You are are finding stuff that I never found ZWU.So to gazzump you I am hoping this will catch your attention,AND it is related to the M&K versus Bendigo bank discount loan case that is due for the Statement of Discovery meet on the 22nd of Feb.It will be interesting
Thursday, 2 July 2009 Source: Australian Financial Review, Angus Grigg and Andre
The scandal surrounding failed agribusiness giant Great Southern has broadened to suggestions of insider trading against its former chief executive, John Young, as well as management misleading auditors and related-party benefits not being disclosed.
The explosive new evidence was given at a Senate inquiry in Perth by former non-executive director Jeffrey Mews, who also accused Mr Young of withholding market-sensitive information from investors and the board before selling $32.5 million worth of shares in February 2005.
Mr Mew?s most compelling testimony centred on the company?s failure to disclose losses from its 1994 forestry project, which were known to management when Mr Young sold his shares as part of a 140 million capital raising by Great Southern.
?This money was raised at a time when executive management was aware of the potential issues surrounding the 1994 project and disclosure of these facts was not made to the board or anyone,? Mr Mews said in an August 2005 letter to the board, tendered yesterday.
The evidence prompted the chairman of the inquiry, Bill Heffernan, to question whether Mr Young was an ?insider trader?.
The Senate inquiry follows an investigation by the Australian Financial Review last month that documented concerns raised by Mr Mews and former chairman Peter Patrikeos over the company?s failure to disclose losses from its 1994 timber project, which was harvested in late 2004.
Both men sought legal advice, which deemed the losses to be material and requiring disclosure, and quit the Great Southern board on July 1, 2005.
?I was losing confidence in the information I was getting from management,? Mr Mews told the inquiry yesterday.
Great Southern?s chief executive, Cameron Rhodes, who was an executive director in 2005, said last night the allegations contained in Mr Mew?s resignation letter were independently investigated by a law firm and found to be unsubstantiated and deemed not to warrant any action.
He would not reveal which law firm conducted the investigation.
Mr Young did not return calls.
The failure of Great Southern, which collapsed in May under debts of more than $800 million, is now being investigated by ASIC.
It is understood that both Mr Mews and Mr Patrikeos have conducted a section 19 interview with ASIC over the collapse of Great Southern and what was known at the time of Mr Young?s share sale and the company?s capital raising.
In response to the AFR investigation, the Australian Securities Exchange sent the company 22 questions about issues raised by the AFR. In reply, Great Southern said losses from 1994 were not material and therefore did not need to be disclosed.
The failure of Great Southern has left 48, 000 former investors exposed and put in jeopardy the $1.8 billion they pumped into its schemes over the years. Like investors in failed rival Timbercorp, which collapsed in April with debts of more than $400 million, they have little prospect of seeing their money again. The collapses have reignited the debate about the merits of the mass-marketed tax-effective agricultural schemes and there effect on neural communities, commodity prices and land values.
Many of these concerns were raised at yesterday?s Senate inquiry, but the focus was on events surrounding the board split, which began in April 2005.
Mr Mews told the senators he resigned as a non-executive director because he had ?extreme concerns? that the share sale took place at a time when news of a projected shortfall from a forestry project was kept secret from the board and the market.
Mr Mews and Mr Patrikeos revealed a series of conflicts between the board and management over the company?s governance standards, including executive remuneration, irregularities with its financial-services license and non-recourse loans given to executives.
In his three-page resignation letter, which was tabled at the inquiry, Mr Mews said he was concerned that Great Southern had misled its auditors about the likely shortfall from the 1994 forestry project. The company?s auditors ? PricewaterhouseCoopers ? raised questions about the upcoming harvest at a meeting attended by Mr Rhodes, but were told the company was not aware of any problems, according to Mr Mew?s letter.
Mr Mews said Great Southern management had known about the projected shortfall since December 2004 when it obtained advice on the issue from law firm Allens and accounting firm KPMG about structuring a new company to buy the timber and top up returns to the project investors.
Mr Mews said his ?first inkling? of the expected shortfall came in an eight-page board paper in late April, prompting him to raise concerns about the group?s continuous disclosure obligations and MR Young?s share sale.
This prompted Senator Heffernan to ask: ?Would it be fair to say you may have had some concerns about the sale of shares by Mr Young in 2005 and whether that meant a breach of the Corporations Law in disclosure??
Mr Mews replied: ?Yes?.
In his letter, Mr Mews claimed the board?s decision to top up the payment to grower investors ? which included Mr Young ? represented a related-party transaction that needed shareholder approval to proceed.
Mr Mews said he had no reason to question before April whether the 1994 forestry plantation would meet investor expectations.
?The board would get forestry reports at almost every board meeting and as far the board was concerned the forests were well managed and well maintained.? He said.
But since the AFR investigations last month, Great Southern has given differing accounts of when it first knew about losses from its 1994 forestry project.
Mr Rhodes told the AFR in a series of emails in June that ?returns? from the 1994 project were not known until harvesting was completed. ?That is the nature of forestry,? he said.
But when questioned by the ASX the company had changed its story.
It said the shortfall from the 1994 project was not material and that lower yields from the plantations were ?generally? known in the industry from as early as 2001.
?Growers in the 1994 project were, or should have been aware, of the lower than expected yields from as early as 2001,? Great Southern?s company secretary, Neil Hackett, told the ASX.
Mr Patrikeos, a former lawyer with Freehills who joined the Great Southern board in 1999 and later became non-executive chairman, said at the inquiry yesterday he too became concerned about the 1994 forestry project after reading the April board paper. But he said he had attempted to act in the best interests of the company.
?This was an extremely stressful time because as chairman I was in the front line of confrontation with management on matters such as executive remuneration and this issue.? he said.
GTP Price at posting:
0.0¢ Sentiment: Sell Disclosure: Held
