Category: Stockmarket / Fraud and Corporate Crime / Corporate Governance / Consumer Finance

Rosewalls to take the stand during BBY liquidators hearing

Monday, 12 Sep 2016 09:49:03 | Elysse Morgan

The high-profile directors of collapsed stockbroker BBY, Ken Rosewall and his son Glenn, will take the stand during the course of a much anticipated liquidators hearing which begins today in Sydney.

Approximately 6,000 clients are owed about $61 million from BBY, which collapsed in May 2015 amid claims of insolvent trading, misuse of client monies and "gross shortcomings in corporate governance" according to liquidator Stephen Vaughan of KPMG.

Of the $61 million that has been calculated as being owed to clients, KPMG have found a there is a $23 million shortfall in available funds, and the court case will attempt to establish a case to recover the shortfall from other sources.

Ken Rosewall, the former tennis great and a director of the firm, will be one of around 10 witnesses called to give evidence.

His son, BBY's former executive chairman Glenn Rosewall, will also be called on, as will former chief executive Arun Maharaj and former director David Perkins.

It is unlikely to be a pleasant time on the stand for any of them, with KPMG concluding in its report that a large part of the responsibility for the demise of BBY, then Australia's largest private stockbroker, lands at the feet of the directors.

"We consider that the underlying contributors to the demise of the BBY business, within control of the directors, were its poor management at a senior executive level, a lack of financial discipline, deficient internal controls and gross shortcomings in corporate governance."

Also expected to take the stand is Glenn Rosewall's close advisor and psychic Nevine Rottinger.

Her website states her career to date "has embraced the sciences, business, vibrational healing, radio psychic and teacher for spirit."

Former BBY employees report that Ms Rottinger worked closely with Glenn Rosewall, advising him on business practices and the ABC witnessed her by his side at the first creditors meeting in Sydney in May 2015.

BBY may have traded insolvent for up to four years

Clients, some many millions of dollars out of pocket, have voiced frustration at the time taken to get this far.

But Stephen Vaughn has told the ABC's The Business that the liquidation has been one of the most complex since the collapse of Lehman Brothers and MG Global during the global financial crisis.

"It has included the examination of around 10 terabytes of company data, 155,000 bank transactions about 16 million emails and about 30 subpoenaed documents," he said.

An annual report released last week alleged that BBY was trading insolvent from "as early as 2011", four years before its eventual collapse, something that Stephen Vaughn has brought to the attention of the corporate regulator ASIC.

"As liquidators we have statutory obligations to report to ASIC any potential breaches of the [Corporations] Act or other legislation, we've provided a number of reports to ASIC in compliance with our obligations and we're continuing to liaise closely with ASIC throughout the investigation," Mr Vaughn added.

The maximum penalty for insolvent trading can be a fine of up to $220,000 or imprisonment for up to five years, or both, the regulator can also seek orders to make directors personally liable for company debts.

'Disastrous' business decisions blamed for collapse

In the annual report, KPMG detailed what it believes were the poor business decisions that led to the collapse of what was then Australia's largest independent stockbroker.

The company was rapidly expanding from a stockbroker to a full service financial firm, but ran out of cash following a "disastrous" decision to invest $25 million in under-subscribed convertible notes in struggling South African coal explorer Firestone Energy.

"This non-core transaction overshadowed the viability of the BBY business until its collapse in 2015," wrote Stephen Vaughn.

That left BBY with insufficient cash to continue its expansion, including the acquisition of financial services firm Stonebridge and its decision to become an ASX self-clearing participant in mid-2011.

It was then that KPMG liquidators identify the first of many transactions with client funds that they say were "outside of the ordinary course of business."

The court case is expected to last two weeks.

KPMG expects that the earliest that clients will see any money returned will be mid to late-2017.



 

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