The man at the centre of one of rural Victoria’s biggest financial collapses has been fined $25,000 and banned from managing companies for five years by the Federal Court.
Patrick John Godfrey is the former managing director of Banksia Securities, which collapsed five years ago owing investors mainly in rural Victoria more than $600 million.
The court declared that Mr Godfrey broke the Corporations Act by failing to comply with accounting rules.
The case was brought by the corporate regulator, the Australian Securities and Investments Commission, and Mr Godfrey agreed on a statement of facts with ASIC.
ASIC said Mr Godfrey did not give a true account of loans the company had approved which were unlikely to be repaid by borrowers.
“Mr Godfrey’s recommendations as to the appropriate amount of provision for bad and doubtful debts resulted in Banksia’s financial reports failing to give a true and fair view of Banksia’s financial position,” ASIC said in a statement.
It also said Mr Godfrey did not have a sufficient understanding of the relevant accounting rules.
Kyabram-based Banksia Securities raised money from investors including retirees and sports clubs and lent the funds to property investors and developers.
It was seen as a local bank for the Kyabram community in northern Victoria and had branches across Victoria, New South Wales and South Australia.
In October 2012 the company had raised approximately $663 million from 15,622 investors.
But in late October that year administrators were called in and the company went under.
Kyabram investor Don McKenzie who runs a support group for Banksia investors said he welcomed the court’s decision.
“It’s nice to see an outcome where there was culpability involved and most investors in Banksia will be satisfied that someone has been made accountable,” he told the ABC.
Mr McKenzie said he expected investors to get around 92 cents in the dollar back after years of legal action.
He said investors have so far recovered around 82 cents in the dollar.
“There’s tremendous relief that it has got to the point it has albeit it has taken five years,” Mr McKenzie said.
ASIC commissioner John Price said it was essential that companies ensured their financial accounts were accurate to provide market confidence.
“Mr Godfrey fell short of the standards required of him in this case,” Mr Price said.
Mr Godfrey’s disqualification order won’t start until February.