Bankrupt failures living lives of luxury

Something that really shits me is seeing executives of failed companies and owners of businesses that collapse owing creditors hundreds of thousands or millions, even hundreds of millions, but still maintaining substantial personal assets and continuing to enjoy lifestyles way beyond what the vast majority of us consider normal.

Some examples:

• Alan Bond went bankrupt in 1992 after what was then Australia’s largest corporate collapse. After he was released from prison, it became apparent that he had managed to hide property and other assets worth millions of dollars - some estimates put the figure as high as $100 million - from his creditors, who received only $3.25 million towards personal debts of $500 million. He defeated attempts by the corporate watchdog, the Australian Securities and Investments Commission, to recover the money, using lavishly funded court challenges and Swiss banking secrecy laws. Bond now lives in a $4.6 million house in Perth which is in the name of his son, is building a $12 million maxi yacht, and is planning a return to the corporate world.
• It emerged last August that Ray Williams, jailed former boss of the collapsed HIH insurance group, had entered into an unusual financial arrangement with his wife, Rita, in December 1998, three years before the company’s collapse. Williams bought a 25-hectare waterfront estate on the NSW Central Coast for $2.5 million, and the same day gave his wife a $6.85 mortgage security over the property. His trustee, Mark Robinson of PPB, is investigating the transaction, which, if valid, would put the proceeds of the sale of the property beyond the reach of his creditors.
• Two days after One.Tel collapsed, one of its founders, Jodee Rich, signed a property agreement under which he transferred $5 million in assets, including his share in their house, to his wife, Maxine, a corporate lawyer. ASIC failed in its attempt to get the Family Court to set aside the agreement, meaning creditors get nothing.
• Malcolm Edwards went bankrupt in 1993 following the collapse of his Essington group of 279 companies, which at the time had more than $1 billion in property developments all over Australia. The brazen Edwards turned up at one creditors’ meeting driving a 560 SEL Mercedes which was owned by his wife - as was the house in Balgowlah in which he continued to live. None of his other assets, which included a string of racehorses, were in his own name and his creditors had to settle for a payment of one third of a cent in the dollar on the $180 million in personal debts for which he was liable.

These people are just saying “fuck you” to their creditors and the community in general.

Now, I accept that many of these people do take risks and shouldn’t be wiped out if things go wrong for normal sorts of business reasons. I’d be happy for them to even continue to retain above average assets and income - but why couldn’t it be (say) a living standard enjoyed at an annual income of $100k or so. Thats pretty good, but not excessive. Allow them to keep say $500k (maybe $750k for the benefit of Sydney people) of real estate and cars - but liquidate anything above that for the benefit of creditors. I’m happy to wipe out those whose business failures come about through fraud or significant negligence - they should pay the full price of their wrongdoing.

Our laws and courts should simply see through and overturn shams where assets and income are diverted to spouses, children, relatives or friends. Someone tell me a legitimate reason for doing these sort of things - not associated with tax or sheltering from creditors. Our lawmakers need to have the guts to legislate that these arrangements are overturned in the event of liquidation and bankruptcy - put the onus of proof that there was a legitimate reason for the transaction on the debtor. That can’t be too hard.

While on my one of my hobbyhorses, lets get rid of trusts too. Can anyone tell me a genuine reason anybody needs one, other than to minimise tax, or shelter assets? I’m keen to know. Why don’t our politicians legislate them out of existence? (oh, yeah, most of them have them, and certainly their mates do).

Family companies - who needs them? Companies should exist only to operate genuine business enterprises, not artificially gain tax and other benefits for individuals and their families.

Negative gearing - I’ll get off my soapbox now …. and tell you about my objections to subsidising other people’s speculative investments some other time.

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