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The former CEO of an investment company that collapsed in 2008 owing $2.5 billion has been declared bankrupt by the Federal Court, following his failure to pay a pecuniary penalty order of $300,000.
Justice Kylie Downes found the court could make orders to declare Michael King bankrupt based on the unpaid pecuniary penalty, even though such debt is not one provable in bankruptcy.
The decision was made on the basis that King owes provable debts exceeding $177 million and there was no evidence to suggest he can pay them.
In addition, Justice Downs found there was a strong public interest in protecting the public, and there was nothing inappropriate in the Australian Securities and Investment Commission (ASIC) seeking bankruptcy against an insolvent debtor.
"The unchallenged evidence therefore establishes that Mr King owes debts exceeding $177 million (at least) which would be provable in the bankruptcy," Justice Downes said.
"There is nothing to suggest that Mr King is able to pay those debts. He is insolvent."
The decision relates to King’s involvement with MFS Investment Management, a formerly publicly listed company with interests in financial services, travel and leisure and childcare businesses that was based on the Gold Coast.
A renaming to Octaviar and a $236 million rescue package were not enough to save MFS from falling into voluntary administration in late 2008, spelling the end for a Gold Coast company that had amassed a fortune in financial services and tourism.
King, alongside four other directors of MFS, were found to have collectively committed 217 contraventions of the Corporations Act while they were with the company.
The Court found in 2016 the five misappropriated $147.5 million of funds held in a managed investment scheme known as the Premium Income Fund (PIF), and used the money to pay debts owed by other related entities within the MFS Group.
At the time, Justice Douglas found that legal requirements were “flagrantly ignored” and that pecuniary penalties should reflect the disregard the defendants had to their duties under the Corporations Act.
King was disqualified for 20 years and fined $300,000, and was ordered to pay $177 million to PIF and 80 per cent of ASIC’s costs.
The former CEO appealed that decision but the High Court quashed his attempt, finding he was in fact an “officer” of the subsidiary.
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