URBAN renewal authority head Peter Clarke has admitted to doing nothing to stop the chief executive of property group Prime Trust from receiving management contracts worth $60 million.
Chief executive Bill Lewski received the contracts for free and later sold them to the benefit of his personal companies.
Mr Clarke was a director of the company that ran Prime Trust, Australian Property Custodian Holdings, between 2006 and 2010, when the group's collapse put in jeopardy $550 million of investors' money.
He was forced to stand aside as chairman of urban renewal authority Places Victoria in late August after it was revealed the corporate watchdog launched legal action to have him and other APCH directors banned from running companies over the collapse.
Giving evidence in a separate proceeding yesterday, a public examination before Supreme Court Associate Justice Rodney Randall, Mr Clarke said after he joined the board the trust continued a practice of gifting the right to manage Prime Trust villages to Mr Lewski. "That was the pattern we followed," Mr Clarke told the court.
"I didn't seek to change it."
Mr Lewski sold the rights over 12 villages to investment bank Babcock & Brown for $60 million in September 2007 an event Mr Clarke told the court he did not recall discussing with anyone."I became aware the rights had a value, I wasn't aware of the quantum," he said.
Mr Clarke admitted Prime Trust relied on the same law firm Mr Lewski used, Madgwicks.
He said he remembered dealing with Madgwicks partners Lorna Gelbert, a Places Victoria board member who gave evidence on Thursday, and Rick Goldberg. He said he did not recall the trust ever getting independent advice.
"There may well have been some advantage in doing that," he said.
Mr Clarke repeatedly told the court he did not recall events, saying his memory was "hazy".
Asked by Jonathan Moore, counsel for APCH receiver KordaMentha, whether he had a medical problem with his memory, he said: "No."
Mr Clarke was taken to property valuations conducted by real estate agents CBRE that showed the existence of the management fees slashed the value of Prime Trust's retirement villages by up to 60 per cent.
"I have no recall of that at all," he told the court.
Separately, Mr Clarke and other directors of APCH, including chairman Michael Wooldridge, the brother of Minister for Community Services Mary Wooldridge, this week filed defences against the disqualification case brought against them by the Australian Securities and Investments Commission in the Federal Court.
Mr Clarke, Dr Wooldridge, Mr Lewski, Mark Butler and Kim Jaques deny acting against the interests of unitholders by approving a $33 million fee paid to Mr Lewski after the fund listed on the stock exchange in 2007.
Mr Clarke said that if paying the fee had hurt unitholders, he "shared in that adverse effect by reason of his own (albeit minor) interest in the Prime Trust".
Frequently Asked Questions about this Article…
Who is Peter Clarke and what was his role in the Places Victoria and Prime Trust matter?
Peter Clarke was chairman of Places Victoria (the urban renewal authority) and a director of Australian Property Custodian Holdings (APCH), the company that ran Prime Trust. He admitted in court that he did nothing to stop the practice of gifting management rights to Prime Trust’s chief executive and was forced to stand aside as Places Victoria chairman after regulators launched legal action related to the collapse.
What happened to the Prime Trust management contracts and who benefited?
Prime Trust’s chief executive, Bill Lewski, received management contracts for free and later sold the rights over 12 villages to investment bank Babcock & Brown for $60 million in September 2007. The article says Lewski sold the contracts to the benefit of his personal companies.
How did the Prime Trust dealings affect investors and the value of the retirement villages?
The collapse of the group put about $550 million of investors’ money in jeopardy, and property valuations by CBRE cited in court showed that the existence of the management fees reduced the value of Prime Trust’s retirement villages by up to 60 percent.
What legal action has been taken against APCH directors and what is their response?
The Australian Securities and Investments Commission (ASIC) launched a disqualification case seeking to ban APCH directors from running companies after the collapse. Peter Clarke, Michael Wooldridge and other directors have filed defences in the Federal Court denying they acted against unitholders’ interests over approvals such as a $33 million fee paid to Bill Lewski.
Which advisers and firms were involved in the Prime Trust transactions?
The article names a number of firms and advisers: Babcock & Brown (which bought the management rights), Madgwicks (the law firm used by Prime Trust and Lewski, with partners Lorna Gelbert and Rick Goldberg mentioned), CBRE (which prepared valuations), and KordaMentha (the APCH receiver).
Did Prime Trust obtain independent legal advice about the management contracts?
Peter Clarke told the court that Prime Trust relied on the same law firm used by Lewski (Madgwicks) and he did not recall the trust ever getting independent advice. He said there “may well have been some advantage” to getting independent advice, but could not recall details.
What evidence about memory and recollection came up in the court hearings?
During a public examination before the Supreme Court, Peter Clarke repeatedly said his memory of events was “hazy.” When asked by counsel for the APCH receiver whether he had a medical problem with his memory, Clarke answered “No.”
What were the disputed fees and approvals that feature in the ASIC case?
ASIC’s disqualification action questions approvals by APCH directors of arrangements including a $33 million fee paid to Bill Lewski after the fund listed on the stock exchange in 2007. The directors deny they acted against the interests of unitholders in approving that payment.
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