great southern director tells of mistrust

RACHEL DONKIN, The West Australian May 6, 2011, 7:54 am



A former Great Southern director has delivered a damning assessment of company co-founder John Young during a public examination into the managed investment scheme spruiker's multi-billion-dollar collapse.

Alice McCleary, a chartered accountant and former deputy chancellor of the University of South Australia who served on the Great Southern board from 2003 through to its 2009 failure, told the examination in the Federal Court in Perth that Mr Young was one of the likely masterminds of a plan to secretly top up losses from the company's first forestry project.

She described her "bitterest" disappointment and the animosity shared by her non-executive colleagues towards Mr Young and executives Cameron Rhodes and Phillip Butlin on learning of the losses from the 1994 project and the plan to top up investor returns in April 2005.

The April revelations came despite the executive team's prior knowledge of the losses, which were allegedly hidden while the company conducted a major capital raising in February that year.

Under examination by Lee Christensen, counsel for Great Southern's receiver Ferrier Hodgson, Ms McCleary described how she "didn't trust" the executive team after the incident, particularly in light of positive information presented about the project's returns at an investor day a month earlier.

Ms McCleary's evidence mirrored that of her former board colleague Jeffrey Mews, who resigned at the height of the boardroom brawl in June 2005 after seeking legal advice about the implications of the company's failure to disclose the 1994 losses to investors.

However, Ms McCleary and Mr Mews acknowledged they were aware that Great Southern bought woodlots in its own right from time to time as a "buffer" in case they might be needed to supplement scheme returns.

The damning testimony is likely to make for an explosive hearing today, when Mr Young and Mr Rhodes - who succeeded Mr Young as managing director in 2008 - are expected to give evidence.

Ferrier Hodgson appears to have hung its hopes of finding new avenues of recovery for creditors through further investigation of the 2005 disclosure issues. The harvest shortfall was finally disclosed in Great Southern's annual report in August 2005.