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* December 6, 2008 * Page 1 of 5 | Single page
ABC Learning founder Eddy Groves has been implicated in a $3 million secret deal that appears to have cost fellow executive director Martin Kemp his job at the child-care giant earlier this year.
The extraordinary deal, for Kemp to sell to ABC three child-care centres he owned, is one of a host of related-party transactions involving key executives at ABC Learning — deals that non-executive directors claim they were unaware of.
The uncovering of the previously undisclosed transactions, as forensic accountants pore over ABC's books, is a key reason why shareholders in ABC have yet to see — and may never — the 2008 accounts for the business.
Instead, two major insolvency firms and one major audit partnership, plus a team of investigators from the Australian Securities and Investments Commission, are examining ABC's entrails.
When the worlds of Groves and ABC Learning crumbled this year, the shudders were felt at the highest levels in Canberra, with Deputy Prime Minister Julia Gillard having to weigh in to reassure the families of 110,000 children, and tip tens of millions of dollars into the kitty to keep the ABC centres open beyond Christmas.
The last official estimate of ABC Learning's losses for the year to June was $437 million, before receivers and administrators took control in October — but that number is believed to have ballooned to closer to $1 billion.
The difficulties they are having coming to grips with ABC were evidenced again yesterday when receiver Chris Honey, from McGrathNicol, said he was delaying until next week clarification on the future of 386 of ABC's more than 1000 centres, which he said a week earlier were "under review".
"Clearly we would prefer to be in a position today to provide a definitive answer for parents and staff at the remaining third of centres who do not yet have certainty; however, the reality is we are working through an extremely complex corporate collapse," Honey's statement said.
A week earlier, Honey had said during a briefing on ABC that the state of the records on ABC's centres was "not good" and that it had required considerable reconstruction to work out which ones were viable, and which not.
That opacity fits with evidence that it was the arrival of ABC's new auditors, Ernst & Young, and senior executives, such as company secretary Matthew Horton, bringing with them tougher corporate governance requirements, that exposed previously unknown arrangements and hastened the company's demise.
