Vaughan Strawbridge.
Mark Korda.
As significant a news story as Deloitte’s appointment as voluntary administrators (VAs) of Virgin Australia Group is, it pales beside the unsubstantiated scuttlebutt upon which iNO routinely latches like a vengeful lamprey with a surfeit of monarchs.
Simply put, the mail going around is that KordaMentha co-founder Mark Korda is less than impressed at being overlooked for this historic restructuring plum and is garnering support to try and roll Deloitte at the first meeting of creditors on April 30.
The man himself declined to comment when contacted yesterday but well placed sources have told iNO that Korda spent two months telling the Virgin board why KordaMentha was the firm for the job and that his and co-firm founder Mark Mentha’s influence among key union figures could be utilised to generate a ground swell of support sufficient to try and replace Deloitte’s awesome foursome.
Our sources indicate that the presumed basis for replacing the incumbents would be in respect of questions around independence fuelled by Deloitte’s not inconsiderable involvement with Virgin Group and related parties pre-appointment.
The 11 page Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) of VAs Vaughan Strawbridge, Richard Hughes, John Greig and Sal Algeri discloses that the four partners were engaged on April 6 by Clayton Utz, Virgin’s legal advisors.
If this sounds familiar it’s because this replicates the trail blazed by Korda, Jarrod Villani and Jennifer Nettleton to bring themselves – via an engagement with Gilbert + Tobin – into the tent of the ailing Ten Network in February 2017 ahead of their appointment as VAs in June of that year.
Deloitte’s DIRRI discloses however that the pre-appointment engagement with Clayton Utz – for which they are to be paid $200,000 – is one of many relationships.
Deloitte provided “Staff wellbeing advice” to Virgin in January 2019 and tax advice in April 2019.
Interestingly the $25,211 in fees for that tax advice went unpaid and “has since been written off by Deloitte Australia”.
Unsurprisingly, Deloitte Australia does or has also done plenty of accounting, tax, assurance, advisory and associated work for ANZ, Bank of China, Deutsche Bank, and BNP Pariba. All are secured creditors of Virgin.
Then there’s Deloitte’s involvement over the last two years with Velocity Frequent Flyer Pty Limited.
Deloitte advised Virgin on taxation matters in respect of the sale of Affinity Equity Partners’ stake in Velocity and in respect of a planned IPO of the program. It has also provided accounting advice to Velocity in relation to valuation of Velocity shared based payments since 2016.
iNO’s preferred declarations however relate to how Velocity’s offices are carved out of the floor space Deloitte leases for its Sydney headquarters in Grosvenor Place and how the four VAs – Strawbridge, Hughes, Greig and Algeri – are all members of the Velocity Frequent Flyer program.
We should note here that Deloitte yesterday insisted none of these relationships would be sufficient to disqualify the VAs on the grounds of a lack of independence.
If however Korda and close associate Leon Zwier of Arnold Bloch Leibler (ABL) couldn’t foment a little creditor revolt with that sort of ammunition then they wouldn’t be trying (and iNO is not stating that they are).
Then again, nor is Virgin Arrium and when it comes to repelling boarders, Deloitte wields more cutlasses than Grant Thornton ever did. Support INO’s continued chronicling of the insolvency sector.
Further reading:
He set of rules for some. Another set for others. Just saying.
How can an accounting firm which had provided audit and tax services within the past two years not be conflicted from a VA? I thought that would require another firm to be involved for a VA.
They was no audit work.
The tax work was immaterial. It related to a specific tax issue. They were not their general tax advisors.
Still, though. I mean, the perception here stinks to Joe Public, and no doubt the unions and the employees.
KPMG is Virgin’s auditor.
Hell hath no fury like a Korda scorned!
I seem to recall KM rolled PWC out of Ansett way back when
Deloitte & Touche LLP are/were the auditors of Boeing. Did that get a run in the DIRRI?
It did not. There are however several references in the DIRRI to work undertaken by member firms of the Deloitte Touche Tohmatsu global group for certain security holders.
I suppose ARITA will stand idly by and allow a DIRRI conflict issue to blow up in court…all looks very, very bad for the insolvency profession.
Stop being critical of the big firms. Must know our place. If it takes almost 20 years to liquidate Ansett ( and still going) you have to think they where doing a great job. A job that keeps giving. Not sure I ever be that efficient. KM certainly know how to sell old plane parts why not they get the job.
I wonder if there might be a circumstance which might cause Deloitte to act in an impartial manner?
$200k reported as agreed fee – Korda won’t get out of bed for that. But he is not stupid enough believe that. Grubby. Agreed Roger – not a good look.
I just find it ironic that KordaMentha intend to raise independence issues against Deloitte when Deloitte merely imitated KordaMentha’s approach in obtaining both pre-appointment restructuring work and later formal appointment work from a client.
Guess Deloitte and KM are just more equal than others.
Anyone recall the issues Korda had with independence on Channel Ten? Sounds very familiar…. There is a set of rules for KM, and another set for everyone else.
On Tuesday the VAs were appointed. On Wednesday ARITA was able to say everything was fine. So either there was a complaint made, investigated and resolved in 24 hours (wow!) or ARITA was consulted in advance
ARITA is dodging accountability here. As our peak industry body it tells the media Deloitte’s DIRRI was incomplete, but offers no clarity on why or what it will do. Is ARITA dancing to the tune of the “big 4” instead of doing its job?!!?
The DIRRI goes “There is no arrangement between us and either Houlihan Lokey or Clayton Utz that we will give any work arising out of the Administration to either Houlihan Lokey or Clayton Utz”. The law firm is clearly acting for the Administrators – conflicts no?
The Courts, ASIC, AFSA, accounting bodies and others all promote independence based upon perception and reality. It baffles me that both firms are putting up their hand and that the aforementioned sit back and say this is ok. The system is broken and this is another occasion where I am embarrassed by the greed of my own profession and complete inadequacy of those that police or guide our industry. No wonder the public does not trust us and no wonder the general body of practitioners dont trust the system.