Former MFS executives ordered to pay more than $600 million compensation following 2008 company collapse

FORMER executives connected to Gold Coast finance empire MFS have been ordered to pay more than $600 million in compensation to investors following the company’s 2008 collapse.

Former MFS boss Michael King.

THE Supreme Court today ordered former executives connected to Gold Coast finance empire MFS to pay more than $600 million in compensation to investors following the company’s 2008 collapse.

The penalties follow the court finding in May last year that Michael Christodoulou King, Craig Robert White, David Mark Anderson, Guy Hutchings and Marilyn Anne Watts had collectively committed 217 contraventions of the Corporations Act.

White, a former CEO, was today disqualified permanently from managing corporations and King — who co-founded MFS — faces a 20-year ban.

Anderson, who was MFS’ chief financial officer and company secretary was disqualified for 25 years, as was Hutchings — former CEO and director of MFS Investment Management Limited.

The breaches were committed in relation to their involvement in the misappropriation of $147.5 million of funds that had been held by the managed investment scheme known as the Premium Income Fund (PIF) on behalf of unitholders.

The misappropriated funds were used to pay debts owed by other related entities in the MFS Group, subsequently known as Octaviar. The MFS Group collapsed in 2008 owing $2.5 billion.

The listed company had grown rapidly into one of Queensland’s largest corporate giants with interests in financial services, travel and leisure and childcare before its spectacular collapse.

Corporate watchdog Australian Securities and Investments Commission launched proceedings against the former MFS company officeholders and a funds manager in 2009.

The court last year found the officers acted dishonestly in carrying out their duties in managing MFSIM, the responsible entity of the Premium Income Fund (PIF), a managed investment fund holding millions of dollars of investors’ funds.

Today, Justice James Douglas imposed penalties ranging from $90,000 to $650,000 on the individuals and ordered King, White, Anderson and Hutchings to each pay compensation ranging from $28.7 million to $205.7 million to PIF and pay the majority of ASIC’s costs.

Justice Douglas endorsed ASIC’s view that legal requirements ‘were flagrantly ignored’ and that the penalties ‘should reflect the complete disregard which these defendants had to their duties under the Corporations Act.’

“(ASIC’s) submissions were justified. The insouciant attitude of the defendants to this misuse of money intended to be used for PIF’s investors beggars belief,’ Justice Douglas said.

ASIC Commissioner John Price said the penalties reflected ‘’the seriousness with which courts view abuses by directors and senior managers of corporations who occupy positions of substantial trust in the investment community.

“To say the least, the Court’s judgment demonstrates that this trust was most seriously abused in this case.”