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Category: Business, Economics and Finance / Education Industry / Law, Crime and Justice / Crime

Collapsed college directors to be reported to ASIC over 'unreasonable' payments

Tuesday, 15 Mar 2016 04:03:03 | Josie Taylor And Alison Branley

Administrators say Aloi Burgess and Roger Williams may have made a number of "unreasonable" payments. (Supplied)

The directors of a training college that left thousands of students stranded when their company collapsed will be reported to the corporate regulator for possibly breaking corporate law.

Key points:

Global Intellectual Holdings directors Aloi Burgess, Roger Williams to be reported to ASIC
Potential breaches of corporate law involve multi-million-dollar payments and transactions
Students blame Government for 'disarray' over 'study now, pay later' loans

The administrators of Global Intellectual Holdings will report Aloi Burgess and Roger Williams to the Australian Securities and Investment Commission (ASIC) for possible offences.

In a creditor's report obtained by the ABC, Hall Chadwick said they had "identified offences that may have been committed by the directors" of Global.

Hall Chadwick said they had identified potential breaches of directors' duties for a "significant level of payments between the entities in the group" totalling $2.3 million.

It also indentified potential "unreasonable" director-related transactions totalling $5.3 million in the form of payments to Mr Burgess's company S.T.A.N.Z, shareholding companies owned by Mr Burgess and Mr Williams, as well as salaries.

The administrator further noted payments of $800,000 each to Mr Williams and Mr Burgess via shelf companies in February this year just before the company closed its doors.

At the last day of NTD basically they took all our files and put them through a shredder.

Jacob De Battista

Details of these most recent transactions came after the ABC revealed the two directors and shareholders of Global stripped the company of $10 million through loans and dividends by mid-2015, just months before the company brought in administrators.

That included paying dividends to themselves via shelf companies of $6.1 million. They also loaned those companies about $4 million each and paid themselves about $500,000 in directors fees.

The company's main source of revenue was government-backed VET-FEE-HELP loans, which was marketed as "study now, pay later".

Do you know more about this story? Email investigations@abc.net.au

'They took all our files and put them through a shredder'

More than $5 billion in VET-FEE-HELP loans have been sold since 2009, including more than $40 million to Global students.

Photo: Former employee Jacob De Battista said staff engaged in potentially illegal behaviour just before administrators came in. (ABC News)

When Global went into administration it left at least 5,000 students from Aspire, Compass, Keystone and the Australia Indigenous Colleges with limited training prospects and a government debt.

Jacob De Battista, a former recruiter with the company's marketing arm National Training and Development (NTD), said staff engaged in potentially illegal behaviour just before administrators came in.

"At the last day of NTD basically they took all our files and put them through a shredder," he said.

Mr Burgess and Mr Williams did not respond to multiple requests for comment.

'I blame the Government'

Students have told the ABC the Government should take responsibility for the disarray in the vocational training sector after an explosion in "study now, pay later" loans.

Photo: Liz Jolley was signed up to a diploma course at Keystone College in Victoria. (ABC News: Sam Clark)

Melbourne disability pensioner Liz Jolley was sold an expensive computer course above her abilities for Keystone College, which was a part of Global.

"I blame the Government," she said.

The diploma-level courses were sold to vulnerable students in disadvantaged areas through the offer of free laptops, but many students struggled with courses and were left with hefty government-backed VET-FEE-HELP debts.

Vocational Training Minister Scott Ryan declined the ABC's request for an interview, but said in a statement he would soon announce further reforms to the sector.

Questions over use of trust

The ABC revealed last night Global's owners set up the company with a trust called "The Collective Exit Strategy Trust".

Experts suggest the directors appear to be using their Collective Exit Strategy Trust to hold at least some of Global's assets which include Aspire, Compass, and Keystone Colleges.

We as an industry need to clean up our own act as well. They've got to separate academic decisions from commercial ones.

Rod Camm

Associate Professor Jason Harris, who is a lecturer in corporate law at the University of Technology Sydney, said there was a strong case for ASIC to investigate, especially given the company's revenue relied largely on taxpayer funds.

"The Commonwealth could well be a creditor," he said.

Mr Harrris said trusts like the Collective Exit Strategy Trust could be set up to shield potential claims from creditors.

"The naming of the trust is a little bit cheeky and suggests that they're anticipating that this house of cards is going to fall over," he said.

"That's the big problem with trusts and insolvency, there's actually no registration requirement with companies."

Training sector collapses:

Gone Bust: Global Intellectual Holdings (Aspire, Compass, Keystone, Australian Indigenous Colleges, Australian College of Creative Design and Arts, Designworks College of Design), Phoenix Institute, Vocation
Deregistered by ASQA: Unique International College, Phoenix Institute of Australia, Australian Institute of Professional Education (AIPE) , Empower Institute (Cornerstone)
Court action by ACCC: Unique International College, Phoenix Institute, Empower Institute, Acquire Learning

Professor Harris said the sharp rise in income to Global Intellectual Holdings — it went from $1.7 million to $35 million in VET-FEE-HELP payments in a year — was referred to as a "hockey stick" in the industry and often reflected the business model of companies cashing in on government incentives.

"This perhaps was set up to take advantage of a short term opportunity," he said.

Rod Camm, from industry group the Australian Council for Private Education and Training, said the industry body was now forensically examining the corporate structures of colleges it recommended.

"We as an industry need to clean up our own act as well. They've got to separate academic decisions from commercial ones," he said.

AustraliaPlus