Administrators McGrathNicol face big task to unravel Forum Finance

Forum Finance director Bill Papas.

Unpicking the detail around the Forum Finance operations and the money trail is a big task, and for those doing so the hard work is just beginning.

Westpac, Societe Generale and Japan’s SMBC Leasing and Finance are separately pursuing Forum Finance and founder Bill Papas in court, with total exposures of $400m.

McGrathNicol is taking over as administrator of a long list of Forum-related entities and also managing those that are already in liquidation. It will take about three weeks for a clearer picture of the situation to emerge for creditors, including the quantum of any shortfall in funds.

Some light should be shed on the complexities, intercompany loans and the way some entities were allegedly used to move money around.

Thursday brought the sale of part of the Forum Group entity to Our Kloud – which is led by Eric Constantinidis – a relative of Forum founder Bill Papas.

While the 72 staff being kept on as part of that transaction may be somewhat thankful they have employment, it’s a sale that warrants further investigation. For those that were terminated as part of the deal, it’s now a waiting game as they seek to retrieve their entitlements from a federal government safety net program.

The sale of lease arrangements and staff out of the Forum Group does show there were some legitimate commercial arrangements entered into via that entity and Papas.

But that’s not really heartening information for Westpac and its investors that now confront another potential hit to earnings, given the $294m exposure to Forum Finance across Australia and New Zealand.

The other Forum-related entity that may be sold, as McGrathNicol takes the reins as administrator, is solar and energy firm Autonomous Energy.

The company’s projects include working with Lendlease on a solar car park shading system at Sunshine Plaza Shopping Centre in Queensland, and partnering with Siemens to install solar array at the Melbourne Museum.

Autonomous Energy – which was acquired by the Iugis entity earlier this year – has the advantage of being a new addition to the Papas stable.

The company’s systems were not merged with those of the Forum Group which makes for an easier extraction.

The fraud allegations and the investigation into Papas’s affairs have a long way to play out. NSW Police have their own probe underway too.

Entangled in the list of 100 transactions that Westpac alleges were the subject of fraud and forgery are Veolia Environmental Services, pubs group ALH, Coles, Kerry Stokes’ WesTrac, local Westfield operator Scentre Group, HWL Ebsworth and Catholic Health Care.

The Federal Court documents go through the detail of the 100 transactions in question and allege Papas “forged or caused to be forged purported signatures of officers” of the aforementioned companies to fraudulently enter into lease agreements.

Because Westpac was providing finance to Forum that underpinned the leases those payments continued to be made by Papas’s group.

That meant it took some time for Westpac to work out what was really going on, via an account query by WesTrac.

Separately, Papas’s brother left the Forum and Iugis entities earlier this month and is now employed by Fishboy Seafoods, according to LinkedIn.

The forensic team at McGrathNicol is now embarking on a detailed funds tracing process across about 50 bank accounts.

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Checking in

The big bank chief executives have been pounding the pavement over the past week to let customers know they are around to help as lockdowns are extended across NSW and Victoria, and South Australia hopes it won’t be next.

Westpac boss Peter King was on morning television this week, while National Australia Bank CEO Ross McEwan spoke to ABC radio on Thursday morning.

The message is deferrals for loan repayments are back and loans are available to small businesses to get them through this period. But there will be a big hit to the economy and some companies won’t recover from this latest Covid-19 intrusion.

“We are starting to see more customers ringing in, looking for assistance. Last week, for example, it was about 10 per cent. This week the volume is up at about 40 per cent. So, the longer the lockdowns go, obviously the more people it impacts, and their financial buffers start to get hit,” McEwan said.

“We’ve had no foreclosures of a single homeowner impacted by Covid over the last, what’s been 14 months.

“Our intention is to keep homeowners in their homes as much as we possibly can and work with them.”

On the possibility of negative gross domestic product growth in the September quarter McEwan said: “We certainly look like we will be going back into negative territory but what we have seen after each of those lockdowns the opening up does bring economic activity back very, very quickly.

“We’re still seeing unemployment at a very low level.”

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Regal’s changes

Personnel changes have been afoot at Regal Funds Management. The firm and longstanding dealer Dylan Rands have parted ways.

Campbell Chambers has taken over as head of Regal’s dealing desk, while Matthew van Rooy has been promoted from operations to the dealing team. They will work alongside Suri Surianti.

Regal last month said it has received a no-action letter from the corporate regulator outlining that no enforcement action would be taken at this time. The investment firm was the subject of an Australian Securities and Investments Commission investigation.