Melbourne property developer gets his passport back after name mix-up

Melbourne property developer Paul Chiodo has had a small legal victory to return his passport after an identity mix-up but a court has been told ASIC is investigating his income source.

Paul Chiodo from Melbourne-based property developer Chiodo Constructions.

The corporate regulator has been forced into an embarrassing backdown after deeming Melbourne-based prop­erty developer Paul Chiodo a flight risk based on the travel bookings of a Swiss family with the same surname.

But during a hearing that ran into Tuesday evening, it was also revealed that the Australian Securities and Investments Commission is scrutinising where Mr Chiodo got money to purchase a house in the name of his wife, amid an investigation involving Keystone Asset Management.

During an ex-parte hearing last week, ASIC obtained interim freezing orders for the Shield Master Fund to “protect investor funds while an investigation is continuing”.

The court also made orders to force Mr Chiodo to surrender his passport to ensure he remained in the country. But ASIC was on Sunday was accused of fumbling its investigation into the former Keystone Asset Management director due to a case of mistaken identity.

ASIC submitted documents that purported to show the property developer had booked flights to travel in and out of Australia between August and September.

But an investigation by The Australian found these bookings were for an unrelated Paolo Chiodo, based in Switzerland.

Following these revelations, ASIC backed down on its flight risk argument, and the travel ban was lifted by mutual consent on Tuesday morning.

Appearing for ASIC, barrister Michael Rush, KC, told the court the regulator agreed to “vacate” orders that restricted Mr Chiodo’s travel.

“ASIC has comfort in the fact of the undertaking … that Mr Chiodo will continue to make himself available during the course of the investigation,” he said.

There was no discussion about the bungle or what lead to ASIC’s change of heart, but Mr Chiodo’s barrister, Kateena O’Gorman, asked that his passport be returned after it was surrendered in line with the court’s request.

While Mr Chiodo secured a small legal win in having the travel ban scrapped, it emerged late on Tuesday that ASIC is scrutinising how he bought a property in the name of his wife.

During an argument about whether or not receivers should be appointed as ASIC sought, or if an independent arbiter of the court – Deloitte – should be, as argued by Keystone’s barrister, Michael Borsky, KC, Federal Court judge David O’Callaghan sought to clarify the case as it involved Mr Chiodo.

“Will consideration of what appear to be unauthorised transactions be part of Deloitte’s remit? The allegation … that this gentleman caused members’ funds to purchase a home in the name of his wife is alarming,” Justice O’Callaghan said.

Mr Borsky said ASIC still has a number of months to go in its investigation and was not at the point of “allegation”.

“We would urge some caution … there are not even allegations,” he said.

Ms O’Gorman sought to “correct” Justice O’Callaghan’s statement.

“As I understand it, the concern that ASIC has … in respect of the Queen’s Rd property is that those funds were withdrawn from the Chiodo Corporation accounts, not from Keystone accounts,” she said.

But in the final argument on the matter, for ASIC Dr Rush said there was a question about “where those funds ultimately originated from”.

“If you trace where they originated from and whose funds they were in the first place might have come from … (the Chiodo Corporation) but that question of substance remains,” he said.

Earlier, the court heard Keystone Asset Management and Mr Chiodo has since last Wednesday’s ex parte application supplied ASIC’s legal team with “voluminous” amounts of evidence.

The Federal Court last week granted ASIC freezing orders over property and bank accounts in Keystone’s Shield Master Fund.

ASIC earlier this year launched action against the Shield fund to stop new offers of investments in it.

The regulator claimed it issued the stop orders to protect retail investors from buying products under product disclosure statements that might be “defective”.

Among the corporate watchdog’s concerns was that the fund might not have adequately disclosed “the conflicts of interest associated with investments in funds related to Keystone or how Keystone managed those conflicts”.