Clive Palmer ‘was close to insolvency’ before election

CLIVE Palmer’s companies were on the brink of insolvency just weeks before he won political office.

The falling out.

CLIVE Palmer’s companies were on the brink of insolvency and facing an unpaid bill of $US15 million just weeks before he won political office and the balance of power in the Senate, according to court documents lodged by his accountant and friend for almost 30 years.

Bill Schoch, who audited the resources tycoon’s companies and handled his tax affairs until 2006 before being hired by Mr Palmer as a salaried executive in 2011, cites ­financial documents, corporate records and his personal knowledge in making the claims.

Mr Schoch is running a ­Supreme Court action against Mr Palmer and two of his companies, Mineralogy and Queensland Nickel, and is seeking damages after being sacked by the Palmer United Party leader in December last year and told: “Sue me.”

In an affidavit examined by The Weekend Australian in the ­Supreme Court yesterday, Mr Schoch alleges Mr Palmer avoided corporate financial collapse by accepting a $45m settlement from the tax ­office on September 9, two days after last year’s federal election. The settlement came after Mr Palmer, who has repeatedly claimed to be a multi-billionaire, allegedly wrongfully siphoned more than $12m in Chinese funds from a bank account to bankroll his party in the election. Mr Palmer has rejected Supreme Court allegations by the Chinese government-owned company Citic Pacific in a “breach of trust” case that his withdrawals — $10m in August and $2.167m in early September — were dishonest and fraudulent.

Mr Palmer, who in May last year said Mr Schoch was “an outstanding individual” of “impeccable character”, received the $45m from the tax office to settle a Federal Court case he launched in which he claimed he had paid too much capital gains tax on a $415m windfall from China for his iron-ore tenements.

Mr Schoch, who stood as the Palmer United Party candidate in the Sunshine Coast seat of Fisher, which neighbours Fairfax, the seat Mr Palmer won, was touted as a ­future federal treasurer during Mr Palmer’s bid to become prime minister under the PUP banner.

Mr Schoch said in his affidavit that, shortly before the election, Mr Palmer owed a Singapore-based company about $US15m. The sum was owing to BGP Geoexplorer Pty Ltd as it had finished a two-year contract for seismic surveying of the sea bed off Papua New Guinea, which had granted exploration rights to Mr Palmer’s company, Palmer Petroleum, controlled by Mr Palmer through his flagship company Mineralogy. A financial filing in Hong Kong by Mr Palmer’s accountants, Ernst & Young, had previously disclosed the contract for the seismic work, “estimated to cost $US35m over two years”, and other filings to Australia’s corporate regulator confirm it.

While Mr Palmer was campaigning as a billionaire, Mr Schoch claims in his legal case that the Palmer group of companies’ finances were grim. He cites audited financial accounts for Mineralogy last year showing “cash at bank” at the time was $16.19m. This was not enough to pay the $US15m that BGP demanded for its completed seismic work, having already been paid almost $US20m when Mr Palmer’s companies held more cash and were not draining funds as quickly.

Mr Schoch said “the unpaid disputed invoice for seismic at 30 June 2013 totalled about the equivalent of the available cash at bank” available to Mr Palmer’s companies. He said that if Mr Palmer had paid the amount allegedly owing, it would have left Mineralogy “without cash until receipt of the $44.9m tax settlement in September 2013”.

Mr Schoch said he asked about the $44.9m settlement received from the tax office and Mr Palmer told him: “They owed 90 (million) but for payment I settled for half.”

Mr Schoch said that Mr Palmer had quickly settled with the tax ­office for half “for the stated reason of the cashflow challenges being experienced by the Palmer group”, running near empty due to it not being paid royalties by Citic Pacific.

The financial accounts for Mineralogy for the year ending June 30, 2013, confirm that Palmer Petroleum Pty Ltd received invoices totalling $US33.2m from BGP Geoexplorer Pte Ltd and had paid $US18.3m. “Palmer Petroleum is considering legal action to recover the amount already paid,” the ­accounts say. “On this basis the amount has been provided in the financial statements at 30 June for unpaid invoice amounts.”

The Mineralogy accounts, which included a note disclosing the disputed invoice for 3D seismic surveying, were filed at a quiet time of the media cycle, last December. Four months earlier, Mr Palmer had issued a media release claiming that 3D seismic surveying of his leases, west of Port Moresby, had “identified a potential $35 billion gas region off the coast of Papua New Guinea to rival Australia’s North West Shelf”.

He claimed in the August 21, 2013 media release that Palmer Petroleum (formerly Chinalpa Pty Ltd), had “spent more than $50m on exploration of the tenements”. He said the gas could power a city the size of Brisbane for a century, adding: “It won’t make much difference to my life, but it should be good for the people of PNG.”

BGP Geoexplorer did not ­respond to questions from The Weekend Australian.

Mr Palmer responded: “When will any newspaper owned by news limited make a profit how many news Journos hate their job and Chris Mitchell (editor-in-chief of The Australian) why is the Australian insolvent as for mr schock (sic) he just not a truthful person.”