The long time, and now former, accountant to Scott McCorkell, the founder of failed North Sydney advertising agency McCorkell and Associates, has agreed in court that the manipulation of a loan agreement was “fraud”.
Andrew Fraser was being questioned in the Federal Court by David Stack, legal counsel representing Michael Hogan, the liquidator of McCorkell and Associates.
The agency went into liquidation in December 2022 after the assets had been sold to a new company, with the similar name of McCorkell Group, for $29,129.61.
Debts, including money owed to the Australian Tax Office, were left in the old company, and 18 were put out of work the week before Christmas without pay, redundancy or superannuation payments.
The transaction has been described to the court as "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 civil court hearing brought by the liquidator is investigating whether the purchase price paid for the business was commercial. Scott and Georgina McCorkell were the sole shareholders.
The court has been told the new company, essentially a mirror of the old, currently has monthly revenue of between $500,000 and $1 million. As of last Friday, the company had assets of $3.517 million and liabilities of $3.72 million.
And dentsu in 2019 had offered $12 million to $14 million to buy the agency before the deal collapsed with management changes at the Japan-based global advertising group, the court has been told.
Andrew Fraser, in the Federal Court, agreed that McCorkell had a good understanding of finance.
Much of the questioning centred around the days leading up to the sale of the agency and efforts to make unsecured loans of $560,000, from McCorkell to the company, secure.
The court was told that paperwork had been backdated to fit with the sale of the business in December.
Andrew Fraser said he became concerned when Scott McCorkell told him that the managing director, Karen Powell, had resigned and that he didn't have the funds to pay her out.
“Scott was reluctant to put more money into the company,” Fraser said.
Fraser was asked: “Was it the collective view of the room (during a meeting to decide what to do) that the company was insolvent.?”
He replied: “Yes.”
He said insolvency expert Liam Bailey had urged making the loans secure so they could be transferred to the new company.
The loan agreement ended up being dated before the meeting.
Fraser was asked: "You know this was a fraud?”
He replied: “In hindsight, yes.”
“Do you think it was the wrong thing to do?”
“In hindsight, yes.”
Professionally, he said, moving the business to a new company was a “good outcome” for McCorkell.
However, personally he felt “sorry” for the employees being made redundant.
Employees finally started to receive some money in May, paid via the Fair Entitlements Guarantee, a federal government backed scheme of last resort.
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