Liquidator accuses Craig Gore of ponzi scheme

Gold Coast businessman Craig Gore has emphatically denied accusations from the liquidator of collapsed investment firm he owned that the company was operating “something akin to a ponzi scheme”.

Secured Capital & Finance, owned by Gore and business associate John Atkinson, was placed in liquidation in June 2009, with investors owed about $2.6 million.

A report by liquidator Steven Kugel of insolvency firm CRS Warner Kugel says that many creditors invested funds with SC&F on advice they received from financial services firm, Wright Patton Shakespeare, which was formerly owned by Gore and Atkinson.

However, the liquidator says he is “doubtful as to whether most investors in SC&F understood that” Gore and Atkinson owned both companies and that despite its name, SC&F did not offer a “secured investment whereby the investor’s capital was secured by way of property or some other tangible asset”.

Kugel says in his report that SC&F did not own or operate any business or own any assets or investments.

He says his investigations of the company’s bank accounts “reveal that new investor funds deposited into SC&F’s bank account were used in the majority of cases between 2001 and 2004” to make interest payments to existing investors; to pay credit card expenses of directors; to be forwarded onto other companies controlled by Gore and Atkinson; and to be forwarded to now-collapsed property company City Pacific.

“At this time, the directors have failed to provide adequate books and records to me that might explain the transactions of the company,” Kugel says.

“In the absence of books and records to adequately record and explain transactions of the company, I can only conclude that the operation of SC&F was something akin to a ponzi scheme.”

A ponzi scheme is a fraudulent investment operation which relies on funds from new investors to make payments to existing investors, but collapses once new investment ceases.

Gore strenuously denied the allegations from Kugel and said the matter has passed on to his lawyers to consider further legal action.

“I can deny emphatically any ponzi scheme and I think it borders on being completely defamatory,” he told SmartCompany.

He says investors have continued to be paid interest on their investment, and have now been presented with an offer from the new owners of Wright Patton Shakespeare that would allow them to recoup 100% of their original investments.

Following yesterday’s creditors meeting, creditors were addressed by a director of Wright Patton Shakespeare, Graham Lello. The company had offered to make “gratuitous” payments to creditors of SC&F.

In a letter to SC&F creditors obtained by SmartCompany, WPS has offered to make initial payments that would equate to 10% of investor’s initial capital (this includes interest payments already made) and further payments over the next four years that take investors’ total returns to 60% of their original capital.

Gore says that when he sold Wright Patton Shakespeare last year, a condition of the sale was that the investors in SC&F would be “looked after”.

“I understand that the incoming buyers have presented to investors and will pursue it.”

He says he is continuing to assist WPS although he is no longer directly involved in the business.

“They were complex businesses and my job is to work with them to ensure there is a smooth transition.”

Graham Lello was unavailable for comment prior to publication.

Lello and Gore are fellow directors of Gold Coast-based wine company Aussie Vineyards, according to the company’s websites

Kugel told SmartCompany this morning that his report, which was presented to creditors yesterday, has also been handed to the Australian Securities and Investment Commission. ASIC had provided some funding for the preparation of the report.

“I am sure ASIC are considering their position,” Kugel says.

He also asked creditors to consider providing some funding for a public court examination of directors and key executives involved in SC&F.

Kugel says creditors have until July 7 to decide whether they will fund public examinations.