When it comes to Australia’s corporate regulator, the Australian Securities and Investment Commission, the wheels of justice turn slowly.
Almost three years after whitegoods franchise Kleenmaid collapsed with $100 million in debt, the watchdog has finally launched legal action against the company’s directors, brothers Andrew Young and Brad Young and fellow director Gary Armstrong.
The trio face charges of 18 counts of criminal insolvent trading of debts totalling more than $4 million and a $13 million fraud committed on Westpac Bank.
In addition to that Gary Armstrong and Andrew Young face another fraud charge and are accused of withdrawing $330,000 from the company’s bank accounts two days before it went into voluntary administration.
The trio faced the Maroochydore Magistrates Court for the first time yesterday. They were not required to enter a plea and are out on conditional bail. The matter is back in court on May 17.
Kleenmaid’s collapse was in many ways one of the ugliest of the GFC in that it had a bit of everything.
The company held $26 million worth of customer deposits when it went under, which meant there were hundreds of consumers left out of pocket, their building or renovation plans severely disrupted.
But there were also a host of franchisees affected, including 15 owners of Kleenmaid stores and a number of franchisees who had maintenance businesses perched on the group.
It’s clearly taken ASIC a long time to wade through the rubble of this business left by the Young brothers, but the fact that the watchdog has come out strongly against the directors is positive.
Many is the time that I’ve heard complaints from disgruntled creditors of collapsed companies that investigations into insolvent trading disappear into ASIC, never to emerge.
With this case, ASIC has the chance to show how vigorously it can investigate and prosecute such matters. It can show to franchisees and consumers that these matters are not forgotten – even if it does take years to bring charges.
The Young brothers appeared relatively contrite yesterday, expressing through their lawyer John Rivett their “deep regret to their customers”.
“They did everything in their power to try and save it from this situation,” he said. ”They are suffering too. They’ve both gone bankrupt. They’re both having to work for a living.”
But as Rivett pointed out, there is still a long way to go in this trial.
”This will be a long, arduous, drawn-out procedure, no doubt.”
This will be a closely watched case in the business community and the franchise sector. ASIC’s reputation for getting answers for those hit by company collapses is on the line.