Union plea: help find Kathy Jackson trustee and missing $1.9m

The HSU pleads with Mark Dreyfus to find a trustee who vanished with $2m that was meant to be repaid to the union as money misappropriated by Kathy Jackson.

Health Services Union convicted fraudster Kathy Jackson arrives with David Rofe at the Royal Commission into Trade Union Governance and Corruption in 2014. Picture: AAP

The Health Services Union is ­appealing for urgent help from ­Attorney-General Mark Dreyfus to find a Sydney bankruptcy trustee who has disappeared overseas with almost $2m that was meant to be repaid to the union as money misappropriated by convicted fraudster Kathy Jackson.

A plea for government help came as it emerged that the HSU was at serious risk of not recovering any of the missing funds because the bankruptcy trustee responsible, Paul Leroy, has failed to maintain his professional indemnity insurance to cover malpractice claims.

The Australian reported on Monday that Mr Leroy had been referred to police and the nation’s insolvency regulator after he ­allegedly “stole” $1.9m from Ms Jackson’s bankruptcy account which he controlled as her trustee. It was also reported that he is believed to have left the country.

The Australian has learned Mr Leroy’s last known whereabouts in Australia was at a Sydney hotel, the W Darling Harbour, where he stayed in November. Mr Leroy checked out on November 25, a few days after withdrawing all of the $1.9m held in an NAB bankruptcy trust account related to Ms Jackson’s bankruptcy case that were to go to the HSU.

Mr Leroy, a former partner with insolvency firm Hall Chadwick and most recently an ­employee of Mackay Goodwin, is believed to have left Australia just days after withdrawing the funds.

Paul Leroy has been Kathy Jackson's bankruptcy trustee since 2015.

The HSU’s lawyers have taken the first steps to recover the missing money with a successful application to the Federal Court to freeze any assets owed by Mr Leroy, and to appoint two joint replacement bankruptcy trustees from SV Partners. A further application by the HSU’s lawyers to seize Mr Leroy’s passport was not successful, with the court taking into account that he is thought to be overseas already.

The Inspector-General in Bankruptcy cancelled Mr Leroy’s registration as a bankruptcy trustee on Monday for not meeting the standards of the Commonwealth Bankruptcy Act, and specifically for his failure to maintain mandatory professional indemnity insurance cover.

HSU national president Gerard Hayes told The Australian he wanted the Attorney-General’s assistance because it appeared the insolvency regulator, the Australian Financial Security Authority, had not treated recovery of the missing funds as a priority so far.

Mr Hayes said a related letter to the HSU’s lawyer from the Australian Government Solicitor also suggested it did not share the union’s sense of urgency.

As Attorney-General and the minister responsible for AFSA, Mr Hayes said he wanted assistance from Mr Dreyfus because the HSU had been “subject to insult on injury”. “It appears there are insufficient processes to protect creditors from being effectively dudded by one trustee who can use one signature to withdraw millions of dollars,” he said.

“That is not only poor governance but promotes, or could entice, a person with questionable character to be able to access easy money.”

HSU secretary Gerard Hayes. Picture: NCA NewsWire / Christian Gilles

The Australian reported on Monday that Mr Leroy withdrew $1.9m over an 18-month period from an NAB bankruptcy trustee account he controlled – instead of handing the funds to the HSU as required. The missing $1.9m originally belonged to a Sydney barrister, David Rofe, who named Ms Jackson as a beneficiary in his final will. The HSU had a legal entitlement to all of Ms Jackson’s inheritance money after he died in 2017 as part of a $2.4m debt which she had been ordered by the Federal Court to pay the union in 2015, as compensation for funds misappropriated when she was a union official.

Ms Jackson avoided paying the funds owed to the HSU because she filed for bankruptcy, with Mr Leroy appointed as her trustee, claiming to have no money at the start of the Federal Court trial to hear the HSU’s successful claim that she owed it $2.4m.

After legal delays in transferring the $1.9m Ms Jackson inheritance to the HSU, the HSU was told in December that the money was set to be handed over.

But the HSU’s lawyer, Geoff Borenstein from Slater & Gordon, received a surprise phone call a fortnight ago from AFSA’s head of enforcement, Tim Cole, informing him that Mr Leroy had withdrawn all of the $1.9m and he was believed to have left the country.

A spokesman for Mr Dreyfus said the missing funds were part of an ongoing investigation and he could not comment. Like all registered bankruptcy practitioners, Mr Leroy could only work in the industry with professional indemnity insurance. His failure to maintain that insurance puts the HSU’s prospects of recovering funds in jeopardy.