Many hands make light work
Then there came news that more than 100 low-doc loan victims who had filed formal complaints of fraud last July had been advised to "get a lawyer". Their supporting evidence was ignored.
When it comes to insolvency though, the Australian Securities and Investments Commission responds with the brutal efficiency of Seal Team 6, the Special Operations Force which took out Osama bin Laden.
The disturbing evidence of two-speed regulation comes care of an accounting and disclosure expert from the University of NSW, Jeff Knapp.
Documents obtained by Knapp under freedom of information laws show no less than nine senior ASIC people, including their top lawyers and division heads, got involved in the process to satisfy an application by a liquidator.
The liquidator, who formerly worked for ASIC and was chasing a special exemption from filing accounts for Kagara, managed to get a three-day turnaround.
In light of the 16-month turnaround in the case of the Comm Bank whistleblowers, this is evidence of military efficiency.
Our story begins with email correspondence from ASIC's special counsel, Stephen Yen, to senior manager corporations, Amanda Zeller. On the CC are Julian Walsh, senior lawyer insolvency practitioners stakeholder team, Kyle Wright, senior lawyer corporations, Kate O'Rourke, senior executive leader corporations and the chief legal officer Michael Kingston.
"Stefan Dopking just called me. In a nutshell, you will shortly be receiving an application from him for an extension, until February 2013, to lodge the accounts of the relevant bodies, etc ... I suspect they may seek some comfort from us that we will deal with their application in a timely manner."
The email is dated October 19, 2012. It shows that Dopking, the senior managing director at insolvency group FTI Consulting (formerly Taylor Woodings), contacted executives at the highest levels of the regulator by phone.
Dopking himself had headed up the insolvency division of ASIC from December 2008 to December 2010.
Three hours later, ASIC's Kyle Wright received a message from Mallesons lawyer Cameron Mew. Mew acts for FTI.
"Further to your telephone conversations with Mr Dopking and me this afternoon, we attach a draft application for financial reporting ... We would appreciate your comments on the draft application with a view to the application being finalised and lodged with you on Monday."
The Mallesons correspondence drew a swift response from the commission, thanking them for the email and advising there were "no comments in relation to the draft". Bear in mind that in the ASIC policy "Applications for Relief" there is nothing about "draft applications".
The piece de resistance in this freedom of information trove is the next email, this time from Stefan Dopking, to cap off the day's email flurry at 6.48pm on the Friday:
"Dear Team, Please refer to attached application. Originals and relevant fee will be delivered Monday morning ..."
It bears noting that, under the commission's own policy guidelines, no application had yet been made, since there was no such thing as a "draft application" for a start, and secondly, all applications have to be in writing and accompanied by the prescribed fee.
There was nothing attached to the Dear Team email, except perhaps an expectation. It was sent to Wright, Amanda Zeller and another ASIC staffer Stephen Clarke, and CCeed to Mallesons.
The Dear Team email which arrived on Friday evening was followed by another email from Mallesons on Monday morning at 9.31: "Dear Mr Walsh, Further to our telephone conversation this morning, we confirm that the attached application for relief was lodged with ASIC on Friday evening ... We understand that ASIC expects to be in a position to assess and make a decision on the application today."
The response from the regulators, addressed to Stefan Dopking and Amanda Zeller, and CCeeing Cameron Mew and Stephen Clarke arrived at 1.44pm, a little over four hours later: "Dear Stefan, I advise that we have decided to grant relief deferring the company's [Kagara's] financial reporting obligations ... I attach a draft order for your review."
If the "Dear Team" email enshrines the cosy relationship between liquidators and regulators, the "Dear Stefan" email tops it off. Accounting academic Jeff Knapp describes this as the "Do you want fries with that?" email.
A four-hour turnaround - with nine commission staff in the loop - is a good deal quicker than 16 months. So, if you have lost your house or if your life savings have been blown up by a blue-chip financial planner, your best bet is to forget about it.
If you want results, become a liquidator.
Another email worthy of note was sent by ASIC's Kyle Wright to Stefan Dopking and Cameron Mew at 3.41pm on the Monday: "Dear Stefan and Cameron, I attach the signed order under S340."
Job done. Stephen Yen and Julian Walsh are Bcc on the email, blind CC that is.
This telling flurry of friendly correspondence is not good news for creditors of Kagara who are demanding an investigation into the administration. Kagara has run too long, cost too much and the administrators FTI have successfully won an exemption from producing financial accounts.
In Michael West's Monday column: The Kagara administration exposed.
Frequently Asked Questions about this Article…
The article highlights apparent 'two‑speed regulation' at the corporate regulator ASIC: a very slow, 16‑month response in the Commonwealth Bank whistleblower matter versus an extremely fast, hours‑to‑days response granting financial‑reporting relief in the Kagara administration. Documents obtained under freedom‑of‑information show close, rapid exchange between a liquidator (who formerly worked at ASIC), FTI Consulting, law firm Mallesons and senior ASIC staff.
In this article 'two‑speed regulation' refers to inconsistent treatment by ASIC — lengthy delays for whistleblower complaints (for example, Commonwealth Bank low‑doc loan complaints) but rapid, almost immediate decisions when dealing with liquidators and administrators (as seen in the Kagara case). For investors that can mean uneven access to timely enforcement and transparency depending on the party involved.
According to the article, Kagara’s liquidator (Stefan Dopking of FTI Consulting) and his lawyers at Mallesons engaged senior ASIC staff by phone and email. A draft application was discussed on a Friday evening and by the following Monday ASIC had communicated a draft order and then issued a signed order deferring Kagara’s financial‑reporting obligations — a turnaround measured in hours to days involving multiple senior ASIC officials.
The article names the liquidator Stefan Dopking (FTI Consulting, formerly of ASIC), law firm Mallesons and its lawyer Cameron Mew, and several senior ASIC staff including Stephen Yen, Amanda Zeller, Julian Walsh, Kyle Wright, Kate O’Rourke, Michael Kingston and Stephen Clarke. The correspondence shows these parties were in close contact during the relief process.
The article says creditors of Kagara, who were calling for an investigation into the administration, are unlikely to welcome the outcome: administrators won an exemption from producing financial accounts, Kagara’s administration ran on for a long time and cost a lot, and the rapid granting of relief reduced the transparency creditors had been seeking.
Yes. The article points out that the liquidator in the Kagara matter formerly worked for ASIC and that emails show unusually close and speedy interaction between the liquidator, his lawyers and senior ASIC staff. An accounting academic characterises the correspondence as evidence of a cosy relationship, implying possible conflicts of interest.
The article contrasts the two: Commonwealth Bank whistleblowers and low‑doc loan fraud complainants experienced long delays (about 16 months) and were reportedly advised to 'get a lawyer' with supporting evidence ignored, whereas the Kagara-related relief was processed in hours to days with multiple senior ASIC staff involved.
While the article focuses on the issues rather than giving formal advice, it implies investors and creditors should follow official correspondence and outcomes closely, push for transparency (for example, request financial accounts or an investigation), and consider seeking independent legal or professional advice if they are directly affected by an administration or believe enforcement has been inconsistent.
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