SMBC chases Humm for $33m in receivables linked to alleged Forum Finance fraud

Humm Group is being pursued for $33m by Sumitomo Mitsui Banking Corporation for allegedly failing to properly check a contract through the collapsed Forum Financial.

Bill Papas pictured at Xanthi Arena in Greece last year.

Humm Group allegedly failed to properly check a major contract brokered through the collapsed Forum Financial – and is being pursued for $33m by Sumitomo Mitsui Banking Corporation.

SMBC alleges the Forum deal, which saw it pay Humm’s Flexirent commercial lease business for four receivables contracts tied to purported Veolia deals, is invalid.

Flexirent part-financed a deal – brokered through Forum – for waste digester machines that were allegedly supplied to Veolia Environmental Services.

SMBC paid $29.6m for those four contracts, but now claims the machines to be delivered to Veolia did not exist.

The Japanese financier alleges it would have reaped $33.8m from the deals but did not after the alleged fraud was exposed and the Forum group was placed into administration.

The Federal Court action is another blow for Humm.

Last month, the proposed sale of its consumer finance business to Latitude Financial collapsed, triggering the resignation of the majority of directors including chairman Christine Christian and major investor John Wylie.

Humm has previously disclosed potential exposures linked to the Forum scandal, noting a $12m expected maximum historical exposure.

A company spokeswoman on Thursday said Humm had first disclosed a potential historical exposure in July 2021.

“The group remains of the view that its estimate of the extent of the exposure is reasonable,” she said.

“We are unable to provide further comment as the matter is subject to legal proceedings.”

SMBC’s court filings allege Flexirent failed to undertake “appropriate” client checks in connection with the contracts.

The bank also alleges the contracts it paid for, which were purportedly signed by Veolia management, were not actually signed by Veolia chief financial officer Gurpreet Brar and company secretary Julian Gaillard.

SMBC claims due to this they did not represent a binding agreement, and Flexirent misrepresented that the usage charges were payable by Veolia, when they were in fact not.

Flexirent allegedly told SMBC “there was no fraud, dishonesty, material misrepresentation or negligence on the part of Flexirent” and that it had sought “all consents required”.

“Flexirent has no reason to believe that any payments due to Flexirent under the Receivable Terms on or after the relevant Settlement Date will not be paid by the Lessee in full in accordance with the terms of the Receivable Terms,” SMBC alleges it was told.

“Flexirent made false or misleading representations in trade or commerce in connection with the supply or possible supply of services that the services were of a particular standard, quality, value or grade.”

However, these contracts were allegedly false and tied to a Forum lease scheme alleged by liquidators to have defrauded almost $500m over several years.

Westpac is currently pursuing former Forum boss Bill Papas and business partner Vincenzo Tesoriero through the courts, alleging they masterminded the loan fraud scheme that saw a trio of banks lend to fund leases that allegedly never existed.

A contract brokered with Veolia was allegedly fraudulently completed, according to court documents. An affidavit filed in the Westpac matter by Veolia finance chief Gurpreet Brar alleged his signatures on notices of assignment and payment schedules were forged.

“My handwritten name on the notice of assignment dated 8 March 2021 is also not my handwriting,” he said.

SMBC is also pursuing Mr Papas and Mr Tesoriero, alleging it is owed a further $88m by the two men due to their allegedly fraudulent activity.

The claim against FlexiGroup and its parent company Humm comes as the lender navigates internal turmoil in the wake of the failed sale of its consumer lending arm to Latitude.

Originally published as SMBC chases Humm for $33m in receivables linked to alleged Forum Finance fraud