Clive Palmer appears to have acted recklessly as a shadow director of Queensland Nickel and may have committed criminal offences, according to a report by administrators.
In its report into the collapse of the Townsville-based refinery business on Tuesday, FTI Consulting said Palmer and his nephew Clive Mensink, QN’s managing director, may have appropriated its assets for their own advantage, causing “significant detriment” to the company.
“Uncommercial” transactions flagged by the administrators included the purchase of 60 vintage cars for Palmer’s Coolum resort, US$15m to a company of which his wife is a director and $5.8m for his project to build a replica of the Titanic.
The report said Palmer and Mensink may have committed criminal offences under section 184 of the Corporations Act, which applies if a director is “reckless or intentionally dishonest, and fails to act in good faith in the best interests of the company or for a proper purpose”.
It also applied if a director “uses their position or the information available to them in their capacity dishonestly with the intention to directly or indirectly gain a personal advantage, or cause detriment to the company” or is reckless to that effect.
“Ultimately, the determination of whether the directors have breached their duties will be made by a court,” the report said.
FTI Consulting’s John Park said administrators were set to provide a report outlining potential offences to the Australian Securities and Investments Commission “as soon as possible”.
Despite Palmer’s claims that he retired from the business in February 2015, FTI’s report on Tuesday said the federal MP for Fairfax had continued to be involved in its operations.
“Based on the evidence available to date, the administrators have conducted investigations on the basis that Mr Palmer is a shadow/de facto director of QN, and owed the same duties to QN as the formally appointed director, Mr (Clive) Mensink.”
The report defines “the directors” collectively as Palmer and Mensink. “Both Mr Mensink and Mr Palmer, in our view, appear to have been reckless in exercising their duties and powers as directors of QN,” the report said.
The report recommended that QN, which went bust in January with debts of $100m, should be liquidated and that “uncommercial and director related transactions” authorised by the pair could be recovered.
This included $224m in loans from QN funds to “director-related parties” since February 2011, of which more than $189m had been “forgiven” to the benefit of those parties.
Among those payments that could be clawed back were $42m in cash transfers to “related entities” in November 2012, including $US15m to Palmer and $US8m to his father-in-law Alexandar Sokolov who worked as QN’s technical director. In addition, QN transferred $US15m to the French Polynesia-based company SCI Le Coeur De L Ocean, in which his wife Anna owns shares and is a director, the report said.
An extra $26m was transferred as political donations and sponsorships “where it appears a director may have received an indirect benefit”, the report says.
This included $21.5m to the Palmer United Party (PUP), with QN contributions making up more than 27% of all Australian political donations in financial years 2014 and 2015. Administrators said this spending, which included $2.2m on PUP’s use of a jet aircraft, “caused detriment to QN”.
The report also flagged possible clawbacks relating to:
- $5.8m spent to fund on Palmer’s project to build a replica of the Titanic, including $3.3m in marketing costs in the UK and US
- QN’s purchase of 60 vintage cars for the Motorama Museum at Palmer’s Coolum resort, which were later sold to Palmer for $5m but the loan forgiven
- QN’s purchase of the Avica Resort on the Gold Coast for $11.55m – sold to Palmer for $7.9m in November 2013 – and a Cessna plane then allegedly sold to Palmer for $5m which it never received
- a US$200,000 sponsorship of the John F Kennedy Library Foundation in the US
- a $40m investment in a Palmer company that owns golf courses on the Gold Coast and Port Douglas, which was later sold to Pamer personally for $8.4m
- $5.4m in sponsorship of think-tank Club De Madrid, allied to a body apparently set up by Palmer called World Economic Council, of which Mensink was treasurer and Palmer’s son Michael was a “trustee”
FTI Consulting pointed to a number of possible breaches of corporate and common law duties by Palmer and Mensink and certain transactions that might be “unfair”.
Its investigations found evidence that Queensland Nickel traded after becoming insolvent “no later than 27 November” 2015.
It said recoveries of preferential payments to creditors by a liquidator would be limited to those after this date, potentially totalling $18.4m.
The report said Palmer and Mensink “each appear to have failed to exercise discretion and avoid the conflict between the interests of QN and their own personal interests in related parties, and as directors, shareholders and/or political party members of the related parties [and] may have gained an advantage directly or indirectly”.
“We have identified transactions which may give rise to successful unfair preference recovery actions,” it says.
“We have identified significant transactions in value and in quantum entered into by QN that appear to be both uncommercial and director related transactions.
“These transactions could be recovered in a liquidation scenario.”
The report advised creditors to vote to wind up Queensland Nickel, which owes about $100m, when they meet on 22 April.
Liquidation means the company’s 800 workers, who have lost their jobs, will have access to a federal scheme to get some of their unpaid entitlements, which total more than $70m.
FTI said Palmer appeared to have acted as a shadow director of QN “at all material times” from Feburary 2012 to the company’s collapse into administration in January.
Palmer’s name was on three QN bank accounts and he held the power to solely and independently authorise transactions from them.
Only he and Mensink had the power to approve expenditure requests at the plant of more than $10,000.
Palmer has told administrators his actions were consistent with his role as chairman of a “joint venture operating committee” by which his parent companies that own the plant directed QN as its operator.
The prime minister, Malcolm Turnbull, said he did not “want to comment on the Four Corners program” on Monday that put a spotlight on the federal MP’s political and business career.
“I’ve made some criticisms of Mr Palmer and his management of the Queensland Nickel situation in the past,” he said.
“But I would say assuming he renominates, I think the electors of Fairfax will cast a very stern judgement on him.”
FTI Consulting said it believed that security claims over QN assets lodged by Palmer companies Waratah Coal and China First in the days before the company’s collapse “will not be admitted as valid” at the second creditors meeting.
