The Australian Taxation Office has launched a potential criminal investigation into Acquire Learning, the failed training broker fronted by former AFL boss and current Crown Resorts director Andrew Demetriou, focusing on the fate of hundreds of millions of dollars in government funding pumped into the company.
Acquire’s former directors — racing identity John Wall, Jesse Sahely, Damien Dau and Mr Demetriou’s nephew, Tim Demetriou — are likely to be grilled under oath as part of the probe, which a court has heard will question what happened to $15m loaned to shareholders, including Andrew Demetriou, and involve a “forensic investigation into misappropriation of funds”, taking in the fate of $22m in overseas transactions.
The ATO is also keen to get its hands on assets, including multi-million-dollar mansions and luxury cars, that it suspects Acquire’s directors failed to disclose to the company’s administrator, a blockbuster Federal Court affidavit sworn by the ATO’s director of significant debt management, Aris Zafirou, reveals.
Andrew Demetriou was never registered with ASIC as a director of Acquire.
Mr Zafirou’s affidavit was filed with the court as part of a successful bid to quash a deal under which Acquire’s four founders promised to tip in just $1.77m to take control of a company with an estimated $145m debt pile.
Established in 2012, Acquire expanded its business up by signing up prospective students and jobseekers to training courses. It would receive a fee for the referrals. The company, which was also a one time match-day short sponsor of the Carlton Football Club, was placed in voluntary administration in May last year. The company was later placed in liquidation as a result of the ATO’s actions.
In letters sent to the Victorian and Federal Education departments in June, the ATO’s lawyers, Minter Ellison, said the deal, a deed of company arrangement, should be set aside and “the public interest would be served by public examinations to identify whether there are viable claims against directors, officers or third parties” and “whether there is evidence of criminal offences that should be referred to the relevant prosecuting authority”.
Arnold Bloch Leiber partner Justin Vaatstra said in a statement to The Weekend Australian on behalf of Mr Wall, Tim Demetriou and Mr Sahely that his clients “deny that Acquire traded whilst insolvent” and that they “provided extension information to the administrators during the course of their investigations”.
“The DOCA would have provided a priority return to employee creditors,” Mr Vaatstra said. “As a consequence of the ATO’s actions, that is now unlikely to occur.”
Mr Vaatstra also pointed out that the administrator had exercised its casting vote in favour of the $1.77m DOCA, which was to be used to mostly pay staff super through instalments.
But the government departments, which together pumped $107m in contract payments and student loans into Acquire and another $223m into training companies that were formerly subsidiaries of the company, threw their weight behind the ATO effort to ditch the DOCA.
There was “significant public interest” in investigating Acquire because of its “disgraceful” high-pressure sales tactics, exposed in a lawsuit brought by the Australian Competition & Consumer Commission that resulted in a $4.5m fine for Acquire, and the “use of intercompany loans and transactions to divert significant amounts of public funds obtained” under the VET FEE-HELP student loan scheme, federal Education Department official Richard Chadwick said in a letter of support sent to the ATO on June 20.
Justice Jennifer Davies formally set aside the DOCA on July 27 after Tim Demetriou, Mr Wall and Mr Sahely consented to the move.
The allegations made by the ATO raise questions about whether the Victorian gambling regulator thoroughly investigated Andrew Demetriou’s links to Acquire as part of its five-yearly review of the Melbourne casino licence held by James Packer’s Crown Resorts.
Former Victorian gaming minister Tony Robinson, who raised Andrew Demetriou’s links with Acquire with the Victorian Commission for Gambling and Liquor Regulation during the review, was unimpressed with the regulator’s efforts. “It’s not clear to me they’ve done anything more than a very, very brief scan of some newspaper headlines,” Mr Robinson told The Weekend Australian. “They’ve had every opportunity to indicate whether they investigated more detailed information that was put to them and failed to confirm that they did.”
Acquire went into voluntary administration in April last year and Mr Wall, Tim Demetriou and Mr Sahely had successfully sought a DOCA in April this year that would have seen them maintain control of Acquire while paying $1.77m in instalments, with the money mainly being used to cover former staff super.
Cor Cordis has now been appointed liquidator and the ATO wants claims against the Acquire directors for potentially trading while insolvent investigated as well as $2.3m in loans Acquire made to digital horse racing media business G1X after the ownership of it was transferred from Acquire to Mr Wall on 1 July 2016.
