Clive Palmer faces Federal Court grilling over QN collapse
QN inked a $250m deal to buy shares from Clive Palmer’s China First company days before voluntary administration.
Clive Palmer’s Queensland Nickel inked a $250m deal to buy shares from the resources tycoon’s China First mining company five days before it was plunged into voluntary administration.
Former QN chief financial officer Daren Wolfe this afternoon told the Federal Court that at that stage he believed it was “inevitable” the company would appoint administrators.
Earlier, he agreed that QN was not able to pay its debts when they fell due as early as October 2015.
Despite holding the position of CFO on January 13 when the deal was done, Mr Wolfe said he didn’t know about QN’s agreement to take on the enormous liability until he was asked to be a witness to the documents being signed.
Barrister Tom Sullivan QC, for special purpose liquidator PPB Advisory, asked Mr Wolfe if that was unusual.
Mr Wolfe: “Not entirely”.
“In a world when an entrepreneur is involved, they tend to act quite quickly on things.”
QN was placed into administration on January 18, after 237 workers were made redundant from the plant on January 15.
The Australian revealed shortly afterwards that Mr Palmer’s companies China First and Waratah Coal had lodged claims to become secured creditors of QN shortly before its collapse.
The hearing has been adjourned until tomorrow when Mr Wolfe will continue giving evidence. Mr Palmer is not expected to be required until later in the week.
“Smith” alias used for years
Clive Palmer used an email address in the name “Terry Smith” to communicate with Queensland Nickel executives as early as 2009, a court has heard.
Former chief financial officer Daren Wolfe told the Federal Court that Mr Palmer used the email address frequently for correspondence relating to the Townsville nickel refinery.
The Australian revealed in January that Mr Palmer ran the refinery using the Terry Smith alias, including to approve expenditure of more than $500.
“Major adjustments” to increase value
Clive Palmer ordered “major adjustments” to Queensland Nickel’s financial statements the year before it collapsed, to increase the value of the refinery and slash its environmental liability.
Former QN chief financial officer Daren Wolfe told the Federal Court that a draft budget prepared in August 2015 contained some big changes to previous years.
Both were ordered by Mr Palmer, the ultimate shareholder of the company but not a director at the time.
Mr Wolfe said the value of the refinery asset was doubled to $1.2bn. He said the cash set aside to pay for environmental remediation of the site - said to be $320m, a figure which originated under previous owner BHP - was vastly reduced.
“His (Mr Palmer’s) view was the assets were undervalued based on their income earning potential,” Mr Wolfe said.
The court heard the refinery company suffered a “significant” operational loss of $150m in the 2015 financial year.
Mr Palmer is expected to give evidence later in the two-week public hearing.
QN “underpaid creditors”
Queensland Nickel was underpaying its creditors as early as June last year at the direction of Clive Palmer, a court has heard.
Former QN chief financial officer Daren Wolfe said by 2015, Mr Palmer had to approval all expenditure of the Townsville company over $500.
By mid-2015, Mr Wolfe confirmed some creditors including Aurizon and the Australian Tax Office were not being paid in full.
He said the strategy had been decided by Mr Palmer and the resources tycoon’s nephew Mr Mensink at a meeting in mid-June.
Earlier, Mr Wolfe said he could not recall a time when Mr Mensink - the company’s sole director - overrode the wishes of Mr Palmer, even when Mr Palmer was not a director.
On November 27 2015, Aurizon issued a “default notice” to QN.
Mr Palmer was summoned to appear to court today. He has not arrived.
Palmer had active interest in QN
Clive Palmer demanded weekly cash flow statements for Queensland Nickel be delivered to him in hard copy because he was “concerned about espionage”.
Former chief financial officer Daren Wolfe has told the Federal Court public examination into the collapse of the Townsville company that Mr Palmer had an “active interest” in the business during 2015, before it fell into voluntary administration in January.
Mr Palmer is alleged to have acted as a shadow director, a claim he denies.
Mr Wolfe told the court weekly and monthly financial documents were prepared about the health of the company.
He said Mr Palmer asked for the data in hard copy, not via email. Asked why, by Tom Sullivan QC for special purpose liquidators PPB Advisory, Mr Wolfe said: “He had concerns about espionage”.
Mr Wolfe said Mr Palmer was required to sign off on any expenditure for Queensland Nickel over $10,000 — even when he was not a director of the company.
When Mr Palmer entered politics as an MP in 2013, Mr Palmer described himself as a fulltime politician and retired from business.
When QN collapsed, Mr Palmer said he was not involved in the day-to-day running of the business.
However, the Federal Court has heard there was a practice within QN for Mr Palmer to have final say on expenditure even when he was not formally a director.
Palmer fronts court
After two failed attempts to avoid being publicly interrogated over the collapse of his Queensland Nickel company, self-proclaimed billionaire Clive Palmer must front court today over the corporate failure.
The resources tycoon, QN’s former chief financial officer Daren Wolfe, and the refinery’s former managing director of operations, Ian Ferguson, have been summoned to appear this morning in the Federal Court in Brisbane to face public examination.
In hearings scheduled to last a fortnight, the three will be quizzed about the Townsville company’s downfall, which left creditors up to $300 million out of pocket and almost 800 workers without jobs.
The federal government had to step in with $68m to cover the redundancy entitlements of Mr Palmer’s former employees.
Lawyers instructed by special- purpose liquidators PPB Advisory will lead the questioning, which will focus on whether a claim can be launched against QN’s director, Mr Palmer’s nephew Clive Mensink, and Mr Palmer as alleged shadow director, for insolvent trading.
The special-purpose liquidators have also been told to investigate QN’s historical affairs and possible claims against its parent companies, QNI Metals and QNI Resources, both ultimately controlled by Mr Palmer.
Mr Palmer denies he acted as a shadow director and both men deny any wrongdoing.
Mr Mensink is overseas and has not yet been served with a summons.
Mr Palmer could also be interrogated about his personal assets, such as property, as liquidators seek funds that might be distributed to creditors.
Under the Corporations Act, examinees are entitled to claim privilege against self-incrimination before each answer. That does not shield the witnesses from answering a question, but prevents their answers being used against them as evidence in future criminal or civil proceedings, apart from perjury. The Australian understands the strategy is used commonly by witnesses in public examinations, particularly directors or former directors of failed companies.
Mr Palmer did not respond to questions from The Australian yesterday.
The former federal MP for Fairfax, who stood down before this year’s election, twice tried and failed to avoid the public examination. Both attempts were dismissed by Federal Court judges, who said the hearings were in the public interest.