Administrators find $10.8 million black hole in Wickham Securities

Investigations into the collapse of mortgage lender Wickham Securities by administrators PPB Advisory have uncovered what appears to be a bogus $10.8 million cashflow statement.

The cashflow statement is one of a number of apparent discrepancies and irregularities uncovered by PPB Advisory, which is also still waiting to receive a copy of the company’s books and records from Wickham auditor Brian Kingston.

A January 29 creditors' report issued by PPB Advisory says that Sandhurst Nominees, the trustee representing Wickham Securities noteholders, requested a cashflow forecast following concerns about the company’s cashflow position last year.

Wickham Securities sent an email to Sandhurst Nominees on November 30 disclosing cashflow forecasts to February 2013 along with a bank confirmation statement “apparently” issued by the Bank of Queensland and fund manager DDH Graham Limited showing a bank balance of $10,779,835.

PPB Advisory subsequently contacted the Bank of Queensland following its appointment to stop all debit transactions and was referred to DDH Graham Limited, which advised that the “statement dated November 30 which you have forwarded to me from the same named account showing a balance of $10,779,835.47 as of 30 November 2012 has not been generated by DDH Graham Limited”.

The PPB Advisory creditors' report says it has “not yet established who provided this document, however that amount was not available in the company’s bank accounts”.

As enquiries continue, no claim has been made in the creditors' report of any wrongdoing by DDH Graham Limited or Bank of Queensland.

PPB Advisory has also noted redemptions totalling $395,000 were paid between December 1 and December 20 from – just before Wickham Securities was placed in administration on December 21.

It says these redemptions are being investigated further.

The creditors' report also reveals that the administrators have yet to receive the company’s books and records from auditor Brian P. Kingston, who signed off on the June 30 annual accounts issued on September 12 last year, which he said were a fair and true view of the financial position of the company.

Wickham Securities should have provided the company's books and records to PPB Advisory by January 4.

In addition to not yet sending the books and records, Kingston has also not sent the administrators company data he says he has on his laptop, telling PPB Advisory his laptop  is being repaired.

PPB Advisory says it will be investigating the audit opinion provided by Kingston to see if it complies with auditing standards.

Other apparent irregularities included in the January 29 creditors report include:

• Doubtful debt provisions of $625,000 for 2010, 2011 and 2012 that are not consistent with loan balances as of June 30 for each year;
• Directors of the company have not complied with their statutory obligation to assist the administrators with their tasks;
• Many Wickham borrowers are already subject to debt recovery efforts from the first mortgagee, but no records is provided in the company ledger to show the amounts owing; and
• The administrators have found funds totalling $37,419 in five separate bank accounts that  have been transferred into the administration bank account.

The creditors' report confirms that ASIC has commenced action against Wickham Securities founder Bradley Sherwin, his wife Deborah Sherwin and eight related companies seeking orders to freeze bank accounts and appoint receivers.

The eight related businesses, which include Sherwin Financial Planners Pty Ltd, were all placed in administration on January 24, with administrators from the firm of Taylor & Woodings appointed.

According to the Brisbane Times, Sherwin Financial Planners was once a major sponsor of the Brothers Junior Rugby League Club, with Sherwin offered $3,300 in spotter fees for any client it referred.

The Australian Financial Review recently reported that former high-profile NRL agent Jim Banaghan once promoted Sherwin's services, but that none of his clients chose to invest in the products he offered.

A Wickham Securities creditors' meeting has been scheduled for February 6, where creditors will vote on the fate of the company.