Westpoint directors' assets frozen

The Australian Securities and Investments Commission has obtained interim asset freezing orders against four directors of Westpoint and a number of companies associated with Westpoint founder Norm Carey.

ASIC made an urgent application in the Federal Court of Australia in Perth against Mr Carey, Graeme Rundle, John Dixon, and Richard Beck, as well as against Richstar Enterprises Pty Ltd, Westpoint Realty Pty Ltd, Bowesco Pty Ltd and Redchime Pty Ltd.

The application was made in the public interest because investigations to date have revealed serious questions of potential liability to Westpoint Corporation Pty Ltd and investors arising out of the collapse of a number of Westpoint entities.

The areas of concern include the management of the Westpoint mezzanine companies and the raising of funds through the issue of promissory notes in excess of limits represented to investors.

Also, certain transactions in the period immediately prior to the appointment of receivers and managers and a liquidator to Westpoint Corporation appear to reduce the overall asset position of the Westpoint group in favour of Richstar Enterprises Pty Ltd, Westpoint Realty Pty Ltd, Bowesco Pty Ltd and Redchime Pty Ltd.

In summary, the Court has made orders on an ex parte basis that each defendant (and their agents and employees) is restrained from disposing of any of assets held legally or beneficially by them until 5.00 pm on April 7 2006.

In addition, Messrs Carey, Beck, Rundle and Dixon are restrained until 5.00 pm on April 7 2006 from leaving Australia.

The Court also made orders permitting the defendants to pay ordinary operating and living expenses as well as costs incurred in these proceedings up to capped amounts.

The proceeding will return to the Federal Court of Australia in Perth at 11.00 am on Friday, 7 April 2006.

THE FULL MEDIA RELEASE APPEARS BELOW.

Australian Securities & Investments Commission (ASIC) MEDIA RELEASE
Friday 31 March 2006

ASIC TAKES URGENT ACTION FREEZING ASSETS OF WESTPOINT DIRECTORS
The Australian Securities and Investments Commission (ASIC) has obtained interim asset freezing and other orders in the Federal Court of Australia in Perth against four directors of Westpoint and a number of companies associated with Mr Norman Phillip Carey.
ASIC made an urgent ex parte application in Perth against Mr Carey, Mr Graeme John Rundle, Mr John Norman Dixon, and Mr Cedric Richard Palmer Beck, as well as against Richstar Enterprises Pty Ltd, Westpoint Realty Pty Ltd, Bowesco Pty Ltd and Redchime Pty Ltd (the defendants).
The application was made in the public interest because, based on investigations to date, there are serious questions of potential liability to Westpoint Corporation Pty Ltd (receiver and manager appointed) (in liquidation) (Westpoint Corporation) and investors arising out of the collapse of a number of Westpoint entities concerning:
- the management of the Westpoint mezzanine companies and the raising of funds through the issue of promissory notes in excess of limits represented to investors; and
- certain transactions, in the period immediately prior to the appointment of receivers and managers and a liquidator to Westpoint Corporation that appear to reduce the overall asset position of the Westpoint group in favour of Richstar Enterprises Pty Ltd, Westpoint Realty Pty Ltd, Bowesco Pty Ltd and Redchime Pty Ltd.

In summary, the Court has made the following orders on an ex parte basis:
- each defendant, by themselves, their servants, agents and employees is restrained until 5.00 pm on 7 April 2006 from disposing of any of their assets whether held legally or beneficially by them; and
- Messrs Carey, Beck, Rundle and Dixon are restrained until 5.00 pm on 7 April 2006 from leaving Australia and from coming within 100 metres of an Australian point of overseas departure.

The Court also made orders permitting the defendants to pay ordinary operating and living expenses as well as costs incurred in these proceedings up to capped amounts.
The proceeding will return to the Federal Court of Australia in Perth at 11.00 am on Friday, 7 April 2006.
ASIC's application is seeking the appointment of receivers to the property of each defendant as well as orders directing each defendant to make affidavits of assets and liabilities and requiring them to deliver up to the Federal Court all passports.
ASIC's investigation is continuing.
Background
ASIC's application was made under sections 1323 and 1324 of the Corporations Act and section 12GD of the ASIC Act.
The application is based on concerns that the Westpoint group raised funds from retail investors through the issue of promissory notes by separate 'mezzanine' companies. In each case, the 'mezzanine' companies published information memoranda setting out, amongst other things, how much money was to be raised for each development. In the case of:
- York Street Mezzanine Pty Ltd, information memoranda sought to raise money from investors through promissory notes capped at $20 million and then later at $40 million. It appears that in fact about $117 million was raised; and
- Ann Street Mezzanine Pty Ltd, the information memoranda represented that $25 million was required and then later $40 million. Again, it appears that a sum far in excess of this amount was raised.

ASIC is concerned that Messrs Dixon and Beck were directors of the mezzanine companies raising amounts in excess of representations made in the Information Memoranda without ensuring that oversubscriptions were repaid to investors. Instead, ASIC's investigations to date show the funds were transferred to Westpoint Corporation and spent.
Mr Carey was a director of Westpoint Corporation and, by and large, the controller of the Westpoint group. Mr Rundle was the Chief Financial Officer of the Westpoint group and secretary of many of the companies within the group, including the mezzanine companies.
ASIC is also concerned about a number of transactions in which it appears that the overall asset position of the Westpoint group, and Westpoint Corporation in particular, was adversely affected involving the transfer, in October and November 2005, of approximately $3.5 million. These transactions include:
- the transfer of funds to Richstar Enterprises Pty Ltd which is the vendor of a property located at Point Piper in NSW, which has been sold with the sale to be settled on 31 March 2006. ASIC is concerned that other transactions involving Richstar Enterprises, Westpoint Corporation and certain other entities, will mean that Westpoint Corporation will not receive repayment of funds advanced to Richstar Enterprises; and
- the transfer of an option to purchase Warnbro Fair Shopping Centre by Westpoint Corporation in favour of Bowseco Pty Ltd, another entity associated with Mr Carey. ASIC is concerned about this assignment which was effected for a consideration of $100 when there is evidence suggesting the true value of the option may be approximately $1 million.

ASIC also raised concerns that funds were used in ways that were inconsistent with representations to investors and some investors were induced to 'roll over' into other Westpoint projects without disclosure that the roll over would not be accompanied by a transfer of cash.
Further, ASIC is concerned about the payment of commission payments owed to Westpoint Finance Pty Ltd by Westpoint Realty Pty Ltd. ASIC is concerned that these payments have been, or will be paid to Redchime Pty Ltd, a company associated with Mr Carey, and which uses the trading name 'Ferntree Financial Services'.