Article from our ABC.net.au

Before Richard Ludwig's company went bust, he and his pre-insolvency advisers smuggled more than $740,000 out of the business

The article goes to a major plank of criminology to the effect that it is not necessarily the extent of the punishment that is a deterrent but the prospects of getting caught.

The enabling liquidators have created an environment that fosters a perception that their deeds shall not be uncovered.
It's the same as having a police force with some corrupt officers. The many do their job however, a small number enable criminals to carry out large scale crime. Think back to the pre Fitzgerald days.

Up until now we have had the perception that ARITA and ASIC are useless but perhaps part of the problem is that they do not have the evidence because it has been ignored by those that enable. For example, liquidators who bleat that there is no money for an investigation and unless creditors want to throw good money after bad and pay for the investigation, then they simply put the company to bed and the fraudsters have won again.

It might also be that the fraud is well hidden, emails deleted and no trail left.
While there is much we need to discuss about future reform, that will take a long time.
One needs to consider our recent experience when Les Williams from The Subcontractors Alliance asked ASIC what it was doing about the crimes of Walton, only to find out that no such crimes have been reported to ASIC by the liquidator.

We know ASIC has acted and we know is ARITA is supportive of this.

This really underlined that these things are planned for a while so the faster subbies bring things to and end with QBCC Monies Owed Complaints and other things, the faster you can protect your position.

Remember the famous line recently quoted to me by one of our friends at whojungle.com while he was making another valid point, "I come to bury Caesar, not to honour him".

ASIC admitted the pre insolvency industry is unregulated. Regulate them and do it urgently.

When you see this on a pre insolvency website;
"A liquidator or trustee in bankruptcy has a legal obligation to represent creditors, whilst our sole objective is achieving the best possible solution for the business owner - you."

Does that mean pre insolvency advisors have no legal obligation? It's clear, the main aim is to defeat creditors.

We are not here "honour" ASIC and ARITA but we can change our mind if they do their job.

7.30 / By Michael Atkin Posted 18h ago

18 hours ago

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A Gold Coast businessman is in custody awaiting sentencing after he followed a plan to illegally strip his telecom company of money and assets before it went bust.

Key points:

• With the advice of two pre-insolvency advisers, Richard Ludwig arranged to illegally smuggle more than $740,000 out of his company Cap Coast Telecoms before it went into liquidation
• The two advisers, Stephen O'Neill and John Narramore, have received prison sentences while Ludwig is awaiting sentencing
• ASIC has admitted the pre-insolvency industry is largely unregulated

Richard Ludwig owned six Leading Edge Telecoms stores, which sold phone and internet products as a Telstra dealer, across Central Queensland.

They suddenly closed weeks after Christmas in early 2015.

On the surface, it appeared to be another business going to the wall after failing to pay its mounting bills, and the collapse left dozens of staff without jobs and millions of dollars owed to creditors.

But the ABC's 7.30 program can reveal the reality was very different, because the collapse had been planned for months to avoid paying creditors, based on illegal advice from two pre-insolvency advisers.

Richard Ludwig has pleaded guilty to 11 charges in the Brisbane District Court, including dealing with the proceeds of crime and breaching his director's duties by dishonestly using his position.

7.30 has exclusively obtained emails between Ludwig and his advisers which set out the secret plan.

Insolvency lawyer Michael Hayter has read the emails.

"The scheme itself was very blatant," Mr Hayter told 7.30.

"It involved the pre-insolvency advisers issuing fictitious invoices of hundreds of thousands of dollars just before the liquidation of the company.

"The monies were then paid to the pre-insolvency advisers' companies and then found their way out the back door for the benefit of the director."

The proposal 

In late 2014, months before his company Cap Coast Telecoms went into liquidation, Richard Ludwig was in contact with SME's R Us, a company then offering what's known as pre-insolvency advice.

SME's R Us was headed by Stephen O'Neill, a prolific adviser who was jailed in 2001 for stealing from customers of his mortgage-broking business.

The ABC has previously investigated and called into question Stephen O'Neill's role in the collapse of another business.

In Queensland, O'Neill's right-hand man was John Narramore.

On October 13, 2014, Narramore emailed Ludwig, with the subject matter labelled: "Proposal".

He went to outline a 12-point plan to help Ludwig avoid his debts and taxes and protect his assets, and said the plan would:

• "Avoid the $1.2m in debt to Leading Edge"
• "Extract and asset protect the $500,000 cash"
• "Asset protect the $450,000 proceeds of stock sales"
• "Prepare and oversee the liquidation"
• "Set up new structures for you moving forward — not directly related to you"

The plan represented savings of more than $2 million, and asset protection of property of over $1 million.

"We need to give them invoices/loans to protect the cash to come out," Narramore wrote.

In return, the advisers would be paid a fee of $220,000.

Several days later, Ludwig wrote back enthusiastically to Narramore and O'Neill:

"It's been … a huge eye opener meeting you guys and I think we are going to be able to enjoy the fruits of our labour very shortly!

"We are happy to go ahead at the 220K amount regardless if we end up falling short."

John Narramore and Stephen O'Neill arranged for fake invoices to be sent to Richard Ludwig's company Cap Coast Telecoms, resulting in payments of more than $740,000 to companies controlled by the advisers.

Money was then paid into various accounts controlled by Ludwig and his associates.

Collapse hurt former employees 

News of the illegal scheme is a shock to Kirsten Stanley, who was devastated when the Gladstone Leading Edge Telecoms store she worked in closed without warning.

Ms Stanley was in her mid-20s and says she was told she was being trained up to become a manager.

But in January 2015 she became one of dozens of workers who lost their jobs overnight.

Many received the news by text message.

"It's probably as stressful as you think it would be," she told 7.30.

"It's the things that run through your mind. You question what had happened, if you've done something wrong, and then the next thought is, 'What am I going to do for a job? For income?'"

7.30 can reveal that about a week before the stores shut, a massive product order worth more than $2 million — mainly for the latest Apple iPhone — was placed by Richard Ludwig's company with Telstra.

The order was placed using the account of another business he had an agreement with called the Leading Edge Group.

The Leading Edge Group was an authorised Telstra dealer trading as Leading Edge Telecoms, and Richard Ludwig's company Cap Coast Telecoms operated his six stores under the agreement.

Ms Stanley signed for the Gladstone deliveries, and was shocked by how many boxes turned up.

"I'd never seen an order that big in the store before, so we were a bit cautious on what to do," she said. 

"So we called head office. Basically they explained to us that it had been a mix-up and an error on Telstra's behalf, and not to open them, and that someone would be there to collect them in the next couple of days."

When Cap Coast Telecoms entered liquidation, the largest creditor was the Leading Edge Group, which was owed debts of more than $3.4 million.

Leading Edge Group declined to be interviewed but in a statement said:

"The Cap Coast matter involved fraud on LEG and cost it in excess of $2m.

"LEG no longer conducts any business in the telco sector and hence the events of the Cap Coast matter have no relevance to the current operations of LEG."

Stronger enforcement needed in pre-insolvency industry

Insolvency lawyer Michael Hayter, from the firm Swaab, said causing harm to creditors like Leading Edge Group was part of the plan discussed by Richard Ludwig and the pre-insolvency advisers.

"They were going to divest the company of its assets … take as much cash out of the company as possible," he said.

Corporate watchdog ASIC investigated the Cap Coast Telecoms collapse after being tipped off by the firm conducting the liquidation, Cor Cordis.

That led to a prosecution by the Commonwealth Director of Public Prosecutions, which has resulted in Stephen O'Neill and John Narramore receiving prison sentences of five and four and a half years respectively for dealing in the proceeds of crime.

7.30 contacted O'Neill's legal representative for comment but did not receive a response. John Narramore declined to comment.

Richard Ludwig also declined to comment ahead of his sentencing in the Brisbane District Court next month.

While the liquidator was able to recover some money in the Cap Coast Telecoms collapse, Cor Cordis told the ABC about $2.9 million remained outstanding.

The liquidation ended in December last year and the company has been deregistered.

John Winter is the head of Australia's insolvency and restructuring industry peak body, known as ARITA.

He said the case showed how serious the negative impact of pre-insolvency advisers instructing company directors on how to strip out money and assets could be. 

"This is the real crime," Mr Winter said. 

"You've got people who put their own livelihoods on the line in terms of going to work at these places, or acting as creditors keeping these businesses going, and all the time the directors and their dodgy facilitators are putting together plans to take money from these people."

Mr Winter said ASIC was to be congratulated for taking strong action in this case, but too many rogue advisers were yet to be prosecuted.

"We've had concerns about a number of these very obvious practitioners of dodgy turnaround advice. It's been a long-standing issue and it continues to grow," he said. 

"Picking off one or two low-hanging fruit isn't enough, there has to be really aggressive enforcement … particularly as we're coming out of COVID, where a lot more people are going to be susceptible to this."

ASIC declined to be interviewed, saying it would not comment on a matter still before the court.

In a statement, ASIC admitted the pre-insolvency industry was largely unregulated but maintained it would take legal action where appropriate.

"Where ASIC has evidence that pre-insolvency advisers are complicit in the illegal conduct of directors, they too can be expected to be investigated as principal offenders and charged with the same or similar crimes," the statement said. 

ASIC recommends directors who want to seek pre-insolvency advice engage an accountant, lawyer or registered liquidator, and conduct due diligence on their background.

Former worker Kirsten Stanley said the hurt caused to people in Central Queensland by the collapse was significant.

"That would have hurt a lot of people," she said. 

"You can't take people for a ride like that and not expect consequences."