You just wouldn’t credit it. After the failure of HIH, the Enron debacle and
the demise of accounting firm Arthur Andersen, the collapse of the German-owned
building company Walter Construction Group (formerly Concrete Constructions)
has thrown up all those old problems.

Auditors apparently not doing their job, directors allowing a shuffle of
assets, strong suggestions of a company trading while insolvent, a breach of
rules that call for construction companies to maintain retention accounts to
pay sub-contractors, and “related party transactions” that allowed the full
extent of the company’s problems to be masked.

The second report to creditors in Walter from administrators KordaMentha makes sorry reading with its echoes
of the dark days of 2000 and 2001. There’s an accusation of “window dressing”
made by the administrators against the directors and management that the
auditors failed to pick up. The company’s auditors, KPMG, were
also auditors of the German parent.

Furthermore. said the administrators “preliminary investigation suggests that
the Company traded whilst it was insolvent. Further investigation is required
to determine the point at which the company became insolvent.”

Their report produced a flurry of commentaries in the morning papers, with
perhaps the best coming from Stephen Batholomeusz in the Fairfax press, pointing out the problems for the board of Walter
Constructions and its auditors.

But it was the report from KordaMentha that carried the most damning remarks
about the way Walter was managed and oversight was exercised. KordaMentha have
so far charged a juicy $1.2 million in fees for its work for the period
1 February to 6 March. Incredibly another $800,000 will be charged (their
estimate) up to the end of March to bring the total bill to $2 million.