J.M. Kelly director John Murphy grilled in court over $2m in loans to companies within the group

A series of loans by embattled Rockhampton construction firm J.M. Kelly in the lead up to its collapse has been likened to shovelling money into a washing machine.

FAILED building company J.M. Kelly Group operated something akin to a money “washing machine” that facilitated more than $2 million in loans to heavily-indebted related firms, a court has heard.

The Federal Court heard that the transfers in 2017 from J.M. Kelly Builders, the main operating arm of the construction group, were made to other companies within the group that had negative assets on their balance sheet of more than $10 million.

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The revelation came as J.M. Kelly director John Murphy continued to give evidence into the $50 million failure last year of the Rockhampton based company that cost 200 jobs.

Mr Murphy, under questioning from barrister Craig Wilkins who is acting for liquidator Derrick Vickers of PwC, said he could not recall the loans or why they had been made.

Mr Wilkins asked Mr Murphy whether JM Kelly operated a “sort of washing machine” in relation to the inter-company loans. “Money seems to go into the machine and then comes out somewhere else,” Mr Wilkins said.

Mr Murphy denied the arrangement was a “washing machine.” He also denied he and his sister Elizabeth, the group’s financial controller, were the only people authorised to make the loans.

J.M. Kelly director John Murphy has been giving evidence.

“It could have been done by other people in the accounting department,” Mr Murphy said.

Mr Wilkins asked Mr Murphy how much due diligence had been done before the loans were made and whether he was aware the companies receiving the loans had negative assets on their balance sheets.

“Did you put your mind to whether creditors of J.M. Kelly Builders would be concerned about more than $2 million being transferred out of the company?” Mr Wilkins asked. Mr Murphy said he did not recall the loans being made.

Mr Murphy also was asked about his access to the company’s accounting system and whether he had deleted certain documents from the system.

Mr Murphy denied deleting any documents and said he only accessed the accounting system to make payments.

The court also heard that in the year leading up to its liquidation in October 2018, the company was arranging alternative finance from Commonwealth Bank after the end of its relationship with the NAB.

The hearing continues.