Economy
A Tasmanian Houdini …
I made an error in my comments regarding John Gay being the CEO of Gunns at the time of the AGM on 11 November 2009. It is of note that neither Gay nor anybody in the legal profession was prepared to air this issue by correcting me.
They preferred to let the sleeping dogs …. why?
I suggest that Gay’s decision to plead guilty was a result of the possible evidence that would have been supplied under oath to the Court by Greg L’Estrange, who had been appointed CEO of Gunns from 1 July 2009.
L’Estrange had been CEO of a Gunns subsidiary, Gunns Timber Products, since April 2008; so this, may I suggest, be considered a strategic in-house appointment by the Gunns Board.
L’Estrange’s appointment was a result of Gunns’ pressing need to raise further corporate funds. Gay was tarnished goods as a result of his conflicted dual role as CEO and Chairman of the Board; so he stepped aside at the end of the 2009 financial year.
He retained his position as Chairman of the Board.
I suggest that L’Estrange was allowed only in part to take over Gay’s role of CEO; a form of window dressing to enable the introduction on the 31st August 2009 of a further capital raising from the corporate sector of a vital $145 million; a raising successfully completed on 30th September 2009.
The Australian (28 July 2009) noted that Gay was still running Gunns and lists his areas of personal control and supervision over L’Estrange.
The Annual Report had to be submitted three times on the 28 September 2009 to the Stock Exchange to allow for corrections as to the Chairman and CEO’s salary and their respective entitlements. This suggests that the transition between the two was already in trouble.
By the end of September Gunns Monthly and Quarterly reports would have been completed. It could be suggested that L’Estrange should by then have had a good grasp and understanding of Gunns’ current financial position.
To the Magistrate in the Launceston court in October 2012 in a preliminary hearing over the Gay insider trading case L’Estrange stated (SMH 4 October 2012):
“Gunns Nightmare”
“It is not a company with a culture of complying with policies …. Transparency was the most difficult part of my job …..”
One particular weakness, L’Estrange told the Launceston Magistrates Court was:
“The monthly management reports to the Board reporting on the state of the company finances ….they had no standard forward forecasting methodology …. there wasn’t a senior management meeting in the organisation.”
I suggest that the Annual Report for the year ended 2009 was a product of Gay’s hubris and that a cross-examination of L’Estrange over this Report – a creation of Gay as the former CEO of Gunns – would have destroyed the reputation of both Gay and his Board when set against the capital raising.
Gay concluded the 2009 Annual Report:
“The Directors have been given the declarations required by Section295A of the Corporations Act from the CEO and the CFO for the financial year ended 30 June 2009.
Signed John E Gay.
Did Gay sign off the Annual Report without stating he was at the time the CEO as well as the Chairman?
I suggest that the cross-examination of L’Estrange in public over these events – occurring between his appointment as CEO from 1 July 2009 and Gay selling his shares in December 2009 – would have led to an escalation of the class action against Gay and his fellow directors; a class action instituted by those corporates and others who had put up the $145 million. This action is currently in abeyance as Gunns is in liquidation.
L’Estrange knows where all the skeletons are buried. Gay knew that they could be publicly disinterred should L’Estrange be called to testify over his insider trading and his corporate governance during this tricky period.
Result: Gay sensibly pleaded guilty; thereby possibly dodging some of these bullets:
• 1: In L’Estrange’s opinion were the Directors of Gunns when raising $145 million in the first half of the 2009/2010 financial year acting under false pretences?
• 2: Did he, L’Estrange, do his homework over the Gunns’ Annual Accounts for the year 2009 and find them misleading?
• 3: Did he, L’Estrange, as the newly-appointed CEO, produce a Quarterly Report for the end of the September Quarter 2009; further did it record the pending financial disaster and does it still exist?
• 4: If so did John Gay and/or his Board prevent the facts contained in the quarterly reporting figures produced by L’Estrange – as CEO of Gunns between 1 July 2009 and the end of September 2009 – from becoming public, in order to progress the capital raising?
• 5: Did John Gay or any member of the Board in the period 1 July 2009 – 1 Dec 2009, try to influence the independence of L’Estrange in his position as CEO of Gunns Ltd?
• 6: Did he, L’Estrange as Gunns CEO, after the Beaconsfield arrests of protesters, supply The Examiner and /or Barry Prismall with the press release that enabled Prismall to write “Gunns Chairman John Gay and his family may quit Tasmania to escape a campaign of terror against them….”
• 7: If so was the release created /or ordered by Gay with the concurrence of Fiona Reynolds, the then-Editor of the Examiner?
• 8: Did Credit Suisse, who underwrote the $145 million raising, complete a programme of due diligence; if so was the documentation supplied by L’Estrange or Gay?
• 9: Maurice Blackburn commenced a class action over this $145 million on 20 April 2011 alleging that Gunns on 31 August 2009 should have warned the market that its financial results for 1H2010 were going to be dismal. Instead they announced a $145 million capital raising. Please explain Mr L’Estrange.
Was Gay advised by his defence to plead guilty so as to prevent his former CEO appearing again in the witness box?
ASIC and a Lucky $50,000 seems a better bet than Maurice Blackburn and a class action over fraudulent conduct?
Only Houdini knows the answer.
• Nick Clark, Mercury: Gunns forests for sale
THOUSANDS of hectares of Tasmanian forest, pulp mill permits and the Bell Bay site formerly owned by Gunns Ltd will finally go on the market in the next three months.
The sale by the liquidator PPB Advisory follows the resolution of months of legal argument and the Supreme Court of Victoria’s rejection of a proposal by Macquarie Bank and Western Australian BlueGum to become the responsible entity for the managed investment schemes.
In an update, liquidator PPB Advisory said the sale of Gunns Plantation Ltd land and forest would be conducted at the same time as the sale of assets controlled by receivers Korda Mentha, which has control of 50,000ha of forest plantations in Tasmania and the pulp mill site and permits. Gunns Ltd spent about $230 million on the pulp mill project before it collapsed in September last year.
Gunns Plantations Ltd forests, controlled by PPB Advisory, comprise some 226,000ha in Tasmania, SA, WA, Victoria, Queensland and NSW.
There are 35,000 grower investors with investments worth $1.6 billion.
“In order to maximise value we will market the scheme assets concurrently with the complementary Gunns as this will provide access to a broader market and a deeper pool of buyers,” liquidator Daniel Bryant said.
“However, prior to the completion of any sale we will seek directions from the court that we are justified in proceeding with the sale.”
Tasmanian Farmers and Graziers Association chief executive Jan Davis said farmers were pleased to see some movement.
“Farmers have trees on their land through leases but for which they are not getting paid,” she said.
She said more than $20 million in back rent was owing to Tasmanian farmers in relation to leases with Gunns Plantations from June 2012.
Mr Bryant was critical of Macquarie in the latest grower update.
“As far back as 2012 the liquidators noted their concerns to parties including Macquarie WABG regarding the need for any restructure proposals to appropriately deal with scheme leases and liabilities,” he said.
“Despite these warnings and as a result of Macquarie/WABG’s misleading and deceptive conduct explanatory memorandum, material delays and costs have been incurred without providing any improved certainty as to the future of the GPL Woodlot Nominated Schemes.”
Mr Bryant said Macquarie had not told growers the quantum of outstanding and future rent and maintenance liabilities that would have become the liability of the new responsible entity.