Politicians make lousy directors – SMH 10-9-08

Excerpts from SMH article – and comments

SURPRISE, SURPRISE!

What is it about politicians and company boards and a jinx? Is it that they are drawn to second-rate companies, or do they simply make second-rate directors?

Former Queensland premier Rob Borbidge set the bar at a new level this week when a company he chairs, Asset Loan Co, lapsed into the loving embrace of voluntary administrators.

He†must be on a streak. As chairman also of foundering Cairns property group, CEC, Borbidge had presided over a record loss only 10 days before when it unveiled a 300% plunge in profits.

Another basket case he chairs, Early Learning Services, has already conceded two profit downgrades since listing on the stock market less than a year ago.

So what, you exclaim! Former Liberal leader John Hewson is chairman of Elderslie Finance Corporation which was barrelled into administration a few weeks back, owing 4000 investors $200 million. Neither was this Hewson’s debut insolvency.

And look! Bill Ireland’s mini-Challenger, Mariner Financial Group, is suspended this week amid survival talks with its financiers. Former Victorian treasurer Alan Stockdale is one of three directors.

Then there are ABC Learning directors Larry Anthony and Sally-Ann Atkinson. Didn’t they preside over hundreds of millions of taxpayer dollars flung into a scheme which is now odds-on for the corporate hospice … even restating its financial accounts while preparing to field a class action lawsuit from its shareholders?

Lest we forget, another Federal Liberal leader, Andrew Peacock, was chairman of MFS (now Octaviar) during its most prolific phase of wealth destruction. The list goes on.

Where Rob Borbidge this former premier of Queensland really made a difference to the indifferent record of politicians-turned-directors was that he did not just front up to a few board meetings, pocket some fees and partake of the fine claret.

No, Borbidge went further, actually spruiking Asset Loan’s “investment” products on commercial radio. Asset Loan has always been a two-bit bucketshop, a low-rent version of City Pacific, if you like.

It advertised to get unsophisticated retail money into its funds, claiming its “bricks and mortar” investments were good for mum and dad investors – then promptly on-lent that money for speculation in property development.

Thanks to the odd press report, Borbidge had been reminded about the colourful activities of fellow directors Paul Hare and Russell Percival quite often – both of whom had been up on perjury charges in Queensland.

Hare had formerly run foul of regulators in California and been banned from selling stocks over there. No problem operating with an ASIC licence over here, naturally.

This mob traded on the complaisance of the regulators. The blue ASX logo adorned all Asset Loan documents as though conveying the gravitas of a significant financial institution. ASIC provided the licences, although it had been warned (as it had been in the case of City Pacific too), that the blow-up was coming. Still the advertisements ran, still the dodgy accounts and claims were published.

Now there are no accounts – yet – only voluntary administrators appointed by directors. If any creditors want independent representation for the wind-up of Asset Loan Co, they should appoint their own VA within the next few days.

Slim pickings for creditors

That way they can prepare to sue Asset Loan and its directors for their losses. There are about $12 million of noteholders’ funds. There probably won’t be a lot left once secured creditors – which probably include the three directors themselves – have a pick at the carcass.

Banks have charges over some of the underlying assets. Loans are out everywhere to mates and to victims of Asset Loan’s usury, who have been known to pay 1000%. There were more side-deals here than a Saigon cock fight.

At last year’s AGM, Borbidge said he was pleased with the results for the year, which included a net profit of $6 million.

This handsome $6 million “profit” just happened to include a $6.56 million revaluation which “represents the change in fair value of an option” to acquire a stake in a property development in Queensland … booked as a profit.

In other words, the company’s entire “profit”, if you could blithely call it that, was based on a directors’ valuation of an option over a Queensland property development. Auditors: KPMG. Solicitors: Minter Ellison, Gold Coast.

Earlier last year a Queensland court found Asset Loan directors Paul Hare and Russell Percival had no case to answer on perjury charges.

The charges arose from a taped phone call with a former associate, Greg Rogers, who claimed the boys had threatened to cancel a loan (from another party) and tried to get him to transfer some land to Paul Hare’s wife.

The court found that the tapes were inadmissible – not because they were illegally made but because the telecommunications laws had been breached because Rogers had a recording device on his telephone handset.

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