'Sorry' Kleenmaid founder tries to jump the creditor queue

THE founder of failed whitegoods company Kleenmaid offered his "sympathy" yesterday to creditors left $82 million out of pocket. Kleenmaid director Andrew Young then leap-frogged thousands of customers, contractors and franchisees in the creditors' queue by lodging a $9 million proof of debt through another of his companies.

http://www.theaustralian.news.com.au
May 26, 2009

'Sorry' Kleenmaid founder tries to jump the creditor queue
Natasha Bita

THE founder of failed whitegoods company Kleenmaid offered his "sympathy" yesterday to creditors left $82 million out of pocket.

Kleenmaid director Andrew Young then leap-frogged thousands of customers, contractors and franchisees in the creditors' queue by lodging a $9 million proof of debt through another of his companies.

Mr Young is the sole shareholder of England and Young Holdings Pty Ltd, which claimed yesterday that Kleenmaid subsidiary Orchard KM owed it $9million as a secured creditor.

But Kleenmaid is so broke that none of the creditors is likely to see a cent, and taxpayers will be asked to finance liquidator Deloitte's investigations into whether the company traded while insolvent.

Taxpayers will also need to cough up the wages and redundancy payments owed to Kleenmaid's 150 former workers, through the federal Government's GEERS scheme.

Mr Young, a former washing machine repairman who founded the Sunshine Coast company 24 years ago, has engaged Brisbane PR firm Crook Publicity to represent him. "I'd like to express my sincere sympathies to those people who have lost in the equation and the people who have faced financial losses as a result of what's happened," he said in a statement read to the media yesterday.

"I understand that the loss is particularly difficult in this current economic climate … and it's caused significant emotional distress to a number of people.

"As one of the directors of Kleenmaid, I acknowledge things in hindsight could have been done better in dealing with the global financial crisis and the enormous pressure on our company as a result."

Deloitte partner John Greig warned that the 4500 creditors — including England and Young Holdings — were unlikely to see any money.

He said the administrators had been working closely with the Australian Securities and Investments Commission.

"They have been very supportive so far and have indicated to us they have a high level of interest in this matter," he said.

"Really, it comes back to us being in a position to supply and identify the information they're specifically looking for."

Deloitte has reported to creditors it is likely Kleenmaid traded while insolvent for at least two years.

Mr Greig revealed yesterday that Kleenmaid's debts could reach $100 million, with barely $2million in assets — not even enough for Deloitte to pursue the directors' assets, which appeared to be listed in their wives' names.

Deloitte was seeking funding through ASIC's assetless administration fund to continue following the legal trail.

"We are hopeful they will give us some funding," Mr Greig said. Mr Greig said ASIC had already spoken to Mr Young and his brother Brad, a fellow director, about the removal of 30 boxes of documents from Kleenmaid's Sunshine Coast headquarters on Friday.

Mr Greig said Kleenmaid's auditor, PKF, had audited only "one side" of the business, as required under franchising laws. The Orchard Group, which held half the debt, had not been audited as it was a private company.

The Young brothers sat in the front row during the 90-minute creditors' meeting but refused to answer questions, to the fury of some of their customers.

"They might as well have stayed at home and spent the afternoon on their $360,000 boat," said Tony Marshel, who paid $20,000 for undelivered whitegoods sold at the Brisbane Home Show, just three days before Kleenmaid went under.

"It's up to ASIC now to get off their backsides and get in and do something about these cowards."

http://www.theaustralian.news.com.au/story/0,25197,25538469-643,00.html


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Risks: Franchisor insolvency, intentional, Assets put in spouse's name, Deposit money not refunded, Externalities: cheap business decision when someone else pays, Fear, distrust, hate and contempt, Sincerity, Taxpayers end up paying for private gain, Trading when insolvent, Australia, 20090526 Sorry kleenmaid

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