Westpac may throw Forum finance net wider to include other executives

Westpac is considering expanding its $294m legal fraud actions against Forum Finance and its directors, to capture other executives involved in the group.

Forum Finance director Bill Papas.

Westpac is considering expanding its $294m legal fraud actions against Forum Finance and its directors, to capture other executives involved in running and overseeing the broader group of entities, according to sources.

It is understood Westpac is conducting detailed funds tracking and tracing work and scoping out whether other Forum executives could be added as defendants to the domestic Federal Court action.

Sources said the bank was closely scrutinising the Forum entities’ bank accounts as it sought to determine whether others participated or knew about the alleged fraud, and what the funds were used for.

At the centre of the investigations are funds flowing into Forum Group Financial Services, an entity that was headed by Forum boss Bill Papas and previously by his business partner Vincenzo Tesoriero. The latter resigned from Forum Group Financial Services in April last year.

Both Mr Papas and Mr Tesoriero along with Forum Finance are defendants in the legal action brought separately by Westpac and two other global banks, relating to alleged fraudulent activity and related losses of $400m.

As foreshadowed by The Australian, Westpac provided the Australian Prudential Regulation Authority a detailed briefing on the alleged fraud, root causes and how it was responding to the matter late last month. The bank also provided a briefing to the corporate regulator at a similar time.

The alleged fraud – which includes claims of forged signatures and missing goods relating to equipment leases entered into by Forum Finance – is believed to have seen money funnelled through Forum Group Financial Services.

Westpac alleges Forum Group Financial Services “was used as the central repository from early 2019 of the funds that were defrauded from Westpac”.

“Westpac is not currently able to identify all of the amounts that Mr Papas has received but has currently identified that Mr Papas was himself paid $2.35m by FGFS,” the bank said in court filings.

“Mr Papas has received the benefit of in excess of $15m paid by Westpac pursuant to transactions 1 to 100 and paid (after intermediate payments) by FGFS.”

The bank is also separately taking legal action against Forum in New Zealand. It has also been conducting an investigation into whether any Westpac employees may have been linked to the alleged fraud, although that has not shown to be the case so far.

A Westpac spokesman declined to comment.

Mr Papas has been holed up in Greece telling the court, via his barrister, he was unable to return to Australia due to contracting Covid-19 and needing additional funds to buy a plane ticket. In one affidavit lodged with the court, Mr Papas also said he was suffering from panic attacks and anxiety.

His assets and those of Mr Tesoriero – including a vast property empire and luxury cars – have been the subject of freezing orders by the Federal Court.

Westpac’s barrister Jeremy Giles last week raised concerns, though, with Mr Papas’s affidavits, which were meant to disclose all his assets in detail.

“I don’t accept that Mr Papas has really tried, frankly, but he has sworn an affidavit and I just wanted to make clear that once we’ve had a chance to look further at it, your Honour may well hear me say that he just really hasn’t tried very hard and he had to do better,” he said.

As the court actions continue, it’s understood the Australian Securities and Investments Commission has been stepping up its probe into the fraud allegations and detailed requests for information by the regulator have been landing with those connected to the Forum case.

As regulators closely assess what happened at Westpac, a Forum creditor’s report lodged publicly with ASIC from a meeting last month revealed a lengthy list of claimants. The meeting was held by then administrator Mackay Goodwin, but McGrathNicol has since taken over the administration and liquidation of about 25 Forum entities.

Westpac Australia’s $253.7m claim tops the creditor list, closely followed by Japan’s SMBC Leasing and Finance’s $98.9m debt.

French bank Societe Generale’s claim for almost $9m is outlined against the Forum. SMBC and Societe Generale have lodged legal action against Forum and its directors and are preparing to file statement of claim documents with the court.

Commonwealth Bank also has submitted a claim for $9.7m against the Forum Group of Companies.

Judo, which holds mortgages against properties owned by Forum‘s Mr Tesoriero, has also put forward a claim for $7m.

Several smaller creditors add up north of $1m funds owing, including claims from the leasing arm of Macquarie bank.

Linney Holdings, which sits behind design company Linney, is claiming $406,000.

Technology retailer Ingram Micro is claiming $293,279 against the Forum Group of companies, followed by Macquarie Leasing for $220,524.

Iugis former head of global marketing and Forum Group chief operating officer Peter Burr is claiming $225,805 against the company.

The report reveals creditors questioned the sale of the Forum Group, a leasing entity for printers and photocopiers, to OurKloud for $434,322.25 last month.

“Richard (surname unknown) asked how the administrators ensured that the purchaser did not use funds that were subject to the alleged fraud,” the report noted.

“The chairperson advised the administrators did not have the power to investigate the source of the funds and noted that the purchaser was a separate company with a different director and shareholder.”

The Australian understands Forum was OurKloud’s biggest customer and any failure of the business would have been a significant issue for the server manager.

OurKloud, which purchased the rights to continue servicing the customers of Forum Group, but not the physical assets, is run by Eric Constantinidis.

Mr Constantinidis, a cousin of Mr Papas, also raced Audi’s with the head of Forum.

McGrathNicol is also seeking to sell solar firm Autonomous Energy out of administration, after receiving bids for the company by close of business on Friday. It was hoped details for a sale would be negotiated swiftly after that.

The remainder of the Forum entities are in liquidation.