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The former CEO of investment vehicle Benjamin Hornigold (ASX: BHD), Stuart McAuliffe, and former CFO Samuel Elderfield could be facing five years’ imprisonment after being charged with dishonestly breaching directors' duties and misleading the ASX.
Arising from Australian Securities and Investments Commission (ASIC) allegations, the criminal charges were read out in the Brisbane Magistrates Court last week.
According to the watchdog, former CEO McAuliffe - a former Bond University academic - did not appear in court when his name was called to be charged with the alleged offences.
ASIC alleged that the two failed to act in the best interests of the company - named after a notorious 18th century pirate - regarding payments between 26 June and 29 June 2019 totalling $3.8 million to one of its investment managers John Bridgeman Limited.
It was also alleged that McAuliffe caused misleading information to be provided to the Australian Securities Exchange in August 2018 about the payments, in contravention of the Corporations Act.
According to the Australian Financial Review, Commonwealth Director of Public Prosecutions Sam Hill told the Brisbane Magistrates Court the $3.8 million payment to John Bridgeman - once a National Stock Exchange-listed investment management company that was also named after a pirate - was described as ‘performance fees’ by Benjamin Hornigold.
“Those fees were ordinarily payable due to an increase in net tangible assets,” Hill said.
“The payments were, the Crown alleges, not made in good faith in the best interests of the company, and in causing those payments to be made the defendant was intentionally dishonest.”
At the time of the alleged offending, the maximum penalty for dishonest breaches of directors’ and officers’ duties, and for knowingly providing or permitting the provision of misleading information to the operator of a financial market, was five years’ imprisonment.
One month after the allegedly ‘dishonest’ payments were made, Benjamin Hornigold was suspended from trading.
In September 2018 a takeover of Bejamin Hornigold by John Bridgeman - the fund manager’s second attempt at a coup - was shut down by the Takeovers Panel. At the time, the Panel cited a lack of competitiveness of the suitor’s offer.
Shortly after, the company that held the majority of BHD’s assets - JB Financial Group - fell into receivership with millions owed to the investment firm.
By June 2019, the board of Benjamin Hornigold resigned, including McAuliffe, and a new board was appointed leading to the resumption of trade for BHD shares in June 2020.
BHD is yet to comment on the charges faced by its former top brass.
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