Lawyers helping dodgy builders

OPPORTUNISTIC accountants and lawyers are cashing in on building company collapses by offering “pre-insolvency” advice that helps dodgy directors avoid paying their debts.

Subcontractor groups say a lack of adequate enforcement by State and Federal authorities have allowed “pre-packaged” liquidations to flourish, creating a deliberate, lucrative and destructive industry based on illegal phoenix activities.

They allege a referral network of professionals has emerged and that some pre-insolvency advisers who helped hide assets for company directors were then appointed as liquidators charged with recouping those same assets on behalf of creditors.

In some cases, unscrupulous lawyers and accountants are cold calling company directors faced with orders to wind up their companies, offering their “asset protection” services and draining assets before liquidators come in.

The practices allow companies to be purposely pushed into failure after shifting their assets elsewhere, leaving a trail of unpaid debts.

Corporate regulator ASIC and the Australian Taxation Office say they have unscrupulous operators in their sights — but subbies say it’s not working.

ASIC’s Adrian Brown told a 2016 conference just 16 of about 220 insolvency firms in Australia won 51 per cent of all credit- ors voluntary liquidation jobs.

Subbies United founder John Goddard said the statistics proved there was a network of firms referring work to each other to the detriment of creditors.

“Almost all building industry insolvencies return zero cents in the dollar to creditors,” he said. “That’s because of the preinsolvency advice given to the liquidating builder on how to protect their assets which really should belong to the creditors.”

ALMOST ALL BUILDING INDUSTRY INSOLVENCIES RETURN ZERO CENTS IN THE DOLLAR TO CREDITORS JOHN GODDARD

A 2015 Senate Committee report into the construction industry found while it only accounted for up to 10 per cent of annual GDP, it was responsible for up to 25 per cent of insolvencies.

It found those insolvencies generated $630 million a year in unpaid debts to subcontractors, employees and taxpayers.

A statement from the ATO said the Government would act where there was evidence illegal behaviour was being promoted or encouraged.

“Phoenix activity doesn’t just impact those people directly affected. It deprives the whole community of necessary funds that could have contributed to hospitals, roads, education and other essential services.”