Forum Finance creditors vote for committee to rake through the ruins

A committee of inspection has been formed for Forum Finance, an entity allegedly linked to a $400m fraud, as liquidators warn directors might have breached their duties.

Forum director Bill Papas in Greece.

One of the alleged architects of the Forum business watched on as creditors voted to form a committee of inspection of the ruins of the company that allegedly bankrolled fast cars, boats and a property empire.

In a meeting on Friday, creditors voted up all resolutions put forward by liquidators McGrathNicol, which is overseeing the wind-up of companies alleged to be behind a massive fraud.

Creditors voted to form a company of inspection for Forum Finance but did not vote on Forum Group Financial Services as the entity remains in provisional liquidation.

In its summary of the alleged fraud McGrathNicol said it was clear Forum Group Financial Services had been used as a “washing machine” to hide illegitimate transactions. McGrathNicol partner Kathy Sozou said the liquidatorshad traced 110,000 transactions through various bank accounts to try to track down the missing millions.

“It does appear the fraudulent activity may date back much further, as far back as 2013,” she said.

But she noted the alleged fraudulent activity “really ramped up in scale” after July 2018.

The scandal has captured several financiers, including Westpac, Societe Generale and the Japanese Sumitomo Mitsui Banking Corporation, with debts of more than $400m claimed against the Forum Group of companies.

Ms Sozou said understanding the true quantum of the alleged fraud was complicated by incomplete and misleading company books. These included $5.8m of “office furniture” that Ms Sozou said was revealed to have never existed.

However, she said details in the clearing account for Forum Group Financial Services “to some extent” accounted for the fraud.

Ms Sozou said it was likely company directors Bill Papas and Vincenzo Tesoriero had breached their director duties.

McGrathNicol said it was likely Mr Papas and Mr Tesoriero had engaged in dishonest and deceptive conduct, did not exercise their power in good faith or for a proper purpose, and had filed incomplete or missing reports on company activities and property.

McGrathNicol partner Jason Preston said the process was moving beyond investigation into asset recovery.

“Loans and funds exiting the broader forum group from (Forum Group Financial Services) that have ended up with various individuals or as assets, we are actively pursuing the recovery of those,” he said.

Mr Papas, who is in Greece, was not announced as watching Friday’s meeting, although Mr Tesoriero was among attendees.

Forum’s auditors, Rothsay Chartered Accountants, were reported as being in attendance. Westpac is actioning a warrant for Mr Papas’s extradition, which the bank’s legal team secured from the Federal Court on Wednesday.

Justice Michael Lee ordered Mr Papas’s arrest and detention, noting despite earlier assurances he would return “there is no basis, let alone a reasonable basis, for thinking that Mr Papas is likely to return from Greece to Australia on any firm date”.

Mr Papas reportedly arrived in Greece on June 26 after missing a meeting with WesTrac.

Westpac had alleged Mr Papas had breached freezing orders on his assets, transferring $720,000 to his cousin Eric Constantinidis.

Mr Constantinidis owns and operates data storage company Our Kloud, which bought a suite of printer leases from the Forum Group after Mr Papas placed the business in administration.

Westpac has since served Mr Constantinidis with orders that he hand over the $720,000, but he returned serve saying the funds were repayment of debts incurred by Mr Papas. Mr Constantinidis said Mr Papas had run up a $1.265m debt to him on car repairs, driving lessons and legal bills.

McGrathNicol has begun selling assets linked to Mr Papas and Mr Tesoriero in a bid to claw back the alleged fraudulent funds.

This has led to the seizure of the XOXO yacht in Miami, owned by Mr Tesoriero, for sale.

The liquidators also have sold or handed back several vehicles linked to the men. However, they noted in the report “in a number of cases, these vehicles are subject to leases, have been damaged and others which are registered in either Mr Papas’s or Mr Tesoriero’s personal name”.