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Allco - another corporate collapse based on ambitious company executives.

News >> Directors and Officers Liability

Allco was put into administration in November 2008. The receivers are representing a consortium of 12 lenders, including Westpac which has a $200 million exposure. The Commonwealth Bank has a $170 million exposure.The Australian Securities and Investments Commission has also been investigating Allco's collapse.

The financial services group had a quick rise, and was valued at close to $5 billion on the stock market in 2006. The company borrowed heavily to fund its expansion, and was soon unable to re-pay its debt. Former Allco Finance Group executives are facing public questioning for the first time, as the company's receivers try to work out exactly how it collapsed in 2008 under $1.1 billion of debt.

There has been an inquiry in the Federal Court and Allco's former chief executive David Clarke faced rigorous scrutiny about the company's liquidity problems and ill-fated acquisitions. He said there was a great deal of activity that pointed to positive outcomes blaming that they did not know they were about to enter the global financial crisis . In particular, he was asked about the motive behind a $50 million loan made by Allco to one of its related companies. He also admitted the company sped up asset sales in late 2007 to make its bottom line look better.

Now this is an example of a company taking risks with other people's money. Were they negligent or acting wilfully? We await the outcome with interest.

 

Last changed: Apr 21 2011 at 5:20 PM

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