Posted April 12, 2017 18:13:19

An ABC investigation into the activities of a number of business advisers, who help companies avoid paying millions of dollars in tax — and money owed to small mum-and-dad businesses — has uncovered a raft of potentially illegal transactions that are now the subject of investigation by ASIC and the Australian Tax Office (ATO).

The six-month investigation has uncovered three central figures in the "pre-insolvency" field, who advise a company's directors how to strip cash and assets from the business and hide them from creditors, including the ATO.

The company is often then restarted under a different name, a practice known as "phoenixing".

The revelations about the scale of potential illegality and fraud call into question the ability of authorities to police an area that the corporate watchdog has itself admitted is essentially unregulated.

Stephen O'Neill, convicted and jailed in 2001 for stealing from customers of his mortgage-broking business, is one of the most prolific pre-insolvency advisers in the country.

O'Neill, who also goes by the name Steve Marks, helped a number of clients escape their debts and personally profited from the money he successfully hid.

In 2013 O'Neill oversaw the failure of Victorian construction company Global Contracting. The business went belly-up owing more than $8 million to almost 300 creditors.

Many of those creditors were small business owners like Daniel O'Connell, a plumber in a regional town.

$200,000 out of pocket

Photo: Plumber Daniel O'Connell is owed $200,000 by the failed company Global Contracting. (ABC News: Sam Clark)

Mr O'Connell had won a tender to install plumbing at a caravan park in central Victoria. But soon after the work started he noticed Global Contracting was slow to pay his invoices, then stopped paying altogether, leaving him more than $200,000 out of pocket.

Then he received a call from the site manager warning him that Global Contracting was in big trouble.

"He gave us the heads up that, yeah, they were in a fair bit of strife. Everyone had been told to get the gear back to the yard," Mr O'Connell said.

"I grabbed a sub-contractor that I knew fairly well and we drove down to their offices and that's when we realised that they were gone, essentially."

What creditors like Mr O'Connell didn't know at the time was that the company's demise had been orchestrated by O'Neill through his companies SMEs R Us, Stemano Holdings, Supa Investments, and Credit Loans Australia.

Global Contracting's liquidators, Melbourne firm Romanis Cant, allege that in the company's final months, more than $1.6 million was transferred out of Global Contracting into the accounts of businesses linked directly to O'Neill.

The ABC has identified a number of other cases where money has flowed from struggling companies into accounts controlled by O'Neill in the lead up to liquidation.

'Lack of prosecutions despite obvious fraud'

Sydney lawyer Michael Hayter, senior partner at the firm Gillis Delaney, has acted for liquidators in a number of cases where O'Neill has orchestrated the ripping out of money and assets prior to liquidation.

"He appears to be intricately involved in giving advice to directors who are in financial difficulties about how to structure assets, and his company appears to be receiving large payments, sometimes millions of dollars, from some of the companies in liquidation," Mr Hayter said.

"It is amazing how much it has been occurring, particularly in the last few years.

"The problem is that there has been a lack of prosecutions against pre-insolvency advisers where there has been obvious fraud."

Legitimate liquidators are becoming increasingly concerned about the rising influence of pre-insolvency experts.

Sources have told that ABC that rogue operators are an increasing presence in company liquidations, which numbered more than 9000 in 2015/16.

John Winter, CEO of the peak body for Australia's insolvency and restructuring industry, has witnessed an alarming rise in illegitimate operators like O'Neill.

"These pre-insolvency advisers are an absolute scourge and they need to be addressed," Mr Winter said.

"Pre-insolvency advice has exploded over the last couple of years, and for registered liquidators, the proper professionals who look after insolvency, we're seeing a substantial erosion of the safe process of being able to reclaim creditors money.

"We think the most important thing that needs to happen in this space is that there needs to be the same level of regulation brought to bear on these dodgy advisers as you find for people who provide financial advice."

Repeat offenders are well known but still operate

Photo: Business adviser and self-described forensic accountant David Graer. (ABC News)

The names of the figures who regularly flout the law are well-known in industry circles but they continue to operate.

