Centro's former chief financial officer told a court he has 'feelings of guilt' about what happened.
CENTRO'S former chief financial officer, who suffered a breakdown during the latter part of 2007, has told a court he has ''feelings of guilt'' about what happened that year when a multibillion-dollar error in the group's financial statements shocked the market and sent the share price plunging.
But under cross-examination in the Federal Court, Romano Nenna rejected suggestions that he had reconstructed a version of events to assuage his guilt about the accounting debacle.
Under lengthy and at times testy cross-examination by lawyers representing Centro shareholders in a class action, Mr Nenna denied he was not functioning properly around August and September 2007 when the Centro group's 2006-07 accounts were being finalised.
He admitted he was under stress and that he suffered some panic attacks and high anxiety in 2007.
But Mr Nenna told the court that this might have been due to ''an accumulation'' of issues he faced at the time, and not solely because he was trying to refinance the group's multibillion-dollar debt book before the end of the year.
''I had multiple other responsibilities,'' Mr Nenna said, explaining later that he was trying to renegotiate many different debt facilities with numerous lenders in Australia and the United States. ''It was an accumulation of those [responsibilities] but yes, it [his refinancing concern] was a part of those.''
Mr Nenna is one of the key witnesses in a complex, multi-party class action being heard by Justice Michelle Gordon in the Federal Court.
Two sets of Centro shareholders, represented by law firms Maurice Blackburn and Slater & Gordon, are suing Centro Properties and Centro Retail Trust over losses they claim they incurred when Centro in late 2007 and early 2008 revealed it had wrongly classified billions of dollars of short-term debt as long-term debt.
Centro, however, has blamed its auditors, PricewaterhouseCoopers, for the flawed accounts. Centro claims PwC ''botched'' the 2006-07 audit and its work was hallmarked by incompetence, carelessness and a lack of supervision of inexperienced, recently graduated staff.
PwC, in turn, is suing Centro. PwC claims Centro should have told the audit partners that the property group was under pressure from its bankers to repay its debt.
Much of Mr Nenna's cross-examination yesterday focused on Mr Nenna's negotiations with Centro's main lenders, including JPMorgan, Commonwealth Bank and Royal Bank of Scotland, and the group's relationships with its banks.
Emails indicated that Mr Nenna was negotiating with various banks to have several of Centro's maturing loan facilities rolled over, and at the same time he was trying to extract extra finance from some lenders to repay others.
The court heard Commonwealth Bank, then Centro's biggest lender, had insisted Centro reduce the total amount it owed CBA, and Royal Bank of Scotland had said it was unlikely to lend Centro any new funds.
Frequently Asked Questions about this Article…
What was the Centro accounting error that shocked investors?
Centro revealed in late 2007 and early 2008 that it had wrongly classified billions of dollars of short-term debt as long-term debt in its 2006–07 accounts. The multibillion-dollar error shocked the market and sent Centro’s share price plunging.
Who is Romano Nenna and what did he say about the Centro accounting scandal?
Romano Nenna is Centro’s former chief financial officer. In Federal Court testimony he said he felt “feelings of guilt” about what happened, admitted he was under stress and suffered panic attacks and high anxiety in 2007, and denied suggestions that he had reconstructed events or was not functioning properly when the 2006–07 accounts were being finalised.
How did Centro’s refinancing and lender negotiations relate to the accounting issues?
The court heard that Centro was trying to renegotiate multiple maturing loan facilities and extract extra financing from various lenders at the time. Emails showed Mr Nenna was negotiating with banks to roll over facilities and manage the group’s debt, and those refinancing pressures formed part of the context around the accounting period.
Which banks were involved with Centro’s debt negotiations and how did they respond?
The article names Centro’s main lenders as JPMorgan, Commonwealth Bank (CBA) and Royal Bank of Scotland (RBS). Commonwealth Bank reportedly insisted Centro reduce the total amount it owed CBA, and RBS indicated it was unlikely to provide new funding, complicating Centro’s refinancing efforts.
Are there legal proceedings related to the Centro accounting and debt disclosures?
Yes. Two sets of Centro shareholders, represented by law firms Maurice Blackburn and Slater & Gordon, brought a complex multi-party class action in the Federal Court against Centro Properties and Centro Retail Trust over losses they say resulted from the debt misclassification. The case has been heard by Justice Michelle Gordon.
Did Centro blame its auditors for the flawed financial statements?
Yes. Centro accused its auditors, PricewaterhouseCoopers (PwC), of ‘botching’ the 2006–07 audit, alleging incompetence, carelessness and a lack of supervision of inexperienced staff in PwC’s audit work.
How did PwC respond to Centro’s accusations about the audit?
PwC has sued Centro. In its claim PwC argues that Centro should have informed the audit partners that the property group was under pressure from its bankers to repay debt, suggesting both sides dispute who is responsible for the flawed accounts.
What does the Centro case highlight for everyday investors about company reporting and audits?
The Centro saga highlights risks investors face when a company misclassifies debt or faces refinancing pressures: it can materially affect reported financial position and market confidence. The case also underscores the importance of reliable external audits and clear company disclosure, given the dispute between Centro and PwC over responsibility for the flawed accounts.
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