The Prime Trust saga has taken a further twist this week, with the ABC discovering controversial emails linking former Prime boss Bill Lewski to a multimillion-dollar payment which casts further focus on the actions of the colourful former accountant.

As Crikey reported earlier this year, while Prime Trust collapsed in 2010 owing investors (most of whom were self-funded retirees) more than $550 million, Lewski, a former partner of the late Max Green, appears to have fared far better. In total, interests associated with Lewski collected more than $150 million from Prime. This occurred through a swathe of controversial transactions, most notably a $33 million “listing fee” and the gifting of management rights to Lewski for virtually no consideration (which Lewski soon after sold for $60 million).

The Australian Securities and Investments Commission has taken Federal Court civil action against Lewski and fellow Prime directors, including former Howard government health minister Michael Wooldridge, over the $33 million fee. The action centres around the board’s decision to amend the Trust’s constitution, which allowed it to pay the fee to Lewski without seeking approval from members.

As reported by the ABC, the secret emails uncovered by Prime’s liquidator, Stirling Horne, raise issues as to whether there was collusion between Prime and long-term consultants Kidder Williams. It remains to be seen what action ASIC will take in response to these new revelations.

The emails relate to the $33 million listing fee paid to interests associated with Lewski, which was allegedly subject to various performance hurdles (only 10% of the fee was payable upfront to Lewski, with the remainder being  payable over three years). The only exception being if control of Prime’s responsible entity changed — if that occurred, Lewski would be able to collect the $33 million immediately, regardless of the performance hurdles (which, given Prime’s performance, would almost certainly not have been met).

Confidential emails which had been deleted by Prime but were recovered by forensic experts indicate that Prime colluded with Kidder Williams to allow for the notional transfer of management rights, but with Lewski retaining ultimate control.

Email correspondence between Kidder and Lewski reveals that Kidder would not retain long-term ownership of the management business and, critically, Lewski would be able to veto the sale of Prime Trust in certain circumstances. The correspondence appears to indicate that the alleged sale of the management rights was merely a façade to allow Lewski to collect the remaining $30 million from the listing fee. While secretly retaining de facto control, Lewski would also publicly remain a full-time consultant to the Trust. Emails indicate that if Kidder Williams agreed to take over Prime’s responsible entity, they would allegedly receive a $5 million payment, as well as an annual $2 million fee. Even more controversially, the purchase by Kidder Williams was actually funded by none other than Bill Lewski.

To add even more intrigue, in 2007 when the board passed the now infamous resolution which allowed for the payment of the listing fee to Lewski, there was no reference to the fee being immediately payable upon a change of control. This didn’t occur until 2008, when the board retrospectively altered the resolution (at the alleged suggestion of Lewski) to allow for the payment. By then, as the confidential emails indicate, Lewski was deep in talks with Kidder Williams regarding the sale.

At the time of the now infamous change of control, then Prime chairman Wooldridge claimed that Prime had low debt, a minimal amount of debt to refinance and substantial cash resources and was “well-placed to be the catalyst for industry consolidation”. Within two years, Prime would collapse, owing more than $550 million, while the directors who approved the payments to Lewski would also be able to retain substantial bonuses paid to them.

Despite the alleged fraudulent transactions and requests from investors in Prime Trust, ASIC has not initiated criminal proceedings against anyone involved in the collapse.

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

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