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Prime Trust directors face class action for alleged secret bonus payments

Bill Lewski and fellow Prime Trust directors, already found guilty of corporate law breaches by the Federal Court, now face a class action for allegedly authorising secret multi-million dollar payments for themselves.

As the Federal Court determines penalties for Bill Lewski and his fellow directors of the collapsed Prime Retirement and Aged Care Property Trust after they were found guilty of breaching corporate laws, the trust’s liquidator is also taking aim, launching a $100 million-plus class action. The class action is backed by litigation funder LCM and directly targets Lewski, as well as his legal advisers Madgwicks Lawyers and Kidder Williams. It is understood that Prime’s liquidators are considering a further action against former auditors Pitcher Partners.

To add a further element of murkiness, Crikey can reveal further allegations that have not yet been prosecuted by the Australian Securities and Investments Commission. The allegations surround several directors of Prime Trust who authorised multimillion-dollar payments to interests associated with Lewski, while allegedly receiving substantial payments from companies controlled by Lewski.

Prime Trust collapsed in 2010, owing more than $550 million to investors and creditors. While unit-holders lost virtually all their investment, Lewski fared far better. In 2007 and 2008, Prime paid interests associated with Lewski a “listing fee” of $33 million (this was the subject of the recent Federal Court finding). And between 2006 and 2008, Lewski’s entities received a total of more than $65 million from Prime Trust for various fees and payments. In addition, another of Lewski’s companies received $60 million from Babcock & Brown (now part of Lend Lease) for the sale of valuable management rights attached to Prime’s retirement homes (Lewski was given those management rights for no payment shortly beforehand). It is the $60 million payment that is subject of the class action (ASIC chose only to take action for the $33 million “listing fee”).

In determining the validity of the $33 million listing fee, Justice Bernard Murphy of the Federal Court was critical of Lewski, noting that his evidence was “implausible … self-serving and designed to assist his defence”, and that Lewski’s statements under oath were “quite unreliable”.

While the subject matter of the court case is complex, in basic terms what happened was the directors of Prime Trust (which included Lewski, former Liberal Party figure Michael Wooldridge, as well as Peter Clarke, Kim Jaques and Mark Butler) resolved to alter the trust’s constitution to allow for the payment of a $33 million “listing fee” to Lewski, without seeking approval from unit-holders. The Federal Court observed that the motion to alter the trust (and allow the payment to Lewski) was proposed by none other than Lewski himself, and seconded by Jaques (before being unanimously approved by all directors).

Furthermore, buried deep in ASIC and Federal Court transcripts, it became apparent that two long-serving directors of Prime Trust (who approved the controversial $33 million and $60 million payments to Lewski) might have had extra incentive to make the controversial payments — they were receiving substantial bonuses.

Court transcripts also reveal that Kim Jaques admitted to receiving a $1.6 million bonus — substantially more than his annual salary of $125,000 — - which was based on Prime’s decision to grant management rights to Lewski (who then sold those rights for $60 million). Several years after Prime’s collapse, Jaques is still employed by Lewski’s company, Australian Property Custodians. Another director of Prime Trust, Mark Butler, revealed to the Federal Court that he had an agreement directly with Lewski that provided him a $750,000 cash bonus if Lewski received the balance of the $33 million listing fee.

Despite receiving payments of upwards of $140 million from his dealings with Prime Trust, Lewski told the Federal Court that he has no assets. Lewski currently resides in a multimillion-dollar Brighton seaside mansion, drives a late-model Porsche and has access to a $4.6 million Gold Coast luxury apartment. ASIC is seeking that Lewski receive a lifelong ban from acting as a director, but declined to pursue criminal sanctions against him or the directors or Prime Trust.

*Adam Schwab is a former corporate lawyer and the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed, published by John Wiley & Sons in 2010.

7
  • 1
    Yclept
    Posted Tuesday, 29 July 2014 at 2:12 pm | Permalink

    but declined to pursue criminal sanctions against him or the directors or Prime Trust”

    How nice of them!

  • 2
    leon knight
    Posted Tuesday, 29 July 2014 at 2:22 pm | Permalink

    Agreed Yclept - how bad does someone have to be before ASIC has a decent go at them…and is that Dr Michael Wooldridge?
    Again the biggest rip-offs always seem to link back to the LNP, no wonder ASIC is being weakened even further.
    Go the class action, and hit them hard..!!

  • 3
    David Hand
    Posted Tuesday, 29 July 2014 at 3:49 pm | Permalink

    It’s just sickening.
    Thievery writ large.

    Walk into a bank with a gun for $50k and get 10 years. Have a “resolution of directors” for $160m and get slapped over the wrist with a wet bus ticket.

  • 4
    CML
    Posted Tuesday, 29 July 2014 at 4:53 pm | Permalink

    Good heavens, David Hand! Sure you are feeling okay? I’m a bit worried about that latest post you see.
    Doesn’t sound like you at all!!

    However, for once you are absolutely correct!!!

  • 5
    David Hand
    Posted Tuesday, 29 July 2014 at 5:32 pm | Permalink

    I’m fine CML.
    My post is quite consistent with my long held views about economics and white collar crime.

  • 6
    Bill Hilliger
    Posted Tuesday, 29 July 2014 at 5:55 pm | Permalink

    Yes David Hand good to know you are fine and well, I thought alike with CML. You’re on the money there (pardon the pun), stealing with a gun for a relatively small amount and get 10 years. Steal with a pen for a truckload of money and get flogged with a wet bus ticket.

  • 7
    Itsarort
    Posted Wednesday, 30 July 2014 at 11:58 am | Permalink

    Haha, now how much were Peter Slipper’s taxi vouchers worth…?

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