There are mates’ deals and there are mates’ deals.
The recent revelations by Jeff Knapp from the University of NSW that the corporate regulator produced an accounting relief order for Kagara on the same day the application was received exposes the soft underbelly of the Australian Securities and Investments Commission – its conflicts of interest.
Nine senior ASIC staff members, including the chief legal officer, are associated with a quick-fire process to render assistance to a former colleague.
The ASIC email chain for Kagara is chilling: a bat phone to high ranking ASIC offices, inappropriate pressure placed on Commission staff by the special counsel with a cc to the chief legal officer, and an exchange of draft documents before a fee is paid for the application.
If this were not bad enough, the process countervails ASIC’s own regulatory policies. None of the people involved appear to pay any heed to the policies in ASIC’s Regulatory Guide 51 “Applications for Relief”.
RG 51.32 explains in Urgent Applications for Relief the applicant must clearly demonstrate that urgency results from factors beyond its reasonable control that could not have been reasonably foreseen.
The relief application for Kagara, though, overlooks this policy requirement. It effectively jumps the queue at the regulator because of the personalities of the applicants involved and telephone discussions with ASIC staff.
And yet RG 51.34 makes it clear that priority ought not be given to an application merely because it is preceded by discussions with ASIC staff. The administrators of Kagara were appointed April 29, 2012 and are experienced operators. There is no apparent reason for the last minute nature of their application to ASIC in October 2012 other than forgetfulness. There is no apparent reason for urgency at ASIC’s end other than cronyism.
Further, ASIC’s own policies do not allow for draft applications or a sounding-out process before the applicant stumps up the required fee for the application. The process ASIC pursued for Kagara suggests that a standard application for relief can be discussed in detail before any fee is paid.
The suggestion is that the application fee is a success fee. Don’t pay until you get the green light, or the amber light, after sending in and discussing a draft with the senior people at ASIC. The public is cheated by such a process, particularly when major claims of corporate fraud, detailed and corroborated by documentation, are passing without investigation.
It has now come to light that the ex-senior executive at ASIC, Stefan Dopking, who made the application on behalf of insolvency group FTIConsulting managed to get ASIC to register him as an official liquidator on November 12, 2010 – around the same time that it was reported that he would be stepping down from his high-ranking role at ASIC.
The government needs to reconsider what ASIC officeholders can and can’t do while carrying out their public duties. The former chairman, Tony D’Aloisio, purchased a winery from Evans and Tate while in office, Stefan Dopking got registered as an official liquidator.
These things are not a good look. Gatekeepers need to be seen to be independent.
Given the serious questions now arising over the conduct of the Kagara administration, it is critical that the regulator is seen to be doing its job properly.
The Minister for Corporate Law, Bernie Ripoll, is expected to respond to questions over the Kagara imbroglio, and ASIC’s stewardship thereof, next week.
In the meantime, we just need ASIC to make mention of the documents in its Freedom of Information log so that any member of the public can access them and see this Kagara conflict for themselves.
The Knapp FOI is not mentioned in the FOI log presumably because it falls under a new category for non-disclosure – embarrassment.
BusinessDay has sought to speak with Stefan Dopking and his fellow liquidators on numerous occasions but the calls have not been returned, nor have they so far responded to questions emailed to them.