Forge may face insolvent trading probe
Auditor KPMG warned about a week before Forge Group's $800 million collapse it might have to blow the whistle on the engineering company for suspected insolvent trading.
Two former Forge board members have told receivers KordaMentha that fellow director John O'Connor told a February 6 meeting that KPMG feared Forge was in breach of corporate laws.
Mr O'Connor was chairman of the board's audit and risk committee. Non-executive director Julie Beeby said Mr O'Connor told the board the auditor had notified Forge that it had an obligation to report the matter to the corporate regulator.
"Specifically, KPMG sought clarification from management regarding its cash flow forecast in light of the insolvency provisions of the Corporations Act," Ms Beeby said in response to a questionnaire by KordaMentha.
"This was the first I had heard about this matter."
Director Grahame White said the board requested chief financial officer Donald Montgomery discuss with KPMG an ongoing solvency review process the board had undertaken. Lawyers Herbert Smith Freehills had been advising.
Forge was put into administration on February 11 after chief financial backer ANZ Bank withdrew support. Administrators and now liquidators Ferrier Hodgson last month said Forge may have been insolvent since November.
But former Forge corporate services chief executive Mark Rankmore told KordaMentha he was aware that Herbert Smith Freehills at the time advised directors the company was not insolvent.
Mr Rankmore also said that four days before the collapse, he thought "ANZ were positive that the financial support would continue to enable the hold- ing company to complete a takeover transaction and/or recapitalisation".
Ms Beeby said ANZ's notification in the early hours of February 11 it would cut off short-term funding was the first occasion the bank had advised it would no longer support Forge. She told KordaMentha that with the exception of the Australian Tax Office she could not recall reports of creditors pressing for payment.
