Kleenmaid directors face insolvent trading and fraud charges three years after collapse

The directors of failed whitegoods company Kleenmaid have appeared in court over charges the business traded while insolvent, in one of the first major insolvency cases for a business that collapsed in the aftermath of the GFC.

The case comes after years of controversy surrounding the company’s failure, which affected thousands of creditors and placed the future of franchisees up in the air.

Directors Andrew Young, Bradley Young and Gary Armstrong have been accused of 20 criminal charges including a $13 million fraud and insolvent trading, following an investigation by the Australian Securities and Investments Commission.

That $13 million fraud was allegedly made against Westpac.

Overall, the trio have been charged with 18 counts of criminal trading of debts more than $40 million. There are also more counts of fraud, with the three accused of withdrawing $330,000 from the company’s bank account just two days before it entered administration.

Each of the criminal insolvent trading charges carries a maximum penalty of $200,000 or imprisonment for five years, or both. The fraud charges carry a maximum penalty of 12 years imprisonment, for each.

The trio have appeared before the Maroochydore Magistrates Court, and were not required to entire a plea. They were all released on bail and are due back to court on May 17.

The case is extremely complex. There will be over 1,100 witness statements used, while ASIC’s argument will revolve around the ability to show the company was insolvent on specific dates.  

Kleenmaid operated as an importer and distributor of whitegoods, with 22 outlets, including 15 franchises, and 200 staff. But in 2009, the company appointed voluntary administrators – it was reported at the time Kleenmaid had debts of nearly $100 million.

The matter was made worse when it was revealed the company had $26 million worth of customer deposits – all out of pocket.

Franchisees were also left up in the air, as a number had substantial businesses built on maintenance of these products.

Soon after the collapse, the company’s intellectual property was bought by Compass Capital Partners, a Sydney private equity firm, which opened up a clearance store. At the time, the company said it believes the reconstruction of the brand could take up to five years.

The former appliance services arm of the company was acquired by Aussie Whitegoods Rescue, which still operates on the Kleenmaid.com.au domain.

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