Melbourne property developer allegedly spent $6.8m on personal expenses, celebrity appearances

A Melbourne property developer allegedly spent $6.8m of investor money on personal expenses including appearances by celebrity sport stars, the corporate watchdog has claimed.

Director Paul Chiodo from Melbourne-based property developer Chiodo Constructions

A Melbourne property developer allegedly spent $6.8m worth of investor money on personal expenses and hundreds of thousands on celebrity boxer appearances, the corporate watchdog has claimed.

The allegations about Paul Chiodo were revealed in the Federal Court on Tuesday, amid an Australian Securities & Investments Commission investigation into Keystone Asset Management and its Shield Master Fund. Barrister Michael Rush KC, acting for ASIC, revealed the watchdog’s “grave” concerns for money invested in the fund as he urged Federal Court judge Mark Moshinsky to immediately appoint receivers to Keystone.

Mr Rush said independent Deloitte managers Jason Tracy and Lucica Palaghia had produced a report that showed $6.8m worth of investor funds had allegedly been paid to Mr Chiodo as “personal expenses” relating to travel, security and family expenses. He said $302,000 was allegedly used to pay for an appearance by celebrity boxer Floyd Mayweather and $110,000 was allegedly paid to Tyson Fury Corporate Events.

Director Paul Chiodo from Melbourne-based property developer Chiodo Constructions

Mr Rush said at least $100,000 was allegedly spent on Elite Classic Basketball, in the name of Josh Giddy – an Australian basketball player who made it in the US professional league.

Justice Moshinsky ultimately indicated he would appoint receivers to the fund and rejected Keystone’s request for a two-week delay to allow it an opportunity to appoint a responsible entity to manage the fund’s affairs instead.

Earlier, the court heard Mr Chiodo was concerned a number of his luxury property development projects in Port Douglas, Fraser Island, Venice, Fiji and elsewhere could be in jeopardy if Keystone entered receivership.

However, Mr Rush said most were already about to fall through, and it would be up to the receivers to decide if it was appropriate to continue the projects. “(The) project in Port Douglas is in a complete holding pattern. Development approval was given for a four star resort, (but) Chiodo … wants to proceed with five stars but doesn’t have approval,” Mr Rush said.

“Then there is a project in Fiji. They were expecting tenders to be delivered in July for possible construction, but we haven’t heard about any of that,” he said. “Another project on Fraser Island is in the same state of development.”  Mr Rush also told the court Mr Chiodo believed ongoing construction of property projects should continue but “in reality … many of those projects have already effectively ceased”.

“(Mr Chiodo’s) concerns about contractors walking off the job … has already occurred,” he said.

The court heard construction contractor CitiBuild was engaged to build a number of property development projects, with only verbal agreements and no tender process, but told ASIC there was “only a skeleton staff on those projects or they are not continuing”.

“ASIC moves today to appoint a receiver. It is firm in its decision,” Mr Rush said.

“The Deloitte report makes it clear that the Keystone situation is grave. (The) asset value of underlying funds and the circumstances in which moneys paid out and dissipated from that fund are deeply troubling,” he said.

Justice Moshinsky said he proposed to make orders in agreement with ASIC.

Appearing for Keystone, Stewart Maiden KC argued that his clients should be allowed to engage a responsible entity instead of a receiver because it was a “less violent” option.

“All we are asking for is another two weeks,” he said.

“(This is) a well considered … and viable proposal which would enable the ongoing operation of the managed investment scheme for the purpose of winding down in an orderly fashion without the drastic intervention of an independent insolvency practitioner.”

Asked whether ASIC had agreed to work co-operatively with Keystone on the installation of a responsible entity, Mr Maiden said: “the blunt answer is no”.