ASIC wins $67.5m from KPMG and directors in Westpoint settlement

The corporate regulator has finalised its action against collapsed property group Westpoint, winning a settlement of $67.5 million, the bulk of which is expected to be paid by accounting firm KPMG.

The settlement will also end the Federal Court proceedings conducted by ASIC against nine of the companies under the Westpoint umbrella, in one of the first instances the body has actually sued liquidators.

ASIC said in a statement yesterday that $57.5 million of the settlement will be payable within 30 days. While ASIC did not confirm how much of the amount will be paid by KPMG, it is suspected this early payment represents the company’s liability.

ASIC chairman Tony D’Aloisio said in a statement the settlement will ensure that any delays associated with a trial will be avoided, and that the figure “provides an additional return for investors in the plaintiff mezzanine companies who lost money as a result of the collapse of the group in 2005”.

“A confidential commercial resolution is, because of the age and circumstances of the investors, the preferred resolution in a case such as this where litigation can take years. This view has been shared by parties involved who have engaged in constructive and bona fide discussions to resolve these issues.”

The liquidators of these companies, which include Ann Street, Bayshore, Bayview, Market Street, Mount Street, North Sydney, York Street and Cinema City, will also be subject to certain undisclosed conditions.

ASIC began action against KPMG back in 2008, accusing it of negligent conduct in the auditing of financial accounts of various Westpoint companies, particularly in the 2002, 2003 and 2004 financial years.

The total value of capital invested in these companies came to $388 million as of January 2006, when Westpoint collapsed. ASIC says the settlement, along with previous recovery efforts, will see investors receive about $160-170 million of that figure.

Previous settlements that came about as a result of action taken against State Trustees and various other financial planners had resulted in payments of $25.5 million, $49.2 million though the liquidation process and returns from Westpoint companies not in liquidation, which are expected to reach $22.5 million.

ASIC said yesterday the settlement funds will be paid to the liquidators of the plaintiff companies, and then apportioned appropriately.