Next strikes agreement with creditors following employee fraud claims
A former senior employee of embattled Sydney builder Next is being investigated over claims he defrauded the company before it fell into administration.
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A former senior employee of embattled Sydney builder Next is being investigated over allegations he defrauded the company out of close to $500,000 before administrators were called in to investigate the company’s financial malaise.
The company’s former operations director Dane Ryan is accused of colluding with subcontractors and falsifying invoices that charged the company for building work that was never undertaken.
Details of the claims have emerged in a report to creditors prepared by administrator Sule Arnautovic from Hall Chadwick.
In it he explains how Mr Ryan is alleged to have approved 26 false invoices between January 2020 and March 2022, worth a total of $472,962.
Investigations into other potential collusion activities are ongoing, according to Mr Arnautovic’s report, including claims that some subcontractors charged Next for building work carried out at Mr Ryan’s personal residence.
Next lodged a management liability insurance claim prior to Mr Arnautovic’s appointment on April 21, seeking to recover the costs of the alleged fraud which the company blames, in part, for its financial demise.
“People might think how can $500,000 bring down a company of that size,” Mr Arnautovic said.
“But it’s not just the $500,000 claim. It’s all the run-off effects on projects – the poor workmanship, delayed work, the liquidated damages. It all adds up.”
Meanwhile creditors last week approved a deed of company arrangement (DOCA) proposal put forward by Next director Joseph Di Girolamo, who has promised to inject $1m into a deed fund via his related company Beyond Investments (Australia) Pty Ltd.
The fund, which will also include proceeds from the sale of plant and equipment and a potential insurance payout relating to the alleged employee fraud, will be used to pay unsecured creditors.
The latest estimates from administrators suggest unsecured creditor claims could reach close to $33m once formally quantified. Under the terms of the DOCA unsecured creditors are only likely to recover between 2.35c and 5c for every dollar owed. Dividends are expected to be paid by October 2023.
Once the DOCA is executed in the coming days, Mr Di Girolamo will take back control of the company he established in 2007.
At its height Next specialised in aged care, student accommodation, hotel and hospitality projects across NSW.
However the company slipped to a $2.7m loss in 2020-21, as revenue dived from $79m in 2019 to just $53.1m.
Administrators suggest the company may have been trading insolvent since last financial year.
Through his related company Next NSW Pty Ltd, and after taking back control of the wider Next group, Mr Di Girolamo is aiming to complete building work on a $35m student accommodation project in Kensington, in Sydney’s southeast, and a 100-bed aged care facility at the Uniting Edinglassie facility near Penrith.
Both projects were brought to a standstill when administrators were called in.
Next is the latest in a string of construction company collapses in recent months, including Gold Coast-based builder Condev and Melbourne-based Probuild earlier this year.
Originally published as Next strikes agreement with creditors following employee fraud claims
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