Poor management, inadequate board control and a poorly implemented acquisition strategy contributed to the collapse of the Hastie Group.
According to a second creditors' report on the collapsed company by the administrator PPB Advisory, former Hastie Group directors failed in their duties.
A 10-bank syndicate owed more than $500 million is unlikely to recover all its money and unsecured creditors will get nothing, but employees have been paid entitlements thanks to a government scheme.
Former directors may be questioned in court by administrators over Hastie's financial statements, corporate governance, and the possibility it was trading insolvent.
PPB has reported its findings to the Australian Securities and Investments Commission (ASIC). The report states that there was a “general culture of ignoring bad news within the company.”
It described Hastie's audit and risk committee as “largely inactive” accusing the Hastie board of not having an “inquiring mind” until Bill Wild was appointed chief executive in 2011.
PPB's report also placed the company's auditor, Deloitte, under scrutiny claiming it breached auditing standards by failing to warn the board about control issues and management problems which eventually led to the collapse including impairments totalling $100 million in early 2012.
PPB recommended Hastie Group companies be placed into liquidation stating that lenders including the big four banks are unlikely to recover debts of about $530 million.
“We do not expect any surplus funds from the receiverships will be available for distribution to ordinary unsecured creditors,'' the administrators said.
About 7000 people were employed by the Hastie Group globally when it went into administration on May 28, 2012.
To date nearly 2000 employees have received $27.4 million from the federal government's employee entitlement program and a further 350 are expected to claim money.
Entitlements for a further 1523 employees have been preserved.
The administrator has compiled a list of concerns that have been referred to the corporate regulator.
This includes seven potential breaches of directors' duties.
Another creditors meeting will be held at the end of this month.
The PPB’s Craig Crosbie told the Australian Financial Review newspaper that “reporting from subsidiaries up to head office level was inadequate and open to manipulation. The board did not have an inquiring mind as to reliability of financial statements and overall reporting.”
The administrator's recommendation to investigate former directors of the Hastie Group could lead to hefty fines or imprisonment if proven true.