Investors in troubled satellite firm NewSat have been lumped with a potential $558,000 tax bill stemming from a $1.2 million bonus awarded to flamboyant chief executive Adrian Ballintine last year.
With NewSat entering administration last week and the Australian Securities and Investments Commission probing the company, BusinessDay can also reveal Mr Ballintine authorised questionable payments of $357,000 to an external tax adviser.
NewSat had an ambitious plan to become Australia's first privately owned, non-government satellite operator and had received $400 million in financial backing from the US and French governments. But the company's relationship with its financial supporters deteriorated badly over the past year amid financial and governance concerns.
The tax debt associated with Mr Ballintine's huge bonus is revealed in a consultant's report provided last year to NewSat's then chief financial officer, Michael Hewins.
The report by Brendan Rudd, a former BHP Billiton vice president of finance hired by NewSat's then independent directors, states that tax advisory firm BMK Partners had advised NewSat that Pay As You Go tax did not need to be deducted from Mr Ballintine's bonus.
However, Mr Rudd wrote that the company was required by law to pay tax on the huge bonus.
"The company is now liable to remit the tax to the Australian Taxation Office and Adrian has a liability to the company of $558,000," Mr Rudd wrote.
Payments of $357,000 to external tax adviser BMK Partners were also identified in the report to Mr Hewins. Invoices suggested that the payments related to tax advice on NewSat's Jabiru-1 satellite project.
However, BusinessDay understands that when Mr Ballintine was later questioned about the payments to BMK, he allegedly stated that they had been wrongly charged to the Jabiru-1 project and instead should have been directed to his personal account.
BMK associate director Jason Cullen is also the chief financial officer of, and a shareholder in, Cresta Motor Yachts, which is majority owned by Mr Ballintine. Cresta also features several past and present NewSat consultants and directors either on its board or as part-owners.
NewSat's latest annual report shows Mr Ballintine as owing NewSat $915,000 – the exact amount when his $558,000 tax bill is combined with the $357,000 paid to BMK Partners. The BMK payments were disclosed in the 2014 accounts under the heading "Correction of Errors", as they were made several years earlier. The accounts were corrected by the company's auditors following Mr Ballintine's confirmation that they should not have been billed to NewSat.
Mr Ballintine has not responded to questions from BusinessDay. Mr Cullen declined to answer questions, citing client confidentiality.
In addition to his $1.2 million bonus, NewSat's 2014 annual report shows Mr Ballintine received a salary of $1.07 million and shares valued at about $1.15 million at the time they were vested in February last year.
The December 2014 accounts disclosed that Mr Ballintine owed $905,000 to the company, suggesting he had repaid only $10,000 to the company in the six-month period.
Separate to the $905,000 Mr Ballintine is believed to still owe to NewSat, Mr Rudd's report found that he previously had built up a $1.16 million debt to the company after it paid expenses incurred by his yacht business and his other personal activities.
This $1.16 million debt was effectively cancelled by the NewSat board's remuneration committee's decision to award Mr Ballintine his contractually agreed maximum bonus of $1.2 million without making any tax deductions.
One member of the NewSat remuneration committee that approved Mr Ballintine's bonus, Chuck Ellison, is also a member of Cresta Motor Yachts' advisory board and a shareholder of Cresta.
Mr Ellison retired as NewSat director late last year. Based in New York, he was also paid consultancy fees of $876,000 between 2011 and 2013 on top of his director's fees and 1.2 million shares in the form of options and performance rights, some of which were approved by shareholders at the 2014 AGM after they had lapsed due to his resignation.
The son-in-law of NewSat chairman Richard Green, investment banker John Stewart, is also a shareholder in Cresta.
BusinessDay makes no allegations of wrongdoing against Mr Ellison, Mr Green or Mr Stewart.
Last week, Business Day revealed Mr Ballintine's transfer of 3 million NewSat shares as security for a personal loan from a US-based lender shortly after he imposed a trading "blackout" on directors and staff ahead of the release of a revised earnings forecast.
NewSat is being administered by PPB advisory and its receiver is McGrathNicol.
