Negligence, Conflict Of Interest Brought Banksia Down

Investigations on why Banksia collapsed showed that conflicts of interest and auditor negligence played a big role.

According to receiver McGrathNicol, it appears that there was corporate mismanagement. Partner Tony McGrath said it appears that investors’ money was transferred to Banksia Mortgage Fund, which is a stand-alone entity.

McGrath said the management of Banksia lent the investment money to an internal vehicle instead of using it to lend money to third parties.

McGrath said the receiver is also looking into possible breaches committed by auditors. He said that these auditors approved the lenders account weeks before Banksia collapsed.

It appears that auditors signed off some accounts in September, where documents showed that the company was enjoying a surplus of $24 million. McGrath said that this appears to be false because Banksia is in a deficit of some $200 to 300 million, which it owes its debenture holders.

McGrath also assured Banksia debenture holders that they are likely to recover some of their investments. Initial reports showed that investors would receive between 50 to 65 cents for every dollar invested in Banksia.

Investors initially received 20 cents. The entire 65 cents may take up to three years before it is fully paid.

McGrath said that these investors placed their trust on Banksia and worked hard to earn that money.