Former CFO 'stressed' when debt error was made

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 when a multibilliondollar error in the group's financial statements shocked the market and sent the share price plunging.

By InvestSMART · 4 Apr 2012

By InvestSMART ·
4 Apr 2012

Comments

But, under cross-examination in the Federal Court, Romano Nenna rejected suggestions he had reconstructed a version of events to assuage his guilt about the accounting debacle.

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 in 2007.

But Mr Nenna told the court 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 debt book before the end of the year.

"I had multiple other responsibilities," Mr Nenna said, explaining later that he was trying renegotiate many different debt facilities with numerous lenders in Australia and the US. "It was an accumulation of those [responsibilities] but, yes, it [his refinancing concerns] was a part of those."

Mr Nenna is one of the key witnesses in a complex 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 has blamed its auditors, PricewaterhouseCoopers, for the flawed accounts. Centro claims PwC "botched" the 2006-07 audit.

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.

Mr Nenna's cross-examination focused on his negotiations with Centro's main lenders, including JPMorgan, Commonwealth Bank and Royal Bank of Scotland, and the group's relationships with its banks.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What was the Centro accounting error that shocked the market?

The article says Centro revealed a multibillion‑dollar accounting error in 2007 when it wrongly classified billions of dollars of short‑term debt as long‑term debt. That misclassification surprised the market and sent Centro's share price plunging.

Who is Romano Nenna and what did he say about his role in the Centro debacle?

Romano Nenna is Centro's former chief financial officer. Under cross‑examination in Federal Court he said he feels guilty about what happened, admitted he was under stress and had some panic attacks in 2007, but rejected suggestions he had reconstructed events or that he was not functioning properly while the 2006–07 accounts were finalised.

What are the Centro shareholders suing over in the class action?

Two sets of Centro shareholders, represented by Maurice Blackburn and Slater & Gordon, are suing Centro Properties and Centro Retail Trust for losses they claim resulted from Centro's late‑2007/early‑2008 disclosure that it had misclassified billions in short‑term debt as long‑term debt.

How is PricewaterhouseCoopers (PwC) involved in the Centro dispute?

Centro has blamed its auditors, PwC, saying the 2006–07 audit was flawed and that PwC 'botched' the accounts. PwC has responded by suing Centro, claiming the company should have told audit partners it was under pressure from bankers to repay debt.

What did PwC allege Centro failed to disclose during the audit?

According to PwC's claim in the article, Centro should have informed the audit partners that the property group was under pressure from its bankers to repay its debt — a disclosure PwC says was necessary during the audit.

Which banks were involved in Centro's refinancing and debt negotiations?

The article names Centro's main lenders involved in negotiations as JPMorgan, Commonwealth Bank and the Royal Bank of Scotland. Nenna said he was trying to renegotiate many debt facilities with numerous lenders in Australia and the US.

What does the Centro case highlight for everyday investors about corporate accounting and audits?

The situation shows how serious accounting errors — such as misclassifying short‑term debt — can shock markets, cause share prices to plunge and trigger large legal disputes. It also highlights the importance of clear disclosure to auditors and the potential consequences when investors lose confidence in financial statements.

What is the current legal status of the Centro matters described in the article?

The matters are before the Federal Court in a complex class action being heard by Justice Michelle Gordon. Romano Nenna is a key witness giving evidence under cross‑examination, and PwC has separate legal action against Centro.