The ATO’s Mr Zafirou claims there actually is about $4.8m owed to staff for super alone, and that there were significant gaps in Acquire’s business records and deficiencies and gaps in information provided by Mr Wall and his fellow Acquire directors, including allegedly not disclosing sales of luxury properties and ownership of sports cars that could be sold to recover funds for creditors.
More damning, he alleges Acquire may have been involved in “potentially rorting” the VET FEE-HELP scheme that underpinned its business model. This included “use of separate companies, unsecured loans and the insolvency laws” to obtain government funds “for the purposes of ultimately profiting the deed proponents and their related entities, but avoid any material recourse if those funds became repayable,” he says in his affidavit.
He also wants the liquidator to investigate whether additional funds are recoverable from Mr Wall, including from a potential sale of West Australian property held with his parents, as well as $8.76m worth of residential property sales made by Mr Wall and his wife in Melbourne bayside suburbs of East Brighton and Black Rock in February 2017, October 2017 and February 2018.
He also wants to know whether funds could be recovered from the potential sale of a $6m house in Armadale owned by Mr Sahely’s wife, while the ATO notes that Mr Sahely has insurance on a 2013 BMW X3 and a 2015 Range Rover.
The ATO says Tim Demetriou has insured a 2012 Range Rover, and Mr Wall a 2013 Aston Martin Rapide. The Aston Martin is currently for sale on carsales.com for $199,000 and searches on the corporate regulator database show Mr Wall taking out a $50,000 loan to buy a racehorse called Rizzuto at the February Inglis sales.
Mr Wall declined to comment, while Andrew Demetriou referred all questions to Mr Wall.
Acquire was once a high-flying company with dreams of a $1 billion stockmarket float and expansion into Britain and the US driven by its 30-plus management team that began operations in 2012.
Looking for some credibility, Acquire appointed Andrew Demetriou chairman of an advisory board in 2014 that also included current ABC board member Peter Lewis, Nicole Sheffield, now Australia Post executive general manager, community and consumer, and former South Australian premier John Olsen.
Crucially, none of the advisory board would even become directors of Acquire or any of its subsidiaries. But they would be handsomely rewarded. Andrew Demetriou was loaned $1.68m by Acquire to buy Acquire shares in 2014 and Mr Lewis $1.82m. Both were later paid a “discretionary bonus” to repay the loan in full.
Mr Wall and his management team were in an industry awash with cash and the founders and major shareholders would be paid gross salaries of $6.3m between 2015 and 2017 when Acquire’s revenue peaked at $136m. Shareholder loans of $28m were advanced between 2014 and 2016, while “trading payments” of about $18m were made to a holding company owned by Mr Wall, Mr Dau, Mr Sahely and Acquire executive Kane Ransley between 2014 and 2017. The ATO wants the shareholder loans to be investigated.
Acquire spent up big on both business and pleasure. It paid $10m to buy the registered training company Kaplan in 2015, six months after spending $19.6m for a 65 per cent stake in job website CareerOne, previously owned by News Corporation, publisher of The Weekend Australian, and US company Monster.
Wall, a keen racehorse owner — his father Don was a long-time horse trainer in WA — would spearhead a push into racing media, setting up the G1X as a digital media business wholly owned by Acquire. It loaned G1X $8.5m in the 2016 financial year, but the business would suffer heavy losses.
By then though, cracks were beginning to show in the Acquire business model. The ACCC took action in December 2015 alleging Acquire had rorted the VET FEE-HELP scheme by enrolling students with little hope of completing the courses they were signed up for, and by using telemarketers who were paid in cash and prizes based on the number of students they could enrol.
Further changes to the VET scheme began to bite and Acquire’s student forecasts — the basis of their government funding — started to fall short. It resulted in a $40m overpayment liability to the government by June 2016.
Andrew Demetriou left his role that same month, only weeks after News Corp subsidiary CareerOne Services exercised a put option to sell Acquire its 25 per cent stake in CareerOne for $7.7m.
Mr Wall later struck a deal that he believed would save Acquire, to provide lead generation data, a call centre and software to Careers Australia Group, which he estimated would bring in $108m.
But in April 2017 Careers Australia Group lost its VET-HELP funding from the government and was placed in administration. Two weeks later Acquire followed the same path.