Question

Clive Palmer treated Queensland Nickel as $200m

Piggy BankClive Palmer is accused of being a reckless, shadow company director who took$200 million out of a Queensland nickel company to fund his political party andinvestments, including a new Titanic.

Administrators of Queensland Nickel, which closed last month, said yesterday thecompany was used as a “piggy bank” to finance what they termed the “Palmerempire”.

More than $200 million was taken out of the company over a five-year period andpumped into companies that were directly related to Mr Palmer, including hisflagship business Mineralogy, FTI Consulting said in its report.

But John Park, from FTI, said his investigations found $189 million in loans tocompanies linked to Mr Palmer were “forgiven” or not paid back to QueenslandNickel, including $5.9 million that went into the plans for the Titanic II.

Of the money that went into the Titanic, most was spent on lavish launch partieswith the only assets now some intellectual property and a “plastic boat”.

The company also became the single biggest political donor in the country,delivering $21.5 million to the Palmer United Party.

The administrators said Queensland Nickel accounted for 27 per cent of thenation’s total political donations in 2014 and last year, including the WA Senateby-election when Palmer United’s Dio Wang was elected.

While money was flowing out of the nickel company into the Palmer CoolumResort and other firms, the world nickel price was falling.

Mr Park said the borrowing from the company could have continued if nickelprices remained high.

“At a very high level, we saw Queensland Nickel as what I’d say (was) the piggybank, the treasury,” Mr Park said.

“And the money was coming through Queensland Nickel in the better times and itwas being dissipated amongst the Palmer empire entities.”

Up to 800 workers are owed $74 million in entitlements.

They are likely to get most of those entitlements paid out under a FederalGovernment program. Remaining creditors will likely get between nothing and 50¢for every dollar owed.

The administrators believe Mr Palmer and his nephew Clive Mensink, QueenslandNickel’s sole director, should be examined by the Australian Securities andInvestments Commission.

They claimed Mr Palmer acted as “shadow director” and that he and Mr Mensinkhad been “reckless in exercising their duties and powers as directors” for takingactions not in the interests of Queensland Nickel.

Mr Palmer is planning to fight any action and argued he was being singled outwhen Prime Minister Malcolm Turnbull was standing by as jobs disappeared in Queensland.

“Despite me controlling a lot of things, being Dr Evil, if you like, I don’t controlthe world’s international nickel price,” he told Melbourne radio.

Mr Palmer said there was a witch-hunt against him for making decisions that hewas entitled to make.

“I mean, that's my money. That's what we live in - a free society, and people havethe right to spend their money as they see fit,” he told the Seven Network.

Mr Palmer is the sole shareholder of Queensland Nickel. His nephew Mr Mensink isthe sole company director. The Administrators believe that Mr Palmer should beexamined by ASIC for breach of s184 of the Corporations Act.

Do you think ASIC would be successful in charging Mr. Palmer for breach of s184of the Corporations Act?

Answer 1

According to the section 184 of the Corporations Act 2001, following are the elements of the offense for the breach of the section:

1. The concerned person is a DIrector or officer

Since Mr. Palmer is the sole shareholder and have the capacity to significantly affect the company's financial standing, he is the shadow director. His nephew Mr. Mensink is the sole company director.

2. The concerned person was reckless or intentionally dishonest

Dishonesty is judged by the standards of ordinary decent people. the FTI investigation found that $189 million loans to Mr. Palmer companies were ' forgiven' which leads to deception and concealment of statements, thus making him intentionally dishonest.

Mr. Palmer was also reckless in exercising his duties as he used the money for his own advantage and benefit.

3. The concerned person(s) exercised their powers and discharged their duties in a manner that:

(a) was not in good faith in the best interest of the corporation

The money was mostly used for the companies that were directly related to Mr. Palmer. Also, the actions of Mr. Palmer had a detrimental effect on Queensland Nickel Company as its price began to fall which was not in companies good faith.

(b) was not for a proper purpose

The money was spent on lavish launch parties, Palmer empire entities and coolum Resort which shows that the powers were not exercised for the company's purpose. Also, his statement to the Seven Network that it was his money shows that he did not act in the interest of the company but un his own interest.

All the above elements are leading to the breach of section 184 of the Corporations Act 2001 and therefore ASIC would be successful in charging Mr. Palmer.