DISGRACED accountant and tax agent Blake Richards has lost his appeal against being banned from being a director of any company.
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In late 2009 the Australian Securities and Investments Commission banned Richards after he was director of four failed companies based at Ulladulla – Longbeach Estate Pty Ltd, Longbeach Lifestyle Pty Ltd, Richards Corporate Consulting Pty Ltd and Lisa Richards Pty Ltd.
The companies went bankrupt, owing more than $2 million to unsecured creditors and more than $1 million to the Australian Taxation Office.
A report presented to ASIC by the liquidators said dividends for outstanding creditors were likely to be less than 10 cents for every dollar owed.
ASIC imposed the ban on Mr Richards after finding he failed to act with the required care and diligence, and “with a lack of commercial morality” over the tax debts accrued by Longbeach Estate Pty Ltd and Longbeach Lifestyle Pty Ltd.
ASIC also found Mr Richards failed to keep proper books and records to adequately explain the companies’ transactions.
The ban was appealed to the Administrative Appeals Tribunal, however senior tribunal member Mason Allen rejected the appeal in a decision handed down last week.
However he shortened the period of the ban to three years, while condemning Mr Richards’ arguments as “convoluted and disjointed”.
Mr Allen also said Richards gave “contradictory evidence regarding the willingness of the ATO to deal with him”.
In the appeal Mr Richards challenged the finding he had failed to keep appropriate records and proper books of accounts for the companies, however Mr Allen noted there were “shortcomings” revealed by the liquidator’s reports.
They included Mr Richards presenting reports to creditors that were “not a true reflection of the company’s position”.
Detailed forensic examination of financial statements provided by Richards “identified numerous areas in which the statements provided by the applicant were unreliable”, Mr Allen noted.
“More to the point, liquidator’s reports state that numerous loans were recorded as secured when in fact no security was held, whereas numerous loans were recorded as unsecured when the relevant loan agreement provided that a security should have been held.
“These are of course serious defaults in the books of a corporation,” Mr Allen said.
While Richards blamed his companies’ problems on a rapid fall in land values on the South Coast, Mr Allen said, “A significant factor in the failure of the companies was the very large – up to 50 per cent – interest rate paid to persons lending money to the companies.
“The applicant conceded that he could have borrowed money from banking institutions at a much less rate of interest to obtain similar results.
“He further conceded evidence that returns of up to 50 per cent could not be supported long term as a result of a down turn in the property market and that such returns placed huge strains on the companies’ cash flow.”
Promises of big returns were routine when Mr Richards obtained money from a wide range of people all over the South Coast, with much of it never being seen again.
His conduct led to the National Institute of Accountants suspending Mr Richards’
membership.