The director of New South Wales beauty chain ERB International, Ali Hammoud, has pleaded guilty to two charges in the Downing Centre Local Court in Sydney, following allegations he misappropriated more than $2.6 million from the company that has subsequently collapsed.
The Australian Securities and Investments Commission accused Hammoud of misappropriating $2,609,831.91 from ERB International, of which he was a director.
ASIC also alleges that between August 8, 2003, and June 26, 2007, Hammoud made false statements in workers’ compensation insurance forms. By understating the company’s wages on the forms, it is alleged the company gained a financial advantage of $338,709.25.
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In a case being prosecuted by the Commonwealth Director of Public Prosecutions, Hammoud pleaded guilty to both charges, which were committed to the Sydney District Court with a hearing on December 5.
The case followed an earlier case before the Companies Auditors and Liquidators Disciplinary Board (CALDB), which saw William James Hamilton suspended for six months, for his conduct as joint liquidator of ERB International. Hamilton was a partner at Hamiltons Chartered Accountants at the time.
The CALDB found Hamilton had entered into a deed of settlement with the directors of ERB to accept an amount without investigating what its true level of debt was. It also found he failed to seek the approval of the court or a resolution of creditors and failed to seek legal advice before entering into the deed of settlement.
A second liquidation notice for ERB International was published on the ASIC website on November 7, overseen by Simon John Cathro from EY. Creditors with claims that have not already been admitted were given until November 24 to establish their claim.
KPMG’s partner in charge of forensic, Gary Gill, told SmartCompany preventing fraud often comes back to businesses maintaining strong controls over finances.
“With senior people in an organisation, it is often harder to detect this sought of fraud, and so the losses go on for longer as the losses become larger,” Gill says.
ASIC said in a statement Hammoud faces up to five years in prison for each offence.
“A breach of directors’ duties carries a penalty of five years imprisonment and/or a fine of $220,000. Making a false statement to obtain a financial advantage carries a penalty of five years imprisonment and/or a fine of $22,000,” ASIC said.
Meanwhile a spokesperson for the Commonwealth Director of Public Prosecutions welcomed Hammoud’s plea.
“The CDPP welcomes the plea by the director of Ella Rouge Beauty, Ali Hammoud. Prosecution of commercial offences forms an important part of the work of the CDPP and we work closely with our partner agencies, such as ASIC, to ensure these matters are prosecuted and appropriate penalties are sought,” the spokesperson says.
In 2013, a five year jail term was handed to real estate agent Michael Wilkes for misappropriating $412,796.40 from trust accounts while operating inner-city Brisbane real estate agencies.
*This article was updated on 30 December 2014 to remove three sentences regarding Hammoud which are currently contested by his legal advisers.