrup Fertilisers receivership, extraordinary allegations made about partners and staff of PPB at the eleventh hour by Martin Goldblatt can now be aired, alongside PPB's rebuttals.

One of the main planks of plaintiff Pankaj Oswal's pursuit of breach of duty findings against Ian Carson, David McEvoy and Simon Theobald rests on the allegation that work-in-progress (WIP) reports were altered to make work that the receivers couldn't charge for into fee-applicable activity for which payment would be authorised. It should be noted that all three reject Oswal's allegations, which their counsel argued were not only wrong but inadmissible.

That said, there's no doubt that WIP reports were altered and payment for professional fees that should not have been charged was picked up by the entities in receivership, which included Burrup Fertilisers Pty Ltd.

Both Theobald and McEvoy conceded as much in their cross-examinations, confirming that the alterations should not have occurred. Further, PPB has undertaken to conduct an audit and repay those sums that don't withstand scrutiny. But in his final oral submissions on October 13, Oswal's barrister Martin Goldblatt used this seeming chink in the receivers' armour to launch a scathing attack on the integrity of the defendants.

Referring Justice Siopis to previous exchanges in cross-examination between Goldblatt and key witness Theobald, PPB's managing partner in Perth and the lead receiver on the Burrup Fertilisers appointment, Goldblatt accused Theobald of sacrificing his colleague, Melbourne-based director Ben Verney, to save himself.

Goldblatt to Theobald: "Here we have very precise descriptions in the work report which have been changed to generalise an enlightening description. By what process from your knowledge – by what process would that have happened during the course of review and preparation of the invoice?

Theobald to Goldblatt: "During the course of review of preparation of the invoice."

Goldblatt to Siopis: "So he (Theobald) was asked:

"So someone would have looked at it and decided it had to be changed?


"Do you know who that was?

"I understand it was Ben Verney."

Goldblatt to Siopis: "So they so to speak, your Honour, Theobald throws Mr Verney under the bus and he’s not called to defend his position."

It's tough stuff. Goldblatt suggests to the judge that Verney didn't appear to explain what he might've known about the altered WIPs because it wouldn't have assisted PPB's cause. But this overlooks the fact that Goldblatt only raised the allegation that the alterations might constitute fraudulent conduct during his final submissions.

The allegation of fraudulent altering of WIP reports was never put directly to the receivers, which, if Oswal believes is what occurred and is provable, represents a missed opportunity.

Goldblatt however argued that the exchange between himself and Theobald - and others like it - were sufficient for Justice Siopis to form adverse inferences around what the three receivers - and particularly Theobald - knew about the altered reports.

Theobald testified he had no idea about it, a fact PPB's counsel, Matt Connock QC was quick to bring to Justice Siopis's attention as he argued that Theobald was a witness of exemplary character and the inferences sought by the plaintiff were not to be found from the evidence.

"..... your Honour is there to deal with the evidence that is before your Honour, and the best evidence that your Honour had from Mr Theobald, who in our submission is a most reliable and open and honest witness, who said - “I wasn’t aware of it. And it shouldn’t have happened, but I wasn’t aware of it.” - And there is no reason .... that that, in our submission, should be doubted."

The difficulty PPB has in dispelling Goldblatt's more incendiary claims is that even the receivers agree that some of the alterations were not warranted.

The firm has also been disinclined to sling mud back at the Indian ammonia mogul, who is already tarred with accusations around improper payments and unpaid tax.

Presently residing in Dubai, Oswal and wife Radhika are waging legal battles involving PPB, ANZ, gas supplier Apache, Norwegian fertiliser giant Yara and the Australian Tax Office (ATO), all bankrolled via a litigation funding agreement entered into with Mercury Services Limited, a company whose sole shareholder Raghav Gupta, is Oswal's brother-in-law.

The inquiry into PPB's conduct is just one of multiple complex proceedings being pursued by the couple, who are also appealing a Federal Court decision which ruled they owe the ATO hundreds of millions in capital gains tax.

Justice Siopis meanwhile is likely to deliver his judgement on the receivers' conduct early in the new year, meaning the receivers will have to sweat through the Christmas period before learning if Goldblatt's shock tactics bore fruit for their foe.

Further reading: