Big bank allegedly propped up failing builder

A FRAUD complaint has alleged that one of Australia’s top four banks exposed 600 small businesses to $30 million in losses to allow it to recover the millions it was owed by a Queensland builder despite knowing the company was in trouble.

NAB allegedly tried to cover up the failings of Walton Construction Queensland. Picture: File image/Thinkstock

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A JOINT fraud complaint to Queensland Police has alleged that one of Australia’s top four banks exposed 600 small businesses to $30 million in losses to allow it to recover more than $18 million it was owed by a failing builder.

The complaint by two Sunshine Coast small business men, which is supported by NAB and Walton Construction Queensland records, alleged the bank not only knew by at least mid-2012 the company was in trouble but actively engaged in propping it up so it could recover its money, the Sunshine Coast Daily reports.

It described the bank’s motive as being that the Walton Group (including WCQ) was insolvent; NAB’s wish to exit their relationship with the Walton Construction Group and recover a $22.5million debt; Walton Construction (Qld) was insolvent and therefore unable to service the $22.5 million NAB debt; the recovery of a bank guarantee issued to WCQ securing the Coles Nambour project and that the bank guarantee was not registered on the Personal Property Securities Register hindering options for NAB to make a conventional recovery.

The complaint alleged the shared intent of WCQ, NAB and the Mawson Group was to engage in a scheme of deception to allow WCQ to continue to dishonestly trade insolvent.

The ultimate purpose was alleged to “induce subcontractors to continue to supply goods and services to WCQ when the company should have been placed into liquidation because it was insolvent; induce subcontractors to continue to supply goods and services to generate funds for WCQ to pay down its debt to NAB, funds that otherwise would not have been available; divert those funds to pay down the $22.5million debt owed to NAB; escalate work on the Coles Nambour project to recover the bank guarantee securing completion; appoint a complicit Administrator/Liquidator and to appoint the external administrator after the recovery of the NAB bank guarantee in order to extinguish WCQ’s debt and avoid payment to the subcontractors”.

The alleged scheme was claimed to have started early on May 6, 2013, being the day Mawson received its second letter of appointment as business advisor.

By that stage NAB had commissioned a report by Deloittes which underlined the extent of the builder’s difficulties.

That view was subsequently supported by the first liquidator appointed after Walton went into receivership in early October, 2013. It found the company to have traded while insolvent since mid 2012.

Deloitte in March, 2013, reported the company was relying on subcontractor retentions for cashflow.

In correspondence it expressed the opinion “the status quo was not a viable option”.

“The business is reliant on new projects to maintain the cash flows, but without access to security, it has no way of securing these projects. Accordingly the relatively stable cash position is unsustainable beyond the immediate term. Subject to obtaining legal advice on the existing security structure the NAB’s options are somewhat hindered as a consequence of the inability to enforce its security and drive an outcome by exercising control,” it advised the bank.

In a further report dated May 17, 2013, Deloitte stated: “a formal appointment at this stage is still not ideal given the ‘green’ nature of the Qld charge. In our view doing nothing is a high risk strategy for the NAB as it is likely that the Group will be unable to continue trading in the immediate term without interim financial support. If short term interim funding is not provided, the group will run out of cash next week. The customer understands that there is no change to the overall strategy and the NAB is still seeking to exit the relationship by 31 August 2013”.

Then on October 10, 2013, after WCQ went into administration and in what the complainants alleged was a post-date report, Deloitte advised NAB that “as the transactions (release of $1.3m to pay Mawson for the Peloton phoenix) involve the transfer of funds from trading accounts they must be executed before any formal insolvency appointments are made, and bank accounts subsequently controlled by VA (voluntary administration). NAB’s charge in relation to Walton Qld remains green. Mawson estimated that unsecured creditors will be in the region of 15-20m”.

Nambour landscaper Earthscapes, owned by Beau Hartshorn, explained in the complaint the degree to which his young family was and continues to be impacted.

Fellow complainant Williams and Kersten, trading as WK Civil, lost $800,000.

They have supplied police with a timeline of the WCQ collapse, and documents they allege support allegations of collusion, planning and intent to trade WCQ while insolvent and to divert subcontract funds to run down NAB’s debt.

The complaint further states NAB provided knowing assistance to, and received the proceeds of, fraud.

Beau Hartshorn and Les Williams have been impacted heavily by the Walton collapse and have laid a formal complaint with the QPS implicating the NAB. Picture: John McCutcheon

Both complainants had been engaged by WCQ on the Nambour Coles project completed just two weeks prior to it going into receivership.

Owed more than $500,000 for work and materials for which he was never going to be paid, Mr Hartshorn was ultimately forced to sell his home, close his business, and move his family in with his parents.

In the complaint Mr Hartshorn starkly laid bare the impact on his family and who he held responsible.

The complaint included in support of the allegations bank and Walton documents dating back to May 6, 2012.

“Earthscapes Consulting P/L was forced into liquidation as a result of fraud,” his complaint has alleged.

“This has resulted in a most dramatic impact on me and my family - financially, physically and mentally.

“We were forced to sell our house and contents, our vehicles, our machinery and tools, our children’s beloved horses and my family were left with only the clothes on our backs. I was forced to move my family into my parents’ home where we still struggle to exist to this day.

“We have inherited a bad credit rating due to the activity of Walton Construction (Qld), Mawson Group and NAB which prevents me from establishing another business and obtaining credit to purchase the necessities needed to support my family.

“The stress inflicted on me and my family is immeasurable. My wife and I still to this day suffer anxiety as a result of losing everything. This has changed the course of our lives and our children’s lives.

“We struggle to understand how this can occur without penalty.”

The Sunshine Coast Daily has reported expansively on the Walton collapse since October 2013.

Those investigations uncovered substantial Walton company records including financial statements, emails and communications between the company, Mawsons and NAB. These documents, which were supplied to the liquidator, included a copy of the Deloitte Report the bank shared with Walton.

There were also substantial financial reports on projects under way, an email from a bank employee recommending Mawson to Walton, bank statements and records, emails between Walton and its own accountant and between Mawson and Walton among three million separate files.

The Queensland Government has expended more than $1 million in support of the liquidation process including a public examination in the Federal Court in Melbourne, a Senate Inquiry into construction industry insolvency and helped change security of payment legislation in this state.

But to date no one has been charged, none of the subcontract businesses compensated.