Mini Research on Asic Investigation

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Research on ASIC’s investigation about the continuation of trade by Queensland’s sunshine coast based national importer and distributor of whitegoods, also the operator of Kleenmaid brand of kitchen appliances, Kleenmaid Group, despite becoming insolvent from March 2008.

The Fact:
Three former directors of national whitegoods distributor Kleenmaid, Andrew Eric Young, Bradley Wendell Young and Gary Colleyer Armstrong were accused of 20 criminal charges including a $13 million fraud and insolvent trading, following an ASIC investigation. The trio were charged with 18 counts of criminal insolvent trading of debts totalling more than $4 million and a $13 million fraud committed on Westpac Bank (ASIC 2012). Gary Armstrong and Andrew Eric Young was also charged with further fraud, accused of withdrawing $330,000 from the company’s bank accounts two days before it went into voluntary administration (ASIC 2012). The focus of ASIC’s investigation centred on the solvency of the Kleenmaid Group and a corporate restructure undertaken by the Kleenmaid directors in September 2007. ASIC alleges the Kleenmaid Group continued to trade despite becoming insolvent from March 2008 (ASIC 2012). The former directors appeared before Magistrate Ehrick at Maroochydore Magistrates Court for their first appearance on February 16, 2012. The trios were not required to enter a plea and released on conditional bail (ASIC 2012). The matter returned to Maroochydore Magistrates Court for mention on 17 May 2012. There at Maroochydore Magistrates Court, the matter was adjourned until 21 June 2012 for a further mention at Maroochydore Magistrates Court. On 21 June 2012 at Maroochydore Magistrates Court the matter was adjourned until 20 September 2012 for a further mention at Maroochydore Magistrates Court. The Commonwealth Director of Public Prosecutions is prosecuting the matter (ASIC 2012).

The Background:
Each of the criminal insolvent trading charges under section 588G(3) of the Corporations Act 2001 (the Corporations Act) carries a maximum penalty of $200,000 or imprisonment for 5 years or both (ASIC 2012).

Andrew Young, Bradley Young and Gary Armstrong face one count of fraud committed on Westpac Bank (ASIC 2012).

Gary Armstrong and Andrew Young face one count of fraud relating to the $330,000 withdrawal from the company bank accounts (ASIC 2012).

Each of the fraud charges under section 408C of the Criminal Code (QLD) carries a maximum penalty of 12 years imprisonment (ASIC 2012).

Based on Queensland’s sunshine coast and employing about 200 staff, the Kleenmaid group of companies operated the Kleenmaid brand of kitchen appliances and was an importer and distributor of whitegoods, operating 22 outlets Australia-wide including 15 franchise stores and 7 company-owned stores (ASIC 2012).

The former directors appointed voluntary administrators on 9 April 2009 with liquidators reporting Kleenmaid Group had consolidated debts of $97 million, including $26 million in customer deposits (ASIC 2012).

The laws involved and the sufficiency of these laws for ASIC to successfully investigate and make the corporate entity/persons liable: 1. Each of the criminal insolvent trading charges under section 588G(3) of the Corporations Act 2001 (the Corporations Act) carries a maximum penalty of $200,000 or imprisonment for 5 years or both (The Corporations Act 2001).

According to the section 588G(3) of the Corporations Act 2001 (the Corporations Act 2001) Division 3—Director’s duty to prevent insolvent trading 588G Director’s duty to prevent insolvent trading by company

(1)This section applies if:
(a)a person is a director of a company at the time when the company incurs a debt; and
(b) the company is insolvent at that time, or becomes insolvent by incurring that debt, or by incurring at that time debts including that debt; and
(c)at that time, there are reasonable grounds for suspecting that the company is...
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