FIVE key players involved in an investment company that collapsed in 2008 owing $2.5 billion have been ordered to repay a total of $615 million, banned from holding management positions and individually fined between $90,000 and $650,000.
The Supreme Court of Queensland found that Craig White, Michael Christodolou, David Anderson, Guy Hutchings (pictured) and Marilyn Watts had collectively committed 217 contraventions of the Corporations Act while they were with MFS Investment Management Limited.
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 in the MFS Group.
Justice Douglas said that legal requirements were "flagrantly ignored" and that the penalties should reflect the complete disregard the defendants had to their duties under the Corporations Act.
"The insouciant attitude of the defendants to this misuse of money intended to be used for PIF's investors beggars' belief," Justice Douglas says.
Craig White (former Deputy CEO) was permanently disqualified from managing corporations, ordered to pay a penalty of $650,000 and, on top, pay $205 million compensation to PIF and 60% of ASIC's costs.
David Anderson (former CFO and company secretary) was disqualified for 25 years, penalised $500,000 and ordered to pay $205 million to PIF and 70% of ASIC's cost.
Guy Hutchings (former CEO and director) was disqualified for 25 years, fined $350,000 and ordered to pay $28 million to PIF and 70% of ASIC's costs.
Michael Christodolou (former CEO and director) was disqualified for 20 years, fined $300,000 and must pay $177 million to PIF and 80% of ASIC's costs.
Marilyn Watts (former funds manager) was disqualified from managing corporations for five years, and fined $90,000 and 40% of ASIC's costs.
"'The substantial disqualifications from managing corporations and pecuniary penalties imposed by the court reflect the seriousness with which courts view abuses by directors and senior managers of corporations who occupy positions of substantial trust in the investment community - in this case their obligations to protect the assets of the PIF," says ASIC commissioner John Price.
"To say the least, the Court's judgment demonstrates that this trust was most seriously abused in this case."
MFS Ltd was a publicly listed company with interests in financial services, travel and leisure and childcare businesses that was based on the Gold Coast.
MFSIM was an unlisted public company and wholly owned subsidiary of MFS Ltd (now in liquidation). MFSIM was the responsible entity for several unlisted managed investment schemes, including the PIF.
The PIF was an unlisted managed investment scheme which offered investments to retail and wholesale investors through a product disclosure statement. A significant number of the investors in the PIF were self-managed superannuation funds.
The civil action, which was brought by the Australian Securities and Investments Commission (ASIC), concluded on 12 September 2014 after 60 days of hearing, excluding interlocutory hearings and appeals.
On 23 May 2016, the Supreme Court of Queensland found that the four former executives and the funds manager of MFSIM had acted dishonestly in their roles.
In the lead-up to the offences occurring, MFS was under pressure to repay maturing short-term debt of about $200 million. The problem was heightened by the company's failure in late 2007 to secure a deal to sell its travel and accommodation business Stella Group, which has since evolved to become Mantra Group (ASX: MTR).
ASIC had alleged that two sums totalling $147.5 million were transferred from PIF to two companies in the MFS group in late 2007. ASIC argued that these funds were taken illegitimately from PIF, a $1 billion investment vehicle that sourced funds from retail investors.
ASIC alleged that the respondents were subsequently involved in falsifying and backdating company documents as late as February 2008 to justify the transactions.
MFS, which was later rebranded as Ocatviar before finally succumbing to liquidators, collapsed in 2008 with debts of $2.5 billion.
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