iNO readers may be aware of claims swirling around a Sydney-based bankruptcy trustee who’s allegedly fled the jurisdiction with almost $2 million swiped from the estate of former bankrupt and Health Sector Union (HSU) secretary Kathy Jackson.
Those claims gained weight yesterday after freezing orders obtained by the HSU’s lawyers were varied to allow veteran insolvency practitioner Paul Leroy to spend a small portion of the $1.94 million he’s alleged to have misappropriated.
“…. if the respondent is abroad, the freezing orders do not prohibit him from paying a sum not exceeding the equivalent of A$4,000 for the purposes of travel to Australia” the amended order, made by Federal Court judge Michael Wheelahan, stated without explicitly confirming Leroy’s whereabouts to be other than down under.
As well as amending the freezing orders in respect of the sum allowed for travel the court also extended them until further order, which is one less issue to consider for the Jackson estate’s new trustees Fabian Micheletto and Michael Carrafa of SV Partners.
Front of mind for the pair will be obtaining the relevant records which may be in the possession of mid-tier insolvency firm Mackay Goodwin, where Leroy was believed to have worked briefly in the latter half of 2023.
Apart from the Jackson estate the remainder of the estates that were under Leroy’s control as trustee passed to the Inspector-General in Bankruptcy (IGB) following Leroy’s deregistration, which came into effect on Monday.
In a statement the IGB said: “Mr Leroy did not meet the standards of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). Specifically, Mr Leroy has failed to maintain mandatory professional indemnity and fidelity insurance cover”.
Citing lapsed professional indemnity and fidelity insurance as the reason to deregister a trustee who’s allegedly absconded with millions would seem the equivalent of convicting mass murderer Al Capone for tax evasion, but Leroy’s alleged conduct has it seems caught everyone by surprise, including the regulator.
Based on the timeline reported in The Australian newspaper, which broke the story online last Sunday night, iNO this week put a series of questions to AFSA to determine when the regulator realised one of its charges had allegedly gone rogue.
iNO asked when Leroy was last audited by the regulator. AFSA refused to answer. iNO asked if Leroy had submitted his 2022/2023 Annual Administration Return (AAR) in respect of the 2016 Jackson estate by the first week of August as required. AFSA refused to say. iNO asked if Leroy had paid AFSA its percentage of his annual realisations and interest charges.
Again AFSA refused to answer, citing the matter’s under-investigation status as a justification for silence, which is the equivalent of invoking the right to avoid self-incrimination.
But given the Jackson estate wasn’t the only administration Leroy controlled involving significant funds, it may be that if the allegations are proved true then they could involve an sum well in excess of $1.94 million.
The problem for AFSA is that the answers to the questions pre-date the commencement of its investigation, the date of which is another topic AFSA’s unwilling to discuss.
iNO is reliably informed that AFSA was tipped off to a problem with Leroy in late 2023 by Mackay Goodwin, which is now likely to find itself the target of a claim brought by the Jackson estate’s new trustees. At least in that event there’ll be an insurance policy able to respond.
The HSU had been anticipating receiving a distribution from the funds held by Leroy, $1.94 million of which comprised an inheritance left to Ms Jackson by the late barrister David Rofe.
But on January 25 the HSU’s principal lawyer Geoff Borenstein of Slater & Gordon received a phone call from AFSA’s director of Enforcement Tim Cole, who told him that Leroy had removed the funds from the Jackson estate bank account and may have left the country.
On February 1 the HSU commenced proceedings in the Federal Court to freeze Leroy’s assets. Comment was sought from Leroy but no response was received prior to iNO’s publication deadline.
Further reading:
Be the first to comment on "Trustee has questions to answer, and so does AFSA"