Liquidators appointed to Forum Finance and its related entities have uncovered further details of the extent of the alleged financial fraud undertaken by its owner, Bill Papas, suggesting it might have dated as far back as 2013, with the alleged fraudulent contracts in excess of $500 million.
The Forum saga began to unravel in May following a discovery by Westpac of a significant potential fraud of more than $250 million involving allegations of forged customer invoices involving managed print services and computer leasing equipment along with environmental services, to obtain bank loans.
Sydney-based managed services provider Forum Group and associated company Forum Finance are just two of the many businesses owned by Basile Papadimitriou – a.k.a Bill Papas – who is reported to have fled to Greece following Westpac’s investigation and subsequent civil proceedings.
Jason Preston and Jason Ireland of McGrath Nicol were appointed as provisional liquidators on 15 July by the Federal Court.
In a detailed report lodged with the Australian Securities and Investments Commission (ASIC), the liquidators poured over 110,000 transactions across 150 bank accounts held by Forum Finance, Forum Group Financial Services (FGFS) and related entities, persons and beneficiaries. While the investigation focused on the period from 1 July 2018 to 30 June 2021, the liquidators also discovered materials dating as far back to 2013.
“The extent of the alleged fraudulent activity and scheme escalated throughout the period of focus between 2018 to 2021, with new financiers being introduced to meet ongoing operation and financial obligations,” the report said. “FSFG was set up in 2017 as the scheme was escalating, predominantly to disguise the source and applications of the funds that had been obtained under the scheme within the group.”
The report pointed to allegedly deliberate attempts by Papas and others to avoid the scheme being uncovered, including intentionally omitting entries into the accounts of Forum Finance to conceal the funds obtained; manipulating financial accounts; establishing FGFS outside the Forum Group to account for the alleged fraud and using various tactics to disguise the source of funds.
The report revealed that the scale of funds obtained in respect to the alleged fraudulent contracts across the entire group was in excess of $500 million.
According to the liquidators, a significant portion of the funding was ultimately applied to meeting obligations to financiers arising out of that funding to repay historical financiers with the balance used to support operations, establish new businesses or invest in new activities; act as a financier to associated entities; fund acquisitions in businesses, properties and interests in a soccer club, high end vehicles, race cars, vessels and race horses along with lifestyle and personal expenses for Papas and his fellow associate, Vince Tesoriero.
The report also points towards the company allegedly breaching its duties to maintain proper financial records that correctly reported and explained transactions, financial position and performance. This led liquidators to believe Forum Finance was likely insolvent from July 2018, with FGFS insolvent since its inception.
So far, the liquidators have said Papas had only engaged with them to a limited extent, hadn’t provided any meaningful assistance in regards to the investigation and eventually shut down the email address used to contact him, further adding to the fact that he was no longer represented in various proceedings against him in respect of the fraudulent activities.
The liquidators claimed, as a result of the investigation, to have identified that a vast majority of funding secured by Forum Finance was allegedly transferred to FSFG, which itself wasn’t a trading business, but was a treasury entity, acting as the conduit for fund transfers between Forum Group entities, as well as providing loans to associated entities and associates of Papas and Tesoriero.
To date, the liquidators claim to have identified receipts in excess of $350 million from various financiers.
Despite the liquidators' requests to directors to provide Report on Company Activities and Property (ROCAPs), Papas and former CFO Tony Bouchahine have allegedly failed to provide completed reports with Bouchahine in particular not answering certain queries “on the basis he wishes to involve privilege against self-crimination.”
Tesoriero hasn’t provided a report which, if he fails to do so, will see him reported to ASIC for non-compliance.
Even without these complete reports, the liquidators claim to have uncovered a number of manual adjustments made between 30 June and their July appointment, and slammed Forum Finance accounting records as ‘misleading.’
This was especially true considering the liquidators identified ‘in and out’ transfers totalling about $290 million from Forum Finance to FGFS, which aren’t recorded in the accounting system, the report suggested.
The liquidators noted that in conversations with Papas he “suggested the failure of Forum Finance as part of the broader Forum Group, was a result of the impact of COVID, and the resulting disruption and inability for the companies to operate effectively.”
However, this was inconsistent with McGrath Nicol’s findings, which stated the real reason for the companies’ failure was the business they were operating included the preparation of false customer contracts which were financed by third parties.
In July, an administrators report showed a lengthy list of at least 112 creditors that claimed to be owed more than $580 million.
The comprehensive creditor’s list includes HP Financial Services, claiming $22.4 million; Commonwealth Bank, claiming $9.7 million; Judo Bank, claiming $7.07 million; and Konica Minolta, claiming $806,930.
Forum Group also had Forum Finance listed as a creditor, claiming $16.3 million; FGFS claiming $75.89 million; Forum Enviro Aus, claiming $78.1 million and Forum Enviro Pty Ltd, claiming $21.06 million.
This is alongside Westpac’s initial $258 million exposure claim, Japanese bank Sumitomo Mitsui’s $98.9 million claim and French bank Société Générale, which estimates $9 million exposure.
Administrators Mackay Goodwin sold the managed IT services component of the company to Sydney-based IT and voice service provider Our Kloud in July, which is owned by Papas’ cousin Eric Constantinidis – a separate business that isn’t otherwise related to or associated with Forum Group.