Clive Palmer had ‘significant influence’ over QN: Ernst & Young

Clive Palmer exerted ‘significant influence’ over Queensland ­Nickel, a ­secret report by Ernst & Young has ­revealed.

Former Queensland Nickel chief financial officer Daren Wolfe in Brisbane.

Clive Palmer exerted “significant influence” over Queensland ­Nickel and its management, a ­secret report by the company’s auditor, Ernst & Young, claims.

A Federal Court examination of the QN corporate collapse also heard a key lieutenant warned Mr Palmer that the company was bleeding cash and couldn’t pay debts in September last year, but the risk of insolvent ­trading was not discussed until December or January.

Former QN chief financial officer Daren Wolfe testified that even though QN was “entitled” to ask its Palmer-controlled parent companies for funds to cover $15 million in redundancy entitlements when 237 workers were sacked in January, it inexplicably “failed to do so”.

Mr Wolfe told the court that ­although he held the position of CFO, he was not told about millions of dollars in loans from QN to other companies in the Palmer empire — loans that were ultimately forgiven — until months, or even years, later.

The court heard QN engaged EY to audit its 2015 ­financial year accounts in the second half of last year. An internal document prepared by EY recorded that Mr Palmer exerted “significant influence” over QN and its management, despite not being the chief executive. Mr Palmer was not registered as a director with the corporate watchdog at the time, and denies allegations he acted as a shadow director.

Asked by Tom Sullivan QC for liquidators PPB Advisory whether he agreed with EY’s assessment, Mr Wolfe said “Yes”.

The EY document revealed Mr Palmer was required to inject cash into QN as early as the 2014 financial year but the money was paid back. It warned he might have to do the same in 2015 if the nickel price continued to dive. While Mr Palmer chipped in about $2.5m to pay for employee expenses in December, the court heard he rejected approaches from administrators FTI Consulting for a cash injection in March to keep the refinery afloat.

QN — whose sole registered director was Mr Palmer’s nephew Clive Mensink — also did not lodge a “cash call” notice with its joint venture parent companies QNI Metals and QNI Resources for funding, even though it was ­entitled to do so.

As a result, more than $65m in employee redundancy entitlements were paid by taxpayers.

In September last year, Mr Wolfe said he travelled to Brisbane or the Gold Coast from Townsville to meet Mr Palmer and present the latest cashflow data from QN. Mr Sullivan asked: “Did you discuss with Mr Palmer at that time that there were creditors due and owing that could not be paid with the current cash reserves?”

Mr Wolfe: “Privilege. Yes.”

Even though the company’s ­internal data was forecasting cash deficits between last October and April, and rail freight company Aurizon was owed $6m, and the company continued to operate, Mr Wolfe said he did not discuss insolvent trading with Mr Palmer or Mr Mensink at that stage. Mr Sullivan: “Did they ever discuss in your presence insolvent trading?”

Mr Wolfe: “I think that ­occurred … that topic was discussed in either late December or January.”

Mr Palmer is likely to be called to give evidence this week.

Mr Wolfe said Mr Mensink was “somewhere in ­Europe”.