Last Monday a jury in New South Wales found Stuart Ariff, a former registered liquidator, guilty on 19 criminal charges. He was immediately taken into custody and will be sentenced on 25 November 2011. The trial Judge indicated that it is inevitable that Ariff will be incarcerated.
The criminal proceedings were brought by ASIC. They related to Ariff’s winding up of HR Cook Investments Pty Ltd. HR Cook was solvent – the job was a voluntary liquidation. Ariff’s primary tasks were to distribute sale proceeds of a $3.2M share sale, sell two investment properties and pay capital gains tax.
Instead, it was found that Ariff took $1.18M. He paid $700,000 in legal bills for unrelated companies of which he was a liquidator. He transferred $400,000 into his own practice’s bank account and transferred $50,000 to his mother. He never paid capital gains tax of $620,000 and he never paid any dividend.
The jury found Ariff guilty after deliberating for less than an hour. They found that Ariff transferred funds from HR Cook with the intent to defraud and that he also falsified HR Cook’s accounts.
This is the end of a long road for Ariff. In August 2009, on the application of ASIC, he was found to be unfit to be an official or registered liquidator and banned for life. This followed allegations that he had failed to faithfully perform his duties in relation to 16 companies, including the Carlovers Group, in respect of which he was alleged to have extracted $13M (for an administration with total debt of $5M).
At the same time he was banned for life, he was ordered to pay $4.9M in compensation. He was also restrained from leaving Australia, pending ongoing investigation.
Two months later he became bankrupt. He paid no compensation but declared assets of only $30,000.
Many say that Mr Ariff’s actions were the catalyst for the Senate Inquiry held last year that resulted in the recommendations of the Senate Economics References Committee and more recently (in June this year), the joint Treasury and Attorney General’s Options Paper ‘A modernisation and harmonisation of the regulatory framework applying to insolvency practitioners in Australia’.
Whatever the impetus, it is certain that the insolvency profession is in for further scrutiny, review and possible reform.
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