A loan agreement signed by Scott McCorkell, the founder of failed advertising agency McCorkell and Associates, was described in the Federal Court as a “fraud” and a “sham”.
David Stack, legal counsel representing Michael Hogan, the liquidator of McCorkell and Associates, used the terms when questioning McCorkell.
He was referring to the backdating of paperwork, making secure unsecured loans of $560,000 to the company by McCorkell.
In an examination being conducted by the liquidator, the court was also told that a claim by McCorkell and his wife, Georgina, against the company for unpaid annual leave, totalling more than $1 million, was “wrong”.
The couple, the sole shareholders in the failed agency, also ran their personal expenses through the company using American Express cards, the court was also told.
The agency went into liquidation the week before Christmas 2022, putting 18 out of work without pay, redundancy or superannuation payments, and leaving a list of trade creditors.
McCorkell Group, registered November 24 before the company went into administration, with Scott McCorkell its sole director, bought the business of McCorkell and Associates on December 14, 2022, for $29,129.61.
The process has been described to the court as having the hallmarks of phoenixing, where the assets of a company are moved to a clean shell of a company leaving behind debts and liabilities in the old business.
The Federal Court has issued a restraining order against McCorkell, preventing him from selling his interest in the family home at 57 Bay Street, Mosman. He also cannot sell the McCorkell Group.
This new company, McCorkell Group, is still trading, using the same website, but with reduced staff.
McCorkell, being questioned in the Federal Court, said McCorkell Group had only lost one client since the business restructured in December 2022.
As of last Friday, the company had assets of $3.517 million and liabilities of $3.72 million.
However, Michael Hogan, the liquidator, is trying to recover money from McCorkell and McCorkell group, on behalf of McCorkell and Associates.
Loans totalling $560,00 by McCorkell to the company to cover wages were at first unsecured.
To make them secure, the loans had to be registered with the Personal Property Securities Register.
This had to be done before the business was transferred and sold to the new entity McCorkell Group. Twenty days were needed and the agreement making the loans secure had to be backdated.
Legal counsel David Stack told McCorkell this was a "fraud" and a "sham".
He replied: Incorrect."
He said the paperwork had been put on his desk, he had signed the back back first before seeing the date on the front page.
McCorkell agreed during questioning that numbers showing he and his wife were owed more than $1 million in annual leave payments were wrong.
This would equate to 28 years without taking leave.
However, he said he had been advised to claim this by his accountant.
During questioning, McCorkell said he had in 2022 spent six weeks in Greece.
“It was leave but I was working … every day I am on the mobile phone,” he said.
On return to the North Sydney business, McCorkell said he found the agency in trouble, with no sales over two months.
After what he called “angst” and an “discussion”, the company went into voluntary liquidation on December 15, 2022.
He had been told, he said, that the then advisor, and subsequent first liquidator, Liam Bailey, that staff not transferred to the new company would be looked after.
“Don’t worry about that, I’ve got it covered,” McCorkell said he was told.
McCorkell told the court: “My staff are very important to me.”
He denied under questioning that 18 staff had lost their jobs. He said this was actually 10-15 contractors, two full time staff and one had resigned.
Questioned about expenses, he agreed that personal spending by him and his wife were covered by the company.
These expenses were then booked as a return on loans made by McCorkell to the company.
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