When ex-trustee in bankruptcy Paul Leroy signed on with Mackay Goodwin (MackGood) in the middle of last year, he must have known his time in the jurisdiction was short.
Since June 2002 the former NSW honorary counsel for Belgium had been looting at least two bankrupt estate accounts under his control, one of which was linked to former bankrupt and Health Services Union (HSU) secretary Katherine Jackson.
Simultaneously he’d been stalling the resolution of a long running dispute with the Health Services Union (HSU), Jackson’s largest creditor by virtue of its pursuit of the ex-HSU secretary over allegations of misappropriation of union funds.
“This information raises grave concerns in relation to the management and availability of trust funds for the ultimate benefit of creditors of the estate.” AFSA’s Tim Cole, in a letter to Paul Leroy dated January 25, 2024.
The dispute between Leroy and the HSU centred around the status of the HSU’s claims in both estates and had been simmering for years but when Leroy chose to wind up his company Integrated Accounting Solutions (IAS) and join Domenic Calabretta’s energetic mid-tier in June 2023 the clock began to tick, as court documents obtained by iNO reveal.
The documents were filed early last month in support of an application by HSU lawyers for orders freezing Leroy’s assets and appointing SV Partners’ Fabian Micheletto and Michael Carrafa as trustees of the Jackson estates.
They include emails showing that within weeks of Leroy commencing employment with MackGood, staff at the new firm began emailing him with requests for online access to the bank accounts for those estates where he was sole trustee.
For example, on July 6, 2023 MackGood manager Vinod Girdhani emailed Leroy: “Hi Paul. Any luck getting us access to NAB bank accounts?”
The information was required to enable MackGood staff to prepare and lodge Leroy’s annual estate returns (AERs) with the Australian Financial Security Authority (AFSA). But for various reasons access to the Jackson estate accounts and to the account of former bankrupt Susan Mary O’Rourke was not forthcoming, unlike Leroy’s excuses which included that he was sick, he was hospitalised or pre-occupied with outstanding remuneration claims.
The months rolled by. The NAB statements remained elusive. But suddenly in late November it seemed that Leroy and the HSU’s lawyers had at least engineered a breakthrough in their dispute.
“On or about 24 November 2023, the applicant and the Trustee appeared to reach an agreement in relation to the applicant’s proof of debt to be lodged in the first and second bankrupt estates,” HSU lawyer Geoff Bornstein said in his affidavit.
“The agreement was on the basis that the applicant would lodge a proof of debt for part of the 19 August 2015 judgment debts in the first bankruptcy and the balance of the 19 August 2015 judgment debts in the second bankruptcy.”
The HSU expected that as a result of this seeming resolution, a distribution would soon flow given in previous reports to creditors Leroy had outlined how Jackson was named as a beneficiary in the will of the late barrister David Rofe, who had left her $100,000 in cash plus 10 per cent of his deceased estate, estimated to be worth up to $31 million.
Little did Bornstein or the HSU know that by the date of the supposed resolution on November 24, Leroy had emptied the Jackson No. 2 estate account of more than $2.3 million, $1.9 million of which remains unaccounted for.
Sources have indicated to iNO that $700,000 of the missing funds was transferred into a bank account operated by Leroy’s sister.
In an affidavit in support of the HSU application MackGood director Gavin King deposed that he had instructed his staff to request that NAB trace amounts transferred from the No. 2 account to an IAS account which were then transferred out. No date for that instruction is provided, though King states that the last contact he had with Leroy was via a text message in December.
In exhibits attached to King’s affidavit is a letter to NAB dated January 8, 2024 from Leroy on MackGood letterhead requesting that the bank provide MackGood with statements for “The Jackson Account for the periods: 1 May 2021 to 31 January 2022 and 1 April 2022 to 8 January 2024, including evidence of the account balance as of 8 January 2024” and “The O’Rourke Account – for the period 1 January 2021 to 8 January 2024, including evidence of the account balance as of 8 January 2024.”
NAB provided the relevant statements on January 16, MackGood wrote to Leroy demanding an explanation the same day and with no response forthcoming reported the matter to AFSA and filed a Fraud Report with the NSW Police on January 19. By that time it seems Leroy had left the country.
Shortly afterwards, AFSA commenced an investigation and subsequently cancelled Leroy’s registration as a trustee in bankruptcy effective from February 5, 2024 on the basis that his professional indemnity and fidelity insurance cover had lapsed.
At this stage it’s unclear when the policies lapsed and iNO’s mail is that Micheletto and Carrafa are preparing to subpoena MackGood to force it to disgorge whatever relevant insurance records it has.
Complicating the new trustees’ progress is the fact that they are without funds and must take care to avoid replicating investigatory functions that AFSA may be undertaking. iNO understands an application for funding has been submitted to AFSA.
The regulator meanwhile may also be investigating the AERs filed by Leroy in 2022, though AFSA at this stage has refused to answer questions about when it last audited any of Leroy’s files.
Nor has it responded to questions about the amounts suspected to have been mishandled in respect of the O’Rourke estate account, which at time of writing was still under the control of the Official Trustee in Bankruptcy according to the National Personal Insolvency Index (NPII) maintained by AFSA.
Further reading:
Missing monies’ Labor links makes waves for AFSA
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