A former board director of failed superannuation fintech venture Sargon said he was assured the company’s founder, Phillip Kingston, could find $31 million to complete its purchase of a trustee service business even after a critical capital raising was deemed “dead”.
Stephen Conroy, a former minister in the Rudd and Gillard Labor governments and a one-time Sargon director, and Fiona Borelli, the former company secretary, gave evidence about the venture’s finances in the Federal Court on Tuesday morning.
The Federal Court is examining the finances of Sargon, founded by Phillip Kingston (pictured in 2019).Credit: Arsineh Houspian
Kingston was bankrupted in December over a $154 million debt to financier China Insurance Group Finance Company, a lending arm of state-backed China Taiping. The matter is back before the Federal Court as liquidators question witnesses about Sargon’s finances, including allegations of potentially trading while insolvent.
Conroy, who joined Sargon in April 2019, was questioned about his knowledge of the company’s acquisition of Diversa, a trustee service business. The court heard that in October 2019, Kingston emailed Conroy and other board members about the best-, worst- and middle-case scenarios to raise capital from stockbroker Wilsons for the Diversa transaction the following month.
The email noted the best-case scenario was raising $21 million from Wilsons, the middle-case was raising $10 million and the worst-case scenario was being unable to receive any funds from the stockbroker.
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When asked by barrister Michael Rose, acting for liquidators Joseph Hayes and Andrew McCabe from Wexted Advisors, whether he thought those funding scenarios were achievable, Conroy responded: “Based on this representation [from Kingston], yes.”
However, on November 20, 2018, investment banker Matthew Kibble emailed Kingston, Conroy and other board members: “In terms of Wilsons, capital raising is dead.” Kibble noted the terms of the sale had been amended so Sargon would pay a deferred purchase price of $31 million by May 2020.
“The discussion at that board meeting also discussed what was represented by Kingston … to draw on payments made to Taiping,” Conroy told the court. “Representations made by Kingston was $15 million could be redrawn and available to the company.