The competition watchdog has fined a company director $450,000 and banned him from managing a business for 15 years after he admitted to duping elderly investors into investing tens of thousands of dollars knowing they would never get the money back.
The decision comes as the Australian Competition and Consumer Commission continues to crack down on businesses and directors in breach of new consumer protection laws, which came into effect earlier this year.
ACCC chair Rod Sims said this was the first time the consumer watchdog had obtained orders from the Federal Court to disqualify someone from managing a business.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
The watchdog took action against Laurence Hann, along with the businesses Halkalia, Heartlink Enterprises and National Semi-Retired Group.
The ACCC was contacted by SmartCompany but Sims was unavailable to comment.
Hann’s companies were involved in producing and selling Heartlink products, which included household goods such as cleaning products and disinfectants. Hann had established the business and its assets.
The business worked on what Hann called a “charity concept”, where volunteers – usually retirees – would manufacture and package the products to be sold through retail outlets. Sales work was done by volunteers as well.
But in several advertisements for sales distribution work, Hann made claims workers would be able to earn a certain amount of money. The Federal Court heard this was usually in the form of telling people they would have an “opportunity to earn in excess of $x per week”.
Hann also required substantial investment from participants, sometimes as much as tens of thousands of dollars. Witnesses gave evidence they were asked to hand over thousands of dollars, while Hann promised returns within a short period of time.
The court heard these amounts of money were never recovered.
”There can be no doubt that Mr Hann’s conduct was deliberate,” Justice Richard Tracey said.
”He was seeking to induce new investors to commit funds to distribution businesses at the same time that, as he well knew, the large number of existing distributors – despite his undertakings to buy back the businesses – were never going to recover their investments.”
”The fact that they had been cynically exploited did not deter Mr Hann from continuing his attempts to attract further investors, who, I readily infer, would have been destined to lose their money.”
The court also heard Hann had established businesses before, using them to “promote dubious business opportunities”.
“He should not have the opportunity to do so again,” Justice Tracey said.
The court handed down a civil pecuniary penalty against Halkalia of $450,000, along with injunctions against all three businesses. Declarations were also made that the three companies breached the Trade Practices Act.
Sims said in a statement the outcome of the case sends a message to other directors.
“This outcome demonstrates the ACCC will use all its powers to take action against those who engage in unscrupulous business practices which prey on disadvantaged or vulnerable consumers.”