In October, the ABC revealed that ASIC and the ATO raided the offices of Melbourne firm A&S Services, operated by Philip Whiteman, over allegations the firm was engaged in widespread phoenixing.

Despite the raids and an ongoing investigation by the ATO and ASIC, Mr Whiteman's operation moved offices and re-branded itself.

Last week, the ATO again raided his office, and successfully applied for the Federal Court to put four Whiteman companies — AHW Solicitors, A&S Services, Bolton & Swan Solicitors and DNV Accountants — into provisional liquidation.

The ABC can also reveal that a Melbourne construction company is being investigated by the ATO over the 2015 collapse of one of its businesses.

Aston Property Developments Australia (APDA), a company operated by Kevin Mingarelli and Michael Leipnik, had just completed construction of a block of 50 apartments in the bayside suburb of Edithvale when the company was placed into administration.

Melbourne business adviser and self-described forensic accountant, David Graer, was the person who called in administrators after providing the company with a small loan. But it appears as if Mr Graer played a much larger role in the demise of APDA.

Financial records obtained by the ABC show that on the company's last day of trading, $2.8 million was paid to a company linked to Mr Graer in an apparent scheme designed so Aston could avoid paying more than $1 million in tax.

When the ABC spoke to Mr Graer he denied any knowledge of the company that received the windfall, Celclip, and also denied helping the operators of Aston shift money out of the company.

Mr Mingarelli and Mr Leipnik did not respond to detailed questions about the failure of APDA and what, if any, role Mr Graer played in it.

However, the ABC has learned the tax affairs of the company are the subject of an ongoing ATO investigation.

When the ABC spoke with Mr Mingarelli before he was due to be interviewed by the ATO a fortnight ago, he denied that Mr Graer played any role in his businesses.

"I have no relationship with David Graer," Mr Mingarelli said.

Despite this denial, the ABC witnessed Mr Mingarelli meeting with Mr Graer at the office of a Melbourne law firm only days previously.

'It's disgusting, it's un-Australian'

Photo: Waterproofer Ron Noonan says he feels ripped off and let down. (ABC News)

Melbourne tradie Ron Noonan, who operates a waterproofing business, is worried the latest version of the Aston brand will meet the same end as APDA.

Last year Mr Noonan was contracted by another Aston company called ASDC to waterproof the basement and balconies of a development in another Melbourne suburb.

Mr Noonan said after a dispute over his work, the former director of ASDC, Mr Leipnik, refused to pay him more than $100,000.

However, when Mr Noonan sent a demand letter to Mr Leipnik at the conclusion of the job he received an alarming response.

"All I got was a letter back saying he is no longer the director of that company, it is someone else," Mr Noonan said.

"I did an ASIC search and that was the case, it was handed over to an Egyptian of a certain address in Chadstone. I went to that address and it was, it was like a halfway house of [a man] who sleeps there two to three nights a week."

7.30 visited the Chadstone address and was told by a resident the home was rented from the Department of Housing.

He said the director of ASDC had not lived at the home for a number of years. Company records show the man is also the director of another company linked to Mr Graer.

The ABC has identified a number of other dummy directors of companies with links to Mr Graer.

Mr Noonan fears that, despite an independent adjudicator ruling that ASDC owe him the money, the use of dummy directors could make it impossible for him to recover the funds.

The entire experience has left him feeling let down and ripped off.

"It's disgusting, it's un-Australian," Mr Noonan said.

"They are criminals, they are thieves, they are nothing but thieves and the Government has to help to make that happen.

"The tradie, the guy on the ground has got to be helped more than they are helped now."

A spokesperson for the ATO declined to comment on their investigation into Aston, but said any company director considering, or involved in, phoenixing was on notice.

"To them we say 'be warned'. The regulatory landscape has changed with the creation of the Phoenix Taskforce and [with ASIC] we are working closely together to catch those responsible."

Topics: corporate-governance, small-business, business-economics-and-finance, regulation, law-crime-and-justice, fraud-and-corporate-crime, melbourne-3000, australia