Allan Raad of Wentworthville, NSW and his brother-in-law Yousef Joseph Bazouni of Sandringham, NSW, have been convicted and sentenced in the Downing Centre District Court after pleading guilty to ASIC charges concerning a breach of director’s duties and the fraudulent removal of company assets.

ASIC had alleged that on 2 July 2011 in Sydney, NSW Mr Raad engaged in illegal phoenix activity by dishonestly using his position as a director of Cornish Property Services Pty Ltd (the Company) with the intention of indirectly gaining an advantage for himself by causing the sale of the assets of the Company to Mr Bazouni’s newly-incorporated company Flow Management Pty Ltd (Flow Management) for an amount of $20,000.

Mr Raad later onsold some of those same assets for $176,000 and used the proceeds to pay:

  • $50,000 for outstanding legal fees owed by the Company but for which he was personally liable;
  • $23,509.20 to creditors of the Company who held personal guarantees against Mr Raad and/or his wife;
  • $51,731.81 towards credit card debts for which he was personally liable;
  • $10,000 towards repayments for a home loan account Mr. Raad shared with his wife;
  • $22,300 to Mr Bazouni’s credit card; and
  • $4,000 was paid to existing unsecured creditors of the Company.

The Company was placed into voluntary liquidation soon after with an estimated deficiency of $1,110,695.93.

ASIC also alleged that between 21 July 2011 and 13 August 2011 Mr Raad fraudulently removed $21,609.16 and $16,044.93 from the Company’s account. It was alleged that Mr Bazouni was complicit in helping Mr Raad remove the funds.

The result was:

  1. Mr Raad pleaded guilty to using his position dishonestly to gain an advantage and for having fraudulently removed property. 
  2. Mr Bazouni also pleaded guilty to these offences on the basis of complicity, in that he aided, abetted, counselled or procured the commission of the offences by Mr Raad.
  3. Mr Raad was sentenced to a total of 18 months’ imprisonment for the offences and released on a recognisance order to be of good behaviour for two years. Mr Bazouni was convicted but no penalty imposed and ordered to be of good behaviour for 12 months.
  4. As a result of the convictions, both men are automatically disqualified from managing companies for five years.

ASIC commenced an investigation following the lodgement of a report by the Liquidator Bruce Gleeson of Jones Partners Insolvency & Recovery.

  • ASIC assisted the Liquidator to conduct an investigation and prepare his report by providing funding from the Assetless Administration Funding.
  • ASIC Commissioner John Price said, ‘ASIC is committed to addressing illegal phoenix activity.
  • ASIC is a member of the Australian Taxation Office-led Phoenix Taskforce, which comprises 29 Commonwealth and State governments agencies who are sharing intelligence and information to detect, deter and prosecute directors and facilitators that engage in illegal phoenix activity.’

FJM 13.9.18

[ASIC website: Media Release 18-246MR; LTN 163, 24/8/18; Tax Month – August 2018]

 

Comprehension questions (answers available)

  1. Did the Phoenix task force investigate, and find, illegal phoenix activity?
  2. Were assets of the Company sold for $20k to a director, who then on-sold them for $176k?
  3. Did the director spend the proceeds on discharging the Company’s assets (albeit, giving those creditors preference)?
  4. Was anyone sentenced to jail?
  5. Did anyone go to jail?
  6. Was anyone disqualified from being a director?
  7. Was the relevant company liquidated?
  8. Could it pay all its debts?
  9. Was the investigation funded by the ‘Assetless Administration Fund’?

[Answers:1.yes;2.yes;3.no(notEntirely);4yes;5.no(theJailSentenceWasSuspended);6.yes(bothDirectorsFor5Years);

7.yes(CornishPropertyServicesPtyLtd);8.no($1,110,695.93);9.yes]

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