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Receiver takes aim at Banksia Securities directors, auditors

Tony McGrath told Banksia Securities Limited debenture holders improper valuing and the Global Financial Crisis were keys to its collapse in October

TRENT HORNEMAN December 17, 2012 4:55am

Receiver Tony McGrath, a partner in McGrath Nicol, addresses the media at a press conference after an information session for Banksia Securities debenture holders.


Receivers in charge of managing Banksia Securities Limited have placed the blame at its directors and auditors responsible for reviewing its books.

Tony McGrath, a partner of McGrathNicol, told about 600 debenture holders at a meeting in Kyabram on Friday that Banksia Securities did not have enough provisions to cover its loans.

He said improper valuing of its assets and the lingering impact of the Global Financial Crisis were also key factors behind the collapse.

Banksia Securities went into receivership on October 25, with about $650million invested.

Mr McGrath told investors he was confident investors would receive at least half of their money back.

‘‘I am confident with bottom end return of 50 cents in the dollar, ultimately my view is that 65 cents is most likely the top end of the outcome,’’ he said.

‘‘It is early days, we wanted to put a projection out there. It is much better to do that than not. To be able to do that within seven weeks is something we are pleased with.’’

Mr McGrath said investors should receive 75 per cent of their returns by September, but warned it could take up to three years for the receival process to completely wind up.

He expected the Australian Securities and Investments Commission would investigate the collapse and hinted at legal action against Banksia’s directors and auditors.

Mr McGrath said there were many factors to consider before launching legal proceedings.

‘‘In a receivership the size and complexity of Banksia, determining who is at fault and whether or not you can sue is a checklist item ... form a view as to whether or not there is a claim you can bring, and then test that with a cost benefit analysis,’’ he said.

Mr McGrath told investors that suing directors and auditors would depend on their insurance coverage and ability to meet claims.

‘‘We all need to be better informed before making the decision, we’ve mentioned we need to complete our investigation. The key targetsthe directors and the auditorswe need to understand their capacity to meet any claims that we might ultimately bring.

‘‘That might come down to the extent of insurance.

‘‘It will take a bit of time. The risks are high in litigation, it takes longer than you want it to take and there are some strange steps on the journey.’’

Mr McGrath also answered questions from debenture holders, with much of the criticism focussed on the role of directors in the collapse and the amount of money McGrathNicol has charged Banksia trustees.

Mr McGrath said his company had already racked up a bill of $1.3million, excluding GST, in seven weeks and expected the total bill would be a further $4million to $5million.

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