The Supreme Court of Queensland today found five former executives of MFS Investment Management Limited (MFSIM), now known as ACN 101 634 146 (in liquidation), liable for breaching their directors’ and officers' duties.
The MFS Group, subsequently known as Octaviar, collapsed in 2008 owing $2.5 billion. ASIC launched civil action alleging the senior executives misappropriated $143.5 million of unitholders’ money to repay debts. ASIC alleged the conduct involved falsifying and backdating company documents to justify the transactions.
ASIC launched civil action alleging the senior executives misappropriated $143.5 million of unitholders’ money to repay debts. ASIC alleged the conduct involved falsifying and backdating company documents to justify the transactions.
ASIC's action addresses the core obligations of a responsible entity and its directors and officers to operate the fund with care and diligence, and in the best interests of the funds members.
Download the judgment here.
The court found that Messers Michael Christodoulou King, Craig Robert White, David Mark Anderson, Guy Hutchings and Ms Marilyn Anne Watts '…were the people closely and relevantly connected with the company and its actions. Their significant roles in the company also seem'…'to qualify them as its "high managerial agents". Each of them was found to have acted dishonestly in their roles as officers of MFSIM.
ASIC Commissioner John Price said, ‘Company officers, including directors, play a very important role as gatekeepers in Australia’s financial system. In this case we saw individuals neglect their duty to act in the interest of their investors'.
The matter has been adjourned until 24 June 2016, at which time the court will consider making declarations of contravention and give further directions in relation to the penalty hearing.
The Court can order a maximum pecuniary penalty of $200,000 to be paid by each individual in respect of each declaration of contravention.
Background
ASIC launched its civil penalty proceedings in 2009. A trial was part-heard in 2013 and resumed and concluded in 2014 (refer: 09-214AD).
Editor's note 1:
The media release was updated on 24 May 2016 to clarify references to MFSIM and MFS Global.
Editor's Note 2:
Following a hearing on 24 June 2016, the matter has been adjourned until 14 October 2016. A hearing will commence on 14 October 2016 in relation to the penalties that should be imposed on the defendants.
Editor's Note 3:
On 14 and 17 October 2016, the Court heard argument as to the form of final orders, the penalties that should be imposed on the defendants and costs. Judgment was reserved.