FORMER health minister Michael Wooldridge has broken his silence over a corporate collapse, which could see him banned from Australia's boardrooms, to defend his role at the helm of retirement village empire Prime Trust.
A public examination into the collapse in the Supreme Court yesterday also heard from lawyer Lorna Gelbert, an adviser to Prime Trust, who sits on the board of the Baillieu government's urban renewal authority Places Victoria.
In separate proceedings, the corporate regulator is attempting to ban from being company directors Dr Wooldridge and Places Victoria chairman Peter Clarke, a close political ally of Mr Baillieu, who has stepped aside from his government role while the court case is going.
Dr Wooldridge was the chairman of the company that ran Prime Trust, Australian Property Custodian Holdings, which put at risk $550 million of investors' money when it collapsed in October 2010.
He told the court APCH's board was aware of a conflict in the role of chief executive Bill Lewski in running the trust and the fact Mr Lewski's personal companies were paid to manage 12 of Prime Trust's retirement villages at the same time.
He said that Mr Lewski was not always asked to leave the room when the issue came up during board meetings.
"On every occasion it was asked if Mr Lewski should leave, but as he was CEO on some occasions he had a body of technical knowledge the board wished to avail itself of," he said.
Dr Wooldridge said some management fees charged by companies associated with Mr Lewski were higher than market rate, but said this was "balanced" by others that were lower.
"I didn't see Mr Lewski's figures, I wasn't involved with his companies, I didn't know if he was making a profit or a loss," he said.
Asked by Jonathan Moore, counsel for APCH receivers KordaMentha, how Mr Lewski could possibly be making a loss given the generous terms of the deal, Dr Wooldridge said: "You assume the management rights had some value."
Mr Lewski received the management rights from APCH for nothing and in September 2007 sold them to investment bank Babcock & Brown, reaping himself more than $60 million.
News of the sale came as a surprise to Dr Wooldridge, he told the court.
Earlier, Mr Moore asked Ms Gelbert if she herself had a conflict of interest by "giving advice to the trust on one hand and Mr Lewski on the other", but Associate Justice Rodney Randall refused to allow her to answer the question, saying it was disrespectful.
Ms Gelbert denied Mr Lewski had acted inappropriately over the management rights.
"If he were in a position of conflict, it would have been dealt with by the board and Mr Lewski," she said.
Frequently Asked Questions about this Article…
What was the Prime Trust / APCH collapse and how did it affect investors?
The company that ran Prime Trust — Australian Property Custodian Holdings (APCH) — collapsed in October 2010. The collapse put about $550 million of investors' money at risk, triggering a public court examination and the appointment of receivers (KordaMentha).
Why is former health minister Michael Wooldridge facing possible bans from company boards?
The corporate regulator is seeking to ban Dr Michael Wooldridge from being a company director after his role as APCH chairman during the Prime Trust collapse. He has been giving evidence in court about board oversight, conflicts of interest and management decisions tied to the collapse.
What conflict-of-interest concerns were raised about CEO Bill Lewski at Prime Trust?
The court heard that CEO Bill Lewski had personal companies that were paid to manage 12 of Prime Trust's retirement villages, creating a potential conflict of interest. Dr Wooldridge said the board was aware of this and that Lewski was not always asked to leave meetings when the issue was discussed.
How did the sale of management rights to Babcock & Brown relate to investors and the collapse?
Bill Lewski received management rights from APCH for no upfront cost and in September 2007 sold them to investment bank Babcock & Brown, reportedly earning more than $60 million. That sale surprised Dr Wooldridge and was part of the scrutiny over how management rights and fees were handled prior to the collapse.
Did APCH directors or advisers acknowledge problems with management fees charged to Prime Trust?
Dr Wooldridge told the court some management fees charged by companies linked to Mr Lewski were higher than market rates, though he said others were lower and that the board considered the overall balance. Adviser Lorna Gelbert denied Lewski acted inappropriately over the management rights.
What action did Places Victoria chairman Peter Clarke take during the court case?
Peter Clarke, who is chairman of Places Victoria and a close political ally of former premier Ted Baillieu, has stepped aside from his government role while the corporate regulator's court proceedings seeking bans are ongoing.
Who are the receivers and legal advisers involved in the APCH/Prime Trust proceedings?
KordaMentha are acting as receivers for APCH, and Jonathan Moore has appeared for the receivers in court. The corporate regulator is pursuing bans, and Associate Justice Rodney Randall has presided over parts of the public examination.
As an everyday investor, what lessons about conflicts of interest and board oversight can I take from the Prime Trust case?
The Prime Trust / APCH case highlights how conflicts of interest (for example, executives running related service companies) and opaque management fee arrangements can place investor funds at risk. It underlines the importance of strong board oversight, transparency about related-party dealings, and regulatory scrutiny when large sums (like the $550 million at risk here) are involved.
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